Terex Corp (TEX) 2002 Q1 法說會逐字稿

Good morning and welcome to the first quarter 2002 financial results conference call. All participants will be in a listen-only mode until the question and answer session. At the request of Terex Corporation, this conference call is being recorded. If there are any objections you may disconnect at this time. I'd now like to turn the meeting over to today's moderator, Mr. Ronald DeFeo, Chairman and CEO of Terex Corporation.

Right. Good morning and thank you for your interest in Terex today. Before I get started, on the phone with me is our management team consisting of Ernie Verebelyi for our America Business, Colin Robertson for Terex Europe, Thys de Beer for Terex Mining and Fil Filipov from our acquisitions group. Also our Chief Financial Officer, Joseph Apuzzo and Kevin O'Reilly from Investor Relations is with me this morning. A replay of the call will be available until Friday April 26th at 6 p.m. Eastern Standard Time, Eastern daylight time rather. To access the replay call 800-551-8028 password tex or 839. It's also available on our web site.

In a few minutes Joe will cover the specific financial performance and I'll return for a more detailed review. But let me begin by saying that overall the first quarter of 2002 was better than our expectations. We're cautiously optimistic for the balance of the year based on this first quarter performance. It is noteworthy that our existing businesses stabilized during this quarter. We have improved visibility on near term outlook and we feel that although conditions still remain challenging in most of our businesses, there is generally a more positive outlook than negative.

In the first quarter excluding acquisitions our revenue was up 4 percent. This compares to 15 to 18 percent revenue decline that we experienced generally in 2001 and in particular in the latter part of the year. Furthermore base revenue grew quarter over quarter. While this historically does happen, it was encouraging to see these businesses solidify.

Secondly, our acquisitions are on track if not better than expected. Both Schaeff and CMI were accretive to earnings and that is after the equity that we used to acquire these businesses was taken into consideration. Atlas was not, but this was expected. The net of the three acquisitions was slightly diluted which was a little bit better than we had expected. Atlas progressively improved during the quarter as manufacturing operations returned to a more normal state. We expect to catch up and deliver solid performance at Atlas in the second quarter.

Lastly, I'm pleased with our continued cost control and the emphasis we placed in this area. Factory costs remained in check and appropriate for the revenue and SG&A excluding acquisitions went down and was at an industry low of eight and half percent of revenue before adding the newly acquired companies. So in an overall sense, while earnings were clearly down versus the year ago period, we feel the company's strength in competitiveness has improved and we remain guardedly positive for the rest of the year. And at this point in time, I want to confirm our guidance year with a earnings per share range of $1.50 to $1.75.

This was the previously given guidance and I think it's still appropriate despite the recent equity offering of 5.4 million new shares. Furthermore, our outlook for 2003 remains unchanged and in 2003 we expect a meaningful recovery to be apparent. Joe, could you take us through the specifics?

Thanks Ron, and good morning ladies and gentlemen. Before I begin, let me remind you that we'll be discussing expectations for future events and performance of the company on today's call and that such expectations are subject to uncertainties related to macro economics factors, interest rates, governmental actions and other factors. A fuller description of the factors that affect future expectations is included in the press release and other public filings and I encourage you to read them.

For the first quarter of 2002 before special items, Terex earned 18 cents a share or seven million dollars on revenues of $582 million. There were two special items for the quarter, a charge of $1.2 million related to the previously announced consolidation of our hot mix asphalt business into CMI and a gain a $10.7 million related to the implementation of FAS-141. The gain reflects the taking into income of the negative goodwill related to the purchase of Fermec in the year 2000. at the purchase price was lower than that - as required, as long as that in 2002. The evaluation of other goodwill has to be completed by the end of the second quarter of 2002. The first quarter of 2002 includes the results of Atlas, Schaeff, CMI and these distribution business purchased in the first quarter.

In addition, certain smaller entities in the aerial work platform business . I am going to take a minute to discuss some consolidated performance measures and performance measures for Terex Americas and Terex Europe without including the impact of the divested businesses and the acquisition. In other words, excluding the divested businesses and acquisitions.

