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

Terex Corporation. (NYSE:TEX)

Q1 2010 Earnings Call

April 22, 2010; 08:30am ET

Executives

Ronald DeFeo - Chairman & Chief Executive Officer

Phil Widman - Senior Vice President & Chief Financial Officer

Tom Riordan - President & Chief Operating Officer

Rick Nichols - President of the Cranes Business

Tim Ford - President of the Aerial Work Platform Business

George Ellis - President of the Construction Business

Kieran Hegarty - President of the Materials Processing Business

Steve Filipov - President of the Developing Markets Business.

Tom Gelston - Vice President of Investor Relations

Analysts

David Raso - ISI Group

Seth Weber - RBC Capital Markets

Charles Brady - BMO Capital Markets

Tom Brinkman - BMO Capital Markets

Jami Kirk - Credit Suisse

Ann Duignan - JP Morgan

Alex Blanton - Ingalls & Snyder

Meredith Taylor - Barclays Capital

David Wells - Thompson Research Group

David Wells - Thompson Research Group

Matt Toyosso - Barclays Capital

Brian Rayle - Northcoast Research

Andrew Casey - Wells Fargo Securities

Joel Tiss - Buckingham Research

Robert Mccarthy - Robert W. Baird

Steve Barger - KeyBanc Capital Markets

Operator

Good morning. My name is Amanda and I’ll be your conference operator today. At this time I would like to welcome everyone to the Terex Corporation’s, first quarter 2010 conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question-and-answer session. (Operator Instructions)

Mr. DeFeo, you may begin the conference.

Ronald M. DeFeo

Thank you. Good morning ladies and gentlemen, and thank you for your interest in Terex today.

On the call with me this morning is Phil Widman, our Senior Vice President and Chief Financial Officer; Tom Riordan, the company's President and Chief Operating Officer; Tom Gelston, Vice President of Investor Relations, and participating in the room with me today is Rick Nichols, President of our Cranes business; Tim Ford, President of our Aerial Work Platform Business; George Ellis is on the call from the Bauma Show, President of our Construction Business; Kieran Hegarty, President of our Materials Processing Business; Steve Filipov is in the room. He’s President of our Developing Markets Business.

A replay of the call will be archived on the company's website under audio archives in the Investor Relations section.

I'd like to begin with some opening commentary followed by Mr. Widman and Mr. Riordan who would discuss specific performance by the business overall and by segments. Then we’ll open it up for questions. I would encourage you to ask only one question and a follow-up.

We will be referring to a presentation on the company’s website as we go through this morning’s presentation. Let me begin by referring to the forward-looking statement on page two, which I encourage you to both review and read.

So now let me start with an overview. The first quarter performance for Terex was generally in line with our expectations. The net sales performance was relatively stable with the fourth quarter performance of 2009, and while on a year-over-year basis, revenue was down 17%. This was expected, and this decline removes the impact of both currency and the benefit from the Terex port equipment business acquisition.

In 2009, in the first quarter we were still selling down our previously high backlogs. Going forward, we have seen our backlogs begin to grow almost everywhere, expect in our crane business where we continue to see some near term weakness. As a general rule, our production schedules have increased meaningfully. This is positive and in line with expectations.

We are now building product and quantities generally consistent with our retail demand. Our cost structure has continued to come down, but we have had some additional restructuring that would be detailed in Phil and Tom’s comments.

As you know, the mining sale netted us a gain of approximately $620 million or $5.72 per share in the quarter. As we’ve looked to the full year 2010, we expect an EPS loss of about $1 per share, excluding the impact of unusual items and this has not changed from our previous report.

What we hear and seek in our market place is encouraging for the future. We expect the years 2011 through 2013 at least, to be strong growth years for our industry, and in particular for our products which are in a slightly different cycle typically than some of our other competitors or other industry colleague’s product lines.

So now let me turn it to Mr. Widman who will summarize our financial performance for our continuing operations. Phil.

Phil Widman

Thanks Ron and good morning everyone. The key figures tabled on page four displays the quarterly year-over-year and sequential performance for the continuing operations of the company. Given the sale of our Atlas business in April, their results have been included in discontinued operations for all periods that I will refer.

Net sales were down 3% from the prior year quarter or 9% when adjusting for the translation on impact with foreign currency movements. The addition of the port equipment business provided an 8% uplift to net sales in the period, and on a sequential basis, first quarter net sales decreased by 7%, virtually all related to the timing of deliveries of large crawler cranes and some softness in our all-terrain crane basis, as other segments were flat to modestly up.

We incurred a loss from operations in the first quarter of $67 million, compared to $111 million in the prior year quarter. The negative effect of the net sales decline was more than offset by reduced spending and favorable manufacturing absorption, which I will cover in more detail in two slides.

Adjusting for currency movement, working capital was flat with the year-end 2009, as increased payables from Heighten manufacturing activity more than offset some inventory build. Net debt improvement to a $172 million reflects the cash proceeds received on the mining business divestiture, reduced by our use of cash from operating activities in the quarter.

Overall liquidity was approximately $2.3 billion, with cash balances of $1.8 billion, and availability under our revolving facility of $500 million, provides significant flexibility to put cash to work to yield higher returns and accelerate growth, as well as be opportunistic on acquisitions should they become actionable.

On page five you will note that our overall backlog is similar to fourth quarter 2009 levels, and down 24% from the first quarter of 2009. Cranes backlog declined from both reference periods, mainly due to softening in the all-terrain demand, and the delivery of port equipment as they have began to catch up on production. All other segments showed improving backlog trends.

Net interest expense increased over the prior year due to the second quarter 2009 capital market’s transactions. The change in other expense from the prior period is largely due to the mark-to-market of derivative instruments intended to partially mitigate risks, associated with the 5.8 million shares of the Bucyrus International common stock acquired in connection with the mining divestiture. We will have this adjustment each quarter until the derivatives expire.

The effective tax rate in the first quarter was approximately 32%, reflecting some mix of jurisdictional income and reduce certain tax provisions relative to last year’s first quarter. The fourth quarter of 2009 had a reduced benefit by comparisons with the discreet charges related to uncertain tax provisions and evaluation allowance on the deferred tax assets of the European operation. We currently expect the 2010 effective tax rate to be approximately 24%.

Page six bridges of the change in operating loss from the prior year’s quarter, to the operating loss for the first quarter of 2009, excluding the impact of acquisitions and in total. The margin impact of $12.6 million on the net sales declining includes both mix and pricing changes as well. Net restructuring was $14.6 million lower this quarter, excluding charges taken in the port equipments business.

Total restructuring charges including port equipment was over $12.9 million in the period, of which $6.4 million was in cost of sales, and $6.5 million in SG&A. Current period capacity variants of $2.3 million, and under absorption combined for a $25.4 million favorable impact over the first quarter of 2009.

As under absorption is reflected in the profit and loss statement as it flows through inventory, there is roughly a one-quarter lag on the current period absorption flowing to the P&L. This was one of the reasons why AWP, which has a faster inventory turnover, has more benefit this period than the other segments. We would expect improving trends in the other segments moving forward as we have picked up production volumes.

