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Executives

Ronald De Feo – Chairman, Chief Executive Officer

Phillip Widman – Chief Financial Officer

Timothy Ford – President, Terex Aerial Work Platforms

Steve Filipov – President, Developing Markets and Strategic Accounts

Kevin Bradley – Terex Cranes

George Ellis – President, Terex Construction

Analysts

David Raso – ISI Group

Jerry Revich – Goldman Sachs

Ted Grace – Susquehanna

Andrew Obin – Bank of America Merrill Lynch

Jamie Cook – Credit Suisse

Rob Wertheimer – Vertical Research Group

Ann Duignan – JP Morgan

Seth Weber – RBC Capital Markets

Charlie Brady – BMO Capital Markets

Vlad Bystricky – Barclays

Henry Kirn – UBS

Matt Vittorioso – Barclays

Aaron Reeves – BB&T Capital Markets

Joel Tiss – Buckingham Research

Terex Corporation (TEX) Q1 2012 Earnings Call April 26, 2012 8:30 AM ET

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 the Terex Corporation First Quarter and 2012 Financial Results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key.

Thank you. I would now like to turn the call over to Mr. Ronald De Feo, Chairman and CEO. Please go ahead.

Ronald De Feo

Thank you and good morning ladies and gentlemen. Thanks for your interest in Terex today. On the call with me this morning is Phil Widman, our Senior Vice President and CFO; Tom Gelston, Vice President of Investor Relations, and participating on the call and available for your questions will be our leadership team, including our business segment presidents and geographic representation from China and developing markets.

As usual, a replay of this call will be archived on the Terex website, www.terex.com, under Audio Archives in the Investor Relations section. I’ll begin with some overall commentary and highlights and Phil will follow with a more detailed financial report, and then of course we’ll open it to your questions. I’d like to request that you ask one question and a follow-up in order to give everyone a chance to participate.

For the call, we’ve prepared a presentation guide to the commentary – that’s available on our website. I’m going to begin by referring to the forward-looking statements and the commentary on that relative to Page 2. I encourage you to read and review the materials, as well as other disclosure available in our public documents.

So now let me begin on Page 3. Overall, I think we began 2012 quite positively. Simply stated, AWP performance improved markedly, cranes returned to solid profitability, our construction business broke even, our newly acquired materials handling and port solution segment performed as expected, the materials processing business had strong performance and our highest margins, plus we generated solid free cash flow. As I look at the global business environment, it continues to support our 2012 financial plan. Most of our end markets are in recovery mode. North America is performing well, as is Australia. Our road building business in North America continues to be challenged, however, as you know, and our European performance is spotty.

Net sales for the quarter increased 45% or 16% excluding the impact of the MHPS acquisition. All segments contributed positively. Price, pricing actions and cost progress is on track, and importantly we achieved an adjusted $0.29 of earnings per share which Phil will summarize in detail in a couple of minutes.

Turning to Page 4 and a bit more about our markets and the environment, if you look at where our net sales came from in the first quarter, we had 37% from North America, reflecting the rebound of the aerial work platform and crane businesses. Western Europe represented only 28%, Asia 10%, Latin America 7%, and 18% other, really reflecting the fairly broad diversification of our revenue geographically. This is something we’ve been working on for many years and it’s good to see, frankly.

By segment, our AWP segment was actually our largest segment this quarter with 28% of our revenue, construction 20%, cranes 23%, MHPS 20%, and materials processing 9% - another solid diversification representation on our business by product type. Discussing each segment, our AWP business continues to experience the recovery in the North American rental channel that we’ve all anticipated, as well as strength in Australia. Importantly, we see independent companies returning to purchase equipment again as they represented almost 40% of our sales in the quarter.

We continue to see strength in our boom and scissor product lines. In our construction segment, the Terex rigid and articulated truck sales were quite strong globally and the outlook here remains quite positive. We have seen some slowdown in our materials handling or scrap handling product lines as steel prices have moderated somewhat, and this is pretty typical and standard for this product category across the cycle. The North American and Brazilian road building businesses continue to lag.

Turning to cranes, our rough terrain crane demand is accelerating, especially in the Americas and in the Middle East. Australia energy-related customers continue to drive growth. Our crawler crane demand has been somewhat soft in western Europe, and as is indicated, the Chinese crane JV, that truck crane JV that we had previously discussed, was restructured in the first quarter with a new partner. The partner is a large state-owned company named SINOMACH that we believe is an important partner for our future. They want this product as part of their portfolio. We also expect to have substantial export opportunities that Terex will lead. This, we believe, will be a good, balanced JV for the future where the JV partner here is committed to the business, where previously our JV partner really was not and was a private investor.

The material handling and port solution segment met our expectations. Industrial cranes were stable and port equipment performed as expected with the service and parts business continuing to be positive, particularly due to high customer capacity utilization. Importantly, the domination agreement became effective as of April 18, 2012 which will allow us to begin the integration process about three to five months ahead of when we had expected the domination agreement to be complete. We continue to target about a $35 million annualized profit improvement as this will offset the step-up amortization of this transaction.

We anticipate both growth and cost-focused integration activities which we can begin now with earnest. On the growth area, the services business and the port integration will be important contributors. On the cost front, material and overhead will be our areas of focus. We’ve determined that there are no immediate surprises or issues as far as we can tell at this stage, and we believe the integration activity can now proceed as planned.

Lastly, our materials processing business remains strong in North America, driven by replacement demand. Australia continues to be positive with western Europe markets somewhat soft.

Now I’ll turn it over to Phil who will provide some detail and information on the numbers. Phil?

Phillip Widman

Thank you, Ron, and good morning. Over the next few slides, I will cover the first quarter performance for the continuing operations of the Company. Please turn to Page 5 to discuss the first quarter results as reported.

Our results continue to reflect the influence of the recovering North American market, continuing softness in Europe, and expanding developing market opportunities. Net sales increased 16% over the prior year period, excluding the impact of Demag Cranes acquisition. Sequentially net sales declined 7%, mainly in cranes and construction, partially offset by increased AWP demand. Overall, net sales and operating profit were consistent with our expectations.

Our pricing and cost reduction initiatives are on track and we continue to be frugal in adding costs. This is evident from the improving gross margin and net margin trends sequentially and year-over-year. The reported first quarter operating results include the $12 million write-down of a note receivable related to the Fantuzzi acquisition due to the declining value of the collateral that supported this note. I’ll discuss adjustments to other periods on the next page.

