Terex Corporation (TEX) Q4 2010 Earnings Report, Transcript and Summary

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 2010 Fourth Quarter Financial Results and 2011 Outlook Conference Call. [Operator Instructions] I would now like to turn the call over to Ronald DeFeo, Chairman and CEO. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and we appreciate your interest in Terex today. On the call with me this morning is Phil Widman, our Senior Vice President and Chief Financial Officer; and Tom Gelston, Vice President of Investor Relations. Also participating on the call and available for your questions are Kevin Bradley for the Cranes segment, Tim Ford for Aerial Work Platforms; George Ellis for the Construction business; Kieran Hegarty for Materials Processing; Steve Filipov for Developing Markets; and Ken Lousberg for our China operations. Many of our management team are participating on this call from India, as there is a significant trade show taking place in Mumbai this week. As you know, India is a growing market for our industry and an important market that is developing for Terex. A replay of this call will be archived on the company's website, www.terex.com, under Audio Archives in the Investor Relations section. I'd like to begin with some overall commentary on our business, followed by Phil Widman, who will provide a more detailed financial report. I'll summarize, and then open it up for your questions. During the Q&A period, please ask one question and a follow up. Thank you for that. The presentation we'll be referring to is accessible on the company's website. Let me begin by referring to the forward-looking statement commentary on Page 2, which I encourage you to read and review, as well as our other disclosures that are available in our public documents. And now let me turn to Page 3, which is marked Overview. During 2010, with the sale of the Mining business, we have been transitioning to becoming a smaller company. The changes required here are substantial and remain underway. Nevertheless, the balance sheet remains strong and our capital structure healthy. Earnings from our remaining businesses are expected to return and accelerate over the next several years. We believe we have a disciplined process in place relative to acquisitions. And so far, we have not been able to complete a significant acquisition that we felt would be substantially accretive to our future returns on capital. Consequently, our operating focus is on the basics. Over the next several quarters, we will continue to streamline our organization to improve customer responsiveness, which is a real focus of the Terex leadership team. We expect to continue building market share, as our market share, particularly in the back half of 2010, increased in many of our product categories. We're going to focus on managing our costs aggressively, including reducing additional costs in some of our segments while investing in developing markets and the systems required to build Terex solidly for the next several years. Turning the page. Commenting on specifically the fourth quarter, our net sales increased 31% compared with the prior year quarter. And fundamentally, all segments saw an increase in revenue. Our operating profit was breakeven over the past two quarters, and we have seen the backlogs that we carry and the inquiry rates that we discuss with our customers improve across most, if not all, of our businesses. This has led to increased production and a positive absorption impact from running our factories more regularly. Nevertheless, we continue to face pricing and cost challenges across most of our businesses. This has put pressure on our margins, which we believe will improve gradually throughout 2011, with a marked increase expected in the second quarter. Inventory reduction remains a significant opportunity for the company, in particular, a significant opportunity in cranes. Our capital structure did improve, as we repaid our bank debt in the fourth quarter and our 7 3/8% subordinated notes were repaid in January of 2011. We see our markets improving. And let me make a few comments by segment on Page 5. First, with regard to Aerial Work Platforms. It's clearly on the recovery path in North America. Both the market and Terex are up approximately 50% in units shipped versus 2009. The vast majority of this growth did take place in the back half of the year. Terex had a particular strength in articulated booms and large rough terrain scissors, both on a unit and share gain basis. In Europe, the market was basically flat as an industry, but Terex European shipments actually grew 29% from the low period in 2009. While this is a substantial number, this took place on mostly smaller lifts, so the absolute sales recovery, in our view, is still to come in Europe. Our Construction business had a particularly positive result in central Europe, following the market, really, which we believe grew 65%, but obviously, from a very low base. Our global off-highway truck demand improved substantially with articulated dump trucks up 150% to 200%, depending upon what period this was measured against, but this mostly reflects the recovery in the industry, which was extremely slow in 2009. We also had a strong performance from our material handling products, but as you may know, this is a specialty product, scrap handlers, and there is no consolidated industry data available to measure market share. But this has been a very good and recovering product for us. On our rock crushing and screening business, or the businesses we refer to in the category of Materials Processing, we saw a year where our factories began to deliver again to North America and Europe as dealers completed their destocking. We actually completed a deplete-the-fleet promotion in North America that we believe was very successful. In addition, we saw strong growth, as anticipated, from the developing markets, led by India, Russia and Eastern Europe. We expect this to continue. We also expect Europe to improve and be strong in these products over the coming quarters. Finally, our Crane business, which is difficult to predict, had a strong fourth quarter and showed very good growth from developing markets. But we still expect a choppy industry in 2011. The North American markets are clearly bottoming and improving. We have seen share gains in a number of our product categories in North America, but our largest market is Europe, and it is difficult to predict. Terex's business pretty much mirrored the market in 2010. We are concerned that large projects are hard to forecast, with customers often postponing delivery of machines from month to month. The port equipment market, as in general, is improving. But much of this business will be delayed until late 2011 and/or 2012. North Africa has been a strong market for our businesses. And as you may expect, the current political climate being uncertain in markets like Tunisia, Algeria, et cetera, that have been good areas for our business, is creating a little difficulty for us in forecasting. But despite all of this in our Crane segment, our book-to-bill ratio is still meaningfully positive for the Crane segment overall in the last quarter. Now I'd like to pass it on to Phil, who will discuss our results in some detail.

