Terex Corp. today announced income from continuing operations for the second quarter of 2011 of $0.9 million, or $0.01 per share, compared to a loss from continuing operations of $13.1 million, or $0.12 per share, in the second quarter of 2010.
The second quarter results were favorably impacted by an after-tax gain of approximately $26 million, or $0.22 per share, on the sale of approximately 1.4 million shares of Bucyrus International common stock, and were negatively impacted by restructuring and related after-tax charges of approximately $33 million, or $0.29 per share, relating to the Cranes segment, where the Company continues its cost reduction and manufacturing footprint rationalization. There were also after-tax charges related to the pending acquisition of Demag Cranes AG of approximately $3 million.
Adjusting for these items, income from continuing operations would have been approximately $11 million, or $0.10 per share. Net sales from continuing operations were $1,488.2 million in the second quarter of 2011, an increase of 37.8% from $1,079.9 million in the second quarter of 2010. Adjusting for the translation effect of foreign currency exchange rate changes, net sales increased approximately 30% from the
comparable prior year period. Income from operations was $6.8 million in the second quarter of 2011, as compared to a loss from operations of $10.4 million in the second quarter of 2010, an improvement of $17.2 million. Excluding the impact of certain items in both periods, income from operations as adjusted would be approximately $43 million in the second quarter of 2011 compared to approximately $8 million in the second quarter of 2010. The Glossary at the end of this press
release contains further details regarding these items.
All results are for continuing operations, unless stated otherwise. Discontinued operations include the Mining, Atlas and Powertrain businesses. All per share amounts are on a fully diluted basis.
“We have made progress during the first six months of 2011, but there is still significant work in front of us,” commented Ronald M. DeFeo, Terex’s Chairman and Chief Executive Officer. “We had strong
performance in terms of order and sales activity in the second quarter but supplier constraints on component deliveries and other operational challenges caused operating margins to be below expectations. Our sales grew by 38% over the prior year period and 18% over the first quarter of
2011. Overall, our Materials Processing (MP) segment performance not only had solid growth in sales, but also made excellent progress in terms of increased operating margins. Our Aerial Work Platforms (AWP) segment also made progress, but not at the operating margins we expected. Our Cranes segment continued to adjust to the softer European market demand and has taken and continues to initiate substantial cost reductions. Our suppliers have struggled in some areas to keep
up with our requirements. This was particularly an issue for our Construction segment, but deliveries from component suppliers had improved by the end of the quarter.”
“We anticipate that Cranes restructuring actions will improve that segment’s performance, particularly in 2012. In total, we expect approximately $70 million in annualized benefit from the actions that have and will be taken in that segment. These changes reflect headcount and facility adjustments, and, while painful, we anticipate a stronger and better franchise in the future. Terex Port Equipment made substantial progress in the quarter. While this business was not yet profitable, losses excluding restructuring and related costs were cut in half from the first quarter. As a result of the improving demand environment and the restructuring actions that have been and will be taken, we expect this
business to exit 2011 at a break even rate or better. AWP costs, both material and headcount, caused some disappointment in our margin performance for this segment. Our previously announced 4.5% price increase in AWP should begin helping our performance in the second half of 2011. Now that the net sales and order rates have moderated somewhat we think the stability of the workforce can be driven to higher productivity. Construction performance is expected to progress as supply
shortages diminish and prior restructuring yield improved results. Roadbuilding product demand did slow, particularly in Brazil, which we had not anticipated.”
"The Demag Cranes AG purchase offer has met our expectations and progressed well. At the end of the extended offer period, preliminary results indicate that approximately 82% of the outstanding shares were tendered for purchase or are already owned by Terex. Demag Cranes AG will add a new business segment to Terex with world-class products in industrial cranes and hoists, port technology and service. Demag Cranes AG’s business is highly complementary to the existing Terex
business, and the combination has compelling industrial logic. The addition of Demag Cranes AG is expected to add approximately $1.7 billion annually in net sales with a strong footprint in Europe and
emerging markets. The completion of the offer still remains subject to merger control clearance by the European Commission. We expect that this transaction will close in the third quarter of 2011."
“We anticipate that our full year performance will be near the top of our range for net sales. Our prior expectation for full year 2011 was for net sales to be between $5.2 billion and $5.5 billion, resulting in EPS, excluding restructuring and other items, between $0.60 and $0.75. Current expectations are for full year 2011 net sales to be between $5.4 billion and $5.6 billion. Our full year earnings guidance reflects our first half performance, as well as input cost concerns that are slowly moderating. We anticipate EPS for the full year 2011 to be between $0.40 and $0.60 per share, excluding restructuring and other items. We also expect the remainder of 2011 to deliver positive free cash flow
in the range of $350 million to $400 million. The above guidance excludes any impact from the Demag Cranes AG transaction.”
Second Quarter Performance Review
In this press release, Terex refers to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures.
