Ronald M. DeFeo - Executive Chairman and Chief Executive Officer Kevin P. Bradley - Chief Financial Officer and Senior Vice President Matthew Fearon - President of Terex Aerial Work Platforms Stoyan Filipov - Chief Executive Officer of Terex Material Handling & Port Solutions and President of Terex Material Handling & Port Solutions Timothy A. Ford - President of Terex Cranes

Ann P. Duignan - JP Morgan Chase & Co, Research Division Nicole DeBlase - Morgan Stanley, Research Division Ted Grace - Susquehanna Financial Group, LLLP, Research Division Jamie L. Cook - Crédit Suisse AG, Research Division Ross P. Gilardi - BofA Merrill Lynch, Research Division Jerry David Revich - Goldman Sachs Group Inc., Research Division Seth Weber - RBC Capital Markets, LLC, Research Division Eli S. Lustgarten - Longbow Research LLC Andrew M. Casey - Wells Fargo Securities, LLC, Research Division Stephen E. Volkmann - Jefferies LLC, Research Division Robert Wertheimer - Vertical Research Partners, LLC Vishal Shah - Deutsche Bank AG, Research Division

Good morning. My name is Phyllis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Terex Corporation First Quarter 2015 Financial Results Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Mr. Ronald DeFeo. You may begin your conference.

Thank you, Phyllis, and good morning, ladies and gentlemen. We appreciate your interest in Terex today. On the call with me this morning is Kevin Bradley, our Senior Vice President and Chief Financial Officer; and Kevin O'Reilly, Vice President of Operational Finance; Tom Gelston, VP of Investor Relations; and several of our leadership team members, including our business segment presidents, available for your questions. As usual, a replay of this call will be archived on Terex website, www.terex.com, under Audio Archives in the Investor Relations section. I'll begin with some overall commentary, and Kevin will follow with a detailed financial report. I will then provide some specific segment information and an overall summary before we open it up to your questions. As always, we will be following the presentation that accompanied the earnings release and is available on our website. [Operator Instructions] Let me now direct your attention to Page 2, which is the forward-looking statement and non-GAAP measures explanation. We encourage you to read these as well as other items in our disclosures because the information we will be discussing includes forward-looking material. So now let me begin, turning to Page 3. The first quarter was challenging, but the overall outlook for 2015 remains very much intact. Three drivers behind the results in the quarter. They were AWP margins, a change in currency rates and an unusually high tax rate. Let me briefly touch on each. As we described back in February, our expectations for the AWP business was to have a slower Q1 than traditional as many customers were asking for deliveries with later ship dates. This was compounded, though, by continued uncertainty in the North American oil and gas industry, unusually cold and snowy weather in many parts of the U.S. and the lingering impact of port…

Thanks, Ron, and good morning, everyone. I'll be reviewing our results for the first quarter of '15 and comparing them to prior year results. Let's turn to Page 4, where I'll review the operating results for Q1 on a consolidated and segment basis. Net sales for the quarter of $1.5 billion decreased from the prior year by 9.6% or $159 million. Foreign exchange impact can account for the entire decline. Our AWP business declined 13%, approximately 10% excluding the impact of currency. Although we had expected Q1 to yield lower sales in Q1 of '14, it was a slower start than we planned. In North America, we did experience some shipping delays due to weather conditions, primarily in the Northeast. However, roughly 70% of the decline relates to the Latin American and European markets. These markets were impacted by different drivers. In Latin America, the decline was driven largely by the macro environment and an overall slowdown in the Brazilian economy, resulting in sales decline of over 90% over last year. In Europe, our business actually remains quite strong with backlog up 37% compared to the prior year. In the first quarter, however, AWP sales in Europe were impacted by the prolonged labor issues in U.S. West Coast ports, which had a meaningful negative impact in the quarter. Construction had a decline of sales of $42 million or 21%, approximately 12% on a currency-neutral basis. This decline was driven primarily by the divestiture of ASV, which is included in the prior year period. Our Crane, MHPS and MP businesses all reported a decline in sales for the quarter but on a currency-neutral basis, increased sales by 11%, 4% and 7%, respectively. Operating profit for the quarter decreased $31 million compared to the prior year. As a percentage of sales, operating…

