Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Terex Corporation (NYSE:TEX)

Q4 2009 Earnings Call Transcript

February 18, 2010 8:30 am ET

Executives

Ron DeFeo – Chairman and CEO

Phil Widman – SVP and CFO

Tom Riordan – President and COO

Rick Nichols – President, Terex Cranes

Tim Ford – President, Terex Aerial Work Platforms

George Ellis – President, Terex Construction

Tom Gelston – VP, IR

Analysts

Chase Beckrow [ph] – Credit Suisse

Ingrid Hodgin [ph] – J.P. Morgan

Alex Blanton – Ingalls & Snyder

Robert Wertheimer – Morgan Stanley

Charlie Brady – BMO Capital Markets

Terry Darling – Goldman Sachs

Seth Weber – RBC

Yang Li Yangkuan [ph] – Barclays

Joel Tiss – Buckingham

David Wells – Thompson Research

Robert McCarthy – Robert W. Baird

David Raso – ISI Group

Steve Barger – KeyBanc Capital

Operator

Good morning. My name is Brandy, and I will be your conference operator today. At this time, I would like to welcome everyone to Terex Corporation's fourth quarter and year-end 2009 earnings release 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 call over to Ron DeFeo, Chairman and CEO of Terex Corporation. Please go ahead, sir.

Ron DeFeo

Thank you, and good morning, ladies and gentlemen. And thanks for your interest in Terex today. On the call with me this morning are Phil Widman, our CFO and Senior VP; Tom Riordan, the company's President and Chief Operating Officer; and, Tom Gelston, Vice President of Investor Relations. Also participating either in the room me or on the phone will be Rick Nichols for the Cranes segment, Tim Ford for Aerial Work Platforms, George Ellis for Construction, Steve Filipov for Developing Markets, and Eric Nielsen for the Materials Processing Businesses. A replay of this call will be archived on the company's Web site, www.terex.com, under Audio Archives in the Investor Relations section.

I'd like to begin with some opening commentary, followed by Phil Widman, who will provide a more detailed financial report; and, Tom Riordan, who will discuss operations by segment. I will obviously open it up to your questions at the end. And please allow for only one follow-up if possible.

The presentation we will be referring to is accessible on the company's Web site. Let me begin by referring to the forward-looking statement on page two. I'll remind you that we'll be discussing expectations of future events and performance of the company on today's call, and that such expectations are subject to uncertainties related to macroeconomic factors, interest rates, government actions, and other factors. A fuller description of the factors that affect future expectations is included in the presentation and in the press release, and other filings. I encourage you to read them.

So now, let me begin, turning to page three. I'd like to offer some overview thoughts on the recently completed quarter and year as well as our current view of 2010. Virtually all our comments today will be for continuing operations. And as you might expect, there are a lot of moving pieces when you pull out the mining business.

Firstly, continuing operations produced net sales level about $4 billion in 2009. This is more than a 50% reduction, and reflects the massive industry contraction that has taken place within our product lines. We think revenue, though, has now stabilized. Manufacturing costs for Terex have been dramatically reduced. And we believe this confirms the strength of our business model, which has historically been focused on a combination of assembly and outsourcing.

Our exposure is virtually entirely to the construction-related market, with not many offsets to other industrial applications at this point in time, nor do we have a finance company that generates income as a primary mission. We've weathered the storm with excellent liquidity. And with the mining sale due to close shortly for $1.3 billion of value, we are in an excellent place to further develop the company over the next year. We are excited about that potential.

However, we recognize that our success is dependent upon bringing our remaining businesses back to profitability, and believe at the operating level, we will be breakeven for the full year in 2010. And we are driving to the end – to end the year with EPS profitability in the final quarter of the year, although this will be a challenging goal. We will be reluctant to speculate over acquisitions. These are hard to predict. And we remain steadfast in our view that we have a variety of choices for using the capital. We will evaluate all options throughout the year.

I know this report is somewhat difficult to understand with the variety of changes. However, I hope you'll find the presentation useful as we explain the performance. Now, I'll turn it over to Phil.

Phil Widman

Thanks, Ron, and good morning. The key figures table, page four, displays the quarterly year-over-year and sequential performance of the company. Given the pending sale of our mining business and the sale of our Load King trailer business, we are reporting net results as discontinued operations. All figures in this presentation are for continuing operations of the company unless specified to the contrary.

Net sales were down 36% from the prior year quarter or 41% when adjusting for the translation impact of foreign currency exchange rate changes. The addition of the port equipment business provided a 3% uplift in net sales in the period. On a sequential basis, fourth quarter net sales increased by 8%, with 3% related to the port equipment business, and the remaining crane business is showing the strongest increase. On a consolidated basis, we incurred a loss from operations in the fourth quarter of $90 million, compared to operating income of $7 million in the prior year quarter, excluding the impact of the goodwill impairment charge. This is mainly due to the net sales reduction.

I'm encouraged by the sequential improvement related to margin improvement, material cost reduction, and absorption, which all improved over the third quarter of 2009. These were partially offset by unfavorability in warranty and transactional foreign currency as well as less profit released from inventories than in the prior quarter. We continued to make good progress on cash generation from working capital reductions, which contributed $430 million for the full year. Our backlog is similar to third quarter levels, and down 46% from the fourth quarter of 2008.

Net debt, including the cash from discontinued operations, which we will keep, was relatively flat sequentially as working capital improvements largely offset the operating loss. Working capital reductions in the quarter would have been more significant, however, we stopped discounting receivables in our continuing operations, which had an unfavorable sequential impact of $68 million to this net debt figure.

Although not detailed on the chart, I will comment on the tax expense in the fourth quarter as we took some discrete charges related to changes in our uncertain tax positions and provided a valuation allowance on the deferred tax assets of our European operation. In total, this amounted to additional expense of approximately $0.27 per share for continuing operations.

The loss from discontinued operations of $0.14 per share includes tax expense for uncertain tax positions, and the removal of APB 23 assertions for certain mining subsidiaries to be sold of approximately $0.26 per share. We also incurred a loss due to costs related to the disposition of discontinued operations associated with the mining and Load King trailer businesses in the fourth quarter of $0.12 per share. As indicated in the release, we also had pretax charges of $27 million for restructuring or approximately $0.17 per share.

Referring to page five, this outlines the net sales trend for the last five quarters, demonstrating the relative stability of most segments during 2009 and the up-tick in Cranes in the fourth quarter, which is somewhat related to the port equipment acquisition and solid demand for higher capacity crane products.

Page six bridges the $97 million change in operating profit from the prior year's quarter to the operating loss for Q4 2009. The margin impact of close to $200 million on the net sales decline represented decremental margin of 33% when compared to the prior year period, including mix and pricing changes. Net restructuring, mainly associated with the reduction in headcount, was $8 million lower this quarter, with total charges of $10 million in the period, of which $2.5 million was in cost of sales and $7.5 million was in SG&A, while current period capacity variants of $17 million and under absorption combined for an unfavorable $11 million impact over 2008.