Thanks, Ron, and good morning. Page 6 displays the quarterly, year-over-year and sequential performance of the continuing operations of the company. I'll hit some high points here and cover more detail in the bridges later. Net sales increased 31% from the prior year quarter and 23% sequentially. Excluding the translation effect of foreign currency exchange rate changes, net sales increased 35% compared to the prior year quarter and 18% sequentially. The increases included all segments when compared to the prior year, and sequentially with particular growth in the Cranes business, as they recovered from the delays in the third quarter. We had a loss from operations of $0.5 million in the fourth quarter compared to a loss of $75 million in the prior year quarter. Increased production absorption levels and the volume favorably impacted the comparison to the prior year quarter, but were partially offset by increased SG&A expenses. Sequentially, the benefit of increased volume and production absorption was more than offset by an increase in SG&A expense, inventory charges and increased intercompany profit eliminations. Working capital was basically flat with the third quarter with improved velocity based on the volume increase, whereby working capital to sales as a percent of the trailing three-month annualized sales dropped to 31% from 38% sequentially and 35% in the prior year quarter. The recovering segments are increasingly building to higher expected demand. Cranes, on the other hand, reduced inventory in the quarter, but did not achieve our internal target. Short-term changes in customer demand and schedules for mobile crane products continue to present challenges to our planning processes, causing increased cost and inefficiencies. We expect to reduce working capital on our Cranes segment as production and demand are more effectively matched. Overall, we expect our working capital to sales ratio to improve in 2011, as the other three segments increase their volume and display their continued working capital efficiency. You should note that during 2010, we have been taking advantage of early payment discounts with our suppliers to improve our returns. This has had a 1% to 2% negative impact on the working capital to sales ratio. Net debt increased to $792 million, mainly due to increased investing activities, further growth in our Terex Financial Services portfolio, declining customer advances as we completed equipment deliveries and slightly higher working capital when including the foreign currency translation effect. Overall liquidity remains strong at $1.4 billion, with cash balances of $900 million and availability on the revolving facility of slightly over $500 million. During October, we repaid approximately $270 million of term debt. We also called the 7 3/8% senior subordinated notes with the redemption occurring in January of 2011. As a reminder, for the terms of the sale of our Mining business, the roughly 5.8 million shares of common stock we hold in Bucyrus International will be available to us after February 20 should we choose to sell them to provide additional liquidity. Page 7 displays other financial items for comparison purposes. The other expense for the period, which is consistent with prior periods, includes the marking-to-market of our derivative instruments intended to partially mitigate price risks associated with the Bucyrus International shares we received from the Mining sale last year. This amounted to an expense of approximately $4.5 million in the quarter, and we also had costs associated with our debt retirements of approximately $4 million. The relatively low tax benefit in the quarter is the result of not being able to record tax benefits on certain lossmaking operations and the effect of certain return to accrual adjustments. The earnings per share effect of the unusual items for the current quarter that are mentioned in our press release would amount to approximately $0.09 per share assuming statutory tax rates. Turning to Page 8. We have outlined the bridge between last year's loss from operations for the fourth quarter of approximately $75 million to the loss from operations of $0.5 million, with segment detail displayed as well. The most significant changes are as expected in the largely favorable volume effect from the recovering segments, partially offset by the Cranes, where material costs, competitive pricing pressure and mix were unfavorable. The $62 million of positive effect on manufacturing absorption helped all segments compared to the prior year quarter. The SG&A increase of approximately $28 million excludes $7 million favorable effect of restructuring related to that category, which is displayed separately, and $5 million related to currency translation. The increase over the prior period includes increased sales and marketing efforts in recovering segments, approximately $4 million in Materials Processing related to unusual legal expenses, and a corporate increased stock-based compensation and benefits, severance costs and reduced allocation of costs to the business segments. Let me refer to Page 9. This is a full year bridge of the operating performance with 2009 to 2010. The themes are relatively consistent with reduced charges for inventory and restructuring costs, increased absorption and reduced SG&A expenses for the full year. Given the partial year effect of the port equipment acquisition, we have shown the increase in their loss from operations separately. We continue to work through our restructuring of this business. However, we don't expect to achieve profitability until 2012. Turning to Page 10, let's review the 2011 outlook. Overall, net sales are expected to increase 14% to 23%, with very little impact from currency changes in these numbers, as we see a solid recovery in AWP, Construction and Materials Processing with a more cautious outlook in the Cranes segment. The return to operating profit tracks to the sales trends, with less year-over-year improvement coming from absorption. We need to manage our input costs to ensure we stay ahead of the pressure, but be mindful that we have a competitive environment, as this recovery is still in its infancy. Interest expense reflects the paydown of the 7 3/8% in term debt already completed. The 2010 as-reported EPS from continuing operations was a loss of $1.98. If we exclude the unusual items we have called out during the year at the statutory tax rates, the EPS would've been a loss of approximately $1.27 per share. The 2011 full year earnings per share outlook is between $0.60 and $0.75, excluding restructuring and unusual items. I'll point out that the first quarter of the year is still a challenge, and we expect a net loss of between $0.10 and $0.15 per share, again, excluding restructuring and unusual items. This is mainly due to the seasonal pattern of our net sales, and particularly to the lumpiness of the Cranes volume, where we see a sequential decline from the fourth quarter levels and continued impact of changing customer delivery dates. We will continue to invest in developing markets, as reflected by the increasing capital expenditures. And I will mention that we will also increase our net investment in Terex Financial Services by approximately $150 million, as we expand the developing markets and enrich our experience in developed markets. I wanted to explain the share count increase from 108.7 million to 118 million in our outlook, as many investors may not have realized the effect of the convertible debt. So turning to Page 11, we have a chart on the dilutive effect at various stock prices. Our assumption of $118 million [sic] is based on an estimate of stock price, share grants and vestings during 2011. The convertible debt is mainly impacted by the volume weighted average stock price in the last 25 days of a reporting period. So at $40 per share, the dilutive effect would be an impact of 6.3 million shares. You should note this effect will not be dilutive until we have a net income. We have had a chart on our website that displays this effect at different share prices as well. On Page 12, we have provided the net sales outlook by segment, indicative of the expected strong market recovery in AWP, our increased product offerings in Recovery and Construction, and a cautious and more backhanded recovery in Cranes, and finally, solid growth in Materials Processing, driven by new products and improving transports' mobile equipment. On Page 13, we detail the operating profit outlook by segment. For explanation, the column titled 2011 Estimate assumes a similar allocation methodology for corporate and other costs as we did in 2010. However, even in that methodology, as we no longer have the Mining business, allocated costs increased to the business segments. Starting in 2011, we intend to fully allocate the corporate and other shared costs to the business segments. The effect of this change is to push out an additional $41 million as detailed in the chart. The adjusted 2011 outlook by segment and the actual results will reflect this change. The remaining items and other will include results of the Terex Financial Services Group, government programs and eliminations of intersegment activity. On Page 14, we have indicated our history of operating profit and net sales. With the 2011 outlook we discussed, we're on track to achieve our goal of $8 billion in sales and an operating margin of 12% by 2013. I'll turn it over to Ron to wrap up.