The mining business was generally unaffected by acquisitions or divestitures year on year. Adjusting for acquisitions and divestitures, sales for the first quarter 2002 were approximately $452 million, gross margin was about 15 percent of revenues, operating expenses about 8.5 percent of revenues and margins about 6.5 percent. On a like basis sales in 2001 were $470 million, gross margin was about 16.6 percent, operating expenses were about 8.5 percent and margins were about 8.1 percent.

The first quarter of 2001 also included about 3 million of goodwill amortization which did not take place in the first quarter of 2002. Working capital was about 4 percent lower period over period and represented about 36 percent of annualized revenues excluding the previously mentioned acquisitions and divestitures. This compares to about 38 percent of revenues at year end and 40 percent in the middle of 2001. So we are making progress in our goal of reducing working capital as a percent of revenues. Backlog was about $190 million and basically flat with both year-ago and end-of-year figures.

Terex America's revenues for the quarter were about $228 million and operating margins were about 5.2 percent. Working capital represented about 24 percent of annualized revenues compared to 28 percent at year-end and 37 percent at the end of the first quarter of 2001. (Inaudible) acquisitions and divestitures Terex Europe recorded sales of $226 million and operating margins of about 7.8 percent. Working capital at the end of the quarter was about 28 percent of revenues compared to 30 percent at the year-end and 27 percent a year ago.

As Ron said, two of the three major acquisitions were for the quarter with Atlas operating at a loss. As we've said before, Atlas distribution and production schedules had been severely disrupted by the financial stress the company was under at the time of acquisition and are expected to be operating at normalized rates in the second half of 2002. Backlog at the acquired businesses is strong at $110 million. Cash flow from operations for the first quarter was negative $14.5 million with the mining business negative and Atlas and Schaeff acquisitions also being negative as the implementation of the restructuring plans of those businesses required cash in the short term.

We expect those businesses to turn cash-flow positive in the second half of the year. Both Terex Europe and Terex Americas were cash-flow positive for the first quarter. Net debt increased in the first quarter from 805 million at year end to 922 million due to the purchase price of the acquisitions. Including the impact of the equity offering in April, net debt was basically flat and net debt to total capital was approximately 51.5 percent. The over the last six months including the impact of the April equity sale, book equity at Terex has increased by $320 million dollars or 72 percent and net debt to capital has declined from 64 percent to 51.5 percent, a decrease of almost 20 percent.

All the while we were acquiring businesses which bring with them annualized revenues of over $600 million. As you aware, in April we went to the market with a 5 million share equity transaction and ended up selling 5,346,700 shares of common stock with the underwriter exercising the overall allotment option for 346,700 shares. Terex realized about 113 million in net proceeds. The proceeds will be used to reduce revolver borrowings and for general corporate purposes including acquisitions. Net performance of the businesses has stabilized in the first quarter of 2002 confirming our belief about the underlying economic environment and we feel well positioned to remain solidly profitable, generate cash and benefit from any economic recoveries.

Back to you Ron.

Thank you Joe. Now I'd like to review each one of the operations in a bit more detail and I'll include the acquisitions in the numbers.

Terex America has delivered a solid first quarter with operating profit at $15.1 million on revenue of $290 million. Consistent with the company overall the impact was very positive and sales declined 4 percent excluding acquisitions. Net sales where impacted negatively by double digit declines in our mobile hydraulic crane business and the Cedarapids businesses. The more hydraulic crane decline reflected the decision we made to lower production and consolidate our convoy operation into Waverly during the first quarter.

We expect that our Terex loader backhoe business will continue to grow and we actually achieved revenue and sales performance that was approximately equal to our entire prior year in the first quarter. We had a very solid performance from our Powerscreen businesses. These businesses continue to reflect the movement into the market for more mobile and flexible equipment which is an advantage of the Powerscreen product.

During the quarter, our Terex America's business completed the relocation of convoy into Waverly and we're now in a position to upgrade our crane product line to take full advantage of the economies of running one operation with one design team. This is important because we feel we are fully capable and already integrated to take on whatever new challenges our crane team might face in the market place. The Teleleck team had a solid quarter although significantly below the year ago level.

