BUSINESS DESCRIPTION

We are a diversified global manufacturer of capital equipment with a mission to deliver value-added offerings that meet or exceed our customers' current and future needs. We manufacture a broad range of equipment for use in the construction, infrastructure, quarrying, recycling, mining, shipping, transportation, refining, utility and maintenance industries. We operate in four reportable segments: (i) Terex Aerial Work Platforms; (ii) Terex Construction;
(iii) Terex Cranes; and (iv) Terex Materials Processing & Mining.

Our Aerial Work Platforms segment designs, manufactures, markets and refurbishes aerial work platform equipment, telehandlers, power equipment, construction trailers and utility equipment. Construction, building maintenance, government and utility customers use these products to build and/or maintain large physical assets and structures, construct and maintain utility lines, trim trees and for other commercial operations. Additionally, we own much of the North American distribution channel for our utility products group and operate a fleet of rental utility products in the United States and Canada.

Our Construction segment designs, manufactures and markets heavy and compact construction equipment, asphalt and concrete equipment, landfill compactors and bridge inspection equipment. Construction, logging, mining, industrial and government customers use these products in construction and infrastructure projects, in coal, minerals, sand and gravel operations and to build roads. 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 loading cranes) 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 also assist customers in their rental, leasing and acquisition of our products through Terex Financial Services, Inc..

On January 1, 2009, we realigned certain operations in an effort to capture market synergies and streamline our cost structure. The Roadbuilding businesses, formerly part of our Roadbuilding, Utility Products and Other ("RBUO") segment, are now consolidated within the Construction segment. The Utility Products businesses, formerly part of the RBUO segment, are now consolidated within the Aerial Work Platforms segment. Additionally, our truck-mounted articulated hydraulic crane line of business produced in Delmenhorst and Vechta, Germany, formerly part of the Construction segment, is now consolidated within the Cranes segment. Certain other businesses that were included in the RBUO segment are now reported in Corporate and Other, which includes eliminations among our segments, and prior period amounts have been retrospectively adjusted to conform to this presentation.

Overview

We continue to experience many challenges in the current operating environment, as the turmoil from the ongoing global recession continues to deeply impact our business. Each of our segments experienced significantly weaker results in the second quarter of 2009 than in the comparable period in 2008. Profits in our Cranes and Materials Processing & Mining ("MPM") segments during the second quarter of 2009 were more than offset by losses in our Aerial Work Platforms ("AWP") and Construction segments. The turmoil from the global credit crisis and economic slowdown has quickly and deeply impacted sales for both the Company and the industry as a whole, with net sales in certain of our businesses down almost 85% from year ago levels. We continue to realign our businesses for the current demand environment by reducing headcount, lowering production levels and production capacity, and consolidating facilities. We remain focused on the challenges ahead and believe we will be a leaner, more competitive company in the future.

While we remain confident that our strategy of product and geographic diversity is the right one to deliver positive shareholder returns for the long term, the current environment presents unique challenges. The depth and duration of the global economic decline is not known, although some stability is beginning to develop in a number of our businesses, giving us an opportunity to lay the foundation for better operating performance in 2010. We expect little market help throughout the remainder of 2009 and 2010. However, we will continue to focus on the items we can control such as expense management, cash generation and returning our factories to steady, planned production levels.

The Company continually evaluates its cost structure to be appropriately positioned to respond to changing market conditions. 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 have already resulted in a $246 million quarterly manufacturing and selling, general and administrative (less restructuring) run-rate spending reduction, as compared to spending levels in the second quarter of 2008, with a target to achieve a per quarter spending reduction of $300 million by year-end 2009. Our manufacturing spending itself was down 49% from the second quarter of 2008.

Given the ongoing recession, in 2008 and continuing in the first half of 2009, the Company initiated certain restructuring programs across all segments to better utilize its workforce to match the decreased demand for its products. The impact of restructuring activities is expected to result in improved financial results for the second half of 2009, although we do not expect to be profitable for the second half of 2009, excluding charges related to ongoing restructuring activities. See Note K -"Restructuring and Other Charges" in our Condensed Consolidated Financial Statements for a detailed description of our restructuring activities, including the reasons, timing and costs associated with such activities.