Earnings per share in the first quarter was $0.18 and $0.29 when adjusted for the impact of the note receivable write-down. We had a favorable impact from a lower effective tax rate this quarter, approximately 29% as reported and approximately 21% when considering the exclusion of the note receivable write-down on which no tax benefit is realized. We also had some categorization differences of approximately 4 million in our first quarter actual results compared to our guidance, negatively impacting operating profit and positively impacting other expense. This was mainly in the MHPS results. This categorization change would be expected to continue going forward. The Chinese truck crane JV ownership changes had a similar effect with two months of operating losses and a gain reflected in other income. Overall, this had an insignificant impact on EPS.

We generated free cash flow of approximately $84 million in the quarter as we were able to limit sequential growth in working capital and the profitability flow-through. Working capital as a percentage of quarter annualized sales was 30.5%, down from 36.5% in the prior year period. Some growth in this metric in the first quarter is expected sequentially as we attempt to build inventory in anticipation of increased second quarter deliveries. We continue to target a level of 25% by the end of 2012.

We used 78.5 million of cash in operating activities in the first quarter of 2012 compared to a use of 76.6 million in 2011. The 2012 results include the cash payment of approximately 124 million for German taxes related to the gain on the mining sale. The 2011 results included the cash receipt of a U.S. tax refund of approximately $105 million. This is the main reason for the change in other net on the statement of cash flows between the two years.

Turning to Page 6, we have displayed the results adjusted for certain items in the reference periods. A full reconciliation is provided on Pages 11 through 13 for reference. The significant improvement in gross profit compared to the prior year is primarily due to the improving AWP and cranes operating performance, and the acquisition effect of MHPS. As a result of the year-over-year cost reductions in SG&A provided in the cranes and construction segments, adjusted SG&A as a percentage of sales declined by 260 basis points, excluding the MHPS acquisition.

As indicated in our last call, the MHPS results include the effects of purchase accounting and proportionate allocation of corporate management charges. In this traditionally slower quarter, MHPS contributed approximately 16% to the consolidated EBITDA.

First quarter 2012 adjusted earnings per share was $0.29, excluding the previously mentioned note receivable write-down. The adjusted loss per share of $0.17 in the prior year quarter excludes the benefit of the gain on sale of the Bucyrus International shares and certain other items. The year-over-year change reflects a significant improvement in the AWP segment due to a recovery in North American market and pricing actions, the restructuring actions previously taken in the crane segment, the stabilization of performance in construction, and continued strength in materials processing as well as the inclusion of MHPS.

On Page 7, we have displayed the order backlog trend with detail by segment. You will note the mix by segment shifting as the cranes European demand has softened and AWP demand has accelerated over the prior periods. All segments improved their positions sequentially. Remember, we only include orders that are deliverable in the next 12 months in our definition of backlog.

On Page 8, we display our current debt profile which includes our recently issued 6.5% notes due 2020 and moves the Demag Cranes AG debt to the current portion of long-term debt given the effectiveness of domination announced last week. Our notes were issued in anticipation of replacing that debt and for other corporate purposes. By June of 2013, 1.8 billion of our debt is prepayable, providing significant deleveraging opportunities.

Let me turn it back to Ron.

Ronald De Feo

Thank you, Phil. So before I open it up to questions, I’d just like to summarize and really turn to the last page of our presentation, Page 9. We believe our outlook for 2012 remains on track. We believe our business trends are improving and our enterprise continues to get stronger. We recently exhibited at a large trade show in Europe and introduced several new products across the range of our business with much success. This trade show is the largest of this year. It’s not a usual selling show; however, we booked as substantial amount of business across a number of our product lines with many international customers who reinforced the positive outlook that we see in our business. Our backlog continues to strength but, as I’ve said many times, backlog is not a complete indicator of future success. A backlog that is too big is a problem, and a backlog that is too small is problem; but generally we feel the backlog we have at this point in time is a solid representation of how our business is going to move forward.

Our emphasis in 2012, however, does remain on margin improvement via price increase and cost initiatives. The emphasis is also on cash flow generation and on the integration of Demag Cranes AG into our new material handling and port solution segment. And speaking of that new segment, as Phil mentioned, it was on track with EBITDA, representing about 16% of the overall company’s performance in the quarter. We believe this diversification of our business into new markets and products, such as are represented with the material handling and port solution segment, will continue this emphasis that we’ve had in the company to broaden our business base across a range of end markets and across a range of geographies. Furthermore, we expect to continue to see improvements in our core developed markets, as we are witnessing in this recent quarter with the North American strength driven by improved replacement rates. So bottom line, we believe the future looks positive for the company, both short term for this calendar year and longer term over the next several years. We obviously reconfirm our guidance for the full year.

So now I’d like to open it up for questions, so Operator?

Question and Answer Session

Operator

As a reminder, if you would like to ask a question, please press star then the number one on your telephone keypad. We ask that you please limit your questions to one and one follow-up, then re-enter the queue.

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

David Raso – ISI Group

Hi, good morning. My question is on AWP. The first quarter sales were up 36. If you look at the rest of the year, using the full-year midpoint, it implies revenue growth up a little bit less than 7%, and the margins the rest of the year, 11.1 versus the 8.3 we just had. So essentially higher margin the rest of the year, but slower top line. So can you speak to maybe—I don’t know if Tim is on the line, but Tim, the backlog – the backlog’s up big year-over-year, right, 51%. Is the mix in that backlog that high a margin relative to what we just put up?

Ronald De Feo

Tim, you want to comment on that?

Timothy Ford

Sure. Thanks for the question, David. When we look at the year and put the revenue forecast out, we were very much in line with the guidance that Ron has communicated. our focus is on margins, not on revenue growth, and we’ve seen some pretty healthy orders in the first quarter which has helped our backlog. When you look at the price that we are implementing in the marketplace and the quality of the backlog, we’re pretty confident in the margin improvement that we have going forward. I think on the aerial side, there is no question we are going to see continued improvement on the margin side.

We do have some challenges on our utilities business and we’re working through those. It’s a relatively small portion of the overall segment, but it does have an effect; and while that business is nominally profitable overall, we’ve got some improvement opportunities there as well. So I think when you look at the mix, I think we feel very confident in the overall margin improvement opportunities.

