UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-K
FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2007
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.

Commission File Number 1-10702

TEREX CORPORATION
(Exact Name of Registrant as Specified in Charter)
 
DELAWARE
34-1531521
(State of incorporation)
(I.R.S. Employer Identification No.)

200 NYALA FARM ROAD, WESTPORT, CONNECTICUT
06880
(Address of principal executive offices)
(Zip Code)

Registrant’s Telephone Number, including area code: (203) 222-7170

Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)

NEW YORK STOCK EXCHANGE
(Name of Exchange on which Registered)

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES  x NO  ¨
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act.
YES  ¨ NO  x
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.
YES  x NO  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer  Accelerated Filer  ¨ Non-accelerated Filer  ¨ Smaller Reporting Company  ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES  ¨ NO  x
The aggregate market value of the voting and non-voting common equity stock held by non-affiliates of the Registrant was approximately $8,154 million based on the last sale price on June 30, 2007.

THE NUMBER OF SHARES OF THE REGISTRANT’S COMMON STOCK OUTSTANDING WAS
101.6 MILLION AS OF FEBRUARY 22, 2008.

DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Terex Corporation Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the year covered by this Form 10-K with respect to the 2008 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.


TEREX CORPORATION AND SUBSIDIARIES
Index to Annual Report on Form 10-K
For the Year Ended December 31, 2007

   
PAGE
 
PART I
 
     
Item 1
Business 
4
Item 1A
Risk Factors
21
Item 1B
Unresolved Staff Comments
25
Item 2
Properties
26
Item 3
Legal Proceedings
28
Item 4
Submission of Matters to a Vote of Security Holders
28
     
 
PART II
 
     
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
29
Item 6
Selected Financial Data
32
Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
33
Item 7A
Quantitative and Qualitative Disclosure about Market Risk
55
Item 8
Financial Statements and Supplementary Data
57
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
57
Item 9A
Controls and Procedures
58
Item 9B
Other Information
59
     
 
PART III
 
     
Item 10
Directors, Executive Officers and Corporate Governance
60
Item 11
Executive Compensation
60
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
60
Item 13
Certain Relationships and Related Transactions, and Director Independence
60
Item 14
Principal Accountant Fees and Services
60
     
 
PART IV
 
     
Item 15
Exhibits and Financial Statement Schedules
61

-2-


As used in this Annual Report on Form 10-K, unless otherwise indicated, Terex Corporation, together with its consolidated subsidiaries, is hereinafter referred to as “Terex,” the “Registrant,” “us,” “we,” “our” or the “Company.” This Annual Report on Form 10-K generally speaks as of December 31, 2007, unless specifically noted otherwise.

Forward-Looking Information

Certain information in this Annual Report includes forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding future events or our future financial performance that involve certain contingencies and uncertainties, including those discussed below in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Contingencies and Uncertainties”. In addition, when included in this Annual Report or in documents incorporated herein by reference, the words “may,” “expects,” “intends,” “anticipates,” “plans,” “projects,” “estimates” and the negatives thereof and analogous or similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statement is not forward-looking. We have based these forward-looking statements on current expectations and projections about future events. These statements are not guarantees of future performance. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Such risks and uncertainties, many of which are beyond our control, include, among others:

 
·
Our business is highly cyclical and weak general economic conditions may affect the sales of our products and financial results;
 
·
our business is sensitive to fluctuations in interest rates and government spending;
 
·
our business is very competitive and may be affected by pricing, product initiatives and other actions taken by competitors;
 
·
a material disruption to one of our significant facilities;
 
·
our retention of key management personnel;
 
·
the financial condition of suppliers and customers, and their continued access to capital;
 
·
our continued access to capital and ability to obtain parts and components from suppliers on a timely basis at competitive prices;
 
·
our ability to timely manufacture and deliver products to customers;
 
·
the need to comply with restrictive covenants contained in our debt agreements;
 
·
our business is global and subject to changes in exchange rates between currencies, as well as international politics, particularly in developing markets;
 
·
the effects of changes in laws and regulations;
 
·
possible work stoppages and other labor matters;
 
·
compliance with applicable environmental laws and regulations;
 
·
product liability claims and other liabilities arising out of our business;
 
·
investigations by the Securities and Exchange Commission and the Department of Justice;
 
·
our implementation of a global enterprise system and its performance;
 
·
our ability to successfully integrate acquired businesses; and
 
·
other factors.

Actual events or our actual future results may differ materially from any forward-looking statement due to these and other risks, uncertainties and significant factors. The forward-looking statements contained herein speak only as of the date of this Annual Report and the forward-looking statements contained in documents incorporated herein by reference speak only as of the date of the respective documents. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained or incorporated by reference in this Annual Report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

-3-


PART I

ITEM 1. BUSINESS

GENERAL

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, refining and utility 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.

We view our purpose as making products that will be used to improve the lives of people around the world. Our mission is to delight our current and future customers with value added offerings that exceed their current and future needs. Our vision focuses on our commitments to our core constituencies of customers, stakeholders and team members by providing our customers with a superior ownership experience, our stakeholders with a profitable enterprise that increases value, and our team members with a preferred place to work.

Our Company was incorporated in Delaware in October 1986 as Terex U.S.A., Inc. We have grown tremendously since that time, achieving $9.1 billion of net sales in 2007, up from $7.6 billion of net sales in 2006. While much of our historic growth had been achieved through acquisitions, a majority of our growth has been generated from existing operations since 2003. Since 2004, we have focused on becoming a superb operating company under the Terex franchise.

As we have grown, our business has become increasingly international in scope, with products manufactured in North and South America, Europe, Australia and Asia and sold worldwide. We are focusing on expanding our business globally, with an increased emphasis on developing markets such as China, India, Russia, the Middle East and Latin America.

For financial information about our industry and geographic segments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note B - “Business Segment Information” in the Notes to the Consolidated Financial Statements.

TEREX AERIAL WORK PLATFORMS

Our Aerial Work Platforms segment designs, manufactures and markets aerial work platform equipment, telehandlers, power equipment and construction trailers. Products include material lifts, portable aerial work platforms, trailer-mounted articulating booms, self-propelled articulating and telescopic booms, scissor lifts, telehandlers, construction trailers, trailer-mounted light towers, power buggies, generators, related components and replacement parts, and other products. Customers in the construction and building maintenance industries use these products to build and/or maintain large physical assets and structures. We market our Aerial Work Platforms products principally under the Terex® and Genie® brand names and the Terex® name in conjunction with the historic Load King brand name.

Aerial Work Platforms has seven significant manufacturing operations:

 
·
Aerial work platform equipment is manufactured in Redmond and Moses Lake, Washington, Perugia, Italy and Coventry, England;
 
 
·
Construction trailers are manufactured in Elk Point, South Dakota;
 
 
·
Telehandlers are manufactured in Baraga, Michigan and Perugia, Italy; and
 
 
·
Trailer-mounted light towers, power buggies and generators are manufactured in Rock Hill, South Carolina.
 
On January 8, 2008, we acquired Phoenix Equipment, a Waco, Texas company specializing in the refurbishment of aerial work platform equipment.

-4-


TEREX CONSTRUCTION

Our Construction segment designs, manufactures and markets two primary categories of construction equipment and their related components and replacement parts:

 
·
Heavy construction equipment, including off-highway trucks, scrapers, hydraulic excavators, large wheel loaders, material handlers and truck-mounted articulated hydraulic cranes; and
 
·
Compact construction equipment, including loader backhoes, compaction equipment, mini and midi excavators, site dumpers, skid steer loaders and wheel loaders.

Construction, logging, mining, industrial and government customers use these products in construction and infrastructure projects and in coal, minerals, sand and gravel operations. We market our Construction products principally under the Terex® brand name and the Terex® name in conjunction with the historic Fuchs brand name.

Construction has thirteen significant manufacturing operations:

Heavy Construction Equipment

 
·
Off-highway rigid haul trucks and articulated haul trucks and scrapers are manufactured in Motherwell, Scotland;
 
 
·
Wheel loaders are manufactured in Crailsheim, Germany;
 
 
·
Excavators, material handlers and truck-mounted articulated hydraulic cranes are manufactured in Delmenhorst, Ganderkesee and Vechta, Germany; and
 
 
·
Material handlers are manufactured in Bad Schoenborn, Germany.

Compact Construction Equipment

 
·
Site dumpers, compaction equipment, material handlers and loader backhoes, as well as equipment for the Terex Aerial Work Platforms segment, are manufactured in Coventry, England;
 
 
·
Small and midsized wheel loaders, mini excavators and midi excavators are manufactured in Langenburg, Gerabronn, Rothenburg, Crailsheim and Clausnitz, Germany; and
 
 
·
Loader backhoes and skid steer loaders are manufactured for the Indian market in Greater Noida, Utter Pradesh, India.

Construction’s North American distribution center is in Southaven, Mississippi and serves as a parts center for Construction and other Terex operations.

We plan to begin the manufacture of compact construction equipment in Sanhe, China by mid-2008.

We have a minority interest in Inner Mongolia North Hauler Joint Stock Company Limited (“North Hauler”), a company incorporated under the laws of China, which manufactures rigid and articulated haulers in China. Trucks manufactured by North Hauler, which is located in Baotou, Inner Mongolia, are principally used in China under the Terex® brand name. We also have a minority interest in Atlas Construction Machinery Company Ltd., a company incorporated under the laws of China, which manufactures excavators in China.

On January 14, 2008, we announced that we have reached a definitive agreement to acquire A.S.V., Inc. (“ASV”), with headquarters in Grand Rapids, Minnesota. ASV designs, manufactures and sells rubber track machines and related components, accessories, and attachments. ASV purpose-built chassis and patented rubber track undercarriage technology enable ASV products to traverse nearly any terrain with minimal damage to the ground, making them useful in markets such as construction, landscaping, forestry and agriculture. ASV’s wholly-owned subsidiary Loegering Mfg., Inc. designs, manufactures and sells traction products and attachments for the skid-steer industry. On February 26, 2008, we successfully completed our cash tender offer for ASV common stock, at which time a total of approximately 98% of the outstanding shares of ASV common stock were tendered.

-5-


TEREX CRANES

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, as well as their related replacement parts and components. These products are used primarily for construction, repair and maintenance of infrastructure, building and manufacturing facilities. We market our Cranes products principally under the Terex® brand name and the Terex® name in conjunction with these historic brand names: American, Bendini, Changjiang, Comedil, Demag, Franna, Peiner and PPM.

Cranes has twelve significant manufacturing operations:

 
·
Rough terrain cranes are manufactured in Crespellano, Italy;
 
 
·
All terrain cranes, truck cranes and telescopic container stackers are manufactured in Montceau-les-Mines, France;
 
 
·
Rough terrain cranes, truck cranes and truck-mounted cranes are manufactured in Waverly, Iowa;
 
 
·
Truck cranes are manufactured in Luzhou, China;
 
 
·
Lift and carry cranes are manufactured in Brisbane, Australia;
 
 
·
Tower cranes are manufactured in Fontanafredda and Milan, Italy;
 
 
·
Lattice boom crawler cranes and tower cranes are manufactured in Wilmington, North Carolina; and
 
 
·
Lattice boom crawler cranes, all terrain cranes and tower cranes are manufactured in Zweibruecken, Wallerscheid and Bierbach, Germany, and Pecs, Hungary.
 
We plan to begin the manufacture of tower crane components at our facility in Tianjin, China.

TEREX MATERIALS PROCESSING & MINING

Our Materials Processing & Mining segment designs, manufactures and markets crushing and screening equipment (including crushers, impactors, washing systems, screens, trommels and feeders), hydraulic mining excavators, highwall mining equipment, high capacity surface mining trucks, drilling equipment, related components and replacement parts, and other products. Construction, mining, quarrying and government customers use these products in construction and commodity mining. We market our Materials Processing & Mining products principally under the Terex® and Powerscreen® brand names and the Terex® name in conjunction with these historic brand names: Canica, Cedarapids, Finlay, Halco, Jaques, O&K, Pegson, Reedrill, SHM, Simplicity and Unit Rig.

Materials Processing & Mining has thirteen significant manufacturing operations:

 
·
Hydraulic mining excavators are manufactured in Dortmund, Germany;
 
 
·
Drilling equipment and tools are manufactured in Denison, Texas and Halifax, England;
 
 
·
High capacity surface mining trucks are manufactured, and components for other Terex businesses are fabricated, in Acuña, Mexico;
 
 
·
Highwall mining equipment is manufactured in Beckley, West Virginia;
 
 
·
Crushing and screening equipment is manufactured in Melbourne, Australia; Subang Jaya, Malaysia; Chomburi, Thailand; Durand, Michigan; Coalville, England; Omagh, Northern Ireland; and Dungannon, Northern Ireland; and
 
 
·
Crushing and screening equipment, along with asphalt pavers for the Terex Roadbuilding, Utility Products and Other segment, are manufactured in Cedar Rapids, Iowa.
 
We have a North American distribution center for materials processing products in Louisville, Kentucky.
 
We own a controlling 50% interest in Terex NHL Equipment Co., Ltd., a company incorporated under the laws of China, which was formed to provide manufacturing capability for surface mining trucks in China.

We also participate in joint ventures in China under the names Wieland International Trading (Shanghai) Co. Ltd. and Shanghai Wieland Engineering Co. Ltd., which manufacture replacement and wear parts for crushing equipment.

We are in the process of developing a facility in India for the manufacture of crushing and screening equipment.

