Terex makes cranes, lifts, towers, materials processing equipment such as crushers, and construction equipment such as backhoes, excavators and
|Most recent||Growth rate (CAGR)|
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|Book value of equity per share||$12.08||-6.1%||-10.6%||-3.5%|
|BV including aggregate dividends||-2.8%||-8.4%||-2.2%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|1 year||5 years||10 years|
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
On July 28, 1997 and August 7, 1997 the Company issued an additional 5,000,000 shares and 700,000 shares, respectively, of its common stock in a public stock offering. The shares were issued at $19.50 per share. The proceeds received by the Company after deduction of underwriting discounts and commissions was $105.6. A portion of the proceeds will be used to redeem a portion of the Company's 13.25% Secured Senior Notes due 2002.
On March 31, 1998, the Company purchased all of the outstanding shares of O&K Mining GmbH from O&K Orenstein & Koppel AG for net aggregate consideration of approximately $168M, subject to certain post-closing adjustments. The transaction was financed through the issuance of the Company's New Senior Subordinated Notes and borrowings under the Company's New Bank Credit Facility. O&K Mining, which will be part of the Terex Earthmoving segment, is headquartered in Dortmund, Germany, and has operations in the United States, the United Kingdom, Australia, Canada, South Africa and Singapore. O&K Mining markets a complete range of large hydraulic mining shovels serving the global surface mining industry and the global construction and infrastructure development markets.
Net cash provided by financing activities of $146.7 million during the six months ended June 30, 1999 represents the net proceeds from the issuance of 3.5 million shares of common stock ($103.6 million) and the 1999 Senior Subordinated Notes ($94.9 million), offset by the Company's repayment of principal under a bank credit facility.
The Company announced on June 15, 1999 an offer to acquire all of the issued and to be issued share capital of Powerscreen International plc. On July 27, 1999, the effective date of acquisition, Terex declared the offer for Powerscreen unconditional, with respect to all valid acceptances received. Powerscreen, headquartered in Dungannon, Northern Ireland, is a manufacturer and marketer of screening and crushing equipment for the quarrying, construction and demolition industries. The purchase price of GBP 181 (approximately $294) was financed with a loan under a bank credit facility maturing March 2006. As of September 30, 1999, Terex owned 95.76% of Powerscreen's issued share capital and had taken management and operational control of Powerscreen. As of October 21, 1999, Terex acquired 100% of Powerscreen's issued share capital.
On July 28, 1999, the Company issued 2 million shares of common stock. The shares were sold in a transaction initiated by Wellington Management Company, LLP on behalf of one of its funds. The net proceeds to the Company totaled $59.1.
In March 2000, the Company's Board of Directors authorized the purchase of up to 2.0[million] shares of the Company's outstanding common stock. No shares were purchased during the nine months ended September 30, 2001. As of September 30, 2001, the Company had acquired 1.3[million] shares at a total cost of $20.2[million].
On October 1, 2001, the Company completed the acquisition of CMI Corporation, now known as CMI Terex Corporation, and its affiliates ("CMI"). CMI, located in Oklahoma City, Oklahoma, is a manufacturer and marketer of mobile equipment and materials processing equipment used in the road building and heavy construction industry. The merger agreement provided for an exchange of all of the outstanding shares of CMI common stock for shares of Terex common stock, at an exchange rate of 0.16 of a share of Terex common stock for each share of CMI common stock. Accordingly, the Company has issued approximately 3.6[million] shares of Terex common stock in connection with the merger. CMI now operates as a subsidiary of the Company and has become a Wholly-owned Guarantor of the 10-3/8% Notes and the 8-7/8% Notes.
A report on Form 8-K dated December 5, 2001 was filed December 6, 2001 announcing that the Company entered into an underwriting agreement with Salomon Smith Barney Inc. relating to the sale and issuance by the Company of up to 5.75 million shares of its Common Stock.
The Company also issued approximately 1.5 million shares of its Common Stock to certain former shareholders of Schaeff in January 2002.
On April 23, 2002, the Company issued 5.3 million shares of its Common Stock in a public offering with net proceeds to the Company of $113.3.
On November 6, 2007, the Company acquired SHM, which is headquartered in Beckley, West Virginia, a leading manufacturer of highwall mining equipment for use in trench mining, open pit mining, contour mining and auger hole mining applications. The total consideration for the transaction was approximately $146 in cash. The purchase price for the acquisition was preliminarily allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Goodwill of approximately $55 was recorded, which represented the excess of the purchase price over the preliminary estimated fair values of net assets acquired. Approximately $25 of the goodwill assigned to SHM is expected to be deductible for tax purposes. The results of SHM are included in the Materials Processing & Mining Segment from the date of acquisition.