Thanks, Phil. The past two years, it is certainly no surprise to anyone, have been very challenging for our industry and for Terex in particular. However, I think we're in a good place looking forward. Virtually all of our products are expected to be in recovery mode in 2011. There are challenges for sure. These challenges are fairly normal in a recovery, such as pricing and cost pressures. We expect to balance these out and offset them as best we can. Nevertheless, we think the trend is pretty clear. Developing markets will outpace the developed markets, although we do expect meaningful improvements from North America, and Europe should begin to show progress later in 2011, with Cranes probably more likely in 2012. The ability for us to secure the longer-term operating margins in our target is dependent upon offsetting cost increases, achieving certain price leverage and making sure developing markets are growing profitably. We are focused on these issues. As you know, our Bucyrus shares can be monetized as of the 20th of February. We will look at these shares as a source of cash as and if we need it. I will be spending a considerable amount of my time focused on operating the business. The emphasis will be on profitable growth and cost improvement. I think we have a more strategically aligned team than we have had in many years, with a common vision and focus to capture the value that exists in our business. I will push to accelerate our performance. The assignment of Doug Friesen to head up the Terex business system reflects our commitment to lean and the processes necessary to make this cultural change happen within the company. I expect 2011 will be a year of significant progress on multiple fronts. Now operator, open it up for questions. I'd like to ask everyone, ask a question and a follow up, and thank you at this stage.

[Operator Instructions] Your first question comes from the line of Ann Duignan with JPMorgan.

It's Ingrid Aja standing in for Ann. I was wondering if you could talk about the sequential improvement in backlog that you saw. It was a little lower than what we saw competitors in AWPs and Cranes. And so I thought maybe if you could give us more color on what might be behind that, maybe what different trends you might be seeing?

Let me comment, and then I'll pass it over. I think, overall, we are fairly pleased with our book-to-bill ratio in Cranes, although we do appreciate the fact that our business is a little bit different than our competitors' business. We tend to have a little bigger business in Europe in the lattice boom kind of Crane categories than they do. They tend to have a little bit bigger business in tower cranes. And so the mix of our businesses are slightly different. Their business is a little bit bigger in North America than our business in North America. So I think, while we do believe that the basic trends are fairly similar and we track them quite regularly, the mix of our business is a little bit different. I also think that nonresidential construction, in particular on the big projects, is going to be a little bit backended in terms of growth, and that's what our big customers are telling us. Relative to Aerial Work Platforms, why don't I have you comment on that, Tim.

Ingrid, I would say we're pretty comfortable and actually quite pleased with where we are at the end of the year. We secured a number of orders from important customers through the latter half of last year. And I think we feel like we're in a very good shape. We believe we're gaining market share. It's our understanding that our competitor has secured a very large military order, and that may have an effect on their overall backlog relative to their performance against us. But we think we're in a pretty good place.

And several of our big customers have really begun placing orders in earnest, really, after the first of the year. Ingrid, let me make one more point. I want to point out that when we count backlog, we only count what's deliverable in the coming 12 months. Some of our competitors don't do it exactly the same way.

And then if you could talk a little bit more about the input cost pressures you're seeing? You mentioned that. What is priced into your outlook and what you're doing to offset those?

This is one that's hard to give a precise answer to because we see increases waxing and waning depending upon what period we're looking at. Steel is a big concern for us. Some think that our steel costs may go up in the range of 20%. I think that is in our planning horizon. I think we will be pricing to recover that. It won't happen evenly. I know some of our businesses, like our Construction business, are moving some new products and taking price increases sooner. Some of our other businesses will be taking price increases later, depending upon the contractual obligations we have with our customers. But I think we're expecting that kind of cost pressure from steel and energy-related areas.

Your next question comes from the line of Jamie Cook with Crédit Suisse. Jamie Cook - Crédit Suisse AG: Two questions on Cranes. First, just to clarify, given your response to the first question, it sounds like your thoughts on the Crane market are consistent with Manitowoc's. It's just Manitowoc is benefiting earlier just because of your mix in Europe and their mix in North America in smaller crane. And the second part of the question, I'm just trying to get a feel for, as I look at your Crane backlog, you talk about a lot of it being delivered late in the year, in particular in the fourth quarter. Can you give me a sense of how we think about, then, earnings, the earnings throughout the year? Are Cranes more backend loaded to achieve your margin profile? And just the mix of Cranes in your backlog.

I'll take a shot at that, Jamie. Yes, I would confirm what you said about relative to our major competitor. I think our view of the world is not that different. The mix of our businesses is meaningfully different. We have the Port Equipment business, which we think is more of a late '11, more like 2012 improvement, and the strength of our big products in Europe for delivery, really, globally. And our North American business, we do see improving, but we don't have the mid-size lattice boom crane business like they do. I think our view, therefore, is that the first part of 2011 will be weaker in our Crane business, and it will begin to strengthen later on in the year. And I think that's how we've calendarized the business. And do you want to comment on that, Phil?

Yes. I was going to comment on the question about where the backlog is, Jamie, just to give you a rough idea. Roughly 50% is in our mobile and lattice boom cranes for the total backlog, about 20% is in port equipment and about 10% is related to our Australian business and 10% in our U.S. business, just to give you a rough idea. Jamie Cook - Crédit Suisse AG: And do you expect to be profitable each quarter in the fourth quarter -- I mean, in 2011 within Cranes?

I don't think we want to provide guidance yet.

By quarter, by segment, it will definitely be more backend loaded in the second half.

Your next question comes from the line of Seth Weber.

So maybe can you just give us a little bit of color on the tax rate here, why it's jumping up so high to 38% in 2011? Whether that's a good number we should use going forward? And then maybe, Ron, a year ago when you talked about the $6 of earnings power, were you assuming that the tax rate would be that high or was that off of a lower tax rate?

As I've mentioned previously, Seth, when your income or loss gets around zero -- and frankly, 11% is still a relatively low pretax number, the rate moves around quite a bit because you have discrete items that are specific dollar amounts as opposed to a percentage benefit or loss. And part of the reason our rate was not a bigger benefit in 2010 is for those factors as well. So when you're losing money, it takes down the benefit; when you're making money, those same dollars would have caused a rate increase. The two particular items that caused the rate to be higher than we would expect is about forecasted losses that we cannot benefit. For example, the Port Equipment business, we have a valuation allowance on any losses there. That can contribute about six or seven points to the rate in the current volume that we have. And also, we have uncertain tax positions, where you accrue interest relative to those. So those are kind of discrete items that affect the rate. So it's more dependent on the volume of profitability. Going forward, I would expect the rate to continue to migrate down. In fact, we are looking at various tax planning strategies to have some significant impact over the years but not necessarily in 2011 at this stage. So I would not expect 38% would be a normal rate to use.

So therefore, in the long-term calculation, we're not going to be looking at a 38% tax rate.