David Raso – ISI Group

And the progression of the revenue growth – again, 36% the first quarter, rest of the year midpoint a little bit below 7 – the backlog, how much of that—I guess essentially the question is how much of that is going to ship in the second quarter? Trying to look out beyond the second quarter, the orders for the quarter were only up 3.8% year-over-year, so I’m just trying to get a feel for how much is the second quarter going to eat up the backlog, and what are you seeing so far this quarter to give you a feel the growth is there for the second half, given the orders year-over-year were up 4 – not bad, but obviously not huge.

Timothy Ford

Yeah, I think the second quarter is going to be a strong quarter – it always is. I think the order intake that we’ve had in the first half, or in the first quarter through the first half will probably be pretty representative of our historical pattern. We get a lot of the national account orders in the first quarter and first half, and the second half is the independent part of the business, and I think that remains to be seen. You know, we think the independent business is getting better, but it’s still not as healthy as the national account business. So I think as we look at the balance between the two, I think we’re pretty comfortable with the first half and I think the second half will play out as we go forward. Really, that’s going to be largely dependent on the independents. We’ve seen some strength there, but we want to make sure that we’re balanced in our view of the full year.

Ronald De Feo

I think also, David, you’re going to see some disciplined deliveries on our part and some disciplined ordering and planning on our customers’ part. The fleets are pretty well understood as to the age, as to the characteristics, as to the utilizations, and I think the buying patterns I anticipate to be much more disciplined across the range of our customers. We don’t expect to have any significant events that would dislodge those buying patterns to bull business in or push business out in any particular period.

David Raso – ISI Group

Okay. Ron, the reason I ask—I mean, the backlog is up 51, right, so say the second quarter comp is up 20, that implies the rest of the year is flat year-over-year. And I know it’s a good mix given the independents; I’m just trying to get a read for is Tim seeing the order book so far, say through April, to suggest hopefully the second half and the full-year guidance in aerials has a little more lift in the back half than, say (inaudible).

Ronald De Feo

Yeah, I understand, David, and I think the comparisons year-over-year in the first part of this year will be a little bit different than in the second part of this year because the business really did start to gain some strength in the latter half of last year.

David Raso – ISI Group

I appreciate it. Thanks for the detail.

Operator

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

Jerry Revich – Goldman Sachs

Hi, good morning. In cranes, excellent margin performance this quarter. I’m wondering if the port cranes business contributed to EBIT, and can you touch on whether you’re seeing pricing discipline holding up in the port crane market? One of your competitors just reported very soft pricing and margins, and I’m wondering if you’re seeing that in the marketplace or is that a company-specific issue.

Ronald De Feo

Yeah. Jerry, our port crane business is really split now. It’s a bit bifurcated between both the material handling and port solutions segment – the newly acquired Demag Cranes – and the business that Kevin Bradley operates in the Terex Cranes business. We experienced a very small loss in our historical Fantuzzi business. That compares with a very small profit that we had in the fourth quarter. It pretty much came in as expected. Most of that loss that we had in the first quarter was related to carryover expenses in our operations that have now left the company. As anticipated, that was the restructuring activities that took place in the second quarter of 2011 that carried through. So we expect that business to be in a pretty good way.

That doesn’t really comment on the pricing comment that you mentioned. I think pricing in the port equipment business is always about the bid, the location, the kind of equipment, and it varies quite dramatically. So if you’re bidding on a big job, in a big port, you’re going to have to sharpen your pencil. On the other hand, the follow-up business – the parts, the service – all of that pays dividends over the years, so I think what we’re seeing in the port equipment business is a number of large projects being quoted, being bid, some good projects being delivered. I’m not overly concerned about the pricing environment in port at this point in time. I think it’s operating pretty much as expected. Our business is probably going to continue to improve its profitability. I think the newly acquired business is a bit of an elephant hunting kind of business. Those are big deals. I expect that business to continue to make a little bit of progress. It is a profitable but a thin margin business at the original equipment side of the house, but a nicely profitable business on the services side.

Jerry Revich – Goldman Sachs

Okay, thanks for the color. I’m wondering if you can comment on your Brazilian businesses. It seems like road building has been soft for a while. I’m wondering if there’s any line of sight on a pickup in demand, and can you just update us on order trends that you’re seeing in the region on your AWP and crane businesses? Thanks.

Ronald De Feo

Sure. I’m going to let Steve Filipov handle the Brazilian commentary. Steve, go ahead.

Steve Filipov

Yeah, sure. Hi Jerry. Business in Latin America is generally up for us. Brazil is about half of the business. Construction and road building was down in the first quarter versus last year, but our cranes, our materials processing businesses made up for that loss, and I would tell you that AWP is probably flat to a little bit up, and we made an acquisition late last year which is in the utilities arena, and that business was a little bit up. So that’s kind of generally the atmosphere in Brazil.

Jerry Revich – Goldman Sachs

And Steve, the bookings activity is consistent with the revenue comments as well? What were book-to-bill like in the quarter?

Steve Filipov

Yeah, for sure. The business – it’s still positive, as I said, for us. Road building is the one that’s lagging the rest of the market, but everything else seems to be doing well.

Jerry Revich – Goldman Sachs

Thank you.

Operator

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

Ted Grace – Susquehanna

Hey guys, good morning. I was hoping to touch on Europe, and specifically just ask if you could speak to what was evident in the orders and the tone of clients through the first quarter, and maybe to the degree you can talk to April for the businesses that are most levered there, so thinking kind of construction equipment, cranes, and the material processing business in particular.

Ronald De Feo

Okay. Well, the good news for us, Ted, is we have a fairly diversified business portfolio, so Europe where maybe a year or two ago represented over 40% of our total business, in this recent quarter it was 28%, and we still have a business that’s growing, meaning that North America is picking up some of the slack left behind from Europe.

Nevertheless, the good news for Terex is that our strongest market in Europe is also the strongest economy in Europe, and that’s Germany. Overall, we did quite well in Germany and I think while maybe that market for equipment is a little bit softer than it was historically, it’s still pretty good overall.

I think in general the Benelux countries, Germany, and the Scandinavian countries are a lot stronger than obviously Italy, Greece, Portugal. But for example, we did have quite a bit of business in Italy and the Netherlands, so I think it’s spotty if I would forecast it. A lot of our European customers also are global customers, particularly in the cranes area, so we sell a crane to a big Dutch customer, it shows up as business in the Netherlands, but in reality that’s where the crane first touches ground but then it goes all over the world after that. So it’s difficult for us to really gauge.

