Terex Corp (TEX) 2010 Q3 法說會逐字稿

Good morning. My name is Lori, and I will be your conference operator today. At this time, I would like to welcome everyone to the Terex Corporation 2010 third-quarter financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions). Thank you. I will now turn the call over to Ron DeFeo, Chairman and CEO of Terex. Please go ahead, sir.

Yes, good morning, ladies and gentlemen, and thank you for your interest in Terex today.

On the call with me this morning is Phil Widman, Senior Vice President and Chief Financial Officer; Tom Riordan, the Company's President and Chief Operating Officer; as well as Tom Gelston, Vice President of Investor Relations. Also participating on the call and available for your questions in the follow-up period will be Rick Nichols for our Cranes segment; Tim Ford for Aerial Work Platforms; George Ellis for the Construction business; Kieran Hegarty for Materials Processing; and Steve Filipov for Developing Markets.

A replay of the call will be archived on the Company's website, www.Terex.com, under Audio Archives in the Investor Relations section.

I would like to begin with a few opening comments followed by Phil who will provide a more detailed financial report, and Tom, who will discuss operations by segment. Then we will follow it up with your questions. During the Q&A portion, please ask one question and a follow-up. Thank you.

So the presentation we will be referring to is accessible on the Company's website. Let me begin by referring to the forward-looking statement on page 2, which I encourage you to review and to read.

Turning to page 3 which is marked overview, our third-quarter operating performance was mostly in line with our expectations, although our Crane revenue deteriorated faster than we had expected.

Net sales for the quarter were flat versus the sequential second-quarter period and up approximately 15% with prior year. The results were quite mixed with stronger revenue performances in three segments -- AWP, Construction, and Materials Processing -- but Cranes actually declined both from Q2 and last year.

We experienced solid backlog growth in all segments except Cranes versus the prior year, and most of the Crane weakness came from our All-Terrain and Crawler products that we produce in Europe, and we will discuss this further in the call.

We had continued strong quotation activity in Port Equipment, but as you know, most of the quotations we make today are for delivery in late 2011 and 2012.

Our production schedules overall in the Company continued to increase in most of our businesses, and this has been the primary contributor to the year-over-year operating profit change as we return to a more stable production environment.

Some additional restructuring activities are expected in Construction and Cranes, but these should be relatively small.

Looking forward, we expect the fourth quarter to reflect strengthening order trends in Aerial Work Platforms, Construction, and Materials Processing, but with a weaker Cranes business than we had previously anticipated. Given the backlog in Cranes, however, we do expect a meaningful sequential net sales increase in the fourth quarter. Overall, we expect net sales to increase approximately 10% to 15% sequentially and to generate an operating profit of roughly $15 million in the fourth quarter, excluding unusual items.

The mid and longer-term expectations for Terex remain unchanged, and we are encouraged with our prospects. We will continue to invest in developing markets and in the systems required to run our business better.

Our AWP, Construction, and Materials Processing customers are frankly quite upbeat for 2011, and we expect Cranes to be relatively flat versus 2010. We are not yet in position to set overall expectations for 2011, but we do expect it will be a profitable year. Furthermore, we expect to reinvest our cash in the business, repay additional debt or a combination of both in 2011.

Now I would like to turn it over to Phil who will cover the numbers in depth. Phil?

Thanks, Ron, and good morning. The table on page 4 displays the quarterly, year-over-year and sequential performance for the continuing operations of the Company. Net sales increased 15% from the prior-year quarter and were flat sequentially. Excluding the translation effect of foreign currency exchange rate changes, net sales increased 19% compared to the prior-year quarter. However, sequentially, there was no significant impact.

Generally the increases included all segments except Cranes, which continued to experience softening demand in certain product areas, mainly All-Terrain and Crawler cranes. We had income from operations of $3 million in the third quarter compared to a loss of $100 million in the prior-year quarter. Increased production levels, cost reductions, and volume increases favorably impacted the comparison to the prior-year quarter.

Sequentially, the three recovering segments of AWP, Materials Processing and Construction, provided the uplift in volume to more than offset the Cranes decline.

Working capital increased in the third quarter by $246 million; more than a third of this relates to the translation effect of foreign currency rate changes, with the remainder spread across the segments. Excuse me, that was in Cranes was the majority of the impact.

The recovering segments are increasingly building to higher expected demand. Cranes, on the other hand, experienced customer cancellations and shipment delays, which pushed their working capital higher than our expectations. We expect to reduce working capital in our Cranes segment as production and demand get more in line.

Balancing this with some increase in recovering segments should improve our working capital to sales ratio as Cranes typically have a higher ratio than the other segments.

Net debt increased to $619 million, mainly due to working capital build in the period and capital spending, partially offset by the positive translation effect of our foreign denominated cash balances.

Overall, liquidity remains strong at $1.86 billion with cash balances of $1.35 billion and availability under our revolving facility of slightly over $500 million.

During October, we repaid approximately $270 million of term debt, consistent with the terms of a bank amendment we recently completed.

We have also launched offers to purchase at par the outstanding 10.875% Senior Notes and 7.375% Senior Subordinated Notes with net available cash from the sale of the Mining business. To the extent these offers are not accepted by November 3, when they expire, the remaining cash will be available for general corporate purposes.

Page 5 displays other financial items for comparison purposes. The other expense in the period, which, consistent with prior periods, includes the marking to market of our derivative instruments intended to partially mitigate price risks associated with the Bucyrus International shares we received from the Mining sale earlier this year. This amounted to expense of approximately $21 million in the quarter as the Bucyrus share price rose during the period.

Tax expense for the period included several discrete items which are displayed on page 6, where you can see the approximate earnings-per-share impact for the third quarter. First, the derivative of instrument impact on EPS is approximately $0.12 per share. Next, we identified that we were likely not to realize the benefit of certain deferred tax assets, given current projections of profitability related to the timeframe for their expiration. We recorded a valuation allowance on these assets of $21 million or approximately $0.19 per share.

