Ronald M. DeFeo - Chairman and CEO Kevin Bradley - SVP and CFO Tim Ford - President, Terex Cranes Steve Filipov - President, Material Handling & Port Solutions Matt Fearon - President, Terex Aerial Work Platforms Kieran Hegarty - President, Terex Materials Processing.

Andy Kaplowitz - Barclays Capital Nicole DeBlase - Morgan Stanley Jamie Cook - Credit Suisse David Raso - ISI Group Ann Duignan - JPMorgan Vishal Shah - Deutsche Bank Joel Tiss - BMO Capital Markets Eli Lustgarten - Longbow Research Rob Wertheimer - Vertical Research Ted Grace - Susquehanna Jerry Revich - Goldman Sachs Seth Weber - RBC Capital Markets Mig Dobre - Robert W.

Baird Andrew Casey - Wells Fargo Securities Schon Williams - BB&T Capital Markets Alexander M. Blanton - Clear Harbor Asset Management.

Good morning. My name is Jody and I will be your conference operator today. At this time, I would like to welcome everyone to the Terex Corporation's First Quarter 2014 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions) Thank you. I would now like to turn the conference over to Mr. Ronald DeFeo, Chairman and CEO of Terex Corporation. Please go ahead, sir..

Thank you, Jody, and good morning, ladies and gentlemen. We appreciate your interest in Terex.

Today on the call with me this morning is Kevin Bradley, our Senior Vice President and Chief Financial Officer; and Kevin O'Reilly, Vice President of Operational Finance; Tom Gelston, Vice President of Investor Relations, and several of our Group presidents, and we're all here to try and address any questions you have later on in the call.

As usual, a replay of this call will be archived on the Terex Web-site, www.terex.com, under Audio Archives in the Investor Relations section.

I'm going to begin with some overall commentary and highlights as usual and Kevin will follow me with a more detailed financial report, and then I'll come back to give more specific comments on where we’re heading and summarize it before we open it up to your questions.

As usual, we will be following a presentation that accompanied the earnings release and it is available on our Web-site. I would like to request that you ask one question and a follow-up in order to give everyone a chance to participate. Let me direct your attention to Page 2, which is the forward-looking statement and non-GAAP measures explanation.

We encourage you to read this, as well as other items in our disclosures, because the material I will be discussing today includes forward-looking information. Now let me begin. Turning to Page 3, we announced last night that our first quarter 2014 earnings were $0.28 a share, a modest improvement over last year.

This result was largely in line with our expectations. The quarter did reflect a mixed performance within our businesses. Most notably, our AWP business in spite of some significant weather conditions in the U.S., posted record first quarter sales. Construction, MP and Material Handling & Port Solutions delivered results in line with expectations.

Our Cranes business on the other hand was disappointing with a particularly weak performance in North America and in many developing markets.

As I look forward, I'm encouraged by the trends in our order intake and backlog for Cranes, and in general when combined with our results in the quarter we are reaffirming our 2014 annual guidance of $2.50 to $2.80 per share and a free cash flow target of $200 million to $250 million.

We do expect the back half of the year to be the stronger of the two fiscal years has with the first half EPS comprising between 40% to 45% of our full year results. I'll come back and provide some more highlights but first I'd like to turn it over to Kevin who will go through the financial results for the quarter.

Kevin?.

Thanks, Ron, and good morning everyone. Let's turn to Slide 4 which provides the year-over-year comparison of the first quarter on both a reported and as adjusted basis. Although there were no adjustments in Q1 of 2014, details on 2013 adjustments can be found in the appendix of the presentation.

Net sales for the quarter of $1.7 billion were flat with the prior year. Our AWP business posted 15% growth and MHPS was up 9%. Construction and Materials Processing were down 7% and 3% respectively. Although we planned for a slow start to the year in Cranes, the 16% decline in sales was greater than we anticipated.

Gross margin was 20.1% for the quarter, up from 19.6%, as adjusted in 2013. An improved mix of business including growth in AWP and MHPS was partially offset by the decline in Cranes. Margins in our Cranes segment were negatively impacted by a combination of decreased sales, lower factory utilization and unfavorable product mix.

SG&A increased slightly to $258 million in the quarter. AWP increased SG&A spending dollars but declined as a percentage of sales to 8.7% in the quarter from 9.1% last year. We continue to invest in new product development and manufacturing footprint diversification in the AWP segment.

Construction and MHPS SG&A declined on both a dollar and as a percentage of sales basis, as we have realized benefits from our 2013 restructuring actions. SG&A in Cranes as compared to last year was up, driven largely by increased investment in Tier IV engineering as well as higher marketing costs associated with trade show activities.

Overall, we remain focused on cost efficiency and leveraging our overhead. Operating profit increased slightly over last year's adjusted levels, coming in at $75 million or 4.5% of sales. Growth in AWP and improved financial performance in Construction and MHPS were partially offset by the reduction we experienced in Cranes.

Net interest and other expense increased slightly when compared to the prior year adjusted numbers. Lower net interest expense, which reflects the benefits of the capital structure actions taken in 2013, was offset primarily by foreign exchange losses in the period.

The first quarter 2014 effective tax rate was 26.7% as compared to 42.8% as adjusted in 2013. Improvements in the quarter were primarily due to the reduced impact of losses not benefited and from a greater benefit from uncertain tax provision releases compared to the first quarter of 2013.

We expect an effective tax rate of between 33% and 35% for the full year. For Q1, earnings per share was $0.28. This compares to $0.22 of adjusted and $0.17 as reported in the prior year quarter. Net working capital as a percentage of annualized sales was 27.6% compared to 25.7% reported in 2013.

This increase was driven primarily by inventory expansion in AWP where we built stock in anticipation of a strong Q2. Also contributing to the increase was the delayed commissioning of roughly $50 million worth of automation equipment in our Port Solutions business, as previously communicated.

Finally, stronger net operating profit after tax drove an improvement in ROIC from 7.2% last year to 8.6% in the quarter. Now, let's turn to Slide 5 and discuss changes in liquidity for the quarter.

Given the capital allocation activities we discussed at the end of 2013, we thought it would be helpful to walk through the impact those changes had on liquidity in the quarter. We began the year with $736 million liquidity. Free cash flow, which we define as cash from ops less CapEx, was $6 million in the first quarter.