This was expected and during the quarter we strengthened the company by completing the acquisition of Pacific Utility, our Teleleck distributor for the West Coast. We expect this will contribute nicely to the second quarter performance of Teleleck. We have had a weak sales profile on the West Coast and need to grow our market share there. Furthermore we recently completed the acquisition of the Teleleck East distribution company. These two combined really allow us to offer a much more comprehensive solution to energy customers on a national scale. These initiatives plus others that are planned should allow us to continue toward our longer term goal of becoming the number one provider of utility equipment in this industry.

During the quarter, we exhibited also at the Con-Expo show. It was a great success for Terex, this show is never measured really in terms of orders taken, but rather we touched at least 3000 quality customers that visited and registered at our booths seeking more information about Terex and the product lines that we offer. We think we've created a tremendous amount of excitement about Terex in general and we did exhibit our Terex Loader Backhoe quite prominently at this show and obviously this is a big market where we have .

We also closed the Dallas sales office for the Schaeff products and we are consolidating both our and Dallas offices into the Memphis Terex facility. This consolidation obviously saves cost, but it also positions us to have a single sales team focused on the construction equipment sector with a fairly comprehensive product line inclusive of mini and midi excavators, wheel loaders and the loader backhoe, all new products now under the Terex brand name that came to us from recent acquisitions.

We expect in the coming months to introduce aggressive marketing campaigns to support these products. Historically these products have been strong regionally mostly in Germany, but have not really expanded beyond some European borders. Terex Europe overall had performance during the first quarter that exceeded our expectations and total operating profit was $18.2 million up from the $16 million in the year-ago period and revenue was up 4 percent quarter over quarter excluding the effects of any acquisitions. Benford, a manufacturer of mini dump trucks and compaction equipment and powerscreen, these - both of these businesses did very well and the crane groups had a solid quarter, in particular in Spain, United Kingdom and France.

Germany, however, for our crane business remained very slow. For the three business groupings of Europe, that is construction equipment, crushing and screening and cranes, each one of these business groups have revenue performance greater than the year-ago period and operating profit the same or greater than the year-ago performance. We're pleased with how these businesses have held up despite the fact that the German market has been soft as previously mentioned and as we enter the second quarter we are encouraged by the activity level and feel that our products are well-positioned to deliver good performance for the remainder of the year.

Our cost reduction and restructuring program is well under way and continuing as highlighted on our last call. We have exited several facilities and we are ahead of schedule. The investments we have made to support better distribution for Terex, inclusive of cranes in the United Kingdom and Spain plus the German distribution that came via the acquisitions are all contributing to or will contribute toward improved performance for our European group. We're also now in full production at the United States Marine Corps to our Italian factory.

This is on track and will help in the second quarter. Furthermore we are moving to increased production blending this product in some core markets. It will take us a bit of time to get this production level up, but we expect to - to see meaningful benefits in the second part of this year and well into 2003 as we grow share. The Terex mining group had a difficult first quarter. In total revenue for our mining group was $65 million and it delivered an operating profit of 1.6 million for only two and half percent of revenue. Revenue was up slightly from the year-ago period, but the financial performance did not meet our expectations.

As mentioned in our last call, this a business where we have two really different performances, first our shovel business continues to remain strong and we feel the replacement cycle for this product is shorter and has been down a bit longer than our truck business. On the other hand, the haul truck market is very slow. We feel there has been a lot of capacity that has been taken out of the market and this has resulted in excess trucks being available and this part of our mining equipment business we expect to remain slow. Please let me assure you that during this period of time, we're continuing to examine all opportunities for profit improvement and we feel that we can continue to be profitable and be positive even at this low revenue level and we are continuing to explore other opportunities.

The acquisitions group delivered revenue of about $125 million as previously noted that this profit contribution was marginally - the profit contribution from this business was marginally diluted during the quarter. All of this dilution effect came as a result of Atlas, because as Joe mentioned CMI and Shaeff were positive even after the effects of the shares issued for these companies. The most important aspect of our acquisitions group has been their activity to continue to streamline the businesses that we acquired in the fourth quarter. I'm very positive about what these companies are doing and feel that we're ahead of schedule, positioning ourselves for the possibility of future transactions and the rapid integration of these business and for the balance of the Terex company.

