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. Through December 31, 2008, we operated 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. We acquired Power Legend International Limited ("Power Legend") and its affiliates, including a controlling 50% ownership interest in Sichuan Changjiang Engineering Crane Co., Ltd. ("Sichuan Crane"), on April 4, 2006. The results of Power Legend and Sichuan Crane are included in the Cranes segment from their date of acquisition.

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 infrastructure projects and commodity mining. We acquired Halco Holdings Limited and its affiliates ("Halco") on January 24, 2006, established the Terex NHL Mining Equipment Company Ltd. ("Terex NHL") joint venture on March 9, 2006, and acquired Superior Highwall Miners Inc. and its affiliates ("SHM") on November 6, 2007. The results of Halco, Terex NHL and SHM are included in the Materials Processing & Mining segment from their respective dates of acquisition or formation.

Our Roadbuilding, Utility Products and Other segment designs, manufactures and markets asphalt and concrete equipment, landfill compactors, bridge inspection 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 TFS.

Effective January 1, 2009, we realigned certain operations in an effort to capture market synergies and streamline our cost structure. Our Roadbuilding businesses, formerly part of our Roadbuilding, Utility Products and Other segment, will now be consolidated within our Construction segment. Our Utility Products businesses, formerly part of our Roadbuilding, Utility Products and Other segment, will now be consolidated within our Aerial Work Platforms segment. Certain other businesses that were included in the Roadbuilding, Utility Products and Other segment will now be reported in Corporate and Other, which includes eliminations among our segments. Additionally, our truck-mounted articulated hydraulic crane line of business produced in Delmenhorst and Vechta, Germany, formerly part of our Construction segment, will now be consolidated within our Cranes segment. The segment disclosures included herein do not reflect these realignments. We will give effect to these realignments in our segment reporting for financial reporting periods beginning January 1, 2009, at which point the Roadbuilding, Utility Products and Other segment will cease to be a reportable 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 2008 was mixed. Very strong performance in the first half of 2008 gave way to significantly weaker performance in the second half of the year, as the deterioration in the fundamentals of the global economy took an increasing toll on our business. For the full year, favorable results in our Cranes and Materials Processing & Mining ("MPM") segments were more than offset by unfavorable results in our Aerial Work Platforms ("AWP"), Construction and Roadbuilding, Utility Products and Other ("RBUO") segments. The challenges in the current operating environment, particularly in the U.S. and Western Europe, have been compounded by the unprecedented levels of instability in the financial markets that have resulted from the ongoing global credit crisis. The AWP and Construction segments and the materials processing business have all experienced weakness for many of their products in these markets. Construction activity has dramatically slowed and many of our end markets have seen significant declines.

We have seen a credit crisis that initially appeared limited to the U.S. intensify into a worldwide financial crisis in the second half of 2008. The causes of this financial and economic turbulence differ from past downturns, thus there is no historical precedent with which to compare. The global economy remains under stress and our expectations for 2009 have deteriorated. The depth and duration of the global economic decline are not known; however, we expect 2009 to be a very challenging year. The current environment is one of a global slowdown, where the product and geographic diversity we have built has little ability to mitigate the market pressure we are experiencing at the moment. While we remain confident that our strategy of product and geographic diversity is the right one to deliver positive shareholder returns in the long term, we know that the current environment presents unique challenges.

In response to the present economic environment, we have taken and will continue to take aggressive actions to reduce costs and preserve cash in all of our businesses. These actions include the following:

· since June 2008, reducing our workforce, including temporary and contract workers;

· the AWP global workforce has been reduced by approximately 34%;
· the Construction global workforce has been reduced by approximately 8%;
· the Materials Processing global workforce has been reduced by approximately 22%;
· the Roadbuilding global workforce has been reduced by approximately 18%;
· additional reductions in our workforce will continue across all segments in 2009;
· temporary shutdowns of manufacturing facilities and shortened work weeks were implemented and will continue to be used to reduce production output as necessary;

· review of existing facilities for potential consolidation, transfer or sale;

· cutting production levels;

· eliminating salary increases in 2009 for management-level team members and significantly reducing executive long-term compensation from 10% to 50%;

· delaying or cutting capital expenditures;

· reducing discretionary spending; and

· identifying and improving process and system efficiencies.