Inventory charges have decreased as volumes and market conditions have stabilized. Transactional foreign currency gain and losses were mixed by segment, but were favorable overall, as we had to unwind various hedges in 2009, given volume declines. SG&A cost reductions had a net positive effect of $16.4 million, and overall foreign currency translation impact was $4.3 million favorable.

Separately you can see the impact of the port equipment acquisition, which negatively affected the operating performance by $4 million, which includes the benefit of the change in VAT obligations of $7.6 million. Restructuring activities are continuing in port equipment with charges of $8.4 million in the period. The breakdown of the costs by segment varies somewhat by issue, but is disclosed for transparency.

Let me refer to page seven. Working capital statistics are on track with our expectations for the first quarter, as we have started to produce ahead of expected increase in sales in the second quarter.

On page eight you can see the impact on the first quarter results of the mining divestiture. Consideration includes the valuation of 5.8 million shares as of the closing day, and we picked up the cash in the divested businesses. The gain of $620 million includes tax obligations that will largely be paid out in 2011. You may recall that we also recorded some fees associated with this transaction in the fourth quarter of 2009.

As mentioned earlier we have entered into derivative transactions, with an initial premium of $21 million to partially mitigate our risk associated with holding the Bucyrus common stock until we can sell. The value of these derivatives will change continually, and variations in the mark-to-market will be reflected in other income or expense in our quarterly results. Changes in the value of the Bucyrus stock from the time of acquisition are reflected in other comprehensive income in the equity section of the balance sheet until, ultimate disposition of the shares.

I’ll turn it over to Tom to tell us more on the operational update.

Tom Riordan

Thanks Phil, and good morning everyone. I will cover the current views of each of our business and then a few Terex wide comments.

Moving onto page nine, most of our businesses are seeing signs of positive trends and orders, mostly due to writing the retail demand after the channel inventory reductions after the last 18 months, and partially due to some truly increased end market demand. Our AWP business has seen a rebound in orders for aerials driven by emerging markets, especially Brazil, and Asia Pacific, including Australia. North America and Western Europe remained sluggish.

Large international account rental companies are increasing their request for quotations and showing interest, but remain weary a place in significant orders. Smaller companies continue to struggle financially with rental rates and utilization, and we believe we are near the bottom of the cycle for them. Our bad debt experience remains stable.

Used equipment pricing has stabilized and firmed somewhat based on recent auction experience and other third party information. We also believe that industry wide de-fleeting has slowed substantially, although most purchased transactions today also involve the trade-in of older fleet. Our utilities business has been strong and we expect that to continue. Overall we believe our segment profitability will continue to improve as the year progresses.

Our production rates have risen significantly with most of our facilities back to a full work week, and in some cases we are working overtime or hiring temps. We ended 2009 with a very low level of finished goods inventory, increases to show we have reasonable product availability and manageable lead times for our customers. As such we will likely be building some inventory short term.

In addition, we are also working diligently to make sure our supply chain partners can keep up with our increasing build rates. Lastly our new China facility remains on track for Q4 production. The team there is genuinely excited about launching a new plant with several products that are tailored to the local market.

Moving onto construction, we again see a nice up-tick in orders recently tied to retail demand. Our backlog is starting to grow, and similar to AWP, we are working hard to maintain lead times to our customers and keep our supply partners in-sync with us. Order in-take is solved in most products, except our truck business at the moment, and even there we are seeing positive signs.

Developing markets are strong, including a rebound in Eastern Europe and Russia. While North America remains sluggish, our Western European business is also showing signs of improvement. Our material handling product line has rebounded with the recent increase in the steel scrap pricing, which is one of the primary applications. Our road building business is also seeing a strong up-tick in orders and in profitability.

Despite the downturn, we continue to focus on new products, and this week at the Obama show in Munich we launched 10 new products in this segment. Most of our restructuring in this segment has been completed, and significant improvement and profitability you see as a direct result of that. We expect further profitability improvements as we go through the year.

Our cranes business has been challenged with the drop in order rates along with the impact of the acquisition of the port equipment business. Our restructuring of the port equipment business is progressing as planned and our customers are walking us back as we have resuscitated the business. Most ports are still under utilized and have cut back on capital purchases. This business performance was a noticeable drag in our cranes earnings for the quarter.

Additionally, we had two large cranes who’s shipping was delayed from Q1 due to supplier quality forms which will now shipping Q2. I totally expect us to be back to moderate profitability in Q2. In general we are seeing strong quote and order rates in Asia Pacific, notably China an Australia and very soft in the Europe and in the US.

Leases are also starting to show early signs of recovery for cranes. Our cranes business also launched several significant products this week at Bahamas, including a new 1000 ton crane with state of the art performance and operating costs, and a new 100 ton rough towing crane, jointly engineered by our Italian-US businesses, which fills a big global gap in our product portfolio.

Moving onto material processing, we’ve effectively gotten back to breakeven. The order rates for crushing and screening products continue to be strong, mostly due to running at retail demand. In general, markets are flat with a few exceptions including India for the aggregate markets, and Australia and South Africa for mining related markets.

Similar to the rest of our businesses, we have numerous new products being launched at Bhama, many of which are targeted from mining applications, and all of which should help the second half results. Our results show the positive impact of cost reductions from this past year, and expect a positive profitability trend as the year progresses. Similar to construction and AWP, we find ourselves working hard to keep the lead times short, in order to be responsive to the customer as our markets recover.

Moving onto page ten, our material costs continue to reduce at the moment, but we are vigilant about potential steel price increases in the second half of this year. With the move of the major mining companies to re-price all on a quarterly basis rather than annually, this will mix differ to be much more volatile. At this point and time, its difficulty to predict the impact of this.

As I alluded to earlier, we are seeing some early delivery challenges for key components. We are working effectively with our suppliers to provide additional visibility into our production plans, that similar to ourselves they are seeing early stage increases that can be dramatic as part of the materials inventory has been used up and the lines begin to run again. While this can be viewed as a good problem, it is still the problem.

Developing markets in general continue to be strong for Terex. Nearly 30% of our sales are in these markets, with Brazil, Russia, India and China accounting for approximately 13% of our revenue by themselves. Brazil and India, both are very dramatically year-over-year, and with the planned investment in India in the start of mode and our recently announce investment in Southern Brazil for a new multi product facility for several segments. I believe you will see these trends continue in these markets.

Our new ERP system continues to help upgrade our ability to improve our back office and other areas, and I mentioned several times already, our new product pipeline is pretty robust, and our tier four engine re-engineering efforts are very much on track. To summarize, we are comfortable and confident with how the year is progressing and how the markets are rebounding.

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

Ron DeFeo

Thanks Tom. So let me summarize. As we look forward, we feel quite positive about the future. The EPS outlook for the full year remains at $1 per share loss previously mentioned. Our net sales outlook will be slightly reduced due to lower anticipated benefits coming from currency translation. However, our developing markets are leading this recovery as Tom has indicated, and we are seeing more positive signs of growth in a number of our businesses, than frankly we had expected a few months ago.

We believe that the channel inventories that took place in 2009, the reductions that took place, are providing production and absorption opportunities in 2010, and this will be a critical area of improvement in the current quarter, and both the third and fourth quarters as well.