All of these business exhibited well at our Con-Expo-Con-Agg show. The communication and corporation between the management of these businesses and the exiting Terex management has been great. While the cost reduction programs initiated across the board at each of these businesses has been rather severe, most of the bad news is now behind us and we are focussed on growth and adding people to deliver on the increased revenue that we are achieving from these businesses. At CMI, in particular, we are encouraged because growth in our order backlog and at Atlas, we have production up and running on a pretty significant scale. The Shaeff through the rest of the Terex corporation.

As I reflect on the because I think we've managed this process fairly well and we continue to look for opportunities to grow our company. There remains numerous strategic and financially . We also believe there is a good potential to add on to the Terex franchise in the coming months and we remain committed to our balanced approach toward growth and leverage.

With that I'd like to now open it up for questions and let's get - let's get - open it up for questions, please.

Thank you - thank you, sir. At this time, we are ready for the question and answers. If you'd like to ask a question, please press star one on your touch-tone phone. Our first question comes from David Raso of Salomon Smith Barney. Sir, your line is now open.

Thank you, hi everybody.

Hi, David.

Hi. Question on the restructuring today being potential for the year. Maybe I'm wrong in trying to backup these numbers. Correct me if I am, but on the SG&A for the acquired sales in America - in the Americas - I'm not sure whether 1.2 million restructuring to be taking out of in the SG&A, but either way you're looking at 15 to 17 percent SG&A of the acquired sales while the core business is below seven. What is the target for that business if it wasn't for that one business, but the acquired sales, what's the SG&A level target we should be working with?

I think David and Fil, maybe you can comment on this as well, but, in particular, that's driven by CMI which has a direct sales force and prior to our acquisition, the SG&A there was running in the range of about 22 percent of revenue. The $1.2 million of restructuring reserve that you referenced really was at a cost of good sales and it reflected the closure of the Glasgow factory from Cedarapids. You know, therefore, it was not really specifically part of the CMI acquisition, but the Glasgow business is going into CMI. The SG&A on an ongoing basis from CMI should run in the range of about 15 percent of revenue. I think that's a more realistic target for that business with the direct sales force. Fil, do you have anything you want to add on that?

Well, yes because we also need to be considering David, that this is a margin business, that it's better than the rest of the business where we do not sell direct and also as Ron indicated earlier in the quarter, our revenues were not where we would like them to be. So, as we grow our revenues, we expect that our percentage to SG&A would be below 15 percent.

It's in the cost savings for the full year, up to three restructuring out of three acquisitions, net total , not just Americas, what target are you looking for?

Well, as I - as I previously indicated, we expected to deliver versus the audio gap) per year of about 20 cents cost savings.

And, a follow-up on Europe. The quarter sales were strong you now have what the acquisition how much was pipeline fill in Germany and also some of the new products for your other existing distribution in Europe?

Yes. Zero was pipeline fill, David. Nothing.

Our next question is from Gary McManus of J.P. Morgan. Sir, your line is now open.

Hi, Ron.

Hi, Gary.

I know this is a bit of semantics, but just on your earnings guidance, are you saying - you know, the share offering has, you know, if I take the five percent, that's like eight cents a share, are you saying you're still comfortable to one fifth in 1.75, after taking that into account or do we adjust your forecast down for that eight cent ?

Well, I think - I think what I - what I said, I would like to just basically stand by and that is, the range remains unchanged and, you know, there is puts and takes and, you know, but the range I provided before and I think we'll still be within that range after the equity offering.

OK. And, you know - to get the , of your earnings forecast, what are you assuming in base sales both in the - in the three segments. What has to happen in - let's that, what kind of base sales forecast would you assume in the three segments?

Our base - our base assumption was flat revenue performance across the board for the entire period of 2002. OK? Plus, the addition of acquisitions which would result in about a 25 to 30 percent year over year revenue change. Almost all of that revenue change comes from the acquisitions.

So you still assume- you're still assuming today, base sales - zero base sales growth?

Absolutely.

And that's five regions three segments, and you think, Europe would be a bit stronger than given how it's performing?

