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Terex (NYSE:TEX)

Q1 2013 Earnings Call

April 25, 2013 8:30 am ET

Executives

Ronald M. DeFeo - Executive Chairman and Chief Executive Officer

Kevin Bradley - Chief Financial Officer and Senior Vice President

Matthew Fearon - President of Terex Aerial Work Platforms

Stoyan Filipov - President of Terex Material Handling & Port Solutions

Timothy A. Ford - President of Terex Cranes

George Ellis - President of Terex Construction

Kenneth D. Lousberg - President of Terex China

Analysts

Jamie L. Cook - Crédit Suisse AG, Research Division

Ted Grace - Susquehanna Financial Group, LLLP, Research Division

Christopher Schon Williams - BB&T Capital Markets, Research Division

Seth Weber - RBC Capital Markets, LLC, Research Division

Robert Wertheimer - Vertical Research Partners, LLC

Andy Kaplowitz - Barclays Capital, Research Division

Jerry Revich - Goldman Sachs Group Inc., Research Division

Matthew Vittorioso - Barclays Capital, Research Division

Rob Young - Wm Smith & Co.

Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division

Ann P. Duignan - JP Morgan Chase & Co, Research Division

Sara Magers - Wells Fargo Securities, LLC, Research Division

Adam Fleck - Morningstar Inc., Research Division

Alexander M. Blanton - Clear Harbor Asset Management, LLC

Yilma Abebe - JP Morgan Chase & Co, Research Division

Operator

Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Terex Corporation First Quarter 2013 Financial Results Conference Call. [Operator Instructions] I would like to turn the conference over to Ron DeFeo. Please go ahead, sir.

Ronald M. DeFeo

Yes, thank you, Stephanie, and good morning, ladies and gentlemen. We appreciate your interest in Terex today, and on the call with me this morning is Kevin Bradley, our Senior Vice President and CFO; and also Kevin O'Reilly, Vice President of Operational Finance; and Tom Gelston, Vice President of Investor Relations; as well as our leadership team members, including our segment presidents. As usual, a replay of this call will be archived on the Terex website, www.terexweb.com, under Audio Archives in the Investor Relations section. I'll begin with some overall commentary. Kevin will follow with a more detailed financial report, and then I'll come back and discuss each one of the segments and open it up to your questions. We'll be following a presentation. It's the presentation that accompany the earnings release and it's available on our website. [Operator Instructions]

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 information we will be discussing today does include forward-looking material.

Turning to Page 3. Let me begin. The first quarter results for Terex were generally in line with company expectations overall, although the results of the individual reporting segments clearly were mixed. On an adjusted basis, we achieved earnings per share of $0.23 and a reported EPS of $0.18. The difference primarily relates to charges in the Material Handling & Port Solutions business, as well as charges taken in conjunction with the sale of certain Roadbuilding assets. As I mentioned on our statement results were mixed in the quarter. Aerial Work Platforms had a strong quarter, delivering both excellent growth, up 21% versus the prior year, as well as solid margins at 14%. The Cranes and Materials Processing business both executed their operating plan about as expected. Challenges in the quarter came from Construction, which is off to a slower start, sales volume wise, and we've taken some additional actions to streamline this business.

Lastly, our Material Handling & Port Solution business continues to show softness across its core markets and there, we're focusing on further actions to get at the base cost in future periods. In the earnings release, we indicated that these cost measures will likely result in Terex taking a restructuring and related charge of about $30 million to $50 million in the second quarter. We expect, however, to realize a similar amount in savings over the next 12 to 24 months.

Clearly, there's some near-term challenges reflecting the continued uncertainty in many markets. Nevertheless, for the company, overall, the year's progressing about as we expected. Earnings wise, at least, our 2013 EPS guidance remains unchanged. We expect $2.40 to $2.70 of earnings per share on an adjusted basis, with net sales between $7.9 billion and $8.3 billion. And our performance was better than expected in terms of first quarter cash generation. Historically, we use cash in the quarter. However, free cash flow of $135 million in the quarter reflects good progress to our overall goal of a second straight year of $500 million in free cash flow.

I'll come back in a few minutes to discuss our segments. But first, I'd like to turn it over to Kevin, who will go through the next couple of pages, discussing the specific financial results on an adjusted and reported basis. Kevin?

Kevin Bradley

Thanks, Ron, and good morning, everyone. Turning to Slide 4. I'll review our financial results for the quarter. I'd like to highlight upfront that changes from foreign exchange rates did not play a major role in either the sequential or prior-year quarterly comparisons for the total company. Our net sales for the quarter of $1.7 billion declined from the prior year quarter by 5.3% or approximately $96 million.

Our AWP segment increased net sales by 21.3% as we continue to benefit from improving replacement demand, particularly in North America. We were also seeing early signs of a fleet replacement cycle taking hold in Europe. The increased order activities for AWP that began in late 2012 continued into 2013, and is reflected in our backlog at the end of the quarter. Our Cranes and Material Processing segment net sales were in line with our expectations for the first quarter. The Construction segment had a difficult start to 2013, posting a 22.9% decline in net sales for the quarter. Contributing to this decline were our Compact and material scrap handling businesses in Europe, as well as the decline in our rigid and articulated truck sales for most markets globally. MHPS also had a weak first quarter, with net sales declining 22.6% compared to the prior year quarter. This decrease was driven largely by softer demand for Port Equipment across most product segments, most product categories and to a lesser extent, a decline in our industrial material handing cranes, which was spread broadly across geographies.

Gross margin, as adjusted, increased 100 basis points to 19.2% from the prior year quarter, as improved price realization and manufacturing efficiencies in our AWP and Crane segments more than offset the impact of the significant net sales decline in our Construction MHPS segments. SG&A, as adjusted, remains relatively consistent with the first quarter as -- of the prior year. Decrease in spending in Construction and MHPS was substantially offset by increased investment in AWP, as their end markets continued to strengthen. Income from operations, as adjusted, remained relatively flat despite the 5% decline in net sales, as we had more favorable mix of AWP and Crane net sales during the quarter. Our AWP and Crane segments both posted strong incremental margins: AWP at 37% and Cranes at 46%. This favorable mix was largely offset by the revenue declines of roughly 23% in both our Construction and MHPS segments.

Net interest and other expense was relatively flat versus the prior year quarter, as the benefit of debt reduction and refinancing actions executed in 2012 was offset primarily by the guaranteed payment to our minority shareholder of Demag AG. As you remember, in Q2 of 2012, we began accruing for this statement. So as we move further into the year, it will be neutral in our year-over-year comparisons. The effective tax rate, after adjustment, was approximately 42% in Q1 2013 compared to approximately 21% in the prior year quarter, which negatively impacted our year-over-year earnings per share comparisons by approximately $0.08. This was mainly due to discrete benefit from the prior-year period that did not reoccur.