And I would say, just for purposes of modeling, I've tended to use a 32% rate, however, with different tax planning strategies, we will update that as we get closer to doing that.

On the Aerial business, are you starting to see order activity from the regional rental guys as well? Or is it primarily just the large nationals?

Seth, this is Tim Ford. I would say, to date, it's been largely the national guys. We're starting to hear more talk from some of the regional players. But certainly in the fourth quarter, the volume was significantly weighted to the large players.

And this is largely just replacement fleet at this point?

Very much so.

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

I have question on Cranes, too. Your orders quarter-over-quarter are actually just as -- up a little bit more than your competitors', I thought, though you mentioned a backlog adjustment. Was that material in any way?

It was related to our Australian business and it was about 40% of the change in quarter-over-quarter.

The second question, therefore, would be on the Aerials. You just talked about the U.S. order rate. Can you talk a little bit more internationally about whether you're seeing anything coming back in Europe, anything structural coming back in Europe, and then the rest of the world as well?

I would say that the North American market recovery, as Ron said in his comments, is very much underway. We feel very good about the U.S. market in 2011. Europe continues to lag the U.S., though I would say in the last 75 days or so, we've started to see some signs of life, things from customers making inquiries, looking for orders or looking for availability, that sort of thing. So my sense is that Europe tends to lag the U.S. about six months, and that's kind of what we're seeing. Latin America continues to be a strong market for us. Brazil in particular, there's a lot of activity going on in that part of the world, and we think that's going to be a very strong market for us for the next several years. And then in Asia-Pacific, 2010 was a good year in Australia. The floods recently create a little bit of a question mark on what 2011 will look like. I'm not sure if that will have an effect on the business. We think that over the next several quarters and/or maybe a couple years, it will probably have a positive impact on the business as the rebuilding happens. But the short-term effect is not known. China, which is, of course, the big opportunity for all of us in that space, continues to grow. We actually -- first part of the year is usually slow because of the Chinese New Year. And we think that the product that we introduced at BAUMA China, which is a boom designed specifically for the shipyard market, is going to be very positive for us. And we've had a lot of inquiries since the product introduction and we're pretty excited about that. Our facility there is up and running, and we're pretty excited about China in particular.

Do you think you can get your price up in all those markets in Aerials?

I would say this is going to be a journey. We're going to be pushing pricing as the volume increases and when we get to an equilibrium standpoint. The fourth quarter was probably not a place where we're at equilibrium, so we'll see. Ron commented on material cost increases. I think we're all facing that. So it's a -- we'll be getting a little bit squeezed on that. But we think over time, as the market balances out, we'll be in a position to hopefully get some pricing as we go forward. The thing that's going to change that is the decline in trade-ins. And as the market balances, people trade less. And as they trade less, obviously, you've got that part of the equation out of the formula.

And I think it's no surprise that those big customers that come to the market early probably get the better pricing. And so I think that's part of that historical trend.

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

Ron, I was wondering if you could update us on your outlook for any acquisition activity in 2011? Are you now comfortable just operating with the assets that you have? Are you not seeing anything that you like at the right price? What's the situation there?

As you know, acquisitions are incredibly hard to forecast or handicap. This is something that we've been doing now in my 19 years or so of operating Terex. The assets that we have we're very comfortable operating and optimizing. And I think there's a lot of optimization opportunity that's housed within our existing businesses. I think we have a mentality today at Terex to become one team, to focus on the synergies that exist between our segments, to focus on the synergies that exist in terms of cost reductions between the segments, and we're going to drive that and we're going to harvest that in the short term. Having said that, we've got, as our business recovers, the potential, I think, to venture out and to look at businesses that present themselves with fair values. It is our anticipation that we will achieve the right position in the middle part of this year, where our trailing performance will actually allow us to raise debt or raise capital again, debt in particular, if we needed to, in an acquisition. And if you couple that with the $500 million of value from the Bucyrus equity, plus the cash on hand, and some anticipated cash flow from our existing businesses, I think we have the potential to capture value that might present itself. The valuations I've seen in the marketplace have run up. So therefore, the ability to actually deliver the kinds of returns on capital I'd like to achieve through acquisitions, I haven't been able to find the right strategic asset coupled at the right price. Having said all of that, we're still pretty active. We've got a number of things that we're looking at and considering. But I would say it's more in the mid- to later part of this year where we'll anticipate doing anything than momentarily.

And then just a couple of quick follow-ups for Phil. In the press release I know you talked about having called the 7 3/8%. It sounded like maybe you'd also been retiring maybe other debt during the quarter? Did I read that correctly? Have you retired any other debt post the end of Q4? And if so, can you give us any detail around that?

No, we retired the 7 3/8%. You may be referring to -- we issued tenders at par in the fourth quarter for other instruments. We received a minuscule amount, and that was in the fourth quarter that we retired that. Unless there's just local, little debt, there's nothing else of significance thus far.

And are there any restrictions on going out into the market to, say, repurchase your higher coupon bonds?

Yes, there are. You need to read all the details to get through all of them. The frictional cost on the higher coupon bonds is very significant. And that does present a level of, call it, barrier to doing that effectively, but we continue to look at other options as we look at trading of those bonds. But you have to kind of get into the detail. It's very complicated on the restrictions that are out there.

And then lastly, Phil, if you could just walk us through the cash taxes that you expect to see in 2011. Just generally on the business, but then also any refunds or cash outflows related to the sale of the Mining assets?

This will be an interesting year for 2011 because you're right, we have several impacts here. So rough estimates, we did receive our U.S. tax refund of $105 million in the first quarter of this year. When we have -- or sell the Bucyrus shares, assuming we do, we will have approximately a $75 million tax payment associated with the gain related to that, that would occur in 2011. So those are a couple of the lumpy items. But overall, we probably net to 2011 payments, including both of those items. So let's say $75 million, order of magnitude, for cash taxes.

Cash outflow of $75 million?

Outflow, yes. It's a rough number.

On the $150 million that you plan to invest for, I think, Terex Financial Services, was that a number for 2011 specifically? And how would we see that in your cash flow statement? Is that working capital just like a receivable build? How will we see that?

So the $150 million represents 2011 net additions. So we've got a portfolio out there today, which we will collect on. It assumes expanding that portfolio. At the end of 2010, we had roughly $95 million on our books. And that shows up in other current assets and other long-term assets, not necessarily in working capital. Both of those, however, would show in cash from operations, in that subtotal. But you won't see them split up into working capital, per se. That's part of the reason we split out other current assets in the cash flow statement this quarter. It was becoming a more significant item, as well as the tax receivable we had at the end of the year. So that's where it'll show up, Matt.