Overall only slightly positive, we've historically been a net consumer of cash in the first quarter of the year due to the seasonal nature of many of our businesses. During the quarter, we completed the purchase of the remaining minority shares in Terex Material Handling & Port Solutions AG for $71 million, bringing our ownership to 100%.

This will eliminate the remaining guaranteed payment associated with these shares, which had an effective cost to the Company of roughly 8%. It will also allow us to more quickly address structural cost, now that it is no longer a public company.

We also repurchased an additional $33 million in Terex shares within the quarter, $24 million of which settled in the quarter, bringing the total repurchase amount to $63 million since the inception of this program in December of last year.

We paid a quarterly dividend of $5 million during the quarter and ended the quarter with liquidity of $632 million. As Ron mentioned, we are reconfirming our full year free cash flow guidance of $200 million to $250 million for the year. With that, let me turn it back to Ron..

Thank you, Kevin. Some additional commentary. First, turning to Page 6, out net sales bridge. For the overall Company, net sales were flat compared with the first quarter of 2013.

In North America, which is our largest market at about 41% of Q1 net sales, performance was down slightly from year ago with wide variances between a positive AWP with double-digit growth offset by a double-digit decline in Cranes.

We were encouraged with the overall Company growth we have experienced in Europe, which is 31% of Q1 net sales, as net sales were up over 30% with all segments growing in Europe. This was the fourth quarter in a row with sequential European growth.

The remaining markets, mostly developing markets, were down meaningfully in the first quarter, virtually offsetting our European gains for now. From a segment perspective, our AWP business remained strong with 15% top line growth and improvements in all three product categories, booms, scissors and telehandlers.

The story remains a strong rental market in the U.S. and improving business conditions in Europe. Our Cranes sales declined $77 million or 16% in the quarter versus a year ago with most regions starting the year slowly, except for Europe.

From a product perspective, we saw declines in our rough terrain and all-terrain product categories with improving sales in our large crawlers and tower cranes. MHPS, sales improved 9% in the quarter, driven by growth principally in our Port business. Turning to Page 7, operating profit and operating margins improved slightly in the quarter.

Our AWP business continued to deliver strong margins with operating profit up 13% from Q1 2013. Planned investments in new product development, CONEXPO expense and manufacturing footprint has put modest pressure on incremental margins in the short term and perhaps a modest mix as our telehandler product line was strongest in the first quarter.

Construction continues to make improvements as our discipline around cost control along with improving order rates has better positioned the business for profitability over the balance of 2014.

The decrease in operating profit for the Cranes segment is primarily a volume story, lower sales plus factory underutilization which is created by the lower sales levels, coupled with increased investment in our engineering spending for Tier IV yielded a breakeven quarter for Cranes.

We will detail why we believe net sales will improve in a few minutes. MHPS performance improved as a result of higher sales volume and the 2013 restructuring actions. We expect MHPS to be profitable during the remaining quarters of the year. Similar to last year, the operating margins should improve throughout the year.

Page 8 illustrates strong year-on-year quarter-on-quarter backlog growth. AWP has seen a shift in the ordering patterns of customers, moving orders from the last quarter of the year to closer to when customers actually need the equipment.

Increased orders for the Cranes segment has been driven by recovering orders in North America and improved conditions throughout Europe. MHPS has also received good bookings from China and Europe in the first quarter of 2014. Overall, an encouraging quarter with regards to bookings, indicating solid revenue for the remainder of 2014.

Construction is seeing good orders activity in the U.S., following CONEXPO as well as in the U.K. When looking at the first quarter 2013 as a comparison, MHPS is the large driver as certain large Port automation projects are now being reported in the next 12 months backlog category.

On Page 9, we have provided a chart that takes a deeper look at our Cranes bookings and backlog. New orders are improving with the highest quarterly bookings in nearly two years. For our Cranes segment, we booked $533 million of orders in Q1 on top of $512 million in Q4 of 2013.

This is why the trailing six-month averages shown on the bottom left chart on Page 9 finally reflect a building backlog. Consequently, the past two quarters have had greater than 100% book-to-bill ratios, with 138% in Q1 2014.

We expect this to result in an improved second half performance with the first half modestly worse than initially anticipated for the year. On Page 10, we have provided the book-to-bill trends for all of our segments. This includes all orders taken during the periods, not just those with delivery in the next 12 months. A few points to note.

First, the nearly $800 million of orders taken in our Aerial Work Platforms segment in Q1 2014, clearly an indicator of a positive year and a positive environment. Also, fairly broad-based progress on these ratios across the Company as you can note by segment. We think this supports our modestly improved trend point of view.

So to conclude on Page 11, during the first quarter we delivered earnings generally in line with our guidance. We continue to see AWP performance as strong and we remain positive about the Construction, MHPS, and MP segments responding to improving market conditions.

We're encouraged by recent order trends in Cranes, despite struggling with lower sales and earnings in the first quarter. We continue to expect gradual performance improvement in the first half of 2014 and some acceleration in the back half of the year. We reiterate our EPS guidance of between $2.50 and $2.80 a share.

Critical for our success is to stay focused and disciplined on our pursuit of internal initiatives to maximize the returns to our shareholders through higher EPS and ROIC, which we expect to continue over the next several years. Thank you, and Jody, I'd like to open up the lines for questions..

(Operator Instructions) Your first question comes from the line of Andrew Kaplowitz from Barclays..

Ron, can I ask you about your inventory situation? I remember you going into the year, you weren't that happy with your inventories, especially in Cranes. It looks like you still built some inventories in the quarter.

So can you talk about the situation as you go into 2Q and beyond, do you still need to under-produce, especially in Cranes, to get your inventories to more manageable levels and did you clear out your inventory in AWP?.

Our inventory would normally build a little bit in Q1, and I don't it's that alarming that it did build in Q1. Some of that was anticipated. In fact most of it was anticipated. The build in AWP was clearly part of a plan to normalize production.

Obviously if you try to back off production and increase production in rapid short periods of time, it does nothing but add costs. So I think we're pretty much as expected in our Aerial Work Platforms business.

The other area of build in inventory is in our MHPS business, and our MHPS business is really building these big Port projects, and offsetting that somewhat are big cash advances that we have from some of our customers. So that's not that big of a concern.