My view of Europe is you have to pay close attention to what’s going on in the financial crisis. It is causing some uncertainty, but every day you read the newspapers it’s either a good story or a bad story, and so our customers are learning to live with that. They’re learning to live with that uncertainty and plan their business accordingly, and it seems to be less and less of an issue every day.

Ted Grace – Susquehanna

That’s helpful. The second thing I was hoping to ask is to come back to David’s question on the aerials. The way we think about that business is probably three-quarters of what’s categorized as AWP as traditional aerial products, and the other part is light towers and utility products. Could you speak to your specific expectations for the core aerial products beyond the higher level—you know, the consolidated expectations?

Ronald De Feo

Tim, do you have a sense of what Ted’s getting at?

Timothy Ford

Could you further explain that, Ted, a little bit?

Ted Grace – Susquehanna

Yeah, absolutely. So when we think about the segment, we think that about a quarter of it is utility products and light towers, and so when David was getting at the growth that you’re pointing to for the year and implications for the back half, that’s for the whole business. What I’m curious about is if we just zero in on booms, telehandlers and scissors, what the growth expectations are for the products themselves.

Ronald De Feo

Okay, okay.

Ted Grace – Susquehanna

Sorry if that wasn’t clear.

Timothy Ford

Do you want to take that one, Ron, or do you want me to handle that?

Ronald De Feo

Go ahead, Tim. I think I’m pretty clear on what Ted means now.

Timothy Ford

Yeah, I think the boom, telehandler and scissor business, obviously, is driven by the rental channel – we all know that. And our boom and scissor business is much bigger than our telehandler category. I think when we look at the mix of the business, we feel pretty good about booms and scissors, and telehandlers, we’re a relatively small player compared to some of our competitors. I think we’ll see some growth there, but it’s still a smaller category for us.

When I look at the utility business and our light tower business, light towers is clearly a third quarter, fourth quarter kind of business, and we’ve actually done very well from a market share standpoint but it’s still, in the grand scheme of things, relatively small compared to the overall. Utilities has been pretty strong. That tends to be a second half business for us and we’ve got a very good backlog in the utilities business; but as I mentioned earlier, it’s nominally profitable. It’s not a big contributor to the bottom line and it’s one that we’ve got to make some improvements on. Frankly, we may look at our backlog and decide that some of the business in that backlog is not business we want on a long-term go-forward basis. So we’re going to be doing some shifting around of some of that business as we look at it, and that may have an effect on how you see the backlog and our second half growth.

Ronald De Feo

Yeah, I’m going to add to that, Tim, the fact that if I were to take our AWP segment and remove the utilities business from it and then take the telehandler business and somewhat take that out so that we’re just left with mainly booms and scissors and try to compare that with the number that our competitor just recently reported, we’re pretty damn close to having revenue almost the same size.

Ted Grace – Susquehanna

That’s great. That’s really helpful. Congrats on the start of the year, guys. Best of luck.

Ronald De Feo

Thank you.

Operator

Your next question comes from the line of Andrew Obin with Bank of America Merrill Lynch.

Andrew Obin – Bank of America Merrill Lynch

Yes, good morning guys. One of the concerns that we hear from clients is that because of the warm weather in the U.S., things have slowed down in March and will continue to be slow in April. Can you comment on whether or not you saw any forward demand from warmer weather, and what did things look like in March for you, and what are they looking like in April?

Ronald De Feo

Well, the first quarter was not a straight line quarter for sure, but it never is. I’ve been doing this now—this is my 20th year at Terex, and the first and third quarters are always eventful because the first month tells you nothing of each one of those quarters, so you basically get most of your business in the second and third quarter of those quarters, and March was a big month for us. We don’t think that had anything to do with weather, to be perfectly blunt about it. We think it had a lot to do with replacement rate and age of equipment, and in North America a generally positive tone. You know, a little bit of GDP creates kind of a positive tone. A longer period of being down in our industry, particularly in some of the non-residential areas, creates that kind of tone, and this quarter going forward we don’t think will at all be negatively impacted by weather, or an early or better spring.

Andrew Obin – Bank of America Merrill Lynch

Just a follow-up question – you mentioned that some of your scrap business has been affected by lower prices. I would imagine you guys are also benefiting from lower steel prices. How is the relationship between price and cost going to play out through the year, and where are we relative to your expectations at the beginning of the year?

Ronald De Feo

I think, Andrew, we’re right on our expectations is how I’d characterize it. There’s a number of offsetting factors, but in general we’re right on our expectations. Steel prices are probably going to be a little bit better than we thought, but there are some other costs that are coming in and some other components.

Now, do I hope that we can drive some further cost reductions from our supply base over the next three quarters? Absolutely. Is it in our forecast right now? Not really.

Andrew Obin – Bank of America Merrill Lynch

Is that a steel pricing forecast?

Ronald De Feo

Steel pricing is pretty much the way we expected it, if not just a little bit better. But you see, Andrew, we also have European steel that’s a bit of an uncertainty because while North American steel is certainly better, European steel prices are tending to go up a little bit.

Andrew Obin – Bank of America Merrill Lynch

Thank you very much, Ron.

Operator

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

Jamie Cook – Credit Suisse

Hi, good morning. Two questions on the crane business – if you back out the charge in the crane business in the first quarter, it looks like you’re making very good progress on the operating profit line relative to what your 2012 forecast is. So I was wondering if you could just comment there what’s going better or worse – the pricing environment on the bigger cranes, because we’re hearing sort of mixed signals there, and where you are in terms of just operationally? And then I guess my next question is the backlog in the crane business has been pretty flat over the past three quarters or so. How do you see that materializing throughout the year, because on the one hand you’re hearing from some guys China and Brazil are weaker; on the other hand, you’re seeing a lot of big energy infrastructure projects move forward. So I’m just trying to get a feel for how that plays into your backlog or order growth. Thank you.

Ronald De Feo

Okay Jamie, thank you. And by the way, it’s good to have you on our call asking questions again.

Jamie Cook – Credit Suisse

It’s good to be back.

Ronald De Feo

I’ll turn that question over to Kevin – really there’s a multi-part aspect to that focus on the operating performance and the changes underway, because a lot of the improvements have been self-initiated over the past year.

Jamie Cook – Credit Suisse

And also on the pricing side within the bigger cranes, too – the crawlers, rough haul.