Our review of uncertain tax positions resulted in discreet tax expense of approximately $12 million or $0.11 per share.

Lastly, we elected to carry back the net operating losses on our US tax return, which caused an additional expense in the current period of approximately $6 million or $0.06 per share. This decision will result in a cash refund of roughly $100 million, which we should receive in the next 60 to 90 days. So in total, these four items account for roughly $0.48 of the $0.82 per share loss for the period.

Turning to page 7, we have outlined the bridge between last year's operating loss from operations of approximately $100 million to the income from operations of $3 million, with segment detail as well. The most significant changes are, as expected, in the largely favorable volume effect from the recovering segments, partially offset by the Cranes decline.

The positive effect of manufactured absorption of building more to retail demand this year continues to provide the most significant leverage as approximately $66 million of our year-over-year profitability improvement in this area in the third quarter. Year to date, this absorption benefit has resulted in an improvement of approximately $140 million in operating performance over 2009.

When thinking of incremental margin improvement as businesses transition to a recovery, the first significant impact is absorption, whose impact will decline over time as we begin to reach production levels close to retail demand. For the three recovering segments, Aerial Work Platforms, construction and material processing, we are basically at that point now.

This is evident in our third quarter, where sequentially, absorption and capacity variance only provided roughly $10 million of pickup in operating income from the second quarter of 2010. The next stage is to hold cost growth to significantly less than volume increases. And last to recover is outright price leverage coupled with the decline in trade-in volume. This occurs when demand outstrips the readily available supply, which is not expected -- and this is not expected to occur in the near term.

For certain Cranes products, we still need to decrease our production levels to match the declining demand, mainly All-Terrain and Crawler Cranes. Our overall incremental margin results in the near term will reflect all of these factors.

Let me refer to page 8. Overall working capital statistics have slipped from our expectations for the third quarter as we have started to produce at higher levels of demand in the recovering segments while the Cranes slowdown in demand has contributed to higher working capital levels in the short term. I'll turn it over to Tom to provide an operational update.

Thanks, Phil, and good morning, everyone. I'll cover the current views of our markets and current performance and then go through a few Terex-wide updates.

As you can see from the chart on page 9, three of our businesses are recovering nicely with very good year-over-year performance gains in revenue and incremental margins. As you would expect and as Phil discussed briefly, the rate of revenue increase in three of our businesses is driving working capital increases. That said, over a third of the increase was from foreign exchange. The balance is somewhat equally spread between our four business segments.

We expect working capital to begin to come out of Cranes, and the other three businesses will continue to see moderate increases at a rate less than revenue growth. So let's begin with our Aerials business. We had a very strong order rate for the quarter with backlog up 45% sequentially, and almost doubling from last year. Brazil and Australia are strong markets, the US market is solid, and Europe continues to be weak.

As I mentioned on our last call, the larger rental companies are engaged with us on planning their 2011 requirements. Used equipment pricing continues to firm up. And while many transactions still involve trade-ins, deflating is slowing rapidly. Our net sales were up nicely compared to prior year, and we expect this trend to continue.

As part of our channel diversity strategy, we have received an $18.9 million order for specially designed tele-handlers for the US Marine Corps to be delivered primarily in 2011. Part of this order is now in the backlog. We see this as a very positive strategic step for our Aerials business. Additionally, we have started up our Changzhou facility in China on time and ahead of budget.

Moving on to Construction, net sales continue to show strong growth over prior year and even up a little bit from the second quarter which traditionally is our strongest quarter for sales. We continue to move closer to reaching profitability.

The Construction team is seeing solid growth in orders for our heavier equipment, rigid trucks and material handlers, which we expect to carry into 2011. Our compact business is seeing good order rates throughout Europe and Latin America with a little softness in North America. As we expect, we are seeing seasonal softness in our Roadbuilding product lines.

Overall for the Construction segment, we should see good sales performance in Q4, which is traditionally one of our softer revenue periods. We're still very excited about the upcoming new product launches of the next generation of loader backhoe and a new skid steer product line which will show revenue impact in 2011.

Our Cranes business had a challenging quarter. Sales were down 15% compared to prior year, and while we have been communicating throughout this year we would see a decline, this quarter's drop was steeper than what we had expected. Part of this reduction was deferred deliveries into Q4. Order rates were okay for the quarter, and backlog basically was flat compared with Q2. We are expecting a rebound in revenue in Q4, the vast majority of which is due to existing orders in place rather than an uptick in orders. We're keeping in very close contact with customers to assure we are accurately assessing the market conditions.

And as I mentioned in our Q2 call, we will likely see a volume reduction in our over 300-ton mobile cranes in 2011, rebounding in 2012.

Our Port Equipment business continues to slowly rebound in performance. While we are seeing container traffic pickup and our requests for quotes continue to be up, we're still in a position where we are working hard for orders to fill our plans.

Moving on to Material Processing, our crushing and screening business also had a solid quarter compared to Q2, and substantial improvement versus last year, up nearly 50% in net sales. We're back to what we consider to be normal seasonality with dealer inventories, very much in line with our expectations and backlog declining at this time of the year.

North America and Europe are recovering as expected, with strong markets in Australia and Southern Africa. New product launches in Q3 targeting mining applications with larger-capacity equipment have been very well received from initial customer reactions.

For Terex overall, emerging markets continue to perform well for us. China continues to be a solid market, with Brazil, India, and other markets up very significantly year over year. Over 30% of our net sales continue to come from markets with above average growth rates and strong needs for infrastructure.

Moving on to page 10, you can see the progression of our backlog trends by quarter since 2005. At that point in time, we had in excess of $5 billion in net sales. While I'm not suggesting our future recovery will follow a similar pattern to the last five years, I do believe our overall backlog has basically leveled out, and you will see a change in backlog mix trends between segments with Cranes reducing as a percent of the total and our other three segments continuing to recover nicely.