These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. Terex believes
that this non-GAAP information is useful to understanding its operating results and the ongoing performance of its underlying businesses. Certain financial measures are shown in italics the first time referenced and are described in a Glossary at the end of this press release.
Aerial Work Platforms: Net sales for the AWP segment for the second quarter of 2011 increased $251.7 million, or 108.3%, to $484.1 million versus the second quarter of 2010. Adjusting for the translation effect of foreign currency exchange rate changes, net sales increased approximately 105% from the comparable prior year period. The North American and Brazilian markets continued to show strong growth and Western European market demand has continued to strengthen from last
quarter. Booms and telehandlers demonstrated particular sales strength and significant growth was seen across all product lines. Additionally, price increases were implemented late in the quarter in all geographies, with the benefits expected to be seen in the second half of the year. Also contributing to the increase in segment sales was the disposition of the remainder of the segment’s utility rental fleet, the first portion of which was sold in late 2010.
Income from operations in the second quarter of 2011 was $28.2 million, or 5.8% of net sales, as compared to a loss from operations of $2.3 million, or 1.0% of net sales, during the second quarter of
2010. Operating profit benefited mainly from increased sales volumes and product mix, partially offset by under-absorption in some facilities due to manufacturing inefficiencies, supplier shortages
and increased costs from suppliers, all of which can occur with rapid increases in production levels.
Construction: Net sales for the Construction segment for the second quarter of 2011 increased $82.3 million, or 29.5%, to $361.3 million versus the second quarter of 2010. Adjusting for the translation
effect of foreign currency exchange rate changes, net sales increased approximately 23% from the comparable prior year period. The improvement in net sales was again driven by strong demand for
material handlers and increased demand for trucks, especially in developing markets like Russia and Latin America. Higher demand in North America relating to increased mining activity also led to
higher truck sales in Canada. Also contributing to the increase in net sales was demand for backhoe loaders in Northern Europe and Russia, increased interest in compact equipment in both rental outlets and the distribution network throughout the Americas and strong parts sales driven by aging fleets and higher utilization. This increase was offset by a sharp decrease in Roadbuilding products, predominantly in Brazil, where some tightening in government sponsored financing programs
Loss from operations in the second quarter of 2011 was $6.8 million, or 1.9% of net sales, as compared to a loss from operations of $16.8 million, or 6.0% of net sales, during the second quarter of 2010. Operating results benefited from increased sales volumes, selling, general and administrative (SG&A) savings and improved operating performance due to restructuring that has taken place over the past few years. This was offset by component shortages which caused missed
shipments and under-absorption at some facilities, lower volumes in Roadbuilding products and an unfavorable product mix in the North American operations. Operating results included a pre-tax charge for a long-standing dispute settled in arbitration for $2.0 million.
Cranes: Net sales for the Cranes segment for the second quarter of 2011 increased $15.0 million, or 3.3%, to $464.1 million versus the second quarter of 2010. Adjusting for the translation effect of foreign currency exchange rate changes, net sales decreased approximately 5% from the
comparable prior year period. Rough terrain cranes, truck cranes and mobile port equipment demonstrated the most significant contribution to sales growth this quarter, especially in North America, where rough terrain and truck cranes have shown particular strength. Tower cranes and some of the large crawler cranes have also experienced positive trends this quarter and the segment is seeing some renewed interest in tower cranes from very low 2009 demand levels. All-terrain cranes
have rebounded a bit from soft first quarter levels, although still significantly lower than a year ago.
Shifting delivery dates for orders in backlog and order cancellations continue to disrupt current shipment expectations in the German cranes business. Loss from operations in the second quarter of 2011 was $34.0 million, or 7.3% of net sales, as compared with income from operations of $17.0 million, or 3.8% of net sales, during the second quarter of 2010. Operating results were negatively affected by under-absorption, SG&A costs and restructuring charges. The pre-tax restructuring and other charges of approximately $36 million related to cost reduction and manufacturing footprint rationalization. These were partially offset by
higher net sales, decreased warranty expense and a favorable adjustment related to a prior acquisition of approximately $3 million.
Materials Processing: Net sales for the MP segment for the second quarter of 2011 increased $53.2 million, or 39.3%, to $188.7 million versus the second quarter of 2010. Adjusting for the translation
effect of foreign currency exchange rate changes, net sales increased approximately 30% from the comparable prior year period. Machine sales continued to show strength worldwide, particularly in Australia, South Africa and the Americas, primarily due to dealer restocking ahead of anticipated orders driven by early cycle demand and an increasing need for higher productivity and larger capacity machines. Northern and Eastern European markets have continued to recover with strong
sales both sequentially and year-over-year partially driven by growth in the UK and Germany.
Income from operations in the second quarter of 2011 was $21.1 million, or 11.2% of net sales, compared to income from operations of $9.2 million, or 6.8% of net sales, during the second quarter of 2010. The primary drivers of the improved operating performance were better manufacturing utilization and product mix and pricing.