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  1. 1. Terex Corporation 2006 Annual Report
  2. 2. CONTENTS 1 Terex Corporation Overview 2 Terex Corporation At-A-Glance 4 Chairman’s Message 8 Terex Aerial Work Platforms 12 Terex Construction 16 Terex Cranes 20 Terex Materials Processing & Mining 24 Terex Roadbuilding, Utility Products and Other 28 Directors, Officers and Business Operations 31 Annual Report on Form 10-K IBC Shareholder Information
  3. 3. T E R E X C O R P O R AT I O N OVERVIEW Terex Corporation is a diversified global manufacturer of a broad range of equip- ment for the construction, infrastructure, quarrying, recycling, surface mining, shipping, transportation, refining, utility, and maintenance industries. We are driven by our mission statement of delighting customers with value added offerings that exceed their current and future needs. Our products are manufactured in 50 facilities in North America, South America, Europe, Asia, and Australia and are marketed in more than 170 countries. They are sold primarily through a global network of dealers and distributors, major accounts, and direct sales to customers. 1
  4. 4. TEREX CORPORATION AT - A-GLANCE BUSINESS SEGMENTS AERIAL WORK PLATFORMS Telescopic Booms 24% Articulating Booms 25% Scissor Lifts 23% Telehandlers 18% Light Construction 6% Portable Aerial Work Platforms 4% Compact Construction 40% CONSTRUCTION Off-Highway Trucks 24% Heavy Construction 36% Mobile Telescopic Cranes 53% CRANES Lattice Boom Crawler Cranes 14% Truck-Mounted Cranes 11% Tower Cranes 15% Other 7% MATERIALS PROCESSING & MINING Hydraulic Mining Shovels 25% Mining Trucks 13% Drills and Drilling Tools 11% Crushing and Screening 51% Utility Equipment 44% ROADBUILDING, UTILITY PRODUCTS AND OTHER Asphalt and Concrete 28% Concrete Mixing Trucks 24% Other 4% 2 TEREX CORPORATION 2006 ANNUAL REPORT
  5. 5. PRODUCTS MANUFACTURING FACILITIES Aerial work platforms Redmond & Moses Lake, Washington, USA; Perugia, Italy Telehandlers Baraga, Michigan, USA; Redmond, Washington, USA; Perugia, Italy Trailer-mounted light towers Rock Hill, South Carolina, USA Generators Rock Hill, South Carolina, USA Construction trailers Elk Point, South Dakota, USA Power buggies Rock Hill, South Carolina, USA Articulated and off-highway rigid haul trucks Motherwell, Scotland Excavators Ganderkesee, Germany Wheel loaders Crailsheim, Germany Truck-mounted articulated hydraulic cranes Delmenhorst, Germany Material handlers Bad Schoenborn & Ganderkesee, Germany; Coventry, England Loader backhoes Coventry, England Compaction equipment, site dumpers Coventry, England Mini and midi excavators Gerabronn & Rothenburg, Germany Scrapers Motherwell, Scotland Pumps and gear boxes Peterhead, Scotland Rough terrain cranes Waverly, Iowa, USA; Crespellano, Italy Truck cranes Waverly, Iowa, USA; Luzhou, China; Montceau-les-Mines, France All-terrain cranes Montceau-les-Mines, France; Zweibruecken & Wallerscheid, Germany Lift and carry cranes Brisbane, Australia Tower cranes Fontanafredda & Milan, Italy; Zweibruecken, Germany; Wilmington, North Carolina, USA Lattice boom crawler cranes Wilmington, North Carolina, USA; Zweibruecken, Germany Truck-mounted cranes Waverly, Iowa, USA Telescopic container stackers Montceau-les-Mines, France Hydraulic mining excavators Dortmund, Germany High capacity surface mining trucks Acuña, Mexico Mobile screens and trommels Dungannon & Omagh, Northern Ireland Mobile crushers Coalville, England Crushers and screening equipment Cedar Rapids, Iowa, USA; Durand, Michigan, USA; Melbourne, Australia; Subang Jaya, Malaysia; Chomburi, Thailand Drilling equipment Denison, Texas, USA; Southowram, England Asphalt pavers Cedar Rapids, Iowa, USA; Cachoerinha, Brazil Asphalt plants Oklahoma City, Oklahoma, USA; Cachoerinha, Brazil Concrete plants Oklahoma City, Oklahoma, USA Concrete mixer trucks Fort Wayne, Indiana, USA Concrete pavers Oklahoma City, Oklahoma, USA; Canton, South Dakota, USA; Opglabbeek, Belgium Pavement profilers, reclaimers/stabilizers Oklahoma City, Oklahoma, USA Landfill compactors Oklahoma City, Oklahoma, USA Utility aerial devices, digger derricks, cable placers Watertown, South Dakota, USA 3
  6. 6. CHAIRMAN’S MESSAGE BLUEPRINT FOR GROWTH For Terex, 2006 was a very good year. We reported record net We are proud of our accomplishments. We are excited about sales of more than $7.6 billion, propelled by a strengthening and our prospects. And we are eager to implement change. powerful global economic tailwind. We improved our balance WHAT HAVE WE ACCOMPLISHED SO FAR? sheet, resulting in a record low debt (less cash)-to-capital ratio We have a strong record of organic and acquisition related of 4.7 percent.1 For our shareholders, it was a year of record growth. Since 1995, we have grown our net sales, on average, positive stock performance, including the addition of our stock 28 percent each year, and since 2002, which marked the to the prestigious Standard & Poor’s 500 Index. end of our last significant acquisition, we have continued to However, as we have said before, the best is yet to come. That’s grow our net sales 28 percent each year with just a few not to say that there won’t be downturns or significant issues, small acquisitions. The strength of many of our end-markets or even surprises, in the future. These are as inevitable as definitely helped our recent growth, but so did the choices they are unwanted. Even Wall Street can be fickle in its view we made that positioned Terex to take advantage of over the short term. Consequently, the best protection for our growth opportunities. shareholders, team members and customers is for us to focus Add to this growth story a strong record of profitability. Since on our operating and financial performance, eliminate waste, 1996, we have grown our net income at a 32 percent average and strive for continuous improvement. annual rate. On a Return on Invested Capital2 basis, we We continue to view Terex as a young company, with significantly delivered a very strong 38 percent performance in 2006; more potential in front of us than past successes behind us. that’s almost quadruple the results we posted in 2002! We There is no doubt that Terex is maturing. We are building the think we have implemented a winning model for returns. operating capability and strength of our franchise. We are doing In an effort to establish a franchise that is well positioned to this with great leadership and a global footprint. And we are produce profitability over the course of an economic cycle, still in the early days of this evolution. we have assembled a diverse franchise of construction, 4 TEREX CORPORATION 2006 ANNUAL REPORT
