The increase over the prior year was driven mainly by heightened inventory levels to meet expected growth, as well as 0.8% due to the addition of approximately $99 million of working capital associated with the acquisition of ASV in February 2008. While most of the inventory accumulation is associated with anticipated continued strong growth, it also reflects logistic issues arising from increased transportation times due to the globalization of customer base, as well as challenges with supplier parts availability at certain locations. The company is continuing to review its global manufacturing footprint to better position production closer to its customers, and aims to moderate this negative influence over the next twelve to eighteen months.

Backlog for orders deliverable during the next twelve months was $4,815.6 million at March 31, 2008, an increase of approximately 41.1% versus the first quarter of 2007, and an increase of 15.2% versus the December 31, 2007 level.

- The increase from December 31, 2007 was reflected across all business segments. The increase versus the prior year’s first quarter was aided substantially by the continued strength of Crane orders, which are outpacing the company’s ability to manufacture and deliver products to its customers. Also meaningfully contributing to the increase was the Construction business, as that segment’s backlog increased 48% over the prior year period, in response to strong Eastern European and Middle East demand, continued strong demand for material handlers in response to higher steel prices, and continued ramp-up challenges on certain product lines.
- Materials Processing & Mining segment backlog increased 27% over the prior year period, reflecting global infrastructure requirements.
- Backlog for the Aerial Work Platforms segment showed a modest improvement, while the Roadbuilding, Utility Products and Other segment declined somewhat from the prior year’s first quarter. With regard to the reported backlog, it should be noted that Terex has not accepted firm orders for rough terrain crane delivery to take place after January 1, 2009. This was designed to ensure that prices for 2009 delivery sufficiently reflect the demand environment and potential input cost increases of the business. Production volumes for the first quarter of 2009 that have not been included in backlog approximate $210 million. The company does not anticipate establishing pricing for rough terrain cranes for 2009 delivery until the third quarter of 2008.

Net sales for the Aerial Work Platforms (AWP) segment increased $38.9 million, or 7.1%, to $586.6 million versus the first quarter of 2007.

- Excluding the translation effect of foreign currency exchange rate changes, net sales increased approximately 5.8%. Strong U.S. demand coupled with international demand, primarily in the Middle East, Russia and Eastern Europe, continued to drive higher sales volume. Additionally, a merger of several customers occurred in Western Europe that negatively impacted sales in that region due to a temporary halt in capital expenditures while those customers reviewed their total fleet composition. The favorable performance in the U.S. market versus expectations helped to offset weaker performance versus expectations in the Western European and Asia Pacific regions. Demand for boom lifts drove sales higher, but was offset somewhat by slower telehandler sales in both the U.S. and Europe.
- Operating margin was essentially flat when compared to the first quarter of 2007, as increased sales volume was offset by costs associated with the expansion of global sales and distribution infrastructure.

Net sales for the Construction segment increased $40.5 million, or 9.9%, to $448.3 million versus the first quarter of 2007.

Excluding the translation effect of foreign currency exchange rate changes of $29.8 million and ASV sales since its acquisition of $21.3 million, net sales decreased approximately 2.6%. The U.S. market remained relatively weak and the European market was slower. This decline was mostly offset with positive developments in the Middle East and Eastern Europe. Additionally, the larger construction-class off-highway truck business in Motherwell, Scotland experienced a slow-down in production rates due to challenges that arose during the shift to a mixed model production line. This shortfall is expected to be temporary, and the net result of this activity is still expected to yield volume opportunity and cost reduction.

Net sales for the Cranes segment increased $131.4 million, or 26.2%, to $632.2 million versus the first quarter of 2007.

- Excluding the translation effect of foreign currency exchange rate changes, net sales increased approximately 15.4%. Strong global demand, particularly for large crawler cranes and mobile telescopic cranes, continued to drive robust sales and order activity. Growth in rough terrain cranes sales reflected North American and Middle East market strength, particularly from the energy sector, while sales of boom trucks and smaller truck cranes in North America remained under pressure.
- Operating margin increased to 13.6%, up substantially from the 10.6% reported in the first quarter of 2007, reflecting the favorable mix of sophisticated, high capacity cranes in the quarter, as well as meaningful improvement in lean manufacturing and productivity enhancements.
- Supplier constraints, particularly in Europe, and capacity limitations in terms of welding and assembly space have extended delivery lead times.