[Operator Instructions] Your next question comes from the line of Henry Kirn with UBS.

It's Eric Crawford on for Henry. But touching on Robert's question, I was wondering if you could talk a little more about the competitive pricing environment you're seeing, where this dynamic is most prevalent. Conversely, where has pricing been strongest relatively speaking?

Let's try and just give a little color. I think it's a broad-based question, and the best we're going to do here is provide some color and perspective on it. I think, we compete in many markets across hundreds of countries, and I think the general sense is that pricing is aggressive at this point in the recovery. In other words, we're all competing for the same business. When business is scarce, people compete for the business. And so in our businesses, even those that have an oligopoly, we're competing, and price is an important part of the mix. Having said that, I think we're competing and making progress. And I think -- let's take Aerial Work Platforms. I think we're sensitive to the fact that we need to get our margins up in Aerial Work Platforms. We're also sensitive to the fact that, historically, we lost some business because of price competition. And our principal competitor was very aggressive historically, and we need to make sure we stay competitive ourselves and win the business. And I think we are certainly doing that. Although, as the market recovers, as the business balances, I think prices will increase. In the Crane area, the Crane business is priced aggressive, often times in trades and in overall packages. And for that business, we have a private company that's a big competitor, European competitor, and they have historically been very price aggressive. So there's some business that we just not going to get on pricing. But I think, there again, as the market starts to increase utilization rates, used equipment values start to go up, the pressure for owning the equipment is as important as the pressure on buying it at the right price. In the smaller equipment, I think the price competition may be a little bit less intense. And I think we're going to be able to, I believe, get some price increases in our small construction equipment. And I think we're going to be able to see some of the benefits and recover some of the costs in that area. And in our Materials Processing business, I think the fact that we have a strong niche and a strong brand and a strong distribution network, we'll be able to recover supplier increases. So rather than try to walk you through each one of our individual businesses, I think that kind of a general comment should suffice. I think you'd also appreciate that the same product can be priced quite differently between the United States and Europe, or between Europe and North Africa. It all very much depends on the competitive environment at a moment in time.

Could you talk a bit about ASV and the progress you're seeing there?

I'm going to turn that over to George. And, George, why don't you comment, because we've got some exciting things happening at Terex in Grand Rapids, Minnesota.

We are seeing the recovery begin on that product line, not necessarily just in North America, but with our distribution that we have throughout Terex. We've been able to see good penetration in Latin America using our AWP distribution to help us grow the market where it wasn't before. We also introduced and began shipping our first skid steers in January out of that facility, which we have some exciting interest in. We introduced it at a few shows last year and put it into production last month. And the demand and desire for that product, even in this market, where there's a couple different competitors, well recognized, has had great acceptance from our distribution. So we're very excited about that product and that business.

So bottom line is meaningful increases in production from that facility. The compact track loader piece of it is solid and improving. And the new skid steer loader that we're introducing, we've already had to take our production planning up meaningfully. So we're pretty positive about what's happening there.

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

Just a couple of more questions. Sequential performance in the Aerial Work Platform business, given the increase in revenues that we've seen and operating profit sort of not really going anywhere. Historically, I thought given your LIFO/FIFO mix, we really did not see raw material costs up front. And so what does that imply about sort of this raw material pressure actually getting worse in the first half of the year of 2011? And what actually happened in the fourth quarter versus the third quarter that we really didn't see any operating leverage from higher volumes in the Aerial Work Platform business, and to a lesser extent, Construction?

Andrew, it's Phil. I'll start and then Tim will fill in some additional detail. When you look at the third quarter to the fourth quarter, there are, as usual, some anomalies between the periods that really impact the margin. So in Q3, we had, I'll talk gross margin of 17.8%. In Q4, it went to 15.1%. If you'll recall, we talked about an adjustment related to our duty, adjustments between the quarter. We actually had favorable benefits in the third quarter versus the fourth quarter of fairly significant size. We also had a very favorable foreign exchange transactional impact in the third quarter that didn't repeat itself in the fourth quarter. That accounts for 4.7% of the change. So in other words, 17.8%, down 4.7%. And then we've recovered on the volume. And we only got about $9 million of absorption between the third and fourth quarter, positive. And I'd say the other factor that contributes to it is some of the margin on the deals that we had come through in the fourth quarter. So I'll let Tim elaborate on that, if there's anything additional.

Andrew, I'm very well prepared for this question because my boss has been asking me the same question for the last 45 days. I think Phil covered most of it. The only other point I would make is that we had very strong volume in the fourth quarter, though pricing was flat in North America. In that, however -- and North America is by far typically our largest market -- we did have some unfavorable product mix. So we sold some smaller equipment that tends to have less favorable margin effect to it. And Phil covered the other point with respect to some of the specific deals that we took in some of the developing markets. But in that, it wasn't only pricing necessarily. There was a mix element to that, too. So I think Phil's commentary on the other pieces are spot on, and that's the other color I would add.

But that would imply that, on a sequential basis, we should start seeing impact as volumes continue to recover. Q4 is a nice base to think about relationship between profitability and volumes. Is that fair?

Yes, well, we had -- I mean, if you look at the 2010 improvement over 2009, it was fantastic in terms of operating profit relative to the dollar sales increase. I don't think we'll see that kind of improvement year-over-year. But we're going to see continued margin growth as we go through the year.

But his point is an accurate one. It's a good base upon which to build. The fourth quarter, I think, if you subtract some of the mix and specific deal issues, too, it actually was substantially better, and that's the base upon which to build. And I think the way I'd look at it is, is we're going to grow this business. The early part of our growth will be in the areas where our customers have the best pricing, meaning margins will be a little bit lower than they'll be in the latter part of the year. But in general, we should expect some meaningful uplifts in margins as we go through the year, as we get continued meaningful uplifts in volume.

And it'll come from the volume, not necessarily absorption or production as much as it did in 2010.

It'll just come from that line.

And just a follow-up question. As I look at your level of profitability in 2010, and I compare it to sort of '02, '03 level, and then I look at free cash flow, the company was generating a lot more free cash flow in '02 and '03. And the question I have, how much of this working capital used in 2010 can actually be reversed in 2011? Or is that just a permanent buildup in working capital?