Kevin Bradley – Terex Cranes

Yeah, Jamie, thanks. We agree – we feel pretty good about Q1 and how it played out, fairly consistent with plan, and we’re sticking to what we said all along, which is hyper-discipline on costs, which is really contributing to the majority of the year-on-year improvement. What we are getting in our gross profit improvement, about half of that is coming from price in Q1 and, candidly, when I look at the backlog, we would expect that to improve even more over the course of the year. So some of it is coming from price, but the majority of it is coming from, as telegraphed, our hyper-focus on cost discipline.

Now on the backlog, it has been stable for three quarters; and just as a reminder, the big change in backlog really occurred in the April-May timeframe last year. Some of that was self-inflicted – you remember we pulled out a fairly large chunk of backlog because of the AC1000 product that was not quite ready for delivery to market. We also had kind of a spike in credit-related backlog where we looked at our customers and said, listen, there was a couple of large ones that did not have the ability to pay, and so we ceased manufacturing and took the backlog out. It was not as much cancellation-related or demand-related as it was those two items, and since then it’s been very stable.

What we’re doing is allowing what we see as a fairly positive improvement in end user demand to accelerate our ability to get price, and that’s reflected in our backlog and we feel good that we’re on track for the rest of the year.

Ronald De Feo

And I think, Jamie, in some of the big crawler cranes, rather than chase an order and chase the immediate business, we’ve been disciplined about being patient and negotiating with a host of customers for our most sophisticated cranes. I mean, we’re only going to build several $25 million cranes a year, so it would be silly for us to just—you know, even if we may have a little bit more inventory, to just run out and discount that crane aggressively to move it. So I think we’re showing better discipline.

The other thing I want to emphasize is we made major cost reduction initiatives in Q2 of last year and we’ve held the line, and that’s shown up in the SG&A and it’s showing up in some of our other areas. So it’s positive, but I will tell you the real strength is going to be when the market starts to improve, probably not the 2013 but we hold our cost and then really reap the rewards.

Kevin Bradley

The only other point I would make, Jamie, is with the majority of the change in backlog being in one area, right, in our large crane plant in Germany, we’ve got new leadership in that plant who’s been really focused on production and an ability to kind of accelerate our lead times on build. So we’re actually very comfortable, although with a smaller level of backlog in that business, that we can turn it more quickly because of production improvements that we’ve made.

Jamie Cook – Credit Suisse

Great, congratulations. Thank you.

Operator

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

Rob Wertheimer – Vertical Research Group

Hey, good morning everyone. I just had, Ron, two big-picture questions for you. Do you have any opinion on whether a highway bill is going to get done either this year or even after the elections? I know you guys follow that more closely than some. And then also, if you have a sense of in China if there’s any resurgence of construction, either halted projects or a feeling that that could come this year, as opposed to slower—you know, if there’s already a resurgence underway. Thanks.

Ronald De Feo

Yeah, sure Rob. The topic of a highway build is something that we and our industry follows pretty closely. I am the Chairman of the public policy board of our trade association, AEM, and I guess our view at this stage is that any highway bill that passes is a good highway bill, compared to not passing anything. But the probability of a substantive long-term highway bill that’s funded in a correct manner is virtually nil until at least after the elections. The only thing that might be possible would be the passage of a two-year bill with funding levels at or about what they have been historically, but the Senate bill is actually a good bill because it changes some of the history about pork-oriented spending and puts much more discipline in the process. So at the end of the day, if the conference activity that’s underway today could result in process change for a two-year bill at historical funding, that will be a good first step; and then after the elections, try to get to a longer term bill. So some progress is happening, but it’s highly politicized, as you know.

Regarding China, I think all of us are watching China quite closely. I think most of us did expect somewhat of a pullback in the Chinese economy, and it was hyper-inflated relative to the machinery world and relative to the amount of projects that are underway. I think this is actually a good news story because the Chinese government is committed to producing safe roads, safe high-speed rail; and I think if they take a little bit more time and reflect upon what it’s going to take to accomplish that, it will result in a better outcome where the kinds of quality equipment that we make will be more appreciated in the long run. So I expect China to continue to have some struggles and some slowdown over the next year, but long-term I think the government is committed to producing a safe product. And that’s got to be our emphasis, and it also is one of the emphasis points we want to make on aerial work platforms because we believe helping to deliver a safe outcome will result in the development of an AWP market in China, that there really is not one today.

Rob Wertheimer – Vertical Research Group

That’s great. Thank you. And if I could ask my follow-up on cranes and China, this is a debate that’s been on for five years as to when the Chinese competitors will start to make an impact. Can you comment in either geography or globally how often you see them out there when you’re involved in bidding processes for cranes, or sales processes for cranes, and whether they’ve started to be material in either sales or participant in these processes and could be bending the pricing curve, or whether that’s still some years away?

Kevin Bradley

Yeah, I’m happy to comment on that. Where we’ve seen them have moderate success is clearly on exporting of truck cranes into some developing markets, and I would say on the lower end tower cranes as well in some developing markets. We have not seen them really be a meaningful impact on the large cranes or in developed markets where technology, quality and safety are the biggest factors, along with up time and residual values – the model still largely unproven. Not that we’re not focused on it and watching what’s happening, but it has not been a factor to date.

Ronald De Feo

Yeah, I would also say, Rob, that clearly the public relations is a lot broader and bigger than the reality, and what I just recently said at the trade show at Intermat in Paris is building a crane business is hard work. If the Chinese want to work hard, they will improve and penetrate some of our markets. But if they think they can come in and just price their way into the business, they’re going to be rudely surprised, as they have been, because of the safety concerns, because of residual value concerns. So I welcome the hard work, but we will compete like heck to protect our business.

Rob Wertheimer – Vertical Research Partners

Thanks gentlemen.

Operator

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

Ann Duignan – JP Morgan

Hi, good morning guys. Ron, I’m curious about your perspective on Brazil and what’s going on down there. Given the upcoming World Cup and the Olympics, a slowdown in equipment demand is kind of counterintuitive. I mean, we know it’s financing related, but can you talk about the pressure to build the infrastructure given all the events that are coming up, versus what we’re seeing there in equipment sales right now. Is there a risk that we get to 2013 and there’s a huge increase in demand because now the deadlines are drawing closer?

Ronald De Feo

Yeah. You know, Brazil is a bit of an enigma to some of us, and on a positive side we definitely see products like our cranes. There’s a trade show coming up in a few weeks, and we’ve got some good announcements on that trade show. We’re going to be an aggressive crane player in that market, so that’s a positive. But cranes are used to build things like stadiums and all the things that are underway.