SG&A and other cost of sales had a net positive effect given cost reductions, profit release as inventory was delivered to third parties, and reduced material input costs. These were partially offset by charges related to inventory and negative transactional foreign currency impacts. Overall, foreign currency translation impact was $10 million favorable. The breakdown of the costs by segment varied somewhat by issue, but is disclosed for transparency.

So let me refer to page seven, which shows our annual key figures table. I will not go through the detail on the annual comparison, but would point out that the continuing operations of the company delivered significant profitability in 2007 and 2008. We believe that the portfolio has been improved by the changes we made in 2009, and is well positioned for the future growth.

I'll now turn it over to Tom for an operational update.

Tom Riordan

Thanks, Phil, and good morning, everyone. I will cover working capital improvements and cost reduction results for 2009, and then discuss the current state of our business.

Let's move to page eight. One area that is always challenging during business downturn is working capital, which has been a primary area of focus for Terex during 2009. At the start of the downturn in mid-2008, we made a very conscious decision to minimize the inventory burden to our distribution partners and customers. During the last 18 months, we drastically cut production rates to reduce channel inventory levels. I'm very pleased we are successful in significantly reducing our inventories by $538 million of cash impact, excluding discontinued operations. Our businesses have done a great job in selling off finished goods inventory and working with other supply chain partners to minimize the inventory impact on Terex and our vendors' businesses by adjusting schedules.

As you can see, inventory turns and net cash days are beginning to move in the right direction. While working capital in total is still high as a percent of revenue by historical standards, this will continue to improve as we return to a more consistent run rate of production. However, I would also add, we need to be in tuned to the short delivery requirements that our customers now have. And we need to have appropriate levels of product available if we are to be competitive in the market.

Moving on to page nine, this is the chart we have shown to demonstrate progress in getting our business right-sized and costs in line with expected revenues. Overall, we have reduced controllable spend by $246 million in Q4 '09, compared to our peak run rate in Q2 of 2008. This is nearly $1 billion annualized run rate of cost production and demonstrates our ability to flex our business model. The Terex manufacturing teams have done a great job in reducing spending by 51% during this timeframe.

Our commitment to cost reductions continuing as we have recently reached agreements with the union representatives of the recently acquired Fantuzzi business or now known as Terex Port Equipment. Their restructuring is underway, along with several other Terex businesses in the US and Europe. The Terex team members being affected through our operations are being true professionals about these required changes. And I'm very appreciative of the support and dedication they have shown while knowing they will be leaving the company. I think this speaks volumes about the culture and character of Terex.

I'd also like to point out, we have reduced our SG&A of our businesses by 44% over the last 18 months. As we have discussed before, I think we have been very judicious in retaining in talent for product engineering for new product development; IT professionals for the Terex management system, our ERP implementation; the variety of financing and risk professionals working on our Terex Financial Services Group to find financing solutions for our customers; our Terex business system professionals who are driving our broad-based lean efforts; our supply and management team working on driving cost reductions with best cross country suppliers; and, other critical functions. While we have been aggressive in reducing structural costs, we also need to improve our capabilities for the future.

Let's move on to page 10. One thing that I'm most proud is our continued focus on safety. Over the last three years, we have been able to significantly improve the safety of our business operations. With the changes that have been instituted and the focus of our team members and leaders, we have prevented or avoided nearly 1,000 loss and accidents over the last three years, compared to our safety rates at the beginning of 2007. With all the ups and downs we have seen during those three years, this is a remarkable achievement.

Let me give you a quick overview on how we see the current business environment today by business. Our aerial work platform business remains challenged. We are seeing very consistent order rates over the last several quarters, but no sign of a real up-tick in either of the two primary markets, Western Europe or the US. We believe most of our larger customers will continue to wait for signs of improvement on equipment utilization and rental rate before any change at buying patterns occur. Virtually every order involves a trade-in package.

With the current lower expectations around non-residential development, we do not expect to see much of an improvement in order rates until late this year or early next year. We are seeing increases in our plant production rates are running to refill demand even at these reduced levels. In Q3 of 2009, we had our assembly lines down for over 30% of the time, and in Q1 will be down less than 10%.

Our construction segment is seeing reasonable order rates for our Contech equipment product line, both in Europe and in the US. Our deal with partners generally have appropriate-sized inventories for the current retail environment. With the limited inventory we have in the distribution channel, we are seeing a solid increase in production rates and hours worked at our Contech facilities. Pricing is still very competitive. Our construction truck business remains challenged with significant used equipment available and fleets being underutilized. And we don't anticipate an improvement in this business until later this year.

Our cranes business will likely be soft to stable overall for much of this year. With Tower Cranes and lower tonnage mobile cranes having lower rental rates and utilization by our customers, we expect to see all our patterns similar to the last six months. Our higher capacity mobile cranes have seen better utilization rates with customers. And based on lead times for larger infrastructure projects, we have better order visibility.

Our Terex Port Equipment business is stable with positive future signs. The dry goods index rates are starting to increase, along with container pricing. We'll also see some improvement in plant utilization, with shutdown days being reduced to most of our cranes facilities, compared to six months ago.

In our material processing business, we are seeing reasonable order demand, which is somewhat seasonal and are also based on low inventories at our dealers. Our running to retail demand now versus reducing channel inventories as we have during most of the last year, we are ramping up production rates, compared to a year ago, with very limited downtime. While we are not declaring victory, this business is off to a reasonable start for 2010.

Moving on to the developing markets, we continue to invest in talent, plant infrastructure, and products for these markets. We saw double-digit increase in revenue for our business in China and parts of Africa, along with solid increases in South and Central America. Our new aerials plant in Changzou, China is on track to startup later this year. And our (inaudible) plant in Bangalore, India is making solid progress since it opened six months ago, along with continued growth of our R&D center near there. Additionally, we have several other facilities in the advanced planning stage in other areas. The majority of our CapEx over the next few years will be invested in developing market regions.

Let me touch on a few other items. Despite the dramatically reduced inbound material purchase in 2009, we were successful in continuing to improve our material pricing. We expect this to continue for 2010 despite suggestions steel prices may increase later this year. Our teams have made solid progress, which will accelerate as material flows more consistently through our production plants.

As I mentioned before, we had been very supportive on improving our new product development process, making sure that we have the talent required to accelerate our product launches. I'm very pleased with the significant number of new products being released in 2010 and 2011 throughout each of our business segments. Some of these are brand new products for Terex, other are enhancements and product line extensions. In addition to all of that, we are on track for all of the Tier 4 changes. We believe we are well positioned with very competitive products in our major markets as the recovery starts in the not too distant future.