Thank you, Kevin. Turning to Page 7, we presented our geographic footprint -- our revenue geographic footprint. Our largest markets remain North America, which showed a slight decline of 2% for the quarter on a year-over-year basis and now makes up 45% of our total revenue base. Most of the global markets were down, however, as some, such as Western Europe, were down mainly as a result of lower euro and British pound valuations versus the U.S. dollar. Europe continued to represent about 1/3 of our overall business. Global markets other than Europe were mostly negative, especially Latin America and Australia, as investments in oil and gas and infrastructure have substantially slowed in these markets. Sales for AWP in Latin America were down 73% year-over-year and, together with MHPS, drives most of the 55% decline in sales in that market for Terex overall. As a result, sales for the rest of the world declined to 23% percent of total sales, down from 27%. We did see a slight improvement in the Middle East in the quarter, which we will continue -- we believe will continue throughout 2015. I'd like to take a few more minutes to provide a quick review of each segment, starting with Aerial Work Platforms, on Page 8. As I stated earlier, AWP is well positioned going into the second quarter with a meaningfully higher backlog than a year ago at $699 million. The order patterns from our customers developed pretty much as we expected, with major accounts placing their large stocking orders in the fourth quarter and expecting delivery in late Q1 and into Q2. This is best highlighted by the chart in the upper right that shows net bookings and the book-to-bill ratio on a trailing 6-month basis. This highlights the overall trends and removes…

[Operator Instructions] Your first question comes from the line of Ann Duignan with JPMorgan. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Ron, could you just walk us through, specifically, your segment guidance sales growth? I know you talked about it in the presentation, backlog -- book-to-bill being up, but net orders were down in every segment. So where is the greatest pressure as you look at each segment in terms of revenues or sales?

Well, I think our order intake was fairly consistent with what we expected in almost every one of our businesses. So essentially, we're not making any significant changes to the guidance we previously provided, both in revenue and margins. So the quarter is really -- while it's disappointing, it's really pretty simple. And the story is AWP margins and a little bit of volume but a very, very nice backlog and a very positive momentum into the second quarter. Cranes pretty much had a quarter as expected, weak North American business, improving in some other areas. Our outlook is actually encouraging in the Crane business. Construction, as anticipated, had a weak Q1. We'll have a significantly improved Q2. Our full year still looks like a little bit around breakeven. The Material Handling or scrap steel product that we have, which is probably our embedded most profitable business, have stabilized but not really delivering a level of profit that would push this whole segment over the goal line. And Material Handling & Port Solutions almost always has a weak early part of the year, with its business strengthening in Q3 and Q4. And that, we expect, will continue. Although the restructuring activity that's underway there will begin also contributing positively later in the year, as we have expected. And Materials Processing had a very good Q1 and is right on track for the rest of the year, had a small acquisition that we just made in Materials Processing to position us better in the wood processing and the environmental products category. But that really will be awash in the short term due to purchase accounting, et cetera, but will be a nice positive contributor. When I say small, it's a business that's in the range of $40 million to $50 million of revenue. And a nicely profitable business once we get through the purchase accounting side of that business. So in general, I want to express a reasonable amount of confidence as we sit here in the second quarter. I'm not happy with posting a $0.02 loss, but as you dissect it, I think it is pretty much as we would have expected, barring a couple of things we already commented about. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Okay, I appreciate that, Ron. And then just as a follow-up, I think you had guided earlier to kind of a 40%, 45% EPS in the first half, with the balance in the back half. Are you still comfortable with that kind of split, first half versus back half? Or have we now pushed more into the second half?

I think as we look with reality of the effects of some of the currency and the tax rate, it's more likely that will be 35% to 40% first half versus 40% to 45%. And that's not out of our historical context. In 2013, for example, our first half was 39% of our earnings for that -- adjusted earnings for that year, and that's a similar business profile that we have today.

Your next question comes from the line of Nicole DeBlase with Morgan Stanley.

So my question -- my first question is on AWP. I guess one of your bigger customers mentioned on their earnings call that they could potentially cancel some CapEx towards the second half of the year if oil and gas remains an issue. So I guess my question is, how much of a risk is that to your full year earnings guidance?

