Terex Corp. Q4 Earnings Call Transcript

123jump.com Staff
23 Feb, 2010
New York City

The construction machinery company reported revenue declined 36% to $1.06 billion in the quarter. Net quarterly loss narrowed 66% to $142.8 million. The company lost $1.32 a share compared to a loss of $4.46 a share a year-ago quarter.

Terex Corp. ((TEX))
Q4 2009 Earnings Call Transcript
February 18, 2010 8:30 a.m. ET

Executive

Ronald M. DeFeo - Chairman and Chief Executive Officer
Phillip C. Widman - Senior Vice President and Chief Financial Officer
Tom Gelston - Vice President, Investor Relations
Thomas J. Riordan - President and Chief Operating Officer
Rick Nichols - President, Terex Cranes
Timothy A. Ford - President, Terex Aerial Work Platforms
George Ellis - President, Terex Construction
Steve Filipov - President, Developing Markets and Strategic Accounts
Eric Nielsen - President, Terex Materials Processing and Mining

Analysts

Chase Becker - Credit Suisse
Ingrid Aja – J.P. Morgan
Alex Blanton - Ingalls & Snyder
Robert Wertheimer - Morgan Stanley
Charlie Brady - BMO Capital Markets
Terry Darling - Goldman Sachs
Seth Weber – RBC Capital Markets
Yangquan – Barclays Capital
Joel Tiss – Buckingham Research Group
David Wells – Thompson Research Group
Robert McCarthy - Robert W. Baird
David Raso – ISI Group
Steve Barger – KeyBanc Capital

Presentation

Operator

Good morning. My name is Brandy and I will be your conference operator today. At this time, I would like to welcome everyone to Terex Corporation''s Fourth Quarter and Year End 2009 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers'' remarks there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw question, press the pound key. Thank you.

I would like to turn the call over to Ron DeFeo, Chairman and CEO of Terex Corporation. Please go ahead, sir.

Ronald M. DeFeo

Thank you and good morning, ladies and gentlemen and thanks for your interest in Terex today. On the call with me this morning is Phil Widman, our CFO and Senior VP, Tom Riordan, the company''s President and Chief Operating Officer and Tom Gelston, Vice President of Investor Relations. Also participating, either in the room with me or on the phone will be Rick Nichols for the Crane segment, Tim Ford for Aerial Work Platforms, George Ellis for Construction, Steve Filipov for Developing Markets and Eric Nielsen for the Materials Processing businesses. 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 opening commentary, followed by Phil Widman, who will provide a more detailed financial report and Tom Riordan, who will discuss operations by segment. I will obviously open it up to your questions at the end and please allow for only one follow up, if possible. The presentation we will be referring to is accessible on the company''s website.

Let me begin by referring to the forward-looking statement on page two. I''ll remind you that we will be discussing expectations of future events and performance of the company on today''s call and that such expectations are subject to uncertainties related to macroeconomic factors, interest rates, government actions and other factors. A fuller description of the factors that affect future expectations is included in the presentation and in the press release and other filings. I encourage you to read them.

So now let me begin, turning to page three. I''d like to offer some overview thoughts on the recently-completed quarter and year as well as our current view of 2010. Virtually, all our comments today will be for continuing operations and as you might expect, there are a lot of moving pieces when you pull out the mining business.

Firstly, continuing operations produced net sales level about $4 billion in 2009. This is more than a 50% reduction and reflects the massive industry contraction that has taken place within our product lines. We think revenue, though, has now stabilized.

Manufacturing costs for Terex have been dramatically reduced and we believe this confirms the strength of our business model which has historically been focused on a combination of assembly and outsourcing. Our exposure is virtually entirely to the construction-related market with not many offsets to other industrial applications at this point in time nor do we have a finance company that generates income as a primary mission.

We''ve weathered the storm with excellent liquidity and with a mining sale due to close shortly for $1.3 billion of value we are in an excellent place to further develop the company over the next year. We are excited about that potential. However, we recognize that our success is dependent upon bringing our remaining businesses back to profitability and believe at the operating level we will be breakeven for the full year in 2010 and we are driving to the end -- to end the year with EPS profitability in the final quarter of the year, although this will be a challenging goal.

We will be reluctant to speculate over acquisitions. These are hard to predict and we remain steadfast in our view that we have a variety of choices for using the capital. We will evaluate all options throughout the year. I know this report is somewhat difficult to understand with the variety of changes. However, I hope you''ll find the presentation useful as we explain the performance.

Now, I''ll turn it over to Phil.

Phillip C. Widman

Thanks, Ron and good morning. The key figures table, page four, displays the quarterly year-over-year and sequential performance of the company. Given the pending sale of our Mining business and the sale of our Load King trailer business, we are reporting their results as discontinued operations. All figures in this presentation are for continuing operations of the company, unless specified to the contrary.

Net sales were down 36% from the prior-year quarter or 41% when adjusting for the translation impact of foreign currency exchange rate changes. The addition of the Port Equipment business provided a 3% uplift to net sales for the period. On a sequential basis, fourth quarter net sales increased by 8% with 3% related to the Port Equipment business and the remaining crane business is showing the strongest increase.

On a consolidated basis, we incurred a loss from operations in the fourth quarter of $90 million compared to operating income of $7 million in the prior-year quarter, excluding the impact of the goodwill impairment charge. This is mainly due to the net sales reduction. I''m encouraged by the sequential improvement related to margin improvement, material cost reduction and absorption which all improved over the third quarter of 2009. These were partially offset by unfavorability in warranty and transactional foreign currency as well as less profit released from inventory than in the prior quarter.

We continued to make good progress on cash generation from working capital reductions which contributed $430 million for the full year. Our backlog is similar to third-quarter levels and down 46% from the fourth quarter of 2008. Net debt, including the cash from discontinued operations, which we will keep, was relatively flat sequentially, as working capital improvements largely offset the operating loss. Working capital reductions in the quarter would have been more significant, however, we stopped discounting receivables in our continuing operations which had an unfavorable sequential impact of $68 million to this net debt figure.

Although not detailed on the chart, I will comment on the tax expense in the fourth quarter as we took some discrete charges related to changes in our uncertain tax positions and provided a valuation allowance on the deferred tax assets of a European operation. In total, these amounted to additional expense of approximately $0.27 per share for continuing operations.