Lastly, while 2010 will be a challenging year, you should note that about 70% of our forecasted profit improvements is based on internal improvements, such as overhead cost reductions we made in 2009, improved productivity and cost absorption in our factories, running our plants to retail sales rates, material cost reductions, smaller manufacturing footprint, and so on. We are not counting on a significant improvement in our end markets to drive our profitability improvement.

At this point in time, I'll turn it back to Ron.

Ron DeFeo

Thank you, Tom. Turning to page 11 of our presentation, on this page, we provide some detail for our outlook for 2010. For net sales, we are expecting about $5 billion. This reflects only a modest amount of growth as the port equipment and currency assumptions contribute substantially to this change, although recent currency changes make this somewhat difficult to predict. Interest expense will be about $140 million, and we expect to end the year at about a $1 per share loss. Capital expenditure should be about $85 million and working capital as a percentage of revenue is targeted to be less than 30%.

Turning to page 12, this highlights where we have been and where we are now, and where we believe we are headed without acquisitions. This is an important page that we think frames the company over the past several years as well as our outlook over the next few years. Our goal is to double the net sales level by 2013 for the 12% operating margin, thus, achieving a 20% growth rate and a 20% return on invested capital. This results in an EPS of about $6 per share in 2013.

So if I can summarize on page 13, we have strong franchises that have performed well in the past and we believe we'll do so again. The construction segment should experience top-line growth and earnings performance will improve as we concentrate on the stronger product niches in this segment. Our materials processing business will be an early improving performer, much like we've predicted for some time. Cranes will be choppy this year, but still improving with excellent potential from the port equipment business in future years. Aerial work platforms is dependent upon construction and infrastructure recovery in North America and Europe, and this will not likely happen until 2011. Developing markets will continue to grow and have a net positive effect. As Tom mentioned we have several new product launches that will be important contributors in 2011 and 2012.

Channel inventories and our focus on cash management in 2009 has positioned us to build the demand again in 2010, adding about $200 million change, positive change, to our net profits. We will remain cost focused and the liquidity of the company is strong, and we plan to keep it that way. There is no doubt that Terex is still a young company, and consequentially, still evolving. The base businesses we have are improving. This year market conditions will remain challenging, but better than 2009. We expect to continue strengthening the company throughout this year and we appreciate your continued support.

Now I'd like to open it up for your questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Jamie Cook with Credit Suisse.

Chase Beckrow – Credit Suisse

Hi, good morning. It's actually Chase Beckrow [ph] for Jamie. I just have a question regarding your comments on having to take market share to grow. I think if you look at your core growth assumptions, it's assuming up about 10% for next year. I just wanted to get some granularity on where you're assuming you need to take market share?

Ron DeFeo

Well, market share will come both in terms of some geographic expansion as well as some moderate share in some of our core businesses.

I'm sorry, Phil. Did you–?

Phil Widman

I was going to say one of the growths is in construction.

Ron DeFeo

Right. Yes. The construction change really will be both an improvement in the marketplace as well as we believe the addition of some new distribution and some focus – renewed focus on some of our compact equipment operations.

Chase Beckrow – Credit Suisse

Okay. But just to be clear, the market share is baked into that 10% core growth number, correct?

Ron DeFeo

Yes.

Chase Beckrow – Credit Suisse

Okay. And then, looking at the $200 million in production benefits that you're assuming, does that ramp throughout the year? And what segments should we expect that that's going to be impacting the most?

Tom Riordan

Chase, it's Tom Riordan. Yes. It will ramp throughout the year. And again, I would suggest – similar to the comments we made with our AWP business effectively we think being flat for most of the year. We'll see a more steady improvement as they run through retail rates, most of the benefit you'll see in the material processing and construction segments.

Chase Beckrow – Credit Suisse

Okay. Great. Thank you.

Operator

Your next question comes from the line of Ann Duignan with J.P. Morgan.

Ingrid Hodgin – J.P. Morgan

Good morning. Actually it's Ingrid Hodgin [ph] for Ann. Looking at your interest expense assumptions, I'm assuming that you're not building in any debt repayment opportunities. Have you set any targets in that respect or are you still trying to determine that?

Ron DeFeo

Well, if you recall when we did our mining sale presentation in December, I think it was. We have the requirement when we have sale proceeds from divestitures to commit to reinvesting in the business in our bank agreement within 300 days of receiving those proceeds, but basically looks through the most of 2010. That's our first priority to invest in CapEx, as Tom mentioned, in developing markets as well as looking at acquisition in Canada. We have not included any debt pay down in the interest expense calculation for 2010 yet. So we'll evaluate where we are with acquisitions in that timeframe and look at what we'll do as we go forward.

Ingrid Hodgin – J.P. Morgan

Okay. Great. And then, if you could just maybe give us a little more color on the backlog. When does it exactly would that hit your sales? When would it translate into sales? Will it be 2010, 2011?

Ron DeFeo

Yes. The definition of backlog that we use, Ingrid, is it's deliverable in the next 12 months. If we may have orders beyond this 12-month delivery, but we don't count that in the backlog figures. So most of the backlog is related to our cranes segment, the larger equipment, which tends to have a little longer lead time, some of the quicker materials. But it's all in 2010.

Ingrid Hodgin – J.P. Morgan

Oh, it is. Okay. Great. Thanks for the clarity.

Operator

Your next question comes from the line of Alex Blanton with Ingalls & Snyder.

Alex Blanton – Ingalls & Snyder

Hi, good morning. I noticed that you had a goodwill charge in the access equipment (inaudible)?

Ron DeFeo

Yes, related to our trailer business.

Alex Blanton – Ingalls & Snyder

Oh, that's the trailer business alone.

Ron DeFeo

Yes.

Alex Blanton – Ingalls & Snyder

Okay. Was there any charges during the year other than that in the access equipment?

Ron DeFeo

No, sir.

Alex Blanton – Ingalls & Snyder

Okay. I wouldn't have thought so because you – basically, there are only two companies in world in that business. Second question is, for 2010, how much sales improvement is available to you simply from lower dealer inventory reduction? Let's say, assume that end market demand is flat. And let's say, dealer's inventory is flat. What sales improvement would you then get to get back to that level of retail demand?

Ron DeFeo

Yes. Alex, what we have basically built into our plan is virtually no increase in dealer inventory. It is not our plan to push inventory into our channel. So what you will see from us is a couple $100 million benefit we're actually producing to the demand that existed in 2009. And we expect to more or less repeat itself in 2010. So without really asking our dealers to take on a lot more inventory just built into their retail demand that's how we're getting a substantial benefit.

Alex Blanton – Ingalls & Snyder

Yes. You mentioned the $200 million. Is that sales or is that profit?

Ron DeFeo

That's profit.