-6-


TEREX ROADBUILDING, UTILITY PRODUCTS AND OTHER

Our Roadbuilding, Utility Products and Other segment designs, manufactures and markets asphalt and concrete equipment (including pavers, transfer devices, plants, mixers, reclaimers, stabilizers, placers and cold planers), landfill compactors, and utility equipment (including digger derricks, aerial devices and cable placers), as well as related components and replacement parts. Government, utility, infrastructure and construction customers use these products to build roads and bridges, construct and maintain utility lines, trim trees, and for other commercial operations. We market our Roadbuilding, Utility Products and Other products principally under the Terex® and Bid-Well® brand names and the Terex® name in conjunction with these historic brand names: Cedarapids, Cifali and CMI.

Terex Roadbuilding, Utility Products and Other has seven significant manufacturing operations:

 
·
Cold planers, reclaimers/stabilizers, asphalt plants, concrete plants, concrete pavers, concrete placers and landfill compactors are manufactured in Oklahoma City, Oklahoma;
 
 
·
Asphalt pavers and transfer devices are manufactured in Cedar Rapids, Iowa;
 
 
·
Asphalt pavers and asphalt plants are manufactured in Cachoeirinha, Brazil;
 
 
·
Concrete pavers are manufactured in Canton, South Dakota and Opglabbeek, Belgium;
 
 
·
Front and rear discharge concrete mixer trucks are manufactured in Fort Wayne, Indiana; and
 
 
·
Utility aerial devices and digger derricks are manufactured in Watertown, South Dakota.
 
We also own much of the North American distribution channel for the utility products group. These operations distribute, install and rent our utility aerial devices and digger derricks as well as other products that service the utility industry. They also provide parts and service support for a variety of other Terex® products, including concrete mixers and aerial devices. We also operate a fleet of rental utility products in the United States and Canada. We own Duvalpilot Equipment Outfitters, LLC, a distributor of the Company’s products and other light construction equipment.

We also assist customers in their rental, leasing and acquisition of our products. We facilitate loans and leases between our customers and various financial institutions under the name Terex Financial Services (“TFS”) in the United States, Europe and elsewhere. In Europe, as discussed in Note K - “Investment in Joint Venture” in the Notes to the Consolidated Financial Statements, we have a 40% ownership interest in a joint venture, Terex Financial Services Holding B.V. (“TFSH”). A European financial institution owns the remaining 60% interest in TFSH. TFSH facilitates the financing of our products sold in certain areas of Europe. TFSH is a direct lender and makes its loans with funds obtained from equity contributions made by the European financial institution and the Company and a debt facility made available to TFSH by the European financial institution.

BUSINESS STRATEGY

At Terex, our purpose is to improve the lives of people around the world. Our mission is to delight our current and future construction, infrastructure, mining and other customers with value added offerings that exceed their current and future needs. To achieve our mission we must attract the best people by creating a Terex culture that is safe, exciting, creative, fun and embraces continuous improvement.

Our vision focuses on the Company’s core constituencies of customers, stakeholders and team members:

 
·
Customers: We aim to be the most customer responsive company in the industry as determined by our customers.
 
·
Stakeholders: We aim to be the most profitable company in the industry as measured by return on invested capital.
 
·
Team Members: We aim to be the best place to work in the industry as determined by our team members.

We operate our business based on a value system we call “The Terex Way” that helps define our culture. The Terex Way is based on six key values:

 
·
Integrity: Integrity reflects honesty, ethics, transparency and accountability. We are committed to maintaining high ethical standards in all of our business dealings.
 
·
Respect: Respect incorporates concern for safety, health, teamwork, diversity, inclusion and performance. We treat all our team members, customers and suppliers with respect and dignity.
 
-7-

 
 
·
Improvement: Improvement encompasses quality, problem-solving systems, continuous improvement culture and collaboration. We continuously search for new and better ways of doing things, focusing on the elimination of waste and continuous improvement.
 
·
Servant Leadership: Servant leadership requires service to others, humility, authenticity and leading by example. We work to serve the needs of our customers, investors and team members.
 
·
Courage: Courage entails willingness to take risks, responsibility, action and empowerment. We have the courage to make a difference even when it is difficult.
 
·
Citizenship: Citizenship means social responsibility and environmental stewardship. We respect all peoples’ values and cultures and are good global, national and local citizens.

Our operational principles are based on the “Terex Business System,” or “TBS.” The Terex Business System is the framework around which we are building our capabilities as a superb operating company to achieve our long-term goals. The key elements of the Terex Business System are illustrated by the following “TBS House” diagram:
 
Terex Business System

The three foundational elements of the Terex Business System are:

 
·
Leadership Commitment for Competitive Advantage;
 
·
Superb Human Resource Practices; and
 
·
Customer Driven Business Processes, evidenced by continuous improvement in quality, speed and simplicity.

Leadership Commitment for Competitive Advantage is the first foundational element in the TBS House. The commitment of our leaders to the TBS House and its underlying values and principles is the best way to increase our chances of success going forward. It means using a compelling vision about an exciting, shared future and fostering trust and teamwork among our team members.

Superb Human Resource Practices is the second step in the TBS House. Our team members are the Company’s most valuable asset. We are committed to making Terex a preferred place to work filled with energized people who share the Terex values and culture, and we aim to acquire, develop and retain diverse and agile team members.

Customer Driven Business Processes is the third step in the TBS House and deals with how we conduct our business by focusing on our customer. We endeavor to engage in only value added activities across the Company and constantly work to eliminate waste. We strive to create and improve our business processes in a way that is organized around the customer, and our process initiatives focus on four key attributes for the customer interface: continuous improvement, quality, speed and simplicity.

-8-


The foundation of the TBS House supports the four pillars of the Terex Business System:

 
·
Achieving Intense Customer Focus;
 
·
Planning Excellence and Annual Deployment;
 
·
Developing Operational Excellence Across the Entire Value Chain; and
 
·
Rapidly Delivering New Products and Services.

Achieving Intense Customer Focus represents the importance of our customer to our business success. Terex is committed to being centered on the customer, and meeting or exceeding customer needs in all aspects of our products and services. This requires an intense understanding of what our customers need and striving to satisfy them on all occasions. We aim to build relationships that our customers can depend on and make it easier for our customers to do their jobs. We understand that our success will flow from our customers’ success, and that the value of our products is defined and determined by our customers.

Planning Excellence and Annual Deployment recognizes that we must have well defined initiatives and action plans in order to achieve our objectives. This requires dedication to planning to achieve the strategic intent of our business, based on quality information about our customers, competitors, markets, economic trends and technological developments. We must deploy our assets appropriately to align our business performance with our objectives. In the spirit of continuous improvement, we are committed to reviewing our performance based on strategic metrics and improving our planning based on our conclusions.

Developing Operational Excellence Across the Entire Value Chain is vital to our delivering high quality, reliable products on time and at a low cost to our customers. This means working with our suppliers to cut lead times and increase inventory turnover, improving the quality of our existing and new products, improving our order entry and scheduling activities, and developing effective management systems for all of our processes, products and people. To achieve operational excellence in the supply chain, in design and in manufacturing, we apply lean principles and lean thinking to every aspect of our business. The core applications of the lean approach involve our promoting a culture of continuous improvement and removing waste (anything that does not add value) at every organizational level of the Company.

Rapidly Delivering New Products and Services means acting on the voice of the customer and quickly moving to develop products and services that better meet customer preferences. It involves listening to the customer’s needs and wants, understanding them, and then focusing design and production efforts around these core factors. This requires innovation and efficiency, and a commitment beyond providing products to also providing the services that our customers require.

With our purpose, mission and vision in mind, using the TBS House as a framework, and operating based on the values of The Terex Way, we have launched numerous strategic initiatives to move us forward. Some of the initiatives on which we will focus in the coming year include:

Diversity and Inclusion. We are committed to having a diverse and inclusive work force that will give us the ability to consistently achieve our business results in culturally conscious, ethical and appropriate ways. Diversity and inclusion allows us to respond to rapidly changing global demographics and a global market for talent, and aids us in opening new markets, innovating, problem solving, productivity and recognizing opportunities.

Strategic Sourcing. We seek to develop and implement best in class capability in supply chain management, logistics and global purchasing. We are focusing on gaining efficiencies with suppliers based on our global purchasing power and resources, which would result in material savings across the entire Terex organization. We seek to develop a world-class global supply base, with better delivery, improved quality and net cost savings for Terex. We have identified our key areas of focus as steel and fabrications, mechanical components, electrical components, hydraulic components, castings, and power systems.

Customer Satisfaction. We are beginning to implement a customer satisfaction research process to understand our level of current customer satisfaction using the net promoter score approach across all our businesses. We will identify areas for improvement across our businesses and geographies to continue our journey of continuous improvement in delighting our customers.

TBS Assessment and Education. We intend to introduce an operational diagnostic tool to measure and assess how well we are implementing our TBS lean manufacturing road map, with an aim of creating a mature enterprise-wide operating system at Terex. We aim to establish and nurture a problem solving culture within Terex, focused on development of leaders who promote learning, business process thinking by all team members and a continuous improvement mindset.

-9-


New Product Identification and Development Process. We are focused on introducing an improved common new product process across all of our businesses. We want to implement a new product and process development method to identify and develop the right products and launch them successfully in order to retain existing and attract new customers. This will start with the voice of the customer and incorporate management engagement at all phases of the new product development process.

Terex Management System. To facilitate our transition to being a unified operating company, we are in the early stages of a multi-year implementation of a worldwide enterprise resource-planning system. Our operations will implement this system in a staged process, concentrating on a few operations initially, and incorporating every location eventually. We expect this system to further our objectives of integrating the Company, improving reporting for decision support, reducing complexity and improving accuracy, improving the customer experience and realizing supply chain economies through the greater visibility into our business that this system will provide.

Aftermarket Service and Logistics. We have listened as our customers have told us that they want improved aftermarket service and support from Terex. Given the importance of aftermarket care to our customers, we are engaged in an assessment of opportunity areas to improve our provision of aftermarket support, including service engineering, competitive benchmarking and parts ordering, pricing and logistics.

Developing Markets. We are focused on expanding the geographic reach of our products, emphasizing developing areas such as China, Russia, India, the Middle East and Latin America. We plan to increase our sales and manufacturing operations in these regions to meet the growing demands of these markets and to utilize the resources of these regions to supply cost effective products to our customers around the globe. We believe that these initiatives help to offset the effect of potential cyclical changes in any one product category or geographic market. These initiatives have also expanded our product lines and geographic reach, added new technology and improved our distribution network.

As a result, we have developed a geographically diverse revenue base with approximately 38% of our revenues derived from the Americas, 48% from Europe, Africa and the Middle East and 14% from Asia and Australia. Our long-term goal is a revenue base of 1/3 of revenue from the Americas, 1/3 from Europe, Africa and the Middle East and 1/3 from Asia and Australia.

Our revenue base is also diverse by product category. The following table lists our main product categories and their percentage of our total sales.

   
PERCENTAGE OF SALES
 
PRODUCT CATEGORY
 
2007
 
2006
 
2005
 
Aerial Work Platforms
   
21
%
 
21
%
 
18
%
Mobile Telescopic & Truck Cranes
   
17
   
16
   
14
 
Heavy Construction Equipment
   
12
   
11
   
16
 
Mining & Drilling Equipment
   
12
   
9
   
8
 
Materials Processing Equipment
   
11
   
10
   
12
 
Lattice Boom Crawler & Tower Cranes and Telescopic Container Stackers
   
9
   
8
   
8
 
Compact Construction Equipment
   
6
   
8
   
6
 
Telehandlers, Construction Trailers & Light Construction Equipment
   
4
   
7
   
6
 
Roadbuilding Equipment
   
3
   
5
   
6
 
Utility Equipment
   
2
   
4
   
4
 
Other
   
3
   
1
   
2
 
TOTAL
   
100
%
 
100
%
 
100
%


-10-


PRODUCTS

TEREX AERIAL WORK PLATFORMS

AERIAL WORK PLATFORMS. Aerial work platform equipment positions workers and materials easily and quickly to elevated work areas. These products have developed as alternatives to scaffolding and ladders. We offer a variety of aerial lifts that are categorized into six product families: material lifts; portable aerial work platforms; trailer-mounted articulating booms; self-propelled articulating booms; self-propelled telescopic booms; and scissor lifts.

 
·
Material lifts are used primarily indoors in the construction, industrial, theatrical and homeowner markets.
 
·
Portable aerial work platforms are used primarily indoors in a variety of markets to perform overhead maintenance.
 
·
Trailer-mounted articulating booms are used both indoors and outdoors, provide versatile reach, and have the ability to be towed between job sites.
 
·
Self-propelled articulating booms are primarily used in construction and industrial applications, both indoors and out. They feature lifting versatility with up, out and over position capabilities to access difficult to reach overhead areas.
 
·
Self-propelled telescopic booms are used outdoors in commercial and industrial construction as well as highway and bridge maintenance projects.
 
·
Scissor lifts are used in outdoor and indoor applications in a variety of construction, industrial and commercial settings.

CONSTRUCTION TRAILERS. Construction trailers are used in the construction and rental industries to haul materials and equipment. We also produce trailers used by the United States military for critical hauling applications. Bottom dump material trailers are used to transport raw aggregates, crushed aggregates and finished hot mix asphalt paving material. Lowbed trailers are used primarily to transport construction equipment.
 
TELEHANDLERS. Telehandlers are used to move and place materials on residential and commercial job sites and are used in the landscaping, recycling and agricultural industries.

