Westport, Conn.-based Terex Corp. last week announced a net loss for the fourth quarter of 2008 of $421.5 million, or $4.46 per share. The net loss in the fourth quarter includes pre-tax non-cash charges of $459.9 million, or $4.84 per share, for the impairment of goodwill. These charges were in the company’s Construction, Roadbuilding and Utility Products businesses.
Additionally, the company incurred pre-tax charges of $21.8 million, or $0.24 per share, primarily associated with a reduction in production levels in the fourth quarter of 2008. These results compare to net income of $174.0 million, or $1.67 per share, for the fourth quarter of 2007. All per share amounts are on a fully diluted basis.
Net sales for the fourth quarter of 2008 dropped by approximately 20 percent to $2.08 billion versus $2.59 billion in the fourth quarter of 2007, as declining demand in the company’s Aerial Work Platforms, Construction and Materials Processing businesses continued. The translation effect of foreign currency exchange rate changes negatively impacted fourth quarter 2008 net sales by approximately 8 percent, while acquisitions added approximately 2 percent to net sales over the prior year’s fourth quarter.
For the full year 2008, the company reported net income of $71.9 million, or $0.72 per share, compared to net income of $613.9 million, or $5.85 per share, for the full-year 2007. The goodwill impairment charges mentioned above reduced net income by $4.60 per share for the full year, and other pre-tax charges totaling $25.8 million, primarily related to adjustment of the company’s production levels, decreased full-year 2008 net income by $0.18 per share.
Net sales were $9.9 billion in 2008, an increase of 8.2 percent from $9.1 billion in 2007. The strong full-year performance of the Cranes and Mining businesses were offset by the dramatic decline in demand for many of the company’s other products during the second half of 2008, largely due to the impact of the rapidly deteriorating global economy.
“This past year has been like no other – the first half of the year exhibited robust growth and expansion, while the second half of the year was severely impacted by the global credit crisis and economic deterioration, which drove significant declines in customer demand in our businesses,” said Ron DeFeo, Terex chairman and CEO. “For the full year, net sales increased significantly in our Cranes and Mining businesses, but were offset by the results in our Aerial Work Platforms, Construction, and Materials Processing businesses, which experienced considerable weakness in the second half of the year. Excluding the goodwill impairment charges, our net income for the year was good given the economic environment. Although we are disappointed with our current working capital levels, we have taken aggressive actions to adjust our production to meet reduced customer demand. We maintained a strong cash position and ended the year with a solid balance sheet and sufficient liquidity to execute our key business plans.
“Given the current market conditions, it is difficult to project 2009 performance with a reasonable degree of certainty. However, we are planning for continued softness in demand. We are experiencing increasing levels of cancellations in our backlog for crane and mining products, as well as delays in acceptance of deliveries, as our customers in these areas are not immune to the effects of the global economic downturn. Based on what we know today, we expect our net sales for 2009 to decline by 30 percent to 35 percent from 2008. The translation effect of foreign currency exchange rate changes is expected to contribute approximately 13 percent of this decline. Given the uncertainty and volatility in today’s environment, we are not providing earnings guidance until we have better visibility; however, we will continue to take aggressive actions to reduce operating costs and improve our cash flow.”
Backlog of orders deliverable during the next 12months was $2.96 billion at Dec. 31, a decrease of 29.3 percent and 18.5 percent versus Dec. 31, 2007 and Sept. 30, 2008, respectively. The decrease was mainly driven by significant reductions in orders for the Aerial Work Platforms, Materials Processing, and Construction businesses, as well as the translation effect of foreign currency exchange rate changes. During the fourth quarter, the company also experienced softening demand and cancellations and rescheduling of orders in the Cranes and Mining businesses, as it confirmed delivery expectations for production in 2009.
The company currently expects its 2009 net sales to decline in the range of 30 to 35 percent compared to 2008, approximately 13 percent of which is the estimated translation effect of foreign currency exchange rate changes. Segment net sales are expected to be affected to varying degrees due to the deteriorating global economy and resultant weak overall demand. As compared to 2008, the Aerial Work Platforms and Utility Products businesses are expected to be down 35 to 45 percent, Construction and Roadbuilding businesses to be down 25 to 35 percent, the Cranes business to be down 25 to 35 percent and the Materials Processing and Mining businesses to be down 25 to 35 percent in 2009.
“Given the negative general economic conditions and the resulting effect on our industry, we are focusing our actions on cash flow generation, and aggressively reducing production levels, incoming material and our cost base,” said Tom Riordan, Terex president and chief operating officer. “This is balanced with a sharper focus on those initiatives that will complement these activities and improve our long-term position.
“In response to the global credit crisis, the company began taking actions during the third quarter of 2008, and as the global economy continued to weaken, the company accelerated its responses. Actions have been taken to slow, and in some cases stop, the production of our products and to reduce the company’s workforce for those realities. Our strategic supply partners have cooperated well with the rescheduling of incoming material. While input costs, particularly steel, have begun to moderate, we don’t expect to see significant favorable impact until the middle of 2009 due to existing inventory levels. It is a very unfortunate statement, but in excess of 5,000 jobs, including the majority of our temporary workforce, have been or are expected to be eliminated as compared to our June 2008 employment levels.”
Terex Corp. is a diversified global manufacturer with 2008 net sales of $9.9 billion. As of Jan. 1, Terex now operates in four business segments: Terex Aerial Work Platforms, Terex Construction, Terex Cranes, and Terex Materials Processing & Mining. Terex manufactures a broad range of equipment for use in various industries, including the construction, infrastructure, quarrying, surface mining, shipping, transportation, refining and utility industries.