For the full year 2013, we are still forecasting an effective tax rate of 36%. For the quarter, earnings per share, as adjusted, was $0.23 compared to $0.29 in 2012. As reported, earnings per share for Q1 2013 and Q1 2012 was $0.18 in both periods. I will walk through a bridge detailing the adjustments in a moment. Net working capital, as a percentage of annualized sales, was 25.7%, a decrease from the 27.3% reported in Q1 2012. The decrease was driven primarily by inventory reductions in several of our segments, as well as increases in customer advances. Return on invested capital improved to 7.7% from 5.1% in the prior-year period, as our profitability continues to be the main driver of ROIC performance for Terex.

Turning to Page 5. In the first quarter of 2013, we continued to execute on the initiatives launched in 2012. That positioned us for improving results in the future. The Construction and MHPS segments have been the primary focus of these initiatives, and we are committed to materially improving the financial contribution these segments have on Terex's overall results. During the quarter, we closed on the previously announced sale of our Brazilian and certain U.S. Roadbuilding businesses. We took charge in the quarter of approximately $0.03 per share related to the finalization and closing of this transaction. We also had charges related to reorganization in our MHPS segment. The impact during the quarter was $0.02 per share. Now let me turn it back to Ron.

Ronald M. DeFeo

Thank you, Kevin. Turning to Page 6. I'm now going to go through the presentation for each one of our business segments. First, our Aerial Work Platforms business. Overall, strong demand continues in North and South America. As Kevin mentioned, very good incremental margins of 37%. The backlog is solid, up 13% sequentially and 10% over the prior year. And very nice, we see the European business, which is different than all of our other businesses, the European businesses are actually beginning the replacement cycle. Our European business was up strong double-digits in the first quarter versus the prior year quarter. Net sales overall for this segment was up 21%. And as you can see, we had a strong operating margin of 14% compared with the 9% of last year and the 10% of the prior quarter. Also interesting is the fact that 63% of our revenue comes from North America and the mix of our customers in North America has been different this year versus last year, with a couple of the bigger customers really strongly getting deliveries in the second quarter as opposed to the first quarter on a year-over-year basis. Western Europe, you see there, is 16%, but I would be remiss if I didn't emphasize Latin America, which had a very, very nice quarter-over-quarter performance. So overall, I think our AWP business is heading in the right direction, and if nothing else can be said about this business, it's a great contributor and we expect that to continue this year.

The Construction business, a little bit of a different story, continuing to have this businesses go through a period of reconstruction, so to speak. We sold portions of our Roadbuilding business, and we have a few more product lines to go, but that was a good progress. We are in the process also of reconstructing our Compact business in Europe. We're going to be selling our components businesses in Germany. That will allow us to reduce substantially the number of people that work for us and focus on the most important value-added activities. We have had a pretty substantial reduction in working hours in the first quarter this year versus last year with very weak European demand. A substantial portion, over 50% of the demand that weakened in this business came from Europe. A little bit of an offset in the concrete mixture truck business, and we've seen the North American business improving. By the numbers, $280 million of revenue, obviously, 23% down from last year, a negative $13 million as reported. Operating margin, and as adjusted, $9 million. Obviously, we're not happy with that financial performance, but we do believe that change is underway, plus a moderation of some of the reductions in revenue will contribute to meaningfully improving the bottom line performance in the back half of this year. Looking at the split of the business, Western Europe is 30%, and that's a pretty significant reduction from where it had been historically, where Western Europe had been well over 50% for this segment. So some good work being done to try and diversify the revenue of the construction segment.

Turning to the Cranes business on Page 8. Great incremental margins on this business at 46% in Q1 versus the prior year, reflecting the pricing in margin focus that we had put on the business. Rough terrain cranes continue to be the strongest performing product category. As predicted, our Australian Crane business came down 25%. It's a very profitable business for us, but tied to the mining industry and tied to commodities, we did anticipate that this business would come down. We also, as I think everyone knows, have resegmented and the North American Services and Utilities business has been added to this segment. The utilities operating margin discretely was up 2.3 points year-over-year, which is a nice improvement and a continued emphasis on this business to get its margins up.

Turning to the numbers. Net sales, $471 million, up 4% from the prior year, down 8% from the prior quarter, not unexpected. And as reported, margin at $33 million, and then as adjusted, the $33 million compared with the $25 million of last year. So 5% to 7% improvement operating margin. Backlog is weaker than perhaps we would like, but we had a very good BAUMA show, encouraged by customer activity, encouraged by the reception to our new products. I'm sure we can talk about that in a little, but net-net, it's hard to say whether that backlog would have been higher, had BAUMA not occurred in April, but we're really positive about what we saw from BAUMA. And as you know, the revenue expectation we have for Cranes is probably one of our hardest numbers to achieve, but we're still pretty positive. Also, because of the utilities and services business, you might note that now, 47% of our Q1 business occurred in North America versus 14% in Western Europe. The good news is that 47% is in North America. The bad news is we'd like that European number to be a bit higher. So that's some of our opportunity going forward.

Turning to Page 9 on the Material Handling and Ports Solutions business. Clearly, a disappointment for us as a company during the quarter. This is a lumpy business. The revenue suffered, 23% decline versus Q1 2012. Industrial Cranes was down 12% on global weakness. What happened here is many of our customers had pushed out their requirements for Cranes, whether it was a new factory that needed Cranes or new Cranes that were going in old factories, many of our customers delayed that, and that occurred pretty broadly, pretty much across the world. From India, China, as well as Europe and Africa, there was a lot of push out of business. The Port Solutions business was down 40% versus Q1 '12. We do expect some top line growth in the second half as these large projects that we have sold begin to ship. Many of you know that's what's impacted our backlog here. But the underlying port business, we really had a hole in our backlog that was created about a year ago at this time with soft orders, and that just showed up pretty substantially in Q1. We did expect it, but the absolute negative margin contribution was probably a little bit more than we thought that would happen. Additional actions, however, are going to be taken. As I mentioned earlier, we expect the restructuring charge of $30 million to $50 million, but it will have a 1 to 2 year payback. By the numbers, you see what they are, $339 million versus $438 million in sales, down 23%, as adjusted, operating loss of $26 million versus basically a break even during last year. The backlog is up, but a lot of that backlog won't be delivered until the second half of this year and into 2014. And as many of you know, we only report backlog that's deliverable in the next 12 months, meaning that, that $679 million actually is a larger backlog number than we're reporting here because some of the projects are for delivery, second, third and fourth quarter of next year. You can see the concentration of our sales, not a huge concentration in North America, pretty big exposure to Western Europe. I think that's contributed to our results. I believe the change in management is going to be helpful for this business. Steve Filipov is on the line and I'm sure he can take some and any of your other questions as we we'll discuss this business in some more depth.