Alex Blanton – Ingalls & Snyder

So that's the profit effect. And what's the assumption on incremental margin there?

Ron DeFeo

Yes, that's very challenging for us to say.

Phil Widman

Well, the $200 is basically the absorption effect as opposed to the – so you could argue on $1 billion increase in revenue is 20% associated with that.

Alex Blanton – Ingalls & Snyder

So were you saying that the sales improvement would be $1 billion and the profit improvement $200 million just to get back to–?

Phil Widman

Yes. Again, that math is a little not exactly perfect because we are producing as opposed to not producing in 2009.

Alex Blanton – Ingalls & Snyder

Right.

Phil Widman

Our base revenue, which we had in '09, of $4 billion, just manufacturing that product provides a large share of that $200 million improvement.

Alex Blanton – Ingalls & Snyder

Okay. All right, fine. That clarifies that a bit. Thank you.

Ron DeFeo

All right, Alex. Thanks.

Operator

Your next question comes from the line of Robert Wertheimer with Morgan Stanley.

Robert Wertheimer – Morgan Stanley

Hi. Good morning, everybody. My first question is on inventory. I think you laid it up pretty well. But I backed into 4Q inventory reduction of around $180 million quarter-over-quarter. I don't know if I did that math right because there're a lot – a couple of moving pieces there. And that would be a little bit basically the same as you get in 3Q. Is that about right?

Phil Widman

I think that's close, Rob.

Robert Wertheimer – Morgan Stanley

Do you have – you guys obviously don't think there're any issues with the aging of the inventory, et cetera. Is that – you changed in all? Can you comment on the aging basically of what class?

Phil Widman

No. We have accounting policies that requires thick reserves if our parts inventory is not moving in certain period of time. If we discontinue a product or something like that, we take those charges. That relates to some of the charges on inventory that I referred to in the fourth quarter. I don't call that out as a special or unique item, just that we did take some charges in the order of magnitude that might be $0.04 or $0.05. But I don't – I think that's operational is the way we term that.

Robert Wertheimer – Morgan Stanley

And if I can ask one other, it's all on the list of things you mentioned in the beginning. You mentioned warranty as being a little bit of an expected expense, was that material and what kind of product was that? I don't know how much detail you want to go into, but can you explain that a bit more?

Ron DeFeo

Well, we've had some issues that, again, I call them relatively normal. There are no major recalls or anything of that nature. But they tended to be higher as a percentage of revenue other than they were in the prior period. So if you took – again, our sales went down 50% order of magnitude in some of these periods, so as a percentage basis that went up and stuck out.

Robert Wertheimer – Morgan Stanley

But not as a dollar basis, has it merely changed that much?

Ron DeFeo

The dollars went up somewhat as well, but again I wouldn't characterize it as major retrofit programs.

Robert Wertheimer – Morgan Stanley

Okay. I'll stop there. Thank you

Operator

Your next question comes from the line of Charlie Brady with BMO Capital Markets.

Charlie Brady – BMO Capital Markets

Hi, thanks. Good morning. I just want to –clarifications, if you could, your comments when you talked about – in the tax, if I heard you correctly, loss in discontinued operations with a minus $0.14, which included $0.26 per share in tax. And I'm just trying to square that with the earnings release, page 15, the ROIC reconciliation with the number seemed a little bit different. What am I missing in that math? On the ROIC disposition, it has income before tax of discontinued at $0.26 a share positive, and that after tax of $0.25,which seemed a bit different than the numbers you talked about in tax.

Phil Widman

Yes. When we do the ROIC calculation, we try to look at a average effective tax rate over a period of time. We can go offline into more detail on that. But it's somewhat in the relation of how we do the ROIC calculation.

Charlie Brady – BMO Capital Markets

Okay. Is there a breakdown in the discontinued operations between the mining the Load King business that you can give us?

Phil Widman

I won't give you the exact specifics. But let's say on the loss on disposition of discontinued ops of $0.12 a share, I would say virtually $0.10 is related to mining.

Charlie Brady – BMO Capital Markets

Okay. And then you have – one more question and I'll get back in the queue. You had a comment where you're talking about how much a time the line was down in AWP. I thought you said third quarter was down 30% of the time. In Q1 you expect to be down less than 10%. Can you tell us what it was in Q4?

Ron DeFeo

It was in the 20% range. And again that's – just to be very specific, that's based on assembly lines (inaudible) plants. If you think about it, Charlie, we've add up all the assembly lines we've got in our AWP business and how many days those are running or not, and then as percent of the total. So again, ballpark Q3 was – our assembly lines were down on average a little more than 30%; in Q4, a little more than 20%; and, in Q1, we think it will be less than 10%.

Charlie Brady – BMO Capital Markets

Right. Thanks for that. I'll get back in the queue.

Operator

Your next question comes from the line of Terry Darling with Goldman Sachs.

Terry Darling -Goldman Sachs

Thanks. A couple of follow-ups on the earnings outlook framework for 2010, Phil, I guess on FX, a 6% assumption there. Is that high $1.40? And then can you translate in the context of this flat – or breakeven rather, operating performance for the year and what that assumes in terms of the tail end from that?

Phil Widman

Yes. I would say, and as Ron mentioned, given the recent volatility FX is a little bit hard to predict. I would say we counted more from FX related to rates that were more prevalent in the fourth quarter than the current rates. So there is some headwinds if we assume the current rates relative to that revenue side. On an operating profit basis, I would say the range of risk there could be in the $5 million to $10 million range, worst case.

Terry Darling – Goldman Sachs

Okay. That is helpful. And then on the Fantuzzi business, I guess you're employing about $350 million of revenues for the year. Can you talk about how that looks throughout the year? Is there significant seasonality variants quarter-to-quarter? And then can you help us with where a range on margins that we should be thinking about there?

Ron DeFeo

Hey, Rick, why don't you take that question, you're closest to it?

Rick Nichols

Okay. It will be first quarter and fourth quarter more heavily oriented with the middle of the year being slightly lower. And we're working towards a breakeven business through the year.

Terry Darling – Goldman Sachs

That's helpful. And then lastly, Ron, I know you don't want to get into too many specifics here. But with regards to strategic transformation, maybe you can talk about the financial characteristics of businesses that you're looking at – you're looking for here just in terms of trying to help people a little bit scope out and what the potential might be?

Ron DeFeo

Yes, Terry. Okay. In an ideal world, and of course, we all know that ideal worlds only happen in your mind, but I think you can strive for an ideal world. We'd be looking for higher gross margin businesses with gross margins in the 25% to 30%-type ranges. Businesses that are less dependent upon the classic residential construction may be somewhat more diversified to the non-residential construction, I recognize that non-residential construction or infrastructure-related. Industrial products are now not in vogue, but it probably is good time to be looking at those kinds of businesses because they'll be coming back.

