Terex Corporation (TEX) Q2 2010 Earnings Report, Transcript and Summary

Good morning, my name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Terex Corporation's Second Quarter 2010 Conference Call. [Operator Instructions] Mr. Ray DeFeo (sic)[Ron DeFeo], you may begin your conference.

Thank you. Good morning, ladies and gentlemen. This is Ron DeFeo, and thank you for your interest in Terex Corporation today. On the call with me this morning is Phil Widman, our Senior Vice President, Chief Financial Officer; Tom Riordan, the company's President and Chief Operating Officer; as well as Tom Gelston, Vice President of Investor Relations. Also participating in the call and available for your questions are Rick Nichols from the Crane segment; Tim Ford for Aerial Work Platforms; George Ellis for Construction business; Kieran Hegarty for the Materials Processing business; Ken Lousberg for our China operations; and Steve Filipov for Developing Markets. A replay of this 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, who will provide with a detailed financial report and Mr. Riordan, who will discuss our operations by segment. Tom and Phil will take your questions along with me at the end of our comments. I'd like to encourage you to ask one question and only a follow-up. The presentation we will be referring to is accessible on the company's website. Let me begin by referring to the forward-looking statement on Page 2, which I encourage you to review and read. So beginning with Page 3 marked overview, I'd like to start. In general, we believe we are at an inflection point with the future where the future will continue to be better than the past. When examining our operating performance, we see this inflection change across many of our key performance indicators. As noted on Slide 3, our net sales have improved although moderately, and we do expect moderate growth in the second half of 2010. We expect this growth to accelerate next year. Backlog has grown with the exception of our Crane business where weakness persists, but the Port Equipment business is beginning to turn the corner. We see this in quotation activity as well as in orders we've been able to secure. Overall, for the company, our production schedules have continued to increase in most of our product categories, allowing us to better absorb our manufacturing costs and return to a more balanced, stable and productive level. Cost reductions continued in the company with some additional restructuring planned for both our Construction and Crane businesses. Net sales growth, new factory and other investments continue in the developing markets, which have been a source of meaningful growth for us this past year. So to turn to Page 4, summarizing our future outlook. We continue to expect our 2010 operating profit to be at break-even. This is excluding restructuring and unusual items. This represents substantial improvement compared to the prior year on modest net sales gains. The resulting per-share result, excluding restructuring and unusual items, is expected to be a $1 per share loss. As expected, we see signs of continuing improvement in three of our four segments with the slowdown in Cranes, as previously mentioned, and has will be noted throughout our commentary. As we look to the future, we expect both market and organic growth through 2013. It's difficult to know the overall strength of this recovery, but we do believe it will be broadly based, led by developing markets, then North America and finally, Europe. From our product portfolio perspective, we believe our Materials Processing business has been and will be the first to improve followed by our Aerial Work Platform business and Construction product lines, with our Crane operations being the last to recover strongly. There are niche businesses within each one of these segments that may have slightly different characteristics, but these are the general trends we expect to see from these segments. As everyone knows, we have and will continue to have a negative arbitrage by carrying the amount of cash we have relative to the amount of debt. We continue to explore strategic usage of its capital, and precise outcomes are hard to predict at this moment in time. However, we remain confident that some combination of debt pay down and acquisitions will be achieved in the future periods. On a macro basis, we see our customers improving somewhat, although smaller customers and specialized customers remain financially stressed. The financial shouts that caused many of our end markets to decline as much as 80% are now behind us, and we see moderate growth from here. We are all a bit frustrated that the six year highway reauthorization bill in the United States has not happened, and it is unlikely to happen in the short term. But somehow, the industry is making do and we are keeping repaired our aging infrastructure with the hope of someday building a better future. Now I'd like to turn it over to Phil who will cover the quarter in detail and Tom remarks will follow. Phil?

Thanks, Ron, and good morning. The key figures table, Page 5, displays the quarterly year-over-year and sequential performance for the continuing operations of the company. Net sales increased 14% from the prior year quarter or 6% when excluding acquisitions. The translation impact to foreign currency exchange rate changes was minimal compared to the prior year. However, sequentially, negatively impacted net sales by $46 million. So on a sequential basis, second quarter net sales increased by 15%. However, excluding the translation effect of foreign currency, the changes is increased by 20%. Generally, the increases included all segments except the Crane segment, which continue to experience softening demand in certain product areas, mainly all-terrain cranes. We incurred a loss from operations in the second quarter of $10.4 million compared to $115.1 million in the prior year quarter. The impact of increased production levels, cost reductions and reduced restructuring activity favorably impacted the comparisons of the prior quarter as well as sequentially. Working capital of quarterly annualized sales was at 32% in the period, which is largely on track with our plans. Net debt increased to $447 million mainly due to the translation effect of our foreign denominated cash balances, we hold approximately EUR 700 million at this stage. Working capital and financing receivable build in the period and capital spending. Overall, liquidity of over $2 billion, with cash balances of $1.5 billion and availability under the revolving facility of $510 million, continues to provide significant flexibility to put cash to work to yield higher returns and accelerate growth as well as be opportunistic on acquisitions. Page 6 displays other financial metrics for comparison purposes. I will comment on the other income for the period, which includes $12 million benefit of marketing to market the derivative instruments to partially mitigate risks associated with the Bucyrus stock we hold. In the first quarter, we incurred an expense of $8 million for this item. The tax rate for the second quarter of 67% benefit is favorable compared to the prior year, partly due to the fact that discrete items have a larger percentage impact on the rate. Approximately half of the rate differential is due to the jurisdictional mix of income with the remainder of the favorability due to the reduction and the provision for uncertain tax positions, partially offset by changes in expectations of the realization of deferred taxes. We currently expect that 2010 full year effective tax rate to be approximately 33%. Page 7 bridges the change in operating loss from the prior year's quarter to the operating loss for the second quarter of 2010, excluding the impact of acquisitions and in total. The net margin improvement of $19.6 million on a net sales increase includes volume mix and pricing changes, with the most significant positive impacts in Construction and Materials Processing volume. Net restructuring and realignment costs were $14.7 million lower this quarter excluding charges taken in acquired businesses. Current period manufacturing under absorption in a capacity variance improved in all segments relative to the prior year by approximately $58 million and approximately $37 million sequentially. SG&A improved overall due to cost reductions from the prior year, partly offsetting Cranes by increased cost for new product prototypes. And you'll note the SEC settlement, which we had accrued in the prior-year second quarter for comparability purposes, is displayed separately. This would have been reported in SG&A expense. Foreign currency had a modest income benefit when compared to last year's second quarter and an insignificant amount sequentially. As noted in the release, we recorded a provision of $7.5 million for expected historical foreign duty and related obligations for certain AWP products. Separately, you can see the effect of acquisitions, which negatively impacted the results by $1.3 million when including restructuring charges. Let me refer to Page 8. Overall, working capital statistics are on track with our expectations for the second quarter, as we've started to build and produce at higher levels of demand. So you see some level of inventory increase but the velocity is improving as we would expect. Let me turn it over to Tom to provide an operational update.

