TEX - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Terex Corporation Q4 2019 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Mr. Randy Wilson, Director of Investor Relations. ahead. go Please

Randy Wilson

and and quarter everyone, today's for in Officer. Executive participating are President Senior Good Chief and financial thank results fourth Financial Officer; Chief and XXXX Garrison, on Duffy conference today's Sheehan, John Vice morning, Chairman you John call. call Participating

Following session. the will question-and-answer remarks, a we prepared conduct

reconciliation is available Today's call a is to We available All use have XXXX the it's share GAAP non-GAAP quarter fully we this which terex.com. during will fourth of a results, in a a presentation, webcast on financial measures and accompanied released our copy, by slide which on is that being diluted call, and basis. presentation amounts adjusted also are on website. our per includes

a Investor of the Presentations. replay Events and on call Relations under post Terex this We website will

attention read statement forward-looking We Let the today forward-looking be discussing Slide me and encourage material. as does financial in include we direct will disclosures this, you items well non-GAAP description your is X, other our measures. which our to information to of because as

Slide and With turn to over Garrison. X, that, it I will to please John turn

John Garrison

Good morning, for interest and joining and for Terex. thank us, in your you

culture during make harm team's am within But culture. is great year, our by further operating reducing and progress safety harm our made The focus harm life. the culture. we will in commitment, For zero realize we accomplishment. global can continue a progress Terex, an on of team environmental significant and recordable injuries and XX%, proud health to way the dedication, zero absolute our safety I of a zero

within where operational segment. year our AWP a we faced completed principally and quarter considerable headwinds, fourth market-driven The

produce AWP's markets, operating quarter of revenue results down revenue. industrial global from were in our XX% was lower expectations and reflect the generally the challenging Our with line QX QX fourth our on results headwinds equipment sentiment decline, in to below markets with the cautious the in operating adversely to revenue impacted AWP's our need coupled America reduce margins. and inventories, XXXX. Europe. This largest retail demonstrates customer North demand

well, execute XX% in QX the being Our revenues down maintaining despite margins, operating MP to team XX% continued quarter.

parts and growth our Execute Driving parts Over drove the element service to X% service our challenging our key from Win a Despite reduce equipment teams time, one global currency markets, neutral cyclicality. this sales is and will initiative. growth on continued initiative basis. help of growth

generated XXXX in we maintained of during which million proceeds Given XXXX. fourth $XX in our disciplined operating, from our the flow cash cash flow of billion million environment dispositions, sheet, have $XXX and Combined over on Terex quarter, strong the We absolute positive free balance we of with liquidity. cash positive are including capital allocation focus ended with free strategy. generated $X.X a

working efficiency. Our improving global generating be cash and committed team our to capital to continues

corporate committed remains consistently Terex a will establishing X. performance Slide its to based Turning goal high of deliver phases on and business to cycle. culture, process the discipline all of that accountability and

Turning to X. Slide

actions We our demonstrated businesses in focus complete rough the crane share material cost some cycles. The industry-leading course completed earn our strategy portfolio finalizing moves processing this Terex two multiple ability element businesses competitive their have that the of their start moved crane of the of They organization. two-segment XXXX portfolio the terrain tower and segment. out to by over of Now, our into we consistently essentially a forward. remaining let transformation These capital Terex move to me At also have year, the positions. the in significant of continue highlights former to segment.

Ireland Terex expanded India global and even have MP demand. facility We manufacturing our including allowing Hosur, brought facility, to more capabilities, Campsie online be Northern to new responsive our in

manufacturing world-class multiple facility will utilities production and buildings into state-of-the-art, new one engineering consolidate Our facility.

business. customer. parts the Technology We service our tools efficiently, to with them a process more global accelerate to a to maximizing and new begins service of their strategic parts Strategic excellence distribution a and partners customers of business. X we sales as opportunity discipline is entire their global allowing of to Waves completed and momentum, process. the part force, is ends This help round rollout digital with and customer launching that XXXX easy-to-use throughout critical our finished providing our growth. team sourcing win advantage Commercial projects. competitive increasing To the sales and industry-leading are service, X, Terex build continues strong deliver implement

and to specialized perform portfolio the position, businesses, investments cycles. throughout equipment strong we facilities our are financial our systems, the With in of and our high-quality positioned well

operational Looking zero harm safety deliver XXXX, culture. our ahead to in driving our consistently our we team we customers, At that are and excellence improvement must can that Terex, shareholders. towards drive on members, commitments so we we to recognize

to water We and energy facilities, are environmental putting is in products our doing emissions. committed this team through with reporting, open conservation developing Terex stewardship members also communication, our and our by responsible first. reduce innovative and that efforts

in are markets. Shredder we to offering in our expands and specialized Terex to markets. serve markets, recycling the improved reflects performance, value, our entry innovative Advance innovation; into the truck, A Ecotec invest to continuing Turning mixer also are products new Terex few examples