No, I think if you do the math on the 28% of working capital to sales, it does throw off a good reduction in terms of working capital balance, Andrew, in terms of what we see. And I think as the mix of businesses change, too, less Cranes, more AWP zero processing and so on, that will improve. There's one structural thing I'll point out, Andrew, that we were discounting receivables back in '02, '03 to the tune of about $200 million. We don't do that anymore. So that's a permanent effect, negative, when you're looking back at those periods. So just so you now understand structurally.

On an apples-to-apples comparison.

Yes.

I would also say 2002, 2003, between 2002 and 2003, we actually acquired Genie, we acquired Demag. We had $100 million of inventory from Demag that we cleaned. I don't know if that's the exact number, it was up.

In the first year.

It was about that in the first year out of Demag, that basically lowered our purchase price and netted our investment in that business to be fairly low. So there was a few unusual activities there. I think the right way to look at our working capital efficiency is this: we're going to measure it on a percent of working capital basis. Phil has indicated 28%. 28% is not heroic. We need to get that number below 20%. We've operated as low as 17%, but that was when we were discounting receivables, as Phil said. But in order to do that, we're going to have to improve the systems and improve the integrated relationships that we have within our business. That's where we're spending money. We're spending a substantial portion of our SG&A on IT systems. Only 19% of Terex is on the enterprise system today. In 2011, later in this year, we will have AWP go on that system. And while AWP is a fairly efficient user of working capital, I believe it's relatively inefficient in how it plans its business globally. So I think there's a big opportunity there. Following that, we will then address some of our bigger European operations in 2012 and 2013. And there, I think we can unlock a substantial amount of working capital in how we plan and organize our business. That's a function of just how young Terex really still is from an operating point of view.

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

I've got a question on AWPs. You said earlier that you were up 29% in Europe and the industry was flat. And that may or may not be a market share gain depending on what happened the year before. If you had lost share the year before, it would simply be a recovery to. So to what extent is that market share and where is that market share gain coming from? Which competitors in Europe?

As I indicated when I made that remark, a large portion of our increase came from smaller products. And yes, there is some moderate market share improvements in the second half of 2010, but I would say, in 2009, we lost market share. And I'd say it's more like a recovery of our market share than substantially new long-term gain. You know, "I'm mad as hell, and I'm not going to take it anymore" kind of approach to the business. But frankly, I'd rather be growing my market share when the market is growing than growing my market share when there is no market. So I think what we're doing is the right thing.

The second part of the question is, relates to the big rental fleets. For example, United Rentals said in their recent call that the age of their fleet in total, including AWPs and all other things, was 48 months, up from 42 months the year before. And we know that the right age is around 40 months, 39 months or even less. So in order to control their maintenance costs, they really have to get their age back to around 40 months. And in that regard, they announced that their purchases of equipment this year would be up some 80% in order to reduce the age of the fleet. To what extent is what URI doing being reflected in the other rental fleets? Is it a general trend or are they alone in doing that?

Tim?

Alex, this is Tim Ford. I would say what you've heard from United is consistent from what others have talked about publicly, the public companies. Largely, the forecast that Phil went through reflects much of that increase. So there's nothing unusual that United is doing versus others. And I think that we're basically in the beginning of a recovery, replacing fleet to get the age down. And once that happens, as the market continues to improve, then we'll see the growth capital. But today, it's really a replacement market.

What I would say in addition to that is, the U.S. may not be in a strong economic recovery, but what happened among most of the major rental companies was they virtually stopped buying. And when you stop buying, fleets age quickly. It's unprecedented in my experience in this industry that the buying went down so much. I mean, usually, people reduce their purchases, adjust, and the economic drop is more -- how should I say it -- less severe. But the fact that everybody stopped buying AWPs for approximately 18 months and now they're buying means that they're buying for replacement because they have to. The good news is, when economic activity really improves in this country, they're going to not only have to buy because their fleet is old, but because they need it to grow. And so I think we still have that in front of us.

Well, that's true. I mean, the business, their purchases of all equipment were down 75% because they let the fleet get older, and they were up from that level last year and they're up another 80% this year, but they're still down 25% from where they were at the peak. In AWPs, I think we're even greater decline within that. Is that correct?

Yes, it was in the range of 80%, Alex. The other thing that I think is good is that during this period, the rental companies figured out how to run their business for profit and for returns, the returns on capital. Which meant they worked hard to get their pricing up; they got rid of branches that weren't profitable; and they systematized, the better companies, systematized how they go about planning their business. So I think despite the fact that this was a pretty difficult period for the rental companies, those that survive now have a business model that works better than the model they had prior to this downturn.

Your next question comes from the line of Andy Casey with Wells Fargo Securities.

Quick question. A lot of it already been asked. But question on the Construction Equipment operating profit increased expectations. If I look at your 2011 guidance midpoint, the implied incremental margin is pretty mixed by segment. But within that Construction incremental, before the allocation change, seems somewhat higher than what you've been able to do historically and somewhat above what some of your competitors have been looking for. I know you've really been working the margin and there's a lot going on in that business. So could you potentially give us a high-level bridge for that operating profit outlook? Or if that's not available, just kind of help us understand the big buckets to think about?

The average of the range would be about a 42% incremental margin relative to what we had. I would say -- well, I'll call on George in a second, but let me give you a couple comments. The Construction segment in 2010 had a level of unusual things occurring. We were still doing a lot of restructuring. We shut down a Chinese plant that we had that was a drag on the business. We certainly had a little bit of other restructuring activity in our German operations, where the facilities were there. So getting those to a level of stability represents part of the recovery that we have. And we also have the acceleration, particularly in the Heavy Truck business, that started about midyear in 2010 that is really ramping up considerably in '11, as well as the Scrap Handling business, which has been fairly good in the back half of 2010 in accelerating as well. The differential in margins from our Compact Equipment would be the other impact year-over-year, where a lot of the restructuring activity has occurred. And George, do you want to add to that?

Sure. Andy, thanks for the question. Also, to add to what he said, is during this period we've done a lot of consolidation to improve our productivity and the throughput and utilization of our plant and equipment throughout some of our Roadbuilding businesses, and also in Germany, where we completed, at the end of last year, consolidating three facilities into one, as an example. So we're really working not only the market side, and we're seeing the growth on the market side, but also inside our walls, really focusing on the improvements there and moving the TBS process faster through the factories to get the benefit.

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

Can you just give us a little sense, the hold up on Fantuzzi? What are some of the issues between here and profitability?