I'll answer that, but Matt, you can provide some additional commentary if you like. Our customers always like to highlight the fact that they have that option, and of course, they do in a certain sense. But we're also pretty much partners with them, and they work with us on planning their fleets and giving us visibility to how they see the year. And so we plan our business pretty much as -- with a positive relationship with our customers. So our customers are telling us right now that they see the year fairly positively. Events can always change, but then places strengthen as well. So one customer doesn't always set the entire tone for the marketplace. Matt, do you want to add anything to that?

Yes. I'll just add that we work with our customers throughout the year, and it's quite often that we do mix changes as we move through the year. And there are no cancellation clauses in our agreements, but it would take something pretty drastic for them to do large significant cancellations. And we don't see that on the horizon. And if there was something large and drastic, putting a bunch of gear in their hands when they don't need it, that's not good for anyone in the long run. But right now, we don't see anything like that coming. And so we stay connected with the customers, and they're still positive.

Okay, got it. That's helpful. And then my follow-up is on FX, I guess. I mean, you guys are in kind of a unique position since you have such a big European manufacturing base. And I think you had talked on the last call about potentially shifting some production to Europe to take advantage of the currency situation. I'm just curious if you guys have made any move so far, if you envision making moves in the rest of the year.

Well, we're fortunately pretty well positioned with a decent footprint in Europe by our segments, and so what we don't want to do on this call is indicate what we've already decided and what we're going to do because we know our competition listens to the calls. But there's clearly a few adjustments that we're making that will address some of the currency, and frankly, we think we're in a reasonable place. But the currency movements will challenge us over an extended period of time, particularly as the euro stays pretty weak. But we will be making some changes because I don't believe the currency goes back to where it was just 6 months or so ago.

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

Ron, could you maybe just -- as a follow-on to Anne's question about kind of the second quarter and the first half, could you maybe talk about how people should be calibrated for orders in the second quarter? Typically, they're flat to down 15% sequentially. You've obviously got the AWP dynamics from the fourth quarter, being strong as it was, kind of manifesting in the first quarter. But just from the standpoint of helping people understand kind of what orders need to look like in the second quarter, could you give us some handholding there?

Sure, Ted. In fact, rather than I do it, I'm going to hit our top 3 segments, starting with AWP. Then I'll go to Steve, in Material Handling, and end it with Cranes. So Matt, why don't you provide some color on that question?

Yes. On Page 8, we gave the chart on the right to try to give you a view that each year, it can be a little deceiving because this year, in particular, we got a lot of orders for the year in Q4, whereas the prior year, we got them in Q1. So the way I look at it is in the Q4, Q1, that's going to be your peak of your order season. And it's going to start and you build your backlog then, and it's going to start to decline as you move through the year. This year, it's a little bit pushed out more towards Q2. Orders will come. They will continue to flow in. The backlog will go down, and when you get into Q3 and Q4, the visibility of filling your order book, it shrinks as you go through the year. But we expect good orders as we move through Q3 and Q4. The large orders are basically all-in, and it comes into more as they look at their fleets, what's out on utilization, they place the orders in smaller chunks.

Steve?

So on MHPS, I'd say Slide 11 kind of tells the tale. And I see a similar year this year as to what it was last year. So you can see we're gaining momentum right now on increasing our book-to-bill, and that's a good sign. And we're increasing the backlog in our core products, which we've said that we're going to go out and do. So I look out a little bit, we've got good coverage on the straddle carriers. We've got good coverage on our rubber-tired gantry cranes, on our ship-to-shores. And we pushed really hard on our mobile harbour cranes, and we doubled the backlog in our mobile harbour cranes year-over-year. So we continue to push...

And this is important because a weak backlog going into this year in mobile harbour cranes caused the Material Handling & Port Solutions, Port Solutions business, in particular, to have an unabsorbed manufacturing operation, which was a pretty big negative drag in Q1. Our Q1 would have been a lot better had we had the backlog that we now have. And I think the market's there for us in the mobile harbor crane business to get.

Yes. So we're pushing that pretty hard, Ted. I'd say on MH, on Material Handling, it's still kind of flat year-over-year, and it's hand to mouth. I mean, there's a lot of velocity in that business. So I'll also talk about the $80 million order intake a month, and we're kind of sitting right about there. So I don't see a much different picture this year than last year.