In June 2009, the Company completed a public offering of Common Stock resulting in the issuance of 12.65 million shares at a price of $13.00 per share. The Company received approximately $156 of net proceeds (net of $8.2 of expenses) from the sale of the shares. This transaction increased the recorded amounts of Common Stock by $0.1 and increased additional paid-in capital by approximately $156.
On July 23, 2009, the Company acquired the Port Equipment Business from Fantuzzi Industries S.a.r.l for approximately $126 million. The results of the Port Equipment Business are included in the Cranes segment from the date of acquisition. Terex Port Equipment designs, manufactures and services port equipment with manufacturing facilities in Italy, Germany and China, as well as sales and service branches around the world. This acquisition helps diversify the Companys Cranes business and expands the product offering of the Cranes segment to the container transport industry beyond its current stacker product line.
On August 16, 2011, the Company acquired approximately 81% of the shares of Demag Cranes AG at a price of Euro 45.50 per share, for total cash consideration of approximately $1.1 billion, bringing the Companys ownership to 82%. Demag Cranes AG is active in the development, planning, production, distribution, and marketing of industrial cranes and hoists and port technology, as well as the provision of services in these areas. Demag Cranes AGs business is highly complementary to the Companys existing business both in terms of product and geographical fit. The acquisition of Demag Cranes AG is consistent with the Companys strategy to expand its position as a globally active manufacturer of machinery and industrial products in niche market segments. In January 2012, the Company entered into a Domination and Profit and Loss Transfer Agreement (the DPLA) with Demag Cranes AG that will become effective following the necessary shareholder approval and subsequent registration of the DPLA in the commercial register of Demag Cranes AG. Upon effectiveness of the DPLA and upon demand from outside shareholders of Demag Cranes AG, the Company will acquire their shares. Any outside shareholders of Demag Cranes AG that choose not to sell their shares to the Company will receive an annual guaranteed dividend.
As part of our annual impairment test performed in the fourth quarter of 2016, we elected to perform a quantitative analysis (Step 1) on the AWP, Cranes and MP reporting units, to determine whether it is more likely than not that fair value exceeds carrying value for these reporting units. Based on the results of our Step 1 analysis, we determined that it is more likely than not that fair value exceeds carrying value for the AWP and MP reporting units. However, we concluded in our Step 1 analysis that the estimated fair value of our Cranes reporting unit was lower than carrying value. Step 2 of the analysis requires us to perform a theoretical purchase price allocation for our Cranes reporting unit to determine implied fair value of goodwill and to compare the implied fair value of goodwill to the recorded amount of goodwill. Upon completion of Step 2 of the test, we recorded a non-cash goodwill impairment charge of $176.0 million. This impairment charge is recorded in Goodwill impairment in the Consolidated Statement of Income (Loss).
On January 4, 2017, the Company completed the disposition of its MHPS business to Konecranes Plc, a Finnish public company limited by shares pursuant to a Stock and Asset Purchase Agreement. In connection with the Disposition, we received 19.6 million newly issued Class B shares of Konecranes and approximately $832 million in cash after adjustments for estimated cash, debt and net working capital at closing and the divestiture of Konecranes Stahl Crane Systems business, which was undertaken by Konecranes in connection with the Disposition. The final transaction consideration is subject to post-closing adjustments for the actual cash, debt and net working capital at closing, the 2016 performance of the MHPS business and Konecranes business, and the closing of the sale of Stahl. The sale of the Companys MHPS business to Konecranes represents a significant strategic shift in the Companys business away from universal, process, mobile harbor and ship-to-shore cranes that will have a major effect on the Companys future operating results, primarily because the MHPS business represented the entirety of one of the Companys five previous reportable operating segments and comprised two of the Companys six previous reporting units, representing a significant portion of the Companys revenues and assets, and is therefore accounted for as a discontinued operation. MHPS products include universal cranes, process cranes and components, such as rope hoists, chain hoists, light crane systems, travel units and electric motors, primarily for industrial applications, and mobile harbor cranes, ship-to-shore gantry cranes, rubber tired and rail mounted gantry cranes, straddle carriers, sprinter carriers, reach stackers, container handlers, general cargo lift trucks, automated stacking cranes, automated guided vehicles and software solutions for logistics terminals. On February 15, 2017, Terex sold approximately 7.5 million Konecranes shares for net proceeds of approximately $268 million. Following the sale of shares, Terex owns approximately 15.5% of the outstanding shares of Konecranes and has two director representatives on the Konecranes Board.