Terex Corporation announces income from continuing operations of $44.8 million, or $0.41 per share for the third quarter of 2015, and excluding certain items, income from continuing operations as adjusted was $63.4 million, or $0.58 per share. This compared to income from continuing operations of $58.7 million, or $0.51 per share for the third quarter of 2014, income from operations as adjusted was $67.8 million, or $0.59 per share.
Net sales were $1,641.3 million in the third quarter of 2015, a decrease of $168.5 million, or 9.3%, when compared with $1,809.8 million in the third quarter of 2014. Excluding the impact of currency exchange rates, net sales decreased $17.4 million or 1.0%. Income from operations was $111.9 million in the third quarter of 2015 and excluding certain items, income from operations as adjusted was $126.8 million. This compared to income from operations of $116.8 million in the third quarter of 2014 and excluding certain items, income from operations as adjusted was $127.5 million.
“Our marketplace remains challenging,” comments Ron DeFeo, Terex Chairman and Chief Executive Officer. “We had another good performance in our Aerial Work Platforms (AWP) business which delivered year-over-year improvement in profitability in the third quarter as increased productivity and lower material cost more than offset lower sales, mainly in the North American telehandler product category. The Materials Processing (MP) business also had a solid quarter, expanding operating margins on relatively flat sales. The Cranes and Construction businesses continue to experience relatively soft market conditions overall, with customers remaining cautious with their equipment purchasing patterns. The Material Handling and Port Solutions (MHPS) business saw declines driven by a decrease in port automation sales.”
DeFeo continues, “As mentioned last quarter, we are seeing pricing pressure in the marketplace, which to date we have been able to mostly offset by reductions in material input costs. We continue to execute very well against the cost saving initiatives that we have previously communicated. We also continue to make progress towards the completion of the merger with Konecranes Plc, which when combined with the improvements already underway creates a compelling financial improvement story in an otherwise flat market.”
Outlook: DeFeo adds, “Given where we are in the year and the challenging environment we are operating in, we believe we will be at or near the low end of our previously announced earnings guidance for the full year 2015.”
Capital Structure: “We generated approximately $62 million of free cash flow in the quarter, which was lower than anticipated, as our net working capital as a percentage of annualized sales remains high at 28%,” comments Kevin Bradley, Terex Senior Vice President and Chief Financial Officer. “We have more work in front of us to improve our working capital efficiency, but we still believe we have an opportunity to meet our free cash flow target for 2015 of $200 - 250 million.”
The company’s liquidity at September 30, 2015 increased by $11 million compared to June 30, 2015 and totaled $829 million, which was comprised of cash balances of $301 million and borrowing availability under the Company’s revolving credit facilities of $528 million.
Return on Invested Capital (ROIC) was 9.7% for the trailing twelve months ended September 30, 2015.
Taxes: The effective tax rate for the third quarter of 2015 was 40.1% as compared to an effective tax rate of 32.1% for the third quarter of 2014. The higher effective rate for the three months ended September 30, 2015 was primarily due to an increase in the provision for uncertain tax positions compared with a reduction in the provision for uncertain tax positions in the three months ended September 30, 2014.
Backlog: Backlog for orders deliverable during the next 12 months was $1,482 million at September 30, 2015, a decrease of 19.2% from June 30, 2015 and a decrease of 13.0% from September 30, 2014. Excluding the impact of foreign exchange rate changes, backlog at September 30, 2015 decreased 5.9% from September 30, 2014 primarily driven by decreases in the MHPS and cranes backlog which were slightly offset by increases in AWP backlog.