Fourth Quarter 2016 Earnings Release Conference Call
Brian Henry - Terex Corporation – Senior Vice President, Business Development & Investor Relations
Good morning everyone, and thank you for joining us for today’s fourth quarter 2016 financial results conference call. Participating on today’s call are John Garrison, President and Chief Executive Officer, and Kevin Bradley, Senior Vice President and Chief Financial Officer.
Following the prepared remarks, we will conduct a question and answer session. Last evening we released our fourth quarter and full year 2016 financial results, a copy of which is available on our website at Terex.com. Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call, and is also available on our website. All per share amounts in the presentation are on a fully-diluted basis. We will post a replay of this call on the Terex website under Audio Archives in the Investor Relations section. Let me turn your attention to slide 2, which is our forward-looking statement and description of non-GAAP financial measures. We encourage you to read this as well as other items in our disclosures because the information we will be discussing today does include forward-looking material. With that, please turn to slide 3 and I’ll turn it over to John.
John L. Garrison, Jr. - Terex Corporation - President and Chief Executive Officer
Thanks, Brian, and good morning everyone. Thank you for joining us and for your interest in Terex. I will start by discussing the progress we are making executing our strategy, including our recent divestiture activities. Kevin will cover our financial results, including details of our restructuring program and significant improvements we have made to our capital structure. I will follow with information about our segments and our guidance for 2017 before we open the line to your questions.
The three key elements of our strategy are: Focus, Simplify and Execute to Win. We discussed each of these in detail at our Investor Day in New York City. Since then, we have been executing to our plan, taking important steps in each of these areas. In the fourth quarter we put into operation a professional program management infrastructure: the Transformation Program Office. This will ensure accountability and process discipline. As we enter 2017 we are not expecting our major markets to improve. In fact, we expect most markets to be as challenging as 2016. In this environment it is essential that we execute our operating plan and make the transformational changes that will enable our longer term success.
Turning to slide 4, we are delivering on our commitment to focus the Company on the aerial work platform, mobile lifting and materials processing and handling industries. Closing the sale of MHPS to Konecranes was a complex process. We set a deadline of January 4th to close the deal and our team worked tirelessly to make that happen. We executed on our commitment. Last week we monetized 9.5% of our ownership interest in Konecranes. We are confident in the industrial logic of the combination of MHPS and Konecranes and therefore we retained a 15.5% interest. Other “Focus” actions include the announced contract to sell our dumper and loader backhoe business based in Coventry, England. We also decided to sell our utilities business in Brazil and loader backhoe business in India. We will continue to operate these businesses and consolidate their results, but our intention is to divest them in 2017. With these actions we are near completion of the “Focus” phase of our strategy.
Turning to slide 5, we continue to simplify the Company, which means reducing our global footprint and cost structure. Since the beginning of 2016 we have either closed or sold eight facilities, not including MHPS. We announced plans to sell or close an additional six locations and are in the process of reducing the footprint at our manufacturing complexes in Redmond, Washington and Zweibrucken, Germany. In total these actions will reduce our global footprint by over 3 million square feet, or approximately 32%, increasing flexibility and efficiency without sacrificing our ability to meet customer demand. We continue to take action to reduce our cost structure with emphasis on our functional general and administrative costs. After adjustments we reduced SG&A in 2016 by approximately $41 million dollars. We will continue to make reductions in 2017. We are also reducing our workforce in our Cranes business as we adjust to lower production volumes.
Moving to slide 6, at the Investor Day our business leaders described our three Execute to Win priorities: Lifecycle Solutions, Commercial Excellence and Strategic Sourcing. Through these initiatives we are developing capabilities and implementing common processes to increase operating leverage and improve performance across the company. For example, within Lifecycle Solutions we are assessing all aspects of our parts and service business. We have best practices within Terex today; our opportunity is to share those across the Company. Within Commercial Excellence, we made progress in the fourth quarter deploying sales management and pipeline tracking tools and implementing common Terex processes. We are starting to see the results of increased visibility and process discipline on the commercial side of our business. As we announced in December, we are developing a global strategic sourcing organization. We are moving from a decentralized structure to a centrally-coordinated structure with consistent Terex-wide processes to leverage our direct and indirect material spend. The organization is taking shape. We appointed a global leader who reports directly to me and we are starting to launch wave one. I will continue to communicate our progress on our transformational priorities.
The following information was filed by Terex Corp (TEX) on Thursday, February 23, 2017 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.