The loss from discontinued operations of $0.14 per share includes tax expense for uncertain tax positions and the removal of APB 23 assertions for certain mining subsidiaries to be sold of approximately $0.26 per share. We also incurred a loss due to costs related to the disposition of discontinued operations associated with the Mining and Load King trailer businesses in the fourth quarter of $0.12 per share. As indicated in the release, we also had pretax charges of $27 million for restructuring, or approximately $0.17 per share.

Referring to page five, this outlines the net sales trend for the last five quarters, demonstrating the relative stability of most segments during 2009 and the uptick in Cranes in the fourth quarter which is somewhat related to the Ford Equipment business acquisition and solid demand for higher-capacity crane products.

Page six bridges the $97 million change in operating profit from the prior-year''s quarter to the operating loss for Q4 2009. The margin impact of close to $200 million on a net sales decline represents a decremental margin of 33% when compared to the prior-year period, including mix and pricing changes.

Net restructuring, mainly associated with the reduction in headcount, was $8 million lower this quarter with total charges of $10 million in the period, of which $2.5 million was in cost of sales and $7.5 million was in SG&A while current-period capacity variance of $17 million and under absorption combined for an unfavorable $11 million impact over 2008.

SG&A and other costs of sales had a neg -- net positive effect, given cost reductions, profit released as inventory was delivered to third parties and reduced material input costs. These were partially offset by charges related to inventory and negative transactional foreign currency impacts.

Overall, foreign currency translation impact was $10 million favorable. The breakdown in the causal by segment varies somewhat by issue, but is disclosed for transparency. So let me refer to page seven which shows our annual key figure table. I will not go through the detail on the annual comparison, but would point out that the continuing operations of the company delivered significant profitability in 2007 and 2008. We believe that the portfolio has been improved by the changes we made in 2009 and is well positioned for the future growth.

I''ll now turn it over to Tom for an operational update.

Thomas J. Riordan

Thanks, Phil and good morning, everyone. I will cover working capital improvements and cost reduction results for 2009 and then discuss the current state of our business.

Let''s move to page eight. One area that is always challenging during a business downturn is working capital which has been a primary area of focus for Terex during 2009. At the start of the downturn in mid 2008, we made a very conscious decision to minimize the inventory burden to our distribution partners and customers.

During the last 18 months we drastically cut production rates to reduce channel inventory levels. I''m very pleased we were successful in significantly reducing our inventories by $538 million of cash impact, excluding discontinued operations.

Our businesses have done a great job in selling off finished goods inventory and working with our supply chain partners to minimize the inventory impact on Terex and our vendors businesses by adjusting schedules. As you can see, inventory turns and net cash days are beginning to move in the right direction.

While working capital in total is still high as a percent of revenue by historical standards, this will continue to improve as we return to a more consistent run rate for the production. However, I will also add we need to be attuned to the short delivery requirements that our customers now have and we need to have appropriate levels of product available if we are to be competitive in the market.

Moving on to page nine, this is a chart we have shown to demonstrate progress in getting our business right-sized and costs in line with expected revenues. Over, we have reduced controllable spend by $246 million in Q4 2009 compared to our peak run rate in Q2 of 2008. This is a nearly $1 billion annualized run rate of cost reduction and demonstrates our ability to flex our business model. The Terex manufacturing teams have done a great job in reducing spending by 51% during this timeframe.

Our commitment to cost reduction is continuing as we have recently reached agreements with the union representatives of the recently-acquired Fantuzzi business or now known as Terex Port Equipment. That restructuring is underway along with several other Terex businesses in the U.S. and Europe.

The Terex team -- the Terex team members being affected throughout our operations are being true professionals about these required changes and I''m very appreciative of the support and dedication they have shown while knowing they will be leaving the company. I think this speaks volumes about the culture and character of Terex.

I''d also like to point out we have reduced our SG&A expenses of our businesses by 34% over the last 18 months. As we have discussed before, I think we have been very judicious in retaining talent for product engineering for new product development, IT professionals for the Terex management system, our ERP implementation, the variety of financing and risk professionals working in our Terex Financial Services group to find financing solutions for our customers, our Terex business system professionals are driving our broad-based Lean effort, our supply management team working on driving cost reductions with best cost country suppliers; and other critical functions. While we have been aggressive sins reducing structural costs, we also need to improve our capabilities for future.

Let''s move on to page 10. One of the things I''m most proud of is our continued focus on safety. Over the last three years, we have been able to significantly improve the safety of our business operations. With the changes that have been instituted and the focus of our team members and leaders, we have prevented or avoided nearly 1,000 lost-time accidents over the last three years compared to our safety rates at the beginning of 2007. With all of the ups and downs we have seen during those three years, this is a remarkable achievement.

Let me give you a quick overview on how we see the current business environment today by business. Our Aerial Work Platform business remains challenged. We are seeing very consistent order rates over the last several quarters, but a no sign of a real uptick in either of the two primary markets; Western Europe or the U.S.

We believe most of our larger customers will continue to wait for signs of improvement on equipment utilization and rental rates before any change in buying patterns occur. Virtually every order involves a trade-in package. With the current lower expectations around non-residential development, we do not expect to see much of an improvement in order rates until late this year or early next year. We are seeing increases in our plant production rates by running to retail demand, even at these reduced levels.

In Q3 2009, we had our assembly lines down for over 30% of the time and in Q1 we''ll be down less than 10%. Our Construction segment is seeing reasonable order rates for our compact equipment product line, both in Europe and in the U.S. Our dealer/partners generally have appropriate sized inventories for the current retail environment. With the limited inventory we have in the distribution channel, we are seeing a solid increase in production rates and hours worked at our compact facilities. Pricing is still very competitive.

Our Construction Truck business remains challenged with significant used equipment available and fleets being underutilized and we don''t anticipate an improvement in the business until later this year.

Our Cranes business will likely be soft to stable overall for much of this year. With tower cranes and lower tonnage mobile cranes having lower rental rates and utilization by our customers, we expect to see an order pattern similar to the last six months.

Our higher-capacity mobile cranes are seeing better utilization rates with customers and based on lead times for larger infrastructure projects we have better order visibility. Our Terex Port Equipment business is stable with positive future signs. The dry goods index rates are starting to increase along with container pricing. We also see some improvement in plant utilization with shutdown days being reduced in most of our crane facilitates compared to six months ago.