And a third area is a rather small actually, inventory build in our Cranes business relative to the sales miss that we had.

And Tim, do you have a comment about that?.

Yes, actually, if you look at our overall segment inventory, the Cranes products piece was slightly up. The rest of the segment was down. So we had actually ended up year-over-year in the Cranes segment with a slight reduction in inventory, which of course plays back into the whole sales and absorption discussion.

We lowered our production to manage the inventory which caused the absorption discussion that Ron mentioned earlier..

So I think we are mostly out of the woods with regards to the underutilization. Maybe it impacted April a little bit, but for the overall quarter, I think we're mostly out of the woods on that issue..

Okay, Ron, that's helpful.

And then, you mentioned that the first half will start a little slow versus what you previously thought, but can you step back and talk about your conviction level regarding – meaning your EPS guidance for the year, I know you really reiterated the guide, but the sell side is at the high end of the range, so how much improvement do we need to see in Cranes to really get towards the higher end of the range here? And then, AWP we would assume would improve when it comes to margin performance over time..

Andy, the $2.50 to $2.80 guidance we think is a realistic view of what we can do as a company. There is an optimistic case on every one of our segments and then there is a pessimistic case on every one of our segments. I don't believe the pessimistic case will happen and I don't believe the optimistic case will happen.

That's why we have provided the range that we have provided. I think the Cranes revenue miss in Q1, taken without an increase in backlog, would be particularly concerning.

So with the increase in backlog, it begins to reflect customer confidence that's building for improving non-residential construction and improving project work, not just for the remainder of 2014 but well into '15 and '16, which is pretty much what we've expected.

The only caution I would put out is that back 12 to 24 months ago, we got a bit of a headwind with regard to Cranes improving business performance as well, and we want to see it sustain itself a little bit more in order to add our confidence.

Clearly AWP is in a solid place, Cranes is a big upside from their current performance, whether it's last year's performance or even the start of this year, MHPS is a building story with restructuring as well as a number of initiatives underway but MHPS' probably best days are not going to be in 2014 but rather again building in '15 and '16, not that we'll have a bad '14, we'll have quite a good '14 relative to last year, but I think that's the story for Terex.

And the very good thing I'd say is AWP, most of our customers are managing their fleet in a way where we are not going to be jerked around by 25% growth and then 25% decline. So, I think we've got a pretty positive balance.

And then of course you have Construction which is going to be a positive contributor for us, and then our Materials Processing business which has always been a pretty solid contributor. So, I would not try to articulate the most optimistic story for the Company at this stage. We need to get deeper into the year.

But I think the guidance we have provided is realistic, but the upside is clearly there for '15 and '16..

Thanks, Ron, I appreciate the color..

Your next question comes from the line of Nicole DeBlase from Morgan Stanley..

So my first question is on MHPS, if you could just comment on the Rotterdam situation, the $50 million of revenue that pushed out from 1Q, how much confidence do you have that this will actually ship during 2014?.

Okay, I'm going to turn that over to Steve..

So on the – let me just give you a picture of Rotterdam and where we are. As you know, there's two projects and one of the projects is AT&T and that's pretty much on time, and in the quarter we shipped about $30 million of automation. Again, the plan was to ship about $80 million, so $50 million of that got pushed out.

Really the issue is with Rotterdam World Gateway and it's more of an infrastructure problem. I'm actually traveling with Ron and Kevin to visit the site in two weeks to get a perspective of what's going on. I would say, there's probably $30 million to $40 million, Nicole, of risk right now that we're trying to mitigate and pull back into '14.

So that's kind of what the customers are telling us. But I will tell you that we're trying to figure out other ways to get $30 million or $40 million of revenue in Port outside of automation to mitigate for that. But the other thing I would like to highlight is, from a cash perspective we are getting the cash.

So as we erect the equipment, and we've now erected about half of the automated stacking cranes, so about 30 units are on site, they are fully erected, we get 80% of that cash upfront and then the remainder of that comes as we install them or finally commission those units.

So that's kind of where I see the risk, and again, internally we're trying to mitigate that risk. I think we'll have a better picture on the next call as to what is the scope of….

And what we've been able to do to offset it in other areas..

Yes, we're working obviously pretty close with Rotterdam World Gateway to see what else we can do to recognize battery exchange stations, some other things that we can do. And the last one is, just to give you an update maybe on Long Beach, Long Beach is going well.

We've got 26 automated guided vehicles on the ground right now and we have to deliver the six remainder in May and then pretty much it kind of looks like it's going to be on time. So those are the three big projects that we have ongoing..

I would emphasize, Long Beach done well will really be a showcase product in the United States for other ports, and while there is no specific order that's in negotiation right now, Long Beach working becomes a real testimony for us to sell other people down the road..

Okay, that's really helpful, Ron and Steve, thanks for that. And then my second question is around AWP. The orders were just really robust this quarter, and I'm wondering how much of that is being driven by the big rental houses coming in and placing orders that carry us throughout the year, or do you think it's more about strength of demand, U.S.

construction demand increasing, European replacement demand increasing? I'm just trying to get the sustainability of that strength..

Matt is on the call from Australia.

So, Matt, why don't you address that? Matt? Maybe, Jody, I don't know if you opened up his line?.

Matt, your line is open..

Okay, can you hear me now?.

Yes, I can, Matt..

Yes, we obviously had a great order quarter and it's pretty much what we've expected. We continue to see a steady U.S. market and it's both the large rental companies and independents, but we're also seeing the improving conditions in Europe and other places around the world. So, I'd say the real shift is the timing.

So you used to see some of the big order entry come in as early as fourth quarter of the prior year, and now you're starting to see it shift more to when they actually need the equipment. And so, it's very positive sign, it's nice healthy growth, and it was pretty much what we expected.

And so far into Q2, it's remained pretty steady, so it's looking really good..

Okay, great, thanks. I'll pass it along..

Your next question comes from the line of Jamie Cook from Credit Suisse..

A few questions.

First, can you just comment on, the Cranes orders obviously were encouraging in the quarter, can you talk about the trends you saw throughout the quarter, was it just driven by margin, how that fell, or was it more evenly distributed, and then did you see the Cranes orders continue into months of April because the concern would be CONEXPO would have pulled forward some orders? And I guess the second question is on the margin front on Cranes.