The road building aspect is part of that enigma because one would think that you’ve got to build the roads to take people to those stadiums and the airports, as we all know, in Brazil are woefully outdated, and as you may have heard, a number of those airports are now in the process of being privatized. So we’re going to see a lot of action, I think, in 2013 in these areas.

However, much like many of the developing world issues, corruption is an overriding concern, and corruption can contaminate any amount of progress, and so all of us are concerned about that, watching it carefully, and trying to be as disciplined as we possibly can because that’s what caused, in our view, the issue in Brazil in the short term relative to a few of these product categories.

Ann Duignan – JP Morgan

Interesting. I think your comments on the airports in Brazil are generous. My follow-up question, then, is on the aerial work platforms – a lot of talk from everybody about replacement demand, replacement demand, replacement demand. With activity beginning to pick up, and you know, Easton Seals’ Sandy Cutler was very upbeat on the broadening acceleration in activity in construction. Ron, what metrics are you looking at as a trigger for the beginning of an expansion in demand for aerial work platforms – you know, is it 750,000 housing starts, or what are you looking at that would be your key leading indicator for the beginning of an expansion?

Ronald De Feo

Yeah, I think, Ann—let me try this, and Tim you can add if you like. Over the years, we’ve seen cycles strengthen, weaken, be strong, be short – any number of things that can happen. But a couple of fundamentals you always come to, and one is the age of the fleet, and in particular that relates to both construction equipment as well as aerial work platforms, and then in this particular case the age of the fleet has gotten—you know, the fleets have gotten quite old. So that’s a given that we’re in the replacement category.

So the real question now is, since all those fleets are utilized and in general, whether that’s construction equipment or aerial work platforms, they’re all fairly highly utilized, what happens if there is demonstrative growth, and what is going to drive that demonstrative growth in the United States and in other markets? Housing is the big thing for me – watch housing, watch what happens. I don’t expect housing to spike up, but I expect housing to begin to recover in ’13, ’14, ’15. Let’s be honest – it started to turn down in 2006, okay, particularly in our equipment categories of construction area. So if you think that that is going to change, which I do, and that the U.S. economy is going to address its deficit issues, which we can all argue about, but those are fundamental things and if those things happen, it’s going to show up in increased construction activity. We’ve been down so long that even a moderate change in this area is going to drive very meaningful demand change.

Tim, do you have anything to add to that?

Timothy Ford

The only thing I would add to what you said, Ron, is that we’ve spent the last year or so working a pretty detailed internal forecast model to try and get our hands around exactly this issue – what are those key drivers? And I think we’ve settled on a model that we’ve built that gives us a pretty good leading indicators. It’s got eight components in it. It’s got some of the things you would expect, like ABI and housing starts and those sorts of things. But there are a couple of other elements in this model that we’ve built which we think is pretty good, because we’ve traced it back over a 10-year period and it tracks almost incredibly right on top of industry shipments, and it gives us a pretty good view into where we’re heading over the next nine to 12 months.

So in addition to the anecdotal or kind of the judgmental items, we’re also trying to work a pretty detailed analytical side of it, too, and I think we feel pretty confident in our forward view looking at the model we’ve built.

Ann Duignan – JP Morgan

Would you mind sharing those eight metrics?

Timothy Ford

Not really.

Ann Duignan – JP Morgan

So ABI and starts are two of them. I assume industrial production is one also.

Ronald De Feo

Ann, Ann!

Ann Duignan – JP Morgan

Well, at least I can get three of them! I might extrapolate the rest. Okay, I’ll leave it there and get back in line. Thanks, guys.

Operator

We ask that you please limit your questions to one question due to time restraints. Your next question comes from the line of Robert McCarthy with Robert W. Baird.

Robert McCarthy – Robert W. Baird

Hi, morning everybody. I guess my first question is directed at Kevin – incrementally on the crane business, particularly in Europe, do we believe that we have resolved our excess inventory position there, or do you still have some excess inventory that needs to be moved? And can you talk about what you’re seeing in terms of order patterns for all terrains and crawlers in Europe, and what I mean by that is you’re clearing going to be working off some backlog this year – important, you’re going to need order rates to stabilize at some point. I wonder if you’re starting to see that happen again.

Kevin Bradley

Okay, Robert. First off on inventory, I feel like we’ve made significant progress, and the numbers would reflect that in our German facility, which is the place where we had most of our inventory. However, I would say there’s still plenty of opportunity between now and year-end, and we’re focused on it. So I would expect the progress to continue to improve, and it’s been across the board. Our progress to date has been in finished goods. Also, as I mentioned earlier, that squeezing of production lead times has allowed us to free up work in process, and our story on raw has improved as well.

We also, and I mentioned it on the earlier question, we do have still a significant inventory of the AC1000—

Ronald De Feo

Components.

Kevin Bradley

--components, and I’m happy to say that we will be delivering that product to market this year, which will also free up a significant percentage of our inventory in Germany.

Robert McCarthy – Robert W. Baird

Yeah. And my question about order rate stability and whether we’re starting to see it—

Kevin Bradley

Yeah, order rate stability in western Europe on ACs and CCs, I would say we have it. I would also say it’s stabilizing at a lower level than we’ve historically had. So it’s not the strongest part of our story. I haven’t seen it weakening. We have had a couple of customers where we’ve seen the demand but their banking facilities have not cooperated, so I would say stable and the watch area is access to capital for some of our more significant customers.

Ronald De Feo

We’re talking purely in western Europe.

Kevin Bradley

Western Europe, ACs and CCs.

Robert McCarthy – Robert W. Baird

Yeah, and that’s what I was asking about. And then the other question – Ron, in terms of the offsetting synergies at Demag in terms of purchase accounting, of course purchase accounting starts on Day One. Presumably you’ll need some time to effect some of the changes there. Can you talk about timing there? When do we—I guess you’d call it a crossover point. When do you we go from net drag on profitability to net contributions to profitability from the synergies that you expect to put in place?

Ronald De Feo

Well just so we’re clear, I think the MHPS segment has been a positive contributor since we’ve owned it. Definitely it’s been accretive to our earnings since the time of ownership, and as Phil mentioned, 16% of the EBITDA is a meaningful portion of our EBITDA in a weak quarter. Having said that, your comment is really about our ability to offset the step-up amortization. We’ll do the hard work to do that between now and the end of the year and probably realize the benefits in 2013. We may get some benefits this year, but it’s hard to forecast at this stage. But I think for planning purposes, realizing the benefits next year is the way we ought to think about it.

Robert McCarthy – Robert W. Baird

Thank you, Ron.