POWER EQUIPMENT. We produce equipment for delivering power, including trailer-mounted light towers, power buggies and generators.

 
·
Trailer-mounted light towers are used primarily to light work areas for night construction activity.
 
·
Power buggies are used primarily to transport concrete from the mixer to the pouring site.
 
·
Generators are used to provide electric power on construction sites and other remote locations.

TEREX CONSTRUCTION

HEAVY CONSTRUCTION EQUIPMENT. We manufacture and/or market off-highway trucks, scrapers, excavators, wheel loaders, material handlers and truck-mounted articulated hydraulic cranes.

 
·
Articulated off-highway trucks are three-axle, six-wheel drive machines with an articulating connection between the cab and body that allows the cab and body to move independently, enabling all six tires to maintain ground contact for traction on rough terrain.
 
·
Rigid off-highway trucks are two-axle machines, which generally have larger capacities than articulated off-highway trucks, but can operate only on improved or graded surfaces, and are used in large construction or infrastructure projects, aggregates and smaller surface mines.
 
·
Scrapers move dirt by elevating it from the ground to a bowl located between the two axles of the machine. Scrapers are used most often in relatively dry, flat terrains.
 
·
Excavators are used for a wide variety of construction applications, including non-residential construction (such as commercial sites and road construction) and residential construction.
 
·
Wheel loaders are used for loading and unloading materials. Applications include mining and quarrying, non-residential construction, airport and industrial snow removal, waste management and general construction.
 
·
Material handlers are designed for handling logs, scrap and other bulky materials with clamshell, magnet or grapple attachments.
 
·
Truck-mounted articulated hydraulic cranes are available in two product categories. The “knuckle boom” crane can be mounted on either the front or the rear of commercial trucks and is folded within the width of the truck while in transport. The “V-boom” crane is also mounted on the front or the rear of the truck and spans the length of the truck while folded.

-11-


COMPACT CONSTRUCTION EQUIPMENT. We manufacture a wide variety of compact construction equipment used primarily in the construction and rental industries. Products include loader backhoes, compaction equipment, excavators, site dumpers, skid steer loaders and wheel loaders.

 
·
Loader backhoes incorporate a front-end loader and rear excavator arm. They are used for loading, excavating and lifting in many construction and agricultural related applications.
 
·
Our compaction equipment ranges from small portable plates to heavy duty ride-on rollers.
 
·
Excavators in the compact equipment category include mini and midi excavators used in the general construction, landscaping and rental businesses.
 
·
Site dumpers are used to move smaller quantities of materials from one location to another, and are primarily used for construction applications.
 
·
Skid steer loaders and wheel loaders are used for loading and unloading materials in construction, industrial, rental and landscaping businesses.

TEREX CRANES

We offer a wide variety of cranes, including mobile telescopic cranes, tower cranes, lattice boom crawler cranes, boom trucks and telescopic container stackers.

MOBILE TELESCOPIC CRANES. Mobile telescopic cranes are used primarily for industrial applications, in commercial and public works construction and in maintenance applications, to lift equipment or material. We offer a complete line of mobile telescopic cranes, including rough terrain cranes, truck cranes, all terrain cranes, and lift and carry cranes.

 
·
Rough terrain cranes move materials and equipment on rough or uneven terrain, and are often located on a single construction or work site such as a building site, a highway or a utility project for long periods. Rough terrain cranes cannot be driven on highways and accordingly must be transported by truck to the work site.
 
·
Truck cranes have two cabs and can travel rapidly from job site to job site at highway speeds. Truck cranes are often used for multiple local jobs, primarily in urban or suburban areas.
 
·
All terrain cranes were developed in Europe as a cross between rough terrain and truck cranes, and are designed to travel across both rough terrain and highways.
 
·
Lift and carry cranes are designed primarily for site work, such as at mine sites, big fabrication yards and building and construction sites, and combine high road speed and all terrain capability without the need for outriggers.

TOWER CRANES. Tower cranes are often used in urban areas where space is constrained and in long-term or very high building sites. Tower cranes lift construction material and place the material at the point where it is being used. We produce the following types of tower cranes:

 
·
Self-erecting tower cranes are trailer-mounted and unfold from four sections (two for the tower and two for the jib); certain larger models have a telescopic tower and folding jib. These cranes can be assembled on site in a few hours. Applications include residential and small commercial construction.
 
·
Hammerhead tower cranes have a tower and a horizontal jib assembled from sections. The tower extends above the jib to which suspension cables supporting the jib are attached. These cranes are assembled on-site in one to three days depending on height, and can increase in height with the project.
 
·
Flat top tower cranes have a tower and a horizontal jib assembled from sections. There is no A-frame above the jib, which is self-supporting and consists of reinforced jib sections. These cranes are assembled on site in one to two days, and can increase in height with the project.
 
·
Luffing jib tower cranes have a tower and an angled jib assembled from sections. There is one A-frame above the jib to which suspension cables supporting the jib are attached. Unlike other tower cranes, there is no trolley to control lateral movement of the load, which is accomplished by changing the jib angle. These cranes are assembled on site in two to three days, and can increase in height with the project.

LATTICE BOOM CRAWLER CRANES. Lattice boom crawler cranes are designed to lift material on rough terrain and can maneuver while bearing a load. The boom is made of tubular steel sections, which are transported to and erected, together with the base unit, at a construction site.

TRUCK-MOUNTED CRANES (BOOM TRUCKS). We manufacture telescopic boom cranes for mounting on commercial truck chassis. Truck-mounted cranes are used primarily in the construction industry to lift equipment or materials to various heights. Boom trucks are generally lighter and have less lifting capacity than truck cranes, and are used for many of the same applications when lower lifting capabilities are sufficient. An advantage of a boom truck is that the equipment or material to be lifted by the crane can be transported by the truck, which can travel at highway speeds. Applications include the installation of commercial air conditioners and other roof equipment.

-12-

 
TELESCOPIC CONTAINER STACKERS. Telescopic container stackers are used to pick up and stack containers at dock and terminal facilities. At the end of a telescopic container stacker’s boom is a spreader which enables it to attach to containers of varying lengths and weights and to rotate the container.

TEREX MATERIALS PROCESSING & MINING

MINING EQUIPMENT. We offer high capacity surface mining trucks, hydraulic mining excavators and highwall mining equipment used in the surface mining industry.

 
·
High capacity surface mining trucks are off-road dump trucks. They are powered by a diesel engine driving an electric alternator that provides power to individual electric motors in each of the rear wheels. Our product line consists of a series of rear dump trucks.
 
·
Hydraulic mining excavators in shovel or backhoe versions are primarily used to dig overburden and minerals and load them into trucks. These excavators are utilized in surface mines, quarries and large construction sites around the world.
 
·
Highwall mining equipment is a self-contained surface mining system used to mine highwall coal seams at predetermined depths.

DRILLING EQUIPMENT. We offer a wide selection of drilling equipment and tools for surface and underground mining, quarrying, construction, and utility applications. Our drilling equipment includes jumbo drills used in underground hard rock mining and tunneling, hydraulic track drills for quarrying, construction, and mining, rotary drills for open pit mining and auger drills used in construction and foundation applications. Drilling tools also include a broad line of auger tools. We also design, manufacture and distribute down-the-hole drill bits and hammers for drills.

MATERIALS PROCESSING EQUIPMENT. Materials processing equipment is used in processing aggregate materials for roadbuilding applications and is also used in the quarrying, demolition and recycling industries. Our materials processing equipment includes crushers, screens, trommels and feeders.

We manufacture a range of track-mounted jaw, impactor and cone crushers as well as base crushers for integration within static plants. Our crushing equipment also includes horizontal and vertical shaft impactors.

 
·
Jaw crushers are used for crushing larger rock, primarily at the quarry face or on recycling duties. Applications include hard rock, sand and gravel and recycled materials.
 
·
Impactor crushers are used in quarries for primary and secondary applications as well as in recycling. Generally, they are better suited for larger reduction on materials with low to medium abrasiveness.
 
·
Cone crushers are used in secondary and tertiary applications to reduce a number of materials, including quarry rock and riverbed gravel.
 
·
Horizontal shaft impactors are primary and secondary crushers, which utilize rotor impact bars and breaker plates to achieve high production tonnages and improved aggregate particle shape. They are typically applied to reduce soft to medium hard materials, as well as recycled materials.
 
·
Vertical shaft impactors are secondary and tertiary crushers that reduce material utilizing various rotor configurations and are highly adaptable to any application. Vertical shaft impactors can be customized to material conditions and desired product size/shape.

Our screening equipment includes:

 
·
Heavy duty inclined screens and feeders are used in high tonnage applications. These units are typically custom designed to meet the needs of each customer. Although primarily found in stationary installations, we supply a variety of screens and feeders for use on heavy-duty portable crushing and screening spreads.
 
·
Inclined screens are used in all phases of plant design from handling quarried material to fine screening. Capable of handling much larger capacity than a flat screen, inclined screens are most commonly found in large stationary installations where maximum output is required.
 
·
Dry screening is used to process materials such as sand, gravel, quarry rock, coal, construction and demolition waste, soil, compost and wood chips.

-13-

 
 
·
 
Washing screens are used to separate, wash, scrub, dewater and stockpile sand and gravel. Our products include a completely mobile single chassis washing plant incorporating separation, washing, dewatering and stockpiling, mobile and stationary screening rinsers, bucket-wheel dewaterers, scrubbing devices for aggregate, a mobile cyclone for maximum retention of sand particles, silt extraction systems, stockpiling conveyors and a sand screw system as an alternative to bucket-wheel dewaterers. 
 
·
Horizontal screens combine high efficiency with the capacity, bearing life and low maintenance of an inclined screen. They are adaptable for heavy scalping, standard duty and fine screening applications.

Trommels are used in the recycling of construction and demolition waste materials, as well as soil, compost and wood chips. Trommels also are used to process construction and demolition waste, as well as decasing, segmenting and processing empty bottles. Soil shredding units are used mainly by landscape contractors and provide a high specification end product.

Feeders are generally situated at the primary end of the processing facility, requiring rugged design in order to handle the impact of the material being fed from front-end loaders and excavators. The feeder moves material to the crushing and screening equipment in a controlled fashion.

TEREX ROADBUILDING, UTILITY PRODUCTS AND OTHER

We offer a diverse range of products for the roadbuilding, utility and construction industries and governments.

ROADBUILDING EQUIPMENT. We manufacture asphalt pavers, transfer devices, asphalt plants, concrete production plants, concrete mixers, concrete pavers, concrete placers, cold planers, reclaimers/stabilizers and landfill compactors.

 
·
Asphalt pavers are available in a variety of sizes and designs. Smaller units are used for commercial work such as parking lots, development streets and construction overlay projects. Mid-sized pavers are used for mainline and commercial projects. High production pavers are engineered and built for heavy-duty, mainline paving.
 
·
Asphalt transfer devices are available in both self-propelled and paver pushed designs and are intended to reduce segregation in the paver to create a smoother roadway.
 
·
Asphalt plants are used to produce hot mix asphalt and are available in portable, relocatable and stationary configurations.
 
·
Concrete production plants are used in residential, commercial, highway, airport and other markets. Our products include a full range of portable and stationary transit mix and central mix production facilities.
 
·
Concrete mixers are machines with a large revolving drum in which cement is mixed with other materials to make concrete. We offer models mounted on trucks with three, four, five, six or seven axles and other front and rear discharge models.
 
·
Our concrete pavers are used to place and finish concrete streets, highways and airport surfaces.
 
·
Concrete placers transfer materials from trucks in preparation for paving.
 
·
Cold planers mill and reclaim deteriorated asphalt pavement, leaving a level, textured surface upon which new paving material is placed.
 
·
Our reclaimers/stabilizers are used to add load-bearing strength to the base structures of new highways and new building sites. They are also used for in-place reclaiming of deteriorated asphalt pavement.
 
·
We produce landfill compactors used to compact refuse at landfill sites.

UTILITY EQUIPMENT. Our utility products include digger derricks, aerial devices and cable placers. These products are used by electric utilities, tree care companies, telecommunications companies and the electric construction industry, as well as by government organizations.

 
·
Digger derricks are used to dig holes and set utility poles.
 
·
Aerial devices are used to elevate workers and material to work areas at the top of utility poles, transmission lines and for trimming trees away from electrical lines, as well as for miscellaneous purposes such as sign maintenance.
 
·
Cable placers are used to install fiber optic, copper and strand telephone and cable lines.

-14-


BACKLOG

Our backlog as of December 31, 2007 and 2006 was as follows:

   
December 31,
 
   
2007
 
2006
 
   
(in millions)
 
Terex Aerial Work Platforms
 
$
652.4
 
$
653.8
 
Terex Construction
   
682.2
   
322.7
 
Terex Cranes
   
2,005.5
   
1,132.3
 
Terex Materials Processing & Mining
   
692.9
   
396.9
 
Terex Roadbuilding, Utility Products and Other (1)
   
147.9
   
219.4
 
Total
 
$
4,180.9
 
$
2,725.1
 

(1)
Backlog for our government programs business of $52.8 million at December 31, 2007, was allocated to the respective segments that produce the products being sold. Roadbuilding, Utility Products and Other backlog at December 31, 2006, included $38.4 million for our government programs business. 

Substantially all of our backlog orders are expected to be filled within one year, although there can be no assurance that all such backlog orders will be filled within that time. Our backlog orders represent primarily new equipment orders. Parts orders are generally filled on an as-ordered basis.