Thank, Phil, and good morning, everybody. I'll cover the current views of each of our businesses and then go through a few Terex-wide updates. Let me start on Page 9. The majority of our businesses are continuing to see positive trends and orders. Inventory is flowing consistently through our distribution channels to dealers and customers or directly to the rental channel, and we are in a good position to build to the rate our customers require. Our Aerial Work Platform business has seen a rebound in orders for products driven by emerging markets, particularly Brazil and Asia Pacific, including Australia. North America remains in a slow and choppy recovery, while the European markets generally continue to lag. Large international account rental companies are increasing their requests for quotations and showing interest in discussing 2011 potential purchasing, but remain weary of placing significant orders. Smaller rental companies continue to struggle financially with rental rates and utilizations, and we believe we are near the bottom of the cycle for them. While customers in general are very concerned about fleet aging, new product availability and manufacturers capacities going into next year, they remain focused on their balance sheets. Eventually, these dynamics will lead to increased orders. Our bad debt experience remains stable. And used equipment pricing has stabilized and firmed somewhat based on recent auction experience as well as third-party indications. We've also believed that based on industry-wide de-fleeting has generally subsided, although most purchased transactions continue to involve some trade in of older fleet. The Utilities business has been solid and we expect that continue based on high levels of quotation activity. Excluding the foreign duty provision we took in Q2, we would've been slightly profitable for the quarter, a terrific achievement on a road back to solid profitability Considering the incremental margins that were demonstrated this quarter on a year-over-year basis, we're very happy with our progress. Our production rates have risen significantly, generally in line with customer order rates which has led to improved productivity and absorption. Our working capital is down compared to last year, while we worked to ensure we have reasonable product availability and manageable lead times. Supply chain partners on almost all cases have been keeping up with our increasing build rates. Lastly, our Changzhou, China facility remains on time and on budget for Q4 start up. I visited there Tuesday and our team is genuinely excited about launching a new plant with several new products that are tailored to the local market. Moving on to Construction. We had a very solid quarter with strong growth compared to last year. Our backlog is steady at this point in the season, and we are working hard to maintain lead times to our customers. Our supply partners are keeping up with a 45% increase in net sales we delivered in Q2. Order intake is solid in most products except our trucks business at the moment, and even there, we're seeing positive signs. Developing markets are strong including a rebound in Russia along with South America. While North America remains sluggish, our business in Germany is strong with mix results in the balance of the EU countries. Our Roadbuilding business had a positive first half, although is now starting to see a seasonal slowdown in-line with expectations. Our product launches to date have been very well received, and we're very excited about the new loader backhoe and skid steer loader product introductions which are on track for later this year. And the real impact of these products will start in 2011. Most of our restructuring in this segment has been completed, and a significant improvement in profitability that you see here is a direct result of that. It's important to note that this quarter included a total $6 million restructuring cost. Incremental margins are good and if you exclude this restructuring, we are getting close to breaking even at about half the volume this business had achieved at the prior peak. This has been our objective and is a positive sign for Terex and our overall return to solid profitability. Our Cranes business has been challenged with the drop in order rates for larger, over 300-ton mobile cranes. Although not unexpected, we expect to see a stable second half 2010 based on the long lead time products, and we'll likely see a volume reduction in this size class in 2011. Our restructuring in the Port Equipment business is progressing nicely, and we've had some recent orders success based on evolving a broader Terex organization with key customers. Quotation volumes and interest continues to improve in this business. Our smaller mobile cranes and stationary cranes continue to be challenged for orders. I would describe our situation as bumping along the bottom. The smaller crane size class was the first to reduce volume and will be the first to recover likely in 2011. Although utilization for many customers continue to be in the 60% to as high as 80%, many are currently waiting out the current economic climate before they place new orders or buying used cranes from financially-stressed crane rental specialists. In general, we're seeing solid quotation and order rates in Asia Pacific, notably, China and Australia, and continued softness in Europe and the U.S. The Middle East is showing some signs of rebound. Our Cranes business is also on track to launch several new products in the second half that we are optimistic about. On our last quarterly call, I mentioned the new 1000-ton crane with the state-of-the-art performance and operating costs, and a new 100-ton rough terrain crane jointly engineered by our Italian-U.S. businesses, which fills a big global gap in our product portfolio. Both introductions are off to a good start despite the challenging environment. Moving on to Material Processing, we're back to being profitable. The overall order rates for crushing and screening products continue to be strong with net sales of nearly 50% year-over-year. In general, EU and U.S. markets are steady. Developing markets are generally strong, with India for aggregate markets and Australia and Africa for mining-related markets. We're seeing some rebound in Eastern Europe as well. We've launched numerous products earlier this year at BAUMA, many of which are targeted for mining applications and all of which will help the second-half results. Our results show the positive impact of cost reductions from last year with terrific incremental margins, and we expect the positive profitability trend to continue as the year progresses. Similar to Construction and AWP, we find ourselves working hard to keep lead times short in order to be responsive to our customers as markets recover. Moving on to Page 10, you can see the developing markets activity, in general, continues to be very strong for Terex. Now that we have 32% of our sales in these areas in the first half compared to 24% in the first half of '09, Brazil and India are both up over 100% year-over-year and Russia's up very dramatically as well. Net sales in Saudi Arabia more than doubled. We're putting increased additional investment in our new plant in India, and our announced investment in Southern Brazil for a new multi-product facility is on track for start up early next year. All in all, a great story in developing markets. Referring to Page 11, I'll move to some overall comments for Terex. While we have new products and new markets that can provide growth opportunities, we're also aggressively pursuing growth on our existing markets. We're in a period where you need to understand the key drivers of customer demand and provide solutions that meet their needs for product and cash flow. As part of that, we're being more active with our Terex Financial Services team in supporting our business growth in most regions of the world. While the majority of the deals use strong financial partners for funding, we have also expanded our own originations with well underwritten and secured with balance sheet financing on an ongoing basis. TFS will continue to be a crucial tool for us to support our customers growth. I've already mentioned a number of specific product launches underway. And additionally, as part of Tier 4 engine conversions, we have a multitude of other products we are updating or enhancing along with required drivetrain changes needed over the next few years. I believe we're well-positioned with a full pipeline of products as we move into the future. Our material costs appear to be somewhat inflexed at the moment. While there's strong price pressure earlier in Q2 for steel, we're seeing clear moderation lately. We now expect steel at this point in time to be basically stable for the balance of the year. And as steel has been the primary cost driver over the last few years, we expect level pricing, in general, for all commodities during the next few quarters. I mentioned on last quarter's call, we're seeing some delivery challenges for key components based on strong production levels. We have been working effectively with our suppliers to provide additional visibility into our production plans and frankly, we now have only limited shortages that we have generally been able to work around. At this point, our supply chain is doing a good job with staying in sync with us, which I expect will continue. To summarize, we remain comfortable and confident on how the year is progressing with no real surprises on how the markets are performing. And at this point, I'll turn it back to Ron.