Right this minute, it looks like North America would be a bit weaker than Europe, and mining will, a kind of, stay down, so, you know, but as we go through the year, you know, maybe that will ...

This is down by about 30 percent. Is that - is that number about right?

there is a mixed effect in the Terex America's business, year over year, whereas this year we sold more products by Fermec where we have a lower total margin in the business and we didn't sell

Put that into some perspective last year our distribution from businesses outside the US about 15 percent of the total volume. This year, our first quarter is about 27 percent, so obviously we got very low margin in that distribution side and we are seeing the benefits of that so that mix could have an effect on the margin

I mean, do you expect the Terex America's margins to improve. I'm talking excluding the benefits you get from cost cutting on acquisitions, just base, you know.

Yes is the answer for that question.

OK. Great. Thank you.

Our next question comes from Mr. John Inch. Your line is now open.

Hi, good morning. This is Elana.

Hi, Elana.

Can you tell us in coal mining what you did this quarter and also what your outlook is for the year?

Well, we didn't do very much in coal mining from our truck business, and we think coal mining has been strong - was strong last year, is showing some real hesitancy near term - you want to add to that?

Well, I think that's correct. The coal prices are a little depressed but we do see some interesting coal mining offshore, South America and other countries where coal mining seems to be fairly strong, so I would say it's probably

but it has not resulted in much - in much in the way of real incremental industry orders.

That's correct.

OK. And then my next question is, going forward what kind of three years.

Yeah, I think, you know we are - we are targeting to try and achieve a 50:50 ratio. And, you know, to achieve that, you know, we may go back up a little bit and we are going to come back down, you know, but really that's where we're trying to get the company from our performance point of view.

Thank you.

Our next question comes from Mr. John McGinty of First Boston. Sir, your line is now open.

Good morning, Ron.

Good morning, John.

A couple of questions. One on, it wasn't 100 percent clear to me when you were talking about the weakness in hydraulic cranes in North America. Was that all the market or was some of that the impact of relocation, you know, consolidation of the two facilities, you know, was it all market or did that disruption in some way impact the sales there?

It is really a combination of markets. We're down about 35 percent first couple of months from the information we have at this point, down about 37 . If I look at we had off the field and adjust for that, our shares have basically been has not changed. If I look for the adjustment we've made in some of the inventory, we're down a few points. So, it's a combination of both those transactions.

I would say, we made a good timely decision to relocate a factory at a time when we wanted industry, inventory, a lot of products to come down a bit, and I think we positioned ourselves pretty well at this point in time for a stronger balance for the year.

Absolutely. There is no doubt about it. We are very well positioned in terms of an inventory situation.

Ron, you said your sales were down double digit in mobile hydraulics and it's clearly double digits, - there is a wide range in it, but sounds to me like you are talking about something down 30 or 40 percent.

Well, I think, in the first quarter, yeah, I may not ...

Markets were down 47 percent.

... Yeah, I may quite remember we took a significant - in fact, you probably would know this John - so we took a pretty significant factory shutdown in January or February.

So I mean, was Cedarapids decline which was also a double digit decline, was it of that magnitude, as well?

It was not of the 30-40 percent magnitude.

Not exactly.

So the operating profit in the Americas was 5.2 percent of sales ex-acquisitions versus 8.0 a year ago. Right?

Right.

Right.

And, John, we got a $1.2 million add back there for the restructuring. That is, you know, I hope you just look at.

Well, OK, but, you know, what I'm saying in a way is that the free incredible in and if the distribution stuff which adds nothing goes from pretty low. I mean, that is pretty impressive underlying performance. Is that a function of the restructuring and the cost savings beginning to come through there. How does that 20 cent spread through the year?

It's a function of a couple of things. First, I think it's a verification of our fundamental business model. OK? and that's a business model that allows us to flex our revenue without crushing our margin. OK? Secondly, it's the function of eliminating a factory or two and getting real cost out of the company. Remember, year over year, our head count . So I think, we got the substantial cost out of - out of that business and I think the third point here is that going forward, we have ...

Structuring breakout over the course of the year.

