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Terex announces second quarter 2009 results

Thursday, July 23rd, 2009

Terex Corporation announce a net loss for the second quarter of 2009 of $77.6 million, or $0.78 per share, compared to net income of $236.3 million, or $2.32 per share, for the second quarter of 2008. Net sales were $1,320.2 million in the second quarter of 2009, a decrease of 55.0% from $2,935.9 million in the second quarter of 2008. Adjusting for the translation effect of foreign currency exchange rate changes, net sales decreased approximately 49% from the comparable prior year period. During the second quarter of 2009, the Company incurred after-tax charges of $31.4 million, or $0.32 per share, associated with restructuring programs and a continued reduction in production levels. Additionally, as previously disclosed, the Company and the U.S. Securities and Exchange Commission (“SEC”) Staff have reached a tentative agreement in principle to resolve the SEC’s concerns which would require, among other things, that the Company pay a penalty. Accordingly, a charge of $8.0 million, or $0.08 per share, was taken during the second quarter of 2009 in anticipation of the proposed settlement with the SEC, which is still subject to SEC and court approval. All per share amounts are on a fully diluted basis.
“The turmoil from the ongoing recession continues to deeply impact sales for our industry,” commented Ron DeFeo, Terex Chairman and Chief Executive Officer. “Certain markets have stabilized, but at low levels, such as Aerial Work Platforms (“AWP”) and Materials Processing. Other markets, such as Mining and large capacity cranes, have begun to weaken, but at less dramatic rates. We are responding by aggressively reducing costs. Manufacturing spending in the second quarter of 2009 was down 49% from the second quarter of 2008 and 16% sequentially from the first quarter. When combined with further reductions of selling, general and administrative expenses (“SG&A”), these actions resulted in a $246 million quarterly run-rate spending reduction in the second quarter of 2009 versus spending levels in the second quarter of 2008. We continue to target a $300 million quarterly run-rate reduction by year end.”
“We are still managing the company for cash, and we made good progress this quarter,” Mr. DeFeo continued. “Our capital markets activity this quarter, plus cash generated from operations, resulted in an improved liquidity position with cash and borrowing availability of approximately $939 million and $486 million, respectively, at June 30, 2009. We believe that we are increasingly well positioned to weather the current economic storm.”
Tom Riordan, Terex President and Chief Operating Officer, commented, “We are continuing to operate through some very challenging times. Our factories are working on reduced schedules, with a build-to-order approach, as we aggressively manage our business to further reduce inventory levels. During the second quarter, inventory reductions generated cash of approximately $278 million, and we are working toward exceeding our $500 million target for the year. We anticipate that further cost savings initiatives will need to be undertaken in order to eliminate operating losses by the end of 2009 in our most challenged businesses. However, for our AWP business specifically, we may not see operating profitability until the demand environment improves, which in our estimate may not occur for another 12 months.”
Mr. Riordan added, “The Construction segment generated a large operating loss during the second quarter, as additional restructuring activities resulted in substantial charges. We are addressing the problems of dramatic net sales reductions as rapidly as possible. At some operating locations, headcount reductions have taken longer to implement than we would have liked, but we will make the necessary changes in the near term. Many of the headcount actions for which restructuring charges have already been incurred will be made effective during the third quarter, and should result in improved income statement performance through the balance of 2009 and into 2010.”
Mr. Riordan continued, “The balance of our businesses posted mixed results in the second quarter, with Mining and Cranes generating modest profitability. The large crane business remains generally healthy, with the large crawler crane business being the most stable. The Mining business began to see a rebound in parts and service activity in June, which was a favorable development not experienced in recent quarters. While the overall environment remains difficult for Materials Processing, we are excited by the startup of our Hosur, India facility and its successful launch of production in July. With the commitment of the Indian government to infrastructure investment, the opportunity for crushing and screening sales in that market over the next few years is expected to be substantial.”
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