The marketplace for each of our businesses is somewhat different, but there is a common approach we are taking throughout the Company. In the remainder of 2009, we will continue to aggressively manage our business for cash. We are operating with a build-to-order approach and we are making solid progress toward our goal of further reducing inventory levels. All of our businesses are working closely with our suppliers to minimize raw material deliveries and with our customers and dealers to confirm existing orders in an effort to minimize the level of inventory in the distribution channel. We continue to operate at reduced production levels, in many instances at levels well below current demand, with the primary objective to reduce inventory. We believe that this strategy, along with significant reductions in production scheduling, should generate significant cash flow from operations during the remainder of 2009. During the second quarter of 2009, inventory reductions generated cash of approximately $278 million and we continue to expect to generate more than $500 million of cash from inventory reductions by the end of 2009.

We are also pleased with the progress in reducing our material costs. Most of our steel costs are back to 2007 levels and other component costs are decreasing as well. We expect to see increasing benefits from lower input costs in the second half of 2009 as raw material receipts increase as we work through our existing raw material inventory.

Due to the ongoing economic uncertainty, customers are ordering equipment when needed, rather than planning purchases in advance as they did in prior periods, resulting in minimal levels of backlog. As a result, year-over-year backlog for all of our segments is down significantly, with AWP, Construction and MPM backlogs down over 65%. Demand for our AWP products has exhibited signs of stability during the last six months, although at low levels. Materials Processing backlog was basically unchanged from March 31, 2009 levels as some stability has been reached in end markets, although at a low level. Mining truck backlog remained relatively unchanged from March 31, 2009 levels due to orders received in June. Mining shovel and drill backlog was down sequentially as demand for the smaller end of the product line slowed. Demand for high capacity cranes, including crawler and all-terrain cranes, is softening, but there is continued demand as these cranes are utilized in infrastructure and energy related projects. Demand for tower cranes and smaller mid-size capacity cranes remains weak.

Our Construction businesses are experiencing a number of significant challenges in this very difficult environment and we are making changes to improve these businesses to meet these challenges. While we currently are implementing the necessary changes to overcome these obstacles, we continue to evaluate strategic options for these businesses and the Construction segment as a whole.

Upon completion of the financing, our credit facility was amended to eliminate financial covenants based on our consolidated leverage ratio and consolidated fixed charge coverage ratio, and instead added requirements that we maintain liquidity of not less than $250 million on the last day of each fiscal quarter through June 30, 2011, and thereafter maintain a specified senior secured debt leverage ratio.

As a result of these actions, we have strengthened our balance sheet and our liquidity position while removing the uncertainty associated with the earnings-based financial covenants under our credit agreement. With the actions we are taking to reduce costs and increase cash generated from operations, along with our strengthened balance sheet, we expect to have sufficient liquidity 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 ("NOPAT") (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. NOPAT, which is a non-GAAP measure, for each quarter is calculated by multiplying Income (loss) 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 (loss) 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 quarters' 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 stockholders' 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 2009 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 segment and former RBUO segment. 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 June 30, 2009 was 2.2%, down from 27.1% at June 30, 2008, mainly due to the operating losses and cash flow from operations in the recent periods.

                                    Jun '09       Mar '09       Dec '08       Sep '08       Jun '08
(Benefit from) provision for
income taxes as adjusted         $  (30.8)     $  (24.0)     $  (1.0)      $  44.9
Divided by: Income (loss) before
income taxes as adjusted            (108.5)       (98.5)        37.0          139.4
Effective tax rate as adjusted      28.4%         24.4%         (2.7)%        32.2%

Income (loss) from operations as
adjusted                         $  (85.7)     $  (72.5)     $  68.1       $  167.2
Multiplied by: 1 minus Effective
tax rate as adjusted                71.6%         75.6%         102.7%        67.8%
Adjusted net operating profit
(loss) after tax                 $  (61.4)     $  (54.8)     $  69.9       $  113.4

Debt (as defined above)          $  1,736.6    $  1,482.8    $  1,435.8    $  1,568.2    $  1,355.9
Less: Cash and cash equivalents     (938.5)       (344.3)       (484.4)       (487.9)       (590.0)
Debt less Cash and cash
equivalents                      $  798.1      $  1,138.5    $  951.4      $  1,080.3    $  765.9