Turning to Page 10. Our Materials Processing business delivered pretty much as expected. Mineral markets are down slightly, mainly Australia and South America. European General Construction is weak. North America is stronger. SG&A was flat. By the numbers, $154 million, down 9% compared to prior year, $12 million of operating profit, down moderately from $15 million a year ago. Backlog at $85 million, up sequentially from the $70 million, but down from the year ago position. We expect this business to continue to be a solid performer. It has its pockets of problems, but it also has its pockets of opportunities.

Turning to Page 11. I'm not going to go through this page in detail. We're providing it to you to have the details. We've structured this on the basis of the old reporting structure, the 2013 guidance that we initiated when we reported the 2012 numbers. On a resegmented basis, you see where that guidance is. We did not go back and try to reconstruct the guidance by segment at this stage obviously. There are areas where we believe we will overachieve. There are areas where we think we'll struggle to get to those numbers, but net-net, we still be feel very good about the company overall, and we wanted to also put this in context of our 2015 goals, which we are driving towards. So while we had mixed results, as I indicated, some positive, some negative. We continue to remain -- we remain committed to the $10 billion of revenue, 10% operating margin, which results in a $5 plus per share objective for 2015. It's an objective that we think the company is focused very much on trying to get to.

So in summary on Page 12. It's important to reflect on who we are and what we're trying to achieve. We're a lifting and material handling solutions company. We are focused on operational improvements, and it's obvious, we've been successful with some operational improvement and have ways to go in other areas. We believe we're a leader in substantially all product categories. We're a geographically diverse company, which gives us exposure to many of the end markets, both up and down. And we believe profitable growth and consistent cash generation is an important area of emphasis and we are really encouraged by the cash generation, as is the last point here, strong free cash flow in the quarter. More work to do in the MHPS business, a little slower start of the year than perhaps was anticipated, but I think within the context of our overall guidance, we remain committed to achieving those targets.

With that, I'd now like to open it up, Stephanie, to questions, and we'll take your questions, encouraging you to have 1 and a follow up.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Jamie Cook with Crédit Suisse.

Jamie L. Cook - Crédit Suisse AG, Research Division

A couple of questions, Ron. I'm trying to -- you had very strong margin performance in the Aerial Work Platform business, up 14.2%. In particular, given it's only the first quarter and Q2, Q3 is generally stronger, so I'm trying to think about that in context with your full-year guidance and your -- I guess your 2015 goals? And then also could you talk about what you're seeing in terms of the competitive environment in Aerial Work Platform, first, in terms of pricing, but also how I would assume margins also get better in the back half of the year as sort of the small and medium guys start to come back into the market, if you think that happens so...

Ronald M. DeFeo

Okay, Jamie, I'll comment a little bit and Matt Fearon is on the call here with me and he can add to this. As you look at the AWP business, we are encouraged by the first quarter. It was a bit stronger, perhaps, than we were expecting, but -- at least, on a margin basis. That is something that we feel is a reflection of the discipline that's taking place in the market. It's also the stage of the cyclical recovery that we're at. We have a situation where our customers are healthy and they need equipment, and our supply base is positive about supporting us, which means that we have a little bit more leverage there, and so we're getting some cost reductions from our supply base, steel and other costs. I mean, on the flip side of that, our business is good, and probably one of our biggest challenges is having our suppliers meet our needs as we go forward. We had a tremendous reception to our SX-180 product introduction, the tallest, largest boom, at least, in the market that's not truck-mounted. We believe that will be a great profit opportunity contributed to our customers, as well as to ourselves. So as I look forward, we have a rational industry with a couple of players. There is some risks in the industry, and we always hear about the Chinese player that wants to come in to the business, but we haven't seen a lot of activity there. So we're being a little bit cautious in our outlook, perhaps. But we're probably balancing that against an optimistic outlook, perhaps, in our MHPS business. So we're not really going to go in and change anything at this stage until we see how the second quarter comes in.

Jamie L. Cook - Crédit Suisse AG, Research Division

I guess, Ron, just to follow up, how much did the steel or supply chain benefits help the first quarter? And did that -- I mean, do you assume that goes away in the back half of the year or material cost, et cetera come up? If you could just say how much that helped actually the margins.

Ronald M. DeFeo

Matt, you want to comment or...

Matthew Fearon

Sure, I will comment on the OP. Obviously, we're very happy with the performance in the first quarter. And if you look at the way we ended the year, the pricing environment was very positive, and we've held to that. We had a 3.4% average price increase that we announced. But the other place that we're getting a boost is from the productivity. As we start to run the plants at the levels that we're at right now, our manufacturing productivity is really helping us out from an absorption standpoint. And then on the supply chain, what we're seeing is that's also favorable. It's been relatively flat. For the second quarter, we think that is going to maintain. Beyond that, it's difficult to tell, but we're in good shape there. And then the customer mix that we mentioned earlier was also very good in the first quarter. So obviously, if you look at the first quarter, it was outstanding for us. If you compare the first quarter of this year, it's very, very similar to the second quarter of last year's performance, which was our best quarter. So we're setup for quite a good second quarter, and hopefully, third and fourth as well. So we're feeling really good about the competitive environment. We think that we're positioned well to take advantage of a very strong market.

Ronald M. DeFeo

And Jamie, we have difficulty quantifying in a way to present it externally, what our supply chain contributed and didn't contribute. It was positive. Steel costs were positive for us. We're not sure if that will carry through the full year, however. And also, the fourth quarter is always hard to handicap for the AWP business, as customers really do take -- they like to take deliveries in the second and third quarters as you know.

Operator

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

Ted Grace - Susquehanna Financial Group, LLLP, Research Division

Ron, I was hoping to kind of come back to MHPS and see if we could walk through the industrial segment and the Port Solutions a little more. And I know in the deck outline, industrials, down, I think, 10% or 12% year-on-year, and I know you mentioned it's broad-based. In terms of just what gives you encouragement that, that comes back in the back half in the second quarter hopefully, and thereafter, can we just start there?