South The manufacturing offerings, facility our budget. within growth. addition are which new In manufacturing on remains to product expanding future investing capabilities, we schedule our in Dakota utilities in and leads to

our Another the an accommodate which China expansion growth important XXXX China is in for global will for facility to aerial facility, products. growth undergo in market future Changzhou, Terex's

addition, product added. and utility In MP be lines will

adoption take to We products. are these of localizing increasing manufacturing of advantage

service enable and investments offerings, growth productivity, manufacturing parts growth. and best-in-class These a improved customers. our industry-leading team experience by delivering customer for Our on focused is

call, challenging we communicated we QX expect to our earnings global industrial during As remain XXXX. the markets in

be sales $X.XX Based which current full-year to per upon to result of a lower XXXX adverse in anticipated expect lower earnings outlook an midpoint effect for on margins. are share. of operating The sales we will $X.XX We billion. to production this anticipating from X% $X.X XX% to down will levels, have XXXX,

We last the four in will our includes disciplined to value strategy, by enhance dividend which each capital years. continue of shareholder executing allocation increases

turn me that, With Duffy. it to let over

John Sheehan

John. Thanks,

Turning to Page X.

by reviewing our sales year, Europe. in last million begin by and to of by challenging $XXX North AWP driven compared America XX% me markets QX highlights. continued segment Let contracted

quarter, During XX% saw we the production challenged margins China sales increased the increase quarter. operating product lower the and Overall, AWP's in to fourth through in a continues levels grow sales, market significantly reduced where adoption. aerial

quarter, last customer to significantly and to we manage have As production. demand we discussed reducing been inventory, align

lower million, This fourth lower QX lower we reduced end did sequentially. QX, improve of XX% the million in During manufacturing resulted material were bookings book-to-bill from XX% Backlog in and compared year. But to XX% the $XXX QX was savings. XXXX. AWP down XXXX. than prior absorption production year $XXX quarter levels ratio at cost

customers However, from AWP's advanced account is our XXXX national all December purchase fully completed backlog XX, year-end comparable XXXX the not orders XXXX. not by as to year, weren't prior

CapEx purchase for revenue customers year-over-year national When Additionally, placed patterns, these customer account backlog adjusted plan our supports ordering a on smaller guidance. their advanced AWP of orders. XXXX percentage our

three cautious crushing $XXX markets. purchases margins, the the achieving equipment. products, digits, quarter aggressively challenging team from Materials material we're XX% the processing screening and operating environment. as despite of out year capital still another driven solid handlers, off Operating a quarters in been year, of challenging down of fourth customer market decreased managing million, has XX% double we by the were elements the and environmental MP the XXXX, with Sales quarter, first delaying margins sentiment, but during cost levels closed all experienced

than lower year. was XX% last million Backlog of $XXX

However, higher MP's year-end XXXX full-year In backlog anomaly. a the equipment of much percentage their XXXX was of to requirements lead quarter due fourth ordered an extended dealers XXXX, times.

by times Within rough normalized and and for we corporate enter patterns ordering with dealer to shorter. saw terrain returned expectations. As operating lead as performed rough crane are to terrain tower we tower Operating cranes the lower in XXXX, lower but modestly margins historically were sales, line sales. other, margins have impacted levels,

that sales Turning an review margin the adjusted our impacted as profit. consolidated contraction operating corporate differences as to related lesser headwinds Total and XX%. operating operating in QX partially to lower our by a charges, Execute margins. production margins, overall primary MP's of AWP investment volume Win and to reported offset approximately lower the between and X expenses decreased and leading Slide results. our were extent, areas, to Restructuring to priority

our had a pre-tax approximately earnings full-year we tax came generated than more of in adjusted QX to benefit per adjust previously a recording Our adjustments provisions tax as On tax adjustments rate These to result XXXX combined full-year tax quarterly our income, in favorable $X.XX. in and we basis, tax of a an anticipated favorable resulted our $X.X of XX%. share returns. million sales between lower XXXX rate mix and of with jurisdictional

for whose XX%, almost in nearly AWP, full-year Terex. expectations to decline sales as reduce X.X% declined their line a XX capital to equipment results. year year the a was levels year. with production up global AWP's rental year. XXXX caused margin basis MP customers from operating had and challenging revenue North were Western Slide margins from AWP's over X%, year to the revenue revenue Turning for Partially full-year lower This MP's XXXX. XXXX review the a our X% in company for revenue the sales reduced Overall, with operating Europe, to approximately to challenged $X.X significantly AWP's over decline, for greatest strong concerns market consolidated contracted beginning offsetting attributable points for our XXX in was $X.X billion. increased industrial equipment and America declines total the the adjusted almost Net purchases. of sales billion.