The backlog for the company is beginning to build in three of our four segments. We have had two and will remain vigilant in terms of cost control initiatives, and continue to look for ways to reduce costs. Improving our material cost will be a constant area of emphasis, and that will positively impact profitability in the second quarter of 2010, although we do have some concern about steel and potential other cost increases later in the year.

Lastly, the liquidity position of the company certainly creates flexibility in terms of acquisitions and/or debt pay down. We continue to pursue both areas as a way to generate increased shareholder returns in the coming months. We are on a path to continue to diversify Terex into a machinery and industrial products enterprise. Our primary focus will be to stay within the context of our basic machinery business, although we will look for other platforms if the opportunity is right.

With that, I’d now like to open it up to you for your questions. Operator, can you do this Amanda?

Question-and-Answer-Session

Operator

(Operator Instructions) Your first question is from David Raso with ISI Group.

David Raso – ISI Group

Good morning. My questions about a line of sight to profitability. The overhead absorption comment was interesting with the quarter lag and it already showed up in aerial relatively materially, but hasn’t really shown up yet at all in construction, in material processing? Then you highlighted how other factors are starting to get back to rehiring, and work weeks are pretty [Inaudible] and overtime in some example.

You mentioned cranes back to profitability in the second quarter. It sounds like material processing should be there as well. So focusing on aerial and construction in particular, this quarter we had all four divisions loosing money. It sounds like you already highlighted profitability pretty soon. With that overhead absorption issue, especially in construction, as Rob was saying, getting closer to breakeven. Can you give us a line of site for when do you see aerials in construction in particular back in the black?

Ronald DeFeo

Let me comment on it David, and then I’ll turn it over to Phil. I think we’ve said that we expect to deliver and our targeting to deliver EPS profitability for the company on the fourth quarter okay. In order to do that of course, when are going to have to progress our way towards profitability throughout the year, and we still believe we can achieve that sitting here today.

As we look at the second quarter, historically the second quarter would normally be a strong quarter and is a prime part of the selling season. From what customers are telling us at the Bhamer show this week; although I am not there, I wish I was there, but given the volcanic issue many of us from North America never made it.

The market environment is clearly improving. So net I think the aerials business, if it isn’t going to be profitable in the second quarter is going to be darn close to that; we are hopeful. I think the construction business has some distance to go, but many of the elements of profitability are working in that constructions business. The biggest drag has been at this point in time the truck business, which only reasonably have we been able to get some meaningful orders on. So I think that’s headed back to that level.

So I think for us, this will be a year where we’ll progress and be able to achieve that EPS profitability by the end of the year.

Phil Widman

Dave, the other comment just to follow-up a little bit on your absorption question. You recall in our guidance that we indicated, about $200 million of year-over-year improve was related to absorption change. So given we are just starting to get more towards full production in a lot of our businesses, some are still not there, that will start to accelerate as we go through the year as well.

David Raso – ISI Group

Well, that’s kind of the point. If we’ve got $180 million left. I’m just trying to think, if the second quarter is going to be close, and the overhead absorption number is only 19 so far or 19.3. You saw it layering in somewhere, a $40 million or $50 million overhead absorption, and you got to get to 180 some however three quarters. I am just trying to think why aren’t we even thinking the third company is back to breakeven.

Phil Widman

If you look back at the history last year, the absorption, we shutdown a lot of our facilities in the second and third quarter of the year and frankly in the fourth quarter as well, so year-over-year that will start to accelerate.

Ronald DeFeo

Yes, the overall question for us is, are going to see a stronger second quarter than the third quarter. Historically the third quarter always backs up a little bit due to vacations and vacation shutdowns and the fourth quarter is stronger. So that is the real question for us David as we look at the next three quarters.

David Raso – ISI Group

Okay. Thank you very much.

Operator

Your next question is from Seth Weber with RBC Capital Markets.

Seth Weber – RBC Capital Markets

Hey, good morning everybody. I was wondering if you could touch on the pricing environment that you are seeing across your segments. How rational are your competitors being? How aggressive are your customers pushing back; and whether you planned to have any price increases baked into your second half assumptions. Then I have a follow up question for Tim.

Ronald DeFeo

Okay. In general, I’ll say the pricing environment is about as we expected. It’s a little challenging in some of our businesses as you might imagine, but it’s not crazy. I am going to kind of turn it over to the segment guys to talk about that, because they are a little closer to them than I am. I am going to start with Tim and then go to Rick, Karen and George.

Tim Ford

Seth from a pricing standpoint business, I’d say customers continue to put or ask for price discounts in the form of over allowance on trades, rather than a reduction on the actual equipment. But countering that with industry production’s at a lower level or at such low levels versus historical levels, that kind of the normalizing affect here as lead times.

So where product is available and the need is immediate, price is less important. I think our view is that we think we’ll continue to see price stabilization through the year as the used market solidifies, and as the customer expectations on what they need grows.

Rick Nichols

I think from a crane’s prospective, certainly pricing is competitive, but in reality the need for financing and the ability to provide financing for our customers is offsetting some of that pricing pressure in the market, but it is a very competitive environment today.

Kieran Hegarty

I guess I would probably echo what both Rick and Tim said. I mean I think we went through a 12 months period of material processing where there was a lot of used equipment in the market place, and a lot of that was washed out. In reality most manufactures significantly cut capacity in the last 12 months. So we would see in the material processing business, certainly in the recent months, a fair degree of price stability, while we expect to get some modest price increases this year.

Again, primarily driven from the past 12 months and there was excess capacity, but there was an element of discounting that existed. We would see a lot of discount. So in real terms we would see less modest price increases, again based on the fact that capacity is no more in line with the retail demand, and a lot of the used equipment has effectively been washed out of the system.

Seth Weber – RBC Capital Markets

Okay, thank you. And just a quick follow-up for Tim; on the aerial business I guess are you seeing any kind of up take in after market activity or parts and services. I am trying to just understand; the rental companies were talking about pushing their fleets up to or even past historical ages, and I’m just trying to understand if you think that that’s a viable strategy and how much longer that they can really push it up?

Tim Ford

I think the short answer to your question Seth is not yet. We are not seeing an uptake in neither parts or services that’s material to speak of. In many cases, customers are continuing to take parts from old equipment and move it from, cannibalize from a fleet that’s sitting there and moving it, but I think we’ll begin to see that stabilize and frankly argue that the parts business will actually turn to corner here and start to grow in the second half as that equipment is either already capitalized or is out on rent.

Seth Weber – RBC Capital Markets

Do you think that the fleets can get past the old age levels just because they haven’t been used a lot or is that?

Ronald DeFeo

To be honest with you Seth, I think that’s the question for the rental companies. Our view is that, and we have a pretty good model on what we think it costs them to maintain the equipment, and frankly for them it’s a function of how much do I want to spend on expense versus how much I want to spend on capital. Our prospective on that and from a planning point of view has generally been that this year they will stretch it, and then next year they will absolutely need equipment.

Seth Weber – RBC Capital Markets

Okay, thanks very much guys.

Operator

Your next question is from Charles Brady with BMO Capital Markets

Charles Brady – BMO Capital Markets

Good morning. This is actually Tom Brinkman standing in for Charley Brady. Just a question about your uses of cash, and kind of wondering what your thinking in terms of a quarterly run rate for interest expense, between now and any such time as you might try to do a debt pay down?