Operator

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

Seth Weber – RBC Capital Markets

Hey, good morning guys. Can you maybe talk a little bit about lead times on the AWP business? If the independent guys do start accelerating their purchasing, can they still get equipment for the construction season? And maybe talk about how you’re thinking about your production capabilities or capacity at this point.

Ronald De Feo

Yeah, we’ve done a lot of work in this area. Tim?

Timothy Ford

Yes, our lead times range, as you might expect. If you want some of our products, you can get them in three weeks. If you want some of our products, you can get them in 30 weeks. So there’s a big variation on lead times.

Really, the big decision item for us in trying to determine when to add capacity to—we’d pull some of these longer lead items in, is really a decision around whether we add a second shift on some of these lines, and that’s not a trivial decision. I mean, it’s a huge investment to make and you’ve got to be really confident that your volumes are going to stay there for a long period of time, because you don’t want to add a second shift and then have to pull it back. We do have second shifts in selective areas, mostly in fabrication – paint and some of the kind of supporting activities outside the main production line. But we haven’t yet made the decision to add a second shift on the main production line in most of our product lines, and we’re evaluating that right now. Frankly, it ties right back to the questions that we had earlier from David and others around what’s the second half look like. I think once we’re confident in volumes through the second half and into the first half of next year, we’ll make that decision and that we’ll be able to pull some lead times back forward.

Seth Weber – RBC Capital Markets

Okay, so a standard 60-foot boom is a couple months at this point, or it’s somewhere in between the two data points you gave us, or is it more further out?

Timothy Ford

I think if you look at some of our bigger booms, they are shorter lead times – under a couple months. The mid-sized booms are three to four months, and then some of the smaller products, surprisingly, is actually a little bit further out.

Seth Weber – RBC Capital Markets

Okay, great. And if I could ask a follow-up – on the construction equipment business, revenues there were a little bit lower than what we were looking for. You’ve been pretty clear about your intent to be disciplined there about not chasing business, so was that just a function of you’re not chasing business, or was the market a little bit softer than what you thought?

Ronald De Feo

I think—George, you want to take a shot at answering that?

George Ellis

Sure. I think it’s a little bit of both. We see a mix shift a bit from last year in what—the demand that we’re going after, and also the pricing discipline as we described in our last calls. We’re really sticking to it, and it’s showing up in the results.

Seth Weber – RBC Capital Markets

So do you think that this is sort of the run rate we should think about for a sales number quarterly?

George Ellis

Yeah, I would say a little bit higher but not much more. We really set our plan this year not for growth but to really drive improvement in margins and working capital.

Seth Weber – RBC Capital Markets

Got it. Okay, thank you very much.

Operator

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

Charlie Brady – BMO Capital Markets

Hey, thanks. Good morning. I’m going to combine two into one here. So on AWP, can you talk about on the independents and the strength you’ve seen there, do you have any concern that that’s pulling a little bit forward and you’re seeing them come in maybe a bit sooner, and maybe that kind of goes into the question about the growth rate expectations in the second half of this year maybe looking a little conservative. And secondarily tied into the rental market, can you talk about what you’re seeing in compact construction equipment? Thanks.

Ronald De Feo

Okay. Tim, why don’t you handle the AWP one, and then George on the compact side.

Timothy Ford

Okay. The independent business typically is, as I said earlier, it’s a second-half business. When I look at the first quarter in North America, we were about 63 to 65% national account business, kind of the big five, six, seven customers; and that’s very consistent with how we’ve—the pattern we’ve seen over the past number of years. When we look at the second half, that’s where the independent business tends to come in, and when I look at the backlog that we have today, kind of forecasting out over the second half, the shift in the backlog is—or I should say the way the backlog is constructed, you can see the shift happening to the independents. And I think we feel like the independents are beginning to step into this market, which they did a little bit at the end of last year. They tend not to be a first quarter—fourth quarter, first quarter buy cycle. But we see them stepping into it as we look into the meat of the season this year.

George Ellis

And on the compact equipment in the construction side, it’s kind of a different story depending on the product and the regions. What we’re seeing on our compact German equipment is strong demand continuing at the pricing that we’re holding to in Germany and in the middle part of Europe. But we’re also seeing as the seasons are coming back in Russia very strong demand along with even the U.K. starting to come around for us on our dumpers and rollers and backhoes, so quite a mix there.

In the States and Australia, very similar in that we’ve held the line and actually have seen our sales in Q1 go down roughly 25% from Q1 of 2011, but it’s basically in our attempt to try to hold the line on the pricing. We are seeing that starting to pick up as March kind of ended, so in that number that you see, you did not see the warmer weather bump that was discussed earlier on the call, particularly in the Americas in total.

Charlie Brady – BMO Capital Markets

Okay, thanks George.

Operator

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

Vlad Bystricky – Barclays

Hey, good morning guys. This is Vlad Bystricky on for Andy. How are you?

Ronald De Feo

Okay, thank you.

Vlad Bystricky – Barclays

I guess just broadly to start off, it seems like overall everything was a generally in line quarter, I’d say. Was there anything that surprised you within the quarter, or any—you know, you kept your overall outlook the same. Would you say any components of the overall outlook have shifted about since the last update?

Ronald De Feo

No, nothing surprised us. There was a little bit of nervousness, to be perfectly blunt, about the quarter because a lot of it took place in March. But after doing this for 20 years, I’ve learned to be nervous in March most of the years. So I think that was probably the most challenging aspect of the quarter.

Vlad Bystricky – Barclays

That’s great, thanks. And then could you elaborate a little more on your comments about some customers having financing challenges on cranes in western Europe? How much of a headwind is that, and whether you’re seeing any signs of that potentially expanding?

Kevin Bradley

It’s Kevin. I would say that it’s a headwind from a historical perspective, but it’s really as anticipated. We’ve been calling that out for a while, so our plans for the year anticipated a tightening of balance sheet availability in Europe, and the banks have been showing exactly what we thought would be the case. It’s as anticipated, so I don’t think it affects our outlook for the year at all.

Ronald De Feo

And some of our customers actually have expected us to be their equipment bank, and we’re starting to change that. Many of the European customers will tell you that just hold the equipment, I’ll take it when I need it; and we’re having a slightly different attitude on that because inventory is expensive to keep.

Vlad Bystricky –Barclays

Okay, great. Thanks.

Operator

Your next question comes from the line of Henry Kirn with UBS.

