05.09.2005

Terex subject to SEC investigation

Terex has received a subpoena from the Securities and Exchange Commission (SEC) in the USA in a matter entitled “In the Matter of United Rentals, Inc.” The subpoena principally requires the production of documents concerning certain transactions involving Terex and it subsidiaries and United Rentals in 2000 and 2001.

In a separate issue, Terex has been advised by the SEC that it is starting an investigation into Terex accounts. Terex say that the investigation is most likely into the ongoing restatement of the company’s results for 2000/2001/2002 and 2003.

The restatement principally pertains to errors identified by Terex in accounting for, and
reconciliation of, certain intercompany imbalances, as well as in the failure to properly eliminate, in consolidation, all intercompany accounts in accordance with generally accepted accounting principles. While no formal order has yet been issued, Terex says that it is cooperating fully and intends to voluntarily provide the SEC staff with information.

Vertikal Comment

United Rentals has been under investigation by the SEC for some time and is in the process of restating its results for 2002. Its President and Chief Financial officer, John Milne was recently fired see United fires Milne after refusing to answer questions posed by a board level committee, on the accounting practices during that period.

Included in the investigation at United which has been running for over a year now, were a number of suspect sale and leaseback transactions with unnamed suppliers. The transactions added $12.5, $20.2 and $1.5 million of gross profits to United’s results in 2000/2001 and 2002. It now appears that at least some of those transactions might have been with Terex.

Terex CEO Ron Defeo, recently resigned from the board of United Rentals in order to avoid potential conflicts of interest.
see Ron Defeo resigns from United

United is also waiting to hear if some of its bond holders will agree to extend amendments to the indentures governing reporting deadlines, Its formal results for the full year 2004 and interim 2005 have been delayed due to the SEC investigation.
The company recently extended the deadline until this Friday, September 9th, presumably due to a lack of consent from some of them? If consent is not received then technically United will be in default.