How are you thinking about Cranes margins for the year, and I'm trying to get a sense in the quarter, how much are the Tier IV engineering costs, did they continue throughout the year, is it a continued headwind? And can you also just about – you mentioned tradeshow cost, I'm just trying to kind of figure out sort of what's one time in the quarter versus incremental cost that will continue throughout the year.

Thanks..

Okay, Jamie, I'm going to let Tim answer that question. Just to remind people, in 2013 there was tradeshow expense in the second quarter with Bauma and in 2014 there was tradeshow expense across the Company in March. So it's really a matter of timing for the tradeshow commentary.

Tim, why don't you answer that part?.

We started to see order improvement back in October. Back if you recall, I made the comment on our third quarter call that that we have seen our best months of 2013 in the month of October, and since that time we've seen continued order improvement.

There is a natural dip in order placement whenever you go through either a year-end time cycle or you have a tradeshow like we had in March. So, there clearly was a build in the quarter, but some of that is, customers are holding orders in anticipation of the tradeshow passing circumstance to have a little celebration.

So I felt pretty good about where we were through both the fourth quarter and the first quarter in our order intake and I feel the order improvement that we're seeing will continue as we go forward. So I'm feeling much, much better about the order intake from where we were at this time a year ago and through the summer months of last year.

Regarding the SG&A, we do have and will have continued SG&A increase, particularly in the engineering spend as we work to finalize our Tier IV product line. We have about 15% increase in engineering spend this year versus last year to finalize a number of the products that we have begun development of last year and will finish this year.

So you will see some incremental spend in engineering through the course of the year, but to the point that Ron made earlier, we planted that. So that is baked into our expectations through the course of the year as we plan on our actual overhead spend..

And then do you care to talk about or answer how you think about margin for Cranes by year-end [inaudible] what's the reasonable margin assumption?.

I think the business profile that we identified when we did the year-end fourth quarter results is still in line with our expectations. Obviously getting off to a little slower start than we had hoped put some pressure on that. So we're going to continue to work on improving margins through the course of the year.

It would be my expectation as leader of the business that we should continue to see improvements each quarter as we go through the course of the year..

Great, I appreciate the color as always. Thank you..

Your next question comes from the line of David Raso from ISI Group..

My question is on the margins. You mentioned the Cranes margins for 2014, but as you said, last quarter we were given sales and margin guidance by segment.

So I'm not trying to nail you down to the exact percentage here, but can you help us a little bit with what's changed since that guidance? Again the Cranes margins you say could be similar to the last guidance.

Can you help us where – if we are a little concerned about the Cranes margins not being able to get to that level, where do you see the other segment margins where there's potentially some upside from the old guide?.

Okay, so without providing a re-segmentation guidance, which we don't want to do at this stage, we'll take a re-look at it at the end of the second quarter.

I would say the obvious answer here, and that is strong AWP may be offsetting a little bit of the Cranes, and MHPS is probably about as expected, Construction might be a little bit better, and MP is probably not a lot of changes.

But I would say it's fairly nuanced today because it's difficult to extrapolate off of Q1, which is still relatively a small margin quarter for us compared to the full year..

I mean your backlog right now is about 40% of the sales you need for the rest of the year to hit the revenue guide, sort of the same spot we were in last year.

So I mean you have the orders in backlog but is there something about the price cost in the backlog or the mix in the backlog to give us more confidence on your ability to execute on the margin side? I mean at the moment, it doesn't seem to be much of a revenue debate, it's your ability to execute.

So if you can help us a bit with again mix or price cost maybe in the backlog would be helpful..

I think in general, David, we're pretty positive about our material costs. We have seen good progress and driving some cost down from our supply base. The only offset to that is a bit of a concern, not real in fact but a bit of a concern, in some steel cost that may go up as we progress through the year.

We think we're offsetting through pricing most of the Tier IV implementation. So that's not an issue. We're not going to add a lot of manufacturing overhead to our business beyond what we're doing. We're adding a little bit of overhead in our AWP business, but that's really to begin to build a new factory in Oklahoma City within our old factory.

And so, the bottom line is, we just have to execute against the plan that we have laid out. I would say, I want to see more backlog, not less backlog.

So, I wouldn't say I'm completely comfortable with the amount of backlog we have here and I want to see our backlog grow because it's not the 2014 that I'm focused on alone, I'm focused on 2015 and beyond that. And the most encouraging thing that I would say is the European change that we have seen.

I mean it has been a long time since all the arrows were green in all of our segments in Europe. And it's 31% of our sales, but in reality it's our biggest footprint. So it should be equal or greater than North America in a recovered environment.

So, I don't look at it exactly the same way, David, as you explained it, I look at it in where's my potential, and my potential is drive growth in Europe and begin to mitigate the falling developing market issues with additional growth, and I think those two things coupled with a stable North America will result in pretty dramatic earnings performance for Terex in '15 and '16..

Okay, I appreciate the color. Thank you..

Your next question comes from the line of Ann Duignan from JPMorgan..

On the Cranes segment, with the commentary that you made about orders being kind of pleasantly positive since last October, I guess my question is, why haven't revenues picked up? Are these orders that have been placed for far out deliveries or – I'm just trying to get an understanding of, if volume is so important, why the revenues haven't picked up that good?.

Sure, Ann. I'll turn it over to Tim, but as you probably know, I mean this is not a short cycle business, this is a little bit of a longer cycle business. But, Tim, go ahead..

The cycle of Cranes production is very much driven by the product category. So we do have some shorter cycle product categories, but none of the product cycle or product production cycles in Cranes is as short as they are in say AWP.

So, the shortest production cycle we would have in our manufacturing portfolio would be the rough terrain and boom truck category. The longest of course would be some of the larger crawler cranes.

And what's encouraging for me is, as the order intake has improved over the past couple of quarters, we are seeing a lot of higher value, longer lead crawler cranes and tower crane production begin to increase.

So that takes a little bit longer to get through the production cycle, but the tower crane business in particular is encouraging because it's an indicator of non-res construction.

So, I expect the impact of these orders will begin to be realized here as we go through the year, and of course if we can drum up the movers for some other faster cycle business, that will help us as well..

Okay, that's helpful. And just a quick follow-up.

Ron, did you say that your book-to-bill, these are orders that can be more than 12 months, or did you clarify that orders are 12 months or less?.