Total Terex Corporation
stockholders' equity as adjusted $  1,860.2    $  1,569.8    $  2,181.2    $  2,302.9    $  2,664.6

Debt less Cash and cash
equivalents plus Total Terex
Corporation stockholders' equity
as adjusted                      $  2,658.3    $  2,708.3    $  3,132.6    $  3,383.2    $  3,430.5

                     June 30, 2009 ROIC                        2.2%
Net operating profit after tax as adjusted (last 4 quarters) $ 67.1
Average Debt less Cash and cash equivalents plus
Total stockholders' equity (5 quarters)                      $ 3,062.6

Reconciliation of the December 2008 column (above) of ROIC adjusted for goodwill impairment as of and for the three months ended December 31, 2008.

                                                                                                                                        12/31/08
Loss before income taxes as reported                                                                                                $ (422.9)
Less: Goodwill impairment                                                                                                             (459.9)
Income before income taxes as adjusted                                                                                              $ 37.0

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                                                                                              $ 37.0
Plus: Benefit from income taxes as adjusted                                                                                           1.0
Net income as adjusted                                                                                                              $ 38.0

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

Total Terex Corporation stockholders' equity as reported                                                                            $ 1,721.7
Less: Net loss as reported                                                                                                            (421.5)
Add: Net income as adjusted                                                                                                           38.0
Total Terex Corporation stockholders' equity as adjusted                                                                            $ 2,181.2

Effective tax rate reconciliation excluding impairment

                                                Three months ended 12/31/08
                                             As reported   Impairment As adjusted
(Loss) income before income taxes             $    (422.9) $  (459.9)   $    37.0
Benefit from income taxes                              2.7        1.7         1.0
Net (loss) income                             $    (420.2)              $    38.0

Effective tax rate                                    0.6%       0.4%      (2.7)%

--------------------------------------------------------------------------------
                                  Jun '08       Mar '08        Dec '07        Sep '07       Jun '07
Provision for income taxes     $  116.8      $  83.2       $  62.0         $  78.5
Divided by: Income before
income taxes                      353.9         247.5         235.5           231.6
Effective tax rate                33.0%         33.6%         26.3%           33.9%

Income from operations         $  370.9      $  256.3      $  239.9        $  236.3
Multiplied by: 1 minus
Effective tax rate                67.0%         66.4%         73.7%           66.1%
Net operating profit after tax $  248.5      $  170.2      $  176.8        $  156.2

Debt (as defined above)        $  1,355.9    $  1,373.4    $  1,352.0      $  705.6      $  651.7
Less: Cash and cash
equivalents                       (590.0)       (604.2)       (1,272.4)       (516.6)       (453.4)
Debt less Cash and cash
equivalents                    $  765.9      $  769.2      $  79.6         $  189.0      $  198.3

Total Terex Corporation
stockholders' equity           $  2,664.6    $  2,538.1    $  2,343.2      $  2,254.4    $  2,073.4

Debt less Cash and cash
equivalents plus Total Terex
Corporation stockholders'
equity                         $  3,430.5    $  3,307.3    $  2,422.8      $  2,443.4    $  2,271.7




               June 30, 2008 ROIC                  27.1%
Net operating profit after tax (last 4 quarters) $ 751.7
Average Debt less Cash and cash equivalents plus
Total stockholders' equity (5 quarters)          $ 2,775.1

RESULTS OF OPERATIONS



Three Months Ended June 30, 2009 Compared with Three Months Ended June 30, 2008



Terex Consolidated



                                  Three Months Ended June 30,
                                      2009             2008
                                          % of             % of      % Change In
                                          Sales            Sales   Reported Amounts
                                    ($ amounts in millions)
Net sales                     $ 1,320.2    -    $  2,935.9   -     (55.0)%
Gross profit                  $ 127.9    9.7%   $  651.2   22.2%   (80.4)%
SG&A                          $ 213.6    16.2%  $  280.3   9.5%    (23.8)%
(Loss) income from operations $ (85.7)   (6.5)% $  370.9   12.6%   (123.1)%

Net sales for the three months ended June 30, 2009 decreased $1,615.7 million when compared to the same period in 2008. The unfavorable translation effect of foreign currency exchange rate changes contributed approximately $175 million to the net sales decrease. Excluding the unfavorable translation effect of foreign currency exchange rate changes, net sales in all segments declined by approximately $1,441 million from the prior year period, primarily due to lower net sales volumes as the global economy continued to deteriorate.