And Tim, Tim Ford?

So I would say in the Cranes segment, Ted, you've got a little bit of a mixed market. The Utility business, Utilities and Services business is actually an area of continued strength for us. It had a good first quarter in orders, and I expect the second quarter to be strong as well. The Crane business is a bit of a mixed bag. We've got 3 negatives and 2 positives. North America, for sure, is struggling. Rough-terrain, all-terrain and boom trucks are down significantly in that space. You've got European large crawlers, which are down, and our Australian Pick & Carry business is down. And I don't expect any material change in those 3 negatives. The 2 positives, I would characterize, are the Middle East, which had a significant improvement in the first quarter in both all-terrains and rough-terrains, and I expect that to continue. And the all-terrain business in Western Europe is actually improving. So those feel like the net pluses and minuses for me in the Crane segment.

All right. That's super helpful. If I could just ask a second question. In terms of the cost-saving plans, you've outlined $50 million target. Could you maybe give us a sense for where we are exiting 1Q and incrementally, what we should look for in 2Q?

Yes, Ted. So essentially, the initiatives across the segments are pretty much on track. We did say that the bulk of the $50 million impact this year would be largely in the second half of the year. We still feel that to be the case. We do intend to give a fairly comprehensive update with Q2 earnings in July. But so far, on track.

Your next question comes from the line of Vishal Shah with Deutsche Bank. Your next question comes from the line of Jamie Cook with Crédit Suisse. Jamie L. Cook - Crédit Suisse AG, Research Division: Ron, I guess just a question, sorry, to harp on the guidance again. But I understand the issues, the specific issues that happened in the first quarter, but you didn't make money in the first quarter. You said before earnings should be 7% to 9%. I think a traditional quarter for -- a traditional first quarter for Terex's earnings to be sort of 10% to 12% of the first -- full year earnings. So I guess my question is how do you think we make up for the hole in the first quarter. Or do you think it's more prudent for investors to think that the low to mid-end of the range is more likely just because of the issues that were sort of out of your control, whether FX type of stuff? And then I guess just my second question, as it relates to energy again, I feel like you were a little more prudent relative to some of the other companies in saying that, look, energy really could be a headwind, even if it happens sort of later in the year, whether it relates to Aerials and Cranes. And I guess I just don't hear that as much of a concern in your voice or in your commentary. So do you still see that as a big risk? And then I guess it gets back to, again, why not say that the low to mid-end of the range is more likely because of that?

Okay, Jamie. The guidance is pretty -- if you dissect the first quarter, the tax rate itself is about an $0.08 impact. And the FX losses, which are nonrecurring, unless the currency deteriorates meaningfully from what it was at the end of March, the FX losses were $0.04. So that's $0.12 delta. Operationally, we missed about $0.08. $0.08, in our view, was within the margin of error, certainly, for the guidance that we provided. And we're not going to try and shave the guidance or narrow the guidance at this point in time because we believe we've got as much upside opportunity still left in our company as we have some downside risk. If the energy and all those headwinds really hit us really hard, the probability is we'll be on the lower side of that guidance. If our competition and others may be right, that the headwinds from energy aren't as bad, then there's possibility we'll be on the upper side of that guidance. And that's how we see it with 3 quarters left. And we'll have a much better picture of how we're performing, really, in July, at the end of our Q2. That will give us a window into our second half order rates for AWP, a window into our second half order rates for Cranes. And Cranes has got to perform in the second, third and fourth quarters, and frankly, I think Construction's going to contribute some, and Material Processing is going to continue to perform pretty well. So although certainly not lost at this stage, it would have been great not to have only had the operational challenges because the operational challenges are pretty straightforward and pretty understandable in our AWP business, in particular. Jamie L. Cook - Crédit Suisse AG, Research Division: Okay. I guess just a follow-up question on the Aerials side. It sounds like most of the strength has come from the large national companies. Can you talk about the conversations that you're having with the independents and whether they're coming in the market and ordering, how you think that progresses throughout the year?