  7. 7. WE CONTINUE TO VIEW TEREX AS A YOUNG COMPANY, WITH SIGNIFICANTLY MORE POTENTIAL IN FRONT OF US THAN PAST SUCCESSES BEHIND US. mining and infrastructure products. Today we are the third operations, and financial results. This requires continuous largest company in the construction, mining and infrastructure leadership improvements. This also requires a level of financial equipment industry. With the historic driver of our product investment on initiatives that we simply could not have pursued breadth being acquisitions, we have successfully taken in years past when we did not have the capability or the financial disparate product lines and weaved them together into a resources to support such projects. well-rounded product portfolio. There is, however, more We need to become more of a learning organization to add work to do in this process. to our action based orientation. The Terex culture has been great at making things happen, and making them happen As a result of the actions and events mentioned above, we quickly. Now we need to make sure we make the right have delivered excellent returns to our shareholders. Since things happen, and that we are continuous learners and 1995, our total shareholder returns have averaged 35 per- strive for continuous improvement in everything we do. And cent per year through year end 2006, superior results when we need to sustain our rapid pace of activity to avoid the compared with all others in our peer machinery group. plague of bureaucracy. WHAT DO WE NEED TO ACCOMPLISH? HOW DO WE PLAN TO ACCOMPLISH THIS? First, we need to simply continue what we have started. Growth, We will employ the Terex Business System, or TBS, as the profit improvement, geographic diversification, and shareholder framework for change and improvement of our Company. returns remain the important focus areas of our business. TBS provides a blueprint for us to build a process around These measures reflect our success with the multitude of continuous improvement and provides the tools we will use integration and operational improvement initiatives that are to shape the Company’s future. See Page 7 for a detailed ongoing in our business today. And there is significant upside description of TBS. yet to be realized. We will continue to challenge the status quo. We have been We need to deepen our capabilities, meaning our development a change agent within our industry. We need to continue to toward world class and sustainable achievements in marketing, 5
  8. 8. CHAIRMAN’S MESSAGE BLUEPRINT FOR GROWTH TBS PROVIDES A BLUEPRINT FOR US TO BUILD A PROCESS AROUND CONTINUOUS IMPROVEMENT AND PROVIDES THE TOOLS WE WILL USE TO SHAPE THE COMPANY’S FUTURE. take risks and seek openings that can be exploited in the And finally, we plan to stretch and challenge the Terex marketplace. We firmly believe the future looks positive for organization of more than 18,000 team members worldwide. our industry, but we need to get a bigger share of the pie and We have established a “12x12 in ’10” goal, meaning $12 establish ourselves as a company of prominence among the billion of net sales with a 12 percent operating margin in customer base. Delivering value and challenging the incumbent 2010. This will not happen easily, and we have to be is part of our make-up. willing to fail (and learn!) if we want to mature. We have challenged our team to achieve lofty goals in the past, and We will continue to work on governance and leadership. Our our organization rose to the challenge and delivered. Board of Directors has been strengthened by the addition of Oren Shaffer, and we thank J.C. Watts for his service. The To you, our shareholders, we cannot promise consistent additions of Tom Riordan, (President and Chief Operating success. But we can promise an unwavering commitment Officer), Tim Ford (President, Aerial Work Platforms), and Bob to building value into everything we do. We believe that Isaman (President, Construction) to the Terex management hard work, creativity, and integrity produce results. team strengthen our leadership. And we will continue to We remain proud of our historical achievements and excited broaden our team’s bench strength. We have been fortunate about our future prospects. We thank you for your support in to have little unplanned turnover and we want to keep it this the past and we hope we can earn your continued support. way as we continue to strengthen all areas of our business. 1 Debt (less cash)-to-capital ratio is the ratio of net debt to the sum of net debt and total Ronald M. DeFeo stockholders’ equity. Net debt is calculated using the Consolidated Balance Sheet amounts for Notes payable and current portion of Long-term debt plus Long-term debt, less current portion, less Cash and Cash Equivalents. Chairman and Chief Executive Officer 2 Return on Invested Capital is calculated by Terex by dividing the last four quarters’ Income from operations by the average of the sum of Total stockholders’ equity plus Debt less Cash and cash equivalents for the last five quarters ended Consolidated Balance Sheets. 6 TEREX CORPORATION 2006 ANNUAL REPORT