First of all, I think it's a long-lead-time purchase product. And while the Ports and Port Equipment outlook is now improving, an order placed today is likely to be an order delivered in 2012. So, A, it's long lead time. The good news for us is that our super stacker type businesses, the product lines that we've produced in the Lentigione factory and in our Montceau les Mines factory in France, which did not come with the Fantuzzi acquisition but was a business we already had, those businesses are very strong. But the bigger products, those that we make in Xiamen in China and in Wurzburg and in Monfalcone, which is in Italy, those are bigger products and those are just beginning to get some recovery in the business. Now, we have underutilization of those facilities as well. And so one of the things that the Crane team, led by Kevin Bradley now, is working on is crossutilization of the factories. And so that will take us some time to put new production into several of these factories, some of which may not be Port equipment. So we're carrying overhead that needs to become more productive, and just was never going to be productive under Fantuzzi's ownership. So we're going to have to keep doing a little bit more restructuring. We probably are carrying a little bit more cost than the team wants at this stage. So it's going to be a gradual process of working that this year. Kevin, do you want to comment any more on that?

I would agree, Ron. I would just say that you're right, the focus on productivity and trying to get at these synergies across the various platforms is going to be a big focus that we're going to intensify this year.

I'm trying to get at the distinction in a bunch of your end markets between equipment wearing out in the field and the end markets, the actual demand in the end markets getting a lot better. Can you just go through a couple of highlights and give us some idea where you see the end markets getting better? I mean, AWPs is pretty obvious. But I mean, is it energy related, commodity related? And then where would it be more of a factor in 2011 that the equipment in the field is worn out? I know it's pretty broad based, but just some highlights.

Let's take a segment that we don't talk about a lot, but, Materials Processing. Our Materials Processing business dropped between, the peak to the trough, from about $1 billion, $1.1 billion in revenue, down to about $350 million in revenue. And basically, that business went on a hiatus, but the equipment continued to be used. The equipment, either rented through the power stream distribution channel or the equipment that was crushing rocks and screening aggregate, continued to be used. One of the things we did was a deplete-the-fleet promotion at the end of last year in order to get whatever was rented in our distribution chain converted to a purchase. We do believe the fleet out there was aged somewhat, and I think -- and in particular in markets like Europe and North America. I think those are positioned pretty well for growth. Moving to the Crane business, the North American crane market actually went through a period of fleet clearance, with many of the big rental companies, either on the edge of bankruptcy or in difficulty, monetizing their fleets and selling them off to South America, Latin America, Middle East. And that process is basically done. And the process of a rental rate improvement is begun, as rental rates and used equipment valuations increase the appetite for new equipment purchases begins. And that's where we are in the Crane business in North America. I think the housing recovery isn't really there. Everybody knows it's not there. Housing began its decline in 2006. But because we're now into the fifth year with virtually no housing recovery, the older small equipment, such as motor backhoes, mini excavators, midi excavators, the various skid steer loaders and equipment that works on the periphery of the housing industry is just now damn old. And it needs to be replaced and is beginning a process of replacement. So while the end market housing isn't much better, after five years, stuff just wears out. Any other members of the management team want to comment on that?

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

This is Nick Capolis [ph] going in for David Wells. I just want to follow up on what you were speaking about earlier in terms of the ERP system and working capital. Of the 19% of revenue that you're already seeing come through the ERP, what benefits are you seeing, whether it's working capital or any other kinds of benefits? And then also, there are a lot of risks surrounding a rollout of an ERP system. So what kind of, I guess, controls do you have in place to kind of watch those risks or just how do you think about that?

I tell you what we're going to do. We're going to ask Phil to deal with the risk question, and then I'm going to ask George Ellis to comment on some of the benefits, because he's got a couple of the facilities that are covered within the 19%. So Phil, why don't you deal with the risk?

Nick, in terms of our process, this has been well orchestrated in the sense of having an executive steering team that's regularly watched how we work through the -- kind of the stage gate process of implementation. We started with businesses in three geographies, U.K., Germany and the U.S., midsize businesses such that if there was an issue, it wouldn't break the bank, so to speak. So in pilots, and then we've expended in those geographies as we've gone through. We are doing a single instance around the world. We are not changing source code in terms of our design, and we have commonality of data around the implementation. The effectiveness of having a business team that works alongside an IT team. And largely we are managing this internally as opposed to writing a check to some expensive outside firm; we have a combination of employees and others that we source from. But working as a team, we work through stage gates, like you would in a new product development. And you don't go past that stage gate until you're comfortable in terms of risk approach. Our biggest implementation this year will be AWP, where we've had more dedicated resources on the business side and very good process reviews to make this a success. So we're very conscious of what can go wrong. We feel we're cautious about our approach, but aggressive in terms of looking for opportunities through the implementation of knowing more about our customers, more about our suppliers, where our inventory is and how we can plan better.

Before we turn it over to George, it is my expectation that we're going to get three benefits from this. Number one, we'll have better visibility to on-time delivery. On-time delivery is an issue for our company and the industry in general. Secondly, in my view, we'll get substantial inventory reduction. And thirdly, we will achieve better data, which will allow us to manage our business more aggressively, both on the supply and purchasing side, as well as on the customer management side. So really, there's a three-pronged benefit here, and it's cost, it's inventory and it's customer service. So George, why don't you comment?

David, also, just to add a little color to what both Phil and Ron described, manufacturing in multiple facilities all over the world and to distributing them in various geographies and doing that with different legacy systems that do not talk to each other creates inefficiency. And with us having it one system that we can all see realtime has allowed us, through our scheduling and operational planning tools, to reduce our overall finished goods inventory at specific sites, reallocate inventory, move it around if we need to, and also help us on the inbound side to make sure we're lined up more with the true demand is. Because having multiple systems that aren't talking, it makes it very inefficient in trying to do that. So generally, you would bring more inventory in to try to protect for that.

For Terex Financial Services, how large can that get? I know you are looking for a $150 million investment in 2012. I'm wondering if you just think about that as a way to kind of prime the revenue pump or are you looking to really get margin on that at any point?

Nick, a few comments there. We are mainly looking at TFS as a generator of incremental sales for the business in the near term. And again, during this downturn, where maybe institutions may have had too much concentration themselves, we know the equipment, we know the customer base. And that's not to say we're only taking bad deals, I want to emphasize. But we are certainly getting higher returns on this portfolio that I am with the cash that I have. Longer term, as we expand in other geographies, and I noted some of the developing market areas are part of our '11 plans, that's going to consume some cash. But I would expect longer term, as we do today, we'll have a combination of third-party funders, which we still use, some on-book activity and then probably getting to the point of maybe financing through securitizations. But we're looking at it more in the near term as an incremental sales generator and a differentiator in that vein. But again the returns are better than the cash that we have. Hopefully, that helps you.