Well, okay. I'll answer this a little bit and turn it over to Matt. We had great orders from our top 15 major rental customers, but they still represent just a little over half of our business. So the order rate also includes a meaningful amount of orders from independents. So Matt, what are you seeing from the rest of your customer base?

Yes. So the rest of the customer base, which normally -- the independent rental companies are typically a smaller percentage of our sales in the first half, in Q1 and Q2, just because the nationals may come in. And they come in early, and they take up a lot of the capacity. But when you have conversations with the independent rental companies, they're still very optimistic. They find niches in the market, so they're seeing good opportunity out there. I think if you talk to an independent rental company down in the Texas area, that's a different story because they can't move fleet around. But there's a lot of other places outside of the oil and gas parts of the country. If you go around the Eastern Seaboard and the upper Midwest, I'd say the independent rental companies are feeling really good.

Your next question comes from the line of Ross Gilardi with Bank of America Merrill Lynch.

Ron, I just want to ask you just on AWP and just sort of the working capital strategy. I mean, your competitors seem to be taking the opposite approach on working capital and built a lot of inventory into this year, whereas you emphasized in your opening comments that you're taking more of a made-to-order approach. Do you feel like that's costing you some market share and accounts for a lot of the differential and sort of what they're showing in terms of growth versus what you're showing? And do you feel tempted to reverse course on that particular strategy?

We're not going to reverse course. I think our course and our view of the market is the appropriate one. And I'm going to let Matt comment on this because this is certainly something that he's had pretty extensive conversations on for quite a while. So Matt, why don't you give Ross your views on this?

Yes, on the last 3 earnings calls, there's been a lot -- I've been discussing and explaining a lot of the manufacturing absorption issues we ran into. And we said, "Hey, we are going to drive productivity as we move into the year." As we were in fourth quarter last year, looking at the backlog we had, we could tell that first quarter was going to be light. So we intentionally shifted our ramp-ups into first quarter because we were trying to time the demand with the order seasonality. That being said, we did build $50 million of inventory between the beginning of first quarter to the end of first quarter but a lot less than last year. So when we say that we are going to drive productivity, those are the kinds of decisions that you have to make. And sitting where we're at, I'm really comfortable. I like where we're at. I feel that we can fill the orders. We're not getting every order, but we didn't -- we set the year up knowing that we wouldn't chase every order because we're looking at the full year and trying to drive our productivity as deep into the year as possible. And that's why you can expect to see the margins improve for AWP as we move through the year.

I'd like to add to that the fact that this is not a science. There's no right answer. And the approach of our competition could work for them for a while, and we believe our approach is the right one for ourselves. I do think you really have to watch your configuration in an uncertain market, and I still would say this market is somewhat uncertain. It's very expensive if you have the wrong mix of product and the wrong configurations. And despite the fact that we all have great relationships with our large rental customers, their loyalty to tell you what specs are the right specs will change as their markets change. And while some of them are excellent at predicting, no one is perfect and has a perfect crystal ball. It's very expensive when you change later on in the year. We paid that price in 2014, and we don't want to repay that price just to chase the last point of market share.

Okay. That's helpful. And then I just want to clarify what you're saying about AWP margin in Q2. I mean, do you expect to be above or below that low to mid-teens level in Q2? And can you clarify what exactly has led to the improvement in the month of March? Are those just the operational issues? Or is that more of timing of deliveries? Anything there would be helpful.

Matt, why don't you answer that?

Yes. We had a slow start in January and February, and then as we moved through March and orders started to release and we started to produce at higher levels, we began to see our OP run rate improve significantly. Couple that with what we see in the backlog for Q2 and into Q3, there's a bit of a shift. In other words, first quarter, our telehandlers were up almost 20%, whereas our boom and scissors buying was down 22% on booms and 11% on scissors. And we can see that, that mix improved more towards booms as we moved into second quarter. That right there, the combination of the volume and the product mix, is what's going to drive the improvement, plus the productivity gains that you get at those higher volumes. So that's why we're saying that we think that the mid-teens in Q2, more of the historic range of Q2 OP, that's what we're expecting.

[Operator Instructions] Your next question comes from the line of Jerry Revich with Goldman Sachs.