Ronald M. DeFeo

Yes. Let me give you a sense. We really have 2 businesses here: One, we call Material Handing, which is the overhead Crane business; and the other is the Port Solutions business, which is -- the one that's down 40%. In the Material Handing business, I said it was fairly broad-based decline. We had about a year-over-year, maybe about a 12% or a $34 million decline year-over-year. It was spread across the U.S., Europe, Latin America, India. India was really pretty disappointing, even Africa, so it was fairly broadly based. And what will give us some encouragement is talking to our customers, and while we stay on this, we'll go to Port in a second. Steve, do you want to add anything to that?

Stoyan Filipov

Yes. On Material Handling, Ted, I would just say that Ron mentioned in the beginning, there were some large projects that got pushed out into Q3 and Q4. So I think we're optimistic that those are going to happen, and those orders were in places like China, Latin America, the Middle East and India. So although we saw some slowdown in order intake in Europe, some of the other businesses are pushed out into Q3 and Q4, which should help us in Material Handling...

Ronald M. DeFeo

And the other thing I would add is this is a business with a very solid services area, but we saw the services business slowdown pretty markedly in Q1. And so we believe many of our customers also pushed off servicing their Cranes in part because industrial production being down, they didn't need the services. So this is not a business that goes away. We just think it will be pushed off into the future quarters. If I comment on the Port business, the Port business is a little bit more dramatic and has always been and will be lumpier. We had about a $44 million decline year-over-year. That came from Western Europe and even the Middle East, which is the only place where our Middle Eastern business really slowed down. And the port business, we had big orders for and our factories are strong. They're performing now, but building product that won't be shipped until the latter part of this year. And because of our revenue recognition policies that's different than IFRS, we're not going to recognize that revenue until they actually get installed in the customers' job site so...

Stoyan Filipov

Yes, I'll just add, Ron, that we're shipping product, Ted. Take an example, in January, February from China to Latin America for orders, and those products aren't going to get revenue recognized until Q3 and Q4. So that gives you -- we've got big products moving across the ocean that need to be reinstalled and commissioned by our customers. So that will happen later in the year. And Ron referenced, the larger projects is really into Q4 and into Q1 and Q2 of next year so...

Ronald M. DeFeo

But clearly, Steve, not to make excuses here, our Mobile Harbor Crane business, which has been the stalwart of the business, is about half as strong as it was a year ago. And the Lentigione factory that we have from the historical Fantuzzi business is an underperformer that needs additional work, and these things are going to be addressed in our Q2 efforts.

Ted Grace - Susquehanna Financial Group, LLLP, Research Division

Okay, and so that comes to the second thing I was hoping to ask you. Just on the restructuring, how should we think about that kind of flowing through either COGS or SG&A? And in terms of just -- I know you said 1 to 2 year payback, but how quickly might we look for realized benefits of the initiatives?

Ronald M. DeFeo

Well, some will be SG&A and some will be manufacturing, and we're really not in a position yet to split it out between direct, indirect COGS and SG&A. So when we conclude that and when the plan gets finalized, we'll be able to explain that in detail. What we did want to do is give you some general information that said, we understand -- you should understand that we've got a plan that will address a couple of these areas that we're going to finalize in the second quarter.

Operator

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

Christopher Schon Williams - BB&T Capital Markets, Research Division

I wonder if we could just maybe delve into the order activity that you've seen here in April and what that means for backlog in Q2? And it seems like there's been a flurry of articles out there about kind of record order activity in April by some of your distributors. And BAUMA, you talked about being very strong. And then even within Material Handling, I think there was some press out there about some successes you've had on the automated guided vehicles there. I mean, could you just talk about was there a material change for you in April maybe versus what we saw in Q1 and what are the implications for the backlog going into Q2?

Ronald M. DeFeo

Well, this may sound a little bit odd, but we kind of expected the year to develop this way. And part of the reason we provide guidance was we ended the year with a pretty weak revenue picture. We expected the first part of this year to be a fairly weak revenue picture. And we did expect the BAUMA show as well as general economic activity to pick up and result in some orders. If we look at the backlog, which is in our appendix on Page 14, you will see that the backlog is split there by product type, although, again, our backlog is 12 months, is what's shippable in the next 12 months. So the $679 million of MHPS backlog, compared with the prior quarter of $577 million, is certainly a positive, but that backlog is substantially bigger than $679 million, but that would be out for shipments beyond 12 months. And so it's a weak current period with a strengthening back half of the year, and that's what's gives us a little bit more encouragement for this business. It won't be easy to make a ton of money on this so we still have work to do to get our margins up in this business. But a 23% decline in year-over-year revenue likely experienced in MHPS, we don't think that will be the case each quarter going forward. And the MP backlog isn't that significant and not surprising, but the Cranes backlog, $634 million versus $642 million, we don't -- I don't frankly see that very different. But maybe I'll ask Tim to comment on how he is seeing this trends in the Mobile Cranes business.

Timothy A. Ford

At the analyst meeting a month ago, I talked about Cranes being a business with potential. I would actually characterize it today as being a business with potential that's turning into momentum. If you look at the first quarter order pattern, each month was better than the prior month. So February was better than January, and March was significantly better than February. As we went in the BAUMA last week, we knew that a lot of customers had pushed off orders in the first quarter going into BAUMA, and we saw the level of activity that we would have expected. So I'm actually pretty enthusiastic about the business as we look ahead. We're coming out of a little bit of a hole, but I feel like the business opportunity is gaining strength, and the momentum is beginning to build so we can turn this potential into real opportunity.

Ronald M. DeFeo

Yes. I'll take a minute more on this question because it gives us an opportunity to look at future revenue trends. Construction, the backlog of $191 million, down from $209 million, and meaningfully down from the $267 million of the prior year, but maybe I can ask the operator to open George's line up for a second because we had a hole in our Terex Truck business and in our Fuchs business, but maybe you can comment on the overall BAUMA effect, George?

George Ellis

Yes, thank you, Ron. It was quite exciting last week, to be candid. We expected activity, but it came in and started very quickly at the beginning of the show, and it was not focused on one part of the world. We saw it coming from Russia, Latin America, Africa, and also some activity in Europe. And what we're seeing is it's starting at the lower or smaller end of our Construction mine, with the momentums really starting to pick up and it really hit hard last week, which was very good, which will help us through Q2 and into Q3. And we did see a lot of activity on our larger construction equipment, which was quite exciting for us. So I would say it was quite refreshing and similar to Tim and Cranes, beginning of the year, kind of started with some slowness, but then turned into a momentum, and I feel very comfortable coming out of the show. That will really help us as we progress through the rest of the year.