The marketplace for each of our businesses is somewhat different, but there is a common approach we are taking throughout the Company. In 2009, we will be managing our business even more aggressively than normal for cash. Most of our businesses are experiencing continued reductions in incoming orders, with orders in backlog being cancelled or deferred. We are intensely focused in each of our businesses in managing our sales, inventory and operations planning process to quickly adjust our production rate and material ordering in line with this rapidly changing market.

Our Construction and Roadbuilding businesses are experiencing a number of significant challenges in this very difficult environment and we need to make changes to build and improve these businesses to meet these challenges. While we would prefer to implement the necessary changes to overcome these obstacles, if different ownership would grow one or more of these businesses faster than we could, then we will consider those alternatives.

Although we continued to see reasonable demand for cranes and mining equipment, we are now experiencing increasing cancellations in our backlog for crane and mining products, as well as delays in acceptance of deliveries, as our customers for these products are not immune to the effects of the economic downturn. Demand in these businesses has been driven by global infrastructure development and maintenance, as well as commodity and energy prices that were at levels which supported continued investment in capital equipment. Commodities and energy pricing generally have been weakening, so we are cautious in our expectations of future demand.

We are making select capital investments in our AWP, Cranes and MPM segments to more effectively and efficiently respond to anticipated market demand. For example, 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 demand for these products in these developing regions.

Year-over-year backlog for all of our segments is down, with AWP and Construction backlogs down significantly. We have also seen recent softening demand for our materials processing, cranes and mining products. During 2008, the AWP and Construction segments experienced declines in net sales and operating income due to continued weakness in the U.S. and Western European markets.

The RBUO segment showed modest 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, resulted in improved profits.

Input costs affected operating results in 2008, but were in part offset by higher pricing to our customers. Input costs continue to present challenges, although they have recently moderated. 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. Most of our steel and other input costs have fallen from recent peak levels, but we are still experiencing higher material costs than last year. We will not see a significant improvement in cost until later in 2009, when we will have utilized material already in our inventory.

Uncertainty around the depth and duration of the current economic decline makes it difficult to forecast our expectations for 2009 with a reasonable degree of certainty. However, we are planning for continued softness in demand. 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 for 2009, net sales for our AWP segment will be down 35%-45%, net sales for our Construction segment will be down 25%-35%, net sales for our Cranes segment will be down 25%-35%, and net sales for our MPM segment will be down 25%-35%, versus 2008 results. We expect our overall 2009 net sales to decline in the range of 30%-35% as compared to 2008, approximately 13% of which is the estimated translation effect of foreign currency exchange rate changes.

Given that external access to credit remains uncertain in the current financial environment, we are focusing on improving liquidity by aggressively reducing costs and working capital and slowing capital spending. We are currently not purchasing shares under our previously announced share repurchase program. However, during 2008, we repurchased $395.5 million, or 7.4 million shares, of our common stock.

TFS provides assistance to our customers in financing purchases of our equipment, largely through the use of financial partners. We have used the flexibility, expertise and capacity of multiple sources to secure financing in this difficult market. In certain cases, TFS will also originate and sell financing transactions to these same financial institutions to increase velocity of transaction processing and maintain our customer linkage. As of December 31, 2008, TFS retained approximately $3 million of these assets on our balance sheet.

We have also accelerated several internal initiatives to reduce inventory, including significantly limiting raw material receipts, particularly in the aerial work platforms, construction and materials processing businesses, while carefully managing incoming inventory in our cranes and mining businesses. We are adjusting production levels as appropriate in relation to slowing end market demand for our products. With the actions we are taking to reduce costs and increase liquidity, we expect to have sufficient flexibility to execute our key business plans.

After tax 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 Net Operating Profit After Tax (as defined below) for each of the previous four quarters 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 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 of October 1, 2008, we performed our annual goodwill impairment test, which resulted in a non-cash impairment charge for goodwill of $459.9 million, which represented all of the goodwill recorded in the Construction and RBUO segments. However, we do not believe that non-cash impairment charges are indicative of returns on our invested capital. Therefore, we have excluded the effect of these impairment charges from the metrics used in our calculation of ROIC. As the tables below show, our ROIC at December 31, 2008 was 19.2%, down from 28.9% at December 31, 2007. The decrease reflects reduced NOPAT performance from approximately $641 million to approximately $601 million and the increased invested capital impact of recent acquisitions of approximately $482 million.

