Terex Corp. announced income from continuing operations for the first quarter of 2011 of $5.0 million, or $0.04 per share.
Terex Corp. announced income from continuing operations for the first quarter of 2011 of $5.0 million, or $0.04 per share, compared to a loss from continuing operations of $79.0 million or $0.73 per share in the first quarter of 2010. The first quarter results were favorably impacted by an after-tax gain of $33.2 million, or $0.28 per share on the sale of approximately 1.8 million shares of Bucyrus International, Inc. common stock, while negatively impacted by an after-tax expense of $4.1 million, or $0.04 per share, for costs associated with the early retirement of the Company’s 7-3/8% senior subordinated notes in the quarter, and afte- tax charges related to restructuring and a customer insolvency of an additional $3.8 million, or $0.03 per share.
Net sales from continuing operations were $1,256.2 million in the first quarter of 2011, an increase of 34.2% from $935.9 million in the first quarter of 2010. Loss from operations was $9.3 million in the first quarter of 2011, an improvement of $57.2 million as compared to a loss from operations of $66.5 million in the first quarter of 2010.
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.
“Overall, the first quarter results were largely in line with our expectations. Order activity continues to accelerate, and demand has picked up sharply, leading to increased quarterly sales in most of our businesses. This is most evident by the significantly increased backlog seen in all four of our segments at the end of the first quarter,” commented Ron DeFeo, Terex Chairman and Chief Executive Officer. “Somewhat offsetting favorable demand trends are increased input costs, mostly associated with purchased materials such as steel, hydraulics, tires and other manufacturing components. In response, we have recently increased pricing in an effort to regain the profitability we would expect from each product line. We also see some potential risks associated with component availability and are monitoring our supplier base closely.”
Mr. DeFeo continued, “The economic recovery is taking hold in many major markets for Terex. As we had previously indicated, we expected our Cranes segment to be challenged in the first half of 2011 as we work through the effects of inconsistent demand for many of our larger cranes during 2010. This was particularly evident in our port equipment line of business, where we had several customers delay delivery in the first quarter, which led to a larger than expected loss for the segment overall. We expect to deliver these cranes during the upcoming months and for our orders and deliveries to improve as we move through the year. Longer term, we are optimistic about our Cranes segment, as we have seen a significant increase in demand from North America, as well as a continued increase in activity in developing markets.”
Mr. DeFeo added, “Performance in the Materials Processing (MP) segment continues to improve, with the business performing consistent with our expectations, and positioned to show improved profitability in the remaining quarters of 2011. Our Aerial Work Platforms (AWP) business has seen a substantial increase in demand from the North American rental channel, with backlog up approximately 123% from this time last year and approximately 45% from the end of 2010. We have initiated pricing increases in AWP starting with deliveries scheduled for late in the second quarter of 2011. However, the current operating margin reflects the impact of orders placed early in the recovery without the benefits of the new pricing structure or the benefit of operating efficiencies as we accelerated production to meet the increased demand. Construction segment operating losses were sharply reduced in the first quarter, mainly reflecting improvements from cost savings initiatives, improved operating performance and increasing demand, particularly for compact construction equipment and material handlers. We are pursuing initiatives to grow our market share in each of our segments and we are very enthusiastic about the new products we launched at the CONEXPO trade show in Las Vegas in March.”
“Our expectation for full year 2011 performance heading into this year was for net sales to be between $5 billion and $5.4 billion, resulting in earnings per share (EPS), excluding restructuring and unusual items, between $0.60 and $0.75. Adjusting our view for an improved demand environment, but increased pressures from component costs, our current expectations are for us to achieve the previously guided EPS range on net sales between $5.2 billion and $5.5 billion. We also expect each of the remaining quarters in 2011 to deliver positive net income and EPS. Longer term, we remain focused on the growth goals previously established for Terex of achieving $8 billion in net sales and an operating margin of 12%.”
First 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 first quarter of 2011 increased $161.1 million, or 74.7%, to $376.8 million versus the first quarter of 2010. The North American market continued its recovery, with increased capital expenditures from both large and medium sized rental customers related to fleet replacement. All other geographies experienced strong growth, especially Western Europe.