  9. 9. THE TEREX BUSINESS SYSTEM This is a journey, and although we are still early in this journey, I am pleased to see the enthusiasm with which the Terex organization worldwide has rallied around this critical and transformational strategic initiative. TBS is based on lean principles and lean thinking as applied to every aspect of our business. The core applications of lean thinking involve the promotion of a culture of continuous improvement and the removal of waste (anything that does not add value) at every organizational level of the Company. Terex intends to communicate these principles to all of our personnel throughout the Company. This is a long-term project In 2005, we introduced the Terex Business System or “TBS.” — one that will support our activities for years to come. The Terex Business System is the framework around which we are building a better Company, enabling each of our USING TBS AS A FRAMEWORK, WE HAVE FOCUSED businesses to reach levels of performance they could not ON A NUMBER OF KEY STRATEGIC INITIATIVES TO achieve alone. While Terex has a history of buying businesses ADVANCE THE COMPANY. THESE ARE: and making them better, this has been accomplished largely • Think Terex – Operating as a unified Company, rather on a standalone operational basis. Going forward, TBS will than a portfolio of individual businesses, combining provide the unifying focus. the strengths of many different people, products and technologies under one global umbrella. THESE FOUR MAIN PILLARS COMPRISE THE • Developing Operational Excellence in the Supply Chain – ESSENCE OF TBS: Viewing the Company’s diverse supply base as potential • Achieving Intense Customer Focus suppliers for all of Terex’s operations, focusing on gaining • Planning Excellence and Annual Deployment efficiencies based on our global purchasing power in a way that transcends individual business units. • Developing Operational Excellence Across the Entire Value Chain • Customer Driven Business Processes – Becoming more customer-centric and making it easier for customers to • Rapidly Delivering New Products and Services do business with us, with the goal of Terex being the In addition to these pillars, we determined that in order to most customer responsive company in our industry. be successful in our transformation, TBS had to have as • Delivering Diverse Products and Services to Diverse End- its foundation: leadership commitment for competitive Markets – Reducing the effect of potential cyclical changes advantage, superb human resource practices, and an in any one product category or geographic market through unwavering mindset of continuous improvement dedicated acquisitions, development of new products, and focused to implementing customer driven business processes. expansion of the geographic reach of our products. 7
  10. 10. TEREX AERIAL WORK PLATFORMS BLUEPRINT FOR GROWTH Full page: The Genie® GSTM-3232 electric self-propelled scissor offers an outstanding solution for increasing worksite productivity. An automatic leveling hydraulic outrigger system levels the machine on sloped surfaces up to 5° for added versatility. With a narrow 32 inch chassis, dual front- wheel drive, and zero inside turning radius, the GSTM-3232 can easily maneuver into tight workspaces. Our Terex Aerial Work Platforms (AWP) segment set records for for Terex® trailer-mounted light towers, construction trailers, power both sales growth and profitability in 2006. This outstanding buggies, and generators. We integrated the sales and aftermarket performance was driven by strong order volume from the North support teams for these various products during 2006 to further American rental channel combined with increasing demand from improve our customer service. international markets. Demand remained strong through the fourth With the momentum of a strong year behind us, the AWP team quarter, which historically is the slowest period for aerial work introduced four new products at the 2007 American Rental platform orders. Association show in February: The ZTM40/23N Self-Propelled The segment turned in a strong operating margin of 17.8 percent Articulating Boom; GSTM-3232 Self-Propelled Scissor Lift; for the year, compared to 12.9 percent in 2005, a direct reflection redesigned GTHTM-1048 and GTHTM-1056 Telehandlers; and the of the commitment shown by Terex team members to enhancing Terex® HFT 70RS Rental Equipment Trailer. production efficiency and improving product design through the We are forecasting that 2007 demand for our AWP products will use of lean manufacturing techniques. remain strong in the U.S. market, and we expect accelerating International demand was robust for a variety of AWP products, growth from overseas markets. In fact, we expect overseas demand with one third of AWP net sales in 2006 generated from outside of to account for about 40 percent of our AWP net sales in 2007, up the United States. To meet increased European demand, we began from a third of AWP net sales in 2006. production of an articulating Z-boom model in the first quarter of Genie marked its 40th year in business in 2006 by winning 2007 at one of our facilities in Italy. We also see new interest in key supplier awards from Hertz, Volvo and CAT Rental Stores. A the AWP products from such markets as the Middle East and Russia, leader in implementing the Terex Business System, our Aerial increasing the geographic diversification of our customer base. Work Platforms segment is better positioned than ever to compete Our AWP segment designs, manufactures and markets a diverse on a global scale through high quality products, unrivaled product line under the Genie brand that includes aerial work ® customer service and support, and utilization of lean platforms, material lifts, self-propelled telescopic and articulated manufacturing principles. booms, scissor lifts, telehandlers, and trailer-mounted articulating booms. In addition, this segment assumed responsibility in 2006 8 TEREX CORPORATION 2006 ANNUAL REPORT
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  12. 12. AERIAL WORK PLATFORMS NET SALES 2500 Telescopic Boom $2,090 2000 $1,480 1500 (in millions) ® Genie $958 1000 500 0 04 05 06 SALES BY GEOGRAPHY Telehandler ® Genie North America 63% Europe 25% Asia/Middle East/ Top: The Genie® S™-60 HC increases productivity with industry leading- Australia 8% capacity. Its three-person capacity platform holds 340 kg (750 lbs.) at Rest of World 4% the maximum horizontal outreach of 15.48 m (50 ft. 10 in.) or 567 kg (1,250 lbs.) up to 12.39 m (40 ft. 8 in.). Bottom: Powerful features such as four-wheel drive, four-wheel steer and a turbo-charged diesel engine make the Genie® GTH™-844 a practical choice for almost any worksite. A frame-leveling chassis allows it to pick up or place loads on side slopes up to 10°.