Ronald DeFeo

Well, we haven’t included in our guidance a debt pay down impact on interest expense. So relatively speaking it’s going to flat barring, but we haven’t announced anything and what we are going to do with that.

Tom Brinkman – BMO Capital Markets

Okay, and if the acquisitions pipeline does not materialize between now and the time the shares can be sold, is that going to be sort of a catalyst for the timing that any debt pay down might occur?

Ronald DeFeo

No, we have requirements in our credit facilities. Within 300 days of the access to the proceeds, from February 19, we have to invest those proceeds in the business or we have to start down in the waterfall of paying off debt with our terms being first and then to the sub notes. The sub notes are 365 days, so there will be some activity this year. On the shares lowest dollar count as proceeds still are put into cash, so it would be more a year or so from now.

Tom Brinkman – BMO Capital Markets

Right, I got you. Okay, the only other question I had was, do you still see any possible divestitures of small product lines?

Ronald DeFeo

At this stage no.

Tom Brinkman – BMO Capital Markets

Okay, thank you.

Operator

Your next question is from Jami Kirk with Credit Suisse.

Jami Kirk – Credit Suisse

Hi, good morning. A couple of questions; first, I was interested in your comments about building inventory as well as seeing some concern out there for supply or concerning, so I was wondering if you could just give a little more granularity on where are you seeing issues in the supply chain. Also to what you are hearing from customers on tier four, whether you there considering buying ahead of tier four, and whether any of that is embedded in your guidance.

Then my last question Ron, the improvement on the improvement in the construction. The losses in the construction business was much better than I anticipated year-over-year and sequentially I am just wondering on the sequential analysis, how much is helped by the fact that -- I think there still the Load King in Q4. So I am just trying to understand what the improvement was I guess on an apples-to-apples basis?

Ronald DeFeo

Yes, I am going to let Phil answer that. No, you come back to that. Let me see if I can address the first couple and may be hand it off.

In a declining market you aggressively want to sell off the inventory, cut your production, run for cash. In an increasing market you want to build inventory in order to capitalize on a future business that you expect to be better tomorrow than today. As we look at our business, that is clearly the path we are now on.

At the end of 2009 I gave kind of the directive to our company and said its time to grow, and my view was it was going to take us six months to turn the ship from a company that was focused on cash generation to a company that’s focused on growth. I think we are right at that point as this point and time.

Frankly we had plenty of capital in order to invest in inventory, in order to capitalize on what we expect to be strong end markets in the next 12 to 18 months. Starting with area wide platforms which are clearly growing in places like Brazil and other parts of the world, and we are seeing some improvement even in Europe and North America, albeit not with the major rental companies, but frankly that’s a good sign because the non-residential construction is still declining. So we expect when non-residential construction plans out either the end of this year or early next year, that will really begin to be a positive for that aerials business.

That some comment frankly is somewhat true for both our construction business and our materials processing business. So we are going to use the capital that we have to try and make sure we have pointed inventory in the right places to capitalize on a growing market.

The one area where we are going to continue to see some softness from a revenue point of view is going to be in our crane business, which has always been a lagging product line from a cycle point of view. It’s the last one to go down and it’s the last one to start back up, and that is no different in this downturn then it has been historically.

Relative to the Q4 engines, I frankly don’t see any pre-buying, but I’ll open that up with any of you guys; Tom do you see any pre-buying.

Tom Riordan

No we don’t. Jami the first types of products are going to get impacted on tier four, the on road products as an example are somewhat a mix of business and continue to be in a very challenging market, and we are not seeing anything in that market. [Inaudible].

Ronald DeFeo

Phil you want to comment on?

Phil Widman

Yes, Jami to clarify your question, if you look at page nine of our presentation where we have the segment results in the prior periods. When we define continuing operation, that means that Load King, Atlas, mining and all those are out of the figures, even in the history that we’re presenting here, so that’s adjusted. So Atlas is out of here.

Ronald M. DeFeo

The improvements in construction are going to be real and we’re seeing our focused material to handle that business, which was a huge drag on the company when steel prices crated. It really solidified; we’re seeing some what of a compact business, a solidified and growing, and we are I think at the early stages of some improvements in some other area, and I think George is having a good job.

Jami Kirk – Credit Suisse

Great I’ll get back in queue thanks.

Operator

Your next question is from Ann Duignan with JPMorgan.

Ann Duignan – JP Morgan

Hi, good morning guys.

Ronald M. DeFeo

Good morning Ann

Ann Duignan – JP Morgan

Ron just a point of clarification; I know you are reiterating your dollars loss and for the year, but Atlas was a loss making business so why wouldn’t we interpret your guidance as your lower guidance, and if that’s true which of the businesses you think are weighing more steadily on your outlook?

Ronald DeFeo

You see, one of the benefits of having my job and is knowing what’s in the guidance that I give, and from my point of view Atlas was always in an area that we were going to act upon one way or the other over the course of the year. So from our point of view, that was in our plan.

Ann Duignan – JP Morgan

Okay good, that’s good color thank you. Then I just wanted to ask you also about, Iron Planet [ph] is that they are talking about the best ever crane only used equipment auction that they are planning for June? I’m curious what you think about that in terms of demand for new equipment? Could this push back the demand for new equipment, that the buyer gets the opportunity globally to purchase used cranes for the first time in a crane only option?

Ronald DeFeo

Yes I’ll comment on that, but pass it back to Rick. One of the, I guess disadvantages of being an old guy now in the business is I’ve seen this movie a couple of times in cranes. Frankly, the way we really decided we were going to get into the crane business big back in 1993, coming out of that last recession when there were no orders in the business, no orders in the business in 1993.

As we produced new cranes and put them into auction and they sold them and they told us what price they were going to sell at, and that really caused us to establish what the price points were going to be, and how we would approach the crane market way back in 1993.

So we have seen a pretty severe recession in 1993. We saw a pretty meaningful one in 2000 to 2002 and we are living with a pretty severe one at this point in time. Having cranes in an auction is pretty consistent with what happened, and frankly should be seen as a positive, and that the inventory would be cleared out and put people into position, to actually buy equipment more equipment in 11 and 12. Rick, you may add?

Richard Nichols

I don’t know whether I could add any more color than that. Auctions have been around for a long period of time. It’s certainly a good avenue for customers to move used equipment, and also gives us an opportunity to replace the used equipment with new equipment. So I think I am very positive about an open auction environment in this environment.

You can also look at the auction and see that for the first time in about nine to twelve months that residual pricing is really pretty good on cranes, which is a good indication, at least in my mind that the future -- we’ve been down, but there is going to be some positives moving forward, so I am supportive of that environment.

Ann Duignan – JP Morgan

Great and if I could speak in one final one. On slide six on the line item price mix volume other, could you break up pricing?

Phil Widman

Not specifically, and I would say that the pricing year-over-year, it’s obviously impacted by the use that we had last year. So year-over-year, probably it’s going to be more of a positive impact as we get to the middle of the year. In the first quarter we didn’t have significant used impact either years, but it’s say generally it’s a small portion of the sale that was there.

Ann Duignan – JP Morgan

Good, but you didn’t notice I think that it was net and negative?