Thank you, Tom. In summary, we do expect a better tomorrow with an initially slow recovery that continues to accelerate. The full year outlook of a $1 per share loss implies a meaningfully better second half led by continued strength from developing markets. Production is on track and we are staying vigilant on costs. Our liquidity is strong giving us a lot of flexibility. Finally, the seeds of our performance in 2011 and 2013 have now been planted. We continue to believe we can achieve $8 billion of revenues in 2013 and somewhere approaching about $6 per share of earnings. Now we'd like to open it up to your questions.

[Operator Instructions] Your first question comes from the line of Charlie Brady with BMO Capital Markets.

Just with regard to AWP and the quoting activity that you're seeing, you talked about more 2011. What's the discussion around pricing looking? I mean, are they coming at you hard on price or where do you expect that to shakeout given kind of the uncertainty still in the market today?

I'm going to turn that over to Tim. Tim?

Yes, Charlie, I would say the -- overall, the market remains challenging but improving from a volume standpoint. When we look at these deals we're talking to customers about, we're mostly competing on used equipment as most of the orders that we're talking to still involve a trade. And I'd also say, we're competing on customer balance sheet risks, as Tom indicated, as a number of our customers are finding it challenging to obtain financing. So as we look at the deals we're talking about, it's less about the equipment price per se and more about what goes around the equipment. I would also say that certain competitors, mostly in Europe, still have significant levels of 2009 and in some cases, 2008 model year equipment that they're discounting severely to move. But overall, I think the pricing environment, while competitive, is stable and very consistent with prior periods.

On the restructuring charge, the $11 million, you broke some of that out in the release, the Construction, the $6 million there, the $2 million in Cranes. Where's the remainder of the $11 million come out of?

A little bit in corporate. I think we had some facilities issues in corporate about $1 million related to some facility closures, and Materials Processing about $1 million.

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

It does seems like things are troughed at least and hopefully getting better. The inventory levels are still a bit high, they've come down just a little bit high. So could you mention whether you have any aged inventory concerns at all? And whether you view this inventory level as sort of necessary to have product there to a sell if somebody comes in to order or whether you can work that down throughout the year?

Rob, it's Phil. In general, I would say the mix of our inventory kind of like in an inflection point, about half of the inventory is still in the Cranes business. And as that softens, we would expect to create cash flow there. I think in Construction and AWP, we are building to demand levels that are expected, and they were too low in finished goods inventory when we entered this year. So there's some level of buildup expected to position the inventory in the right spots where the demand is occurring. Over time, we expect as the mix of Materials Processing, Construction and AWP increase, as well as Crane's goes down, that working capital sales ratio will improve. Crane's will use a little bit more working capital. So you've got to look at the different pieces [indiscernible](41:14).

And then just in terms of cost reduction throughout the year, do you have any major extra additional cost cutting plans or do you think you're kind of getting to where you need to be? And then do you have any concern that there's R&D pulse ahead? I mean, you guys have said over and over you're pretty much on track with Tier 4, I just wanted to confirm.

Yes, we are on track with Tier 4. I mean, like any major project, we've got a couple of places that were a little bit behind, and a couple of places where we're in really good shape. But in general, I don't see any major threats relative to overall cost reductions. We continue to prune, I guess, is the way I would define it, Rob, and looking for opportunities, and I wouldn't say we have any major changes planned. But in addition to the Tier 4, I think it's important to emphasize, we've got a couple of meaningful new products coming on in the Cranes and the Construction areas in particular that probably won't impact us until 2011 of any consequence. And furthermore, in the Terex Port Equipment business, there's been really a complete reorientation of that business since we took ownership of it. And it's almost like we're reintroducing ourselves to the marketplace for that company, and the response has been quite positive.

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

It's actually Chase Becker in for Jamie. I was wondering if you could just provide some color on the European markets and kind of the trends that we've seen as the quarter progressed?

I'll give you a general comments on the European markets and of course,, these things tend to be general in nature. Europe of course is not Europe. We have a mixed bag of performance in Europe. Countries like Spain, Portugal and to a degree, Italy still remains very slow and contracted. Countries like Germany in particular have remained solid, although there is a bit of a slowdown in Germany. And the United Kingdom has been difficult, but we see the U.K. beginning to turn the corner. France is pretty good and Scandinavia is pretty good. So overall, Europe isn't where we would like it. We think it's not a snapback recovery at all. We think it probably follows in sequence North America. So you're going to have developing markets first, North America second and Europe in total, third, but there's still pockets of opportunity. And then if you look at places like Poland and the Eastern European countries and then Russia, you see significant growth.

And then shifting gears, on the Crane side, the margins were, x restructuring, were decent relative to last quarter, and I know there's a lot of moving parts with the Port Equipment business. But how should we kind of think about the sustainability of profitability given backlog being down and kind as we progress throughout the balance of the year?

I think we would look at it being fairly comparable period-on-period as we go forward through 2010. I think we have a little less visibility as backlog continues to bleed off a bit in the higher capacity cranes for 2011, so we have a little bit of cautiousness around that. And we really are beginning to see some of the benefits of the restructuring activities within the Terex Port Equipment business, and some incremental volume in that business that quarter-on-quarter had pretty significant improvements for Terex. So we've seen some improvements.

So as I net out the Crane business and if you want to think about it as three main pieces, we got the small cranes, went down first and that went down last year 70% to 80%, with a strong franchise we had in North America. The big cranes, which really began to slow this year and we expect, will continue to slow next year, and then the third piece being the Port Equipment business. So the trends I expect into 2011 would be that the smaller equipment will begin to show strength and will begin to grow. Two years being down, that will be the third year and it should begin to grow. The Port Equipment business beginning to deliver from our restructuring. Those two positives will be somewhat offset by slowdown from the bigger crane.

Your next question comes from the line of Meredith Taylor with Barclays Capital.

I understand that as you say precise outcomes are hard to predict around M&A, but I'm hoping we can talk a little bit about the acquisition environment. I'm hoping you can address specifically the pipeline, how that's evolved over the course of the quarter? How bid ask spreads have trended if they've narrowed it all? And if so, where? And then, in terms of pipeline, if you could give us a little bit more color in terms of the size of transactions that you're looking for and maybe some more specificity around potential areas of interest?