On Page 10 of the presentation, these are orders, all orders that come in for the Company. So, some could be more than 12 months here. And that's why historically we haven't provided this because our backlog is only 12 months.

So, this is bookings and this is against billings, but it would be hard to go back for us, very tedious and probably lead to inaccuracies if we tried to go and pull out 12 months or less than 12 months, but it does provide a trend of all the orders we take in. Kevin, go ahead..

The only thing I would add, Ann, is that the vast majority of that impact would be in MHPS, so MHPS and obviously the total Terex including MHPS..

Okay, that's helpful. Thank you. I just wanted to clarify that. Ron, I know you talked about Europe.

A bit more color on Europe maybe, is it – for Europe, is it European rental companies because other regions are stronger and they are doing projects in other regions, just a little bit of color around what you are actually seeing on the ground in Europe?.

Okay. First of all, I'll [indiscernible] and say, when you go down so far, your first time's up seems like a big one, and this is really a bounce off from the bottom of Europe.

And then when you look at each one of our product categories, you'd say, this is the second year going for AWP, so there must be more to it than that, but nevertheless, the AWP category is probably still on the 40% to 45% of its historical highs in Europe. So, lots of room to move in AWP.

In the Port business, yes, we are shipping some port equipment, as Steve has mentioned, just for European consumption. But even the Material Handling side of Steve's business is stabilized and may be going to show some positive trends, but really pretty small at this stage, but positive.

And then our Cranes business had a very bad 2013 in Europe, very bad, but now some of our customers, particularly our bigger customers, are asking for delivery because they are in anticipation of good projects, some of which will be in Europe but some of which will be outside of Europe as well.

There's no way that Netherlands can consume all the cranes it buys. And then our Construction business, which albeit is a compact equipment business, has actually got a bigger backlog which is quite encouraging for the small compact products and the steel scrap product.

Fuchs has finally got a decent backlog after about a year and a half to two years of scrapping for every order it could possibly get.

And that leaves the Materials Processing business for us, Kieran Hegarty's business, which historically has had a strong European business but has been quite weak, and where Kieran has got most of his business has been in North America and in developing markets and now we're beginning to see a little bit of growth in Europe there.

So overall, it's a bounce off of a pretty weak recent history but a solid one and across-the-board one..

Great. Thanks, Ron, I really appreciate the color. I'll get back in line..

Your next question comes from the line of Vishal Shah from Deutsche Bank..

Ron, just wanted to get your sense on competition and how you think some of the Asian players are dealing with recovery in the Cranes business here in North America, are you seeing any pricing pressure?.

I think we're seeing very little presence from Asian players in Cranes in North America, a lot of aspiration but not much perspiration and certainly the quality concerns remain.

You want to add to that, Tim?.

I would say that that's an accurate statement, Ron. I would also add, from a pricing standpoint we've actually seen neither price degradation nor price increases outside of Tier IV activity. So, the market I would characterize as pretty equally balanced. Nobody is out there using price as a mechanism to get orders by and large.

It's clearly a competitive industry but that's not a leading method for order taking at this stage..

That's helpful.

And just on the Cranes business, where do you think the orders are coming from, which segment within the Cranes, is it crawler cranes, tower cranes, where are you seeing the strength in orders and what percentage of the backlog is from Europe?.

Vishal, the tower crane business is improving substantially. Our order intake there is up pretty significantly in the last two quarters in particular, which is encouraging because it's a leading indicator of non-residential construction.

And keep in mind, we're a relatively small player in the tower crane industry relative to some of our local competitors, but it is encouraging nonetheless. With respect to the Europe, our order intake in Europe has been strong in the last couple of quarters as well.

I rather not break down the backlog by region, but I would tell you that it's improved substantially from where we were a couple of quarters ago, and I feel relatively good about the quote activity that we're seeing in Europe..

Your next question comes from the line of Joel Tiss from BMO..

I wonder, just two things, I'll ask them both at once, the emerging markets, I just wondered if you could give us a little bit of color, you've been so helpful on Europe and everything else about what's behind the – what caused the big drop there, and then can you just talk about, as you're going through your portfolio it sounds like everything is very strong and improving and back on solid footing, but can you talk about if there are other businesses inside there that you could sell and just sort of M&A, like what you're thinking there?.

Okay, Joel. Developing markets or emerging markets have generally been negative in recent past. I don't think we should be alarmed by this. I don't think it's unusual for developing markets to go through rapid periods of expansion and then periods of consolidation of that expansion.

I would say, as we look to different parts of the world, our business in Latin America tends to be either flat or down. The Brazilian business has probably been under a little bit more pressure than we would have expected.

I think Middle East is a mixed bag, and as we lookout for the remainder of the year, it's one of the hardest ones for us to predict and it's been good for us.

China in general has stabilized for all our business but the internal Chinese players are probably feeling a very difficult period of time because they've benefited from such rapid, rapid growth and some of those companies have 8 to 15 months of receivables on their balance sheet. That's not the product categories that we are competing in.

So in the areas where we are competing, such as our Aerial Work Platform business, we're seeing good solid performance there, some of our Materials Handling business, Steve's business in overhead cranes has in fact begun to improve, which is a positive sign for China. So, again, a bit of a mixed bag there.

And as you go into India, India today is pretty negative but they are right in the midst of elections. So, once the elections are behind us, we're cautiously optimistic about India. So, it's a bit of a mixed bag. And that's one of the reasons why I said, we grew in Europe, but for now the emerging markets have somewhat offset that.

That trend changes over a period of time in my opinion and Europe will remain strong for some time and developing markets will begin to recover, which I think is the key for really driving overall Terex revenue growth. So that's it on kind of the commentary on emerging markets.

With regard to portfolio, I think we're pretty much done with portfolio management from a what are we going to sell and what are we going to buy at this stage.

We are not in a big acquisitions mode, but as you know, we always have looked at what might be additive to the Company and we will continue to look at that, but we're in an internally focused mode.

I think I want to harvest all the hard work George has done and is still doing in Construction, and certainly we are not pleased with negative performance but I expect the full year to be positive in Construction, and that business is really only at about 50% of the revenue that that business has achieved in prior peaks.