  13. 13. TEREX C0NSTRUCTION BLUEPRINT FOR GROWTH The new Terex® TC210 LC crawler excavator consumes less fuel thanks to a new hydraulics system. The standard air-conditioned cabin provides the operator both comfort and enhanced all-around visibility. Our Construction segment introduced 26 new products during 2006. increase cash generation, will improve the performance of our These product launches included a variety of product enhancements Construction group to a level more consistent with the rest of designed to improve the performance and availability of our equipment the industry. on the job site, which translates into improved financial returns for Looking forward, the markets in China, India and the rest of Asia our customers. We offer off-highway rigid and articulated haul offer significant opportunities for growth for our Construction seg- trucks, hydraulic excavators, wheel loaders, loader backhoes, mini ment. Our Scotland-based heavy truck operation established a joint and midi excavators, material handlers, pumps, gear boxes, scrap- venture with Inner Mongolia-based North Hauler Limited 20 years ers, truck mounted articulated hydraulic cranes, site dumpers, road ago to sell older generation trucks into China. We recently have been graders and compaction equipment. Our Construction segment man- expanding this very successful relationship to include the latest gen- ufactures its products in the United Kingdom and Germany, and is eration in our German designed hydraulic excavators and products developing a number of facilities in China. outside of our Construction segment, including our Terex Mining haul While our results for 2006 highlighted improvement in several of trucks. Our multiple joint ventures and “greenfield” developments in our Construction businesses over the prior year, it is clear that China illustrate our commitment to becoming a significant participant considerable work remains to be accomplished in order for this in the Asian market. business to achieve its true potential. The fourth quarter showed the We are also excited about our plans to improve our North American most improvement versus the prior year, reflecting strong European distribution network for Construction equipment. We are in the early demand for compact construction equipment and global demand for stages of our “Dealer of the Future” initiative. This initiative is heavy trucks, spurred on by favorable non-residential construction designed to improve the financial returns available to our dealers, trends worldwide. Late in 2006, we hired a new President for the allowing us to attract larger and more established partners. Dealers Construction segment, an individual with extensive experience in will benefit by minimizing their required investment in finished goods production and sourcing in developing countries. We are aggressively inventory and, instead, will be able to focus their capital on investing attacking our costs through Terex-wide procurement initiatives and in higher return service capabilities and rental fleets. Our customers by seeking to source from lower cost countries. We are confident will benefit from the greater service presence and opportunity to pur- that our commitment to the Terex Business System and lean manufac- chase the entire product line from a stronger dealer network. When turing principles, along with focused programs to improve aftermarket our dealers and customers benefit, we benefit too, through higher support, accomplish geographic expansion, improve margins and sales and improved profitability. 12 TEREX CORPORATION 2006 ANNUAL REPORT
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  15. 15. CONSTRUCTION NET SALES 2000 $1,582 $1,490 1500 Rigid Truck $1,319 (in millions) ® 1000 Terex 500 0 Industrial Wheel Loader 04 05 06 SALES BY GEOGRAPHY ® Terex North America 19% Europe 73% Asia/Middle East/ Top: Terex® TR 45 off-highway rigid frame trucks are used all over the Australia 7% globe in large infrastructure and construction projects. Rest of World 1% Bottom: Terex® TL 260 industrial wheel loaders are at work in a wide variety of applications including non-residential construction, quarries, and airport and industrial facility snow removal.