Ron DeFeo

Not a massive negative. Less, but not massively. I think we’re still a couple of years away from having a common information enterprise system which would allow us to discreetly be able to measure that better. Now we have to do it kind of business by business and provide some over side or some prospective on it. I think generally speaking, pricing hasn’t been a positive, but it hasn’t been a huge negative either.

Ann Duignan – JP Morgan

Okay thanks guys; I’ll get back in queue.

Operator

Your next question is from Alex Blanton with Ingalls & Snyder.

Alex Blanton - Ingalls & Snyder

My question is for Tim on the work platform business. The 5% sequential increase in the quarter, if we were to seasonally adjust that somehow, it would be pretty bad, because normally the fourth quarter is the weakest, and the first quarter starts the seasonal upswing in a pretty good fashion.

So, clearly there is not any improvement there, and United Rentals related to one of the prior questions reported yesterday that the age of the fleet was 44.1 months, up from 42.4 months 3 months ago, so they are aging the fleet dramatically. Their CapEx was only $49 million, rental CapEx in the quarter, about a quarter of what it was to be so.

The question really is, do we have to wait until 2011 for a tipping point here? Things are pretty bad now, but there is an indication that there was an update yesterday reported in the billings index for Architecture for the AII, and that’s still below 50, but a better than the prior month. So, if there is an improvement in Non-Rev’s could we see some uptick from a really disastrous level of purchases of AWPs by the end of this year, or do we have to wait for the next purchase season, which is a year from now?

Tim Ford

Well, Alex this is Tim. You took the air out of my balloon here. I was feeling pretty good about 5% sequential growth up to the last seven quarters.

Alex Blanton - Ingalls & Snyder

Yes, but you really compare it with what it usually is quarter-over-quarter, that’s nothing.

Ron DeFeo

Well, it is isn’t anything, but a little bit is better than nothing, and frankly Alex, as you look at the aerials business, it has really shrunk, it’s pretty dramatic. If you were to take the utility business out of our business, we’d be down to levels in the 2000 to 2002 period. So that’s the bad news scenario.

The good news is, it is going to come back, and it is going to come back strongly. I’ll let Tim comment on how he sees the year playing out.

Tim Ford

I guess, when I kind of step back and look at the big picture, our backlog has grown each quarter since basically bottoming out of the end of the second quarter of 09. Obviously some of that was the fact that we weren’t producing a whole lot to offset the orders that were coming in, but backlog grew in the third quarter, it grew in the fourth quarter, it grew in the first quarter. If you look around the world, to the comments that were made earlier we…

Alex Blanton - Ingalls & Snyder

What was the backlog increase in the first quarter sequentially?

Tim Ford

Its 200 over 158. 28% on this slide.

Alex Blanton - Ingalls & Snyder

Okay gotcha.

Tim Ford

North America is still sluggish. I think Ron commented on that earlier. The rental rates we think bottomed in the first quarter, utilizations are improving seasonally. The math between that we were seeing in the first half of last year is mostly complete. However, most of our new orders come on the tray. I’m hearing more buying interest from our customers than I’ve heard any time since basically mid 2008. Has that translated into orders yet? No, but there is a sense that we’ve got to take some action.

In Europe it’s the same story as the US though. If you look at our first quarter bookings, they were very strong. Ron commented earlier about Brazil. Latin America has been very strong for us led by Brazil, and in Asia Pacific we had a pretty strong first quarters run rate, mostly driven by in Australian recovery. So I can look around the world and I feel like ‘I don’t think we have to wait until 2011,’ but I think the second half of 2010 will be better than the first half, but I don’t see massive recovery, but I see its improving.

Alex Blanton - Ingalls & Snyder

Okay, great. Thank you.

Operator

Your next question is from the Meredith Taylor with Barclays Capital.

Meredith Taylor - Barclays Capital

Hi, good morning. Giving your comments around the outlook for debt pay down, I am hope you can talk a little bit about the acquisition environment. Specifically, is there any way for you to give us a sense of the size of the pipeline and how it’s developing. Then broadly speaking, where are you seeing opportunities right now? Was it more long the lines of built on acquisitions to your core businesses or some of these industrial products types of acquisitions that you’ve talked about?

Tim Ford

I see the opportunities more along the built on, smaller size acquisitions, and even some of them are a little bit difficult to predict. We have a very active process, as I am sure you know Meredith, and pretty high level of expectation relative to trying to meet financial hurdles, coupled with a strategic hurdle.

A strategic acquisition that doesn’t meet our financial, our guideline isn’t going to be done, and financially attractive acquisition that is way off strategically isn’t going to be done. So we are trying overlay those circles to be on top of each other, and at this moment in time there are not many opportunities that present themselves with that level of fit, that I’d be confident in predicting something.

Having said that, there are a number of smaller built on’s, nice tuck-in’s that our team is working on and I think we will continue to do. What that means of course is that we will invest in our business in other ways. Some of which we have already talked about, and it also means that we will pay down some debt that we have always known that we will do, and just remain diligent in looking for acquisitions. If they don’t present themselves in the next 270 days, then we’re not going to just spend money to spend money, because we can always get financing particularly as our basic business improves.

Meredith Taylor - Barclays Capital

Okay, that’s helpful. Could you give any more clarity around what the mix might be between acquisitions and debt pay down, and then just as quick other follow up; if you can give us a sense of just directionally how you are seeing valuations evolve at this point?

Tim Ford

Well, valuations are attractive for the assets you don’t want, and for the assets you do want, the valuations are higher than I would expect at this point. Part of it has to do with the recovery of the financial institutions that really came back very strongly, and it is general pre volume that’s taken place with equities, so it’s pushed equity values up for some of the industrial companies. So expectations haven’t eroded as much as I might have thought. But nevertheless, if you start working the acquisition process across the world, and don’t limit yourself just to US kind of companies, I think you can spoke find some opportunities.

Ron DeFeo

Let me excise a little bit to help you Meredith. If you think of the proceeds we got from the mining divestiture, around $1 billion for round number purposes. You take off the taxes and about $250 million, then we will think of other investments that we are going to make in our business. We’ve got $85 million to $100 million of CapEx in this time going through the rest of the year.

Let’s say you had about $650 million, the size, what was required by our bank agreement to again invest in the business or pay down debt, and out of that acquisitions would obviously be a piece of that, and may be working capital. So therefore, you are going to go through your debt and if you look at the debt we have, you start with the term debt and the term debt is $272 million, and then you work your way down the other debt.

Meredith Taylor - Barclays Capital

Okay, thanks very much.

Operator

Your next question is from David Wells with Thompson Research Group.

David Wells - Thompson Research Group

Good morning everyone. I guess first off maybe kind of tying into sort of the commentary about cash and the use of cash, I certainly understand in terms of the amount of proceeds that are left, but given the capital rates out of the business, you still have $1.6 billion $1.7 billion worth of cash that’s with treasuries where they are. Obviously you’re not earning a significant amount of return.

From a time prospective, how do you lay out the choice of saying “With the deals that are presenting themselves, it’s a lot more freedom to shareholders to make a significance kind of debt pay down. You paid on a large slug and boost EPS from that.” How did that process get managed internally in that choice?

