Terex Crane Segment Challenged in Q3, Terex AWP Loses 500 Team Members | Construction News

While third quarter 2014 results were in line with Terex's revised guidance, the company's income is down. Terex Corp. announced late last week its income from continuing operations was $58.7 million, or $0.51 per share for the third quarter of 2014, and excluding certain items, income from continuing operations as adjusted was $67.8 million, or $0.59 per share. This compared to income from continuing operations of $84.5 million, or $0.73 per share for the third quarter of 2013. The Glossary at the end of the release contains more details on these items.

Net sales were $1,8 billion in the third quarter of 2014, 3% higher than net sales of $1.76 billion in the third quarter of 2013. Income from operations was $116.8 million in the third quarter of 2014 and excluding certain items, income from operations as adjusted was $127.5 million. This compared to income from operations o f$138.6 million in the third quarter of 2013.

“Our results for the third quarter were in line with the revised guidance communicated in mid-September,” commented Ron DeFeo, Terex chairman and CEO. “Our cranes segment met our lowered expectations for the quarter as end markets remain challenged. However, despite continued market environment challenges, we are anticipating sequential improvement from cranes in the fourth quarter.

"While our AWP business is performing well, we had planned for a stronger second half of 2014 than has materialized which has put pressure on margins. AWP profitability was further negatively affected by currency movements late in the quarter, primarily the Brazilian Real, higher commodity costs, and continued manufacturing startup costs related to the production of telehandlers at our Oklahoma City facility. As a result, we removed approximately 500 team members from AWP in the third quarter, which will aid in the return to more normal mid-teens margins within the next 12 months.

"Our MHPS segment had a strong improvement in profitability, excluding the reserve we booked related to the planned closure of a manufacturing facility and production relocation. We are taking this action to improve the efficiency of our manufacturing footprint. Our Construction segment performed as we expected. Our Materials Processing segment had a weak margin quarter as it experienced unfavorable geographic and product mix and our investments in new growth initiatives have yet to deliver increased net sales.”

DeFeo noted that predicting market improvements has been challenging, and the company will assume flat markets and only performance improvements that it can control. “Consequently, we now expect our annual outlook for earnings per share to be at or near the bottom of our previously announced range of$2.35 to $2.50, excluding restructuring and other unusual items, on net sales of between $7.3 billion and $7.5 billion." he said. "Looking forward, we have identified improvement opportunities from cost reduction actions, interest expense declines, and tax rate improvements. We think we can accomplish these in the next two years to provide meaningful improvement in our earnings per share even in a flat market.”

During the third quarter, Terex completed the refinancing of its senior credit facility, allowing it to lower its borrowing cost, extend the maturity dates substantially, and increase liquidity. “In addition, we generated $70.8 million in free cash flow in the quarter," said Kevin Bradley, Terex senior vice president and CFO. "Although we have more work in front of us, we still believe we will meet our free cash flow target although at or near the lower end of the range which is $200 million. We repurchased $11 million of our shares within the quarter for a cumulative total of $95 million since the inception of the program in December 2013."

The company’s liquidity at Sept. 30, 2014 was $894.5 million, which was comprised of cash balances of $344.5 million and borrowing availability under the company’s revolving credit facilities f $550.0 million. 

Return on Invested Capital (ROIC) was 9.8% for the trailing twelve months ended Sept. 30, 2014.

The effective tax rate for the third quarter of 2014 was 32.1% as compared to an effective tax rate of 21.4% for the third quarter of 2013. The higher effective tax rate for the third quarter of 2014 was primarily due to the reduced benefit from the release of uncertain tax positions partially offset by a more favorable geographic mix of earnings when compared to the prior year quarter.

Backlog for orders deliverable during the next twelve months was $1,704.3 million at Sept. 30, 2014, a decrease of 5.1% from Sept. 30, 2013 and a decrease of 22.5% from June 30, 2014.