Our management views backlog as one of many indicators of the performance of our business. Because many variables can cause changes in backlog, and these changes may or may not be of any significance, we consequently view backlog as only a modest directional indicator of future results. High backlogs can indicate a high level of future sales; however, when backlogs are high, this may also reflect a high level of production delays, which may result in future order cancellations from disappointed customers. Small backlogs may indicate a low level of future sales; however, they may also reflect a rapid ability to fill orders that is appreciated by our customers.

Our Aerial Work Platforms segment backlog decreased $1.4 million to $652.4 million at December 31, 2007 from $653.8 million at December 31, 2006, as  strong demand in Europe and developing markets offset moderating demand in North America.

Our Construction segment backlog at December 31, 2007 increased $359.5 million to $682.2 million, as compared to $322.7 million at December 31, 2006.  This increase in backlog reflects strong demand in Europe for all of our construction products combined with production challenges in our ability to deliver products to our customers arising from continued supplier constraints for select components.

The backlog at our Cranes segment increased $873.2 million to $2,005.5 million at December 31, 2007 from $1,132.3 million at December 31, 2006.  Strong global demand for cranes, particularly rough-terrain and crawler cranes, exceeded our production capacity and that of our suppliers.

Our Materials Processing & Mining segment backlog at December 31, 2007 increased $296.0 million to $692.9 million compared to $396.9 million at December 31, 2006.  Demand is strong for both materials processing equipment and mining equipment.  Non-residential construction, infrastructure and recycling needs are driving demand for portable crushing and screening equipment and strong global commodity demand is driving sales of mining equipment.

The backlog at our Roadbuilding, Utility Products and Other segment decreased $71.5 million to $147.9 million at December 31, 2007 from $219.4 million at December 31, 2006.  Backlog at December 31, 2007 was consistent with backlog levels throughout the year.  By comparison, backlog was elevated at December 31, 2006 as our utility and concrete mixer truck customers increased purchasing ahead of the tighter Tier III U.S. Environmental Protection Agency engine requirements that took effect in 2007.

-15-


DISTRIBUTION

We distribute our products through a global network of dealers, rental companies, major accounts and direct sales to customers.

TEREX AERIAL WORK PLATFORMS

Our aerial work platform and telehandler products are distributed principally through a global network of rental companies, independent dealers and, to a lesser extent, strategic accounts. We employ sales representatives who service these channel partners from offices located throughout the world.

Construction trailers are distributed primarily through dealers in the United States and are also sold directly to users when local dealers are not available.

Our power equipment products are distributed through a global network of dealers, rental companies and strategic accounts. We employ sales representatives who service these dealers throughout the world.

TEREX CONSTRUCTION

We distribute heavy construction equipment (trucks and scrapers) and replacement parts manufactured in the United Kingdom primarily through worldwide dealership networks. Our truck dealers are independent businesses, which generally serve the construction, mining, timber and/or scrap industries. Although these dealers may carry products from a variety of manufacturers, they generally carry only one manufacturer’s “brand” of each particular type of product. Excavators manufactured in Germany and China are sold through a network of independent dealers and distributors. Wheel loaders manufactured in Germany are sold through a network of independent dealers and distributors. Excavators and wheel loaders manufactured for us in South Korea are only sold in North America through our existing heavy construction equipment dealer network. Material handling machines manufactured in Germany are sold worldwide through a network of independent dealers and distributors.

We distribute compact construction equipment primarily through a network of independent dealers and distributors throughout the world. Although some dealers represent only one of our product lines, we have recently focused on developing the dealer network to represent our broader range of compact equipment.

We distribute loader backhoes and skid steer loaders manufactured in India through a network of approximately forty dealers located in India, Nepal and neighboring countries.

TEREX CRANES

We market our crane products globally, optimizing assorted channel marketing systems including a distribution network and a direct sales force. We have direct sales, primarily to specialized crane rental companies, in certain crane markets such as the United States, United Kingdom, Germany, Spain, Italy, France and Scandinavia to offer comprehensive service and support to customers. Distribution via a dealer network is often utilized in other geographic areas.

TEREX MATERIALS PROCESSING & MINING

We distribute surface mining products and services through a global network of wholly owned subsidiaries, regional sales and support offices, joint venture partners and through independent dealership networks. In addition, our excavators may be sold and serviced through authorized Caterpillar dealers.

Crushing and screening equipment is distributed principally through a worldwide network of independent distributors and dealers.

TEREX ROADBUILDING, UTILITY PRODUCTS AND OTHER

We sell asphalt pavers, transfer devices, reclaimers, stabilizers, cold planers, concrete pavers, concrete placers, concrete plants and landfill compactors to end user customers principally through independent dealers and distributors and, to a lesser extent, on a direct basis in areas where distributors are not established. We sell asphalt plants and concrete roller pavers primarily direct to end user customers.

We sell concrete mixers primarily direct to customers, but concrete mixers are also available through distributors in certain regions of the United States.

-16-

 
We sell utility equipment to the utility and municipal markets through a network of both company-owned and independent distributors in North America.

RESEARCH AND DEVELOPMENT

We maintain engineering staff at most of our locations. Our engineers design new products and improvements in existing product lines. Our engineering expenses are primarily incurred in connection with the improvements of existing products, efforts to reduce costs of existing products and, in certain cases, the development of products, which may have additional applications or represent extensions of our existing product line.

We are adjusting our engineering initiatives commensurate with the business priorities of expanding into global markets, product standardization, component rationalization and strategic alignment with global suppliers. Product change driven by regulations requiring Tier 4 emission compliant engines in most of our machinery starting in 2010 is also part of our engineering priorities. We have targeted greater effectiveness and efficiency in our engineering spend by leveraging more readily available engineering resources in lower cost countries.

Our costs incurred in the development of new products, cost reductions, or improvements to existing products of continuing operations amounted to $69.5 million, $52.6 million and $46.8 million in 2007, 2006 and 2005, respectively. The increase from 2006 to 2007 was mainly due to new product development and quality control of our sourced materials in our Cranes and Materials Processing & Mining segments. The increase from 2005 to 2006 was mainly due to new product development and improvements on our existing products in our Aerial Work Platforms, Construction and Cranes segments.

MATERIALS

Principal materials we use in our various manufacturing processes include steel, castings, engines, tires, hydraulic cylinders, drive trains, electric controls and motors, and a variety of other commodities and fabricated or manufactured items. Our performance may be impacted by extreme movements in material costs and from availability of these materials. As our manufacturing volume has increased, our need for these commodities and manufactured items also has increased, which in turn has created pressure on our existing supplier base to deliver us materials on a timely basis and in sufficient amounts when requested. This supply constraint has been exacerbated by higher global demand for the same materials caused by recovering end-markets in some of our product areas and by higher consumption from developing economies such as China. The inability of suppliers to deliver materials promptly has resulted, and could result, in production delays and increased costs to manufacture our products. Some of the necessary components for which we have experienced supply constraints over the recent past include large off-highway tires, steel and steel products, bearings, gear boxes, hydraulic components and various fabricated weldments. Furthermore, as demand for these materials has increased, we have experienced increased costs to obtain these components.

In the absence of labor strikes or other unusual circumstances, substantially all materials are normally available from multiple suppliers. Current and potential suppliers are evaluated on a regular basis on their ability to meet our requirements and standards. We actively manage our material supply sourcing, and may employ various methods to limit risk associated with commodity cost fluctuations and availability. To deal with some of the recent supply constraints we have experienced, for example, we designed and implemented plans to mitigate their impact by using alternate suppliers, leveraging our overall purchasing volumes to obtain favorable quantities and costs, and increasing the price of our products. We are also in the process of forming sourcing teams in India and China to support our cost reduction objectives. We continue to search for acceptable alternative supply sources and less expensive supply options on a regular basis. One key Terex Business System initiative has been developing and implementing world-class capability in supply chain management, logistics and global purchasing. We are focusing on gaining efficiencies with suppliers based on our global purchasing power and resources.

-17-


COMPETITION

We face a competitive global manufacturing market for all of our products. We compete with other manufacturers based on many factors, particularly price, performance and product reliability. We generally operate under a best value strategy, where we attempt to offer our customers products that are designed to improve the customer’s return on invested capital. However, in some instances, customers may prefer the pricing, performance or reliability aspects of a competitor’s product despite our product pricing or performance. We do not have a single competitor across all business segments. The following table shows the primary competitors for our products in the following categories:

BUSINESS SEGMENT
 
PRODUCTS
 
PRIMARY COMPETITORS
Terex Aerial Work Platforms
 
Boom Lifts
 
Oshkosh (JLG), Haulotte, Skyjack, Snorkel and Upright
         
   
Scissor Lifts
 
Oshkosh (JLG), Skyjack, Haulotte, Snorkel and Upright
         
   
Construction Trailers
 
Trail King, Talbert, Fontaine, Rogers, Etnyre, Ranco, Clement, CPS, as well as regional suppliers
         
   
Telehandlers
 
Oshkosh (JLG with Skytrak, Caterpillar, Gradall and Lull brands), Gehl, JCB, CNH, Merlo and Manitou
         
   
Trailer-mounted Light Towers
 
Allmand Bros., Magnum and Doosan (Ingersoll-Rand)
         
   
Power Buggies
 
Multiquip and Stone
         
   
Generators
 
Doosan (Ingersoll-Rand), Multiquip, Magnum, Wacker and Caterpillar
         
Terex Construction
 
Articulated Off-highway Trucks & Rigid Off-highway Trucks
 
Volvo, Caterpillar, Moxy, John Deere, Bell and Komatsu
         
   
Scrapers
 
Caterpillar
         
   
Excavators
 
Caterpillar, Komatsu, Volvo, John Deere, Hitachi, CNH, Sumitomo (Link-Belt), Doosan, Hyundai and Liebherr
         
   
Truck-mounted Articulated Hydraulic Cranes
 
Palfinger, HIAB, HMF, Effer and Fassi
         
   
Material Handlers
 
Liebherr, Sennebogen and Caterpillar
         
   
Wheel Loaders
 
Caterpillar, Volvo, Kubota, Kawasaki, John Deere, Komatsu, Hitachi, CNH, Liebherr and Doosan
         
   
Loader Backhoes
 
Caterpillar, CNH (Case and New Holland brands), JCB, Komatsu, Volvo and John Deere
         
   
Compaction Equipment
 
Doosan (Ingersoll-Rand), Caterpillar, Bomag, Amman, Dynapac and Hamm
         
   
Mini Excavators
 
Doosan (Bobcat), Yanmar, Volvo, Takeuchi, IHI, CNH, Caterpillar, John Deere, Neuson and Kubota

-18-


BUSINESS SEGMENT
 
PRODUCTS
 
PRIMARY COMPETITORS
   
Midi Excavators
 
Komatsu, Hitachi, Volvo and Yanmar
         
   
Site Dumpers
 
Thwaites and AUSA
         
   
Skid Steer Loaders
 
Doosan (Bobcat), CNH and JCB
         
Terex Cranes
 
Mobile Telescopic Cranes
 
Liebherr, Manitowoc (Grove), Tadano-Faun, Sumitomo (Link-Belt) and Kato
         
   
Tower Cranes
 
Liebherr, Manitowoc (Potain) and MAN Wolff
         
   
Lattice Boom Crawler Cranes
 
Manitowoc, Sumitomo (Link-Belt), Liebherr, Hitachi and Kobelco
         
   
Boom Trucks
 
Manitowoc (National Crane), Palfinger, Hiab, Altec, Fassi and PM
         
   
Telescopic Container Stackers
 
Kalmar, SMV, CVS Ferrari, Fantuzzi, Liebherr and Linde
         
Terex Materials Processing
 
Hydraulic Mining Excavators
 
Hitachi, Komatsu and Liebherr
& Mining
       
   
High Capacity Surface Mining Trucks
 
Caterpillar, Komatsu, Liebherr and Euclid/Hitachi
         
   
Highwall Mining Equipment
 
Addcar and American Highwall
         
   
Drilling Equipment
 
Sandvik, Atlas Copco, Furukawa and Altec
         
   
Materials Processing Equipment
 
Metso, Astec Industries, Sandvik, Komatsu, Deister Machine and McCloskey Brothers
         
         
         
Terex Roadbuilding, Utility Products & Other
 
Asphalt Pavers and Transfer Devices
 
Volvo (Blaw-Knox), Fayat (Bomag), Caterpillar, Wirtgen (Ciber), Atlas Copco (Dynapac), Astec (Roadtec) and Wirtgen (Vogele)
         
   
Asphalt Plants
 
Astec Industries, Gencor Corporation, All-Mix, Dillman Equipment, Ciber and ADM
         
   
Cold Planers
 
Fayat (Bomag), Caterpillar, Atlas Copco (Dynapac), Wirtgen and Astec (Roadtec)
         
   
Reclaimers/Stabilizers
 
Caterpillar, Wirtgen and Fayat (Bomag),
         
   
Concrete Production Plants
 
Con-E-Co, Erie Strayer, Helco, Hagen and Stephens
         
   
Concrete Pavers
 
Gomaco, Wirtgen, Power Curbers and Guntert & Zimmerman
         
   
Concrete Placers
 
Gomaco, Wirtgen and Guntert & Zimmerman
         
   
Concrete Mixers
 
McNeilus, Oshkosh, London and Continental Manufacturing
         
   
Landfill Compactors
 
Al-Jon, Fayat (Bomag) and Caterpillar
         
    Utility Equipment   Altec and Time Manufacturing
 
-19-

 
MAJOR CUSTOMERS

None of our customers accounted for more than 10% of our consolidated sales in 2007. We are not dependent upon any single customer.