Ron DeFeo

Well, it will get managed. Phil and I and our board of directors reflect on what’s in the offer and we that’s top of mind around the organization today.

Tim Ford

And David, we have to keep in mind some of the restrictions we have right now with the lack of nearly significant EBITDA, we can’t incur new debts. So when we see our line of cite to some of these restrictions that go away, it gives us a better comfort level and flexibility, and that’s going to be another factor in this as well. Although you are right, we have a lot of cash and a lot of liquidity and we will likely take action in several fronts this year related to that, but we can look at all the pieces.

David Wells - Thompson Research Group

I guess looking at the top line guidance previously in this $5 billion range; certainly stepping back from that somewhat, given the divestiture, given or seen in the forex market, I guess in relation to the ship to that look at the crane business. It was previously kind of a $2.2 billion number.

How does that move given what we’ve seen with the atlas piece? Given what we saw out of the port equipment business, are you seeing softening that further push on that? Because I guess given the book-to-bill on the quarter and things like that, I maybe not seeing that number being quite as high as it was in late February.

Ron DeFeo

Yes, David in the call in February I indicated that FX in our expectations is about $250 million year-over-year, which at that time I indicated that that’s somewhat in Jeopardy, in a state where they are at -- obviously they wouldn’t get a lot of that.

Atlas had some impact on the revenue as well. In terms of the downturn, again I’m not going to give a specific number there, but there is still pressure on FX, so we agree and we try to indicate that that would be some downward pressure. Rick if you want to comment.

Rick Nichols

I think on the previous call from a cranes prospective, we said it would be flat to slightly down. I think we are still holding that line. We did have a challenging first quarter, and as Tom mentioned we missed shipments that were meaningful from a revenue standpoint, because of the supplier calling the issues, and I think we are seeing some positives in the environment.

The market in North America can’t be much further down than 85% over the prior year and I think we’re seeing some opportunities there, so it is certainly going to be a challenging year from a revenue to maintain the revenue profile, but I think we have a line of sight to try to be flat to slightly down like we have communicated prior.

David Wells - Thompson Research Group

Well, thank you.

Operator

Your next question is from Robert Wertheimer with Morgan Stanley.

Robert Wertheimer – Morgan Stanley

Good morning. This is Joe Day in for Rob. My question is on crane background and you mentioned in the earnings release that the majority is high capacity cranes and port equipment, but can you give anymore detail around the breakdown of high capacity port equipment and smaller capacity, and then what was the book to bill on the high capacity cranes in the quarter?

Rick Nichols

Well, this is Rick. Let me try to answer that. Out of that $801 million, the Terex port equipment business is about $150 million, $158 million of that number; which leaves about $643 million in backlog for the base cranes business, and it’s broken [ph] business is about $400 million to $450 million to that total. So that would give you a feel of the larger crane backlog.

Ron DeFeo

But we should also point out, we do not show backlog for anything that we don’t believe will ship within the next 12 month period, and not all of our competitors do it that way. We know we have orders in hand for cranes that would be delivered beyond the 12 month period; that are meaningful and they are almost always the larger cranes that are the most expensive cranes that are project related, as long as we think.

Robert Wertheimer – Morgan Stanley

Okay, great. Thanks very much.

Operator

Your next question is from Matt Toyosso with Barclays Capital.

Matt Toyosso – Barclays Capital

Yes, good morning. I think I have left out a couple clean up cash flow items and I apologies if I miss them, but could you just comment on cash taxes of 2010 and may be 2011, given the money asset sale. Then I think previously you had guided essentially to flat working capital in 2010. Is that the case? If, not, could you comment on what you think it will be for the full year?

Ron DeFeo

Let me answer the working capital question. We did indicate that as a percent of revenue we would improve to below 30% when you think of working capital to sales fourth quarter annualized. In general I think the overall plan on working capital with levels increasing and offsetting inventory increases, as well as we continue to build production level. So I think still planning on a dollar basis to be relatively flat year-over-year.

Cash taxes; I knew the comment about the money taxes of $250 million, and I would say of that probably a couple $100 million is going to be paid in 2011, and some will be paid in 2010. I don’t think I’ve given guidance on cash backs as overall, but I’ll go back and look at that.

Given we lost money last year, it would be mainly international operations from ’08 that we would pay in 2010, and that was part of the mining, so it just continues.

Matt Toyosso – Barclays Capital

Okay thanks.

Operator

Your next question is from Brian Rayle with Northcoast Research.

Brian Rayle - Northcoast Research

Good morning. Most of my questions have been answered, but I want to talk about as we look at the acquisition opportunities going forward, you have the construction businesses that has made some significant progress on the operating margin due to cost cuts. It’s been a business has been sort of debated back and forth as a part of the portfolio.

How do we use that in terms of your acquisition strategy? Are you looking for something that can leverage the distribution that you have in those markets, both mainly in North America, but in Europe as well, or is that not only the factor in terms of the overall acquisition strategy?

Ronald DeFeo

Yes, I think you’re asking the question about our construction business correct?

Brian Rayle - Northcoast Research

Absolutely.

Ronald DeFeo

Yes, I think we have a path forward in our construction business that doesn’t include many acquisitions. We want that business to develop on its own, that’s our main area of emphasis. We’ll be introducing some additional new products later this year, building off of some of our historical acquisitions that we think have the potential to broaden and improve that business quite meaningfully.

So we’re using the platforms of being a focused compact equipment company on one hand, and a specialty manufacturer of material handlers, and high performance dump trucks and off highway trucks on the other hand. George you want to comment on that at all?

George Ellis

I think you’re spot on with your comments there, and there are nitch products within our portfolio that I believe that we can really leverage our product and it’s technical ability and get good growth and profitability of this business in time.

Brian Rayle - Northcoast Research

I think I appreciate that. I guess what I was trying to drive out was, as you look at acquisitions obviously your AWPs go directly to rental. A lot of the cranes go directly to rental or end customers. There is not a lot of distribution involved. Construction is one of the places you have a pretty good distribution forth front in North America in the US.

When you look at acquisitions, does the fact that you sort of have that, whether it be something indirectly in compact construction equipment, but something that you can utilize distribution for or are you sort of the regular term, agnostic towards how you go to market with the customer?

Ronald DeFeo

I would actually say it a different way. I would say we have more opportunities to build off of our area work platform rental relationships with our compact equipment business, than we have to find acquisitions that would use the distribution network for the construction business.

I think the distributional network of the construction business can be built by adding new products that we already have on the drawing board, and will be introduced later next year, and that the leverage internal leverage we have is just beginning between our Aerial’s team and our construction team, and its our intent longer term to demonstrate to the major rental companies that we can deliver the same high level of service, the same high level of value, that Aerial’s and Gene brand have historically had a reputation for in our mid and small range construction products.

In fact the company’s mission over the next several years is really going to be to drive customer performance, and so I think there is a huge opportunity there for us.

Brian Rayle - Northcoast Research

Great, thank you for the clarification.

Operator

Your next question is from Andy Casey with Wells Fargo Securities.

Andrew Casey - Wells Fargo Securities

Good morning everyone. A few questions on cost management. First as you enter a cyclical upturn, do you think the commodity inflations cycle right now is any different than what occurred in the early to mid 2000s in the front of add upturn outside of the price volatility and material contract changes that you discussed?