  16. 16. TEREX CRANES BLUEPRINT FOR GROWTH Full page: The Terex® Demag AC 70 is the most compact 70-ton (80-ton US) telescopic boom crane on the market, with a transport length of only 9.96 m (32.7 ft.). One of the highly successful City class models, it also features a 52 m (171 ft.) main boom, the longest in its class. Terex Cranes demonstrated its world class project management Terex designs, builds and markets mobile telescopic cranes, tower capabilities in 2006 with the delivery to the U.S. Marine Corps of cranes, lattice boom crawler cranes, truck-mounted cranes and the first MAC-50 all-terrain cranes. Based on the Terex® Demag telescopic container stackers for the world market at facilities in AC-50-1 commercial crane built in Germany, the military model the United States, Germany, France, Australia, Italy and China. was modified to provide salt water fording capability and meet Terex Cranes enjoyed a truly outstanding year in 2006, recording other tough specifications. These cranes will be supported sales of better than $1.7 billion, up from approximately $1.3 billion logistically through the Terex Cranes facility located in Wilmington, in 2005. More importantly, Terex Cranes is well positioned for North Carolina. A full contract for 130 cranes would be worth additional growth in 2007 and beyond. The worldwide market for $90 million. cranes is robust and no other company offers our wide selection The heritage of Terex Cranes can be traced back to the late 1800s. of lifting equipment, including some of the most technologically Today, our proven technologies and commitment to product support advanced, powerful and reliable machines available. To address continue to result in greater productivity, lower operational costs our order backlog and improve our ability to meet world demand, and a higher return on investment for our customers. we have ramped up production at virtually all of our plants and are continually looking for ways to expand production further. In April 2006, Terex acquired a controlling 50 percent interest in Sichuan Changjiang Engineering Crane Co., Ltd., a leading producer in China of on-road truck cranes with lifting capacities from 8 to 160 tons (9 to 176 US-tons). This investment is already contributing positively to the segment, accounting for approxi- mately 18 percent of the growth in net sales for Terex Cranes during 2006. In addition to the Changjiang Crane acquisition providing us with significant growth opportunities both within and outside China, we hope to tap into Changjiang Crane’s supplier base to help improve our component costs globally. 16 TEREX CORPORATION 2006 ANNUAL REPORT
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  18. 18. NET SALES CRANES 2000 $1,740 Terex Comedil Tower Crane 1500 $1,272 $1,077 (in millions) ® 1000 500 0 04 05 06 Terex American SALES BY GEOGRAPHY Crawler Crane ® North America 26% Europe 46% Asia/Middle East 19% Top: Terex® Comedil flat top tower cranes have no A-frame above the Australia 6% jib, reducing costs and assembly time. They are assembled on site in one Rest of World 3% to two days and can increase in height with the project. The CTT 561A models shown have a maximum freestanding height of 84 m (276 ft.). Bottom: The Terex® American HC 165 crawler crane can lift 149.7 tons (165 US-tons) and has a maximum jib length of 97.5 m (320 ft.). Lattice boom crawler cranes are designed to lift materials on rough terrain and can maneuver while bearing a load.
  19. 19. TEREX MATERIALS PROCESSING & MINING BLUEPRINT FOR GROWTH Full page: The Terex® O&K RH 200 is a giant excavator designed to meet the severe conditions of mining applications. Its features include an independent oil cooling system and state-of-the-art electronics. Terex designs, builds and markets hydraulic mining excavators, the Terex Reedrill drilling equipment operation to better serve high capacity surface mining trucks, drilling equipment, crushers, customers around the globe. Improved customer service and screens, feeders, washers and trommels at various plants worldwide, support, along with enhanced growth opportunities for the full including in North America, Germany, Australia, the United Kingdom range of Terex products throughout Sub-Saharan Africa, provided and in Asia. The Terex O&K RH series of excavators includes the ® the rationale for the sale of our Southern Africa distribution world’s largest mobile hydraulic excavator, capable of moving up to business to Imperial Holdings, which closed late in the year. 91 tons (100 US-tons) in a single pass. Terex is one of the world’s In China, Terex received a $150 million order in April 2006 to leading manufacturers of mobile crushing and screening equipment. supply 55 Terex® Unit Rig rigid 240-ton and 360-ton class off- The emerging market economies of China, India, Latin America highway haul trucks to a Chinese state-owned company for use in and Russia are helping to drive strong overall demand for Terex an open pit coal mine. The ability of the Terex MPM segment to Materials Processing & Mining (MPM) equipment. Large hydraulic compete on a global scale was again demonstrated in February mining excavator deliveries and the continued growth of our mobile 2007 when we were awarded a $93 million order by Fortescue crushing and screening product lines led the segment’s impressive Metals Group Ltd. to supply twenty MT3700AC 205-ton capacity net sales increase to over $1.6 billion in 2006, up from less than haul trucks, three RH170 excavators and four RH340 excavators $1.4 billion in the previous year. The gross profit margin rose to to be used in a new iron ore mining operation in Australia. Most 21.0 percent in 2006 from 17.2 percent in 2005. of the equipment is scheduled to be delivered in the second half of 2007. Worldwide commodity demand and infrastructure building are expected to remain strong over the next several years, providing The Terex MPM segment is well positioned to compete in the the cornerstone for the MPM segment’s growth. In addition, world market as we ramp up production to meet growing demand, the increasing volume of Terex MPM equipment in the field will utilize joint ventures and distribution agreements to better simultaneously improve our future parts and service sales outlook. penetrate select markets and continue to strive to exceed our customers’ expectations. In 2006, Terex completed the acquisition of Halco Holdings Limited, a leading worldwide manufacturer of down-the-hole drill bits and hammers for drills, and combined the Halco business with 20 TEREX CORPORATION 2006 ANNUAL REPORT
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  21. 21. MATERIALS PROCESSING & MINING NET SALES 2000 $1,625 Terex Unit Rig Mining Truck 1500 $1,360 (in millions) $951 1000 ® 500 0 04 05 06 Vibratory Screen SALES BY GEOGRAPHY ® Powerscreen North America 30% Europe 26% Asia/Middle East 11% Top: Terex® Unit Rig surface mining trucks use huge diesel engines that Australia 19% drive alternators providing power to drive electric motors in each of the Rest of World 14% rear wheels. The MT 5500 can haul 326 tons (360 US-tons). Bottom: The Terex® Powerscreen Horizon 6203 tracked vibratory screener can process 800 tons (882 US-tons) an hour of sand, gravel, quarry rock, construction waste and other materials.