I'm wondering if you folks can just give us an updated view on the Europe CapEx cycle with the move in FX and based on the data points that you're seeing, customer inquiry levels, et cetera, and maybe specifically comment on how much industrial production we have to pick up to see new industrial crane orders for your business there. I would appreciate any color you're comfortable providing.

Okay. Steve?

Yes. Jerry, I'd say industrial production is starting to pick up in Europe, which is a good sign. And we expected our business in Europe to actually be a bit better in the quarter. We've got a lot of quotes out there. We're just not getting closure, so there's a bit of a lag. But I think the team feels pretty confident that over the course of Q2 and Q3, a lot of that CapEx is going to open up. So I feel a little bit better about the spend, I'd say, later in the year than kind of right now.

I mean, confidence is building in Europe, in particular, as they effectuate the lower currency becomes an opportunity for them to export. And so confidence is building.

And I guess can you give any color on the number of inquiries or any additional detail, Ron?

Not really, not really. It's not something that we could feel we could provide any trend information on because you'd have to have a good historical context. So it's just a bit of an overall view. This is a business we've owned now for 3-plus years, and I guess it's the first time in the time we've owned it that we're beginning to see the European industrial activity picking up. We think it will also support a stronger parts and services business later on in the year when the repair and maintenance cycle hits.

I think, Jerry, just to add to what Ron was saying, I mean, we track the quotations that are out there. As I said, there's improvement there. It's just the closure is not happening. On the services side, it's pretty flat, but we have signed a couple of large long-term servicing contracts, like 3 to 5 years out, that are very positive. So that's happened over the past couple of weeks or months, so that means that the CapEx is kind of coming out. So it's difficult to give it to you by market. Germany is obviously our biggest market, but we have good market and market shares in France, in the U.K., in Scandinavia. That business is still doing okay, I'd say.

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

I guess just first, a clarification. Do you expect that the European AWP orders that were hurt by the port issues, will those revenues hit in the second quarter? And then I guess my question is really on pricing. I think in your prepared remarks, you talked -- you did call out some competitive pricing in the AWP business. Can you just give us a little bit more color there, whether that's coming from foreign OEMs or whether that's a regional issue? And then can you comment on currency-related pricing in the crane market as well?

That's a good one question, Seth. Thank you. We'll try to address that starting with Matt.

Okay, Seth. I'll address the Europe business for AWP. Yes, the cumulative effect of the port slowdown, that started in November, lasted through most of February. So that's when we typically are putting machines coming from the U.S. over there, and that was slowed down and had an impact on us. But if you look at our backlog for Europe, it's at 4.7 months versus 2.7 months last year at this time, and we had a great year in Europe last year. So yes, we are a little bit bottled up. We do expect to have a good year in Europe, but then you also have to take into consideration the currency. We expected the currency changes. We don't expect it's going to change dramatically from where it's at today. So we'll have a headwind with that, but in general, the business in Europe is solid, and customers are ordering, so we're feeling good about that. As far as the pricing environment, I would say that the pricing environment has become slightly more competitive in the past 2 quarters. Some of it is certainly related to the strengthening dollar, giving the non-North American -- or the non-U.S. manufacturers an advantage and are using that rather aggressively. But there's other places where people were dealing with a slow Q1, and there was some competitive nature there. But it's not out of control. But the bottom line with pricing, we're not expecting to get a lot of pricing. What we're planning for the year, where we're going to get margin expansion, is through productivity gains and margin improvements on the initiatives that we have going. So it is getting a little bit tougher. We won't chase all the prices down, but we'll stay competitive. So I'd say it has gotten a little bit more competitive.

And that's in both AWPs and Cranes, that comment works for?

Well, we're going to ask Tim to comment on Crane.

I'd say, Seth, in Cranes, probably 70% of my business in Crane -- in the Crane business is euro-based. So that's really a translation effect more than it is pricing. The U.S. dollar-based markets are pretty consistent. So there's the natural competition. We're all producing in the same places, but I haven't seen any material change in product pricing based on foreign exchange.

Your next question comes from the line of Eli Lustgarten with Longbow Securities.

