BUSINESS DESCRIPTION

Terex is a diversified global manufacturer of capital equipment focused on delivering reliable, customer relevant solutions for the construction, infrastructure, quarrying, surface mining, shipping, transportation, power and energy industries. We operate in five reportable segments: (i) Terex Aerial Work Platforms; (ii) Terex Construction; (iii) Terex Cranes; (iv) Terex Materials Processing & Mining; and (v) Terex Roadbuilding, Utility Products and Other.

Our Aerial Work Platforms segment designs, manufactures, refurbishes and markets aerial work platform equipment, telehandlers, power equipment and construction trailers. Customers in the construction and building maintenance industries use these products to build and/or maintain large physical assets and structures.

Our Construction segment designs, manufactures and markets two primary categories of construction equipment: heavy construction and compact construction equipment. Construction, logging, mining, industrial and government customers use these products in construction and infrastructure projects and in coal, minerals, sand and gravel operations. We acquired A.S.V., Inc. ("ASV") on February 26, 2008. The results of ASV are included in the Construction segment from its date of acquisition.

Our Cranes segment designs, manufactures and markets mobile telescopic cranes, tower cranes, lattice boom crawler cranes, truck-mounted cranes (boom trucks) and telescopic container stackers. These products are used primarily for construction, repair and maintenance of infrastructure, building and manufacturing facilities.

Our Materials Processing & Mining segment designs, manufactures and markets crushing and screening equipment, hydraulic mining excavators, highwall mining equipment, high capacity surface mining trucks, drilling equipment and other products. Construction, mining, quarrying and government customers use these products in construction and commodity mining. We acquired Superior Highwall Miners Inc. and its affiliates ("SHM") on November 6, 2007. The results of SHM are included in the Materials Processing & Mining segment from its date of acquisition.

Our Roadbuilding, Utility Products and Other segment designs, manufactures and markets asphalt and concrete equipment, bridge inspection equipment, landfill compactors and utility equipment. Government, utility and construction customers use these products to build roads, construct and maintain utility lines, trim trees and for other commercial operations. Additionally, we own a majority of the North American distribution channel for our utility products group, operate a fleet of rental utility products in the United States and Canada and own a distributor of our equipment and other products. We also assist customers in their rental, leasing and acquisition of our products through Terex Financial Services, Inc.

In October 2008, we announced our intention to realign certain operations in an effort to capture market synergies and streamline our cost structure in the U.S. As a result, effective in January 2009, the roadbuilding business will become part of the Construction segment and the utility product business will become part of the Aerial Work Platforms segment.

Included in Eliminations/Corporate are the eliminations among the five segments, as well as certain general and corporate expenses that have not been allocated to the segments.

Overview

Our overall financial performance during the third quarter of 2008 was mixed, with favorable results in our Cranes, Materials Processing & Mining ("MPM"), and Roadbuilding, Utility Products and Other ("RBUO") segments and unfavorable results in our Aerial Work Platforms ("AWP") and Construction segments. The current operating environment continues to be challenging, due to unprecedented levels of instability in the financial markets that have resulted from the ongoing global credit crisis, particularly in the U.S. and Western Europe. The AWP and Construction segments and the materials processing business all have experienced weakness for many of their products in these markets.

We continue to see strong demand for cranes and mining equipment, which remain in sustained up-cycles. Year-over-year demand for our cranes and mining businesses continues to grow. This growth has been driven by global infrastructure development and maintenance, as well as commodity and energy prices that remain at levels which support continued investment in capital equipment. Commodities and energy pricing may be weakening, but this has not affected our business materially at this point in time.

We are making select capital investments in our AWP, Cranes and MPM segments to more effectively and efficiently respond to anticipated market demand. We are investing in existing facilities in Germany for cranes and hydraulic mining excavators, and we are developing new facilities in India for material processing equipment and in China for cranes, hydraulic excavators, portable products and scissor and boom lifts to reduce manufacturing costs and to meet the growing demand for these products in these developing regions.