Lastly, let me touch on material cost trends. We continue to see moderation in commodity pricing trends in steel and other commodities in general. While we are seeing pressure on tire pricing and some other categories, we expect relative price stability into Q1. Our supply chain team has had great success in driving our cost performance.

Our key corporate initiatives remain on track. Our Terex management system is working well, and we have an aggressive implementation schedule for 2011. We are enhancing our approach with our Terex business system, our lean initiative, with a core group of leaders working to expand our scope to the whole enterprise, including customers and suppliers. Our Tier 4 program for engine changes to comply with emission regulations is very much on track. All in all, I think we're making very good progress in positioning Terex for a much brighter future.

At this point in time, I will turn it back to Ron.

Thanks, Tom. Let me summarize and go to the slide number 12. This has been and will continue to be a challenging year for us. When we sold the Mining business, we expected our other product categories would be slow to recover. Unfortunately, this has proven to be the case as a broad-based recovery has not really materialized. However, there are clear performance improvements underway and orders that support our expectation that we will see a substantially stronger 2011 through 2013 period. The investments we have made in developing markets, as well as the aggressive pursuit of several large orders will contribute significantly to our future performance. We've paid down $270 million of our term debt, and we have offers to purchase at par the 10.875% and 7.375% bonds.

We've had difficulty in finding appropriately priced acquisitions, and while we continue to consider strategic and financially interesting deals, there are more limited prospects than we had expected. The fourth quarter will show improvements, but not yet a net income.

So, in conclusion, we are about where we expected except that our Crane decline was a little bit stiff -- steeper than we expected, being offset with a little bit better performance in some of our other businesses, somewhat for delivery in early part of 2011.

There are a lot of encouraging signs as I reflect upon the business. Even in Cranes, frankly, today, in Germany, we have 1,120 customers visiting us from 50 countries all over the world. And they're not visiting us to have just a beer. They are visiting us to discuss their crane needs next year and the years after. And frankly, they are more upbeat than our leadership team expected, and we have gotten a great turnout.

Last week, we had the largest fleet managers in the United States for all equipment at our corporate headquarters for a session that involved our senior management for two days. It was a great meeting, and Terex prospects look excellent with these fleet managers.

We have more new products ready for introduction completing their testing right now -- and ready for introduction in 2011 -- than I have seen in my many years at Terex.

Our revenue has diversified. We've been able to grow our revenue in the developing markets. But the developed markets revenues we have, have, frankly, still not come back that strongly. But that will begin to change in 2011, and in particular with Aerial Work Platforms leading the way in the United States.

So, in general, we had a tough quarter. We are about where we expected, and we are looking forward to completing this year as strongly as we possibly can and moving into next year to deliver that level of profit that we need to achieve.

So let me turn it over to open it up for questions.

(Operator Instructions). Jamie Cook, Credit Suisse.

Hi, good morning. Ron, my first question has to -- you made some comments about 2011 that you hope to be profitable. And I guess, one, I want to clarify it's on an EPS basis, but can you give us a little more color in that? Do you expect to be profitable across all segments? And will this, will 2011, be a normal seasonal year or will your profitability be back-end loaded?

And my follow-up question I guess is on acquisitions and how you balance that with paying down debt. There's been obviously a lot of speculation that you guys were interested in Demag, and I guess I'm just trying to get a sense of -- I understand you want to buy a business that gives you cyclical leverage. But how do you balance that with making sure your businesses are, while all cyclical, that they somewhat counter-balance one another? And Cranes doesn't seem to do that. So if you could comment on that.

There's a lot of questions in that, Jamie, and I will do my best. First, let me start and say by saying I expect 2011 to be profitable, it is on a net income basis, and it's not $0.01. Okay, I expect it to have a meaningful level of profitability. I expect all of our segments to be profitable at the operating profit line. I expect us to still have a little bit too much overhead as we implement our Terex management systems and continue building the Terex business system that we think are critical to achieve the longer-term profitabilities that we have laid out. I don't want to set expectations at this point in time because we haven't completed our budget reviews. And there's obviously a lot of trade-offs that we'll be looking at in the short term.

But, overall, we said in the last quarter that we expect to be at an inflection point. We are at that inflection point. The Cranes business was a little bit more disappointing than I was hoping for, particularly in the third quarter in that we had a number of order cancellations and push-outs. And we will recover a little bit in the fourth quarter, but we don't expect Cranes to deteriorate much more than it is right now next year, but we don't see a tremendous uplift. If anything, it will happen in the back half of the year in Cranes.

So overall, that would mean that 2011 is solidly profitable, 2012 is much better, and 2013 will be close to the expectations that I had laid out, if not on them. That's what we're driving toward, okay? And by 2013, we will be in a growth capital mode for many of our customers, which will give us even some pricing leverage, frankly, that we don't have right now.

Let me comment on your question about acquisitions. We don't comment on rumors or speculation. And so, your point about Demag cranes, you know, I just can't comment on that. I don't think it would be appropriate, and I think the press rumor mill, certainly, for some reason has gotten kind of a bit out of hand.

I would say, we don't just look at our business by what the external world calls -- you know, our Crane business is a huge mix of different products today. We have tower cranes that operate differently than lattice booms that operate differently than our Port Equipment. And, obviously, we're going to look for those opportunities that improve the Company's financial performance characteristics. So let me assure people that whatever we do, if we do anything, and we're going to be price disciplined -- and I want to emphasize the word if -- will be because we are confident that the financial returns will be better and less cyclical than the businesses that we have.

Thank you. I'll get back in queue.

Meredith Taylor, Barclays Capital.

Hi, good morning. I'm hoping first of all you could give us a little more color around how you are thinking about the fourth quarter from a profitability standpoint. As I look at even the low end of your sequential top-line growth rate, that would imply sequential incremental margins of something only slightly better than 10%. Can you talk about what you are looking for maybe on a production standpoint, kind of on a business-by-business basis? And then, just how much of a headwind should we think about Cranes in the fourth quarter? And how much of a swing factor is that in this $15 million that you are talking about?