This gives me an opportunity to be specific without saying anything, which of course is a hard place to be in. But I'll say this, first of all, we have an active process. We probably looked at and monitor somewhere around 300 companies. We have a screen that has gone through those companies to try and focus on those that are strategically in our wheelhouse and those that would financially be attractive. When you put that combination together, financial attractiveness coupled with strategic appropriateness, you narrow it down to a fairly small list of companies. And it's impossible to say what bid ask spreads are because some situations are just hard to predict at this stage. Size of transaction, I think from our point of view, we don't want to do anything too large. But at the same thing, we want to do something meaningful enough that it will move the needle. So too large would be anything that would require any dilution of our equity holders at this stage, and too small will do small things that are bolt-ons, but those won't move the needle. So somewhere midsize, I would say, $0.5 billion to $1 billion would be midsize. And I think that's about as specific as I think I can get.

And then just as a follow-up on the Construction business. Could you give a little bit more color on where you are in terms of production rates and capacity utilization? And how much further you have to go to get to breakeven in this business? And maybe you could address kind of how the business trended on a month-by-month basis? I'm interested in on an exit-rate basis, were you at breakeven or if not, how close?

Well, I think what we did say is that June was clearly better than April and May. And I think we are very close to being at breakeven with this business as we sit here. I'm going to let George comment on production rates and where we are relative to capacity utilization. George?

Generally speaking, on the production rates, it obviously depends on the business and its regions. But in general, the majority of the factories are running at a capacity at which we have forecasted for this time of the year to be in-line with the rest of the year forecast. The word I would use is lumpy. And some of the businesses, particularly as Tom and Ron both noted in the Truck business, we still do not have complete clarity of the order book going forward. But in general, we're at a capacity that we feel comfortable that can get us to the future forecast of the business. And also with our supply chain with us, production meets our end-of-the-year targets.

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

A question related to the last 12 months, your operating cash flow's been negative almost $300 million while your operating loss has only been about $200 million. So you've been burning through a decent amount of cash. I was kind of just curious how that is impacting your view of a use of balance sheet? But particularly what type of acquisition you're looking for? I guess, I would make a comment at this stage of the cycle with so many in your own markets depressed. Someones interest in the stock is how are we going to get to bounce back, a recovery eventually in your core businesses. The idea of buying something now to smooth out the business, that seems more of a mid-cycle kind of acquisition when things have eventually slow down, we're at such low depths. I'm not real sure the benefit of getting that smooths out their earnings stream unless you're thinking we need some help on smoothing out the cash flow. So if you could just take me through the thought process on how you're addressing this cash flow burn and how it impacts your use of cash?

Well, let me comment on the cash burn and maybe Ron can pick up on the acquisition side. David, the things that aren't going through the income statement that are affecting cash over the last few periods, we do have tax obligations on mainly International businesses that are kind of delayed almost a year, a year and a half, in terms of when the cash effect occurs, that's part of what's there. When we go to continuing operations versus discontinued operations, looking at that net debt, there are some cash usages associated with discontinued businesses that we funded from the cash balances that we show here, namely, the Atlas divestiture would have been one of those that's there. We also have the...

Is that in the operating cash flow though?

It goes up in the net debt change. That's the main area that they even see that in.

That would not be in operating cash flow, correct?

It's in disc ops, not on operating cash flow, which you don't necessarily see from the statements that we have here, but it does affect that cash balance. We also have the overall cash, and if you're talking operating cash in total, the change in the euro affected, as you saw $16 million in the quarter, and I understand operating cash flow is not there. So the movement of deferred taxes is one of the larger things that we have. And payout on benefit programs that we have in last few years that we really decreased relative what's on the P&L this year, also had factors in it. But again, there's a lot of individual pieces, there's not one lump some.

Would you be willing to at least comment on how you think the free cash flow or particularly operating cash flow for the year is going to play out? Because usually, when you get these turns in the cyclical companies where you start to get some revenue growth and hopefully, you get to a profitable GAAP earnings, EPS-wise in the fourth quarter, that often doesn't go hand-in-hand with initial cash flow positive, right? You're kind of building up your working capital to serve at a higher demand.

Let me comment on cash flow for the remainder of the year. The swing item, I would say, on operating cash flow is really on the Cranes business. We know we expect that they're going to generate cash from working capital as we go into the second half of this year it was a pretty very significant amount, and continue the profitability that we've seen demonstrated. That's kind of the swing item on working capital. The other businesses will grow but in relation to their sales, it should be relatively flat. We do have about $90 million of cash tax payments in the second half of the year. And we also are building our on balance sheet financial services assets, which in the second quarter was $28 million of an increase. I would expect it in the next two quarters, it would be similar each quarter relative to that, then we'll have about $60 million of interest payments as well. So from a working capital standpoint, I'd expect -- and P&L, a positive cash flow but we do have some of the negative offsets that I've mentioned on taxes, interest and the TFS build up.

Well, Phil, is that $28 million now kind of per quarter on helping customers finance some equipment? Is that showing up in operating cash flow or is that down on the financing?

It will show on the operating cash flow. That's a different way to show it.

So net, what's your thought on operating cash flow for the year? We're running, operating-wise, about negative $263 million, if I'm correct, or $262 million or so year-to-date. Any wide range you want to give at least?

I'm not going to get too specific on it. I'm trying to give pieces there. I think it will improve from the year-to-date position.

And David, on the topic of acquisitions, I guess I would say, we still haven't given up on the ability to find something at this point in the economic cycle that has substantial upside to it. And that might mean paying a respectable multiple for our businesses at this point in time. But finding a business that has meaningful upside and reliable future earning stream that -- so we believe that we're not yet to the mid-cycle kind of looking out from an acquisition's point of view, we're still kind of at the bottom.

This obviously point taken that at this stage of the cycle, there'll be buying something that's a razor blade business, that gives you a smoother earning stream. At this stage of the cycle, we're not worried about smooth, we're worried about can we get some lift?

Exactly. That's exactly what we want.

It sounds that we've kind of moved a little bit away from kind of when if you see money came in. It's not a little bit more that we're looking for something to smooth the cycle out. And at this stage of the cycle, we're so low, I don't think it's a matter of smoothing it out. So we obviously should maybe pay down some debt and look for businesses that, obviously, Genie was a historic success. But I mean something like that, of that nature, it's something we get an eventual, cyclical lift, not just smooth it out?

Yes, that's exactly how I would characterize it.

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

Just a question on rental channel CapEx assumptions. What kind of assumptions do you guys have? And how does the recent announcement from URI sort of figure in to what you guys were thinking? And have you updated your thought about rental CapEx based on this announcement? I understand, you guys have a very close relationship with them.

We have no closer relationship with them than any of our other customers. And they're the largest rental company in the industry, and we stay close to them. But good thing is that their headquarters is about 30 minutes from here, but the Hertz quarters is only about 50 minutes. So I think our view was that the United Rentals announcement was positive. It reflected a couple of very important things. One, it demonstrated the fact that the fleets are clearly aged. Two, it demonstrated the fact that utilization rates have improved. And three, they are now delivering profit and generating some amount of positive performance, which can only mean that with some sustainability there, they're going to need to freshen their fleet. I don't know, Tim, you have any more global view of this, would you like to comment on that?