Your next question comes from the line of Paul Bodnar with Longbow Research.

Could you just talk a little bit about the different -- what the profit profile looks like maybe in some of the South American and Brazilian orders? Is that substantially different or different than the rest of your geographies?

Let me turn it over to Steve. I'll comment on some of what we're seeing in the developing markets. Steve?

Thanks, Paul, for the question. Definitely Latin America is growing. The business there for us has basically doubled. Margins are, I'd say the same, maybe a little bit better than some of the other markets. But Latin America is definitely one. India is definitely picking up for us. We're up about 150% versus last year. Russia and Eastern Europe are up about 30%. And if you look at the Middle East, again, United Arab Emirates is pretty slow, but Saudi and places like Kuwait, they're investing in petrochem, and commodities continue to grow for us. But to capture really the different margins is kind of difficult.

The one thing I would say is that where there's a big order, it's highly price competitive, and we know that -- we took a pretty sizable AWP order at the end of the year. And frankly, we did it to invest in the market long term. We are, in our view, going to be the number one seller of telehandlers in a market that never used telehandlers before. And we felt it's important to get the Terex and Genie name into the market in order to be the product of choice for the future.

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

Just a couple of quick ones here. On AWP, you talked about the sale of utility rental fleet being part of sales. Can you just quantify that? What did that involve?

Order of magnitude, it was about $30 million.

And then on Construction Equipment, the amount of rental volume out of Construction in the quarter, was that unusually high? Did something drive that to be abnormally high? And would you expect part sales to kind of continue to be higher than normal in the early part of a pick-up here?

I'm sorry, Charlie, did you say rental in Construction?

No, the construction, the parts business.

Parts activity has been pretty strong in Construction, and I'd say really started to pick up in the second quarter of 2010. And again, as equipment ages, we've talked about that, that does have a factor in here. Plus the programs we're looking at in terms of customer replenishment rates, still rates and so on, we've done a lot to improve there, which will bring additional volume from our customers. So I don't know if George wants to comment on that as well?

Yes, Phil. I just support what you said, and we have seen a steady improvement in part sales and some of the businesses that have not recovered as fast yet, we are seeing significant part increase basically because the equipment is getting older, and to keep it running they're having to buy more parts to keep it moving. So it's been steady growth for us for the last five or six months.

Just on the Material Processing business, you talked about a dealer restocking kind of benefiting you. I'm just wondering to how far into the dealer restocking are we? How much more legs do we have on that going into 2011?

I'm going to ask Kieran Hegarty, who's in Bangalore, to answer that.

Well, first of all, I do want to stress, right, obviously as Ron touched earlier, you see the Materials Processing business declined quite significantly in 2009 from the peak. A lot of that was the fact that because of effectively dealer stock. Whilst our business in terms of the actual true demand, the customer demand, didn't decline, that level of which it was obviously through their peak years, 2007, 2008, the dealers were stocking up. One thing that we've been very diligent on in the last year or two is to actually try and make sure, whilst it's good the dealers have stock on the brand, you don't want to get ahead of yourself and you certainly don't want to load your channel up in the event that there's a slowdown. So we've been very careful in measuring our dealer inventory and trying to ensure that both end-user demand and dealer stock are aligned. We're actually very comfortable in most of our main markets, particularly in North America, that, that's actually the effect, the truing effect, and that demand, dealer stock, supply, et cetera, are all aligned. So we're fairly comfortable with that position. Just briefly again in terms of deplete the fleet, we use a dealer model that go to market, primarily, in Material Processing. A lot of our products are actually sold on a rental/purchase basis. The deplete-the-fleet tactic actually moving product, either the rental fleets and dealers that is perhaps 18 months to 24 months. That's typically when dealers like to turn the inventory in terms of replacing the fleet. So in terms of broadly speaking, in terms of what more, we don't actually believe stocking dealers is going to be driving growth. What we think is going to be the driving growth is just the fact that the demand is picking up, and the fact that supply and demand are linked by the dealer channel.

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

I just wanted to make sure I understand the timing of the raw material impact. Just broadly speaking, do you have the material for the quarter or the first half locked in, either on the ground or contractually, meaning you face a bigger magnitude increase later in the year? Or are you already absorbing that now and are going to face less margin pressure going forward due to offsetting price actions?

Steve, I think the answer to that question is really a mixed bag, depending upon the business, the market, the factory, et cetera. We do have a number of long term supply agreements. And actually, we're going to buy forward. We're actually doing that right now under those agreements in order to mitigate future increases. That, coupled with some pressure on from me to take prices up will, I think, help balance out the negative effects. This is though -- it's a bit of a navigation game. The wind is blowing one way, and as it shifts, we navigate and we're all trying to get our margins and we're trying to get prices up and keep costs down. So eventually, when I have that system in place and I can give you good material price variances from anticipated standards and have it all rolled up in a common system, I'll be able to answer that question quantitatively. I don't want to sound like I'm just giving you generalities here. I think I could answer it quantitatively on every particular business, but then adding it up wouldn't be so easy. And so I think that's a general answer to the question, Steve. I hope you didn't mind.

I understand there's a lot of moving parts right now. One last one I'll squeeze in. The lack of a highway bill, as I talked to some of these smaller private companies, is really hurting their planning and CapEx spend for machines. Is there any way to frame up how big the impact of that is to you or maybe talk about what's the potential for pent-up demand if they finally do put together a multiyear deal?

I think the highway bill effects, the negative effects are basically played through our business more or less at this stage. I don't think any of us in the industry are optimistic that there's going to be a bellwether bill in the short term that's going to drive our business substantially different than where it already is. I'd like to wax eloquently here and tell you how important it is for us to build our infrastructure, et cetera, in this country, but then we'll come back to the reality that we have a multi-trillion dollar deficit that needs to be addressed first. So I think it's a long term issue. But in the short term, probably not a lot of help. Well, I want to thank everybody for your interest in Terex today. I hope we got to everybody's question. If we didn't, please follow up with Tom and our team, and we'll do the best to address any and all of your questions. Thanks again.

This concludes Terex Corporation's 2010 Fourth Quarter Financial Results and 2011 Outlook Conference Call. You may now disconnect.