Year-over-year backlog for the AWP, Construction and RBUO segments is down, with AWP and Construction backlogs down significantly. We have also seen recent softening demand for our materials processing products. During the quarter, the AWP and Constructions segments experienced the effects of continued weakness in the U.S. and Western European markets. Both segments experienced declines in net sales and operating income, excluding the effects of foreign currency translation and recent acquisitions.

The RBUO segment showed improvements in sales, as well as profitability, when compared to the prior year period. Stronger demand for utility products, coupled with cost reduction efforts in the roadbuilding business, have resulted in improved profits.

Input costs, particularly higher steel prices, have increasingly been affecting operating results, but have in part been offset by higher pricing to our customers. Input costs continue to present challenges, although they are expected to moderate over time. At this time, our price increases have not yet fully offset our total input cost increases. Rising input costs have had the most effect on the AWP segment, with a lesser impact on the Cranes and MPM segments, as these businesses tend to have longer supply contracts as well as cost escalation clauses in certain contracts with our customers.

We maintain our favorable outlook on the Cranes and MPM segments, as well as our growth in developing markets across all segments, as large global infrastructure, energy and mining projects are expected to continue to drive demand for our cranes and mining equipment. We expect that Western European and U.S. markets will remain soft for our aerial work platforms, construction and materials processing businesses well into 2009. We expect that, beginning in the fourth quarter of 2008 and for the next twelve months, net sales for our AWP segment will be down 30%-40%, our materials processing business will be down 15%-20% and our Construction segment will be down 25%-35% versus the prior twelve-month period. We expect 2009 net sales, including the effect of announced acquisitions, to be similar to 2008 full year net sales, driven by strong results in the cranes and mining businesses, offset by lower net sales in the aerial work platforms, materials processing and construction businesses.

In response to weaker demand, we are taking aggressive actions to reduce costs and inventories, particularly in the aerial work platforms, construction, and materials processing businesses. These actions include reductions in our workforce, temporary shutdowns of manufacturing facilities, review of utilization of existing facilities for potential consolidation, transfer or sale, and improving process and system efficiencies. At the same time, we are continuing to invest in developing markets and our improvement initiatives, as well as selectively increasing cranes and mining capacity to better meet the growing demand in those areas. We anticipate closing the previously announced acquisition of the port equipment businesses of Fantuzzi Industries S.a.r.l. in the fourth quarter of 2008.

Given that external access to credit remains uncertain in the current economic climate, we are focusing on cash management. In addition to aggressively reducing costs and working capital, we are increasing our efforts to maintain adequate liquidity in light of the current economic environment, particularly in the developed regions of the U.S. and Western Europe. As a result, we have slowed capital spending and are currently not purchasing shares under our previously announced share repurchase program due to uncertain access to the credit markets. However, during the third quarter of 2008, we repurchased approximately $200 million, or 4.2 million shares, of our common stock, and we remain committed to the share repurchase program when access to the capital markets is clearer.

Return on Invested Capital ("ROIC"), continues to be the unifying metric we use to measure our operating performance. ROIC measures how effectively we utilize the capital invested in our operations. After tax ROIC is determined by dividing the sum of 2008 four quarters' Net Operating Profit After Tax (as defined below) by the average of the sum of Total stockholders equity plus Debt (as defined below) less Cash and cash equivalents for the previous five quarters. Net Operating Profit After Tax ("NOPAT"), which is a non-GAAP measure, for each quarter is calculated by multiplying Income from operations by a figure equal to one minus the effective tax rate of the Company. The effective tax rate is equal to the (Provision for) benefit from income taxes divided by Income before income taxes for the respective quarter. Debt is calculated using the amounts for Notes payable and current portion of long-term debt plus Long-term debt, less current portion. We calculate ROIC using the last four quarters' NOPAT as this represents the most recent twelve month period at any given point of determination. In order for the denominator of the ROIC ratio to properly match the operational period reflected in the numerator, we include the average of five quarter's ending balance sheet amounts so that the denominator includes the average of the opening through ending balances (on a quarterly basis) over the same time period as the numerator (four quarters of average invested capital).