Ronald M. DeFeo

Okay. Thank you, George, and I think we've already commented on AWP so we don't need to go over that ground again.

Christopher Schon Williams - BB&T Capital Markets, Research Division

Okay. And then if I could just have a follow-up on maybe on MHPS. It sounds like in some of your commentary, the restructuring that you're putting in place, I'm just -- I wanted to get a little bit more detail there as to maybe what you're targeting, and I mean, because I'm a little bit confused, I mean, it sounds like some of the issues that we saw in MHPS are more kind of timing issues of shipments. I'm just wondering if you had a hole in the backlog this quarter, I mean, that seems to be going away, why do you feel it's necessary to do additional restructuring? It's certainly welcome, but maybe why do you think it's necessary at this point if most of the decline that we've seen seems to be timing issues. And then could you talk a little bit more in detail about what we are actually putting in place?

Ronald M. DeFeo

Sure. Well, we're not really happy with this business getting back to a slightly profitable position. We need to get back -- we need to get this business in -- 2015 goal is about a 7.5% margin, but I know Steve's goal is even higher than that. If you look at what's contributed to the negative performance, obviously, we have a big issue on volume in the short term. But stepping further back on the business, you'd say our SG&A is too high. This is a business particularly in the Material Handing side that's running 23% SG&A. That's anathema for Terex. We'd like to see that substantially below that, but let's say there's 3 or 4 margin points, for sure, we believe, in that SG&A that can come down. We also know we have some unproductive and excess manufacturing capacity that we have to deal with, that's going to be expensive for us to deal with, but we need to deal with that. And so we will work with the unions and the workers representatives to address those plans appropriately. So short-term, yes, volume issue, but there's also some structural costs and there's some SG&A. And if you do those things and then the market does begin to solidify and improve, getting back to where it might have been a few years ago, you can get this business to a much healthier position. And this is a good business that's performing poorly. We've got good franchises and the Demag Crane business, a franchise that many companies would love to have, but it's expensive, the product, and its cost structure is a bit too high. And in the Port business, we put together a range of products that really are first class, but we are at the early stages of integrating them into a real business plan that can attract even more Port customers. So a lot of work to do here. I know this is a quarter that none of us like, but we're going to keep a steady hand and we're going to move down the path of doing what we need to do to get this business performing correctly.

Operator

Your next question comes from the line of Seth Weber with RBC.

Seth Weber - RBC Capital Markets, LLC, Research Division

Coming back to the aerial business. You talked about Europe, Europe aerial revenues up double digits in the quarter. Can you talk about is that a sustainable type number? I'm just looking into where the order book looks for Europe specifically. Has momentum continued there? Are you still getting orders at that type of level or has that slowed down now?

Ronald M. DeFeo

Thank you, Seth. The encouraging thing for me, and Matt will comment specifically on your question, the encouraging thing for me is that AWP is an early cycle business, and I could go through each one of our other product lines and show you the weakness in Europe. And it's substantive and meaningful, okay, that weakness. On the flip side, AWP is early cycle, meaning, products get old, and they rust out and they need to be replaced. And we're seeing that from the customer base that's basically telling us, "Hey, look, the economic activity is certainly not robust in Western Europe." But we're in business. We have products, and we need to order material. So Matt, maybe you can comment kind of more detail about to what your sense is.

Matthew Fearon

Yes, I just spent the last 2 weeks in Europe, the BAUMA show and then the week before I was visiting with customers. And as you know historically, the Europe piece of our business is much bigger. It's been down longer than North America, and it's really encouraging to see the signs that we started to see. Actually, in the fourth quarter, we started to see a little bit more life and that continued through first quarter. And the people that are buying are the large rental houses. It's the companies that are well capitalized, and it's certainly not all over Europe. When you go -- when you talk to customers in Europe, I've described it as tepid. They are -- it's reached a point where there are fleets of age. Some of the larger ones have got to the point where they have decided it is time to replace. So it's not like just taking off, but it is encouraging. And as far as was this a one-time deal for first quarter, I don't think so. I think looking at our backlog, we're seeing some continued good activity, especially coming right out of BAUMA, we're feeling good about Europe continuing to nudge up, and that offers some great potential for us.

Seth Weber - RBC Capital Markets, LLC, Research Division

Okay. And then in the U.S., one of your large customers talked about pulling some CapEx forward for this year. Is that -- are you seeing that from multiple customers on the Aerial side? And Is that contributing to the first half strength? I think you actually said the second quarter was going to be sort of tilted towards the larger national guys. I mean, can you just give us any color on what you are seeing there from the demand perspective?

Matthew Fearon

Yes, the -- I guess if I was going to describe the demand, to me, it's getting much more predictable. In other words, we work closely with all the big national rental houses about what their CapEx plans are in the fourth quarter, and then we layout our plan for the year. And as we progress through the year, we stay close with them to understand how is it looking. And what I'm saying is that people are getting to -- have through the first quarter. They're performing well, and they are stepping forward with some additional orders, so not everybody, some people placed early because they were concerned about lead times, but in general, we're seeing steady predictable growth, and we think that we're set up to handle it really well.

Seth Weber - RBC Capital Markets, LLC, Research Division

But have orders actually pulled from third quarter delivery up to second quarter delivery? Or is that just kind of a one-off-type scenario?

Ronald M. DeFeo

If you ask all the big rental companies, they'd like to get everything in a 2-month period of time. So there's a lot of noise in the system about when they want to -- pulling up is a funny term in this business, okay? There's the definite push and pull between manufacturer and rental company, and we work it out. So I wouldn't assess any significance of consequence to that view.

Operator

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

Robert Wertheimer - Vertical Research Partners, LLC

My first question was on Cranes. Obviously, the margins were good and you talked about the order flow. The gross margin was, I think, down year-over-year adjusted. Was there anything mix related or were -- your pricings, I think, have been very disciplined. I'm just curious about what drove that.

Ronald M. DeFeo

Yes, go ahead.

Timothy A. Ford

Rob, this is Tim. The gross margin decline that you're referencing, really, I think, there's -- I think the primary contributor to that is going to be a mix-related dimension. We had, as Ron mentioned, we had a decline in our Australian business, pretty substantial year-over-year, though, I would say that business is still very healthy, but last year was an extraordinary year. And the Australian business for us is a very positive and profitable business. We had some growth in our boom truck business, which is actually a lower margin business, but one that we're seeing positive improvement on overall. So I think if you kind of look at it on a balance, mix was probably the most significant aspect of that. Pricing has remained steady. We've been very disciplined on that. And I think the improvements we'll see over time will come from continued operational performance both on the Cranes side and in the Utilities business as well.