One clarification and product question. We talked a lot about the oil and gas business. Can you give us your experience, you identified at least about 10% of revenue as oil and gas, what you actually saw in the first quarter and the second quarter? And then the real question is with the Latin American business down so sharply and Brazil being a mess, what have you, should we be looking for any restructuring or some changes over that part of the world given the fact that it looks like it's going to be a mess for an extended period of time?

It's difficult for us, as you might imagine, to completely handicap oil and gas impact. Up until a few quarters ago, we were measuring the impact of oil and gas in the category, really, of nonresidential construction activity. So to segment it more refinely, we really can't do. What we can do is we can kind of provide our perspectives that we see from our customers, in particular, the Crane customers and, in particular, the AWP customers, that generally tell us, well, the number of wellheads are way down. The equipment is coming off jobs. That equipment that comes off jobs is being placed in other places, which has a knock-on effect to new equipment ordering and to new equipment -- and our customers are going to manage their utilization. Fundamental to their business is their utilization rates. And the utilization rates are acceptable. They're generally high from a historic point of view, but they're generally not improving, which means that their equipment fleets are probably pretty much in balance. So you're into a classic situation of replacing old with new, and that is pretty much what happened. So oil and gas provides that negative umbrella that's offsetting other nonresidential growth, and so we feel it's kind of neutralizing what might have been some growth. So with that -- I think there was a second part of your question.

Latin America, Brazil, the sharp declines and how you're handling it. There's a restructuring approach to a market that look like it's going to stay soft for probably an extended period of time.

Okay. Steve has got some -- a big facility there, so...

So Eli, we're doing restructuring, for sure. Part of our improvement initiatives, a piece of it is actually the restructuring we're doing in Brazil. So we've taken out probably 50 team members so far, and we continue to restructure that business. Now the savings you're going to see...

But that's already in...

Embedded in the...

Embedded in what we've said and taking charges for it.

Right. So I guess we're getting our cost in line with the market from an MH perspective. Material Handling is probably the largest footprint that we have in Brazil right now.

The rest of the stuff, we mostly import into Brazil. We are fortunate in that we didn't chase that crane market and didn't chase that market and put in extra production.

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

Can you please provide a little more color on the productivity-driven AWP margin improvements for Q1, really, in the context of the total $30 million productivity called out within the longer-term improvement initiatives, at least going back to the Q4 presentation? Specifically meaning, did you realize most of that productivity improvement already? Or is the productivity comment more short-term driven mainly by mix, and a longer-term benefit has yet to be realized?

Andy, I'm going to set this question up for Matt a little bit, but the productivity opportunity for us is twofold, really. One is to not repeat the mistakes of yesterday, and we had anticipated in 2014 that the market would be stronger than it actually was. We had too many people, and we had the equipment that was prebuilt, as we said earlier, and configurations that weren't exactly what we wanted. So we had too many people for a market that wasn't as strong as we expected and therefore -- and need to reconfigure. Therefore, we had pretty severe productivity issues last year. The other side of that is simply running our business closer to the market and having a better control of our labors. But let me ask Matt to comment on that because he's deep into this.

Yes. We have a productivity target for the year, the full year of $30 million, as you brought up. We are on track after Q1, and the gains really start to kick in when you get the volumes of Q2 and where our productivity really dipped last year, Q3 and Q4. So we're -- to date, we're on track a little bit. Now with the volume miss, a little bit behind, but the $30 million, we had more built into it than that $30 million. So that is like the primary focus of what we're doing within AWP to make sure that we get that corrected. So we feel like we're in good space, and you'll see the real benefits. Those will begin to kick in in Q2, but Q3 is where there'll really be -- have a substantial impact.

Your next question comes from the line of Steve Volkmann with Jefferies.

Most of my questions have been answered. But I guess I'm curious about how should we think about working capital sort of against the backdrop of not building inventories and so forth and where do we think that can end year-end. And do you still think there's a longer-term opportunity there?