So, if we can kind of breakeven at this level of volume, I'm sure as the market comes back, we'll be able to drive to more positive performance. So, I'm pretty – we want to finish the sale of our Terex Equipment Limited to Volvo.

That is still in a waiting, pending the Chinese antitrust review, which we think is still within the next 30 to 60 days, but let's get that done and I think our portfolio will be in pretty good shape..

Your next question comes from the line of Eli Lustgarten from Longbow..

Just one quick clarification. You said the tax rate will be 33% to 35% for the next three quarters or for the full year or the same thing, I just wanted to make sure with the low first quarter tax rate..

That's for the full year, Eli..

Okay, so there will be an adjustment somewhere to bring it up?.

That's correct. First quarter being such a small piece of the total annual pie, we wouldn't want people to overreact to the tax rate in Q1..

Alright.

Could we talk a little bit about the mix of orders in AWP? I mean such an outstanding number in quarter, when you gave us the chart to show the full pattern, can you give us any idea of geographic breakdown and the type of customers between rental companies and independents, because I mean it's just dramatically higher quarter, can we see where it came from?.

Okay, Matt, why don't you give some color on that?.

On the orders, I guess I'd start with just the customer sentiment. They just remain confident, both in the U.S. and in Europe that's really improved. The backlog distribution globally, it's still driven mostly by North America but the one that has grown as a percentage more than other places is Europe. So that's really the difference.

So we're seeing the shift happening and that's what we've been talking about throughout the call, and that's been going on for a couple of quarters in a row, so we're feeling really good about it being – it wasn't just a blip for one quarter, we're seeing it go through quite a few quarters in a row..

And was that 70% here in North America and 25% in Europe and 5% rest of the world, do you have that split worked [indiscernible] rental houses and independents, what have you?.

No, we do it by customer type. If you look at North America, I'll start with that, if you look at the split or the large consolidators versus the independents, we did see a little bit of an uptick if you compared first quarter of 2014 to the first quarter of 2013, we did see more independent business, a couple of percentage more.

Overall, the North American business is around 63% or so, and that moves quarter to quarter, and the remaining 37% is rest of the world. So, that's starting to shift and that's why we keep mentioning Europe..

And basically, in the mix of that business, with telehandler as a much bigger piece [indiscernible] entering the business that it would keep the margin mix pretty much what we're seeing now or go back to more traditional products?.

For us, with telehandlers, the mix on telehandlers would affect North America way more than it would Europe. So the North American mix is shifting a little bit more towards telehandler. In Europe it has a traditional mix..

Your next question comes from the line of Rob Wertheimer from Vertical Research..

Ron, just to step back a bit, you've been very vocal from time to time on U.S. infrastructure and investment in repairing and building and so forth.

Do you have any general comments or your own view on whether there is a way out, a more structural fix or how things are going to go?.

I think I'd characterize it as let's hope for the lame-duck session, because in the lame-duck session Congressmen and women can actually make courageous decisions, and right now it looks like funding is up for grabs unless Congress acts by mid to late summer. And everybody knows we need spending more.

I mean the administration proposed a very nice huge increase in transportation highway bill but with no suggestions on how to fund it. A note below that tax reforms is not going to happen this year, they suggested tax reform to fund it. So, it's a little bit like me wishing I was 50 pounds lighter.

Unless I do something about it, the probability is something that's not going to happen.

So, I think we've got to hope for a lame-duck session where some leadership takes place, and what I think you'll see there is an increase in the gas tax, at least that's what I'm hoping, and then in the years that follow, real tax reform and real dedication to transportation infrastructure which I think will happen but it will have to happen with the new Congress..

That was helpful, thank you.

Actually just one small one if I may on Cranes, could you talk about just – I think you said weakness in RT cranes in North America, is that just the fracing being built out, is there no take up in demand on the commercial side, maybe just a quick comment on that and I'll stop?.

Okay, I'll let Tim comment on that..

No, that's not a fracing related comment. If you recall, Rob, we talked in the second half of last year about the buildup of inventory in the channel, and what we saw was that gets sold down through the second half of last year and frankly even into the first quarter of this year.

Our expectation going forward is that we'll see a more normal balance of RTs as a part of our portfolio..

And I think we have some encouraging orders in North America but for delivery later in the year in RTs..

Your next question comes from the line of Ted Grace from Susquehanna..

Ron, I was wondering if you could touch on your structuring plans or benefits for this year, maybe just focus on the anticipated benefits in MHPS and Cranes, what we realized in 1Q, how that compared to plan and how we should think about that layering in across 2Q, 3Q, 4Q?.

Okay. Maybe I'll turn that over to Kevin Bradley..

Sure. Ted, in Q1, we had about $5.5 million in benefit in the numbers from restructuring and about half of that came out of Steve's business, MHPS. For the remainder of the year, we have an additional about $25 million coming across all three segments, MHPS, Cranes and Construction for a total of just over $30 million in the year..

In the year-over-year benefit..

Okay. And just as a reminder, for some reason in my notes I had been looking for something more like north of $40 million, something in the mid-40s.

Did we realized some of that early in the fourth quarter last year or is it just taking a little longer to get in places like Europe?.

I think we realized a little bit last year and we're expecting some sales on that in 2015..

Okay, that's helpful.

And just for clarity's sake, of the remaining $25 million, how much of that comes from MHPS?.

For the remainder of the year, that would be about a little over $6 million..

$6 million incremental on MHPS..

Yes, (inaudible) quarters..

And then the second thing I was hoping to ask about is, Ron, I know you touched on, and Tim did as well, a shift in Aerial order patterns from 4Q into 1Q.

As we just think about order patterns across the rest of the year, could you give us any handholding how to think about how is second quarter likely to play out vis-a-vis history, you have the benefit of April in your back pocket and just if there are any other discernible shifts we should be factoring into our expectations?.

The only thing I would say – and Matt, please chime in here when I'm finished – but the only thing I would say is, we expect the year to play out pretty much like it has historically.

And last year, we had a stronger fourth quarter than we probably expect we'll have this year, and we did some things intentionally to drive fourth quarter business last year which may or may not be able to be pulled off again. So, probably that's the only variance I would suggest there.

Matt, you want to add anything to that?.

No, I agree with that. To me it's feeling like a normal year. I think that you're going to see second quarter will be the biggest and third and fourth taper off. Like Ron mentioned, last year we had a really good fourth quarter.