Turning to Slide XX.

business, our on segment and MP. are operating XXXX AWP terrain presentation, Our we including in to earnings quarter. your our results The analyses included our XXXX appendices reflected tower XXXX, of to model, for website. businesses our and XXXX years modeling in assist by have based These To Investor guidance and posted Relations QX the the MP. recast full crane are rough is our and two-segment

and guidance Today's and X.X% Reduced improvement. offset sales on lower basis by XXXX, anticipated leverage points partially decrease ongoing our investments by on operating are investment operating simplified Transformation to our financial expect all completed operational In our includes approximately the AWP and to Program. as XXX XX% community have between X% currently an margins segments, lower MP our in currently we approximately sales. to reporting both we X.X% volumes, expenses, in to the

China while made on half. With respect first are year from be material currently AWP and up lower year, impact anticipating will expect our second the which half sales our in earnings to not the we have the results, we full do coronavirus, in the of facility any to

our of EPS any excludes authorization. benefit of but XXX We full-year exclusions associated $X.XX expected and XXXX guidance that China. per XX%, also our imported assumes This expect $X.XX extension rate components into share assumes guidance are a This with from between the existing repurchase and XXXX share. earnings existing tariffs machines for tax U.S.

perspective, quarterly expect sales normal pattern. a we a From historical

year-over-year half year. basis, XX%, revenue half in approximately first will However, of year down on the of be the the a the and second in flat

We The overhead on our expect in and QX QX by production below our EPS in retail XX% demand, the each in XX% driven and impact profitability level QX, to low X% being the finally, year-over-year, is of on coronavirus QX, combined and generated XX% down AWP roughly operations. be China unabsorbed and revenues of QX. abnormally with

cash strong positive For are free million full generation. of the reflecting flow a we cash $XXX approximately estimating of year year,

cash improve to quarter expect performance. flow We first year-over-year

cash to consistent However, patterns. historical expect do QX we be flow negative, with

level be will to of initiatives expenditures approximately earnings $XXX shareholder capital estimate CapEx growth returns. This and reflects long-term in designed continued million. also drive investment We

our to segment Turning guidance.

expect X% and AWP into in XX% resulting operating being XXXX by continue down sales to exhibited of Genie to customers to during the being X%. caution XXXX, We margins rental X%

approximately be and which We cranes XX%, including XX%. MPs our businesses expect result to XX% processing in materials margins revenues, operating being will down to X% towers to rough terrain

continue Terex with to exit any Union, the developments material the associated process. anticipate not impact monitor from we in UK XXXX the we While with European Brexit to do associated

planning continue million gains sales corporate for for will XXXX lower receivables. managing of expenses from on $XX at in $XX incentive Overall, corporate approximately our guiding be during compensation due up do payout been and and increase million to The target is financing XXXX. our we are to so, have XXXX. structure XXXX, to We aggressively

reducing XXXX, discipline introduced our Turning made strategy to strengthening and over capital our Since to capital strategy. sheet, review Slide $XXX in capital disciplined in allocation allocation day tremendous analysts our our debt XX we our have progress of at by reducing we our million. cost balance

our than times year turn than As X.X which a net is nearly result, X.X adjusted better was less divided EBITDA our XXXX the net end cycle. targeted leverage, full a through debt by times

this pension our reduced we $XXX Additionally, than over more obligations period. million by

made substantial last the three Terex. have we investments in years, During

our the annual of a commitment last invested is billion fact, long-term which These three businesses into In have years, maintenance demonstrate our higher our $X.XX almost growth. million. CapEx we investments than to significantly over $XX

by We are the their which cost of of businesses earns portfolio out of we excited have capital. each

We sales return to have the of capital deployed from shareholders. businesses the proceeds to

XXXX First, now approximately shares we our outstanding at Analyst have XX% than fewer were Day.

we to $X.XX by Second, dividend per XX% quarterly increased our have share.

Terex As have I continue team capital through shareholder the to consistently, said of allocation our and value the has execution generate will strategy. discipline,

back you, John. to With that, I'll turn it

John Garrison

Thank Work starting our Platforms challenging. North are American segments with and I'll our markets Aerial you, review The Duffy. AWP. European

However, utilities the strong. North American market remains

fleet utilization. to be in their rental decisions. are capital their prudently They expenditure cautious North managing Our continue American customers

XXXX. half into the into As we of and the year move latter

increase. in expect the cycle replacement Europe America and We to North

Finally, Work is the Aerial Platforms of growth. adoption in China ongoing fueling

To team sourcing volume strategic committed to transitioning improve is plans, new fully suppliers. significant AWP their executing including margins, to

are rates We expectations. our savings with seeing consistent

However, the The are the new Genie, total fuel brand date. fill ANSI due be have levels In will capacity for out XXXX, the lower continue governing is levels Genie will currently due which the more value line In important take we load on CONEXPO. synonymous add and at production with is products savings hybrid line, leadership innovation. market, to extra effect and standards to technological impacted efficient of March. Aerials in display as XC realized

facility renew the will This continue efficiency enable with grow. to will facility new products capacity, during and summer. transition engineering increase and new Terex to will together team improve and services which utilities utilities The to manufacturing