At our Material Processing business we are seeing reasonable order demand which is somewhat seasonal also based on low inventories at our dealers. By running to retail demand now versus reducing channel inventories, as we have during most of the last year, we are ramping up production rates compared to a year ago with very limited downtime. While we are not declaring victory, this business is off to a reasonable start for 2010.

Moving on to the developing markets, we continue to invest in talent, plant infrastructure and products for these markets. We saw a double-digit increase in revenue for our business in China and parts of Africa along with solid increases in South and Central America.

Our new Aerials plan in Changzhou, China is on track to start up later this year. And the Hosur plant near Bangalore, India is making solid progress since it opened six months ago along with continued growth of our R&D center near there. Additionally, we have several of the facilities in the advanced planning stage in other areas. The majority of our CapEx over the next few years will be invested in developing market regions.

Let me touch on a few other items. Despite the dramatically-reduced inbound material purchases in 2009, we were successful in continuing to improve our material pricing. We expect this to continue for 2010 despite suggestions steel prices may increase later this year. Our teams have made solid progress which will accelerate as material flows more consistently through our production plants.

As I mentioned before, we have been very supportive on improving our new product development process, making sure that we have the talent required to accelerate our product launches. I''m very pleased with the significant number of new products being released in 2010 and 2011 throughout each of our business segments. Some of these are brand-new products for Terex, other are enhancements or product line extensions.

In addition all of that, we are on track for all of the Tier 4 changes. We believe we are well positioned with very competitive products in our major markets as the recovery starts in the not too distant future.

Lastly, while 2010 will be a challenging year, you shall note that about 70% of our forecasted profit improvement is based on internal improvements such as overhead cost reductions we made in 2009, improved productivity and cost absorption in our factories, running our plants to retail sales rates, material cost reductions, smaller manufacturing footprint and so on. We are not counting on a significant improvement in our end market to drive our profitability improvement.

And at this point in time, I''ll turn it back to Ron.

Ronald M. DeFeo

Thank you, Tom. Turning to page 11 of our presentation, on this page, we provide some detail for our outlook for 2010.

For net sales, we are expecting about $5 billion. This reflects only a modest amount of growth, as the Port Equipment and currency assumptions contribute substantially to this change, although recent currency changes make this somewhat difficult to predict.

Interest expense will be about $140 million and we expect to end the year at about a $1 per share loss. Capital expenditures should be about $85 million and working capital as a percentage of revenue is targeted to be less than 30%.

Turning to page 12, this highlights, where we have been and where we are now and where we believe we are headed without acquisitions. This is an important page that we think frames the company over the past several years, as well as our outlook over the next few years. Our goal is to double the net sales level by 2013 with a 12% operating margin, thus achieving a 20% growth rate and a 20% return on invested capital. This results in an EPS of about $6 per share in 2013.

So if I can summarize on page 13, we have strong franchises that have performed well in the past and we believe will do so again. The Construction segment should experience top-line growth and earnings performance will improve as we concentrate on the stronger product niches in this segment.

Our Materials Processing business will be an early improving performer, much like we predicted for some time. Cranes will be choppy this year, but still improving with excellent potential from the Port Equipment business in future years. Aerial Work Platforms is dependent upon construction and infrastructure recovery in North America and Europe and this will not likely happen until 2011.

Developing Markets will continue to grow and have a net positive effect and as Tom mentioned, we have several new product launches that will be important contributors in 2011 and 2012. Channel inventories and our focus on cash management in 2009 has positioned us to build to demand again in 2010, adding about a $200 million change, positive change to our net profits. We will remain cost focused and the liquidity of the company is strong and we plan to keep it that way.

There is no doubt that Terex is still a young company and consequentially still evolving. The base businesses we have are improving. This year market conditions will remain challenging, but better than 2009. We expect to continue strengthening the company throughout this year and we appreciate your continued support.

Now I''d like to open it up for your questions.

Question-and-Answer Session

Operator

At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. Your first question comes from the line of Jamie Cook with Credit Suisse.

Chase Becker – Credit Suisse

Hi, good morning. It''s actually Chase Becker in for Jamie. Just had a question regarding your comments on having to take market share to grow. I think if you look at your core growth assumptions, it''s assuming up about 10% for next year, just wanted to get some more granularity on where you''re assuming you need to take market share?

Ronald M. DeFeo

Well, market share will come both in terms of some geographic expansion, as well as moderate share in some of our core businesses. I''m sorry, Phil, did you –

Phillip C. Widman

You say a lot of the growth is in Construction.

Ronald M. DeFeo

Right. Yeah. The construction change really will be both an improvement in the marketplace, as well as, we believe, the addition of some new distribution and some renewed focus on some of our compact equipment operations.

Chase Becker - Credit Suisse

Okay. But just to be clear, the market share is baked into that 10% core growth number, correct?

Ronald M. DeFeo

Yes.

Chase Becker - Credit Suisse

Okay. And then looking at the $200 million in production benefits that you''re assuming, does that ramp throughout the year and what segments should we expect that that''s going to be impacting the most?

Thomas J. Riordan

Chase, Tom Riordan. Yeah. It will ramp through the year and, again, I would suggest, similar to the comments we made with our AWP business, effectively we think being flat for most of the year. You''ll see a more steady improvement as they run to retail rate. Most of the benefit you''ll see in the Material Processing and Construction segments.

Chase Becker - Credit Suisse

Okay. Great, thank you.

Operator

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

Ingrid Aja - J.P. Morgan

Good morning. Actually it''s Ingrid Aja in for Ann. Looking at your interest expense assumptions I''m assuming that you''re not building in any debt repayment opportunities. Have you set any targets in that respect, or are you still trying to determine that?

Ronald M. DeFeo

Well, if you recall when we did our Mining sales presentation in December, I think it was, we have the requirement when we have sale proceeds from divestures to commit to reinvesting in the business in our bank agreement within 300 days of receiving those proceeds, so that basically looks through most of 2010.

That''s our first priority to invest in CapEx, as Tom mentioned, in developing markets, as well as looking at acquisition candidates. We have not included any debt paydown in the interest expense calculation for 2010 yet. So we''ll evaluation where we are with acquisitions in that timeframe and look at what we do as we go forward.

Ingrid Aja - J.P. Morgan

Okay. Great. And then if you could just give us a little more color on the backlog, when exactly would that hit your sales, when would it translate into sales? Would it be 2010, 2011, 2012?