We'll hope to get that again, but I think it will be what we're expecting and what we build into our outlook as a traditional year..

And that was specific to Aerials, right Matt?.

Yes, that's specific to Aerials..

Yes..

Kevin Bradley wants to add one thing..

Yes, I just wanted to correct something. The MHPS, remainder of the year, more in the $16 million to $17 million..

Right, that was for the previous question, not for Ted, but that was the previous question on restructuring..

Okay, perfect. That actually makes me feel a lot better. I was kind of worried there for a second. Great, guys. Best of luck this quarter..

Your next question comes from the line of Jerry Revich from Goldman Sachs..

Ron, Matt, I'm wondering if you could talk about how the telehandler product rollout is tracking, what was mix like in the quarter, and then can you calibrate us at this point in the cycle, as the mix of Aerials in Europe rises, what does that mean for margins for your business? Presumably it helps absorption a lot but I'm wondering if you could flush that out for us..

I think our product blends pretty much on track. I think the launch of the SX-180 has really been very well received in our Aerials business.

We are shipping pretty aggressively, our customers are pretty happy with it, we believe we're ahead of our competition, we believe our product has benefits in transportation that our customers appreciate, that is an advantage over our primary competitor.

I think in the crane area, we're getting very well, very good commentary on some of the new products we introduced at CONEXPO or introduced at Bauma. Some of the new products we introduced at Bauma really didn't get – they got ordered but not shipped until really going to be shipped first quarter and the remainder of this year.

So, I think the receptions of those new products was pretty positive. And some have very specific advantages over what the competitors are showing. So in general, I'd say our new product implementation is pretty much as expected.

With regard to absorption and utilization, I think the worst is behind us from underutilized or unabsorbed manufacturing operations. Some small pockets of concern in places like Brazil or India or China, but overall our bigger factories are pretty much absorbed and/or likely to continue to be highly absorbed..

And any mix implication of the European Aerial Work Platforms business ramping up at this point of cycle that better or worse margin than North America?.

Historically it has been only minor differences in margins. The only thing I would say is, as the telehandler business grows in North America, it has a slightly less margin for us than the booms business, but we don't really have much telehandler business in Europe. So that's really not an issue.

But I don't think there's much mix difference between Europe and North America in margins..

Okay.

And Ron, can you flush out for us what you're seeing in Latin America order trends, are there any businesses where that region is more stable versus others, can you just provide some more color there?.

I guess I'd say, Latin America overall is probably a negative picture and there is some opportunity in the port business that's been up a little bit in Latin America, but in general it's a fairly negative picture. I don't think it's negative forever. I think there's opportunities there. With forever, I mean the next 9 to 24 months.

I think there's still opportunities there. I think our team is coming together in Latin America under a new leader and I think that's encouraging. We've got new feet on the street in the Cranes area, and we are aggressively going back to some of the big historical Cranes customers in Brazil to try and recapture some share that we lost in Cranes.

So, it will take a little bit of time but I think I'm a little concerned about the market overall, but I think our position will strengthen there..

In consideration of time, we ask that you please limit your questions to one per caller. Your next question comes from the line of Seth Weber from RBC Capital Markets..

Actually just first I have a clarification and then a question. In a prior answer to a question, you talked about you're not seeing any Asian competitors in North America in the Crane business.

Was that meant to be about China or does that hold for Japanese competitors as well?.

Good clarification. That's China we were talking about. Japanese are well established in North America..

Okay, thank you. And then just on the AWP business, we've heard some recent commentary about more aggressive pricing in Europe and Latin America.

Have you seen anything like that on the AWP business?.

Matt, why don't you comment on that?.

Yes, I guess what I would say on pricing is that it's mostly stable and consistent. There are some pockets where we're seeing irrational pricing and terms, but in general it's been pretty stable and consistent, and that's been steady I would say over the last few years. I've not seen anything that's a lot different.

What we are seeing is that with some of the Tier IV coming in, the price of the equipment has gone up to a point where rental rates are not keeping up with new equipment cost and we're seeing timing of when each manufacturer switches, there's some games that go on with who has Tier IV and who doesn't, but other than that it's kind of working through the system and it's been stable..

Okay thanks.

And then maybe just real quick, Ron, any update on the tax planning process to just trying lower your tax rate going forward?.

I'd say it's on track, it's on track with what we expected..

Your next question comes from the line of Mig Dobre from Robert W Baird..

Ron, I'm sorry but I'm still confused as far as the Cranes segment is concerned. You came into the quarter with $500 million in backlog, you had orders better than $500 million in the quarter, yet revenue was less than $400 million, the lowest in three years, and by your own comments you said that this was a pretty disappointing quarter.

I'm trying to understand, what was it that prevented you from recognizing higher volume or higher revenue this quarter and how do you think about revenue next quarter given your backlog?.

Well, customers didn't want the product. That's what prevented us from shipping more inventory in the first quarter. We don't operate like big construction equipment companies that fore-plan inventory to dealer networks. We sell directly to rental companies and rental companies want the product when they want it.

Tim?.

And I would also say, Mig, earlier on the call I made the commentary that the backlog is interesting but what you got to understand is what's in the backlog.

If the backlog is a bunch of nine-month production product, then you're not going to ship it in three months, and if you look at our order intake in the third quarter of last year, it was relatively low.

So I think we're working through the system, I think the first quarter revenue that we saw here is really a reflection of what transpired from an order standpoint in the middle of last year..

Make no mistake about it, we're not happy with the level of revenue we had in Q1, but that really was a function of the orders that we took in Q3 and maybe even before that, but in that time period what we were hoping, and we all know that hope is not a strategy, that we could actually book and ship more orders in Q1 than would have been obvious.

We definitely had some inventory to ship in Q1 if our customers had wanted the product then. We're disappointed, we're concerned but we're encouraged by some of the orders we've actually taken for future delivery..

Can you calibrate us on Q2 at all?.

No, I don't want to calibrate on Q2, other than the things that I've already communicated, because it will be better, it will be building, and we believe it will be a solid quarter for us in Cranes but probably not our best quarter of the year..

Alright, thank you..

Your next question comes from the line of Andy Casey from Wells Fargo Securities..

A lot has been asked, so I just wanted to ask kind of a holistic question about a comment you made earlier, Ron, about 2015 and 2016 being driven by a little bit higher growth in the Europe than is probably likely in the U.S.