We use ROIC as a unifying metric because we feel that it measures how effectively we invest our capital and provides a better measure to compare ourselves to peer companies to assist in assessing how we drive operational improvement. We believe that ROIC measures return on the full enterprise-wide amount of capital invested in our business, as opposed to another metric such as return on shareholder's equity that only incorporates book equity, and is thus a more accurate and descriptive measure of our performance. We also believe that adding Debt less Cash and cash equivalents to Total stockholders' equity provides a better comparison across similar businesses regarding total capitalization, and that ROIC highlights the level of value creation as a percentage of capital invested. Consistent with this belief, we use ROIC in evaluating executive performance and compensation, as we have disclosed in the Compensation Discussion and Analysis in our proxy statement for the 2008 annual meeting of stockholders. As the tables below show, our ROIC at September 30, 2008 was 23.6%, down from 27.0% at September 30, 2007. The decrease reflects reduced operating income performance and the increased invested capital impact of recent acquisitions and working capital.

                          Sep '08         Jun '08         Mar '08         Dec '07        Sep '07
Provision for income
taxes                  $  44.9        $  116.8        $  83.2         $  62.0
Divided by: Income
before income taxes       138.7          353.1           246.5           236.0
Effective tax rate        32.4%          33.1%           33.8%           26.3%

Income from operations $  167.2       $  370.9        $  256.3        $  239.9
Multiplied by: 1 minus
Effective
tax rate                  67.6%          66.9%           66.2%           73.7%
Net operating profit
after tax              $  113.0       $  248.1        $  169.7        $  176.8

Debt (as defined
above)                 $  1,568.2     $  1,355.9      $  1,373.4      $  1,352.0      $  705.6
Less: Cash and cash
equivalents               (487.9)        (590.0)         (604.2)         (1,272.4)       (516.6)
Debt less Cash and
cash
equivalents            $  1,080.3     $  765.9        $  769.2        $  79.6         $  189.0

Total stockholders'
equity                 $  2,302.9     $  2,664.6      $  2,538.1      $  2,343.2      $  2,254.4

Debt less Cash and
cash
equivalents plus
   Total stockholders'
equity                 $  3,383.2     $  3,430.5      $  3,307.3      $  2,422.8      $  2,443.4




            September 30, 2008 ROIC                23.6%
Net operating profit after tax (last 4 quarters) $ 707.6
Average Debt less Cash and cash equivalents plus
Total stockholders' equity (5 quarters)          $ 2,997.4

--------------------------------------------------------------------------------
                              Sep '07        Jun '07        Mar '07       Dec '06       Sep '06
Provision for income taxes $  78.5        $  96.7        $  68.2       $  56.1
Divided by: Income before
income taxes                  230.0          271.3          182.0         157.0
Effective tax rate            34.1%          35.6%          37.5%         35.7%

Income from operations     $  236.3       $  284.5       $  200.7      $  169.3
Multiplied by: 1 minus
Effective tax rate            65.9%          64.4%          62.5%         64.3%
Net operating profit after
tax                        $  155.7       $  183.2       $  125.4      $  108.9

Debt (as defined above)    $  705.6       $  651.7       $  678.4      $  763.1      $  791.7
Less: Cash and cash
equivalents                   (516.6)        (453.4)        (431.2)       (676.7)       (428.3)
Debt less Cash and cash
equivalents                $  189.0       $  198.3       $  247.2      $  86.4       $  363.4

Total stockholders' equity $  2,254.4     $  2,073.4     $  1,851.9    $  1,751.0    $  1,591.7