Let me answer that, Meredith. As I mentioned in my discussion points earlier, the incremental margin has several components to it. So if you look at our fourth quarter relative to the fourth quarter of last year, you will still see a very meaningful improvement in absorption, order of magnitude, probably close to $50 million in total Company. However, when you look at it from third quarter to fourth quarter, that number is probably still in the $10 million range.

So it depends on when you talk incremental margin year over year or quarter to quarter. So smaller from an absorption standpoint as the facilities are still operating pretty well relative to their third-quarter levels. I'm talking overall. I get a little bit by segment in a second. So I wouldn't expect major shifts in the absorption, but which I would expect is continued cost control relative to what we have.

As -- the other factor relative to incremental margins that's most significant would be pricing and volume, obviously. And for really all businesses, we would expect a level of volume increase in the fourth quarter.

Cranes would likely be the most significant due to some of the delays we had from the third to pick up. But remember, our margins at this stage are very competitive in terms of price levels. So it's not with trade-ins involved largely in Cranes and AWP that tends to have a depressing effect on what you would normally think is incremental margin situations. In a regular steady-state, our Company would tend to have about a 25% kind of incremental margin when all the factors are equal on it. So segment by segment you need to consider some of those factors.

I think, Meredith, we also want to be somewhat cautious in our fourth-quarter outlook because we just were in a situation where going into September, our Crane business looked quite a bit stronger than we thought it was going to be -- than it ended up being, in part because many of our big customers delayed receipt or, in fact, cancelled some orders. Now we've been able to reschedule and/or actually resell some of that equipment, which is -- was giving us some positives in the fourth quarter, but not always at the same margin level. If I go and -- by the other businesses, I think our Aerial Work Platforms business is doing quite well from a production plan point of view, but it is the fourth quarter. And many of our customers don't want delivery of their product in the fourth quarter. So we may be producing, but not shipping all of what we produce in that business.

And if I go to the construction business, it's kind of a mixed bag. Some of our customers actually do want delivery of their product in the fourth quarter, but yet we have also gotten orders -- some fairly substantial orders on our larger rigid frame trucks and material handlers for delivery in early 2011.

And then lastly, in the Materials Processing business, what I'd basically say is that business is moving along as expected with normal seasonal trends which is quite encouraging. The team led out of Northern Ireland has got a number of new products in the mix as they always do, and I think we're going to see kind of normalized trends.

We were hoping to have a net income in the fourth quarter as I had previously indicated, and perhaps to achieve that, we would have had to pay down a little bit more debt than we have actually paid down and have a little better operating profit. We're not as far away from that as would appear. And that was our strategy, to pay down more debt and/or have an acquisition that actually added operating profit, or ,and have a little bit more operating profit. I just think it's a matter of a quarter or so away.

Okay. Just as a follow-up on the Cranes business, it certainly sounds like you are looking for some incremental pricing pressure 4Q relative to 3Q. I mean how long do you anticipate this will persist? Is this a case of some temporary pressure as a competitor tries to work through inventory in the region? How do you really see the pricing environment taking shape for 2011, and correspondingly, the impact on margins for the Crane business?

Yes, Rick, do you want to comment on that?

I think pricing is still pretty disciplined within the marketplace. We're certainly seeing a lot more trade -- trade-in as really an element of pricing that we hadn't seen in the past. But I think across the board in North America, Europe, even in the developing markets, certainly, everyone is competitive, but we really haven't seen price erosion. And certainly with where we are sitting with backlog and our expectations for the fourth quarter, we wouldn't expect it to be significantly different in the fourth quarter.

Okay, that's helpful. I'll get back in queue. Thank you.

Jerry Revich, Goldman Sachs.

Ron, you mentioned high M&A prices in your prepared remarks. Would you consider some stock buyback if you can't find the right M&A fit over the next year? Is that an option?

I would not at this stage say stock buyback is on our horizon, given some of the indentures that we have and the covenants that we have. I think we will get our balance sheet back in line, get our business performing, and then we will evaluate that down the road.

Helpful. And I'm not sure if Tim is on the line. I'm wondering if somebody can comment for their Aerials business, how much of a contribution from pricing you saw this quarter because of improved residual values on trade-ins. And given continued used equipment value improvement, should we expect a greater pricing tailwind in coming quarters?

Yes, Jerry, what I would say is many of the deals we're doing still come with trades, not all of them, but many of them do. Earlier this year, a customer might have wanted to trade in $1 of used for $1 of new. Now they're saying I will take $2 of new for $1 of trade or $3 for $1, that sort of thing. And used equipment pricing, to your point, has stabilized. And that's giving us some breathing room when it comes to doing the deal.

I would say, however, there is still an imbalance between manufacturer capacity and customer demand. But that gap is closing pretty rapidly. With the exception of one European manufacturer, there is not really any excess inventory in the system. And that inventory is being worked through from that European manufacturer. So, in all that together, I would say pricing is competitive but firming. And as demand grows over the next few quarters, I think we will see less discounting and improving pricing.

Yes, but I would not expect margins to just rocket-ship up. This will be progressive and disciplined because our customers understand -- particularly the more sophisticated customers, understand where pricing has been. They understand the trajectories, and they are going to be hard-pressed to take a 10% or 15% price increase anytime soon, so this will be progressive.

Helpful. And lastly, Tim, can you say more about revenue by region this quarter? Which regions were up significantly more than the segment average and was Europe in positive territory year over year?

Yes, I won't get that granular, Jerry, but I would say North America is in a much better state than it's been. Europe continues to be a challenge. Many of the European customers we do business with are still struggling with both time utilization and dollar utilization. But, so on balance, the US is probably six to nine months ahead of Europe. We had a very good quarter in the Americas, Latin America in particular and expect that will continue into 2011. And, Australia has been pretty strong for us over the past several months as well.

Thank you very much.

Henry Kirn, UBS.

Good morning, guys. Wondering if you could chat a little bit about what you are seeing with your parts business -- aftermarket is a aforethought, so what are you seeing there? And how big is it today?