The amounts described below are reported in millions of U.S. dollars, except for the effective tax rates.

                                   Dec '08        Sep '08       Jun '08       Mar '08       Dec '07
(Benefit from) Provision for
income taxes as adjusted          $    (1.0 )    $    44.9     $   116.8     $    83.2
Divided by: Income before
income taxes as adjusted               35.7          138.7         353.1         246.5
Effective tax rate as adjusted         (2.8 )%        32.4 %        33.1 %        33.8 %

Income from operations as
adjusted                          $    68.1      $   167.2     $   370.9     $   256.3
Multiplied by: 1 minus
Effective tax rate as adjusted        102.8 %         67.6 %        66.9 %        66.2 %
Adjusted net operating profit
after tax                         $    70.0      $   113.0     $   248.1     $   169.7

Debt (as defined above)           $ 1,435.8      $ 1,568.2     $ 1,355.9     $ 1,373.4     $  1,352.0
Less: Cash and cash equivalents      (484.4 )       (487.9 )      (590.0 )      (604.2 )     (1,272.4 )
Debt less Cash and cash
equivalents                       $   951.4      $ 1,080.3     $   765.9     $   769.2     $     79.6

Total stockholders' equity as
adjusted                          $ 2,179.9      $ 2,302.9     $ 2,664.6     $ 2,538.1     $  2,343.2

Debt less Cash and cash
equivalents plus Total
stockholders' equity as
adjusted                          $ 3,131.3      $ 3,383.2     $ 3,430.5     $ 3,307.3     $  2,422.8



                              2008 ROIC                                       19.2 %
Adjusted net operating profit after tax (last 4 quarters)                $   600.8
Average Debt less Cash and cash equivalents plus Total stockholders'
equity as adjusted (5 quarters)                                          $ 3,135.0

Reconciliation of ROIC table amounts adjusted for impairment

                                                                      Three months
                                                                     ended 12/31/08
Loss before income taxes as reported                                $          (424.2 )
Less: Goodwill impairment                                                      (459.9 )
Income before income taxes as adjusted                              $            35.7

Benefit from income taxes as reported                               $             2.7
Less: Benefit from income taxes on impairment                                     1.7
Benefit from income taxes as adjusted                               $             1.0

Income before income taxes as adjusted                              $            35.7
Plus: Benefit from income taxes as adjusted                                       1.0
Net income as adjusted                                              $            36.7

Loss from operations as reported                                    $          (391.8 )
Less: Goodwill impairment                                                      (459.9 )
Income from operations as adjusted                                  $            68.1

Total stockholders' equity as reported                              $         1,721.7
Less: Net loss as reported                                                     (421.5 )
Add: Net income as adjusted                                                      36.7
Total stockholders' equity as adjusted                              $         2,179.9

Effective tax rate reconciliation excluding impairment

                                                           Three months ended 12/31/08
                                                 As reported         Impairment       As adjusted
(Loss) income before income taxes               $       (424.2 )    $     (459.9 )   $        35.7
Benefit from income taxes                                  2.7               1.7               1.0
Net (loss) income                               $       (421.5 )                     $        36.7

Effective tax rate                                         0.6 %             0.4 %            (2.8 )%



                                   Dec '07        Sep '07       Jun '07       Mar '07       Dec '06
Provision for income taxes        $     62.0     $    78.5     $    96.7     $    68.2
Divided by: Income before
income taxes                           236.0         230.0         271.3         182.0
Effective tax rate                      26.3 %        34.1 %        35.6 %        37.5 %

Income from operations            $    239.9     $   236.3     $   284.5     $   200.7
Multiplied by: 1 minus
Effective tax rate                      73.7 %        65.9 %        64.4 %        62.5 %
Net operating profit after tax    $    176.8     $   155.7     $   183.2     $   125.4

Debt (as defined above)           $  1,352.0     $   705.6     $   651.7     $   678.4     $   763.1
Less: Cash and cash equivalents     (1,272.4 )      (516.6 )      (453.4 )      (405.2 )      (676.7 )
Debt less Cash and cash
equivalents                       $     79.6     $   189.0     $   198.3     $   273.2     $    86.4