EMPLOYEES

As of December 31, 2007, we had approximately 21,000 employees. We generally consider our relations with our employees to be good. Approximately 30% of our employees are represented by labor unions, or similar employee organizations outside the United States, which have entered into various separate collective agreements with us.

PATENTS, LICENSES AND TRADEMARKS

We use proprietary materials such as patents, trademarks, trade secrets and trade names in our operations and take actions to protect these rights.

We use several significant trademarks and trade names, most notably the Terex®, Bid-Well®, Genie® and Powerscreen® trademarks. The P&H trademark is a registered trademark of Joy Global Inc. that a subsidiary of the Company has the right to use for certain products until 2011 pursuant to a license agreement. We also have the right to use the O&K and Orenstein & Koppel names (which are registered trademarks of O&K Orenstein & Koppel AG) for most applications in the mining business for an unlimited period. The other trademarks and trade names of the Company referred to in this Annual Report include registered trademarks of Terex Corporation or its subsidiaries.

We have many patents that we use in connection with our operations, and most of our products contain some proprietary components. Many of these patents and related proprietary technology are important to the production of particular products; however, overall, our patents, individually and taken together, are not material to our business or our financial results, nor does our proprietary technology provide us with a competitive advantage over our competitors.

We protect our proprietary rights through registration, agreements and litigation to the extent we deem appropriate. We own and maintain trademark registrations and patents in countries where we conduct business, and monitor the status of our trademark registrations and patents to maintain them in force and renew them as required. The duration of these registrations is the maximum permitted under the law and varies based upon the relevant statutes in the applicable jurisdiction. We also take further actions to protect our proprietary rights when circumstances warrant, including the initiation of legal proceedings if necessary.

Currently, we are engaged in various legal proceedings with respect to intellectual property rights, both as a plaintiff and as a defendant. While the final outcome of these matters cannot be predicted with certainty, we believe the outcome of such matters will not have a material adverse effect, individually or in the aggregate, on our business or operating performance.

SAFETY AND ENVIRONMENTAL CONSIDERATIONS

As part of The Terex Way, we are committed to provide a safe and healthy environment for our team members, and strive to provide quality products that are safe to use and operate in an environmentally conscious and respectful manner.

All of our employees are required to obey all applicable national, local or other health, safety and environmental laws and regulations and must observe the proper safety rules and environmental practices in work situations. We are committed to complying with these standards and monitoring our workplaces to determine if equipment, machinery and facilities meet specified safety standards. We are dedicated to seeing that safety and health hazards are adequately addressed through appropriate work practices, training and procedures.

We generate hazardous and non-hazardous wastes in the normal course of our manufacturing operations. As a result, we are subject to a wide range of federal, state, local and foreign environmental laws and regulations. These laws and regulations govern actions that may have adverse environmental effects, such as discharges to air and water, and require compliance with certain practices when handling and disposing of hazardous and non-hazardous wastes. These laws and regulations would also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances, should any of such events occur. No such incidents have occurred which required us to pay material amounts to comply with such laws and regulations.

-20-

 
Compliance with laws and regulations regarding safety and the environment has required, and will continue to require, us to make expenditures. We do not expect that these expenditures will have a material adverse effect on our business or profitability.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, GEOGRAPHIC AREAS AND EXPORT SALES

Information regarding foreign and domestic operations, export sales and segment information is included in Note B - “Business Segment Information” in the Notes to the Consolidated Financial Statements.

SEASONAL FACTORS

Over the past several years our business has become less seasonal. As we have grown, diversified our product offerings and expanded the geographic reach of our products, our sales have become less dependent on construction products and sales in the United States and Europe. In addition, high levels of backlog in a number of our segments have led to longer wait times and deliveries being accepted regardless of the season. As a result, we expect first and second half sales to be relatively equal in 2008. For more detail on seasonal factors, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

WORKING CAPITAL

Our businesses are working capital intensive and require funding for purchases of production and replacement parts inventories, capital expenditures for repair, replacement and upgrading of existing facilities, as well as trade financing for receivables from customers and dealers. We have debt service requirements, including semi-annual interest payments on our senior subordinated notes and monthly interest payments on our bank credit facilities. We believe that cash generated from operations, together with availability under our bank credit facilities and cash on hand, provide us with adequate liquidity to meet our operating and debt service requirements. For more detail on working capital matters, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

AVAILABLE INFORMATION

We maintain a website at www.terex.com. We make available on our website under “About Terex” - “Investor Relations” - “SEC Filings,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such material with the Securities and Exchange Commission (“SEC”). In addition, we make available on our website under “About Terex”-“Investor Relations” - “Corporate Governance,” free of charge, our Audit Committee Charter, Compensation Committee Charter, Governance and Nominating Committee Charter, Corporate Governance Guidelines and Code of Ethics and Conduct. In addition, the foregoing information is available in print, without charge, to any stockholder who requests these materials from us.

NYSE AND SEC CERTIFICATIONS

Our Chief Executive Officer certified to the New York Stock Exchange (“NYSE”) in 2007 that he was not aware of any violation by the Company of NYSE corporate governance listing standards. Furthermore, our Chief Executive Officer and Chief Financial Officer filed with the SEC, as an exhibit to this Annual Report on Form 10-K, the certification required under Section 302 of the Sarbanes Oxley Act. In addition, our Chief Executive Officer and Chief Financial Officer filed with the SEC, as an exhibit to our 2006 Annual Report on Form 10-K, the certification required under Section 302 of the Sarbanes Oxley Act.

ITEM 1A. RISK FACTORS

You should carefully consider the following risks, together with the cautionary statement under the caption “Forward-Looking Information” above and the other information included in this report. The risks described below are not the only ones we face. Additional risks that are currently unknown to us or that we currently consider to be immaterial may also impair our business or adversely affect our financial condition or results of operations. If any of the following risks actually occurs, our business, financial condition or results of operation could be adversely affected.

Our business is affected by the cyclical nature of the markets we serve.

Demand for our products depends upon general economic conditions in the markets in which we compete. Our sales depend in part upon our customers’ replacement or repair cycles. Adverse economic conditions, including a decrease in commodity prices, may cause customers to forego or postpone new purchases in favor of repairing existing machinery. Downward economic cycles may result in reductions in sales of our products, which may reduce our profits. We have taken a number of steps to reduce our fixed costs and diversify our operations to decrease the negative impact of these cycles. There can be no assurance, however, that these steps will prevent the negative impact of poor economic conditions.

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Our business is sensitive to increases in interest rates.

We are exposed to interest rate volatility with regard to existing variable rate debt and future issuances of fixed rate debt. Primary exposure includes movements in the U.S. prime rate and the London Interbank Offer Rate (“LIBOR”). We use interest rate swaps to help manage our interest rate risk.

If interest rates rise, it becomes more costly for our customers to borrow money to pay for the equipment they buy from us. Should interest rates in our key markets rise, prospects for business investment and manufacturing could deteriorate sufficiently to impact sales.

Our business is sensitive to government spending.

Many of our customers depend substantially on government funding of highway construction, maintenance and other infrastructure projects. In addition, we sell products to governments and government agencies in the U.S. and other nations. Any decrease or delay in government funding of highway construction and maintenance, other infrastructure projects and overall government spending could cause our revenues and profits to decrease.

We operate in a highly competitive industry.

Our industry is highly competitive. To compete successfully, our products must excel in terms of quality, price, features, ease of use, safety and comfort, and we must also provide excellent customer service. The greater financial resources of certain of our competitors may put us at a competitive disadvantage. If competition in our industry intensifies or if our current competitors enhance their products or lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products. This may reduce revenue from our products and services, lower our gross margins or cause us to lose market share.

A material disruption to one of our significant manufacturing plants could adversely affect our ability to generate revenue.

We produce most of our machines and aftermarket parts for each product type at one manufacturing facility. If operations at a significant facility were to be disrupted as a result of equipment failures, natural disasters, work stoppages, power outages or other reasons, our business, financial conditions and results of operations could be adversely affected. Interruptions in production could increase costs and delay delivery of units in production. Production capacity limits could cause us to reduce or delay sales efforts until production capacity is available.

We rely on key management.

We rely on the management and leadership skills of Ronald M. DeFeo, our Chairman of the Board and Chief Executive Officer. Mr. DeFeo has been with us since 1992, serving as Chief Executive Officer since 1995 and Chairman since 1998, guiding the transformation of Terex during that time. We have an employment agreement with Mr. DeFeo, which expires on December 31, 2012. The loss of his services could have a significant, negative impact on our business. In addition, we rely on the management and leadership skills of our other senior executives who are not bound by employment agreements. We could be harmed by the loss of any of these senior executives or other key personnel in the future.

Some of our customers rely on financing with third parties to purchase our products.

We rely on sales of our products to generate cash from operations. A significant portion of our sales are financed by third party finance companies on behalf of our customers. The availability of financing by third parties is affected by general economic conditions, the credit worthiness of our customers and the estimated residual value of our equipment. Deterioration in the credit quality of our customers or the estimated residual value of our equipment could negatively impact the ability of our customers to obtain the resources they need to make purchases of our equipment.

We provide financing for some of our customers.

We, directly and through joint ventures, provide financing for some of our customers, primarily in Europe and the United States, to purchase our equipment. For the most part, this financing represents sales type leases and operating leases. It has been our policy to provide such financing to our customers in situations where we anticipate that we will be able to sell the financing obligations to a third party financial institution within a short period. However, until such financing obligations are sold to a third party or if we are unable to sell such obligations to a third party, we retain the risks resulting from such customer financing. Our results could be adversely affected if such customers default on their contractual obligations to us. Our results also could be adversely affected if the residual values of such leased equipment declines below its original estimated values and we subsequently sell such equipment at a loss.

-22-

 
We insure and sell a portion of our accounts receivable to third party finance companies. These third party finance companies are not obligated to purchase accounts receivable from us, and may choose to limit or discontinue further purchases from us at any time. Changes in our customers’ credit worthiness, in the market for credit insurance or in the willingness of third party finance companies to purchase accounts receivable from us could impact our cash flow from operations.

We are dependent upon third-party suppliers, making us vulnerable to supply shortages and price increases.

We obtain materials and manufactured components from third-party suppliers. Delays in our suppliers’ abilities to provide us with necessary materials and components may delay production at a number of our manufacturing locations, or may require us to seek alternative supply sources. Delays in obtaining supplies may result from a number of factors affecting our suppliers, including capacity constraints, labor disputes, impaired supplier financial condition, suppliers’ allocations to other purchasers, weather emergencies or acts of war or terrorism. Any delay in receiving supplies could impair our ability to deliver products to our customers and, accordingly, could have a material adverse effect on our business, results of operations and financial condition.

Recently, market prices of some of our key materials have increased significantly as a result of higher global demand for these materials caused by recovering end-markets in some of our product areas and by higher consumption from developing economies such as China. While we have been able to pass a portion of such increased costs to our customers by way of surcharges and price increases, there is no assurance that increasing costs can continue to be addressed by increases in pricing. Continued increases in material prices could negatively impact our gross margins and financial results.

In addition, we purchase material and services from our suppliers on terms extended based on our overall credit rating. Deterioration in our credit rating may impact suppliers’ willingness to extend terms and in turn increase the cash requirements of our business.

We have debt outstanding and must comply with restrictive covenants in our debt agreements.

Our existing debt agreements contain a number of significant covenants, which limit our ability to, among other things, borrow additional money, make capital expenditures, pay dividends, dispose of assets and acquire new businesses. These covenants also require us to meet certain financial tests, specifically a consolidated leverage ratio test and a consolidated fixed charge coverage ratio test, as such tests are defined in our debt agreements. While we are currently in compliance with both of the foregoing tests, increases in our debt or decreases in our earnings could cause us to be in default of these financial covenants. If we are unable to comply with these covenants, there would be a default under these debt agreements. In addition, changes in economic or business conditions, results of operations or other factors could cause us to default under our debt agreements. A default, if not waived by our lenders, could result in acceleration of our debt and possibly bankruptcy.

We are subject to currency fluctuations.

Our products are sold in over 100 countries around the world. Our revenues are generated in U.S. dollars and foreign currencies, including the Euro and British Pound Sterling, while costs incurred to generate our revenues are only partly incurred in the same currencies. Since our financial statements are denominated in U.S. Dollars, changes in currency exchange rates between the U.S. Dollar and other currencies, such as the recent decline of the U.S. Dollar relative to the Euro and British Pound Sterling, have had, and will continue to have, an impact on our earnings. To reduce this currency exchange risk, we may buy protecting or offsetting positions (known as “hedges”) in certain currencies to reduce the risk of an adverse currency exchange movement. We have not engaged in any speculative or profit motivated hedging activities. Although we partially hedge our revenues and costs, currency fluctuations may impact our financial performance in the future.

We are exposed to political, economic and other risks that arise from operating a multinational business.

Our international operations are subject to a number of potential risks. Such risks principally include:

 
·
trade protection measures and currency exchange controls;
 
·
labor unrest;
 
·
regional economic uncertainty;
 
·
political instability;
 
·
terrorist activities and the U.S. and international response thereto;
 
-23-

 
 
·
restrictions on the transfer of funds into or out of a country;
 
·
export duties and quotas;
 
·
domestic and foreign customs and tariffs;
 
·
current and changing regulatory environments;
 
·
difficulty in obtaining distribution support; and
 
·
current and changing tax laws.