Ronald DeFeo

Let me answer that Andy. I think this period we’re in is more difficult to predict than the 2000 to 2002 period. In that period, 2000 to 2002, we did see for the first time real material cost increases in the 2003 to 2004, that frankly for a decade we hadn’t seen, and we had a whole management team that didn’t know how to take price increases.

Now we have a management team that knows how to take price increases and will take price increases accordingly as we see material increases, but I think the material increases we’re going to get now are going to be harder to predict and perhaps more severe at times, because of volatility in steel principle is.

Andrew Casey - Wells Fargo Securities

Okay thanks Ron; and as a follow up to that can you remind us what you have built in to the 2010 annual outlook for price versus cost. Is it neutral or was it a modest positive?

Ronald M. DeFeo

It’s principally neutral, and probably maybe even a little bit negative.

Andrew Casey - Wells Fargo Securities

Okay and well a couple of others. The supply chain component stress I think you talked about. What component areas -- are you seeing any signs of stress or is that more of an expectation going forward?

Tom Riordan

I’m not going to kind of call out specific sectors, but frankly it is of very reminiscing of some of the capacity challenges we’ve had in the past. I think the more highly engineered products, particularly custom products tend to be the ones that are most challenging, and in many cases fall in the hydraulic electronic controlled areas.

Ronald DeFeo

I think you have to reflect upon what has happened. If you’re a component supplier, you are the tail at the end of the dog so to speak. Anything even worse than frankly what we have with our schedule.

So in 2009 people said “Don’t ship me what you built for me; I don’t want it, I won’t take it” and then in 2010 people say “Give me everything you can ship me, because my production has going up again.” Frankly Caterpillar did a good job in communicating to the supply base, how to expect this change to happen, and I think it’s helped the rest of the industry, but nevertheless and still is going to be a bit of a challenge in some places.

Andrew Casey - Wells Fargo Securities

Okay thanks, and lastly just a little bit of tying what we just talked about together with a longer term outlook. Can you help us frame really how we should look at any risk to your shorter term Q4 profitability goal in the context of right now generally stable pricing environment, expected modest demand, improvements through 2010, and then maybe it’s going to be volatile as you said, but commodity cost inflation through the year, and then any impact of that on expected longer term earnings ramp up to the 2013 potential, especially as you layer in some of the machines and cost increases on top of whatever happens in commodity cost?

Ronald DeFeo

Okay, well I think most of our issues will be volume driven, and we will offset cost increases through pricing, and as the markets improved generally. Whether we are a quarter or two lagged on that, I think we’ll get that. The fourth quarter for us is hard to project. We are driving to achieve EPS profitability as I indicated.

The real question is going to be, will we have customers that want to take some Aerial equipment in advances of the selling season or not, and that will depend upon whether they’re in the southern part of the US, and in the western part of the US and some parts of Europe. So that will have a swing, somewhat of a swing impact on us, but frankly we know that delivering EPS profitability in the fourth quarter is going to be a very good challenge, because most of the real improved demand that’s going to be lead by AWP, construction and material processing in 2011 is going to be there for us.

We’re going to be looking at 15%, 20% maybe 30% kind of increases in these businesses in the 2011 to 2012 periods, and just exactly when that falls it’s hard to project. Cranes will probably begin to pick up in 2011, but really hit it’s stride in 2012.

Andrew Casey - Wells Fargo Securities

Okay, thank you very much.

Operator

Your next question is from Joel Tiss of Buckingham Research.

Joel Tiss - Buckingham Research

Okay thanks. I have kind of a weird question. Is there anyway you guys can help us to separate out sort of the seasonal and the inventorial rebuilding by division versus any real structural factors that are happening? I know you kind of hinted around and then I don’t know if it’s something that you can help us with?

Ronald DeFeo

Yes, this is a typical question for us because we don’t see this seasonal patterns being the same as they have might have been in a more historical context, but I’m going to see if Phil can provide some spectrum or any of our guys here on that?

Phillip Widman

I think like we had very little inventory, Bill when you take our the FX it was $22 million in the quarter, so I don’t think there is anything that spiked. AWP, fourth quarter and first quarter was flat [indiscernible]. Construction was actually down a little bit. Cranes down, again this is without the FX taken out. Material processing as well was up slightly like less that $10 million. So again this is not big shifts interims of fourth quarter to first quarter. It’s just a level of tendency.

Joel Tiss - Buckingham Research

Okay and then just a kind of clean up also. Phil can you talk about the status of the dispute on the prior tax returns and also that $100 million swing in other current liabilities on the balance sheet?

Phillip Widman

Well, when we you say disputes on prior tax returns we quit some provisions up in the fourth quarter. We have audits going on in the US as well as in the European jurisdictions. I would rather not comment on ongoing discussions that we’ve had there. We are close to bringing the US to resolution for the periods 2004 to 2007, but we have been trying to adjust any provisions at this stage.

Joel Tiss - Buckingham Research

And then the $100 million increase in other liabilities, what’s in there?

Phillip Widman

Just a second.

Joel Tiss - Buckingham Research

Thank you.

Phillip Widman

I may have to get back to you on that okay.

Joel Tiss - Buckingham Research

Alright, thank you very much guys.

Operator

Your next question is from Robert Mccarthy with Robert W. Baird

Robert Mccarthy - Robert W. Baird

I’ll since in jewels, that you for sticking with us. Hollow, there everybody but you have a cast of thousands there with you Ron, so I wouldn’t remember everybody’s name. I want to follow up with questions that were asked earlier. In a couple of cases, I don’t think we ever got the complete answer. There was a discussion of pricing going on by segments for sales at the beginning of the call and I don’t think we got to hear from George on construction.

Ronald DeFeo

That’s right, I didn’t think we wanted to leave him off, but we just kind of jumped over to the end. George, why don’t you comment on that?

George Ellis

Sure thing, Robert thanks for the question. What we are seeing in pricing really is regionally based. As the markets are starting to pick up in certain regions of the world the prices have stabilized. Generally I’m reflecting the same comments that my colleague has mentioned, but one thing that is somewhat different is in the compact equipment sector where I see still some of our competition with one, two year old work, the new inventory is still sitting that it disrupting the pricing. But on for the basic inventory of the larger equipment within construction, it had flowed through and we are seeing it stabilize, but I would say on the smaller stuff we are still dealing with excess inventory in certain regions of the world.

Robert Mccarthy - Robert W. Baird

Does that excess inventory affect more traditional sales through third party dealers and distributors, because I am thinking that may be a lot of that excess inventories is not appropriate for rental?

George Ellis

I would say its setting in dealer’s yard, that they can be removed.

Robert Mccarthy - Robert W. Baird

Thanks that’s very helpful George. Can we get an updated CapEx and DNA estimate for the year with the various divestitures etc for the period?

Ronald DeFeo

We talked about CapEx about $85 million that had already taken into account our divestiture expectation and DNA. DNA yeah is basically $27 million approximately for quarter someone in that range.

Rick Nichols

Yes, little over a $100 million.