Well, I think you'll see most of it in the third, in the second, third and fourth quarters. Very, very, we got a little bit of it in the first quarter, but most of it will happen in the second, third and fourth quarters.

I think,John, if remember some of that was related to reducing the manufacturing infrastructure, which gets along with lower levels of manufacturing if we try and reduce the inventory in the system, so you know, it is not all going to flow through, it is incremental process .

Right, then the final question - the mining, the substantial decline, I mean, it is - it is small numbers, but it isslightly, the higher revenues declined

And you know, we just, you know, it's not really a terrible performance given the slowness of the business. We are also having some offset positives from pretty good parts business that we have, so you know, I expect mining unless we get some substantial truck orders to stay about where it is right now, maybe a little bit better and you know, when we get some revenue we'll see - you will see a pretty significant change.

What do you see mining profits doing for the full year versus the year ago because they do not get any impact of acquisition and much in terms of the restructuring.

Yeah, I think that will be down a little bit year over year.

OK, thank you, thank you very much.

Our next question comes from Tom Klamka of Credit Suisse First Boston.

(Inaudible) from outlook and what do you see as far as utilization at the and the rental companies and then also could you talk about the impact on your cost basis given theWaverly consolidation.

Well, first on the cost basis of Waverly, we think we have got the lowest cost in the industry bar none. OK, so we can produce the hydraulic mobile crane, market it and sell it for a profit in a range that is meaningfully better than our competitors and since many of our competitors listen to this call,I am not going to detail how we, anymore how we view that. Secondly, I think the market overall for cranes is going to continue to be difficult in the near term. Several large customers are capital challenged, several large crane dealers are capital challenged, and I think the utilization for cranes generally is pretty good, but I don't think there is a lot of capital frozen out there, put a lot of new equipment in the marketplace. I think the rough terrain and smaller cranes will improve more quickly than the large lattice boom cranes, which we think are just beginning their decline.

And, howdo you address in a situation where people are using their cranes and going forward. We need to you are but the, you know, these rental companies don't have the capital. How do you guys sort of work around the middle defeo: Well, I think we can offer creative solutions to some of our rentalcompanies, for those that - we've done that in the past, and we will do it in the future.

Is the replacement cycle here just too long to be of any benefit over the next year or two?

Well, I think the replacements, I think we'll see some improvements in 2003 in the smaller rough terrain cranes.

OK, and then on the loader backhoe you've ownedthese companies for thewhile in Las Vegas. Can you sort of give us an idea of what sort of potential do you see for your new product right now in the US, sort of, which is I guess ...

Meaning three years or so. In the longer term, I do not see any reason why we could not have at least 10 percent market share on loader backhoes,it is a 60,000 unit market. Last year, we made about 2100 units, so we have very small market shares; so I think there is a pretty dramatic potential to grow our share. In the near term, we have got to get our capacity aligned with our ability to sell and we have the cost down and now we've just got to kick up the capacity and call in Robertson who is on the phone, who is working very hard on that and we've got some things under way that I'd prefer not to get into at this point in time.

OK, and in this last question, when you talk about the acquisitions in total, being I guess, EPS dilutive on an EBITDA basis. Was this still at a loss?

No, not at a loss, no.

Is it positive from that standpoint.

You cangive a number on that?

$4 to 5 million.

Right, thanks Joe, Thank you.

Our next question comes from Robert McCarthy of Robert W. Baird. Sir, you line is now open.

Good morning, gentleman.

Good morning, Bob.

Just follow up on Tom's questions about Fermec, your commented I think Ron, that your business in North America is up 65 percent. You tell us what the overall business, what the increase was for the business on a global basis, total basis? defeo: Colin, do you want - you want to take that on, I think it is, you know, if you're talking about Fermec in particular, I think it is our future outlook.

OK, if you compare it to same quarter last year.

Yeah.

Looks like our volume was up somewhere close to 30 percent we are forecasting, 40 percent over last year second quarter. As Ron said, you have worked hard at some outsourcing and improving capacity and the factory - the factory has underlying capacity of somewhere close to 10, 000 units per year. So obviously in terms of getting up from that type of volume, wehavethe equipment - we have the full space, it's just about people basically.