I think we'll be looking at businesses that have clear leadership positions in definable niches. And some of those niches maybe in more traditional industrial applications as previously said. The dependency or the vulnerability on Asia is a question in our mind because we'll want to understand the probability of an Asian-based manufacture either penetrating those markets or maybe participating in the Asian market. So that is going to be an important thing that we consider. And probably as much as anything, what's the reliability of the cash flow because we're going to want to have businesses that have proven cash flow positive generation. One of the challenges of high working capital intensive businesses is the difficulty in predicting cash flow. And we think we need to have some rebalancing a little bit in our product portfolio in that arena. Hope that's helpful.

Terry Darling – Goldman Sachs

That is helpful. I'll just throw one more question related to that, which is the time dimension. Are you optimistic that you can do something significant in 2010?

Ron DeFeo

It's almost impossible for me to say. Let's put it this way, what's the worst that could happen? The worst that could happen is we pay back debt. Okay. That will have a definable specific return to investors. And as markets recover, we will then go back and actually have the finance, whatever acquisitions we do on the back of that acquisition. So I look at it and say on one hand I don't want to rush because I don't want to just feel driven to go spend money in order to continue to transform the company's portfolio. On the other hand, from the timing point of view, 2010 is probably a good time period to find transactions of reasonable valuation.

Terry Darling – Goldman Sachs

That's really helpful. Thanks for the help.

Operator

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

Seth Weber – RBC

Hi, thanks. Good morning, everybody. Given your comments on, it sounds like you feel like the construction business is improving. Should we start to think about the sale of that business or the further restructuring there being off the table at this point that you're going to continue to make a go of it? How much of the lease are you going to give that business going forward, or are there any mile posts we should be watching for, for profitability, et cetera?

Ron DeFeo

Well, as what we said in that business, there are clear definable product niches where we think we can be successful. And we're working those product niches aggressively, and I think effectively. If you examine that a step further, you can look at our compact equipment business, particularly that business that has been in Europe. And those are businesses that have had a history of having good market positions and double-digit margins.

If you look at our materials handling business or Fuchs product line, which has been a scrap handler principally steel scrap. That's a business that has had a history of being a number one or number two player in that niche with strong operating profits. Not today, and not over the past 18 months as that business has gone through a dramatic change. But we think we're coming out of that.

We invested in the ASV product line in North America. And that business has had a strong history of decent profitability. And when combined with our other compact equipment products, we think we can make a goal of that business in North America, which means that our articulated trust business, as Tom indicated, will be a difficult business in 2010. But that's very dependent upon non-residential construction.

And so we think we've got a good niche in that product, but 2010 is not going to be a particularly good year, and though the other parts of that – of the construction business that we'll look at. We think we're making progress in the road building piece, particularly in Latin America. We're actually going to invest and build a new factory in the Latin American market to accommodate the profitability that's taking place in that category. I won't rule out looking at strategic options for a variety of smaller pieces of the product range. But I don't think it will be the main activity. It'll be a subset of activities.

Seth Weber – RBC

Okay. Thanks. That's helpful. And then just going back to the – your comment about capturing market share, can you characterize what you're seeing on the pricing environment? Will you use price to either go after or defend market share? And are you getting a lot of pushback from some of your bigger customers in the rental channel, on the aerials business at this point?

Ron DeFeo

Yes. Tim, you want to comment on pricing and the rental channel because I think that is probably one of the areas where pricing activity is most pronounced. But I think it shows up a lot of times and in differences, in trade packages, and requests.

No doubt, pricing is an important element at this moment in time. We don't think you're going to get a lot of market share by being the lowest price guy out there. But we also don't think you cannot be price competitive. You have to be price competitive. But Tim, on the rental channel, you want to comment?

Tim Ford

Yes, I would say, Ron, your comments on trade values are right on. The pressure that the market has seen on pricing in the last six to nine months has really been on the values placed on the trade package more than on the new equipment. At the end of the day, it's a net calculation. But the real value focuses again on the trade side. And as we look at market share growth in 2010, really it's how you use financing creatively on one hand, while managing the credit capability on the other side. So that's how I'd characterize the pricing today.

Seth Weber – RBC

Okay. Thanks very much, guys.

Ron DeFeo

Okay.

Operator

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

Yang Li Yangkuan – Barclays

Good morning. This is Yang Li Yangkuan [ph] for Matt, just a quick question on working capital. Given the focus on returning to growth, at what point do you expect that to invest in your working capital again to accommodate your goals?

Tom Riordan

Yang Li, in 2010, if you do the math on the percentage of working capital to sales, it would imply about $100 million increase from our year-end position. So I'm thinking we're going to be pretty flat in total. And what's happening though, as we start to produce, we are buying more material, which will be a source of cash related to payables, which drove down dramatically in 2009 as we cut our inputs down. So it is a discussion of working capital. There'll be some offsets. Inventory could go up a little bit. But overall, I'm expecting flat to up about $100 million in 2010. But inventory could be up a little more and payables favorable offsetting most of that.

Yang Li Yangkuan – Barclays

And then, just if I could follow on with another question on the M&A environment out there. Are you seeing more reasonable multiples today? What is the acquisition environment like?

Ron DeFeo

The acquisition environment is very localized. It's very dependent upon a particular product category. And I don't think you can say conclusively that it's either positive or negative. I think it all depends upon the segment that a particular business is in, the geography that a particular business is in, so it varies.

The real test for Terex, and I think for anyone who wants to do acquisitions, is not the multiple on a looking backward basis, but rather the multiply on the forward basis after you implement the changes you want to implement as a result of making that transaction.

And that has been where Terex has historically done their best transactions. Initial 100-day plans, plans that have clear and specific cost reductions attached to them, plans that are not dependent upon sales increases, but rather dependent upon cost management and overhead reductions. And those are the things that we will have to get comfortable with as we look at any merger or acquisition opportunity.

Yang Li Yangkuan – Barclays

Great. Thanks for the color. That's it for me.

Operator

Your next question comes from the line of Joel Tiss with Buckingham.

Joel Tiss – Buckingham

How's it going?

Ron DeFeo

Hi, Joel.

Joel Tiss – Buckingham

Does the $1 billion drop in your operating cost, does that include the mining business?

Ron DeFeo

No.

Joel Tiss – Buckingham

Okay. And then the rental CapEx, can you give us a sense of where the rental companies are really focusing? Is it more earth moving equipment, a little bit aerials?

Ron DeFeo

Yes. Tim, why don't you handle that?

Tim Ford

Yes. I would say at this point, Joel, the rental CapEx is – well, what there is sprayed evenly between construction, earth moving, and aerials, maybe with a little bit more emphasis on the earth moving at this point. But I think it's a little unfair to characterize it as one or the other because customers at this point are really holding back to see how the year evolves. So I would say at the ARA show last week, customers were on balance, got to be optimistic. And I think many are taking a wait-and-see attitude to how the spring evolves. And if business picks up, some of what they're planning on spending, which is not a tremendous increase over last year. But what they're planning on spending will be released this beginning of the spring time.