Yes, Ron. I would just add, Andrew, that every conversation I have with a customer goes something like this, "My fleet is too old and it's on book for more than its worth in trade. But I know I need to do something. My utilizations and my rates are improving, and I'm concerned about whether or not I'm going to be able to get equipment in 2011, because I know all the manufacturers have reduced capacity dramatically during the downturn." So as I go around and have conversations with customers, virtually, every one of them gives some indication that they're going to do something, whether it's in the back half of this year or in the first half of next year. I expect we're going to see more announcements like we've seen from certain customers that CapEx is expected to grow over the next 12 to 18 months. And I think, I'm pretty confident that 2011 is going to be a year of growth for this segment.

And just a follow-up, and I appreciate you guys being conservative at this point in the cycle, and maybe you have addressed and I missed it, but it seems that rental companies are actually more willing to spend money, if you look at CAT's numbers, if you look at [indiscernible] numbers, the industry outlook for Construction equipment spending is improving, and I understand the mix difference. You referenced the fact that input prices maybe are not as much of a headwind as it was before. Why did you guys choose to give the guidance? What are the negative headwinds?

Well the biggest negative headwind is the fourth quarter performance of our large Crane business. So as we look at trying to anticipate the year, what are we going to have as performance from that business. We think we understand but if tomorrow, somebody cancels a couple of big cranes on us, it will change the outlook. Not a couple, but you understand my point. As we sit here, we're feeling very positive about the trends in our business, the inflection points. And as we look at 2011 for Cranes, I went through the explanation of a couple of positives offset by a negative. So I think from that point of view, we feel reasonable. But the next six months are still a little bit hard to predict, because the recovery is not a spiked recovery in our product categories. And it's not like we are a manufacturer that can push inventory into the distribution channel in anticipation of a recovery. We don't push inventory into the distribution channel. We actually let the product and the market pull the inventory from us. That's just the nature of how we go to market in our various product categories.

Your next question comes from the line of Alex Blanton with Ingalls Snyder (sic) [Ingalls & Snyder]. Alexander Blanton - Ingalls & Snyder: Question on what you said earlier about the highway reauthorization bill. What does this mean for highway spending, so you don't pass that over the next year or so? And isn't it -- it strikes me as odd that they would be holding back on that and spending stimulus money for infrastructure at the same time. It seemed to be moving in opposite directions on that.

Well, the stimulus money that was targeted for infrastructure has much more been in the headlines than and it is in reality, okay? So the overall spending on infrastructure from the stimulus program was targeted to be about 6%. As we look at it now, it's probably closer to 3%. It's really replacing money that the states took out of their budget and has now replaced that money with federal's funding. So in reality, it's been little or no major incremental spending on infrastructure. There has been spending on road paving and possible improvement. And because that's the things that can be done quickly and you could put up a sign called Funded from the American Recovery and Reinvestment Act. So it has a political value and people see it, but in terms of real infrastructure, it's not there. We do need the six-year highway reauthorization act passed. But in order to do that, it contains a user fee increase or at gas tax increase. That is unlikely to happen before midterm elections. The best read I have is that it's possible we could get a highway bill done in the lame-duck session. But I wouldn't put my money on it. And so everybody, Republican or Democrat, believes in spending. But they don't know how to get the money or where to get the money from. And so what we're going to see here, in one man's view, is a bunch of continuing spending resolutions to keep the program alive, with no long-term decisions until a minimum, in the lame-duck session, or likely, the next Congress. Alexander Blanton - Ingalls & Snyder: Well, you heard what URI said about all these stimulus projects that they're tracking and so on and all the trenching business that they're getting. How does that fit in with what you just said?

Well, as I said, a lot of money from the stimulus spending was targeted on very visible, easy-to-go-at things. I mean, there's no doubt that there is some money that came from the stimulus money, but it will not sustain us without a highway bill. Alexander Blanton - Ingalls & Snyder: I think, really, it's already been answered by Tim recently in the call, but I was going to -- you said that Aerials would be one of the last groups to recover, but did he didn't just say 2011 would be -- sometime in 2011, we'd see a real uptick?

Alex, I did not say that Aerials would be one of the last to recover. What I said was Materials Processing would be first, Aerials, second, Construction, third and Cranes, the last. And that is, as I have said -- I've said that two years ago. And I believe that, that -- and it's good when things actually come to pass like you believe. But I think we're on track for that to happen. Alexander Blanton - Ingalls & Snyder: On the capacity situation in Aerials that Tim mentioned, the age of the fleets will probably be, let's say URI will be up close to 49 months by the end of the year, and if they decided to go back to 40, they would have to just about triple their orders, because they're running at about half the normal rate right now. And to restore the average age back to where it would be, it has to be running about $700 million or $800 million versus about $200 million or $300 million right now. And so that is some concern. How much capacity has been taken out?

Well, we have tremendous capacity in our business, that it's very people-dependent. We can ramp up production, but it doesn't happen overnight. You have to -- that's why getting orders ahead of time is a good thing. You can't just react when somebody wakes up tomorrow morning and say, send me $50 million of equipment. But we have the facilities that are capable of ramping up. And I don't believe our customers, whether it's United Rentals, Hertz or whatever, are going to aggressively take down their fleet ages all at once. I think, they will really manage their fleet very carefully, because their profitability is dependent upon that balance between fleet age for good cost management and fleet age for an attractive value proposition to their end users. Younger is better for their customer, older is better for their P&L.

Your next question comes from the line of Ann Duignan from JPMorgan. Ann Duignan - JP Morgan Chase & Co: Couple of clarifications, Ron, I think you said you have $700 million cash in euro denomination. Does that imply that BUCY paid for the Mining business in euros?

Ann, it's $700 million equivalent in euros. So let's say about EUR 570 million. The German portion of the business was denominated in euros. So U.S. was in the other categories.

They converted it basically, at the time of the sale. Converted dollars to euros such that we would be in the natural currency of the country where the operation was. And the tax obligation obviously, is likely to be in Germany as well. Ann Duignan - JP Morgan Chase & Co: And then Ron, could you address -- I mean, I think you said that you're looking for acquisitions that are strategically appropriate and then up to $1 billion. And I think, in answer to David's questions, you said, you only be opposed to buying something at the trough of the cycle. Should we infer from all of that, that the board would approve of $1 billion fixer-upper?