Ronald M. DeFeo

Yes. The definition of the backlog that we use, Ingrid, is it''s deliverable in the next 12 months.

Ingrid Aja - J.P. Morgan

Okay.

Ronald M. DeFeo

We may have orders beyond the 12-month delivery, but we don''t count that in the backlog figures. So, most of the backlog is related to our Crane segment, the larger equipment, which tends to have a little longer lead time than some of the quicker materials. But it''s all within 2010.

Ingrid Aja – J.P. Morgan

Oh, it is. Okay. Great. Thanks for the clarity.

Ronald M. DeFeo

Yes.

Operator

Your next question comes from the line of Alex Blanton with Ingalls & Snyder.

Alex Blanton - Ingalls & Snyder

Hi, good morning. I noticed that you had a goodwill charge in the access equipment genie?

Ronald M. DeFeo

Yes, related to our trailer business.

Alex Blanton - Ingalls & Snyder

That''s the trailer business alone?

Ronald M. DeFeo

Yeah.

Alex Blanton - Ingalls & Snyder

Okay. Was there any charges during the year other than that in the access equipment?

Ronald M. DeFeo

No, sir.

Alex Blanton - Ingalls & Snyder

Okay. All right. I wouldn''t have thought so, because basically there are only two companies in the world in that business. The second question is, for 2010 how much sales improvement is available to you simply from dealer inventory reduction? Let''s say assume that end market demand is flat and let''s say dealers'' inventory is flat, what sales improvement would you then get to get back to that level of retail demand?

Ronald M. DeFeo

Alex, what we have basically built into our plan is virtually no increase in dealer inventory. It is not our plan to push inventory into our channel. So what you will see from us is a couple hundred million dollar benefit, for actually producing to the demand that existed in 2009 and we''re expect to more or less repeat itself in 2010.

So without really asking our dealers to take on a lot more inventory, just building to their retail demand, that''s how we''re getting a substantial benefit.

Alex Blanton - Ingalls & Snyder

Yeah. You mentioned the $200 million, is that sales or is that profit?

Ronald M. DeFeo

That''s profit.

Alex Blanton - Ingalls & Snyder

So that''s the profit effect and what''s the assumption on incremental margin there?

Ronald M. DeFeo

Yeah. That''s very challenging for us to predict.

Phillip C. Widman

Well, the $200 million is basically the absorption effect as opposed to the -- so you could argue on $1 billion increase in revenue is 20% associated with that.

Alex Blanton - Ingalls & Snyder

So are we saying the sales improvement would be $1 billion and the profit improvement $200 million just to get back to --?

Phillip C. Widman

Yes.

Ronald M. DeFeo

Yes. Again, that math is a little – not exactly perfect, because we are producing as opposed to not producing in 2009.

Alex Blanton - Ingalls & Snyder

Right.

Ronald M. DeFeo

So our base revenue, which we had in 2009 of $4 billion --

Alex Blanton - Ingalls & Snyder

Right.

Ronald M. DeFeo

Just manufacturing that product provides a large share of that $200 million improvement.

Alex Blanton - Ingalls & Snyder

Okay. All right, fine, that clarifies that a bit. Thank you.

Thomas J. Riordan

All right, Alex. Thanks.

Operator

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

Robert Wertheimer - Morgan Stanley

Hey, good morning, everybody. My first question is on inventory. I think you laid it out pretty well, but I backed into 4Q inventory reduction of around $180 million quarter over quarter. I don''t know if I did that math right because there''s a lot of – a couple of moving pieces there and that would be a little bit, basically the same has you did in 3Q. Is that about right?

Phillip C. Widman

I think that''s close, Rob.

Robert Wertheimer - Morgan Stanley

Do you have – you guys obviously don''t think there''s any issues with the aging of the inventory, et cetera. Has that view changed at all? Can you comment on the aging basically, what''s left?

Phillip C. Widman

No. We have accounting policies that require us to take reserves if our parts inventory is not moving in a certain period of time. And then when we – if we discontinue a product or something like that we take those charges. That relates to some of the charges on inventory that I referred to in the fourth quarter. I don''t call that out as a special or unique item, just that we did take some charges. Order of magnitude that might be $0.04 or $0.05, but I think that''s operational, the way I would term that.

Robert Wertheimer - Morgan Stanley

And if I can ask one other. Phil, on the list of things you mentioned at the beginning, you mentioned warranty as being a little bit of an unexpected expense. Was that material and what kind of product was it? Well, I don''t know how much detail you want to go into, but can you explain that a bit more?

Phillip C. Widman

Well, we''ve had some issues that, again, I''d call them relatively normal. There were no major recalls or anything of that nature, but they tended to be higher as a percentage of revenue than they were in the prior period. So if you took – again, our sales went down 50% order of magnitude in some of these periods, so as a percentage basis it went up and stuck out.

Robert Wertheimer - Morgan Stanley

But not as a dollar basis, it didn''t really change that much?

Phillip C. Widman

The dollars went up somewhat, as well, but again, I wouldn''t characterize it as major retrofit programs.

Robert Wertheimer - Morgan Stanley

Okay. I''ll stop there. Thank you.

Phillip C. Widman

Okay.

Operator

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

Charlie Brady - BMO Capital Markets

Hi. Thanks, good morning. I just want a clarification because your comments when you talk about the tax, if I heard you correctly loss from discontinued operations was a minus $0.14, which included $0.26 a share in tax and I''m just trying to square that with the earnings release, page 15, the ROIC reconciliation, where the numbers seem a little different. What am I missing in that math?

On the ROIC disposition it has income before tax of discontinued of $0.26 a share positive and then after taxes of $0.25, which seems a bit different than the numbers you talked about in taxes.

Phillip C. Widman

Yeah. When we do the ROIC calculation we try to look at an average effective tax rate over a period of time. We can go off line into more detail on that, but it''s somewhat in the relation of how we do the ROIC calculation.

Charlie Brady - BMO Capital Markets

Okay. Is there a breakdown in the discontinued operations between the Mining and the Load King business that you can give us?

Phillip C. Widman

I won''t give you the exact specifics, but let''s say on the loss, on disposition of discontinued Ops of $0.12 a share, I would say virtually $0.10 is related to Mining.