Ron DeFeo

Yes, but there's no doubt that the equipment is being aged. And if we go through this year without a lot of purchasing of equipment, particularly in the aerials category, the pleats are going to be quite old and quite in need of repair.

Tim Ford

And much higher operating costs that go with this and everything else.

Ron DeFeo

So maybe, we don't have a very strong 2010 from a purse of new equipment. But at some point, the basic business models of the round companies, we'll require them to start doing new equipment purchases. So I think, Tim, that's a pretty accurate statement.

Joel Tiss – Buckingham

Yes. They're all bumping up on their 45 months. Last, can you just talk about the OEM after market mix at Fantuzzi?

Ron DeFeo

Rick, you want to talk about that?

Rick Nichols

Sure. The aftermarket business is actually a pretty strong element of the Fantuzzi business. It's about 15% of the total revenue base. And at one time, it was 30%. So we're actively pursuing re-engaging and recapturing that market for the business. And it is a significant margin producer, much closer to what we had with the mining group. So it is a large contributor that I think we have excellent opportunity to grow it.

Joel Tiss – Buckingham

Okay. Thank you very much.

Operator

Your next question comes from the line of David Wells with Thompson Research.

David Wells – Thompson Research

Good morning, everyone.

Ron DeFeo

Hi, David.

David Wells – Thompson Research

First off, if we could –since I'm talking about the

crane business, I guess there's a commentary in the press release about seeing a softening in large cranes in the back half of the year. I wonder if you could give us some additional color on that. And then I guess on the third quarter call, you talked about a firming up in Tower Cranes and just wanted an update with regard to what you're seeing in the Tower Crane market right now?

Ron DeFeo

Okay. Why don't I let Rick handle that?

Rick Nichols

Okay. If I start with the larger crane business, I still think we have pretty decent demand and pretty decent backlog in the, I'll call it, over 300-ton crane category. It's not principally in the same markets that we saw in 2009. It's moving out of a European/US contacts and putting that into a developing market context. So we actually are seeing decent demand. We took the position where we ramped down production. But over the course of the last four or five months, we have began to take back up production closer to what we saw in I'll call it the back half of 2009. So we're actually seeing some improvements in the order patterns for the larger cranes.

For the Tower Crane business, we see the Tower Crane business stabilizing. The downturn typically are – took place in the late 2008 timeframe. We ramped down roughly 85% throughout the year of 2009. We see slight incremental growth in 2010 principally in the Asia Pacific market.

David Wells – Thompson Research

That's helpful. And then, touching back on the aerial business and the construction business, I guess there's been some commentary about increase in the amount of cross-selling that's done between those two business lines. Strategically, did that put your AWP business in a place where risks damaging relationships at the rental level. If suddenly you're competing to some extent by selling equipment to the same end customer that they would traditionally try to sell fleet to?

Ron DeFeo

Yes. Let me ask Tim to answer that question, and maybe George can provide a comment or two. Tim? Or maybe we lost him.

Tim Ford

No. I'm here, sorry. I lost you there for a minute.

Ron DeFeo

Did you get the question?

Tim Ford

I did not, sorry.

Ron DeFeo

Okay. I'll begin to answer the question. The question was, did the cross-selling that we're initiating have the potential to damage some of the relationships that we have with major rental customers. And I'd answer that question categorically not. I think the rental companies that we have been doing business with at our aerial work platform operations for many years understand our strengths. We will never jeopardize the relationships on the strengths of our current business to sell new products. We believe some of the cross-selling opportunities that we have could actually assist our rental companies and will be a tremendously additive value.

But it will take some time to demonstrate that. It is a competitive advantage to be able to offer a rental company a broad array of both dirt and aerial products. Nobody can offer that broad array. But until the rental companies get comfortable that the level of service and the level of support will be at the premier level, they'll be reluctant to buy. So I'm very positive about the way we've gone about this, which is really to get the best of our construction guys and gals and the best of our aerial work platform guys and gals and have them work together in a collaborative way. So I think I answered the question. Tim or George want to add anything? Tim first.

Tim Ford

The only thing that I would add, Ron, is that I think the addition of the ASV business and the product line that it brings in rounds out the portfolio of products that a rental company would want to buy and does buy. And we see that as a potential as the way to seal the gap on that. So I'm actually pretty excited that the activity we had last week at the ARA show with the aerials team and the construction team working side-by-side, hand-in-hand talking to customers, was actually pretty exciting.

George Ellis

And this is George. Also we really worked hard to ensure the aftermarket care for end users. As feels and touch is very similar to what their experience has been in the persistent, so I feel very comfortable that this a net add benefit for Terex in the rental market.

Ron DeFeo

And George, as to some of you may know or may not know, rent operations that are aerial work platform business when we acquired Genie back in 2002. So I think he has a pretty good experience based on what the customer expectations are for that channel.

David Wells – Thompson Research

Right. Thank you very much.

Operator

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

Robert McCarthy – Robert W. Baird

Good morning, gentlemen.

Ron DeFeo

Good morning, Robert.

Robert McCarthy – Robert W. Baird

You'll have to forgive me. I don't think I've been keeping up with my continuing (inaudible). Can you help us a little bit with – maybe some lay man's explanation of why operating results for the divested operations were reported as a loss. You mentioned some taxes using your prepared comments.

Phil Widman

Yes. Let me go through it, Rob. There's a couple of pieces and I'll refer to the P&L that's in our press release. So as far as the bottom, you see the diluted loss per share by the continuing, discontinued, and so on. That's the loss on disposition of discontinued operations of $0.12 negative. About $0.10 of that is related to the mining disposition. And you might say, “Well, why are you booking mining in the fourth quarter? You haven't sold it yet?”

But based on the accounting approach to commitments that we have for things like investment banking fees and due diligence expense that we had, we have to book those in the fourth quarter. Load King trailer business was the other fees related to that. So that's disposition. So when you go into – and that's net of tax as well. And then you look at loss from discontinued operations of $0.14. What I mentioned in relation to that is we had tax charges – and let me just get to my notes there. Loss from – okay.

Robert McCarthy – Robert W. Baird

You're making me feel better.

Phil Widman

No. I'm just looking for it in these notes, yes. We've got over this. Well, we had uncertain tax positions, and we also had the APV 23 related assertions, which if you dive a little more deep, they are. But APV23 means indefinite investment in foreign subsidiaries. If I'm selling those subsidiaries, I have to book the tax associated with the earnings and profits in those foreign subsidiaries. So between that and the uncertain tax position, there was $0.27 negative or additional expense in that figure of $0.14 is their loss?