Net sales for the Materials Processing & Mining (MPM) segment increased $169 million, or 42.8%, to $564.3 million versus the first quarter of 2007.

Excluding the translation effect of foreign currency exchange rate changes, net sales increased approximately 35.3%. The acquisition of SHM in November 2007 contributed approximately one-tenth of the 2008 sales increase, while also reducing operating profit by approximately $5 million as a result of inventory valuation adjustments and intangible amortization. The Mining business had a strong first quarter, with sales increasing approximately 65% when compared with the prior year period, driven by continued strong commodity demand. This increase was attributable in large part to commissioning activity of large hydraulic mining shovels, including the delivery of the first of two scheduled RH400’s (the world’s largest hydraulic mining shovel) to the Canadian Oil Sands project. The second shovel was commissioned in early April 2008. The Materials Processing business continues to benefit from developing market infrastructure activity. While demand remains strong in this business, capacity constraints, specifically in assembly space, are a key challenge that may impede acceleration in the growth of this business. The company is continuing to improve historic production bottlenecks through supply management and lean manufacturing techniques.

Net sales for the Roadbuilding, Utility Products and Other (RBUO) segment decreased $9.6 million, or 5.4%, to $169.2 million versus the first quarter of 2007.

This is directly related to the decrease in concrete mixer truck demand resulting from continued softness in the North American housing construction market. Additionally, the prior year’s results reflected an unusual positive effect of the Tier III engine changeover which resulted in an elevated level of customer demand ahead of the introduction of the higher cost, stricter emissions engine. Order quoting activity remains strong for both the asphalt plant and utility product businesses and shipments are expected to increase in the second quarter. The lower net sales volume had a negative impact on Gross Margin and operating margin. The company will continue to monitor the estimated fair value of the roadbuilding business for purposes of determining whether an impairment is evidenced.

The increase in loss from operations to $7.2 million versus the prior year’s $6.5 million loss from operations reflects continued investment in company-wide initiatives, namely supply chain management, manufacturing strategy, information technology, marketing, and the Terex Business System, offset by approximately $8.9 million in the allocation of incremental corporate costs to the business segments in 2008 versus the prior year.

Key questions from the first quarter earnings call conducted by Terex Corporation on April 24, 2008.

Terry Darling (Goldman Sachs): What you expect in terms of order of magnitude the price that you are looking at to offset those steel cost increases?

Ronald M. DeFeo: We are trying not to be so specific that somebody can simply paintbrush a price increase because it is all about each on of our individual businesses. We expect to recover the full amount of our cost increases. That will vary because in our Crane business we have the opportunity to have some escalation, particularly in our larger cranes. Our Aerial Work Platforms business will be more challenged, particularly in the short-term, to recover that increase although we are going to work hard to do that. It varies by business. It is our intent within the next to 6 to 12 months to fully recover our entire cost. If you reflect upon the last time steel went up significantly, which is in the 2004 period, most companies, ourselves included, were caught flat-footed relative to how to price to recover these kinds of increases. We learned our lessons, but that does not make it any easier. We have a good roadmap. While others are out there saying we are going to take prices up 5% or up to 5%, I do not think that is an appropriate way to give guidance here because we want to take prices up as necessary to recover the cost, no more but certainly no less.

Terry Darling (Goldman Sachs): Within your guidance, what increase have you assumed for raw materials broadly?

Ronald M. DeFeo: We have looked at what our variances are. We think we have some sensitivity handicap. But if we give you that number, you are going to look at it and say what your contingency to your EPS guidance is. We look at this rather holistically because there are other things that are happening that are positive that may be offsetting this.

Terry Darling (Goldman Sachs): How conservative or how aggressive your raw material assumptions in the back half of the year might be?