Charlie Brady - BMO Capital Markets

Okay. And then one more question and I''ll get back in the queue. You had a comment where you''re talking about how much time the line was down in AWP. I thought you said third quarter was down 30% of the time, in Q1 you expect to be down 10%. Can you tell us what it was in Q4?

Thomas J. Riordan

It was in the 20% range and, again, that''s – just to be very specific, that''s based on assembly lines, not necessarily plants. If you think about it, Charlie, if we add up all of the assembly lines we''ve got in our AWP business and how many days those are running are not in as a percent of the total.

So again, ballpark Q3 – our assembly lines were down on average a little more than 30% and Q4 a little more than 20% and in Q1 we think it''ll be less than 10%.
Charlie Brady - BMO Capital Markets

Great, thanks for that. I''ll jump back into the queue.

Operator

Your next question comes from the line of Terry Darling with Goldman Sachs.

Terry Darling - Goldman Sachs

Thanks. A couple follow ups on the earnings outlook framework for 2010. Phil, I guess on FX 6% assumption there, is that high $1.40 euro/dollar and then can you translate in the context that it''s flat or breakeven, rather, operating performance for the year what that assumes in terms of tailwind from that?

Phillip C. Widman

Yeah. I would say – and as Ron mentioned, given the recent volatility, FX is a little bit hard to predict. I would say we counted more from FX related to rates that were more prevalent in the fourth quarter than the current rates, so there is some headwind if we assume the current rates relative to that revenue side. On an operating profit basis I would say the range of risk there would be in the $5 million to $10 million range worst case.

Terry Darling - Goldman Sachs

Okay. That is helpful. And then on the Fantuzzi business, I guess you''re implying about $350 million of revenues for the year, can you talk about how that looks throughout the year? Is there significant seasonality variance quarter to quarter and then can you help us with where a range of margins that we should be thinking about there?

Ronald M. DeFeo

Hey, Rick, why don''t you take that question, you''re close to it.

Rick Nichols

Okay. It will be first quarter and fourth quarter more heavily oriented, with the middle of the year being slightly lower and we''re working towards a breakeven business through the year.

Terry Darling - Goldman Sachs

That''s helpful. And then lastly, Ron, I know you don''t want to get into too many specifics here, but with regards to the strategic transformation maybe you could talk about the financial characteristics of businesses that you''re looking about, you''re looking for here just in terms of trying to help people a little bit scope out what the potential might be?

Ronald M. DeFeo

Yes. Terry, okay. In an ideal world and, of course, we all know that ideal worlds only happen in your mind, but I think you can strive for an ideal world. We''ll be looking for higher gross margin businesses with gross margins in the 25% to 30%-type ranges, businesses that are less dependent upon the classic residential construction, maybe somewhat more diversified to the nonresidential construction.

I recognize that nonresidential construction or infrastructure-related industrial projects are now not in vogue, but it probably is a good time to be looking at those kinds of businesses because they''ll be coming back. I think we''ll be looking at businesses that have clear leadership positions in definable niches and some of those niches may be in more traditional industrial applications, as previously said.

The dependency or the vulnerability on Asia is a question in our mind, because we''ll want to understand the probability of an Asian-based manufacturer either penetrating those markets or maybe participating in the Asian markets, so that is going to be an important thing that we consider. And probably as much as anything, what''s the reliability of the cash flow because we''re going to want to have business that have proven cash flow positive generation.

One of the challenges of high working capital intensive businesses is the difficulty in predicting cash flow. And we think we need to have some rebalancing a little bit in our product portfolio in that arena. Hope that''s helpful, Terry.

Terry Darling - Goldman Sachs

That is helpful. I''d just throw one more question related to that, which is the time dimension. Are you optimistic you can do something significant in 2010?

Ronald M. DeFeo

It''s almost impossible for me to say. Let''s put it this way, what''s worst that could happen? The worst that can happen is we pay back debt. That''ll have a definable, specific return to investors. And as Markets recover we will then go back and actually have to finance whatever acquisitions we do on the back of that acquisition.

So I look at it and say, on one hand, I don''t want to rush because I don''t want to just feel driven to go spend money in order to continue to transform the company''s portfolio. On the other hand, from a timing point of view, 2010 is probably a good time period to find transactions of reasonable valuation.

Terry Darling - Goldman Sachs

That''s very helpful. Thank for the help.

Operator

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

Seth Weber – RBC Capital Markets

Hey, thanks. Good morning, everybody. Given your comments on -- it sounds like you think the Construction business is improving, should we start to think about the sale of that business or the restructure -- for the restructuring there being kind off the table at this point that you''re going to continue to have a go at it? And maybe how much of a leash are you going to give that business going forward and are there any kind of mileposts we should be watching for profitability, et cetera?

Ronald M. DeFeo

Well, as I''ve always said in that business there are clear definable product niches where we think we can be successful. And we''re working those product niches aggressively and I think effectively. If you examine that a step further you can look at our compact equipment business, particularly that business that has been in Europe and those are businesses that have had a history of having good market positions and double-digit margins.

If you look at our material handling business, our Fuchs product line, which has been a scrap handler, principally steel scrap. That''s a business that has had a history of being a number one or number two player in that niche with strong operating profits. Not today and not over the past 18 months, as that business has gone through a dramatic change. But we think we''re coming out of that.

We invested in the ASV product line in North America and that business has had a strong history of decent profitability and when combined with our other compact equipment products. We think we can make a go of that business in North America, which means that our articulated truck business, as Tom indicated, will be a difficult business in 2010. But that''s very dependent upon non-residential construction. And so we think we''ve got a good niche in that product, but 2010 is not going to be a particularly good year.

And there''ll be other parts of that of the Construction business that we''ll look at. We think we''re making progress in the road building piece, particularly in Latin America. We''re actually going to invest and build a new factory in the Latin American market to accommodate the profitability that''s taking place in that category. I won''t rule out looking at strategic options for a variety of smaller pieces of the product range. But I don''t think it will be the main activity. It''ll be a subset of activities.

Seth Weber – RBC Capital Markets

Okay. Thanks. That''s helpful. And then just going back to your comment about capturing market share, can you characterize what you''re seeing on the pricing environment? Will you use price to either go after or defend market share. Are you getting a lot of pushback from some of your bigger customers, say in the rental channel on the aerials business at this point?