For see line products example, our a support and requires service electrification at offerings. TL-ADJUSTED us the transmission visit our pictured that world. our slide you innovation Terex on distribution The at the electric around invite exciting Terex utilities continued the occurring is new the investment to product We is grid new market. CONEXPO significant the serving to to booths and

to processing that heading team their as continues innovate. XXXX on meet results Slide XX. new positioned to The product segment consistently and well offerings. Turning AMP high its into Materials AMP markets commitment. capacity, will launch crushing performing strong a deliver with AMP in our environmental for Colt value to screening higher XXXX. and here AMP The its Evoquip emerging pictured The Screen QX, into It and mobile equipment. team and telematics continues customers. delivers expand to penetration is

in to and to CONEXPO. our year. this high execute environment, shareholders. global Terex to in our qX commitments separate deliver screening of expect and AMPs I on at risk be up industry leading crushing awards. team our Terex team continue a again a global its innovation with customers will efficiency is that industry was by new and on kind of first our recognized display sites. injury three the to all plans OMNI meeting at level improves XXXX on AMPs wrap innovation on remarks challenging OMNI To and innovation AMP reduces and prepared continues a its focus

in to products win will and to term marketplace. the conditions, continue we Despite innovative the in invest and near services grow market

in We our improve will continue the to initiatives operating capabilities. invest and that commercial

continue capital also will allocation objectives. strategy shareholders. create confident we our in for follow and achieving finally, to additional disciplined our value our are And XXXX We

With that, to it Randy. turn back let me

Randy Wilson

John. Thanks,

With to up and to a As you I'd open to up a questions that, to questions, we reminder, during asked get answer to ensure to follow your limit one time have question for and session, operator. the like we everyone.

Operator

Jerry Instructions] comes with [Operator question first Goldman Sachs. Ravage Your from

Jerry Ravage

for more Good the earnings the on hit level. second for know, you your you expand morning, Hi. Can quarter, outlook to everyone.

guidance. the it midpoint call at So of $X.XX

in and the I points this compared of years? just be piece fact the second basis of disproportionately essentially why of be terms you in Aerials quarter to through your for margins Can step expected quarter within significant XXX that check know, just XX. me to is year you'd You think and second moving prior

John Garrison

in in and and of look QX. our down it the QX. be QX first the our the is have a more with Production the quarter, you coming demand our will know our have the that second expectation quarter Thanks, business we of the impact and revenue at down challenging then Yes. AWP when quarter, global the lower best line you in a the year. And would take by In a in it And the as basis production the virus. for as after that Aerials seasonally Jerry. of strong on retail expecting be certainly that quarter dispersion almost well guidance XX% for AWP corona adjusted that utilities QX EPS business second both question. are XX% will year-over-year as reflects we would I'll with also so year,

Aerials Terex we utilities both And performance businesses strong would expecting are so for to which operating a whole. drive as and our perform,

Jerry Ravage

John, that -- on expand may And maybe point.

expecting for? first the XXX in So that know points versus me about, sequentially how wrong, XQ. much don't you base Just to production correct looking XXX, ramp you're get up margin quarter big versus that XQ normal betting to are compared I'm if seasonality improvement to you're sequential AWP second be in quarter I but the

around building you comfort just that'd be So helpful? if wouldn't level mind our that,

John Garrison

the by And where which all. at few the revenue to in with production XX% moments of production improvement range year-over-year in XX%. you're XX AWP production the QX as range, that be line from percent ago, don't QX would was. increase, XX-ish with would of which estimating QX. problem said down QX to QX in I would margin from down to in the in And XX I disagree be would be No a on

to XX% by improvement XX% sequential a see you'd be actually. would that So

Jerry Ravage

QX, So destock as we're of done essentially? with

John Garrison

of The correct. is it absolutely that biggest portion

Jerry Ravage

you. thank Okay,

Operator

with Morgan. JP Next question Duignan comes from Ann

Ann Duignan

for I'm the Can about what's I worried bad about Materials talk United mean, that Processing, businesses processing. in look that going mean, not your business? particularly Are market morning. just the States cranes is we the little that should somewhere? US leaving and investment booming. you backlog as there's infrastructure the you're you be fundamentals seeing I that outlook a any and share on regionally concerned we Europe, in good out the and with materials are the Hi, for in losing