Total stockholders' equity        $  2,343.2     $ 2,254.4     $ 2,073.4     $ 1,851.9     $ 1,751.0

Debt less Cash and cash
equivalents plus Total
stockholders' equity              $  2,422.8     $ 2,443.4     $ 2,271.7     $ 2,125.1     $ 1,837.4



                              2007 ROIC                                       28.9 %
Net operating profit after tax (last 4 quarters)                         $   641.1
Average Debt less Cash and cash equivalents plus Total stockholders'
equity (5 quarters)                                                      $ 2,220.1

RESULTS OF OPERATIONS

2008 COMPARED WITH 2007

Terex Consolidated

                                   2008                     2007
                                          % of                     % of         % Change In
                                         Sales                    Sales       Reported Amounts
                                      ($ amounts in millions)
  Net sales                $ 9,889.6          -     $ 9,137.7          -                    8.2 %
  Gross profit             $ 1,927.7       19.5 %   $ 1,882.0       20.6 %                  2.4 %
  SG&A                     $ 1,065.2       10.8 %   $   920.6       10.1 %                 15.7 %
  Goodwill impairment      $   459.9        4.7 %   $       -          -                      -
  Income from operations   $   402.6        4.1 %   $   961.4       10.5 %                (58.1 )%

Net sales for the year ended December 31, 2008 increased $751.9 million when compared to the same period in 2007. The favorable translation effect of foreign currency exchange rate changes contributed approximately $234 million of the net sales increase. Acquisitions, particularly ASV and SHM, contributed approximately $265 million to the increase in net sales. Excluding the favorable translation effect of foreign currency exchange rate changes and acquisitions, our MPM and Cranes segments were the primary drivers of the remaining increase in net sales and, combined, contributed approximately $806 million to the increase, as worldwide infrastructure and commodity needs continued to provide significant demand for our products. Excluding the favorable translation effect of foreign currency exchange rate changes and acquisitions, our AWP and Construction segments declined by approximately $557 million from the prior year. We had moderate net sales growth in the RBUO segment. While we experienced growth in net sales in the first half of 2008 of approximately 22% over the same period in 2007, during the second half of 2008, net sales decreased approximately 4% over the same period in 2007. This sharp decline was due to the significant weakening of many of our end markets in the second half of 2008.

Gross profit for the year ended December 31, 2008 increased $45.7 million when compared to the same period in 2007. The favorable translation effect of foreign currency exchange rate changes contributed approximately $98 million to gross profit. The increase in gross profit in 2008 was driven by the strong sales in the MPM and Cranes segments, which, excluding the favorable translation effect of foreign currency exchange rate changes, combined to increase gross profit by approximately $246 million over the prior year. However, the AWP and Construction segments had lower combined gross profit of approximately $305 million, excluding the favorable translation effect of foreign currency exchange rate changes. The RBUO segment did not provide significant contribution to the increase in gross profit due to increasing costs.

Selling, general and administrative ("SG&A") costs increased for the year ended December 31, 2008 by $144.6 million when compared to the same period in 2007. The unfavorable translation effect of foreign currency exchange rate changes accounted for approximately $19 million of the SG&A increase. Most of the rise in SG&A costs was 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 enterprise resource management system, and strategic sourcing initiatives.

As of October 1, 2008, we performed our annual goodwill impairment test, which resulted in a non-cash impairment charge for goodwill of $459.9 million and represented all of the goodwill recorded in the Construction and RBUO segments. This goodwill impairment charge was necessary, as the fair value of the reporting units within these segments had significantly declined, reflecting reduced estimated future cash flows for these businesses based on lower expectations for growth and profitability, primarily as a result of the current global economic downturn.

Income from operations decreased by $558.8 million for the year ended December 31, 2008 over the comparable period in 2007. The decrease was primarily due to $459.9 million of impairment charges. Although, we experienced improvement in operating profit due to higher volume, pricing actions and the favorable translation effect of foreign currency exchange rate changes, these were more than offset by transactional foreign currency losses and higher SG&A costs. While we experienced an increase in operating profit in the first half of . . .