  22. 22. TEREX ROADBUILDING, UTILITY PRODUCTS AND OTHER BLUEPRINT FOR GROWTH Full page: The Terex® Cedarapids CR462 paver with a 3.0 m (10 ft.) electric screed features the patented SmartracTM rubber track drive system and includes the Terex® Cedarapids exclusive Frame Raise and Three-Point suspension systems. This versatile commercial and mainline paver is capable of paving a wide variety of applications at widths ranging from 3.1 to 8.5 m (10 to 28 ft.). This Terex business segment offers a diverse range of products for the Top 100 New Products, and Better Roads Top Rollout 2005. Terex roadbuilding, utility and construction industries. These products include Roadbuilding awards also included the Construction Equipment Top pavement profilers, reclaimers, stabilizers, asphalt plants, asphalt pavers, 100 New Products award for the PR950 Milling Machine, and two concrete plants, concrete pavers, landfill compactors, front and rear from Better Roads Top Rollout 2005 for the E150P. discharge concrete mixer trucks, utility aerial devices and digger derricks. In 2006, the Company sold its controlling interest in Tatra a.s., a Our plants are located in the United States, Belgium and Brazil. Czech-based manufacturer of heavy duty on and off road trucks for Our Terex Roadbuilding, Utility Products and Other segment demonstrated commercial and military applications, to a group of investors in that marked improvement in 2006, with net sales of $746 million, up from country. After detailed analysis, we determined that Tatra was not a $665 million in the prior year, with growth in most business units and core operation and no longer fit with our long-term strategy. product categories. End markets in the United States showed improvement, Our 2007 outlook for this segment is optimistic, due to increased and our Brazilian roadbuilding operation continued to grow. investment in United States infrastructure needs, including roadbuilding Terex features the industry’s broadest line of asphalt and concrete and energy projects linked to passage of federal spending bills, tempered equipment for preparing, paving, maintaining and reclaiming roads and somewhat by expected softness in the concrete mixer truck business bridges. Our utility equipment features advanced technologies backed due to a slowdown in residential construction. by a network of service centers and mobile technicians. In late 2006, Terex Financial Services (TFS), whose financial results are consolidated Terex Utilities introduced its HRX-55® Overcenter Material Handling as part of this segment, provides a variety of competitive financing Device outfitted for the first time on a Peterbuilt hybrid-electric medium solutions to our customers to facilitate the sale of Terex equipment duty truck in response to customer requirements for quieter equipment worldwide. As a relatively new group within Terex, TFS has been and greater fuel economy. historically focused on the United States and Western European Terex Roadbuilding continues its history of innovation and in 2006 was markets, but is aggressively working to expand its global presence. the proud recipient of several prestigious equipment industry awards. Besides the obvious benefits of meeting and exceeding our customer Our Terex® Cedarapids CR662 RoadMix machine received three awards expectations for financing solutions, TFS offers the potential for – from Equipment World Innovations 2006, Construction Equipment generating a solid financial return in the future. 24 TEREX CORPORATION 2006 ANNUAL REPORT
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  24. 24. ROADBUILDING, UTILITY PRODUCTS AND OTHER NET SALES Material Transfer Vehicle $746 800 Terex Cedarapids $665 700 $581 600 500 (in millions) ® 400 300 200 100 Commander Digger Derrick 0 04 05 06 SALES BY GEOGRAPHY ® Terex North America 89% Europe 1% Asia/Middle East/ Top: The Terex® Cedarapids CR662RM RoadMix combines a remix Australia 5% anti-segregation system with a material transfer vehicle for non-contact, Rest of World 5% continuous and off-set paving. This machine is the only material transfer vehicle on the market that doubles as a remix paver. Bottom: The Terex® Commander series of digger derricks are used to dig holes and set utility poles. They include a telescopic boom with mounted auger to dig the hole and a winch with associated equipment to set the pole.