In addition, many of the nations in which we operate have developing legal and economic systems, adding greater uncertainty to our operations in those countries than would be expected in North America and Western Europe. These factors may have an adverse effect on our international operations in the future.

Difficulties in managing and expanding into developing markets could divert management's attention from our existing operations.

We plan to increase our presence in developing markets such as China, India, Russia, the Middle East and Latin America. Increasing these sales efforts will require us to hire, train and retain qualified personnel in countries where language, cultural or regulatory barriers may exist. Any difficulties in expanding our sales in developing markets may divert management's attention from our existing operations.

We may be adversely impacted by work stoppages and other labor matters.

As of December 31, 2007, we employed approximately 21,000 people worldwide. Approximately 30% of our employees are represented by labor unions, or similar employee organizations outside the United States, which have entered into various separate collective agreements with us. While we have no reason to believe that we will be impacted by work stoppages or other labor matters, we cannot assure that future issues with our labor unions will be resolved favorably or that we will not encounter future strikes, further unionization efforts or other types of conflicts with labor unions or our employees. Any of these factors may have an adverse effect on us or may limit our flexibility in dealing with our workforce.

Compliance with environmental regulations could be costly and require us to make significant expenditures.

We generate hazardous and nonhazardous wastes in the normal course of our manufacturing operations. As a result, we are subject to a wide range of federal, state, local and foreign environmental laws and regulations. These laws and regulations govern actions that may have adverse environmental effects and require compliance with certain practices when handling and disposing of hazardous and nonhazardous wastes. These laws and regulations also impose liability for the costs of, and damages resulting from, cleaning up sites, past spills, disposals and other releases of hazardous substances, should any of such events occur. No such incidents have occurred which required us to pay material amounts to comply with such laws and regulations.

Compliance with these laws and regulations has required, and will continue to require, us to make expenditures that we do not expect to have a material adverse effect on our business or profitability.

We face product liability claims and other liabilities due to the nature of our business.

In our lines of business, numerous suits have been filed alleging damages for accidents that have occurred during the use or operation of our products. We are self-insured, up to certain limits, for these product liability exposures, as well as for certain exposures related to general, workers’ compensation and automobile liability. Insurance coverage is obtained for catastrophic losses as well as those risks required to be insured by law or contract. We do not believe that the outcome of such matters will have a material adverse effect on our consolidated financial position; however, any significant liabilities not covered by insurance could have an adverse effect on our financial condition.

We are currently the subject of government investigations.

We have received a Formal Order of Private Investigation from the SEC advising us that they have commenced an investigation of our accounting. We also received a subpoena from the SEC in an investigation entitled “In the Matter of United Rentals, Inc.” This subpoena requested information to assist the SEC in its investigation of four transactions during 2000 and 2001 involving United Rentals, on the one hand, and Terex or a Terex subsidiary (prior to its acquisition by Terex), on the other. We have been cooperating with the SEC, and will continue to cooperate fully to furnish the SEC staff with information needed to complete their investigation. Until the SEC’s investigation of the Company is complete, we are not able to predict the outcome of the SEC’s investigation.

-24-

 
We have also received subpoenas from the United States Department of Justice, Antitrust Division (“DOJ”), with respect to an investigation by the DOJ into pricing practices in the rock crushing and screening equipment industry.  We are cooperating fully with the DOJ in its investigation and will continue to cooperate fully to furnish the DOJ with information needed to complete its investigation. Until the DOJ investigation is complete, we are not able to predict its outcome.

We are in the process of implementing a global enterprise system.

We are implementing a global enterprise system to replace many of our existing operating and financial systems. Such an implementation is a major undertaking both financially and from a management and personnel perspective. Should the system not be implemented successfully and within budget, or if the system does not perform in a satisfactory manner, it could disrupt and might adversely affect our operations and results of operations, including our ability to report accurate and timely financial results.

We may face limitations on our ability to integrate acquired businesses.

We have completed a number of acquisitions since 2000 and we regularly consider other acquisition opportunities. In 2007, we acquired Superior Highwall Miners Inc. and its affiliates (“SHM”) and in 2008 announced that we have reached a definitive agreement to acquire ASV. The successful integration of new businesses depends on our ability to manage these new businesses and coordinate their activities with those of other Terex operations to realize expected synergies. While we believe we have successfully integrated acquisitions to date, we cannot ensure that newly acquired companies will operate profitably or that the intended beneficial effect from these acquisitions will be realized. Further, in connection with acquisitions, we may need to consolidate or restructure our acquired or existing facilities, which may require expenditures for severance obligations related to reductions in workforce and other charges resulting from the consolidations or restructurings, such as write-down of inventory and lease termination costs.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

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ITEM 2. PROPERTIES

The following table outlines the principal manufacturing, warehouse and office facilities owned or leased (as indicated below) by the Company and its subsidiaries as of December 31, 2007:

BUSINESS UNIT
 
FACILITY LOCATION
 
TYPE AND APPROXIMATE SIZE OF FACILITY
Terex (Corporate Offices)
 
Westport, Connecticut (1)
 
Office;
       
174,000 sq. ft.
Terex Aerial Work Platforms
 
Redmond, Washington (1)
 
Office, manufacturing and warehouse;
       
750,000 sq. ft.
   
Moses Lake, Washington (1), (3)
 
Office, manufacturing and warehouse;
       
422,000 sq. ft.
   
Elk Point, South Dakota
 
Office, manufacturing and warehouse;
       
93,000 sq. ft.
   
Baraga, Michigan
 
Office, manufacturing and warehouse;
       
54,000 sq. ft.
   
Rock Hill, South Carolina
 
Office, manufacturing and warehouse;
       
121,000 sq. ft.
   
Perugia, Italy
 
Office, manufacturing and warehouse;
       
114,000 sq. ft.
   
Grantham, England (1)
 
Warehouse;
       
136,000 sq. ft
   
Newark, England (1)
 
Office and warehouse;
       
60,750 sq. ft.
   
Dara, Australia (1)
 
Warehouse;
       
56,000 sq. ft
   
Maddington, Australia (1)
 
Warehouse;
       
54,000 sq. ft
         
Terex Construction
 
Motherwell, Scotland (1)
 
Office, manufacturing and warehouse;
       
473,000 sq. ft.
   
Delmenhorst, Germany
 
Office, manufacturing and warehouse;
       
216,000 sq. ft.
   
Ganderkesee, Germany
 
Office, manufacturing and warehouse;
       
362,000 sq. ft.
   
Vechta, Germany
 
Manufacturing and warehouse;
       
267,000 sq. ft.
   
Bad Schoenborn, Germany
 
Office, manufacturing and warehouse;
       
238,000 sq. ft.
   
Coventry, England (1)
 
Office, manufacturing and warehouse;
       
326,000 sq. ft.
   
Langenburg, Germany
 
Office, manufacturing and warehouse;
       
102,000 sq. ft.
   
Gerabronn, Germany
 
Office and manufacturing;
       
147,000 sq. ft.
   
Rothenburg, Germany (2)
 
Office, manufacturing and warehouse;
       
97,000 sq. ft.
   
Crailsheim, Germany
 
Office and manufacturing;
       
185,000 sq. ft.
   
Clausnitz, Germany
 
Office and manufacturing;
       
84,000 sq. ft.
   
Sanhe, China
 
Office and manufacturing;
       
60,000 sq. ft.
   
Southaven, Mississippi (1)
 
Office and warehouse;
       
505,000 sq. ft.
   
Greater Noida, Utter Pradesh, India (1)
 
Office, manufacturing and warehouse;
       
275,000 sq. ft.
         
Terex Cranes
 
Crespellano, Italy
 
Office, manufacturing and warehouse;
       
66,000 sq. ft.
 
-26-


BUSINESS UNIT
 
FACILITY LOCATION
 
TYPE AND APPROXIMATE SIZE OF FACILITY
   
Montceau-les-Mines, France
 
Office, manufacturing and warehouse;
       
418,000 sq. ft.
   
Waverly, Iowa
 
Office, manufacturing and warehouse;
       
312,000 sq. ft.
   
Brisbane, Australia (1)
 
Office, manufacturing and warehouse;
       
42,000 sq. ft.
   
Fontanafredda, Italy
 
Office, manufacturing and warehouse;
       
101,000 sq. ft.
   
Milan, Italy (1)
 
Office, manufacturing and warehouse;
       
175,000 sq. ft.
   
Wilmington, North Carolina
 
Office, manufacturing and warehouse;
       
559,000 sq. ft.
   
Zweibruecken, Germany
 
Office, manufacturing and warehouse;
       
483,000 sq. ft.
   
Wallerscheid, Germany (1)
 
Office, warehouse and manufacturing;
       
336,000 sq. ft.
   
Bierbach, Germany (1)
 
Warehouse and manufacturing;
       
198,000 sq. ft.
   
Pecs, Hungary (1)
 
Office and manufacturing;
       
82,000 sq. ft.
   
Luzhou, China
 
Office, warehouse and manufacturing;
       
1,100,000 sq. ft.
   
Tianjin, China
 
Office and manufacturing;
       
50,000 sq. ft.
         
Terex Materials Processing & Mining
 
Dortmund, Germany (1)
 
Office, manufacturing and warehouse;
       
775,000 sq. ft.
   
Cedar Rapids, Iowa
 
Office, manufacturing and warehouse;
       
608,000 sq. ft.
   
Denison, Texas
 
Office, manufacturing and warehouse;
       
244,000 sq. ft.
   
Acuña, Mexico
 
Office, manufacturing and warehouse;
       
225,000 sq. ft.
   
Melbourne, Australia (1)
 
Office, manufacturing and warehouse;
       
29,000 sq. ft.
   
Subang Jaya, Malaysia (1)
 
Manufacturing and warehouse;
       
111,000 sq. ft.
   
Chomburi, Thailand
 
Manufacturing;
       
80,000 sq. ft.
   
Durand, Michigan
 
Office, manufacturing and warehouse;
       
114,000 sq. ft.
   
Coalville, England
 
Office, manufacturing and warehouse;
       
204,000 sq. ft.
   
Omagh, Northern Ireland (1)
 
Office, manufacturing and warehouse;
       
153,000 sq. ft.
   
Dungannon, Northern Ireland (1)
 
Office, manufacturing and warehouse;
       
330,000 sq. ft.
   
Halifax, England
 
Office, manufacturing and warehouse;
       
70,000 sq. ft.
   
Beckley, West Virginia
 
Office, manufacturing and warehouse;
       
113,500 sq. ft
         
Terex Roadbuilding, Utility Products
 
Cachoeirinha, Brazil
 
Office, manufacturing and warehouse;
and Other
     
78,000 sq. ft.
   
Oklahoma City, Oklahoma
 
Office, manufacturing and warehouse;
       
620,000 sq. ft.
   
Canton, South Dakota
 
Office, manufacturing and warehouse;
       
71,000 sq. ft.
 
-27-


BUSINESS UNIT
 
FACILITY LOCATION
 
TYPE AND APPROXIMATE SIZE OF FACILITY
   
Opglabbeek, Belgium
 
Office, manufacturing and warehouse;
       
54,000 sq. ft.
   
Fort Wayne, Indiana
 
Office, manufacturing and warehouse;
       
170,000 sq. ft.
   
Watertown, South Dakota
 
Office, manufacturing and warehouse;
       
219,000 sq. ft.
   
Huron, South Dakota
 
Office and manufacturing;
       
88,000 sq. ft.
 
(1)
These facilities are either leased or subleased.
(2)
Includes approximately 54,000 sq. ft., which are leased.
(3)
Includes approximately 106,000 sq. ft. of warehouse space subleased to others.

We also have numerous owned or leased locations for new machine and parts sales and distribution and rebuilding of components located worldwide. Our Terex Utilities distribution network has sales locations throughout the southern and western United States.

We believe that the properties listed above are suitable and adequate for our use. From time to time, we may determine that certain of our properties exceed our requirements. Such properties may be sold, leased or utilized in another manner.

ITEM 3. LEGAL PROCEEDINGS

As described in Note R - “Litigation and Contingencies” in the Notes to the Consolidated Financial Statements, we are involved in various legal proceedings, including product liability, workers’ compensation liability and intellectual property litigation, which have arisen in the normal course of operations. We are insured for product liability, general liability, workers’ compensation, employer’s liability, property damage and other insurable risk required by law or contract with retained liability to us or deductibles. We believe that the outcome of such matters will not have a material adverse effect on our consolidated financial position.

On February 1, 2006, we received a copy of a written order of a private investigation from the SEC with respect to our accounting. We have been cooperating with the SEC and will continue to cooperate fully to furnish the SEC staff with information needed to complete their investigation.

We have also received a subpoena from the SEC dated May 9, 2005, in a matter entitled “In the Matter of United Rentals, Inc.” The subpoena principally requested information to assist the SEC in its investigation of four transactions involving us and our subsidiaries, on the one hand, and United Rentals, on the other, in 2000 and 2001. We are also cooperating fully with this investigation. The U.S. Attorney’s office responsible for this matter also has requested information from us about these transactions and we are fully cooperating with this request.

On November 2, 2006 and January 19, 2007, we received subpoenas from the DOJ with respect to its investigation into pricing practices in the rock crushing and screening equipment industry.  We have been cooperating fully with the DOJ and will continue to cooperate fully to furnish the DOJ staff with information needed to complete their investigation.