Gross profit for the three months ended June 30, 2009 decreased $523.3 million when compared to the same period in 2008. The unfavorable translation effect of foreign currency exchange rate changes decreased gross profit by approximately $23 million from the prior year period. Excluding the unfavorable translation effect of foreign currency exchange rate changes, the impact of lower net sales volume decreased gross profit by approximately $424 million. Charges, primarily related to production level and headcount reductions, decreased gross profit by approximately $34 million. Additionally, due to lower production levels, net manufacturing unabsorbed overhead increased, resulting in a reduction to gross profit of approximately $42 million.

Selling, general and administrative ("SG&A") costs decreased for the three months ended June 30, 2009 by $66.7 million when compared to the same period in 2008. Approximately $23 million of the decrease was due to the favorable translation effect of foreign currency exchange rate changes. Excluding the favorable translation effect of foreign currency exchange rate changes, SG&A costs in all of the segments decreased by approximately $53 million due to lower net sales volume and curtailment of spending. These decreases were partially offset by approximately $10 million of charges related to headcount reductions.

Income (loss) from operations decreased by $456.6 million for the three months ended June 30, 2009 when compared to the same period in 2008. The decrease was due to the items noted above, particularly lower net sales volume, and higher costs due to lower production levels and headcount reductions, which were partially offset by lower SG&A costs.

Terex Aerial Work Platforms



                                     Three Months Ended June 30,
                                         2009             2008
                                             % of            % of      % Change In
                                            Sales            Sales   Reported Amounts
                                       ($ amounts in millions)
   Net sales                     $ 209.9      -     $  755.4 -       (72.2)%
   Gross profit                  $ 10.2    4.9%     $  196.5 26.0%   (94.8)%
   SG&A                          $ 43.0    20.5%    $  65.1  8.6%    (33.9)%
   (Loss) income from operations $ (32.8)  (15.6)%  $  131.4 17.4%   (125.0)%

Net sales for the Aerial Work Platforms segment for the three months ended June 30, 2009 decreased $545.5 million when compared to the same period in 2008. The unfavorable translation effect of foreign currency exchange rate changes accounted for approximately $13 million of the net sales decrease. Lower net sales volume of approximately $528 million across all products and regions primarily drove the decrease in net sales. The lower net sales volume was primarily due to rental customers aging their fleets and deferring purchases of new products, particularly for mid-size booms, scissor lifts and telehandlers. The core markets for aerials in North America and Europe remained at very depressed levels.

Gross profit for the three months ended June 30, 2009 decreased $186.3 million when compared to the same period in 2008. The unfavorable translation effect of foreign currency exchange rate changes decreased gross profit by approximately $7 million from the prior year period. The impact of lower net sales volume decreased gross profit by approximately $145 million. Charges, primarily associated with reductions in production levels and restructuring, reduced gross profit by approximately $13 million. Additionally, due to lower production levels, net manufacturing unabsorbed overhead increased, resulting in a reduction to gross profit of approximately $22 million.

SG&A costs for the three months ended June 30, 2009 decreased $22.1 million when compared to the same period in 2008. Approximately $2 million of the decrease was due to the favorable translation effect of foreign currency exchange rate changes. Selling, marketing and administrative costs were lower by approximately $18 million due to decreased volume and curtailment of spending. Additionally, the allocation of corporate costs decreased by approximately $5 million over the prior year period. These decreases were partially offset by approximately $3 million of increased bad debt charges.

Income (loss) from operations for the three months ended June 30, 2009 decreased $164.2 million when compared to the same period in 2008. The decrease was due to the items noted above, particularly lower net sales volume and higher costs due to lower production levels and headcount reductions, partially offset by lower SG&A costs.

Terex Construction



                                     Three Months Ended June 30,
                                         2009             2008
                                             % of            % of      % Change In
                                            Sales            Sales   Reported Amounts
                                       ($ amounts in millions)
. . .