Well, I think a fixer-upper is different than a business that's a solid performing business at the bottom of the cycle with good cash flow, good cash flow conversion, et cetera. And I like to emphasize when someone asks me what the board will approve, the fact that I own and I'm substantially compensated on what happens with the Terex stock. I've got about 1.3 million to 1.5 million shares depending upon how you count. So I'm not going to look for a fixer-upper that has a lot of risks. I'm going to look for a business that has clear franchise strength and clear ability to contribute. And it may be cyclical, that's okay. In fact, that may be preferred at this point in time. Ann Duignan - JP Morgan Chase & Co: Your SG&A's running at about 16% of sales versus the peer group average runs about somewhere between 8% and 9%. Ron, I guess it's more of a longer-term question, but can you really continue to restructure to prosperity when you've got that kind of overhead?

Ann, we don't believe our peer group runs at 8% to 9%. We believe our peer group is more in the 15% range overall. I don't believe a 16% SG&A level is appropriate. We think a 10% to 12% is the level that it needs to be at. We obviously, are maintaining more cost at this point in time following the sale of the Mining business and we will either get that cost down or we will acquire a business and spread the cost over that business, as well as leverage growth. Basically, we've said that we think the revenue opportunity within the company is to be at $8 billion within our existing businesses, save a couple of bolt-on acquisitions. When you're at $8 billion, you don't have to increase your SG&A proportionately. You'll leverage that pretty substantially and that's where we think opportunity sits. Ann Duignan - JP Morgan Chase & Co: Then I guess, I see that as a bit of a strategic dilemma, Ron, and that it's going to be hard to cut, call it enough to get to 10% without doing an acquisition. So you're kind of like almost forced to do an acquisition to spread that cost across a greater volume?

Well, we have our substantial organic growth and -- just think about what we were talking about relative to the Aerial Work Platform business. The Aerial Work Platform business is now about call it a $900 million to $950 million business. It's trailing revenue in June of '08 was $2.5 billion. We have said that we don't expect the U.S. and European markets to get back to exactly the same levels. But we do expect it will be able to secure growth in other parts of the world. And so there's tremendous leverage just in the AWP SG&A line. And the same thing I would say is true in our Construction business and in our Materials Processing business. The Cranes business is a little bit different in that, we're still going through a bit of a contraction. But I see that business being able to drive growth particularly through the Port Equipment acquisition, which will have a lot of upside without adding a lot of SG&A. So bottom line is, the acquisitions will allow us to spread our corporate SG&A better. But we think we can grow from the $4.5 billion of revenue that we're anticipating or so this year to $8 billion with only adding a very modest amount of SG&A to get there. Ann Duignan - JP Morgan Chase & Co: You mentioned in the presentation that you would expect Small Cranes to start to pick up in 2011. What are the fundamentals behind that? What will drive a recovery? Or why shouldn't we expect that business to lag a little bit in maybe 2011, 2012 before that picks up?

Well, I think if you look at history, this businesses are down two years or so, and then they begin to recover. And I think that the Small Crane business really begin to go down in the second half of '08. It was down in '09, it's down in 2010. So sometime in 2011, it's not unreasonable to expect that we'll continue to grow. It will grow, and it also will respond to some of the smaller Construction improvements, residential construction in the United States. And Rick do you want to add anything?

I don't think -- that's good. Ann Duignan - JP Morgan Chase & Co: But it's more based on historically, this is what happened. Therefore, it should happen again?

Yes, what happens Ann -- here's what happens in the Crane business. The customer bases of rental customer base, they get overextended. The business is growing rapidly. Then the business hits the wall. The weaker rental companies get into financial trouble. They begin selling off their fleet. They sell off their fleet to the stronger rental company. The stronger rental company stop buying from the manufacturer. So manufacturers go down dramatically and a period of time takes place where everything will settle out, and that's where I see it. Just this past week, I talked to a couple of crane rental guys who, either their company or one of their local competitors was going out of business and they're buying cranes at half price out of their fleet. Obviously, they're not coming to us to buy a new crane at full price. But that will stop as the economic recovery begins. We are probably six to nine months away from that, and we're right at the point where people who are in financial trouble have finished or exited, and that period is about behind us. Does that make sense to you? Ann Duignan - JP Morgan Chase & Co: Yes, of course it does. But it just sounds like a business that's not a very attractive business given what you just described. But I do appreciate it, and I appreciate the cyclicalities. It's just that, I was just hoping that maybe we could understand what's behind the anticipation of a recovery from a fundamental standpoint, and I think the resi [ph] improving does make sense.

And the last thing -- what I would say to that is, it's a very good business when it's good, and it's a very bad business when it's bad. It's the old story of beauty is in the eye of the beholder and it is the lot in life we've chosen. So the value of the Crane business is your ability to expand and grow in the good times and make sure you protect yourself in the downtime in turns.

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

Sticking on the crane theme for a second, just a clarification. It seems like your commentary around the large cranes, the crawlers, has gotten more conservative this quarter relative to some of the way that Rick answered some questions last quarter. Is that correct? I mean, did something happen? Were there cancellations? Or is there something that you're seeing out there on the crawler side?

I think it's purely a visibility thing, Seth. We are continuing to bleed off backlog. Certainly, we're still filling the order book in the out years or the out months. But the level of activity we see is dropping off when I look at really into 2011. So I think we're being a little bit conservative at this point in saying, we think there's some potential downward trend in the larger-capacity cranes. Certainly, there's still a lot of projects out there. Certainly, the developing market is still a real opportunity for that segment of the business. Rental fleets continue to grow into larger capacity area faster than they're growing on the lower-capacity models. But I think, there's a bit of conservatism and really, what I would call the outside-of-lead-time type activity.

You haven't seen an increase in cancellations then?

Not meaningful, not versus the run rate we've seen and really, the prior nine months.

My question, I guess, maybe for Phil, the under absorption chart in the deck. I mean, so you're about I think $75 million or so along the way. I think, your original guidance was about $200 million. I guess, is that $200 million still accurate? And how should we think about that flowing through? Is it going to flow through kind of the same proportion that we saw this quarter? Mostly, AWP is in Construction, or can you give us any color there for the second half?

I would say that for the next two quarters, the year-over-year improvement would be similar to the second quarter in absorption overall. Cranes probably not as much, given the softness now. So it would be spread across the other segments and AWP certainly would be a big piece of that in Construction. MP, to a certain extent, but not as large. And I think I talked about $200 million. There is a flow through inventory of your absorption. That's about one quarter lag. We may be off a little bit from the overall $200 million, but I think you can use the second quarter kind comps to get an indication of that.

It sounds like you're getting a little bit more positive on Russia. What's changed there recently? What's driving that?

I'm going to turn it over to Steve.

I think, obviously, the drop off in Russia was huge in 2009. And basically, business stopped for everyone, kind of a retake of Spain, if you look at Europe. So I think what you see is just the level of business coming back. We're starting to see it in, I'd say, the lighter equipment. It's not yet in the larger size. So I think it's just generally the market stopped now is kind of coming back. So you're seeing investments and infrastructure. And really, our focus has been to develop distribution on the down cycle. So we spent probably the bulk of the past eight months building our distribution channel in down markets, so we're starting to see that flow through into the market now. And we'll say that on a different segment, it's been very, very hot in Russia. And there are a lot of issues for the agricultural part of their market. And I think, it's something just to pay attention to and how that kind of develops over time. But again, it's just the that market went down so far. We're seeing it come back again.