Overall in the aftermarket business?

Right.

Okay. Phil, do you want --?

I'm just doing some math, Henry. Year to date, we've got about $600 million of parts sales out of the [$4.4 billion].

And how is that trending versus the rest of your business? Is that somewhat of a lead indicator?

Excuse me just a second.

We're at a run rate of about that.

Yes, a run rate of about that, so $450 million year to date. And trend-wise, slightly up, I would say quarter to quarter.

And --

Our parts business has improved faster than our other business in general.

Are there any spots in the portfolio that are doing better on the parts side that would give you better visibility as to a recovery on the new side?

I'm not sure we can fine-tune it that much in our business, Henry. I mean we clearly saw our parts business drop off in the economic crisis that told us that we had a lot of equipment that was parked. And we clearly saw our parts business start to improve ahead of our new machinery business. But I'm not sure we could give you a precise correlation that would be the kind of regression analysis you might want to say that would cause you to be able to forecast better.

That's helpful. And one more if I may. Could you talk about any more restructuring opportunities across the portfolio, what we could see from that?

Well, I think we've got a few places where we know we've got to look at our work force and some consolidations. And I don't want to make any announcements here on the call or frighten anybody. I just think there's some pockets of improvement as I had indicated in both our Crane business and in our Construction business in particular.

Great. Thanks a lot.

Charlie Brady, BMO Capital Markets.

Thanks. Good morning. Let's focus on the Crane business for just a minute. Can you quantify the extent of the cancellations and/or the delays? And I guess as you look into October, has that trend continued, or have you seen more people coming back and putting additional push-outs? And what's really the reason behind it? Is it a financing issue? Is it a reevaluation of projects? Or what's the driver there?

Why don't I turn it over to Phil, and then Rick?

And specifically on the cancellations, I think we had order of magnitude $30 million in September. And Rick can comment on the current pattern.

I would say that the issues relate to all of the above. Certainly financing can be a challenge in Europe in particular, but sometimes it's really the timing of the project and when the customer wants to take delivery is probably a more significant impact than that one.

The financial health of the customer.

Right. That's right.

It tends to be episodic as compared to a broad-based general trend.

Yes, that's right.

Rick, why don't you comment on that?

Okay. The cancellations were principally around ability to finance the equipment, and the projects -- and projects were principally located in Europe, and we saw some delays in project timing and startup. So it was more a push, and from my perspective, the cancellations -- we really saw in late August, September, we actually had a fairly healthy booking month in September. So, and we haven't seen these types of levels of cancellations consistently through the quarter. It was more episodic in the quarter, if that gives you some color.

Yes, that's helpful. Can you give us just a sense of the mix of the cranes, of the Crawlers or the A-T cranes today relative to what it looked like say going back a year or two years ago. Has it changed materially?

Rick?

From a revenue standpoint, the mix is fairly consistent. So, revenue on revenue, we would still have our Zweibrucken business being the leading business or our largest business in the portfolio, and it's still the largest contributor from a profitability standpoint.

Yes, but let me also put you -- give you some perspective, Charlie. In 2007, our US business was almost 4 or 5 times what it is today, okay, and was nicely profitable. Now it is less than 10% of our total Cranes business, and only making a little bit of money, but it's making a little bit of money because we have a fairly lean process in place in our North American operations. But that gives you the potential that exists in the Crane business once the North American operation starts to improve, which we are not saying we expect in 2011 -- maybe -- we're hoping, but I don't think we are expecting it in 2011. But that business was down 70%, 80% and it's kind of stayed there.

And then, turning to the tower crane business, which, for us, was at its peak, probably a $300 plus million business, and that business is down 90%.

So, Rick's comment is true over the past year or two, Zweibrucken has remained, but we've got these other sides of our Crane business that will begin to grow, and will begin to get some initiatives moving, particularly in the developing markets.

We just took a big tower crane order in Brazil. I think we've got some other activity in developing markets. So, the investments we've made to put people on the ground to build capability in developing markets, while expensive when you don't have revenue, when the revenue starts to come in, plus you get -- recapture the revenue back in your developed markets, that's when it will really repay and pay dividends for Terex overall.

Thanks. That color is helpful. I appreciate it.

Ann Duignan, JPMorgan.

Good morning. Maybe one of you could talk a little bit about the rollout of Tier 4 interim and stage IIIB and how that's going to impact each of your different segments as we roll through 2011 and into 2014; and should we anticipate higher costs because of the more complex engines?

Ann, I'm going to let Tom give you some details of that, but we made a presentation to the biggest fleet managers in the United States on Tier 4 engines and the Tier 4 interim, the conversion; and their comment back to us, to a man was, you guys have made it the clearest, the simplest, the most straightforward for us to understand of any of the companies we had visited with and we visited with all in the industry. That's not to say it won't be a challenging transition, but I think we've got our act together. And I'm going to let Tom kind of give you some more depth on that.

Thanks, Ron. Ann, we've just gone through program reviews over the last month with each of our businesses. They have been hard at work at this for two years. They are on track. The implementation schedule is staggered based on the size of the engine and a number of other factors. But I'm comfortable that one, we are on track. Secondly, that we are not going to see significant increased or incremental costs as we go forward based on additional engineering costs or new program testing or anything else. So we are at a run rate today that I'm comfortable with we're going to be very successful.

But we will see material costs.

We will see material costs. We are working hard to offset that as part of a rationalization process we are going through with our engine suppliers to significantly reduce the number of suppliers we are dealing with, and frankly, enhance our ability to control costs and work with them from a technology standpoint.

And that being said, the entire market is in that same position, so you will see price pressure across the board, across the industry in almost every market that's requiring Tier 4 which is specifically US and EU over the next couple of years.

Having said what Tom just said, we are going to be different than a lot of others in that we are not getting a lot of pre-buying. People aren't buying -- pre-buying from us engines for gen sets and for all these other things to get their Tier 3 engine purchases done. That's not happening with us. Customers will buy our equipment when they need the equipment.