Tom Riordan

Go through your notes.

Phil Widman

So that's one of the pieces related to the discontinued ops. Then I mentioned on continuing operations, we had tax charges again totaling roughly $0.27 as well related to a valuation allowance in the European operation as well as adjust the certain and uncertain tax positions. Does that help you?

Robert McCarthy – Robert W. Baird

Yes, it does, quite a bit actually. Thanks, Phil.

Phil Widman

And then the restructure of – that the restructuring costs that we booked pre-tax is about $27 million, is about $0.17 per share as well. That's for continuing operation.

Robert McCarthy – Robert W. Baird

Okay. Thanks. We weren't quite sure what tax rates to apply. And then the other thing I want to ask about was the crane business. First, just one little number, I wonder if you – last quarter you shared what impact Fantuzzi had on backlog in that business. Could you give us that number from the end of the year as well?

Phil Widman

Hold on. Do you have another question while I'm looking here?

Robert McCarthy – Robert W. Baird

Yes. My real question has to do really just with my confusion about what we are – what we're saying about the crane business. And you go into the year with almost $1 billion of backlog. I appreciate I think that you believe that given that level of backlog and what you see in the market that you think that business can be stable on a revenue basis or even up. But I'm not – I'm also interested in what's happening on an order basis. And it's not clear to me how dependent your revenue outlook is on the fact that you have the billion dollars of backlog. Does that make sense?

Phil Widman

Rick, may want to get into that question, but let me answer your first one. There's about $200 million of backlog related to Fantuzzi at the end of the year.

Robert McCarthy – Robert W. Baird

Okay. Thank you.

Ron DeFeo

And what I would say, and I'll turn it over to Rick, is that historically, the crane business has lagged. In other words, it continued strong until well end to a downturn, and then it starts to improve later. So the crane cycle has historically been a little different. What Rick was trying to say earlier, and I just want to reinforce it, is that while our view was that the larger cranes may still soften up somewhat, that is being offset a bit by developing markets interest in the product lines. So whereas traditionally, we would have expected the big stuff to continue to weaken for the balance of this year, we may be seeing some changes in that through developing markets. Rick, I think I – maybe I haven't answered to the whole question, but do you want to add anything to that?

Rick Nichols

Well, yes. Definitely, a good point. I also like to say in the fourth quarter, we actually saw a real improvement in bookings. And it really changed a little bit of our outlook on the year. I think Tom's comments early on said the year would be flat to slightly down. We're still looking at that as, I'll call, a more pessimistic view. But the order rate with our backlog only moving down about 4% sequentially quarter-to-quarter, we're seeing some more positive signs in the market. And as Ron said, it's not coming from our traditional market. It's coming from other parts of the world. So we're cautiously optimistic. It is a late cycle business. And we still will see some down tick in some of our markets. But other markets are really beginning to pickup.

Robert McCarthy – Robert W. Baird

And would that include the RT market, Rick?

Rick Nichols

Yes. I think the RT market, in the US most specifically, will be down and will stay down through 2010. The upside we're actually seeing in the RT business is the channel inventory has really begun to clear. So we actually believe that it will be a bit of a back half up-tick in the RT business just by clearing a significant amount of inventory we ran out of 2008 with the end of 2009.

Tom Riordan

We are still are. Inventory is actually in better shape than probably our competitor's inventory. And in the RT product line, we also have had some difficult progress then in Africa and in some developing markets.

Robert McCarthy – Robert W. Baird

Very good. Thank you.

Operator

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

David Raso – ISI Group

Good morning. I apologize, an hour into the call, my question is a little bit long, but if you want to take it offline, I understand. Going back to the slides you put out with the mining sale, and you had that view of tomorrow revenue range for each business, with tomorrow being '10 throughout '13?

Ron DeFeo

Right.

David Raso – ISI Group

Just using that as a guide post, tell me what – how's your outlook now deviate from then? AWP, as the revenues came at $838 million for the year. You spoke to tomorrow, low end revenue is about $1 billion. So again, somewhat implying '10 is $1 billion of rev. That's 31% AWP growth. And just doing at the same math at divisions, the AWP up 31%, construction up 16%, cranes down 5%, then you add Fantuzzi, and material processing up 70%. So again, going through that, can you tell me how that changed? How are you doing AWP versus at 31% (inaudible), construction 16%, crane down 5%, which we talked about earlier a little bit about, and then material processing up 70%?

Ron DeFeo

Yes.

David Raso – ISI Group

I'm not sure if I'm hearing 31% AWP growth from the commentary on the call. I'm just trying to make sure I understand yield framework and how we're viewing it today.

Ron DeFeo

Go ahead, Tom.

Tom Riordan

David, it's Tom Riordan. We may need to take this a little bit offline. And I think, without referencing the specific numbers you went through, we're expecting some up-tick. And I think frankly, less than 10% at aerial work platform segment. And frankly, that also includes our utility business, which is in a little more robust position. On construction, we are looking at a fairly reasonable up-tick in revenue. On the cranes business, you're pretty close relative to – excluding Fantuzzi, we think it's flattish, as I would describe it. And in a material processing, we are looking at a reasonable up-tick in that business as well.

Phil Widman

Material processing was $1 billion business pretty recently. And the percentage may appear high, but –

Ron DeFeo

And again, recognizing – as we've talking about and as you pointed out a little bit as well, David, a lot of this is driven around our belief of the channel inventories that we've got, and virtually every business we have are at very reasonable levels with current realities. And as such, running the retail is going to provide a nice increase.

Tom Riordan

I don't think the 31% number's the right number in aerial work platform. So I think it's more in the high single digits number from where we are.

David Raso – ISI Group

Swapping, basically take down the AWP, I thought raised the construction. Those are the biggest delta potential.

Ron DeFeo

Principally, that's right, David.

David Raso – ISI Group

And then when I think through the profit margins – and again, I'm not trying to pin you to a slide that you're trying to put a framework actually say that. But if you look at the tomorrow margins for each division, you had AWP going to – I mean going to breakeven for '10. Given we're taking down the sales growth rate, is it fair to say that number is no longer the bogie breakeven for aerials? I'm not saying you're not going to strive for it. But realistically, is that breakeven business in '10?

Ron DeFeo

Well, I think it's what we're after trying to get to maybe at the small loss. But we think we can get pretty darn close. There'll be some offsetting factors. How strong is Latin America? How strong is Asia Pacific, if we can get some strength there? There'll be some offsetting factors. The utilities business, which is in aerial work platforms, maybe – acts a little bit stronger than we think. But we think this is a year where we've got to get that business at or around breakeven. Okay. It's going to be very hard to do. Our competitors aren't saying they can do it. But I think that's the challenge the management team has.