For information concerning other contingencies and uncertainties, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Contingencies and Uncertainties.”

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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PART II

ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) Our common stock, par value $.01 per share (“Common Stock”) is listed on the NYSE under the symbol “TEX.” On December 19, 2006, our Common Stock was added to the Standard & Poor’s 500 Index. The high and low stock prices for our Common Stock on the NYSE Composite Tape (for the last two completed years) are as follows:

   
2007
 
2006
 
   
Fourth
 
Third
 
Second
 
First
 
Fourth
 
Third
 
Second
 
First
 
High
 
$
90.75
 
$
96.94
 
$
86.99
 
$
73.25
 
$
66.52
 
$
50.89
 
$
51.57
 
$
40.83
 
Low
 
$
56.20
 
$
66.24
 
$
70.60
 
$
54.75
 
$
45.11
 
$
37.69
 
$
37.55
 
$
29.58
 

No dividends were declared or paid in 2007 or 2006. Certain of our debt agreements contain restrictions as to the payment of cash dividends to stockholders. In addition, Delaware law limits payment of dividends. We intend generally to retain earnings, if any, to fund the development and growth of our business, pay down debt or repurchase stock. We may consider paying dividends on the Common Stock at some point in the future, subject to the limitations described above. Any future payments of cash dividends will depend upon our financial condition, capital requirements and earnings, as well as other factors that the Board of Directors may deem relevant.

As of February 22, 2008, there were 1,118 stockholders of record of our Common Stock.

-29-


Performance Graph

The following stock performance graph is intended to show our stock performance compared with that of comparable companies. The stock performance graph shows the change in market value of $100 invested in our Common Stock, the Standard & Poor’s 500 Stock Index and a peer group of comparable companies (“Custom Index”) for the period commencing December 31, 2002 through December 31, 2007. The cumulative total stockholder return assumes dividends are reinvested. The stockholder return shown on the graph below is not indicative of future performance.

The Custom Index consists of the following companies, which are in similar lines of business to Terex: Astec Industries, Inc., Caterpillar Inc., CNH Global N.V., Deere & Co., JLG Industries, Inc. (ending December 6, 2006), Joy Global Inc., Manitowoc Co. and Oshkosh Corporation (since December 7, 2006). The companies in the Custom Index are weighted by market capitalization.
 
 
 
 
Dec-02
 
Dec-03
 
Dec-04
 
Dec-05
 
Dec-06
 
Dec-07
 
Terex Corp.
 
$
100
 
$
256
 
$
428
 
$
533
 
$
1,159
 
$
1,177
 
S&P 500®
 
$
100
 
$
129
 
$
143
 
$
150
 
$
173
 
$
183
 
Custom Composite Index
(8 Stocks)
 
$
100
 
$
163
 
$
196
 
$
228
 
$
280
 
$
434
 

The Custom Composite Index consists of Astec Industries, Inc., Caterpillar Inc., CNH Global N.V., Deere & Co., JLG Industries, Inc (ending 6-Dec-06), Oshkosh Corporation (since 7-Dec-06), Joy Global Inc. and Manitowoc Co.
Copyright © 2008, Standard & Poor's, a division of the McGraw-Hill Companies, Inc. All rights reserved.

(b) Not applicable.

-30-

 
(c) The following table provides information about our purchases during the quarter ended December 31, 2007 of Common Stock that is registered by the Company pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
 
   
Issuer Purchases of Equity Securities
 
Period
 
(a) Total Number of Shares Purchased
 
(b) Average Price Paid per Share
 
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
 
(d) Approximate Dollar Value of Shares that May Yet be Purchased
Under the Plans or Programs (in thousands) (1)
 
October 1, 2007 - October 31, 2007
   
228,600
 
$
83.44
   
228,600
 
$
106,729
 
                           
November 1, 2007 - November 30, 2007
   
889,603
(2)
$
62.52
   
889,308
 
$
51,112
 
                           
December 1, 2007 - December 31, 2007
   
274,400
 
$
64.19
   
274,400
 
$
533,498
 
                           
Total
   
1,392,603
 
$
66.28
   
1,392,308
 
$
533,498
 

(1)
In December 2006, our Board of Directors authorized the repurchase of up to $200 million of the Company’s outstanding common shares through June 30, 2008. In December 2007, our Board of Directors increased the authorization for repurchase of the Company’s outstanding common shares by $500 million for a total of $700 million. The program was also extended to allow for repurchases through June 30, 2009.

(2)
In November 2007, the Company accepted 295 shares of our common stock from an employee of the Company as payment for an option exercise.
 
-31-


ITEM 6. SELECTED FINANCIAL DATA

FIVE-YEAR SELECTED FINANCIAL DATA

The following table summarizes our selected financial data and should be read in conjunction with the more detailed Consolidated Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operation.

(in millions, except per share amounts and employees)

   
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
 
                       
   
2007
 
2006
 
2005
 
2004
 
2003
 
SUMMARY OF OPERATIONS
                               
Net sales
 
$
9,137.7
 
$
7,647.6
 
$
6,156.5
 
$
4,799.3
 
$
3,844.2
 
Income from operations
   
961.4
   
709.5
   
370.4
   
211.6
   
55.8
 
Income (loss) from continuing operations
   
613.9
   
396.5
   
187.6
   
320.6
   
(228.4
)
Income from discontinued operations – net of tax
   
   
11.1
   
0.9
   
3.5
   
1.8
 
Loss on disposition of discontinued operations - net of tax
   
   
(7.7
)
 
   
   
 
Net income (loss)
   
613.9
   
399.9
   
188.5
   
324.1
   
(226.6
)
Per Common and Common Equivalent Share:
                               
Basic
                               
Income (loss) from continuing operations
 
$
6.00
 
$
3.94
 
$
1.89
 
$
3.26
 
$
(2.39
)
Income from discontinued operations – net of tax
   
   
0.11
   
0.01
   
0.04
   
0.01
 
Loss on disposition of discontinued operations – net of tax
   
   
(0.08
)
 
   
   
 
Net income (loss)
   
6.00
   
3.97
   
1.90
   
3.30
   
(2.38
)
Diluted
                               
Income (loss) from continuing operations
 
$
5.85
 
$
3.85
 
$
1.84
 
$
3.14
 
$
(2.39
)
Income from discontinued operations – net of tax
   
   
0.10
   
   
0.03
   
0.01
 
Loss on disposition of discontinued operations – net of tax
   
   
(0.07
)
 
   
   
 
Net income (loss)
   
5.85
   
3.88
   
1.84
   
3.17
   
(2.38
)
                                 
CURRENT ASSETS AND LIABILITIES
                               
Current assets
 
$
4,776.9
 
$
3,432.8
 
$
2,903.5
 
$
2,647.1
 
$
2,219.5
 
Current liabilities
   
2,175.3
   
2,027.2
   
1,524.6
   
1,529.5
   
1,168.6
 
PROPERTY, PLANT AND EQUIPMENT
                               
Net property, plant and equipment
 
$
419.4
 
$
338.5
 
$
329.9
 
$
362.6
 
$
353.8
 
Capital expenditures
   
111.5
   
78.9
   
48.6
   
35.5
   
27.1
 
Depreciation
   
63.4
   
61.2
   
61.4
   
60.1
   
67.5
 
TOTAL ASSETS
 
$
6,316.3
 
$
4,785.9
 
$
4,200.3
 
$
4,179.1
 
$
3,554.2
 
                                 
CAPITALIZATION
                               
Long-term debt and notes payable (includes capital leases)
 
$
1,319.5
 
$
536.1
 
$
1,075.8
 
$
1,114.2
 
$
1,274.8
 
Stockholders’ equity
   
2,343.2
   
1,751.0
   
1,161.0
   
1,135.2
   
674.6
 
Dividends per share of Common Stock
   
   
   
   
   
 
Shares of Common Stock outstanding at year end
   
100.3
   
101.1
   
99.8
   
98.8
   
97.2
 
EMPLOYEES
   
20,600
   
18,200
   
17,600
   
16,800
   
15,050
 

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Notes to the Consolidated Financial Statements for a discussion of “Acquisitions,” “Goodwill,” “Long-Term Obligations” and “Stockholders’ Equity.”

-32-


ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, refining and utility 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 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.

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 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 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 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 and TFSH, our joint venture with a European financial institution.

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

2007 was another year of solid performance for Terex, as we continued to benefit from global economic growth driving strong end market demand. We focused on numerous internal initiatives to grow sales and profitability as we transform from a holding company to an integrated operating company. We have also benefited from global growth driven by strong economies in North America and Western Europe and improving standards of living around the world. Although we expect slower economic growth in 2008 in North America, and to a lesser extent in Western Europe, our strategy of product and geographic diversity is expected to drive sales growth that will allow us to remain on pace to achieve our goal of $12 billion in sales with a 12% operating margin by 2010. Demand for infrastructure and energy has resulted in extraordinary demand for our cranes. Strong commodity demand driven by developing economies has increased demand for our mining equipment. Increasing labor rates that require productivity enhancing solutions combined with improving global safety standards is driving demand for our aerial work platforms products. Our construction products faced a mixed year in 2007, with weakness in North America partially offset by strength in other geographies, particularly in Western Europe, for certain types of heavy equipment, and in both Western and Eastern Europe for compact construction equipment. Our roadbuilding and utility businesses, which are primarily North American focused, remained weak, as a result of continued low levels of governmental spending on infrastructure.

-33-

 
A key to our continued strong performance is that our product portfolio contains a mix of early, mid and late cycle products combined with mining products that are tied to global commodity demand. For example, compact construction equipment is an early cycle product, aerial work platforms and heavy construction equipment are mid-cycle equipment, and cranes and roadbuilding equipment are late cycle equipment. This relatively balanced mix of product types helps to moderate cyclical sales movements for Terex as a whole, as demand for one product may weaken, but be offset by demand for products in a different cycle. A balanced geographic sales mix also helps moderate demand swings for our products, as demand in one region may strengthen or weaken over different times as compared to economies in other geographies. 2007 events demonstrated the value of geographic diversity, as construction equipment sales slowed in North America but were strong in Europe. In 2007, 45% of our sales were to customers located in the USA, United Kingdom and Germany. To further our geographic sales mix, we are intent on growing our presence in developing markets as we work towards our goal of generating approximately 1/3 of our sales from the Americas, 1/3 from Europe, Africa and the Middle East and the remaining 1/3 from Asia and Australia.

Global dynamics expected to continue to drive demand for our equipment include creating infrastructure in developing economies, repairing/replacing infrastructure in North America and Western Europe, increasing labor costs and strengthening safety standards globally. Developing economies are building infrastructure at a rapid pace, as demonstrated in countries and regions around the world such as the Middle East, and particularly Dubai, cities in Eastern China such as Shanghai and Beijing, and Eastern Europe. This growth is expected to continue as profits from oil exports are invested by exporting countries such as Russia and the Middle East and as western Chinese cities develop. Decaying infrastructure and historical under-investment in infrastructure to support population growth are expected to continue to drive demand for equipment in North America and Western Europe. This global infrastructure demand favorably impacts all five of our segments, particularly Cranes and Materials Processing & Mining. Aerial work platforms and compact construction equipment such as mini excavators are benefiting from higher labor costs that drive demand for productivity enhancing solutions. Stricter safety standards are also driving demand for equipment such as aerial work platforms as countries recognize the inherent risks of working at height on ladders and scaffolding.

We also continued to improve our financial position and long-term strategic plans in 2007. In January 2007, we completed our previously announced redemption of $200 million principal amount of 9-1/4% Senior Subordinated Notes due 2011. This transaction allowed us to repay high cost debt with cash generated from operations. In November 2007, we acquired SHM, a leading manufacturer of highwall mining equipment. The total consideration for the transaction was approximately $146 million paid in cash. We recognized that the softening North American economy combined with credit market concerns offered both a potential opportunity for finding acquisitions but also a challenge for raising capital. In November 2007, we took pre-emptive action by raising approximately $800 million by issuing Senior Subordinated Notes with a coupon of 8.00% that mature in November 2017. The note issuance was undertaken in anticipation of increasing acquisition opportunities for the Company as economic trends worsened. Subsequent to year-end 2007, we announced the acquisition of ASV, which was valued at approximately $488 million. ASV designs and manufactures rubber track loaders and undercarriages. In December 2007, we increased and extended our share repurchase program by $500 million. This brings the total dollar amount that may be repurchased under the share repurchase program to $700 million, and extends the program period from its original expiration date of June 30, 2008 through June 30, 2009. During 2007, we repurchased approximately 2.3 million shares for $166.6 million.

Return on Invested Capital, or 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. In 2007, we achieved an ROIC of 43.3%, compared to 38.4% ROIC in 2006 and our 2007 ROIC target of 41.9%. ROIC is determined by dividing the last four quarters’ Income from operations (including operating income from discontinued operations) by the average of the sum of Total stockholders’ equity plus Debt less Cash and cash equivalents for the last five quarters. 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’ Income from operations 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). In 2006, we included operating income from discontinued operations in the numerator of our calculation of ROIC because the ROIC metric is intended to compare total enterprise operational return to a total enterprise denominator that is based on amounts that include invested capital of discontinued operations in the balances. We believe that this total enterprise ROIC calculation, including operating income from discontinued operations, provides a more complete performance metric.