And, I think we have, by business, a transition plan which is both in line with the law, in line with our suppliers' capabilities. We have announced engine changeovers; for example, we are moving to Scania in some of our products which will give us profitability on some of the parts that we have never had before. So we have used this as an opportunity to improve the company, not as an opportunity -- and to tailor our engine applications to the requirements of our customers. And I think that's been well received.

Yes, thanks for the color on that. That's helpful. And just as a follow-up to that, because you almost answered my follow-up question -- I was just curious if some of your building production above retail sales this third quarter and going into the fourth quarter was a kind of a building and buffer of inventory there that will be pre Tier 4 interim. Is that the wrong way to interpret what's going on? Or are you just building in anticipation of demand because you need the absorption?

Ann, that is the wrong way to look at it. We are building in advance of what we expect to be a reasonably solid Q1. And frankly we want to make sure we are in a position in our recovering businesses to keep leadtimes to a minimum and be responsive to customers. So we're going to continue to see inventory slowly moving up, clearly not at the same rate as revenue increases, but we need to be responsive to customers. It is, at this point in time, there is no factor as it relates to Tier 4 as part of those inventory changes.

Yes, and Tier 4 is not the issue. Simply stated, AWP expects strong business in the first part of next year. We want to have the product for them. Construction expects some strong customer orders. We want to have the product for them. And MP is building kind of normally. We need to get inventory out of our Crane business; the Crane inventory is too high.

All right, that's very helpful. And then just one real quick follow-up, Ron, on the acquisition front. Could you just comment on, is there plenty out there in the pipeline, there's just too much competition? We heard from ITW the other day that private equity is aggressively bidding up valuations for businesses $100 million and above. Are you seeing that out there or is there just a lack of businesses that fit the kind of profile that you are looking for?

I would say it's a little bit of both, Ann. I would say that it's difficult -- people's value expectations are still, in my opinion, too high. In part it's because of the easy access to capital. That's really kind of a -- we're in an odd place. We have cash, but until our basic operating performance improves, we have some constraints on our ability to get capital. I really don't want to give anyone the wrong impression that we are -- you know, we feel compelled to make an acquisition.

On the other hand, I don't want to give anybody the wrong impression that we don't think there's some things that can be done at the right price, at the right price. And management teams tend to think that their valuation expectations are of another era. And when they think that, they -- they are only hurting themselves and their existing shareholders. And so are not going to participate like that.

Okay. That's very helpful, Ron. I appreciate the color. I will get back in line. Thanks.

Andrew Obin, Merrill Lynch.

Yes, good morning. Just a question -- one of your key customers, I think yesterday commented on the fact that they want to sort of shift their business mix slightly, well not slightly, but shift their business mix away from Aerial Work Platforms to earth moving and HVAC. And the question I have for you, are we seeing a structural shift away from AWPs in this cycle? Is there something different in your customers' purchasing behavior when it comes to AWP in this cycle versus what we would have example or seen in the prior cycle?

Yes, the customer you are referring to probably had too high of a concentration in Aerials in their historical business. And through a series of acquisitions, that customer had focused on buying Aerials customers. So I think it's totally appropriate for that customer to try and diversify their revenue. And I think the dirt business presents them with some good opportunities.

Having said that, the age of their fleet is huge in Aerials, and they're going to need to buy equipment. And this is going to play into our hands because over time, we want our customers to have a level of diversification, and we're going to be there saying hey, we've got dirt equipment too; we can help you out.

While that might be a hard sell immediately to some of the large rental companies, we're going to be there trying, particularly when we've got our new backhoe, our new skid steer and aggressive programs to support that. Tim, do you want to comment about anything -- add anything to that?

The only thing I would add, Ron, is I think our customers are going to follow the revenue and the opportunity that's out there, and you've got to dig a hole before you put the siding up. So I think as the customers look to rebalance their fleet mix, dirt, more than Aerials in the near term makes sense. But as you saw yesterday, the ABI, the Architects Building Index, crossed 50 for the first time in 2+ years, almost three. And that is going to drive demand. That's a great leading indicator of our business six to -- 9 to 12 months out, and when I see that, it starts to get me excited about where this business can go.

Yes, and one of the -- Andrew, let me just make one further point. One of the historical facts, and I guess this is what happens when you have no more hair and been around the industry a long time, is that non-residential construction has been helpful for cranes and aerial products, but residential construction has been very important to the smaller compact size dirt products.

Residential construction started to fall off the table in 2006, as did the dirt product categories that are now beginning to respond, of loader backhoes, skid steers, mini excavators, those kind of products. And so it's very natural for them to want to buy that product now in 2010.

I have never seen a decline in the marketplace that's lasted four years. So we've been through one of the most severe declines in that compact dirt equipment business in my lifetime in the industry. And I think it's beginning to recover.

And just to follow up on your Construction business, when do you think this business will start posting positive operating profit? And how good could it get next year given that we are starting to hear from your customers about increased purchases?

Sure. I'm going to turn that over to my -- the leader of the Construction business, who, by nature, is conservative, so let's see what he has to say.

Andrew, thank you for the question. We are seeing very positive trends, particularly on the heavier end of our product line (technical difficulty) still a bit of a mix on the smaller end of our business. And we are in a fight for every deal that is out there.

There is still pricing pressure in the marketplace. But the key thing that we are seeing in the increased activity is, similar to, as Tim described, less pressure on the trade side, which also creates margin erosion for us at times and seeing stability in the used equipment much faster than we expected for this time of year.

We are seeing continued normal activity around the Roadbuilding side of our business. I believe that there is some strength coming for Q1 for us in that part of the business. So I am starting to feel very confident. As Ron said, I am generally very conservative as a view, but I'm seeing very positive signs.

But, can we break even in the near term, particularly given what the currencies are doing and given your manufacturing base?

Currency is a wild card, I will definitely admit. But fortunately for us, where we are seeing the market growth and coming back for us is generally not in North America. And we are seeing our Latin American, Indian and middle Europe, Russia, North Africa coming on much quicker, so there's some offset there for us.