David Raso – ISI Group

I think the framework before – and I guess now you just swap it between construction and aerial. The crane business looks like you're not – again, using the old bogie you had before of roughly 4% margins in cranes for '10, that's essentially implying flat profits in cranes '09 to '10. You had about 5% incremental in material processing. You're earning the EBIT growth because you're growing the business a lot. But AWP in construction are still – those business were – if you run the straight math, and I definitely appreciate the overhead absorption that you should benefit from after what they went through in '09, maybe you're looking at roughly 100% incremental on both those businesses. I'm roughing the numbers.

Of those two, which of the – which is the one where it's – god knows nothing to lay-up right now. But which of the businesses that you'd say – it's not even asking that much. It sounds like a big number because Genie went from shutdown selling the high cost inventory, and now they're producing in the lower cost environment. Or do I not appreciate that construction has $150 million of savings or just that compact business where you're getting the growth from is just not profitable?

Ron DeFeo

I think you can't discount the fact that we have the whole pricing. Okay. And the pricing environment is unpredictable. And we also have to achieve material cost reductions from our supply base. So there're at least three or four main variables that are going on here in these businesses. I don't think anything is lay-up. But I think we have a pretty straightforward plan that if executed will get us the numbers we're talking about.

Phil Widman

David, how I would trim it is the business we're probably most comfortable with relative to how we get to the right answer is material processing, and followed by AWP construction secondarily pre-setting. AWP has just got a tough market ahead of us, with frankly very limited headlights going out in the market. And in construction, again, we're encouraged by the impact of the cost reductions that have been made over the last 18 months. And we've got a little bit more to do there as well. And we're encouraged by the compact side of the business. We clearly have some challenges in the other niche businesses that Ron articulated earlier.

David Raso – ISI Group

Of the two AWP in construction, which is the one – if you had to pick one that the line in play is just more obvious, just given overhead absorption issue?

Ron DeFeo

It's a lot like your family. You love both your kids, David. So we're working on both of them as well.

Tom Riordan

Yes. And if they don't deliver, we're going to depend upon the cranes guys to come through for us.

Phil Widman

And David, one other comment is don't forget we had one-time restructuring in these businesses in '09 too that you–

David Raso – ISI Group

Yes. I'm trying to back that out. I'm trying to back that already.

Ron DeFeo

You are looking for aerial to basically go up now $80-ish million of revs, but you need to get the loss trimmed by $80-plus million. Construction, let's say that goes up $200 million, $250 million, you are looking to take a loss that was roughly $225 million down to roughly $25 million (inaudible). And that's how I'm getting the number, so.

David Raso – ISI Group

It is what it is. I'm just trying to get a feel – obviously, it's a challenge, which business has the better line of sight.

Ron DeFeo

I think you have your feel.

David Raso – ISI Group

And then real quick big picture, you're looking at taking a $4 billion business in '09, up to, you said, double. I'm looking at it more like $9 billion, but $8 billion to $9 billion of revs. From here to there, you're implying a 25, 30 – maybe a little higher on incremental margins, given the history of Contech, it probably shouldn't be that challenging. I'm with less question of profitability and more of the top line. But just to be clear, that analysis does not include any use to that cash being – or the balance sheet being turned into revenue. Those are core businesses betting into $8 billion to $9 billion.

Phil Widman

That's right. And the way I characterize the revenue is, we may not get the revenue in on all those same markets that we got it. But we're going to get it into some other markets.

David Raso – ISI Group

I appreciate it. Thank you.

Operator

Your next question comes from the line of Steve Barger with KeyBanc Capital.

Steve Barger – KeyBanc Capital

Good morning.

Ron DeFeo

Hi, Steve.

Steve Barger – KeyBanc Capital

I just want to go back real quick to the tentative nature of some of the customers right now. And one of the things that I've heard from a lot of people at AED and some of the other industry shows recently is that people just can't get financing even if they wanted to buy equipment. So given the cash, are you considering providing any financing for dealers or customers or getting more creative with your liquidity?

Ron DeFeo

Good question.

Phil Widman

Hi, Steve. It's Phil. In the US in particular, we have, over the last couple of years, been using our balance sheet to originate leases. We've typically sold those off, but we have held some of the balance sheet at the end of the year. It's less than $10 million on our balance sheet for that. But given the liquidity we have, we are getting more aggressive to try to be creative to generate additional sales. So yes, that can have an impact mainly in the US side relative to our business.

Steve Barger – KeyBanc Capital

And mainly on the US side, just because credit is better non-domestically or just – you feel more comfortable here?

Phil Widman

More technical reasons in terms of our ability to originate leases with some of the foreign countries.

Ron DeFeo

And risk management.

Phil Widman

And we've also added some risk people overseas. And again, we may take recourse on deals as well. But on the balance sheet, typically it's just the US.

Steve Barger – KeyBanc Capital

Okay. And my follow-up, you call the developing markets as a real growth driver right now. And you laid out a pretty good framework for how you're thinking about potential acquisitions should they occur. I'm just wondering, is there a reasonable pool of targets that meet those criteria that you outlined? Or is it more realistic for us to think about market share being built organically in some of those higher growth markets?

Ron DeFeo

I think the market share being built organically is the thing that we can probably control more of. I think the opportunity for acquisitions is always hard to predict and tentative. Not only does it take two consenting partners, you have to come up with a similar view of valuation and opportunity to secure an acquisition, so. I think that's why we laid out the yesterday, today, and tomorrow scenario in our mining presentation because we believe there's substantial value that can be created just within our existing franchise.

And if you recall, back in 2000 – you may or you may not recall. But beginning in 2002, 2003, following the GNB Mac [ph] acquisitions, the company grew from nearly $3 billion to almost $10 billion in 2008. And over 90% of that growth was organic. And a large portion of that organic growth was market-based for the large, some of it was market share based in new markets. So while we've been reset and it's been a reset for everyone, I think we can return to some level of growth again.

Steve Barger – KeyBanc Capital

Okay. Yes. But I mean, domestically, at least that growth is going to be predicated on some legislative things that you can't predict the timing of a highway build or stimulus actually being spent. So in the meantime, presumably, acquisitions are a reasonable bridge to think about.

Ron DeFeo

Yes. I think that's right.

Steve Barger – KeyBanc Capital

Okay. Great. Thanks for your time.

Operator

Your final question is a follow-up question from the line of Charlie Brady with BMO Capital Markets.

Charlie Brady – BMO Capital Markets

It's been answered, guys. Thanks.

Tom Gelston

Okay. Well, I'd like to thank everybody for their interest in Terex today. And please follow-up with Tom, Phil, or myself, Tom Gelston, first hopefully. And I appreciate speaking with you. Thank you.

Operator

This concludes Terex Corporation's fourth quarter and year-end 2009 earnings release conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Terex Corporation Q4 2009 Earnings Call Transcript
This Transcript
All Transcripts