Ronald M. DeFeo

Yeah. Tim, you want to comment on pricing in the rental channel, because I think that is probably one of the areas where pricing activity is most pronounced. But I think it shows up a lot of times in differences in trade packages and requests. No doubt pricing is an important element at this moment in time. We don''t think you''re going to get a lot of market share by being the lowest price guy out there, but we also don''t think you can not be price competitive. You have to be price competitive. But Tim, on the rental channel, you want to comment?

Timothy A. Ford

Yeah. I would say, Ron, your comments on trade values are right on. The pressure that the market has seen on pricing in the last six to nine months has really been on the values placed on the trade package more than on the new equipment. At the end of the day, it''s a net calculation, but the real value focus has been on the trade side. And as we look at market share growth in 2010 really it''s how you use financing creatively on one hand while managing the credit capability on the other side. So that''s how I''d characterize the pricing today.

Seth Weber – RBC Capital Markets

Okay. Thanks very much, guys.

Ronald M. DeFeo

Okay.

Operator

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

Yangquan – Barclays Capital

Good morning, this is actually Yangquan [ph] in for Matt. Just a quick question on working capital, given the focus on returning to growth, at what point do you expect to have to invest in your working capital again to accommodate your goals?

Ronald M. DeFeo

Yang, in 2010, if you do the math on the percentage of working capital to sales it would imply about a $100 million increase from our year-end position. So I''m thinking we''re going to be pretty flat in total. What''s happening though, as we start to produce we are buying more material, which will be a source of cash related to payables, which drove down dramatically in 2009 as we cut our inputs down, so it is a discussion of working capital. There''ll be some offsets, inventory will go up a little bit, but overall flat I expect be flat to up about a $100 million in 2010. But inventory could be up a little more and payables favorably offsetting most of that.

Yangquan – Barclays Capital

Got you. And then just if I could follow on with another question on the M&A environment there. Are you kind of seeing more reasonable multiples today? What is the acquisition environment like?

Ronald M. DeFeo

Yeah. The acquisition environment is very localized. It''s very dependent upon a particular product category and I don''t think you can say conclusively that it''s either positive or negative. I think it all depends upon the segment that a particular business is in, the geography that a particular business is in, so it varies. The real test for Terex and I think for anyone who wants to do acquisitions, is not the multiple on a looking backward basis, but rather the multiple on a forward basis after you implement the changes you want to implement as a result of making that transaction. And that has been where Terex has historically done their best transactions.

Initial 100 day plans, plans that have clear and specific cost reductions attached to them, plans that are not dependent upon sales increases. But rather dependent upon cost management and overhead reductions and those are things that we will have to get comfortable with as we look at any merger or acquisition opportunity.

Yangquan – Barclays Capital

Great. Thanks for the color, that''s it for me.

Operator

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

Joel Tiss – Buckingham Research Group

How''s it going?

Ronald M. DeFeo

Hi, Joel.

Joel Tiss – Buckingham Research Group

Does the $1 billion drop in your operating costs, does that include the Mining business?

Phillip C. Widman

No.

Joel Tiss – Buckingham Research Group

Okay. And then the rental CapEx, can you give us a sense of where the rental companies are really focusing? Is it more earth moving equipment, a little bit aerials?

Ronald M. DeFeo

Yeah. Tim, why don''t you handle that?

Timothy A. Ford

Yeah. I would say, at this point, Joel, the rental CapEx is -- well, what there is spread even by between construction or earth moving and aerials, maybe with a little bit more emphasis on the earth moving at this point. But I think it''s a little unfair to characterize it as one or the other, because customers at this point are really holding back to see how the year involves. Though, I would say at the ARA show last week, customers were -- on balance, guardedly optimistic and I think many are taking a wait-and-see attitude to how the spring involves. And if business picks up I think some of what they''re planning on spending, which is not a tremendous increased over last year, but what they''re planning on spent will be released as we get to the spring time.

Ronald M. DeFeo

Yeah. But that''s no doubt the equipment is being aged and if we go through this year without a lot of purchasing of equipment, particularly in the aerials category. The fleets are going to be quite old and quite in need of repair and…

Phillip C. Widman

Much higher operating costs to go with it than everything else.

Ronald M. DeFeo

Yeah. So maybe we don''t have a very strong 2010 from a purse of new equipment. But at some point, the basic business models of the rental companies will require them to start doing new equipment purchases. So I think, Tim, that''s a pretty accurate statement.
Timothy A. Ford

Yes. They''re all bumping up on their 45 months.

Joel Tiss – Buckingham Research Group

Last, can you just talk about the OEM aftermarket mix at Fantuzzi?

Ronald M. DeFeo

Rick, you want to talk about that?

Rick Nichols

Sure. The aftermarket business is actually a pretty strong element of the Fantuzzi business. It''s about 15% of the total revenue base and at one time it was 30%. So we''re actively pursuing reengaging and recapturing that market for the business. And it is a significant margin producer much closer to what we had with the Mining group. So it is a large contributor and we think we have an excellent opportunity to grow it.

Joel Tiss – Buckingham Research Group

Okay. Thank you very much.

Operator

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

David Wells – Thompson Research Group

Good morning, everyone.

Ronald M. DeFeo

Hi, David.

David Wells – Thompson Research Group

First off if we could spend some time talking about the crane business. I guess there was a commentary in the press release about seeing a softening in large cranes at the back half of the year. Wonder if you could give us additional color on that? And that I guess on the third quarter call you talked about a firming up of tower cranes just wanted an update with regards to what you''re seeing in the tower crane market right now?

Ronald M. DeFeo

Okay. Why don''t I let Rick handle that.

Rick Nichols

Okay. If I start with the larger crane business, I still think we have pretty decent demand and pretty decent backlog in the, I''ll call it over 300 pound crane category. It''s not principally in the same markets that we saw in 2009, it''s moving out of the European/U.S. context and putting it into a developing market context. So we actually are seeing decent demand. We took a position where we ramped down production, but over the course of the last four or five months we have begun to take back up production closer to what we saw in, I''ll call it the back half of 2009.

So we''re actually seeing some improvements in the order pattern for the larger cranes. From the tower crane business, we see the tower crane business stabilizing. The downturn typically took place in the late 2008 timeframe. We ramped down roughly 85%, throughout the year 2009 we see slight incremental growth in 2010, principally in the Asia-Pacific markets.