John Garrison

couple think for dynamics MP it's we is thanks environment over macroeconomic global at backlog we're different strong, cycle a well, but years and about of into question very historically, to has high type the our and we are do Ann, driving backlog going done and course If we and a business. consistent Normally, of impacting been It's each much demand, excited shorter well MP, a for continue Thanks, the last about business to business. debt but performer it will business. not backlog. level a book look had did XXXX operate historically the business the

higher if the it XX, than backlog into you previous going was been So look three XX% had almost years. our in

would a dealer to of that year for network being strongly the historical times was went would backlog, tight, around to the pattern. orders normal backlog the And there's say encourage it in we So When pattern, more XX, our I would dealers place did into now world need the that the backlog early higher not our is like full this to have we level year, year. get when this obviously lead say the for along but with I demand in their demand. shorter

They're the you asked, impacting is a a a seeing crushing is key on businesses customers and of to rental screening, networks. ownership equipment if the the utilization North that we rate the delaying you look as you retail hesitancy know, is that is good stable. you so dealers, restocking that in America, So which of convert look if backlog. at the rental overall there's the at the caution but to and know, dynamic utilization And the

There's So are markets good. screening still generally overall, the the and good just crushing cautious being still utilization customers on side.

they're that prices Ann, steel good America, distribution the their North specifically now handlers, they've down material coming business, channels, world Fuchs in steel executed but the offering the has expanding with well, coming business pretty into, expanding team but job, around scrap prices Fuchs significantly, done or a drive our Now the really still Fuchs. impacted scrap

if most. within backlog AMP, off So businesses the standpoint at I actually look Fuchs the is from the the business

to businesses, Offsetting that environmental our done brings the marketplace. job good a team new products Kieran is and have

year-over-year. relatively brands. business, globally continuing we're So operates bit. our North really a down for Carry across regional concrete business look US again, in at well looking environmental American year, know, to a the like we us down mixer at stable relatively a last all When was throughout business, North that's was And Australia, then it relatively you MP, on see stable. to growth Ecotec we're business the & again, bit American Pick portfolio little principally that our be stable that up little And

So are seeing confident I'd But it, I'm still out. capitalize to outlook. cautious head are team cautious. going customers that for And still, of how are how the the is strong, with know, they're XXXX. backlog that's erosion associated any in characterize into to the will are but I'm play you the markets being being, on at share play customers all as about dealers, revenue the And as the concerned markets opportunities not the we year

Ann Duignan

you? on QX color. EPS? Or impact Did helpful your quantify can of the That's you coronavirus

John Garrison

has ramp did slowed with plant broader members you virus. team travel of members segment do our of is we are that don't during to want companies city a our delay have to team plant did members to China, come just we the to Changzhou. the priority facility on back opening Lunar out open members been most if this like are allowed plan the holiday. in only in before XX. quantify But the I Due manufacturing not We our Year for the on virus did world fortunate that week February team the none New mind have because the the the class So, corona that a comment to have been been AWP say and definitely reported our we virus. first, team the of

a So days. because they for slow to ramp it's self-quarantine to XX have be going

team. And the said we we assume our guidance, with that make working with QX our guidance our coronavirus, Duffy that working QX does the QX the we that we're our the QX So will AWP performance. and of up in as in impact We're shortcoming. suppliers. believe and have And incorporated

through do QX. add Duff anything there? and want QX move to we As

John Sheehan

say that revenue would guidance from impact at for I revenue purposes evolving, a is say $X impact and the $XX to into that's million to is Since built perspective. OP $XX anyway, still moment, million $XX the the guidance million built million revenue of there $XX $XX a impact a for situation we, QX and to million negative into million been that.

Ann Duignan

helpful. appreciate that. that's Okay, Thank very you. I

Operator

Cook comes question Next Jamie Suisse. Credit with from

Jamie Cook

Hi, good morning.

area producing the the different just year? for you again sales on supply the what that will of of last under Just another Because what quarter. said the understanding said you. down and we're implied did And how first the could we're of sort lose miss seem much on in you just XX%. first money we're first there's in for handicap what the the in If question, losing benefits question I before. that guidance quarter materially I'm in the Is the we cadence Thank then chain quarter. way quarter. assuming any first business doesn't we guys from to my coronavirus? and in assumption And

John Garrison

have did Is QX in operating XXXX. our margin will positive platforms the at XXXX look work positive when margin platforms QX in Aerial operating that have work and business segment Aerial

inventory revenue been in money. we losing the ourselves lower isn't demand the retail revenue certainly The do has segment business. those of the expect therefore XX% down the producing improve. bringing profitability a both resulting is The once market below certainly levels significantly we of past our And is ahead. to get challenging and headwind impacts So, margins environment and

John Sheehan

supply to You go want the chain.