Do you think that is likely going to follow the same sort of cadence we've seen in U.S., meaning higher initial growth from AWP and potentially over there MHPS followed by Cranes, or is it looking like it's a little more synchronized in what we've seen here?.

My experience, Andy, would suggest that AWP is in its second year of a recovery in Europe and is leading the pack, and our Crane business will actually improve in '15 and '16 in Europe faster than our Material Handling business which is in MHPS, which is more of an industrial recovery business and it's a business that we haven't had historically but through the Demag AG acquisition it's a business we have.

That short-term weakness is somewhat offset in the MHPS business with the Port business carrying those bigger orders for Rotterdam and the Netherlands and some other ports in Europe. So, I don't want to forget the crushing and screening business which I think can and will have an improving order.

I know Kieran Hegarty has been on the call, and Kieran is our only European of our management team. So I think his view is probably moderate and positive in Europe, no great increases but probably positive, and then George's business as well.

Kieran, do you want to add anything to that?.

I think from a historical point of view, I mean Europe certainly from back at the prior peak in '07, '08, still significantly trends below on [some of the] (ph) peaks here in MP business and some of the other businesses. We're seeing Western Europe, particularly markets like the U.K. have a fairly healthy recovery, right.

Southern Europe still remains a challenge and it's still a long way off the peak, but clearly there is good potential upside in Southern Europe, the Italians [indiscernible] as they really come off the bottom through the last three, four years, but Eastern Europe I think still remains a good opportunity for growth. So we would be reasonably bullish.

I think Western Europe already historically much more stable, but we are fairly bullish on solid European upside over the course of the next few years..

Okay, thank you, Kieran..

Okay, thanks for that. And then just one quick one on Construction. You're continuing to show good margin improvement there.

From here, are we really looking for volume to drive significant improvement from where we are outside of maybe tradeshow timing impact and all that?.

I'd say, yes. We need to get volume, we need to get a recovery, we got a pretty stable cost base. You'll see it first from North America, particularly our cement mixer business where we do have a good backlog and trends are positive and net profitable and margins are actually improving in that area.

The next from our Material Handler and the Fuchs business, we're seeing some strengthening there. We're a small, small player in the compact equipment business but we're a niche player, we're working on the product.

As I've said before, we still have some work to do to get that product more rental ready, but down the road we think there's an opportunity there..

Your next question comes from the line of Schon Williams from BB&T Capital Markets..

Ron, wonder if you could address, you talked a little bit about emerging markets, I know Australia was a bit of a headwind last quarter, could you just talk about any developments you're seeing there? I think you thought that maybe you're seeing some bottoming but has that changed given what you saw this quarter?.

Australia, Matt is in Australia right now but I am going to speak for the Company overall. Australia was negative for us in Q1, meaningfully negative and importantly negative in the Cranes business and importantly negative in the MHPS business, so overall pretty negative. It's an important market for us.

Offsetting some of those negatives were a couple of positives with AWP being the most positive but on a fairly small base. It's a bit of a mixed bag. I think it's bottoming but I don't think we've completely seen the bottom.

Had the Cranes business in Australia been a little bit better, we would have had a little bit better results, but I wouldn't blame Australia for our Cranes issues, it's just a piece of it..

Okay.

And then as my follow-up, I wanted to maybe address something that you guys brought to light in the Analyst Day last year, just talking around the global trading initiative and kind of changing, streamlining the customer interface, having the factories and the customers go through what you are calling Terex Global as opposed to kind of a hodgepodge interactions within Terex, at that time I think you talked about that being possible incremental $0.50 to $0.75 of EPS.

I just wanted to see, do you have any update from where we were a year on now, do you still think that those types of savings are plausible?.

Schon, I'll give you a quick update. So, as you know, Terex, a lot of acquisition, a big initiative for us is trying to pull the Company together. This is one of the things that we're doing to become easier to do business with.

So getting more consistent commercial experience for our customers as they transact with one kind of global trading platform over time, is something that we've been working on for a while. We are making good progress. As Ron said, I think we're on track and we will have benefit in the year.

In terms of the exact sizing over the couple of year horizon, we're going to hold off on that right now, but we're making progress, we're committed to it, we think it will make us more commercially effective and more operationally efficient as we get standardization and controls throughout our business which has been grown through acquisition.

We think this is a big positive, both internally and externally..

I don't think we can provide any more insight numerically than what we said before. Any ability to drive value and to hit the numbers is directly dependent upon how much income we make. So, I don't think there's anything that would change our prior point of view. Last question..

Your last question comes from the line of Alex Blanton from Clear Harbor Asset Management..

Thanks for fitting me in there. I wanted to discuss Europe for a minute. I mean you said that AWP were 40% to 45% of the historical high there, and that's pretty much in line with what Oshkosh said about their business over there in AWPs, but that was in 2008, that high.

Now since then, last six years – and that market at that point was considerably behind the North American market in the adoption of AWPs for the various applications. So that's been a driver of the growth in North America is using AWPs for more and more things. So, Europe was behind the U.S. at that point.

Has there been any progress and has that market expanded, the potential market let's say, expanded from what it was in 2008 to any degree or are we just looking at going back to the high?.

Our ability to metric the adoption of a product category and talk factually about it is difficult, Alex. I mean I think we use guts and judgment when we talk about adoption of a category. We know it's not adopted for example in Asia but we know it's more adopted in the United States than it probably is in Europe, okay.

So I'd say my instinct will say, it's fairly well adopted in Europe, you have high labor rates, you have a number of factors that would contribute to the product category being well-received, but there's probably some more opportunity for growth as the Eastern European markets continue to improve their economic success.

So, I think there's more room to run in Europe. The opportunity for the peak is probably greater than 2008, but frankly the same thing is true in the United States, because we are close to the prior peak in the United States, yet we continue to see growth. I mean our first quarter AWP performance was double digits in North America of growth.

So, some of that may be our success and some of it is probably the category continuing to find new applications..

Thank you. There are no further questions at this time. I will turn it back over to management for closing remarks..

Thank you, Jody. We appreciate everybody's interest in Terex today. Please follow up with us if you have any additional questions or commentary..

Thank you. That concludes today's conference call. You may now disconnect..