So to answer your question, Andrew, yes, okay, to be definitive about it.

The champagne is not quite on ice yet, but it will be shortly.

Oh yes. And George and his team have gone through a lot of lumpy issues that they have had to deal with over the past couple of quarters. I'm highly confident this business will be profitable. It won't be strongly profitable for a little while yet, but the real wild card for me is how high is high with some of the new products that we're introducing?

And I think we want to be a little cautious on that. We've got some introductory expense associated with that. But, I think we are virtually there in terms of breaking even. We will make progress in this business.

Well, you guys have done a lot of hard work and we hope to see good results. So thank you very much.

Robert Wertheimer, Morgan Stanley.

I had two questions. The first one is just on the Cranes, if you could speak a little bit to share position and competitiveness. I gather the cancellations were oneoff, and I assume you didn't lose any of the competition or the push-backs. But do you feel like you are still winning your fair share in bids that are up? And is your pricing equivalent to competition?

Rick?

Yes, Robert, thanks for the question. I do think we are winning our share back. Certainly we had a little bit of share erosion through the clearing of channels that took place in most of the businesses in 2009. But we are picking up -- actually picking up share as we're looking at 2010 in the marketplace. So I think we are winning our fair share of battles.

Relative to pricing, I think, as I stated before, it's a pretty -- we're pretty disciplined in the marketplace still. It is aggressive, and trade-ins are really the key to winning deals right now.

I just left 1100 customers to take this call, and -- from around the world -- and they are very -- they are more upbeat -- not very upbeat -- but more upbeat on 2011 in their market. That doesn't mean it's going to have a direct correlation to our business in 2011, but I certainly think they're looking at replacing equipment, not necessarily growing capacity, and they're pretty optimistic about rental rates and utilization within the marketplace. So, that's pretty positive -- it's more positive than it really has been from a customer standpoint in the last 12 months or so.

But Robert, let me be more specific. Okay, we track our products and market shares product by product, market by market. Okay, in 2009, we knew we lost some market share in a number of product categories. We believe we were less aggressive in the marketplace because there was a lot of channel clearing, as Rick mentioned.

We also know that we had a couple of product holes, that we spent the money in the downturn to come up with new products. These products will be introduced in 2011 to fix those product holes.

In 2010, we have seen our share of rebound, not entirely back to where it was in 2007 and 2008, but it is rebounding, and we expect to get that share back.

We just hired a new leader of the North American business. He was the CEO of a big crane rental company in the United States. He knows the crane rental business, and we're going to compete and get that business back in the US, which is where our business softened a lot.

Perfect. And those were Crane comments you just made, right, Ron?

Those are only Crane comments.

Perfect. And if I can just ask one follow-up on the engine changeover, I think you had talked about consolidating -- and you just mentioned it again -- but consolidating engine suppliers is almost entirely or maybe mostly offsetting the increased cost of the engine. And you mentioned that's happening somewhat. Is that as good as you thought it might be when you started the negotiation with those engine suppliers, better or worse?

Robert, let me clear that up a little bit. If I gave you the impression we're going to offset the price increases, that is not the case. I think we are mitigating it somewhat simply based on rationalizing the supply base and putting ourselves in a better competitive position. Our end customers will see price increases as a direct result of the Tier 4 interim and Tier 4 final engines that are coming out on the marketplace over the next several years.

In addition to that, they're going to see operating challenges in moving equipment from market-to-market, and that was a big piece of the discussion we had with the fleet managers that Ron alluded to because you will no longer be able to take engines and move them into effectively a lower-tier market because of the sulfur content in the fuel.

So, there will be price increases coming through from engine suppliers to us that we are not able to offset or reduce completely by negotiating. And there will be price increases that we will have to pass through to our end customers as a result of that over the next several years.

I think what -- just to avoid confusion, I think what Tom was referring to is we were able to get support from a lot of our engine manufacturers on the engineering costs.

Engineering technology. The other piece of this without going too far into detail, is there's fundamentally two different technology platforms, and there's different costs and operating costs and maintenance costs and performance curves that go with each of those.

So as part of this whole activity, we are fine-tuning our engine strategy to make sure we've got the right technology on the right product platform and we're able to demonstrate that to customers. That's frankly our big advantage we've got as compared to some of the integrated suppliers who have typically picked on one technology, and they're going to try and sell that to their customer base regardless of the performance that may or may not be advantageous to customers compared to the other technology.

Thank you.

Seth Weber, RBC.

Thanks. Good morning, everybody. Just going back to the AWP discussion for a second, so should we -- given this customer commentary or whether it's posturing or what have you, but should we assume that most of the growth for 2011 will come from emerging markets? And is there any margin implication from sales to emerging markets versus US? And maybe could you characterize the sale that you referenced in South America? Is that something new, or is that something we should be excited about?

Yes, Seth, this is Tim Ford. I don't think you should expect all the -- any growth we have in 2011 to come only from developing or emerging markets. We expect the North American customers who, frankly, have not bought any fleet to speak of for 2+ years will begin buying fleet. We have been engaged in fleet conversations with virtually every large rental company since mid-summer I would say in the US; and in Europe, we've been engaged in the same conversation, though I think they're a bit further behind as I noted. So, I think we're going to start to see, in fact, I'm confident we're going to start to see many of the US rental companies begin fleet buying in 2011 and frankly maybe even begin placing some of those orders late here in 2010.

When you look at the business and the growth we have had in South America, we did, in fact, secure several orders from a few new customers, a couple of note that were significant. And, we're pretty confident that that market is going to continue to grow for us as we move ahead.

The other point I would make from a China standpoint, and I think Tom made reference to this in his comments, we began production in our new Changzhou facility in very limited quantities, but we began production in September. And I think we are pretty excited about the opportunity that's going to create for us to help build that market. We've added a lot of salespeople. We are adding dealers and rental companies, and China is going to be a place for us as we go forward.