John Garrison

Jamie? supply and to question that questions Is I your was in think around specific Jamie, chain sourcing. with strategic last your So

Jamie Cook

my Yes, the that chain The question. assumption guidance. was in [indiscernible] supply

John Garrison

so thank you. Yes,

about So of $XX we're a you in impact our full XXXX million. know, year anticipating guidance,

consume experiencing in comments, opening we're in volume longer my But savings in what said with rates the on I pipeline. good raw inventory is to lower doing. As the taking we're production the

built changed do say with were really able manufacturing our So limited the we've literally facility. thousands no good in, over are that of the course of we we 'XX job, to teams will that I to a doing disruption and to parts

we're in see you So the teams improvements the is to strategic capability continue And to SSI I processes, going that developing sourcing, you up the and drive show know, us. clearly to critical think internalize these and or we as the in that seeing AWP margins savings go that And percentage through incremental with is segment. associated enjoy. sourcing detrimental will will strategic largest our year that say we're I of the

Jamie Cook

Okay, thanks. I appreciate the color.

Operator

comes question from ISI. David Raso with Evercore Next

David Raso

cash $XX questions adjust and absorb million. despite will million, cash the that's $XX about being flow also Good morning, grow the EBIT the million $XX flow million my XX CapEx million, on down down but lower When you million $X the free year-over-year, retirement be extra to you guidance. for for the G&A $X obligation. It implies

then especially Just concentrated production working performance trying do in ramps capital And if strong year, we part the expect the first why to get comfortable with throughout back. year. it's the of very

Just with comfort gain that? trying to

John Sheehan

I'll for revenue anticipate XXXX the that. environment it David, and down in headwind environment So take In that the at a we will market balance shrinking sheet. result of

do receivable and bring accounts down a result will cash So them restock inventory a payable of cash. also level source we source levels the that of our that in will don't be we as of expect accounts that

collection inventories, associated of dynamics receivables about of result that in in the the being a the with the reductions So really source cash. working capital it's

cash John XXXX. in free achieved So generation. And our that I our flow I million you can know, has teams over subject. see assure got performance us a cash cash and generation you free all that, you flow that our free the team capital on is to the have absolutely will flow focused improve. $XXX that working And I acknowledge generation and And been on

David Raso

changed I would sure being to just how Just And to to it's give up very appreciate how compensated proved cash the the being mean, thinking about is anything, are people and that. I flows to being cash still flow sales make committed you're John, trying anything say to last free we there. willing elusive. year that I'm spoke that

trying So should thought where believe would a guidance we production decent capital have when the inflows, didn't it why year understand you some have this it to generated big working year, materialize? just year under would last in

John Garrison

David. Thanks, Right.

So our management Obviously, capital team below networking plan, XXXX. for want of compensation to it that to was target the part yes target we and drive in in significantly as XXXX. incentive

standpoint, focused of the compensation driving I even a was bit the being production. more had down David is the little disciplined on fourth than quarter, from is networking So the things team capital. assure we we're can revenue the on a And forecasted. management And you in that very one

ensure disciplined. And trying producing inventories we're our line going we in that still retail to to and bring be are we're very below so demand to

help important where these in yourself and may I don't this very a in you do. disciplined because think markets. you it's some in over put have in pricing types these on it position of put things that to to doesn't anybody to Be your do it businesses production inventory and produce on build want

said, elevated. revenue production production to cash of our attack that's going capital the CapEx long-term schedules and schedules, we're best to in free So as investments, flow great networking remains organic to you interest based mentioned, going for a we're sizable to the we're shareholders. growth think Duffy level with the or expand We adjust drive year. And inventory, our continuing attack that as on going our to we're into

of our incentive this around intense XXXX. that going plan, in in has it is [indiscernible] year, and team. focus, leadership And highly reflected it compensation our to part turn disappointed in So it our performance was of we're the

David Raso

lastly, call it the flow Well, how should the say that; cash only XXX free the do $XXX of to expect million, you if use do you excess hit dividends free related did let's those flow If probably cash million $XX that? targets? the we of roughly,

John Sheehan

Yes.

allocation David the times. ended revolving available, this the that been our balance liquidity We Net to with We a So downturn. of during we'll sheet the market through facility, headwind EBITDA XXXX to include the cash have balance debt think returning shareholders strategy, preserving follow credit be. capital borrowings. on and to X.X between economic that's billion liquidity cycle, $X.X of and good discipline on will portion our place sheet we and

to are allocation the consider we including sure level the of of shareholders. discipline efficient and make we liquidity right continue return capital will of So, that capital what following to strategy, is

David Raso

with as to be played thought it's but the access note, So probably you that just if utilized? start you comfortable clear Again, would to the here; ask from easier the any on where that I'm time million. management everything out commitment year, the of $XXX be if will as Are so you repo EBITDA down leverage year down a as sensitive leverage the the look keeping maintain and a are it amount but bit opportunity debt naturally goes this share you or you this at drops? leverage the up level, EBITDA to would so be the more

John Garrison

we EBITDA David, we cycle X.X a to target, going the had like net we're position EBITDA through target, into year. to debt

will authorization, be we that will we're ensure board the liquidity repurchase create share liquidity softer any against have year. outstanding approved, a David, the going we and we repurchase for don't has ourselves, we into market issues the that like an manage but opportunistic to position now, our in We but outstanding share in authorization outstanding as