Debt less Cash and cash
equivalents
plus Total stockholders'
equity                     $  2,443.4     $  2,271.7     $  2,099.1    $  1,837.4    $  1,955.1




            September 30, 2007 ROIC                27.0%
Net operating profit after tax (last 4 quarters) $ 573.2
Average Debt less Cash and cash equivalents plus
Total stockholders' equity (5 quarters)          $ 2,121.3

RESULTS OF OPERATIONS

Three Months Ended September 30, 2008 Compared with Three Months Ended September 30, 2007

Terex Consolidated



                             Three Months Ended September 30,
                                   2008                  2007
                                        % of                 % of      % Change In
                                        Sales                Sales   Reported Amounts
                                  ($ amounts in millions)
Net sales              $ 2,514.6      -    $         2,196.5   -     14.5%
Gross profit           $ 446.2     17.7%   $         464.3   21.1%   (3.9)%
SG&A                   $ 279.0     11.1%   $         228.0   10.4%   22.4%
Income from operations $ 167.2     6.6%    $         236.3   10.8%   (29.2)%

Net sales for the three months ended September 30, 2008 increased $318.1 million when compared to the same period in 2007. The favorable translation effect of foreign currency exchange rate changes contributed approximately $107 million of the net sales increase. Acquisitions, particularly ASV and SHM, contributed approximately $80 million to the increase in net sales. Excluding the favorable translation effect of foreign currency exchange rate changes and acquisitions, our Materials Processing & Mining and Cranes segments were the primary drivers of the increase in net sales, and combined contributed approximately $231 million to the increase, as worldwide infrastructure and commodity needs continued to provide significant demand for these products. The remaining net sales growth was from the Roadbuilding, Utility Products and Other segment. These increases were partially offset by lower net sales in the Aerial Work Platforms segment of approximately $67 million, excluding favorable translation effect of foreign currency exchange rate changes. Additionally, excluding the favorable translation effect of foreign currency exchange rate changes and acquisitions, our Construction segment had lower net sales of approximately $43 million.

Selling, general and administrative ("SG&A") costs increased by $51.0 million for the three months ended September 30, 2008 when compared to the same period in 2007. The unfavorable translation effect of foreign currency exchange rate changes accounted for approximately $11 million of the SG&A increase. In addition, each segment's SG&A costs rose due to our continued investment in operational improvement initiatives, including supply chain management, global sales and service capabilities in developing markets, marketing, implementation of our management information system, and strategic sourcing initiatives.

Income from operations decreased by $69.1 million for the three months ended September 30, 2008 when compared to the same period in 2007. The decrease was driven primarily by volume declines in the Aerial Work Platforms segment, higher input costs in the Aerial Work Platforms and Construction segments, and investment in our improvement initiatives. The crane repair program charge also lowered operating profit. This was partially offset by increases in operating profit in the Cranes and Materials Processing & Mining segments. The favorable translation effect of foreign currency exchange rate changes contributed approximately $21 million to income from operations.

Terex Aerial Work Platforms



                               Three Months Ended September 30,
                                  2008                 2007
                                       % of                 % of       % Change In
                                      Sales                Sales     Reported Amounts
                                   ($ amounts in millions)
   Net sales              $ 513.5       -     $  563.9    -          (8.9)%
   Gross profit           $ 78.6     15.3%    $  161.3    28.6%      (51.3)%
   SG&A                   $ 57.3     11.2%    $  49.1     8.7%       16.7%
   Income from operations $ 21.3     4.1%     $  112.2    19.9%      (81.0)%

Net sales for the Aerial Work Platforms segment for the three months ended September 30, 2008 decreased $50.4 million when compared to the same period in 2007. The decrease was driven primarily by lower sales volume of approximately $56 million, particularly for boom and scissor lift products, partially offset by improved telehandler product sales. Customers in North America and Western Europe significantly slowed their purchases during the third quarter of 2008 due to the softening in construction activity and uncertainty regarding the global economy. Net sales decreased approximately $18 million due to an increased sales mix to high volume customers and competition in certain markets, which negatively affected average pricing. These decreases were partially offset by approximately $17 million due to the favorable translation effect of foreign currency exchange rate changes.