Well, we had an $80 million headwind in customer advances in the port business that contributed to the working capital increase. If you set that aside and set that -- understand that, that dealt with big projects, I think we expect to make good progress this year year-over-year in working capital. It remains a critical focus for us in every area, whether it's raw material, work in progress. In particular, the big areas of working capital that need to come out of the company are in the Crane business, in particular, in our European operations. That's going to take a little bit of time, but we've got new management really initiating substantial lean changes in the [indiscernible] plants that Tim is responsible for. And we think there's a couple of other targeted areas of inventory which will come out. And it's a constant battle in the area of receivables and receivable management. We think part of solving that problem longer term is a much more robust Terex Financial Services organization, which we're putting in place, and we'll have the securitizations to support this quarter. And lastly, our accounts payables has been a very active area for us. We are asking for terms improvements from many and most of our vendors and have been successful in getting them. So it's tough to predict exactly what our working capital-to-sales ratio will be as we go through the year, but it's an area we're pretty engaged in.

Okay. I think in the past, we might have bandied about a 20% target. I can't remember if you've actually blessed that or not, but is that a way to think about it?

Well, certainly, Steve, with our mix of businesses, that 20% target should be achievable for us. But to accomplish that, we've got to get this [indiscernible] -- we've got to do what I've just said, really. And you have to, of course, have stable, steady markets. Markets that shrink and grow cause working capital dislocation. So in growing markets, of course, it's likely that you can improve your working capital ratios, but 20% is not unreasonable.

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

I wanted to ask a question about port congestion. I mean, it seems like the West Coast issue is, in one sense, diminished, but maybe a trucker strike is rising. I don't know whether the risk is gone or not. And then in Rotterdam, there's been sporadic reports of port congestion. I don't know if that's a positive sign because it's so automated, and they're sending bigger and more ships and haven't figured out the sequence there or if there's any risk of equipment having issues.

Okay, Rob. Steve, do you want to handle the -- I'll come back to the port and truck strike.

Yes. So Rotterdam, Rob, I'd say the automated ports that we put in place are just getting ramped up. So they're starting to take effect, but to be honest with you, they're still in the ramp-up phase. So as to what's creating the backlog, so to speak, it's probably the larger ships that are coming in, the Triple Es and all of that, and just trying to gauge the right equipment to offload 18,000-TEUs type ships. So I think that's probably a big part of it in Rotterdam. And as these new projects get up and running, it's going to help, obviously, the throughput. And turning to the West Coast, I mean, Long Beach, that, I think, is going to be showcased for us and for the Port of Long Beach with our automation project there. And everything's still on track to go live at the end of Q4, so I think all eyes are going to be on what happens there.

Yes. What I would say, the West Coast ports slowdown -- or it was a slowdown, labor slowdown, was a very difficult thing for us in AWP, in part because we have a lot of suppliers, Asian-based suppliers, that put their products on the ship, and we have just-in-time delivery through some local consolidators. And what was hard about that is we just couldn't predict when our material would get unloaded, which caused us to airfreight a bunch of things. And then the compounding factor was the shipping of our own product out to Europe through those same ports, when it could get loaded, how long it waited at the port. It's just no one could predict what would happen, and it lasted for months. So that -- we also didn't want to highlight this too much because it's kind of a unique situation to us compared with our major competitor in that we're located on the West Coast. With regard to a trucking strike, well, who knows what will happen there. We'll all learn and we'll all have to adapt if something happens in that area. So I don't want to make any comments about what that will do.

Your final question comes from the line of Vishal Shah with Deutsche Bank.

I just wanted to better understand the inventory levels in the Crane segment, how you think the inventory levels are and the dealer levels as well.

Okay, Tim?

Yes. I would say, Vishal, that the real visibility we have on dealer inventory is in North America. That's where we have the most significant dealer network. And looking at where we were at the end of the year and where we are today, they're up slightly but not materially different from where we were 3 months ago. So it's a little higher than we'd like but not anything that I would say is overly concerning at this point.

Great. I don't know if this was asked earlier, but given the slower-than-expected start to the year in terms of margins, what latitude do you have to pull forward some of the $50 million of cost savings from the second half or maybe to increase the cost savings overall?

Well, Vishal, this is part of how we've explained the year overall. Our cost savings are on target. The backlog is strong for the company. There's very definable reasons for the first quarter miss. We think they're recoverable, and so we're going to bring in our cost savings as fast as we possibly can. And as Kevin has indicated, we'll give a pretty good report on that when we report our Q2 performance. Thank you, everyone. Operator?

Thank you. That does conclude today's conference. You may now disconnect. Presenters, please hold.