) will redeem $300 million senior notes bearing an interest rate of
10-7/8% and maturing in 2016. The redemption of the notes, issued
in May 2009, will be effective on September 28, 2012.
Terex decided to pay the holders the principal amount, a premium
which will be calculated under the make-whole provision of the
indentures plus accrued interest of $35.34 per $1,000 principal
amount at the redemption date.
The decision fits well with Terex's strategy, helping it to improve
earnings and generate cash flow thus assisting the company in
reducing its debt level. The company focuses on reducing its
interest expenses to improve its overall capital structure.
The company's debt to capital ratio, as of June 30, 2012, was
54.7%, compared with 54.6% as of December 31, 2011. With the note
redemption, the debt level is expected to fall.
During the second quarter, the company posted adjusted earnings of
75 cents per share, easily beating the Zacks Consensus Estimate of
49 cents. Terex generated free cash flows of $155 million during
Earlier, in January 18, 2011, Terex completed the redemption of
$297.6 million 7-3/8% outstanding senior subordinated notes due
2014. The total cash paid was $312.3 million.
Terex has made significant progress in diversifying its businesses,
achieving growth in targeted areas and cultivating new revenue
streams. The company completed the acquisition of nearly 82% shares
of Demag Cranes AG in August last year and added a new business
unit called Cranes segment.
Terex operates in highly competitive markets. The company competes
with large players like
Deere and Company
) with greater financial resources, as well as smaller
manufacturers that compete primarily on price. If the competitors
resort to price cuts, then the company would be forced either to
lower prices on its products or lose market share.
Terex retains a short-term Zacks #3 Rank (Hold). We have a
long-term Neutral recommendation on the stock.
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TEREX CORP (TEX): Free Stock Analysis Report
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