In other words, you don't have any issues with supply chain.

Obviously, looking two to three months, generally, though in terms of engines, transmissions, actual , all of the key components suppliers have more than adequate capacity. We just have to give them a reasonable repaint to ramp up in laying with our own requirements, but - I don't see any issue over that two to three months period and get into the you know 15 to 22 machines .

Very good. OK, thank you. Ron, your interest in your comment about the large end of the lattice boom market, you think it is just turning, just starting to turn down, that is a market where you don't have a lot of presence, I am just curious what you based that comment on?

We own American crane, OK, and it has you know, pretty good customer base to start with, in particular, in the parts business with that sector.

Right.

And you know we've seen that sector be strong for a number of years and we are continuing to penetrate the mid size lattice boom crane market and the very few lattice boom cranes that we have sold of the larger variety, you know, we've seen very little interest in that sector, and you know frankly this is a typical adjustment in the industry.

OK, your strategy for the Teleleck utility market has resulted in a couple of distribution acquisitions, I gather that you intend to complete a nationwide network for that business?

Why, I think that's a bit of a stretch at this stage to come to that conclusion, but we are certainly working toward the ability to integrate the network more effectively, which would allow us to compete against the other principal marketer of equipment that has a company owned network.

I was going to say, I gather you have decided the direct sales approach is more effective in that market.

Well I wouldn't say a 100 percent direct sales approach, but what we have to be able to do is offer the utility company that does business in the northeast and the southeast, a solution as opposed to get three or four different independent business men together with different margin expectations that really feeds into the hand of our competitor and we'll probably lose in those businesses where that (audio break)

(audio break) comment on the release about the mining shovel business, it says, I believe there is a quote that says we have orders through the second quarter. Exactly what does that mean, that you are sold out production wise through the second quarter or you only have orders that extend out that far and so you don't have much visibility for the rest of the year or ...

No, we have orders beyond that. I think, please correct me if I'm wrong, but that means - that means we are sold out through the quarter.

Correct yeah, we have really sold out - you know our delivery times are not excessive, but we have certainly sold out committed deliveries and we have in fact had deliveries scheduled for the fourth quarter - third quarter such as the large RH 400 that we have sold into Canada. That will be delivered in the third quarter.

OK, one other clarification, I'll get off the phone. Joe, on the FAS 141 goodwill impairment review. I gather from your comments that you are signaling that we could see a charge in the second quarter for that.

We are going through the process of the grouping of the companies which is not the same as the segments necessarily under the guidance of the new rules.

Right.

And you know depending on how the grouping ends on coming out in the evaluation, it is possible there could be a charge, but we are not in a position to give any indications right now as to the levels of magnitude.

Well, what on the other hand if you think there is some possibility that there will be no charge, that would seem to suggest that is there is a charge it will be smaller than a red basket, would you disagree with that?

I think you are reading into this too hard, you are working too hard on it, you know I think just take - the guidance for what it is and that is, we are evaluating it, we have a lot of goodwill on our books and we are going to make the most prudent decision overall for the company going forward. You know I think every company has witnessed this and has struggled with exactly what to do and how to value this, and we are clearly no different, and we want to make the right decisions.

, thank you.

Our next question comes from Mike Kender of Solomon Smith Barney, Inc. Your line is now open.

OK. Most of my questions have been answered, just a couple of clean-outs. One was on the debt, do you have the breakout of the pieces of the bank debt at the end of the quarter?

What do you mean, did you want to know how much is bank debt and what the revolver was and ...

Right, exactly.

... and what is the .

Yeah.

OK. Let's see, I think at the end of the quarter the revolver was somewhere - its off the top of my head, $50 million maybe - let me handle this sheet here, and then you know the term B is 65, the C is 150 down.

OK, and when you in terms of applying the proceeds from the equity offering today, that you against, I assume you paid down revolver, was there any modification in the term ?

No.

OK, so the rest would in cash from a performance standpoint.

Right.

OK, and the other question I had was in terms of restructuring. How much are we going to have - how much cash are you going to need to spend over the rest over the year.