They have some visibility to the energy cost, at energy profit at this stage where maybe a year ago, they weren't.

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

Could you talk about the progress in selling the earthmoving and ASP products into the rental companies?

Sure. I'm going to let -- I think, I'll let Tim cover that a little bit and then George and I would say in general, we haven't been as successful as we would like but we have some new products under way too. So we have some expectations that the future maybe a little bit better. But Tim, why don't you start?

Yes, I guess, I would characterize it this way, Henry. We know that getting rental companies in particular to make a brand decision that's different from what they've done historically is going to take time. We have been working with and made presentations to a number of the larger companies but we're also working with mid-sized companies as well, that are either straight rental or kind of rental dealer combination. And I think we've had more success there short-term than we've had with the larger rental guys. But to Ron's point, this is not going to be a number that's going to meaningfully move the needle in 2010 and maybe not even in 2011. But we think there's real value here to the rental company to continue working on this. And I think, the Aerial team and the Construction team are working very, very well together to present comprehensive packages to the customer. And I think, it's a matter of time, but we will crack the code and get some meaningful progress in this space. It's just going to take some time.

George, you want to anything to add to that?

Yes, the only other thing that I would add to it is within our own Construction distribution channel, we've introduced the product and working through them, albeit slow to add to their lineup of their Compact Equipment offering and also working with them to develop their own rental strategy within their own traditional distribution.

What are you seeing from Chinese competition in the global cranes and construction equipment markets right now?

Okay, that's a very broad question. I think we should try to answer it reasonably quickly. Rick, why don't you take that for cranes?

From a Cranes perspective, certainly, we see the Chinese probably more often selling into what I would call the Developing Markets. They have a decent product that's relatively well priced to go into more price-sensitive markets. They are fairly aggressive at developing new products. I think we are not only beginning to leverage our own CJ organization to compete directly with them in Developing Markets. But they are a bit more effective in the Developing Markets. Also, I would say, that the residual values as we see in the developed markets where they've sold their product have been under fairly significant pressure, and are very low, which is causing some buying decision changes more towards I'll call it, developed markets products with the major rental companies.

I'm going to ask Tom. Tom happens to be in China from this call right now with Ken Lousberg. You guys want to add anything, Tom?

Yes, the only thing I would add, Henry is the market in general over here continues to be strong. The Chinese government has basically made the decision. The construction industry is a strategic asset for them. They've been very heavily investing in it. They have been tough competitors in the past. They're going to continue to be tough going forward, both in the construction market and the cranes market and most product lines that they're in. But that being said, back to Rick's point, I think there's a number of areas where we feel we can compete effectively with them in a number of areas. And obviously, my being here in China this week, is suggestive of we're doing just that.

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

Can you just talk a little bit about 2011, new product introductions and new engines, if there's going to be a margin opportunity there? Or if the competition is still tight enough where that might not be as good as you would think?

Tom, you want to take that?

Joe, you're referring to Tier 4 introductions?

Yes.

Hard to say, and we think in general, the pricing we're seeing is reasonably consistent. But that thing aside, I do think, our supply-chain team and our engineering teams have done a great job in making sure we get focused on what engine best fits the specific applications from the need standpoint, from a technology standpoint, as well as from a price performance standpoint. So in general, we feel we're going to come out of Tier 4 better than what we're going into it from a relative competitive basis. But it's tough to get specific with as broader range of products we have. In general, we're pretty comfortable that with the pricing terms, tech support we're getting from the major engine suppliers we're working with, that we're going to be in good shape.

And then just last quick one, on that Developing Markets slide like you had in your deck, the Middle East still looks like it's down quite a bit and we've been hearing a lot of good things about Saudi Arabia. Can you just give us a sense of what else is in there? Is that all from Dubai?

Go ahead, you want to do that Steve?

Yes, sure. Joel this is Steve. Really what we're seeing is the shift outside of Dubai actually. So I Abu Dhabi is probably the Emirate that is kind of the biggest opportunity there. We're also seeing, as you said Saudi, is continuing to develop their infrastructure. Qatar, a lot of larger crane projects, LNG plants going up. So it's kind of actually moved out of Dubai in those areas. And then there's part of North Africa that's also been a bit up. That's what I would say.

Well, if you look back in time, the UAE was very strong for us a couple of years ago. It's okay for us now, probably better than pretty consistent with where it was a year ago. But Saudi has really done well. But relative to where UAE was, it's still down dramatically.

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

Just looking at the Construction business, I know there's been a number of moving pieces in terms of the dealer base there. Can you break out kind of a same-store type number for the dealers that have stayed in the network? I'm just trying to get a sense of some of the drivers for the top line boost we saw in the quarter. Is that a function of existing folks actually starting to reorder? Or is it just a larger base than previously existed?

I don't think we could give you a same-store sales report in that many of our dealers are pretty small, pretty remote, and we don't have a floor plan type program of consequence that we put a lot of inventory in there. And if you really pull the Construction business apart, it's got a lot of moving pieces, probably about half of it is the Compact Equipment business and the other half would be products like the Terex Truck business, which is articulated trucks, material handler product line, which is a large part and portion of it goes to scrap handlers, and then the Roadbuilding business. So it's not one business through one common distribution network. The way I would characterize it, and George can follow up and correct anything that I may have said wrong, but the way I'd characterize it is that the smaller equipment is beginning to improve, but it's not at the levels that we expected to recover to, in particular, some of our smaller equipment in Germany and in Europe. We have had a positive quarter relative to our Roadbuilding business, which was the Roadbuilding guys have really done an excellent job responding to a fairly strong market. And the balance of our business whether it be the Truck or the U.S. business et cetera, is just beginning to come along. And we have capitalized on some opportunistic situations, such as backhoes to Russia. And so there's a lot of still growth potential in front of us. We very much believe the new backhoe will be introducing later this year. It's going to be helpful. And the Skid Steer will be introducing, will be helpful in solidifying our Compact product line plan. George, do you want anything to add to that?

The only other color that I would add to it is on the Roadbuilding side, our Latin American team has had a really consistent strong growth that has continued throughout the year. And then also our Material Handling business, and it gets back to the earlier point that was made about not filling our distribution channel with a lot of inventory and the retail demand in that space has significantly increased year-over-year and it's afforded a good ramp up for us in that business.

In the AWP business, the foreign duty provision we saw in the quarter, I'm assuming it's a one-time item. But would we expect some nominal increase on a run rate basis going forward? Or is this just a true up? Any thoughts there?