David Raso

time. you. the appreciate I Thank

Operator

Next Baird. question Dobre Mig comes with from

Mig Dobre

everyone. a Want moving more on there. AWP understand little to pieces in just the Morning, dig

about business So on that as to business? little utility that can As a portion So can of how the utility the the in associated the far And with clarity was of a for maybe XXXX is you $X.X concerned? you little XXXX? billion much guidance of the us business? how as that segment thinking about can bit revenue, you give you're talk

John Garrison

doesn't solid about part really is our and business, utilities Yes, And what's the the Aerials of AWP of Thanks, segment. seasonality are business. a different Mig. it It's utilities experience cyclicality business. Yes. same

So it's bit constant. a little more

course through the go year. we As the of

it $XXX said, we've was million. As about

the team facility. QX our $XXX as can that We've move quarter. year, facilities up. you operating our into occur a anticipated bit our generating consistent challenging manufacturing going for equally to across QX. level the That in we've in as state-of-the-art be this plan picks between margins. reasonably revenue, will lower. $XXX is So QX said, But to and a in guide, X% split from and year. we million XX% across QX's relatively the million little

utilities of are the into of across give business we expect space as as if for business. good to about market. facility, growing things increased to drive it's $XXX reasonably One, The to And think There's have about to advantage lot right margin, get that. investment improve extended year, efficiency we times us market a electrical forward. capacity because capacity to in are As then also capacity a that's and way and that spread infrastructure a And operating we new take for go we think that's to two believe you XX% to increased lead move, we million occur. in is grid that to good X% a now, our going million, we we XXXX. going be. us $XXX required constrained think the But

Mircea Dobre

some to It's fair XXXX? say in this be business that -- to expected is up you

John Garrison

Slightly, yes.

Mircea Dobre

Slight, okay.

framework And XXXX, should Are is revenue would about out? that all mean, AWP the So, us your and as concerned? below help revenue. of segment then that historically, if coming in levels? the us because for versus, how this noise recession? Where I end your kind number historically demand replacement look this Really with I with that we Can there's low business frame that going a modeling as so billion you've to be of coming we implies in revenue here? out out you demand in of done say to think at replacement level $X guidance, versus of industrial far much back stuff been be the

John Garrison

Right.

I of -- me have in let don't front me. XX So,

that, you Mick. we'll So, on to get have to back

Sorry for commentary. that. We'll replacement But next me the time. that frame about let the cycle have

think were They're begin their general, into As to years it eight maintains this its are kick range and half of in customers we say They're at rental into already disciplined. of in equipment the back purchased in and capital the seven week cycle aerials to as life XXXX, across talking the in being again, we XXXX I as go ARA customers talking multiple I do being CapEx plans. move customer disciplined They their spectrum. highly was XXXX, the look a business that to in the that's should the to first because ago years. seven products longer about they eight plans, the channels result at for in. replacement

conversation kick cycle time the of aerial in a cycle that as to just going expect move also we the only business replacement North XXXX So, XXXX we And Obviously, but we would it's the America. and American topic a week. into the this was replacement and build help with into or think looking to forward, as replacement cycle term Europe from cycle do in will XXXX period, we move XXXX. term, customers even similar on in to clearly in February kick in, Europe. the North is longer of very intermediate demand

John Sheehan

same $X you the it guidance today in the is revenue gave still Mick, and have moment a with in the that we've XXXX provided XXXX. the in here of are aerials billion, information And the area that say a in us is so was I said John that. above ago, business of as portion would we John apologies don't our with room, [indiscernible] for

it's So, obviously I lower. would up because XXXX versus XXXX was say

Mircea Dobre

helpful. that's you. Thank right, All Right.

John Sheehan

Absolutely.

Operator

from Jefferies. Next question comes Stephen Volkmann with

Stephen Volkmann

had Good well. this just on follow-up morning, a thing guys. quick as utilities I

still So, the a John? as once this XX% plants X% consolidate to business, about think new these we into one, do EBIT we

John Garrison

than of And kind I is the that, XX% number in challenging out around that We're look efficiency, to team if the put move efficiency the was Stephen. to production associated at improvement with there facility. the production new do better

time production It's but the to within plant. going day an be around not take on if improvement our to see didn't efficiency Now, we'll occur would one, ramp. disappointed we XX% than

John Sheehan

say did the in the fair take manufacturing margins. continues certainly I anticipate case line the And top it'd to drives secondly, I business mean, efficiency utilities the think business business gross growth to then Yes, share. market for that the as be stronger

John Garrison

That's correct.