Robert Wertheimer - Vertical Research Partners, LLC

Okay. That was helpful. And I know people talked a lot about MHPS. But Ron, I wondered if the change from the Investor Day to now and then what you decided to do from the restructuring, how much did you see coming? I'm just curious if you feel like you had any holes in the information systems or in the speed of which you're able to see things developing versus maybe things really did fall apart quickly. Just wanted your thoughts on that.

Ronald M. DeFeo

Yes, at the Investor Day, we had a good sense of where we were, and I think I even setup the fact that there will be additional charges coming, maybe $30 million to $50 million, a bit more than what people have thought. When you're dealing with European manufacturing location, it's easy to -- it's easy to have that number become a fairly substantial number, but offsetting, of course, is the fact that the savings is substantial. So we had a sense of this. We've had a domination agreement in place less than 1 year. It will be 1 year in May, and the domination agreement really provided us the depth and the window to see what was going on more clearly. The revenue reduction is stronger than we thought was happening, but it is there. We knew we needed to take SG&A cost and the manufacturing, some of the manufacturing cost, down. And the one thing that we probably, looking backward, is in the 1 year between the time we got domination and after we bought it, while we were working hard to lower cost through elimination of corporate costs that they had, there was some embedded cost creep that was happening in the SG&A area, particularly in services and in some other areas that really didn't pay off. So they were adding costs at a time when the market was weakening, okay. And if you look at what our competitors, like Kone, were doing, you'll actually see that they were experiencing some of the same issues. So I think we are on it now. I think the management team that's led by Steve gets this, and we're going to go back and take out some of that additional costs that was added, as well as making sure we harvest our integration savings as planned.

Operator

Your next question comes from the line of Andy Kaplowitz with Barclays.

Andy Kaplowitz - Barclays Capital, Research Division

Ron, or Tim, you guys have highlighted that new products in Cranes were going to be a decent portion of your business this year, specifically a new crawler crane, a new all-terrain crane. Could you update on us on what you've seen in terms of sales in those particular products? And then maybe you can talk about crawler cranes in general. I know you guys aren't big in the U.S., but at BAUMA, we kind of heard crawlers sounding a little bit better. Maybe you can comment on that.

Timothy A. Ford

Andy, thanks. This is Tim. The guidance we gave back in February was that our revenue in Cranes would be about 10% from the market or half from the market, I should say half from the market and half from new products. And as we kind of look at the first quarter result and as we project forward through the course of the year, I think we still feel pretty good about that split, 50-50, new products and market. The interest level we saw at BAUMA for our new products was fantastic. We had sold a number of our new Superlift 3800, 650-ton crane product going into BAUMA. And we had a lot of interest at BAUMA. We actually had a number of deals closed there. And a number of deals, we're continuing to finalize the negotiations and hopefully bring some of those to closure as well. We had terrific interest in our new 5 Axle product, which won't be available until the first quarter of next year, and some of our other rough terrain categories as well that we've brought outside. I actually feel pretty good about that new product rollout out that we've got. I think it's playing out pretty much as we thought it would. And I think we're in a good position to be able to deliver on those orders throughout the course of this year and into the first part of next year.

Andy Kaplowitz - Barclays Capital, Research Division

Ron, you've talked in the past about the competition in Cranes as maybe not as focused on price as you'd like or maybe at times discounting. Have you seen any mitigation in price competition within Cranes this year yet? Or is it just kind of more of the same?

Ronald M. DeFeo

I'd just say it's more of the same. We think we've established the right bar, and that is -- we have to get money for what we produce, and we have to continue to concentrate on margin and margin improvement. We believe we lost a little bit of market share while doing that. And we expect that may rebalance or at least we're hopeful that it may rebalance in the coming 12 to 24 months. But not a lot new at this moment, but we'll will stay in touch. I think that's right, Tim, correct?

Timothy A. Ford

Absolutely, yes.

Operator

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

Jerry Revich - Goldman Sachs Group Inc., Research Division

Ron, big year in Construction equipment with the Roadbuilding divestiture here. I'm just wondering if you could frame out for us the building blocks that gets you to your margin targets in 2015 for the remaining business. How much of that do you need to see a market recovery and what additional structural changes in the business would you be comfortable flushing out here?

Ronald M. DeFeo

Yes, I'm not sure I can give it to you in clear building blocks, Jerry, exactly because the base period has shifted a little bit with the weakening revenue base, okay? But without a doubt, as George presented at the meeting, at the Analyst Day, if you were to pullout Royal Building, he had been profitable, he would have been profitable for most of the past several years, okay? So Roadbuilding was a big anchor. But while we now are pulling that out, the most profitable business in construction, Fuchs or Terex Fuchs, has actually gone through a pretty severe weakening. It's still profitable, but pretty severe weakening because of scrap steel cost. And scrap steel and that business has been cut probably by 40% as well as our TEL truck business has weakened. We do expect, given what we saw at the BAUMA show and some feedback from our customers, that those businesses will both -- will begin to grow again. And with that growth, plus the last piece which is the German component sale, which we'll take out about half of our total German headcount, we think will get us to the profitability targets that we've laid out. I don't want to give you a waterfall explanation because it's been a bit of a moving target, but I just want to give you assurance that we think the pieces and the changes that we have in place help get us there.

Jerry Revich - Goldman Sachs Group Inc., Research Division

Okay. And separately, in Cranes, I'm wondering, Ron, if you or Tim can expand on the comments on the strength you saw at BAUMA? How much of that do you see continuing into the second quarter? A couple of U.S. rental houses are finally pushing pricing in crawlers and towers, and I'm wondering if are you optimistic about a sustained acceleration in quoting activity there? And on Europe cranes, nice to see the replacement cycle starting for aerials. I'm wondering how far behind do you think the Crane business is.

Timothy A. Ford

Jerry, one of the things Kevin started when he was in this role was a weekly tracking of opportunities, and I've continued that since I've taken over the business in January, and what we're seeing is the opportunity list is continuing to grow. We talk to all the sales leaders around the world on a weekly basis and the opportunities that we're quoting and realizing is continuing to increase as we go forward. So I actually feel pretty good about the continuing potential of this business turning into a momentum and those -- that momentum turning into orders.

Jerry Revich - Goldman Sachs Group Inc., Research Division

And Tim, is that a comment on both U.S. and Europe?