Robert Mccarthy - Robert W. Baird

I wonder if we could talk just a little bit about what you are seeing in the crane business by line of business, so we have better understanding of where the issues remaining. Last quarter, you all talked about significant excess field inventories in rough terrain cranes, less an issue for you more an issue for competitors. Have do you see that market now and how far away do you think we are from an uptake in actual retail ordering?

Rick Nichols

Okay Robert, this is Rick Nichols. If I look at the crane business by product the RT business set a significant shock in 2009, about 85% drop in the global business. It ran at a fairly constantly low level throughout 2009 and I see first half of 10 being approximately the same as 2009, but I think we will see meaningful, or some change over the top but some change in the RT demand in a positive manner in the back of this year.

Robert Mccarthy - Robert W. Baird

That’s something that could affect your production, right Rick. Because you guys are so lien on inventory?

Rick Nichols

Absolutely. I see the tower crane business being flat, really ’09 levels in 2010.

Robert Mccarthy - Robert W. Baird

At a very low level?

Rich Nichols

At a very low level, but there is some potential markets that I think will have some influence on that, which would be principally the pacific around and some parts of the Middle East and North Africa. So those are markets that are now beginning to provide some positive command influences on that business. So I think there is a potential for some back half fourth quarter uptick in that business, and 2011 will be better than 2010.

Robert Mccarthy - Robert W. Baird

In Europe and you don’t see an inventory issue?

Rick Nichols

I do not see an inventory issue. We product line, we see it continuing as Tom mentioned, a decline and what I would call under a 300 ton class of AC units really across the board in all markets, that will be a tough market place in 2010, and potentially into the first part of 2011.

Our larger crawler market continues to be strong. We are a bit pessimistic I think as I said on the last conference call. This year we took production down, and we are actually beginning to take production back up from what we put in our schedule this year. Demand is very global and its moving from the 300 ton, 400 ton up into the larger tonnage crawler class.

In that same thing I would say, the larger AC products are still very stable and it’ not growing from a demand perspective from us.

Robert Mccarthy - Robert W. Baird

And you are say the larger crawlers you are talking what, like 600 ton and up?

Rick Nichols

And what you have seen or heard from, I know you not at the show right, but I think the Bhama show is in an interesting indication of the market for us, because we frankly didn’t know what to expect.

Ronald DeFeo

I think we’ve seen very positive -- from the customers that are attended, again we have some mix of customers that aren’t there because of the volcano and inability to get the show, but I think we have very positive indications from Europe and the larger AC products. We have actually secured orders that we didn’t think we would secure during the show environment.

So it’s been a very positive show and really the industry after about a year to 18 months of challenge depending on which product segment your in is fairly optimistic about a low level, but optimistic about the balance of the year and what 2011 will bring.

Rick Nichols

I think we are bouncing along the bottom at this point in time, and with some positives in few places, and 11 will be able to be a bit better, and 12 will be the year where we’ll see some meaningful growth.

Robert Mccarthy - Robert W. Baird

If you don’t mind, just related to that, I swear this would be last one. Its popular on our side of the table for a net order number from revenue and backlog activity in the quarter. That is of course a calculation affected by changes in currency rates, particularly on the backlog figure.

So ex, we calculated net new orders in the crane business down roughly by half compared with the prior year, but I am guessing that we are under counting potentially anyway crane order activity by as much as like $50 million, which would put the number the closer to $300 million for that net order number. Am I on the ballpark Phil?

Phil Widman

I think you are very close. I think it maybe a little higher than that number, but I think you are pretty close.

Robert Mccarthy - Robert W. Baird

All right, thanks guys. I appreciate the patience.

Ronald DeFeo

One follow-up Joel had asked about our current liabilities. If he’s on the phone and for other’s clarification, the change from the fourth of the first quarter was about $100 million are largely taxes payable, which would be impacted by the mining sales, so that would be within twelve months, the amount that would be payable, but not all of it is necessarily mining because it’s the biggest piece. Okay.

Operator

Your next question is from Steve Barger with KeyBanc Capital Markets.

Steve Barger – KeyBanc Capital Markets

Two quick ones. First on the seasonality versus historical revenue trends. For the several years going in the downturn you averaged about 20% sequential revenue increase going into 2Q. You’re going to need a lot more than that this year, unless your revenue story for the $5 billion is really back half loaded. So can you think about the sequential revenue increase to expect for 2Q for the quarter?

Ronald DeFeo

I’ll give you a little indication. What I think what I’ll say is, while the $5 billion number, you got to remember again is some of the big currency lists, the $250 million. If that doesn’t happen you got to flatten that down, okay, and it hasn’t happened at this point and time, okay, but put that aside and we will respect a pretty meaningful Q2 revenue list. That’ll be a very meaningful Q2 revenue list sequentially over where we are right now. We are not providing revenue guidance by quarter, and we see that happening.

Steve Barger – KeyBanc Capital Markets

So, you expect that -- I know that 3Q typically has shutdowns and vacation, but do you expect an atypical revenue ramp through the year with each quarter being more or would you expect 3Q will be lower?

Ronald DeFeo

Yes. This is a guess, okay. We have forecasts, but I think at this stage it’s a bit of a guess. I would expect our Q2 to be slightly higher than our Q3, and our Q4 to be somewhere between Q2 and Q3.

Steve Barger – KeyBanc Capital Markets

That’s great, and one since it’s late in the call, just a conceptual question. What seems to be ever changing news out of Greece, is factoring into your thinking about the prospects for your large. Is that going to become a bigger issue, and are you concerned at all about that?

Ronald DeFeo

Well, I think we are all riding in the same boat so to speak on that issue. I think it will get resolved in some form. The European economy we’re not expecting huge amounts of change, there will be some positives. I don’t see if having a material impact on us at this point in time.

Steve Barger – KeyBanc Capital Markets

Great, thanks.

Operator

Your next question is from [Inaudible].

Unidentified Participant

If large meaning acquisitions are difficult, and with some get restrictions, are you still confident in reaching the $6 per share level by 2013 which you previously talked about; and do you have any restrictions on mining acquisition?

Ronald DeFeo

I am not sure I picked up the last part -- we have any restrictions on mining?

Unidentified Participant

Acquisitions yes, because your sales could be silent.

Ronald DeFeo

Yes, we do have a non-compete restriction to go back into the same products that we just divested, but other mining related products, I don’t think there is any restrictions on, but let me comment on the $6 per share number.

The $6 per share number assumes that we get back to revenue levels consistent with where we were in 2007 and 2008, maybe slightly less. That won’t be the case exactly coming from the same places, because we see us having more business in 2008 from places like Brazil, Russia, India and China, than we did in 2008. So that revenue assumption may seem to be about the same amount, but the revenue will come from different places. Secondly, the $6 per share earnings that’s projected in that number assumes we paid debt down and no acquisitions.

Unidentified Participant

Thank you.

Ronald DeFeo

Okay. I think operator that’s it.

Operator

There are no further questions. Do you have any further remarks?

Ronald DeFeo

I just like to thank you everybody for their patience in staying with us for an hour and a half. We appreciate your interests in Terex and if you have any follow-up questions, please contact us. Thank you.

Operator

Thank you for participating in today’s conference call. This concludes the call and 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 Q1 2010 Earnings Call Transcript
This Transcript
All Transcripts