-34-

 
We utilize 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 previously disclosed in the Compensation Discussion and Analysis in our proxy statement for the 2007 annual meeting of stockholders. The following tables provide ROIC calculations for 2007 and 2006 and provide information to reconcile 2006 amounts used in our ROIC calculation that are adjusted for discontinued operations to the most directly comparable measure calculated and presented in accordance with GAAP ($ amounts in millions):

   
Dec ‘07
 
 Sep ‘07
 
 Jun ‘07
 
 Mar ‘07
 
 Dec ‘06
 
Income from operations
 
$
239.9
 
$
236.3
 
$
284.5
 
$
200.7
       
                                 
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
 
43.3%
 
Income from operations (last 4 quarters)
 
$
961.4
 
Average Debt less Cash and cash equivalents plus          
Total stockholders’ equity (5 quarters)
 
$
2,220.1
 

   
Dec ‘06
 
 Sep ‘06
 
 Jun ‘06
 
 Mar ‘06
 
 Dec ‘05
 
Income from operations
 
$
169.3
 
$
191.1
 
$
207.2
 
$
141.9
       
Plus: Income from operations of Disc. Ops
   
-
   
5.7
   
6.0
   
2.9
       
Income from operations adjusted for Disc. Ops
 
$
169.3
 
$
196.8
 
$
213.2
 
$
144.8
       
                                 
Debt (as defined above)
 
$
763.1
 
$
791.7
 
$
1,055.8
 
$
1,122.3
 
$
1,123.9
 
Less: Cash and cash equivalents
   
(676.7
)
 
(428.3
)
 
(525.7
)
 
(506.9
)
 
(553.6
)
Debt less Cash and cash equivalents
 
$
86.4
 
$
363.4
 
$
530.1
 
$
615.4
 
$
570.3
 
                                 
Total stockholders’ equity
 
$
1,751.0
 
$
1,591.7
 
$
1,490.5
 
$
1,274.1
 
$
1,161.0
 
                                 
Debt less Cash and cash equivalents plus                                  
Total stockholders’ equity
 
$
1,837.4
 
$
1,955.1
 
$
2,020.6
 
$
1,889.5
 
$
1,731.3
 
 
2006 ROIC
 
38.4%
 
Income from operations adjusted for Disc. Ops (last 4 quarters)
 
$
724.1
 
Average Debt less Cash and cash equivalents plus          
Total stockholders’ equity (5 quarters)
 
$
1,886.8
 
 
RESULTS OF OPERATIONS

2007 COMPARED WITH 2006

Terex Consolidated

   
2007
 
2006
 
 
 
       
% of
Sales
     
% of
Sales
 
 % Change In
Reported Amounts
 
   
($ amounts in millions)
     
Net sales
 
$
9,137.7
   
-
 
$
7,647.6
   
-
   
19.5
%
Gross profit
 
$
1,882.0
   
20.6
%
$
1,443.1
   
18.9
%
 
30.4
%
SG&A
 
$
920.6
   
10.1
%
$
733.6
   
9.6
%
 
25.5
%
Income from operations
 
$
961.4
   
10.5
%
$
709.5
   
9.3
%
 
35.5
%

Net sales for the year ended December 31, 2007 increased $1,490.1 million when compared to the same period in 2006. Our sales increased across all segments, with the exception of Roadbuilding, Utility Products and Other, due to strong global demand across many product categories. Increased sales volume and pricing actions contributed approximately $818 million of the increase. Additionally, the favorable translation effect of foreign currency exchange rate changes contributed approximately 32% of the net sales increase.

-35-

 
Gross profit for the year ended December 31, 2007 increased $438.9 million when compared to the same period in 2006.  Gross profit increased across all segments, with the exception of Roadbuilding, Utility Products and Other. Approximately $320 million of the increase in gross profit was the result of the combination of increased volume, particularly international sales, a more favorable product mix in certain businesses and the positive impact of pricing initiatives. Additionally, the favorable translation effect of foreign currency exchange rate changes contributed approximately 21% of the increase.

Selling, general and administrative costs (“SG&A”) increased for the year ended December 31, 2007 by $187.0 million when compared to the same period in 2006. Each segment’s SG&A costs rose due to its portion of the increased selling, engineering and administrative infrastructure investment of approximately $105 million Company-wide. The unfavorable translation effect of foreign currency exchange rate changes also accounted for approximately 24% of the increase.

Income from operations increased by $251.9 million for the year ended December 31, 2007 over the comparable period in 2006. We experienced improvement in operating profit due to the higher volume and pricing actions and the favorable translation effect of foreign currency exchange rate changes, offset by the higher SG&A costs described above.

Terex Aerial Work Platforms

   
2007
 
2006
     
       
% of
Sales
     
% of
Sales
 
% Change In
Reported Amounts
 
   
($ amounts in millions)
     
Net sales
 
$
2,337.8
   
-
 
$
2,090.3
   
-
   
11.8
%
Gross profit
 
$
647.9
   
27.7
%
$
525.5
   
25.1
%
 
23.3
%
SG&A
 
$
194.8
   
8.3
%
$
152.9
   
7.3
%
 
27.4
%
Income from operations
 
$
453.1
   
19.4
%
$
372.6
   
17.8
%
 
21.6
%

Net sales for the Aerial Work Platforms segment for the year ended December 31, 2007 increased $247.5 million when compared to the same period in 2006. Markets in Europe, Latin America and Asia/Pacific continued to drive the increase in net sales, with sales in these regions increasing by approximately 47%, while sales in North America decreased approximately 6%, primarily in our telehandler product line. Included in our increased net sales is approximately $58 million resulting from price increases as well as approximately $79 million due to the favorable translation effect of foreign currency exchange rate changes.

Gross profit for the year ended December 31, 2007 increased $122.4 million from the comparable period in 2006. Gross profit improved approximately $58 million due to price increases. Additionally, approximately $35 million of the gross profit increase was due to the increased sales noted above. This improvement was partially offset by approximately $17 million in higher costs for material used in production. Approximately 9% of the increase in gross profit resulted from the favorable translation effect of foreign currency exchange rate changes on products made in the U.S. and sold into markets elsewhere throughout the world.

SG&A costs for the year ended December 31, 2007 increased $41.9 million when compared to the same period in 2006. The expansion of our international sales and distribution infrastructure accounted for approximately $14 million of the increase. Additionally, due to our significant growth, we had approximately $16 million higher costs for other sales and marketing, engineering, information technology and personnel related expenses. Corporate cost allocation increased approximately $7 million over the prior year and approximately 13% of the increase was due to the favorable translation effect of foreign currency exchange rate changes.

Income from operations for the year ended December 31, 2007 increased $80.5 million when compared to the same period in 2006. The increase was due to the items noted above, particularly continued higher volume in European and other international markets and the favorable translation effect of foreign currency exchange rate changes, partially offset by costs related to our investment in new markets.
 
-36-


Terex Construction

   
2007
 
2006
     
       
% of
Sales
     
% of
Sales
 
% Change In Reported Amounts
 
   
($ amounts in millions)
     
Net sales
 
$
1,908.5
   
-
 
$
1,582.4
   
-
   
20.6
%
Gross profit
 
$
250.3
   
13.1
%
$
179.1
   
11.3
%
 
39.8
%
SG&A
 
$
194.2
   
10.2
%
$
163.1
   
10.3
%
 
19.1
%
Income from operations
 
$
56.1
   
2.9
%
$
16.0
   
1.0
%
 
250.6
%

Net sales in the Construction segment increased by $326.1 million for the year ended December 31, 2007 when compared to the same period in 2006. Approximately $200 million of the increase was due to increased product volume, particularly loader backhoes, material handlers, mini and midi excavators and large trucks. Regionally, growth was predominantly in Europe due to continued strong demand, partially offset by lower U.S. sales due to the downturn in the U.S. economy. Additionally, the favorable translation effect of foreign currency exchange rate changes accounted for approximately 41% of the net sales increase.

Gross profit increased $71.2 million when compared to 2006 results for the same period. This improvement was driven primarily by the combination of higher sales volume and increased pricing of approximately $53 million. The favorable translation effect of foreign currency exchange rate changes also added approximately 26% of the increase.

SG&A costs for the year ended December 31, 2007 increased $31.1 million from the comparable period in 2006. The increase was due to higher selling costs of approximately $8 million associated with improving our global sales network and certain promotional programs and trade show activities, while increased engineering costs of approximately $3 million for product improvements also contributed to the increase. Additionally, the unfavorable translation effect of foreign currency exchange rate changes accounted for approximately 48% of the increase.

Income from operations for the year ended December 31, 2007 increased $40.1 million when compared to the same period in 2006, resulting primarily from the items noted above, particularly improved sales and the translation effect of foreign currency exchange rate changes, offset in part by higher SG&A costs.

Terex Cranes
 
   
2007
 
2006
     
       
% of
Sales
     
% of
Sales
 
% Change In
Reported Amounts
 
   
($ amounts in millions)
     
Net sales
 
$
2,234.9
   
-
 
$
1,740.1
   
-
   
28.4
%
Gross profit
 
$
448.2
   
20.1
%
$
293.0
   
16.8
%
 
53.0
%
SG&A
 
$
191.5
   
8.6
%
$
138.5
   
8.0
%
 
38.3
%
Income from operations
 
$
256.7
   
11.5
%
$
154.5
   
8.9
%
 
66.1
%


Net sales for the Cranes segment for the year ended December 31, 2007 increased by $494.8 million when compared to the same period in 2006. The increase in net sales was due to higher unit volume, which accounted for approximately $100 million of the increase. Approximately $121 million of the increase resulted from improvement in our product mix due to higher sales of crawler and rough-terrain cranes. These offset lower sales of boom trucks in the U.S. market. Increased pricing at certain facilities and sales of products with enhanced features added approximately $113 million to the increase. The favorable translation effect of foreign currency exchange rate changes on Euro denominated sales contributed approximately 28% of the net sales increase.

Gross profit for the year ended December 31, 2007 increased $155.2 million relative to the same period in 2006. Gross profit benefited approximately $30 million from the effect of prior pricing actions flowing through our order backlog, coupled with a higher mix of crawler and rough terrain cranes, which added approximately $77 million. The favorable translation effect of foreign currency exchange rate changes on Euro denominated sales improved gross margin by approximately 12% from the prior year.

SG&A costs for the year ended December 31, 2007 increased $53.0 million over the same period in 2006. The increase was driven by higher sales costs of approximately $14 million due to increased volume and increased allocation of corporate costs of approximately $18 million. Approximately 24% of the increase was due to the unfavorable translation effect of foreign currency exchange rate changes.

-37-

 
Income from operations for the year ended December 31, 2007 increased $102.2 million over the comparable period in 2006. Income from operations in 2007 benefited from higher sales volume and product mix, the translation effect of foreign currency exchange rate changes and the impact of prior pricing actions, offset in part by higher SG&A expenses.

Terex Materials Processing & Mining

   
2007
 
2006
     
       
% of
Sales
     
% of
Sales
 
% Change In
Reported Amounts
 
   
($ amounts in millions)
     
Net sales
 
$
2,092.1
   
-
 
$
1,625.0
   
-
   
28.7
%
Gross profit
 
$
442.4
   
21.1
%
$
341.0
   
21.0
%
 
29.7
%
SG&A
 
$
196.7
   
9.4
%
$
151.0
   
9.3
%
 
30.3
%
Income from operations
 
$
245.7
   
11.7
%
$
190.0
   
11.7
%
 
29.3
%

Net sales in the Materials Processing & Mining segment increased $467.1 million over the comparable period in 2006. Approximately $247 million of the increase was due to continued solid demand for our products, particularly large mining trucks, excavators and crushing and screening products. This demand was driven by continued high commodity prices combined with increased global mining operations, as well as European and Indian demand for crushing and screening products. Pricing actions improved our sales by approximately $36 million. Strong parts revenue also contributed approximately $64 million of the increase. Additionally, the favorable translation effect of foreign currency exchange rate changes accounted for approximately 25% of the net sales increase.

Gross profit increased by $101.4 million in the year ended December 31, 2007 over the comparable period in 2006. The increase was due to higher sales volume, including increased parts sales, and product mix, which contributed approximately $51 million, combined with the impact of prior pricing actions of approximately $36 million, offset in part by approximately $5 million in higher costs for material and component purchases and approximately $9 million in higher warranty costs. As a percentage of sales, gross profit was unfavorably impacted by a higher proportion of mining truck sales, which have lower margin than other products in this category. Additionally, the favorable translation effect of foreign currency exchange rate changes accounted for approximately 29% of the increase.

SG&A costs increased by $45.7 million relative to the comparable period in 2006. The increase in SG&A expense was due to approximately $4 million of additional staffing costs to support sales growth, engineering costs of approximately $5 million for product development and supplier qualification activity, approximately $7 million in legal costs associated with claims and investigations, as well as an additional allocation of corporate costs of $11 million. Approximately $10 million of higher administration costs were incurred in support of business growth. The unfavorable translation effect of foreign currency exchange rate changes added approximately 23% of the increase.

Income from operations for the Materials Processing & Mining segment increased $55.7 million over the comparable period in 2006. The increase was a result of the items noted above, particularly higher sales volume and the impact of pricing actions, partially offset by higher SG&A costs associated with the segment’s growth.

Terex Roadbuilding, Utility Products and Other

   
2007
 
2006
     
       
% of
Sales
     
% of
Sales
 
% Change In
Reported Amounts
 
   
($ amounts in millions)
     
Net sales
 
$
675.8
   
-
 
$
746.0
   
-
   
(9.4
)%
Gross profit
 
$
91.1
   
13.5
%
$
102.4