Timothy A. Ford

Yes, absolutely. I would say both. Europe is surprisingly strong, to be honest with you.

Ronald M. DeFeo

The question about Europe, though, is obvious, does the products stay in Europe or does it -- is it bought in Europe, and ends up being used some place else? And a lot of our European customers, the equipment that they buy finds its way into a lot of markets.

Timothy A. Ford

That's a really good point. I think the demand that we're seeing from our European customer is going into places like the stans, the Middle East, some in Asia, that sort of thing. So I think it can be misleading to look at where the customer is based. I think we need to look more where the project is based. That's a good point, Ron.

Operator

Your next question comes from the line of Matt Vittorioso with Barclays.

Matthew Vittorioso - Barclays Capital, Research Division

Just curious, you've got a very healthy cash balance here. It looks like you guys could and should continue to generate cash over the course of the year. And as you approach potentially $900 million to $1 billion of cash, at what point will you actually pay down some debt with that cash?

Ronald M. DeFeo

Kevin?

Kevin Bradley

Yes, thanks, Matt. As we said, we're pleased with the first quarter cash generation, and we've signaled that we're going to use cash generation within the year to pay down debt. That's still the plan. As we get further into the year, we'll decide exactly how much is the timing on that. So I would expect this to be signaling later in the year our plans for debt reduction.

Jerry Revich - Goldman Sachs Group Inc., Research Division

Could you just remind us what you feel is your minimum cash balance that you need to carry just to support the business, working capital and what not?

Kevin Bradley

Historically, I think we've signaled something in the area of about $400 million or $500 million as a healthy balance. Obviously, things are changing in the world. Predictability is different. So as the business evolves, we'll continually update that but...

Ronald M. DeFeo

And the location of that cash makes a difference. Historically, we've had a bunch of that cash in Europe. As we generate cash in North America, the location of that may cause to feel differently about it. But at this stage, we are not changing as -- but we'll keep everybody updated on the conference calls.

Rob Young - Wm Smith & Co.

And one last follow-up question just on the cash flow, again, very good performance on first quarter free cash flow, particularly looking back at last year's first quarter. What would you say is the biggest year-over-year change in cash flow? I mean, your EBITDA is pretty similar. Working capital looks relatively similar. Was it Terex finance activity, like helping finance customers last year, that was the big drag on cash flow? How did you improve cash flow so meaningfully this first quarter?

Ronald M. DeFeo

I think we turned our inventory a little bit faster. And now I know the EBITDA is pretty similar, but we've got more orders and we turned them quicker. I also think we turned some inventory into cash, particularly from our Construction business, and then we sold a piece of the Roadbuilding, which contributed to that.

Kevin Bradley

And just to remind you, Matt, we did have a significant tax payment in 2012 Q1 that also contributed to the variance year-on-year. As Ron pointed out, a lot of it was from good operational results.

Operator

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

Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division

Unfortunately, I missed some of your early comments, and I'd like to ask just about AWP. Can you provide some commentary as far as growth that you've seen from the developing markets? Apparently, Europe was strong. What about Asia and Latin America?

Ronald M. DeFeo

I'll turn it over to Matt, but I can just easily answer that question. I mean, our developing market business, in particular, Latin America, was phenomenal. We had a strong fourth quarter in Latin America, and we had a very strong first quarter, nearly 3x what we were in the year-ago period. Our developing markets business was up over 50% in the AWP business, which is our strategy. Really, this was our strategy, is to diversify, globalize this business and harvest in North American recovery, position ourselves to continue to engage in Europe, but then buildout capability in the developing markets. And under Tim's leadership, we did that. It was expensive. And with Steve's help, when he was running the developing markets, we got all the teams aligned, and Matt is just going to continue to execute on that same game plan.

Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division

That's great, and I'm seeing here that Latin America and Asia was about 18% of your business. I think that's clearly higher than where it was last year. As we're looking at 2015, what sort of contribution from these emerging markets do you see to your AWP overall revenue mix?

Ronald M. DeFeo

Yes, we really have -- haven't publicly laid out the 2015 by geography. Obviously, there are a number of ways to get to the 2015 number. You can probably get there and even surpass that number if you really think developing markets accelerate a lot. I'm not convinced that the Chinese market becomes a huge market yet. That's the -- a number that's hard, impossible to handicap. But if China does continue to develop, and Ken is on the call. Between China and the Middle East, those are 2 big opportunities. Ken is working hard to get the -- as well as our competitors are, to get the Chinese government to state that AWP products are a safe way to take people to work at height. Ken, do you want to comment on that?

Kenneth D. Lousberg

Yes, Ron. We continue to essentially work on the advocacy to improve the safety for people working at height in China. I think we're making progress. But like you said, it's real hard to guess when the government will actually start to enforce those rules.

Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division

Excellent. And I know I'm a hog here, but if I may squeeze one last one on the Crane. I guess, we've heard that some of your Japanese competitors might be using movements in the yen to their advantage as far as pricing. I'm wondering if you can comment at all on that, and I'll leave it at that.

Ronald M. DeFeo

Okay. Yes, Mig, we do expect and we have begun to see or hear that our Japanese competitors will use currency to their advantage. But also keep in mind, we have a supply relationship with a Japanese manufacturer as well. And we're working with them to make sure we bring that currency advantage to our capabilities as well. So it's a concern, but we will continue to work our way through it and our customers will buy the value that they see, and we're going to continue to work hard to get the business that we believe is rightfully ours.

Operator

Your next question comes from the line of Damien Fortune with JP Morgan.

Ann P. Duignan - JP Morgan Chase & Co, Research Division

It's Ann Duignan. Ron, we missed you at BAUMA last week. So I'm sure you were there, but we...

Ronald M. DeFeo

I was there for 4 days, but I had 2 days with Steve Filipov at MHPS beforehand so I'm sure you would have preferred me to be at BAUMA all those days.

Ann P. Duignan - JP Morgan Chase & Co, Research Division

I'm sure. You mentioned something interesting on the Material Handling business. You noted that the services side of the business was down in Q1. When you acquired the business, that was -- the services business that was described as sort of an annuity. So are we now to believe that, that business is cyclical and highly correlated with industrial production or was there an anomaly in the quarter?

Ronald M. DeFeo

Ann, I think we're trying to figure that out. I think we've got that business now split. Tim Ford has the North American services business and the North American services business was down. Am I wrong, Tim...

Timothy A. Ford

It was soft in this quarter.

Ronald M. DeFeo

Okay. So the European business, that was down. Maybe you can comment on that?