Stephen Volkmann

the other facility might things you then, And in I do could said in as past Okay. well. you've that there that think some be

any there is benefit positive the anywhere company? sort in of So, else

John Garrison

for Boone on the purpose installs side. is facility special this for facility both utilities lines and a No, what manufacture we product our

any on service using a anticipating parts, customers. currently doing have not very in service XX centers lines. the aerial working we're we've customers, centers is facility are associated utilities we with seen for the other our and closely those and that nice revenue very XX our growth we more with business, So, in What service product aerial centers service are focusing in

to that would some has drive the more synergy, manufacturing utilities and 'XX beyond. the in to that having helped a and segment did AWP so, necessarily in see synergy, continue in of underneath growth we that 'XX, and plant. the was in And synergy business of anticipate Watertown That not as

Stephen Volkmann

Got it.

of Okay, to And maintenance to then more is CapEx or thanks. finally, back done, this is does after go kind do? there

John Garrison

we it's to out maintenance think going don't we're it's the organic we And in there levels all $XX come of goes opportunities our to don't to processes. Stephen, the put think all I and go as -- down going don't want going I systems in our capital opportunities of not at to growth to to to that business, invest XXX, down from way in but XXXX. to look some maintenance back CapEx it the I continue for the way million

Stephen Volkmann

it. Appreciate guys. you, Thank

John Garrison

you, Thank Stephen.

Operator

Next question UBS. comes with Fisher from Steven

Steven Fisher

Thanks. Good morning.

and segment, not to And degree the you included how the within decline legacy component? of assumed question. wondering the that MP I'm materials Anne's do for Just for answer the processing processing if revenue the versus are XXXX? the assume towers sure you in crane decrimentals terrains component materials then what in of rough was

John Garrison

Yes.

difference RTs of terms towers So I no the revenue the and really say guide. in the level top with would

XX% a in that guide with margin XXXX. at business. down range down a the for operating -- associated little we're XX% margins and at to assuming have that is what is in same actually, standpoint, revenue actually And to overall a call segment. did proportion somewhere the with crane X% We pretty the good consistent from So, XX%. But lower business X%

reasonable I a think assessment. that's

John Sheehan

that's Yes, correct.

Steven Fisher

early of how first some of maybe thinking I'm annual then the kind And set just the in finalized half So, the half. the this through for order walk for of the the curious, AWP year? you ordering kind year. kind patterns about patterns the think how customers it over the Okay, now about point? just get you on order that's about half just fit the the at QX. expect rest Really be rest the CONEXPO the I you here for side, for for us pattern of second can to if Is purchase does is helpful. plans didn't of of the the orders too into definitive into the second mentioned both up year, order and thinking that

John Garrison

So, other CapEx of of year what was And purchase dynamics, national the was on the percentage And put advanced really were this full to accounts. negotiations specific to their order. that dynamic backlog the AWP timing with you. impacted the the thank and year they willing

So, as their I the national with plans. disciplined being said, very are accounts

bit you lead times 'XX, more flowed ended Those much now 'XX national industry argue negotiations negotiations it January principally a was into that than more you into have 'XX. normal pattern And our it's can of as going February. if we were so account 'XX, a early go Our and complete. shorter, are to back into

now. we stand where that's So

perspective, an In some is selling CONEXPO the from cranes MP businesses. and big not a show as CONEXPO, other of terms of perhaps aerials as

As I just ARA week. I said, was this at

You at ARA. do sell a little bit

that given impact I significant MP some to on the of year, some customers. it's of pickup expect second see We that have think AWP the it would March CONEXPO would be customers. a too and in early would with week dealers the

put So, AWP everyone in, products of big the hope is of terms for business that positioning in not CONEXPO. going term that a question CONEXPO flow. to new, demonstrate for at I a that's product for exciting, segment. But that answers shameless got some innovative investing CONEXPO. incredibly lines growth. our I we're would how that and the We've technology your be we're longer telematics inventing, selling I'd look at to portfolio show visit the across in come us the plug and

Steven Fisher

neutralize? wondering, Just be more starting big if it QX is any we year-over-year, or in to orders anticipating swing particularly should

John Garrison

the into half going comps the it's the to I'd some get quarter. the Obviously, word going given back flowed until But we're -- use more first that's difficult I'd be year-over-year neutralized. say to of year. demand, still the we record to it's

John Sheehan

right. That's

Steven Fisher

Thanks a it. Got lot.

Operator

time, At this over Wilson. will the to turn call I Mr. back

Randy Wilson

concluding Thank session. concludes over I you, remarks. John? Garrison now it John for our to This will Q&A operator. turn

John Garrison

thank all, encourage to for -- you CONEXPO. would of of want interest in I Terex, I you I First know you many your and attend do

going to to CONEXPO Terex, We the will our host portfolio show be across you would that that customers. and We love there. we're of and you things showing be at the we have demonstrating to exciting and

love John. So and see have I'd up for Randy and if you you your CONEXPO, again, follow at thank any to interest. with questions, please

Operator

this gentlemen, today's call. for Thank Ladies concludes and participating. conference you

disconnect. You may now

Terex (TEX) 14 Feb 202019 Q4 Earnings call transcript