David Wells – Thompson Research Group

That''s helpful. And then touching back on the aerial business and the construction business, I guess there''s been some commentary about increasing the amount of cross-selling that''s done between those two business lines. Strategically, I mean does that put your AWP business in a place where it risks damaging relationships at the rental level if suddenly you''re competing to some extent by selling equipment to the same end customer that they would traditionally try to sell a fleet to?

Ronald M. DeFeo

Yeah. Let me ask, Tim, to answer that question and maybe George can provide a comment or two. Tim? Well, maybe we lost Tim.

Timothy A. Ford

No. I''m here, sorry. I last you there for a minute.

Ronald M. DeFeo

Did you get the question?

Timothy A. Ford

I did not. Sorry.

Ronald M. DeFeo

Okay, I''ll begin to answer the question. The question was, does the cross-selling that we''re initiating have the potential to damage some of the relationships that we have major rental customers. And I''d answer that question categorically not. I think the rental companies that we had been doing business with at our Aerial Work Platform operations for many years understand our strengths. We will never jeopardize the relationships on the strengths of our current business to sell new products.

We believe some of the cross-selling opportunities that we have could actually assist our rental companies and will be a tremendously additive value. But it will take some time to demonstrate that. It is a competitive advantage to be able to offer a rental company a broad array of both dirt and aerial products. Nobody can offer that broad array, but until the rental companies get comfortable that the level of service and the level of support will be at the premier level they''ll be reluctant to buy.

So I''m very positive about the way we''ve gone about this, which is really to get the best of our construction guys and gals and the best of our Aerial Work Platform guys and gals and have them work together in a collaborative way. So I think I answered the question, Tim or George, want to add anything, Tim, first?

Timothy A. Ford

The only thing I would add, Ron, is that I think the addition of the ASV business and the product line that it brings in rounds out the portfolio of products that a rental company would want to buy and does buy. And we see that as a potential, as a way to fill the gap on that. So I''m actually pretty excited. The activity we had last week at the ARA show with the aerials team and the construction team working side-by-side, hand-in-hand, talking to customers was actually pretty exciting.

George Ellis

And this is George. Also we have really worked hard to ensure the aftermarket care for our end users. As deals and such is very similar to what their experience has been in the past, so I feel very comfortable that this is a net add benefit for Terex and the rental market.

Ronald M. DeFeo

And George, as some of you may or may not know, rent operations at our Aerial Work Platform business when we acquired Genie back in 2002. So I think he has a pretty good experience based on what the customer expectations are for that channel.

David Wells – Thompson Research Group

Great. Thank you very much.

Operator

Your next question comes from the line of Robert McCarthy with Robert W. Baird.

Robert McCarthy – Robert W. Baird

Good morning, gentlemen.

Ronald M. DeFeo

Good morning, Robert.

Robert McCarthy – Robert W. Baird

You''ll have to forgive me. I don''t I''ve been keeping up with my continuing add. Can you help us a little bit with maybe some layman''s explanation of why operating results for the divested operations were reported as a loss? You mentioned some tax issues in your prepared comments?

Phillip C. Widman

Yeah. Let me go through it, Rob. There''s a couple of pieces and I''ll refer to the P&L that''s in our press release. And towards the bottom, you see the diluted loss per share by the continuing, discontinued and so on. And you see loss on disposition of discontinued operations of $0.12 negative, so about $0.10 of that is related to the Mining disposition and you might say, well why are you booking Mining in the fourth quarter, you haven''t sold that yet.

But based on the accounting approach to commitments that we have for things like investment banking fees and due diligence expense that we had, we have to book those in the fourth quarter. The Load King trailer business was the other piece related to that. So that''s disposition. So when you go into -- and that''s net of tax as well. And then you look at loss from discontinued operations of $0.14. What I mentioned in relation to that is we had tax charges and let me just get to my notes here -- a loss from, okay. Where is it?

Robert McCarthy - Robert W. Baird

You''re making me feel better.

Ronald M. DeFeo

No. Just he''s looking for it in his notes, Rob. We''ve gone over this..

Phillip C. Widman

Well, we had uncertain tax positions and we also had the APB 23 related assertions, which -- to dive a little bit more detail, but APB 23 means indefinite investment in foreign subsidiaries. If I''m selling those subsidiaries I have to book the tax associated with the earnings and profit in those foreign subsidiaries. So between that and the uncertain tax position there was $0.27 negative or additional expense in that figure of $0.14 that''s their loss.

Robert McCarthy - Robert W. Baird

Okay.

Ronald M. DeFeo

Go through your notes.

Phillip C. Widman

Yeah. So that''s one of the pieces related to the discontinued ops. And then I mentioned, on continuing operations, we had tax charges again, totaling roughly $0.27, as well, related to a valuation allowance on a European operation as well as adjusting uncertain tax positions. Does that help you?

Robert McCarthy - Robert W. Baird

Yeah. It does quite a bit, actually. Thanks, Phil.

Phillip C. Widman

And then recall, Rob, that the restructuring cost that we booked pretax of about $27 million is about $0.17 a share, as well. That''s for continuing operations.

Robert McCarthy - Robert W. Baird

Okay. Thanks. We weren''t quite sure what tax rates to apply. And then the other thing I wanted to ask about was the crane business. First, just one little number, I wonder if you -- last quarter you shared with us what impact Fantuzzi had on backlog in that business. Could you give us that number from the end of the year, as well?

Phillip C. Widman

Hold on. Do you have another question while I''m looking here?

Robert McCarthy - Robert W. Baird

Yeah. The -- my real question has to do really just my confusion about what we are -- what we''re saying about the crane business. You go into the year with almost $1 billion of backlog. I appreciate -- I think that you believe that given that level of backlog and what you see in the market that you think that business can be stable on a revenue basis or even up. But I''m not -- I''m also interested in what''s happening on an order basis and it''s not clear to me, how dependent your revenue outlook is on the fact that you have the $1 billion of backlog. Does that make sense?

Phillip C. Widman

Yeah. Rick may want to get into that question, but let me answer your first one. There''s about 200 million of backlog related to Fantuzzi at the end of the year.

Robert McCarthy - Robert W. Baird

Okay. Thank you.

Ronald M. DeFeo

And what I would say and I''ll turn it over to Rick, is that historically the crane business has lagged. In other words, it continued strong until well into a downturn and then it -- and it starts to improve later, so the crane cycle has historically been a little different. What Rick was trying to say earlier and I just want to reinforce it is that while our view was that the larger cranes may still soften up somewhat, that is being offset a bit by developing markets'' interest in the product lines. So whereas traditionally we would have expected the big stuff to continue to weaken for the balance of this year, we may be seeing some changes in that through developing markets. And Rick, I think, I’ve – may be I haven''t answered the whole question but do you want to add anything to that?