Yeah, I think we spent most of it, lets take now, maybe there is a couple of additional cash restructuring activities that needs to take place, but you know the share of that activity has been executed and paid for and most of that personal restructuring is in Germany, so there maybe you know ...

A couple of million?

A couple of million dollars left on that.

OK. Great. Thank you.

Our next question comes from Mr. David Raso, also from Solomon Smith Barney, Inc. Sir, your line is now open.

Right. Thank you. I was just following up two issues. One, cash flow, two on the quarter sale. The quarter sales were stronger. I was just trying to get a feel for the kind of going back to the - the old days, I was looking at the company's globally lifting versus earth moving, so bear with me but just looking at the bigger pieces, mobile cranes were down at - in roughly the construction . That must be stronger than I thought in the tower and crushing cranes, in tower cranes in particular.

I think that's correct, David. I think that you - you've backed into it correctly. The articulated truck is - you know, not doing very strong, it's so-so, but the rigid off highway truck, we had a very good first quarter on. We sold a number of trucks into big quarry places that we have never been in before. And the tower crane business had a great first quarter.

OK, great. And then on cash flow, which will be expecting for working capital number year over year, the change and some Capex and into the operating cash flow and free cash flow, but can you help us out there, Joe.

Yeah, I think you know pretty much unchanged from what we have been saying, which is, is it in the low 200's, 80 million or so in cash interests, taxes of 10 to 15, capex at 20, which leaves you around a 100, 75 to 100 in cash flow. Not counting on any necessarily working capital reductions as we give this guidance or working capital investments, a lot of that will depend on how the sales profile develops over the second half of the year and you know, how we want to drive that. We are looking to put the working capital close to the 30 percent of revenues, but the absolute movement in numbers is going to depend a lot on how we drive sales in the second half of the year.

Right. Thank you.

All right, last question.

Our final question comes from Mr. John McGinty of First Boston.

Yeah, I just wondered if we could come back, just a follow-up question on the Teleleck. If you've given the acquisitions to distributors, what portion of your distribution would you now own, 50 percent or 20 percent, I am just trying to get an order of magnitude there.

About 35 percent, 30-35 percent.

And then, are there other products that's having you - no- is having that distribution, are there obvious either products that you can acquire and other acquisitions to make, in other words did those - -just what portion of those distributors sales would the Teleleck product have represented.

John, you're in this business too long. And then, you know - there's other businesses that those dealers have brought from other people that we're going to replace with Telelect product, so that's an opportunity. There are other Terex products, such as the Loader Backhoe and Atlas cranes that we think we can sell through those dealers to the utility market place, and obviously there is - there is parts and service and what they call, final stage manufacturing, that also is added. Ernie, do you want to add anything to that?

Yeah, in addition, there's some other products like Johnson sweepers and a few products like that, we'll continue to carry through those distribution companies outside of the Terex products.

And are there another two acquisitions that you could make that would get you up to 70 percent, I just don't know how big the distributors in general are in this industry?

Well there's - there's a couple of pieces of cooperativeness. OK, that I think we're looking to try and achieve which effectively solves the issue we're looking to solve.

OK and then - I'm a little bit confused back on the Tractor Loader Backhoe you talked about, was that 2100 a worldwide number?

Yes.

OK.

Worldwide number.

That's a worldwide number. Because you - you had said, you sold as many in the States in the first quarter as, I thought you said, as you sold all of last year?

Right, right.

OK. And given the transitions that have gone on in that market and -and since the Fermec product would seem to be a natural product into the Renault market, JCB has knocked out CNH, URI - where are you in terms of trying to get into the large Renault companies with that product?

Well, I think.

You probably don't have enough capacity yet?

We - probably we - we are going to solve that problem as Colin mentioned, but you know we think we're good - we sold quite a few units actually to United Renault's and when you are not - we don't have their - the game plan that they have with JCB .

The quarries which you had not done before was that in the U.K. or was that in the States?

Both.

Both, interesting. OK. Thanks very much.

OK. I think that's it. I want to thank everybody for their interest in Terex and please followup with Joe, Kevin, or myself, or any other member of the management team. Thank you very much.

This concludes the first quarter of 2002 Financial Results Conference Call. All participants may disconnect at this time.

Thank you .