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Terex 2Q Sales Jump, DeFeo Calls Prospects ‘Cautious, but Positive’

Terex Corp. (NYSE: TEX) last week announced a net loss from continuing operations for the second quarter of 2010 of $13.1 million, or $0.12 per share, compared to a net loss from continuing operations of $99.6 million, or $1.00 per share, for the second quarter of 2009. Contributing to the 2Q10 net loss were pre-tax charges of approximately $11 million associated with restructuring programs and manufacturing realignment in certain businesses and a pre-tax provision of approximately $7 million for expected historical foreign duty and related obligations for certain products.

Net sales for continuing operations were $1.08 billion in the second quarter of 2010, an increase of $132.6 million, or 14 percent from $947.3 million in the second quarter of 2009. Excluding the impact of acquisitions, net sales increased approximately 6 percent from the comparable prior-year period. Each of the company’s segments, with the exception of Cranes, experienced improvement in net sales compared to the second quarter of 2009 as a result of slightly improved economic conditions, the replacement of dealer rental equipment and the company’s internal initiatives to improve sales performance.

“We have just completed a challenging first half of 2010, but many of our businesses have seen their recent results show improvement off of trough levels experienced during 2009,” said Ron DeFeo, Terex chairman and CEO. “We are cautious, but positive, about our prospects for continued improvement. Backlog in three of our four segments indicate slightly improved near-term prospects. Our factories have returned to more regular work schedules and production output. These improving business conditions are the basis for our cautious optimism about the balance of 2010 and lay the foundation for what we feel will be a positive business environment in 2011 for most of our product categories.”

Higher debt levels resulting from the company’s capital markets activity executed in June 2009 combined with acquisition-related debt in July 2009 increased interest expense for the second quarter of 2010 by approximately $10 million compared to the prior year period. Interest income increased by approximately $1 million compared to the prior year period, reflecting the company’s larger cash balance.

Net sales for the Aerial Work Platforms segment for the second quarter of 2010 increased $24.3 million, or 11.7 percent, to $232.4 million versus the second quarter of 2009. While rental customers in the North American and European markets continued to age their aerial fleets and generally deferred the purchase of new products, selective buying patterns have begun to emerge. Additionally, it appears that the de-fleeting of inventory at rental locations has slowed. Developing markets remain a strong growth component for the AWP segment as demand for large booms, light towers and telehandlers continues to steadily improve in markets such as South America and South East Asia.

Net sales for the Construction segment for the second quarter of 2010 increased $87.2 million, or 45.5 percent, to $279.0 million versus the second quarter of 2009. This change in net sales was driven by a broad-based recovery from trough levels in 2009 in almost every product category and across most regions. A significant increase in sales of material handlers continued globally and the off-highway truck business experienced an increase in order and quotation activities, aided by strong demand from Latin American markets. Compact construction equipment continued to experience good order demand, including increased demand for the compact track loader product in North America and undercarriage components supplied to another major manufacturer. The Roadbuilding business grew approximately 46 percent in the quarter versus the prior-year period, driven by improvements in both the North American and Latin American markets. The concrete mixing truck product line remained challenged, with sales still running approximately 80-percent below the most recent peak levels.

Net sales for the Cranes segment for the second quarter of 2010 decreased $23.8 million, or 5.0 percent, to $449.1 million versus the second quarter of 2009. Excluding the translation effect of foreign currency exchange rate changes of approximately $5 million and acquisition-related net sales during the second quarter of 2010 of approximately $80 million, net sales decreased approximately 21 percent versus the prior-year period. Customers continued to purchase high capacity crawler cranes during the second quarter of 2010, driven by global infrastructure and power projects. Tower crane and rough terrain crane demand remained stable, albeit at low levels.

Net sales for the Materials Processing segment for the second quarter of 2010 increased $45.1 million, or 49.9 percent, to $135.5 million versus the second quarter of 2009. Demand for materials processing equipment has increased as dealers have generally stopped downsizing their inventory and are now ordering in concert with end market demand. Additionally, markets such as Australia and South America are showing favorable signs of growth driven by both mining and infrastructure applications.

“Operationally, we view our results as being consistent with previous guidance,” DeFeo said. “We continue to expect break-even operating profit for the full-year 2010 before interest and taxes, and a loss of approximately $1.00 per share, both excluding restructuring and unusual items. Due to the divestiture of the Atlas business and the negative effect of currency exchange rate changes, we now expect full-year 2010 sales to be in the range of $4.5 to $4.6 billion. While clearly a challenge, our objective remains to return to EPS profitability in the fourth quarter of 2010. Longer term, we continue to view 2011 as a profitable growth year. Assuming a return to a more normalized economic environment, based on the historical performances of our businesses, we believe doubling our revenue, with net income of approximately $6 per share, is achievable by 2013.”

Terex Corp. is based in Westport, Conn.

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