Henry Kirn – UBS

Hey, good morning guys. Ron, now that you’re a few quarters into Demag, domination agreement is in effect, how does the opportunity look different from what you originally anticipated?

Ronald De Feo

Yeah, I thank you for that question. I’m still quite excited about the material handling port solution segment, the new segment we have here, for the same fundamental reasons that caused us to be interested in the business. First, it represents a great diversification for us away from the classic machinery kind of business. Let’s remember that about $450 million of revenue from this company comes from a services business that has a 16 to 20% EBITDA margin, depending upon the quarter and depending upon kind of the geography, and that services business just is not any—it just is very different than any other business Terex has. So it really is an opportunity for us to learn, grow, and improve both their services business and improve our services business. So point one is fundamental change in some of the potential future income stream.

Secondly, the industrial cranes business does also represent a good diversification, getting us into the factory, getting us into the overhead side of that business, and I think that is particularly given the fact that this is a great name – Demag Cranes – but also business that’s languished somewhat in that it really hasn’t got down and dirty and competed with some of the other players in the industry, and we’re going to get out there and we’re going to compete. We’re going to give it a little bit of the old let’s get up and go, and I think that gives us another future opportunity.

And third, we’re creating a first-class global port equipment business that we think will be unmatched in quality and unmatched in breadth of product line that can dramatically influence the kind of port productivity that many of our customers have been looking for. You combine the great mobile crane business and the very substantial AGV – automatic guided vehicles – that Gottwald brings to the table with the Terex port equipment businesses that we’ve been building, combine that into a new Terex port equipment franchise, and many of the customers out there are going to be surprised and give us a chance. But yet, there’s some hard work to do because we still there’s cost—the cost opportunities are there, the manufacturing consolidation opportunities, the material consolidation savings may be there. So really, it’s quite positive.

The bottom line, though, is it’s going to be some hard work, but that’s to be expected. So the domination process happened faster than some predicted, but frankly, I’m an impatient guy so I would have liked to have seen it happen earlier.

Henry Kirn – UBS

That’s helpful. Thanks a lot, Ron.

Operator

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

Matt Vittorioso – Barclays

Yeah, good morning guys. Maybe Phil, if you could just give us an update on a few of the cash flow items. I guess better than expected performance on the working capital side in the first quarter, at least from our seat, so great job there. What do you expect for the second quarter – will that be a use or a source of cash? And then maybe an update on expected cash taxes for the rest of the year and reiterate what your guidance is for CAPEX.

Phillip Widman

Okay, Matt. Again, we’re reconfirming our guidance for the full year, so I’m not going to give a tremendous amount more than what we’ve already done. However, we had CAPEX of about 140 million, for example. Cash taxes, excluding the large German payment, and we have a little bit more to go in the second quarter on the German tax payment of about 125 to 130—

Ronald De Feo

We don’t have that to go.

Phillip Widman

No – 125 to 130 is roughly the cash tax for the full year, excluding the German tax payment, just to give you an idea. The second quarter – again, it’s one of our larger quarters so I think similar to the first quarter, we would tend to drive most of our cash flow from the P&L, and as we go through the year we still talk about the 25% working capital, the sales by the end of the year, which will also drive a considerable amount of working capital reduction. So I’m not going to go through all the pieces again – I think we talked about that in the last call. But in general, we’re on track. I’m always encouraging more inventory reduction and the timing of that earlier in the year, but it’s going to be largely from the profitability of the company that you see the cash flow come.

Matt Vittorioso – Barclays

Okay, and then a quick follow-up – you’re expecting to generate cash. You’ve got a bunch of cash on your balance sheet. You talk in the slides about how much prepayable debt you’ll have by the midpoint of next year. Do you expect to actually pay down any bank debt in 2012 or any other debt here in 2012, or are we sort of building cash towards that midpoint of ’13 when the 10 7/8ths become callable, and then you’ll address the cap structure then?

Phillip Widman

Well, when you look at the cash that we have and the debt that we raised in the first quarter, we need to get through the Demag Cranes acquisition impacts this year. So we will replace, is our expectation, the Demag debt, which is now shown as current on our balance sheet, with cash and then depending on the tender of shares for the remainder will also be a cash impact. I would expect in the back half of the year we’ll get more involved in what our progress has been on cash flow operationally and where we sit relative to those items, and trying to look at what we would do over that—again, I call it the 12 to 18 month period starting with the back half of this year. I don’t want to make an evaluation at this stage other than we have tremendous opportunity to delever the company.

Matt Vittorioso – Barclays

Great. Good quarter. Thank you.

Operator

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

Aaron Reeves – BB&T Capital Markets

Good morning. This is Aaron Reeves sitting in for Schon. Hope everybody’s doing well. Got a couple quick questions. Most of mine have been answered already, but the first really goes back to the effective tax rate in the quarter. I noticed that was a little bit lower than we might have expected, and I was wondering if you could add a little bit of color to that and maybe talk about what you see going forward maybe for the rest of the year. And then my final question was procedurally what remains to be taking place before we close the Demag acquisition? So as we think about that procedurally, what are the other milestones that need to be met? Thanks a lot.

Phillip Widman

All right, Aaron. The tax rate in the quarter, there were a couple impacts related to this, and at this stage I’m not changing our full-year guidance in terms of the rate that we talked about at 38%. We do have some discrete items quarter to quarter – we always have them. There were some that were related to statute of limitations expirations that we had in terms of entering the year here, but we also had an impact, which is a positive, from the losses—the entities that are losing money that we can’t get a tax benefit for, as our profit before tax increased year-over-year, they become less of a factor in terms of the rate. So we comment in, I think, our press release in the Q somewhat to that effect, but at this stage I’m reevaluating the full year and not really changing the full-year guidance of 38% that we’ve indicated previously.

Ronald De Feo

And basically on the Demag AG, we own 82% of the shares. We have an offer out for €45.52 per share to the remaining 18% minority holders. That offer will remain outstanding, and nothing further needs to really happen. With the completion of the domination and profit and loss transfer agreement that took place on the 18th of April, that’s all we really needed to happen.

Aaron Reeves – BB&T Capital Markets

Okay, thank you.

Operator

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

Joel Tiss – Buckingham Research

Our questions have been answered. Thank you.

Ronald De Feo

Fine. Thank you very much, everyone. Thank you for your interest in Terex today and please follow up if you have any further questions with our team.

Operator

This concludes Terex Corporation’s First Quarter 2012 Financial Results conference call. You may now disconnect.

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