  25. 25. D I R E C T O R S , O F F I C E R S A N D B U S I N E S S O P E R AT I O N S BOARD OF DIRECTORS Ronald M. DeFeo G. Chris Andersen Paula H.J. Cholmondeley Chairman and Chief Partner, G.C.Andersen Executive Officer, Partners, LLC Private Consultant - Terex Corporation Strategic Planning G. Chris Andersen was Ronald M. DeFeo was a Vice Chairman of Paula H. J. Cholmondeley appointed Chief Executive PaineWebber Inc. from is currently a private con- Officer of the Company March 1990 through sultant on strategic plan- on March 24, 1995 and 1995. Mr. Andersen ning. Ms. Cholmondeley Chairman of the Board has been a merchant served as Vice President on March 4, 1998. Mr. DeFeo joined the Company in banker since 1996 and is currently a partner of G.C. and General Manager of Sappi Fine Paper, North America May 1992 as President of the Company’s then Heavy Andersen Partners, LLC, a private merchant banking from 2000 through 2004, where she was responsible for Equipment Group. A year later, he also assumed the and advisory firm, and also serves as the non- their Specialty Products division. Ms. Cholmondeley held responsibility of serving as the President of the executive Chairman of the Board of Directors senior positions with various other companies from 1980 Company’s former Clark Material Handling Company of Millennium Cell Inc. through 1998, including Owens Corning, The Faxon subsidiary. He was appointed President and COO of the Company, Blue Cross of Greater Philadelphia, and Company on October 4, 1993. Prior to joining the Westinghouse Elevator Company, and also served as a Company on May 1, 1992, Mr. DeFeo was a Senior Vice White House Fellow assisting the U.S. Trade President of J.I. Case Company, the former Tenneco Representative during the Reagan administration. Ms. farm and construction equipment division, and also Cholmondeley, a certified public accountant, is an alumnus served as a Managing Director of Case Construction of Howard University and received a Masters Degree in Equipment throughout Europe. While at J.I. Case, Mr. Accounting from the University of Pennsylvania, Wharton DeFeo was also a Vice President of North American School of Finance. Ms. Cholmondeley is also a director of Construction Equipment Sales and General Manager of Dentsply International Inc., Ultralife Batteries, Inc., Albany Retail Operations. Mr. DeFeo serves as a director of International Corp. and Minerals Technologies Inc., and is Kennametal Inc. (a supplier of the Company). an independent trustee of Gartmore Capital. Donald DeFosset William H. Fike Dr. Donald P. Jacobs Chairman, President and President, Fike & CEO (retired), Walter Associates Dean Emeritus and Gaylord Industries, Inc. Freeman Distinguished Professor of Banking, William H. Fike has The Kellog Graduate Don DeFosset retired been President of School of Management, in November 2005 as Northwestern University Fike & Associates, a Chairman, President consulting firm, since and Chief Executive Dr. Donald P. Jacobs is January 2000. Mr. Fike Officer of Walter Dean Emeritus and the retired as the Vice Industries, Inc., a diversified company with principal Gaylord Freeman Distinguished Professor of Banking Chairman and Executive Vice President of Magna operating businesses in homebuilding and home of the J.L. Kellogg Graduate School of Management International Inc., an automotive parts manufacturer financing, water transmission products and energy at Northwestern University, positions he has held based in Ontario, Canada, in February 1999. Prior to services. Mr. DeFosset had served since November since 2001. Prior to that, Dr. Jacobs was Dean of the joining Magna International in August 1994, Mr. Fike 2000 as President and CEO, and since March 2002 Kellogg School from 1975 through 2001. Dr. Jacobs was employed by Ford Motor Company from 1965 to as Chairman, of Walter Industries. Previously, he was also serves as a director of ProLogis Trust and 1994, where he served most recently as a Corporate Executive Vice President and Chief Operating Officer CDW Corporation. Vice President and as President of Ford Europe. of Dura Automotive Systems, Inc., a global supplier of Mr. Fike currently serves as a director of engineered systems, from October 1999 through Magna International. June 2000. Before joining Dura, Mr. DeFosset served as a Corporate Executive Vice President, President of the Truck Group and a member of the Office of Chief Executive Officer of Navistar International Corporation from October 1996 to August 1999. Mr. DeFosset serves as a director of Regions Financial Corporation, James Hardie Industries NV and Safelite Glass Corp. 28 TEREX CORPORATION 2006 ANNUAL REPORT
  26. 26. C O R P O R AT E O F F I C E R S David A. Sachs Ronald M. DeFeo Colin Fox Managing Director, Chairman and Chief Executive Officer Senior Vice President, Ares Management LLC Terex Business Systems Thomas Riordan David A. Sachs is a Managing Director, Head of the President and Chief Operating Officer Brian J. Henry Capital Markets Group and Co-Portfolio Manager of Senior Vice President, Kevin A. Barr Ares Management LLC, an investment management Finance and Business Development Senior Vice President, Human firm of which he was a founder in 1997. Mr. Sachs Resources Hyeryun Lee Park has been an investment banker and investment President, Terex Asia Eric I Cohen manager since 1981. Senior Vice President, Phillip C. Widman Secretary and General Counsel Senior Vice President and Chief Financial Officer Katia Facchetti Senior Vice President and Chief Marketing Officer Oren G. Shaffer B U S I N E S S O P E R AT I O N S Vice Chairman and Chief Financial Officer, Qwest Communications International Inc. TEREX AERIAL