Rick Nichols

Well, that''s a good point. I''d also like to say, the fourth quarter we actually saw a real improvement in bookings and really changed a little bit of our outlook on the year. I think Tom''s comments early on said the year would be flat to slightly down. We''re still looking at that as a -- I''ll call a more pessimistic view but the order rate with our backlog moving down, about 4% sequentially quarter to quarter we''re seeing more positive signs in the market and as Ron said, it''s not coming from our traditional market, it''s coming from other parts of the world. So we''re cautiously optimistic. It is a late-cycle business and we still will see downtick in some of our markets but other markets are really beginning to pick up.

Robert McCarthy – Robert W. Baird

Would that include the RT market Rick?

Rick Nichols

Yeah. I think the RT market in the U.S., most specifically will be down and it will stay down through 2010. The upside we actually see in the RT business is the channel inventory has really begun to clear, so we actually believe there''ll be a bit of a back-half uptick in the RT business just by clearing a significant amount of inventory we ran out of 2008 with and into 2009.

Phillip C. Widman

Yeah. We feel our inventory is actually in better shape than probably our competitors'' inventory and in the RT product line we also have had some reasonable progress in Africa and in some developing markets.

Robert McCarthy – Robert W. Baird

Very good. Thank you.

Operator

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

David Raso – ISI Group

Good morning. I apologize. An hour into the call my question, a little bit long but if you want to take it off line, I understand. Going back to the slides you put out with the Mining sale and you had that view of tomorrow revenue range for each business with tomorrow being ‘10 through 2013.

Ronald M. DeFeo

Right.

David Raso – ISI Group

Just using that as a guidepost and tell me what -- how does your outlook now deviate from then? AWPs, the revenues came in at 838 for the year. You spoke to tomorrow low-end revenues about 1 billion so again, somewhat implying ‘10 is 1 billion of revs. That''s 31% AWP growth. And just doing that same math with other divisions, you have AWP of 31, Construction up 16, cranes down 5 then you add Fantuzzi and Material Processing up 70%. So again, going through that, can you tell me how that changed, how are you viewing AWP versus that 31% , Construction 16, crane down 5 which we talked already a little bit about and then Material Processing up 70?

Ronald M. DeFeo

Yeah.

David Raso – ISI Group

I''m not sure if I''m hearing 31% AWP growth from the commentary on the call, so I''m just trying to make sure I understand the old framework and how we''re viewing it today.

Ronald M. DeFeo

Go ahead Tom.

Thomas J. Riordan

Dave, this is Tom Riordan. We may need to take this a little bit off line. I think without referencing the specific numbers you went through, we''re expecting some uptick and I think, frankly, less than 10% in Aerial Work Platform segment and frankly that also includes our utility business, which is in a little more robust position. On Construction we are looking at a fairly reasonable uptick in revenue. On the cranes business you''re pretty close. Relative to excluding Fantuzzi we think it''s flatish, as I would describe it. And in Material Processing we are looking at a reasonable uptick in that business, as well.

Ronald M. DeFeo

But again, Material Processing was a 1 billion business pretty recently and the percentage may appear high but --

Thomas J. Riordan

Yeah. And again, recognizing, as we''ve been talking about and I think as you pointed out a little bit, as well David, that a lot of this is driven around our belief of the channel inventories that we''ve got and virtually every business we have are at very reasonable levels with current realities and as such, running the retail is going to provide a nice increase here.

Ronald M. DeFeo

I don''t think the 31% number is a right number in Aerial Work Platforms, I think it''s more in the high single-digits number from where are.

David Raso – ISI Group

So you''re swapping -- based on the base rate take down the AWP thought, raise the Construction? Those are the biggest deltas essentially.

Ronald M. DeFeo

Yeah. Yeah, principally that''s right Dave.

David Raso – ISI Group

And then when I think through the profit margins and again, I''m not trying to pin you to a slide that you''re trying to put a framework, I appreciate that but if you look at the tomorrow margin for each division, you had AWP going to pro – I mean, going to breakeven for ‘10. Given we''re taking down the sales growth rate, is it fair to say that number is no longer the breakeven for Aerial? I''m not saying you''re not going to strive for it but realistically is that a breakeven business in ‘10?

Ronald M. DeFeo

Well, I think it''s what we''re after trying to get to. May be it''s a small loss but we think we can get pretty darn close. There''ll be some off-setting factors; how strong is Latin America, how strong is Asia-Pacific, if we can get some strength there. There''ll be some offsetting factors. The utilities business, which is in Aerial Work Platforms, may be actually a little bit stronger than we think. But we think this is a year where we''ve got to get that business at or around breakeven. And okay. It''s going to be very hard to do, our competitors aren''t saying they can do it but I think that''s the challenge the management team has.

David Raso – ISI Group

Because I think the framework before and I guess now you just swap it a bit between Construction and Aerial. The crane business looks like you''re not using the (inaudible) you had before of roughly 4% margins in cranes for 2010 that''s essentially implying kind of flat profits in cranes 2009 to 20010.

Ronald M. DeFeo

Yes.

David Raso – ISI Group

You get about a 25% incremental in Material Processing, you''re kind of earning the EBIT growth because you''re growing the business a lot but AWP and Construction are still those businesses where if you run the straight math and I definitely appreciate the overhead absorption that Judy [ph] should benefit from after what they went through in 2009 may be you are looking at roughly 100% incremental on both those businesses and I''m roughing the numbers. Of those two, which of the -- which is the one where it''s -- God knows nothing to lay up right now but which of the businesses that you''d say -- it''s not even asking that much, even though it sounds like a big number, because Genie went from shutdowns, selling the high-cost inventory, to now they''re producing in the lower-cost environment or do I not appreciate that Construction has 150 million of savings or just that compact business where you''re getting the growth from is just that profitable?

Ronald M. DeFeo

Well, I think you can''t discount the fact that we have to hold pricing and the pricing environment is unpredictable and we also have to achieve material cost reductions from our supply base. So there''s at least three or four main variables that are going on here in these businesses. I don''t think anything is a lay up but I think