Stoyan Filipov

Yes. No, I think it's what you referenced earlier on. The industrial production was down in Europe and that's what affected our services businesses, really, in Europe. As Tim said, North America was up and a lot of other regions were also up. So Europe, where we have a big footprint, is, Ann, is where things are kind of down. I don't think that necessarily correlates to new equipment sales. It's really just a factor of the first quarter being slow in the industrial production in Europe, but I think it's still a good business for us and we're still investing in it.

Ronald M. DeFeo

So we made money, but we didn't make as much or nearly enough to offset a 23% decline in overall revenue.

Stoyan Filipov

Yes.

Ann P. Duignan - JP Morgan Chase & Co, Research Division

Okay. And then just a quick follow-up, you noted that the SG&A in that business is too high. But Ron, again, isn't there kind of a fine balance between it is a services driven business, you need the SG&A there? Was there some specific program they embarked on that you think just won't deliver returns?

Ronald M. DeFeo

Yes, Ann, there is a fine balance there, and it is a different business than the rest of Terex. But having said that, the structure that's been in place in this business, which is a structure of regional or country-wide CEOs, which have their own finance people and their own sales people and a pretty heavy structure, is what Steve is addressing.

Stoyan Filipov

Yes. I would say, you saw a charge, actually, in the first quarter of an SG&A reduction and some of that was attributed to reorganizing the services business. So we're reorganizing things, really decentralizing the business and just trying to kind of figure out where -- what battles we want to fight in what regions, and that's kind of the work that we're doing into Q2 and in Q3 on the services side.

Operator

Your next question comes from the line of Sara Magers with Wells Fargo Securities.

Sara Magers - Wells Fargo Securities, LLC, Research Division

Most of my questions have been answered. I just wanted to quickly follow-up on the free cash flow guidance, and I'm wondering if that's consistent with what you provided in Q4. I know you mentioned the $500 million number, but I don't know if it was explicitly given in terms of guidance.

Ronald M. DeFeo

Yes, it is. It is consistent with what we've said before.

Operator

Your next question comes from the line of Adam Fleck with MorningStar.

Adam Fleck - Morningstar Inc., Research Division

I have a follow-up for George in the Construction business side. I appreciate the update regarding the activity of BAUMA, but can you maybe help us with the pricing environment you're seeing within that activity or maybe more generally?

Ronald M. DeFeo

Yes, operator, can open George's line up?

George Ellis

Very much for the question. We're seeing a little bit improvement in the pricing as compared to last year candidly to improve the volume. We are backing down just a little bit, but it this positive to where we ended last year, and I think it'll be helpful for us as we progress through the rest of the year.

Adam Fleck - Morningstar Inc., Research Division

Okay, great. And then just a quick follow-up on the free cash flow discussion. Your working capital improvement was pretty substantial in the quarter. I think you talked about 22% of sales for the full year? Is that still a good target?

George Ellis

It's still the full year target, yes.

Operator

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

Alexander M. Blanton - Clear Harbor Asset Management, LLC

I wanted to ask about the rough terrain strength, rough terrain Cranes, where is that coming from? Is there a significant market in frac-ing for you?

Timothy A. Ford

The rough terrain -- Al, this is Tim Ford. The rough terrain strength that you're referencing, we've had really good business in North America. I'm not sure that I can pinpoint it to a specific vertical market at this point, but we've had strong North American business. We've also had really good growth in our Middle East business. We sell a lot of products, rough terrain product, out of Waverly, Iowa, as well as our Crespellano, Italy factory into the Middle East. So we had some really good receptivity in those 2 markets in particular. And to a lesser extent, but still significant, Latin America as well. So I'm not sure if I can tie it to a specific vertical market, but the potential that we have in rough terrain is continuing to grow, and I think the strength that we have in those markets will help us as we continue to build some momentum.

Alexander M. Blanton - Clear Harbor Asset Management, LLC

Okay. Second question is on your 2015 goal. For operating profit, it's not too difficult to move that to the earnings per share line if you assume $100 million in interest and 35% tax rate, you come out to about $5 a share. So I was wondering why you just didn't state that and put it -- instead of operating profit, just gave us your earnings per share guidance as well.

Kevin Bradley

We have said, Alex, that we expect earnings per share to be $5 plus. We just didn't put it on this chart because that's what it translates to. We said $5 plus because it depends upon how much debt we pay down, and that would be a little bit harder to handicap so that's why rather than doing it purely on EPS. And frankly, Alex, I think a lot of people invest in Terex off of an enterprise value, the EBITDA multiple. And I think it's less about PE and more about enterprise value to EBITDA. And as we reduce the amount of debt that we have, we think a lot of the opportunity for value creation will come from debt reduction and the EBITDA going up. And during the Analyst Day, if you may recall, we tried to say that we thought that the opportunity for a $75 stock value was there with this kind of EBIT performance -- EBITDA performance and valuations within the same range as they're currently at.

Kevin Bradley

Excuse me, Alex. It's Kevin Bradley. I just want to clarify, I think you mentioned that the 2015 as a guidance, it's actually a goal. I just wanted to be clear on that.

Ronald M. DeFeo

Yes. It's not a guidance.

Operator

Your last question comes from the line of Yilma Abebe with JP Morgan.

Yilma Abebe - JP Morgan Chase & Co, Research Division

One quick one on the credit rating of the company. As you look at your debt reduction, the goal and financial policy, any thoughts in terms of moving up the current rating of the enterprise?

Ronald M. DeFeo

Good question. I think as Terex focuses on our future plan, which is to be an operating company and the lifting and Material Handling categories of solutions provider, without an emphasis on acquisitions and with a focus on cash generation, we ought to be able to see meaningful credit-rating improvement, okay. But that, as you know, is a process, and I think the rating agencies will want to see us live by our commitments of being less-oriented to acquisitions, focused on debt pay down, focused on cash generation. And so we think all of that is part of the opportunity that exists within our existing portfolio of businesses.

Yilma Abebe - JP Morgan Chase & Co, Research Division

Is there a particular ratings category that you'll be targeting at this moment?

Ronald M. DeFeo

No, I don't think we have set a ratings category, but obviously, in this environment, we do think there's improvement in front of us. I don't want to say at this stage, but we'd like to see this move better, improve.

Alright, operator.

Operator

At this time, I would like to turn it over back over for the management for closing remarks.

Ronald M. DeFeo

Okay, thank you, everyone, for your interest in Terex today. We appreciate it. Please follow-up with Tom or the management team here for additional questions. We appreciate your interest in the company.

Operator

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

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