Again, we've taken -- this is Phil. We've taken up provisions, so this is related to historical issue that we've had over a number of years. We continue to look at the duty rates around the period, but overall, not a significant impact on AWP run rate. Some nominal piece, but not significant.

Your next question comes from the line of Robert McCarthy with Robert W. Baird. Robert McCarthy - Robert W. Baird & Co. Incorporated: Mr. DeFeo -- actually, I'd like to ask Mr. Widman a question. Roughly, how much of your cash and equivalents balance is effectively not available for debt reductions or reinvestment acquisitions? In other words, how much is kind of locked up geographically?

Well, when we think of acquisition, we're thinking of global acquisitions. So I don't -- and I would do different things, if there was a U.S. acquisition or a foreign one. I've got enough cash outside of the U.S. but I would try to use that cash to make a foreign acquisition. So I don't want to think of it as locked up. If I have to not indefinitely invest that cash overseas and bring it back for U.S. acquisition, there's some tax consequences for that. But I wouldn't say I'm constrained Rob. It just depends on where we would have that situation occur. Robert McCarthy - Robert W. Baird & Co. Incorporated: Can we say yet that Port Equipment has achieved breakeven?

Well if you look at the second quarter results, and you see on page, the restructuring, you take out restructuring, it generated about $800,000 of profit, I think, in the quarter. And I think it's a lumpy business as we've said. So it's getting close or is there. And I would say -- Rick, I don't want to speak for you, but...

That's exactly right. We did achieve breakeven in the second quarter net of restructuring. As Ron said, it is a lumpy business, because the project or large crane side of that business comes in big orders in lumpy parts of the year just like we had with our Mining business. So there maybe some ups and downs quarter-to-quarter, but we believe with the restructuring has taken effect and some of the incremental volume, we think we're winning in the marketplace that we have on a run rate basis, a break-even business now. Robert McCarthy - Robert W. Baird & Co. Incorporated: As we think about the Construction business sequentially, given seasonally weaker demand in the third quarter typically, can we expect to see much progress on profitability in the third quarter? Or do we have to really wait for the fourth quarter to see that really move?

George, do you want to comment on that?

Sure. I think, the third quarter will still be a little lumpy as Q2 was. But we are seeing a consistent order book, which allows us because on the smaller end of our product line, flow it through in the same period generally. I think we'll continue to see progress over the next two quarters. I would not necessarily say we'll see a major difference between the two quarters. Robert McCarthy - Robert W. Baird & Co. Incorporated: Ron, as you were talking about acquisition targets or potential ones and how you've been evaluating the possible universe, I actually made the note to myself that you're seeking cyclical leverage. Do you think about it in terms of your overall exposure to the rental channel even though those are different channels in different businesses? Or is that a considerate -- you know what I'm saying. It is the fact that you are substantially leveraged to rental already make you want to find something that isn't? Or do you think of it more in terms of let's build on that strength?

No, I think of it, let's find a good business. That's the way I think of it. And a good business that's exposed to rental can be a good business. Now nobody likes it at the bottom of the cycle. Everybody says that bad business is the bottom of the cycle. But it's not necessarily a bad business if you look at it across the cycle. But I'm not looking at it from the point of view of, I want to run away from rental, or I want to run towards rental. I want to look at it as what's the business, because rental is a channel to market. It is the channel to market today, for Aerial Work Platforms. It may not be the channel for market for Aerial Work Platforms in China, for example. It doesn't necessarily have to be. We make products. It gets to the market through a certain distribution process. It's just happens to be that for cranes and for AWP, it goes through direct sale to rental companies. So I don't really look at it that way, Rob. I do look at the cyclicality of it. And I do believe that at this moment in time, embracing the cyclicality is not a bad thing. I would hope that some businesses we would acquire might have a little bit better cash flow consistency. So that's an evaluation metric from my point of view, but.. Robert McCarthy - Robert W. Baird & Co. Incorporated: Last clarification I wanted to ask about was the commentary surrounding large crawlers and the outlook there. I understand when you say 2011 looks to be slower and that you have some questions about 2011, we're talking about production rates and shipments. But I also got the sense that you may have seen cancellations in this above-300-ton class as recently as the current quarter. So I mean, is that part of what's entering into the lack of visibility in this one very specific sector that some of your backlog is still at risk?

I don't think our backlog is still at risk but you never know, okay? Yes, we did see some cancellations in the current quarter, but none that I would say, that out of the realm of what we normally would see in this size class. I mean, that's part of the business. But as we said earlier on the call, you got to build in some conservatism in your view of the future. And if the large crawler cranes slowed down, it can change your perspective a little bit and they will slow down a little bit. And we've said that for the past couple of years that we expected the Crane business to slow down, but not drop off the steepness that our other businesses did. Robert McCarthy - Robert W. Baird & Co. Incorporated: Your orders bounced a little bit in the quarter, but clearly not in this space. So where did you see improvement? And was it really sell-through? Or were some of it just dealers starting to add a little bit of product back?

I think we began to see the orders begin to bounce Robert, in the Port Equipment side of the business. So we are beginning to see both the mobile, which would be our reach stackers, empty container handler product and forklift products begin to rebound. We also won some significant orders in the strato carrier space of this area and with pretty good quote activity and some of the larger project business. So some of the more bumpiness in the order book is around beginning to rejuvenate and re-enter this market, the Port Equipment market, in a meaningful manner. Robert McCarthy - Robert W. Baird & Co. Incorporated: Sure, but didn't you get a slight improvement in orders even without that? I'm talking about compared with the first quarter.

Slight. Yes, there's a slight improvement.

Your next question comes from the line of Charlie Rentschler with Morgan Joseph. Charles Rentschler - Morgan Joseph & Co., Inc.: Your $6 projection for 2013, Ron, I guess that's assuming no M&A kind of reminiscent of couple of three years ago, the slogan 10 by '10 and '12, which implied a $8 kind of target for 2012, which for reasons beyond Terex' control, isn't going to happen. But what kind of confidence do you have in the $6 dollar projection? Could you expand on that please?

Yes, Charlie. I think, the way I'd answer that is that we think of this as the potential in our business. I don't think of this as guidance. I think of it as the potential that sits on our business. If things work out well, and the market recovers and we implement the plans that we have started, we think that's what we can achieve x any meaningful acquisitions. If I do a fewer financial analysis. If I put my analyst hat as opposed to my CEO hat on, you got to handicap that. You give it a pretty broad range at this point in time of kind of $4 to $6. But the upside potential here is at $6 and that's the right thing to try and drive the company towards.

There are no further questions at this time. Please continue with any further comments or closing remarks.

Well we appreciate everybody's patience. It's been an hour and a half and hopefully that reflects everybody's interest in the company. Thank you very much. Follow up with Tom, Phil or myself or any members of the Terex team for further information. Thank you.

This concludes today's conference call. You may now disconnect.