Income from operations in the first quarter was $6.0 million, or 1.6% of net sales, as compared to a loss from operations of $20.3 million, or 9.4% of net sales, incurred during the first quarter of 2010.
Operating profit benefited mainly from increased sales volumes and manufacturing cost absorption due to increased production levels. Partially offsetting this increase were higher input costs and weaker price realization due to early order discount and other incentives.
Net sales for the Construction segment for the first quarter of 2011 increased $138.4 million, or 67.7%, to $342.9 million versus the first quarter of 2010. The improvement in net sales was driven by strong demand for the material handler product and increased demand for trucks, especially for quarry applications in developing markets. Also contributing to the increase in net sales was demand for backhoe loaders in Western Europe and Russia, increased interest in compact equipment in rental outlets throughout the Americas and strong parts sales driven by aging fleets and higher utilization.
Loss from operations in the first quarter was $3.5 million, or 1.0% of net sales, as compared to a loss from operations of $22.8 million, or 11.1% of net sales, during the first quarter of 2010. Operating results benefited from increased sales volumes and improved operating performance due to restructuring that has taken place over the past year. This was slightly offset by increased costs for certain raw materials and components as well as selling, general and administrative expenses in
response to the growth.
Net sales for the Cranes segment for the first quarter of 2011 decreased $15.4 million, or 3.7%, to $398.3 million versus the first quarter of 2010. The quarterly net sales were favorably impacted by a recovery in demand throughout the Americas with shipments being driven predominantly by energy and commercial construction applications. Demand remained slow for large crawler cranes worldwide, where the market tends to recover later in the business cycle. Also contributing to crawler crane demand weakness was the postponement or cancellation of certain wind projects in Germany and the UK due to reductions in government funding. Our port equipment products have experienced delivery delays, with these deliveries now expected to take place in the second and third quarters of 2011. Quarterly results related to port equipment products remain somewhat hard to predict with the unevenness of product ordering, tenders and customer delivery.
Loss from operations during the first quarter of 2011 was $22.5 million, or 5.6% of net sales, as compared with a loss from operations of $3.1 million, or 0.7% of net sales, during the first quarter of 2010. Operating results were negatively impacted by material cost increases, competitive pricing, product mix, and a $5 million charge taken for a customer insolvency, but were helped slightly by improved cost absorption, especially in North America. Larger than expected losses of approximately $16 million mainly due to delayed deliveries and a cost structure that currently remains too high were reported in the port equipment business. The Cranes segment continues to work on accelerating its improvement plan and cost reduction activities related to its port equipment business.
Net sales for the MP segment for the first quarter of 2011 increased $44.0 million, or 40.7%, to $152.2 million versus the first quarter of 2010. Machine sales increased worldwide, particularly in Australia, South Africa and the Americas, primarily due to a stronger global economic picture and dealer restocking ahead of anticipated orders driven by early cycle demand. Northern and Eastern European markets have started to show signs of recovery, while demand in
Southern European markets remained fairly soft.
Income from operations during the first quarter of 2011 was $12.3 million, or 8.1% of net sales, compared to a loss from operations of $0.3 million, or 0.3% of net sales, incurred during the first quarter of 2010. The primary drivers of the improved operating performance were better manufacturing utilization and product pricing, offset partially by the rising cost of components and raw materials.
Corporate and Other / Eliminations:
The loss from operations of $1.6 million during the first quarter of 2011 improved by $18.4 million compared to the prior year period, mainly due to the impact of a higher allocation of expenses to the business segments, less restructuring and increased government sales and other activities in the current year period.
Interest and Other Income (Expense): Interest expense, net of interest income in the first quarter of 2011 decreased $8.7 million when compared to the first quarter of 2010, primarily driven by reduced interest expense due to the recent debt retirements. Other income in the first quarter of 2011 included a $51.6 million gain related to the sale of a portion of the Company’s shares of Bucyrus International common stock.
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