WORK TEREX ROADBUILDING, UTILITY Oren G. Shaffer has been the Vice Chairman and PLATFORMS PRODUCTS AND OTHER Chief Financial Officer of Qwest Communications George Ellis Tim Ford International Inc. since July 2002. Prior to joining President, Terex Utilities President, Terex Aerial Qwest, Mr. Shaffer was President and Chief Work Platforms Dale Jones Operating Officer of Sorrento Networks, a maker of President, Terex Roadbuilding optical products, beginning in 2000. From 1994 to TEREX CONSTRUCTION 1999, he was Chief Financial Officer of Ameritech Corporation, a telecommunications TEREX FINANCIAL SERVICES Robert Isaman provider that was acquired by SBC Communications Inc. in 1999. He has also President, Terex Construction served as President of Virgo Cap Inc., an investment firm, and from 1968 to 1992 Kevin Bradley in various positions at Goodyear Tire & Rubber Co. Mr. Shaffer serves on President, Terex Financial Services TEREX CRANES the boards of directors of Belgacom SA, the Daiwa family of mutual funds and Intermec, Inc. Steve Filipov President, Terex Cranes TEREX MATERIALS Helge H. Wehmeier PROCESSING & MINING President and Chief Executive Officer (retired), Bayer Corporation Rick Nichols President, Terex Materials Helge H. Wehmeier retired in December 2004 as Processing & Mining Vice-Chairman of Bayer Corporation, a post he held since July 1, 2002. Prior to that, Mr. Wehmeier served as President and Chief Executive Officer of Bayer Corporation from 1991 through June 2002. C O R P O R AT E I N F O R M AT I O N Mr. Wehmeier spent more than 35 years with Bayer AG, a diversified, international chemicals and health care group, in various positions of increasing responsibility, including senior management positions in both Europe Terex Corporation Terex Team Members Worldwide and the United States. Mr. Wehmeier is an alumnus of the International 200 Nyala Farm Road 18,200 Full-time Management Development Institute, Lausanne, Switzerland and Institut European Westport, Connecticut 06880, USA d’Administration des Affaires, Fontainebleau, France. Mr. Wehmeier is also a Telephone: 203-222-7170 director of PNC Financial Services Group, Inc., a diversified banking and financial Fax: 203-222-7976 services company, and Owens Illinois, Inc., a manufacturer of glass containers. Website: 29
  27. 27. OUR PURPOSE To improve the lives of people around the world OUR MISSION To delight construction, infrastructure, mining and other customers with value added offerings that exceed their current and future needs To achieve our mission we must attract the best people by creating a Terex culture that is safe, exciting, creative, fun and embraces continuous improvement OUR VISION Customer – to be the most customer responsive company in the industry as determined by the customer Financial – to be the most profitable company in the industry as measured by Return on Invested Capital Team Member – to be the best place to work in the industry as determined by our team members 30 TEREX CORPORATION 2006 ANNUAL REPORT
  28. 28. Terex Corporation 2006 Annual Report on Form 10-K
  29. 29. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) ⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2006 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________. Commission File Number 1-10702 TEREX CORPORATION (Exact Name of Registrant as Specified in Charter) DELAWARE 34-1531521 (State of incorporation) (I.R.S. Employer Identification No.) 200 NYALA FARM ROAD, WESTPORT, CONNECTICUT 06880 (Address of principal executive offices) (Zip Code) Registrant’s Telephone Number, including area code: (203) 222-7170 Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK, $.01 PAR VALUE (Title of Class) NEW YORK STOCK EXCHANGE (Name of Exchange on which Registered) Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. NO ⌧ YES Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act. NO ⌧ YES Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES ⌧ NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer ⌧ Accelerated Filer Non-accelerated Filer Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). NO ⌧ YES The aggregate market value of the voting and non-voting common equity stock held by non-affiliates of the Registrant was approximately $4,819 million based on the last sale price on June 30, 2006. THE NUMBER OF SHARES OF THE REGISTRANT’S COMMON STOCK OUTSTANDING WAS 102.6 MILLION AS OF FEBRUARY 22, 2007. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Terex Corporation Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by this Form 10-K with respect to the 2007 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
  30. 30. TEREX CORPORATION AND SUBSIDIARIES Index to Annual Report on Form 10-K For the Year Ended December 31, 2006 PAGE PART I Item 1 Business 3 Item 1A Risk Factors 22 Item 1B Unresolved Staff Comments 25 Item 2 Properties 26 Item 3 Legal Proceedings 28 Item 4 Submission of Matters to a Vote of Security Holders 28 PART II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 6 Selected Financial Data 32 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A Quantitative and Qualitative Disclosure about Market Risk 56 Item 8 Financial Statements and Supplementary Data 58 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 58 Item 9A Controls and Procedures 59 Item 9B Other Information 62 PART III Item 10 Directors, Executive Officers and Corporate Governance 63 Item 11 Executive Compensation 63 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 63 Item 13 Certain Relationships and Related Transactions, and Director Independence 63 Item 14 Principal Accountant Fees and Services 63 PART IV Item 15 Exhibits and Financial Statement Schedules 64 -2-