Gross profit for the three months ended September 30, 2008 decreased $82.7 million when compared to the same period in 2007. Approximately $36 million of the decrease in gross profit was due to higher input costs, primarily steel. The mix of sales to high volume customers and competition affecting average pricing, as well as a product mix shift from boom and scissor lifts to telehandler products, lowered gross profit by approximately $18 million. The impact of lower net sales volume on gross profit was approximately $18 million. Transactional foreign currency losses lowered gross profit by approximately $14 million. Other costs, including warranty, product liability and distribution, lowered gross profit by approximately $7 million. These decreases were partially offset by the favorable translation effect of foreign currency exchange rate changes, which increased gross profit by approximately $11 million.

Income from operations for the three months ended September 30, 2008 decreased $90.9 million when compared to the same period in 2007. The decrease was due to the items noted above, particularly lower net sales volume and continued higher input costs not recovered in pricing.

Terex Construction



                               Three Months Ended September 30,
                                    2008                2007
                                         % of               % of      % Change In
                                         Sales              Sales   Reported Amounts
                                   ($ amounts in millions)
    Net sales              $ 474.2         -     $  452.1     -     4.9%
    Gross profit           $ 36.0      7.6%      $  62.6    13.8%   (42.5)%
    SG&A                   $ 64.4      13.6%     $  48.8    10.8%   32.0%
    Income from operations $ (28.4)    (6.0)%    $  13.8    3.1%    (305.8)%

Net sales in the Construction segment increased by $22.1 million for the three months ended September 30, 2008 when compared to the same period in 2007, as developing market demand was partially offset by softer demand in North America and Western Europe. The favorable translation effect of foreign currency exchange rate changes accounted for approximately $16 million of the net sales increase. Acquisitions contributed approximately $49 million to the increase. These increases were offset by lower net sales volume of approximately $44 million in North America and Western Europe across most product lines. Specifically, construction spending remained weak in North America and continued to weaken in Western Europe.

Gross profit decreased $26.6 million for the three months ended September 30, 2008 when compared to the same period in 2007. The approximately $3 million effect of higher net sales on gross profit attributable to acquisitions was offset by the effect of lower net sales volume in North America and Western Europe. Higher input costs, particularly for steel, as well as transactional foreign currency losses decreased gross profit by approximately $16 million. Additionally, due to lower production levels, manufacturing overhead represented a greater percentage of production costs, resulting in a reduction to gross profit by approximately $14 million.

SG&A costs for the three months ended September 30, 2008 increased $15.6 million when compared to the same period in 2007. Approximately $2 million of the increase was due to the unfavorable translation effect of foreign currency exchange rate changes. Approximately $6 million of the increase was due to acquisitions. We incurred approximately $3 million of higher costs related to selling and other infrastructure initiatives. Additionally, corporate cost allocation increased approximately $2 million over the prior year period.

Income from operations for the three months ended September 30, 2008 decreased $42.2 million when compared to the same period in 2007, primarily resulting from lower net sales volume (excluding the impact of acquisitions), increased input costs and higher production and SG&A costs.

As of September 30, 2008, the Construction segment, which is a reporting unit, did not meet the business performance expectations used in the annual goodwill impairment testing as of October 1, 2007. The downturn in construction spending in both North America and Western Europe has negatively impacted the businesses in which this reporting unit operates. We have updated our forecast to address the impact of changes in business conditions and performed a goodwill impairment test as of September 30, 2008 for the construction reporting unit. Our assessment of the construction reporting unit goodwill resulted in no impairment being evidenced at September 30, 2008. We will continue to monitor the . . .