In addition to adding a lot of engineering talent for new product development there in that market.

So is it safe to say with the local production that margins should be about the same across the board then?

Well, I don't know that you can count -- if you are specifically referring to China, I don't know that you can specifically refer to China having a material effect on our overall margin base. I think we will be competitive where we need to be competitive.

We don't have the full range of products in China, so we will still be producing in the US and exporting to China. But I think on balance, margins have historically been relatively similar around the world. I think we see that trend continuing.

Yes, China is a multi-year strategy. We're just dipping our toe in the water at this moment, but over time, we expect it to be a good market.

Right. That will be a small impact for 2011.

Okay. And I guess just as a follow-up to that, on China, you guys announced this Chinese-Korean acquisition I think over the summer. Was there anything y you could do there with leveraging that as far as expanding your -- I mean do you expect that to be a near term benefit to you? Or how long do you think that will take to contribute?

Yes; this is going to take us time. In the near term, I don't expect it to be meaningful whatsoever. I think it's going to take a couple of years. There's several models of cranes that this particular operation has, and we expect to standardize and operationalize those models eventually, with the idea that we'll be able to produce them and sell them both in China and elsewhere.

Okay, great. Thanks very much, guys.

David Wells, Thompson Research Group.

First off, I guess on the last call, you had outlined some kind of flow of product type expectations for the Crane business where you expected to see some of the smaller capacity equipment I guess begin to ramp up more meaningfully in 2011. Given what we saw in the quarter, have your expectations changed materially with regards to what you would expect in terms of product category?

I don't think so, David. I just think that maybe a quarter or two push-out, a little bit of slower burn.

And then secondly, it looks like you continue to use your balance sheet selectively for financing opportunities. Is that a business where you feel like you could use some of the cash on the balance sheet and to go into it in a more meaningful way? Or is it -- does it make more sense to continue at kind of a smaller pace here?

David, it's Phil. Again, we added about $13 million in the quarter in finance and receivables. And I would characterize it in the current market that certain partners aren't as willing to lend into our industry certainly. So we're trying to fill gaps. We're trying to create opportunities where we understand the residual values and we understand the customer risks a lot better than some of the financial institutions. So we are trying to create incremental sales that -- for our business in the near term. We're being pretty judicious in our underwriting. It's an opportunity for us to expand.

You will see modest growth as we continue. And you will see it in other parts of the world than just in the US -- in Europe as well as in Asia as we go forward. We're not going to become the size of a Cat Finance, for example, but I think we will certainly fill the gaps that are out there in terms of what we have. So it's a good, positive contributor to the sales activity.

Okay, that's helpful. And then just lastly, as we look at the tender offers that are outstanding, assuming that the full balance of those isn't completed, are there still restrictions that exist on that cash or does it then become available for kind of whatever you want to do with it, in terms of acquisitions or investments in the business?

Yes, it's available for general corporate purposes. Now as we mentioned earlier in the call, we have restrictions on doing things like share repurchase, for example, but yes, it's available for basically anything else.

Great, thank you.

Robert McCarthy, Robert W. Baird.

Thanks for taking my question. I wanted to pursue a little bit further what you are seeing in the North American Crane market. The release includes some language about improving backlog. I'm wondering if that's early dealer orders for 2011 in rough terrain perhaps or -- given how low that business has gone, I'm curious as to why you don't have greater -- you don't seem to have greater expectations for it in 2011.

I think as a general comment, Robert, I would say we're just being cautious. I mean, as we know the Crane business will improve in North America. We just aren't absolutely sure when and at what point in time it will come back. Rick, you want to add to that?

I also would say that most of the improvements in the backlog from a US perspective is really coming from not dealer stocking, but from more direct sales to major national accounts that are looking at replacing fleet that, for several years they haven't had the ability to do that. So, it's not going into the channel, so we don't see a channel inventory build. It's more directly oriented to some projects and good solid business decisions on replacing fleet.

But you are telling us not to extrapolate from a small positive signal in the third quarter. Am I getting this right?

I think we may be a little conservative, but I think we're also a little bit optimistic and saying you know, we hope it's better. But right now, I think we're looking at a fairly flat forward-looking view of the market with potentially some comeback in some of the lower-end products with the residential construction starting to show some improvements, et cetera towards the latter half of the year.

Yes, Robert, the North American business is such a small base right now that we get a little bit of improvement, it's not going to be that meaningful in the overall Cranes segment. So my view is we will get a little bit more positive, and 2012 will be a strong year.

Okay. And to make sure that we've got our near-term expectations calibrated correctly, I think I heard that in the fourth quarter, the Crane business revenue should go up a bit as you ship some of this deferred business but that profitability could be challenged because of competitive pricing and the concessions that you might have needed to make to move some of that product. Did I get that right?

We're talking about Cranes, correct?

Cranes in the fourth quarter.

Yes; yes, that is what we said.

Okay. And then lastly, Tom, we've -- those of us who have been around the company for a long time have been very excited about the potential Terex Business System and what it could mean. And of course, in the early days of implementation, these calls were filled with exactly where are we at? What commodities have you resourced and those kinds of things. We lost all that of course in a giant cyclical downturn. So I'm wondering, is there a way for us to characterize at this point at what stage of implementation we are at. If volume starts to come back in a meaningful way in mid-2011, do we see better than historic leverage because a lot of the work is done? Or have you had to postpone a number of initiatives because of how far down we went and are we still middle innings on this process, recognizing that it never ends, of course.

Right. You've got a couple things mixed together relative to how we look at it, Robert. One, on the supply-chain side, we have kept the team intact and frankly, we've got over 50 professionals on a global basis, including teams in India and China working us hard. So I think that's under control. We're going to keep managing as best we can moving forward. I think we've made very good progress this year. And short term we're clearly seeing cost moderation as a result of their efforts. I'm happy with how that's progressing.

On the broader Terex Business System, our lean initiative, we have just had the -- a group of 10 people, seven of which are clear lean practitioners, business leaders in our businesses spend several weeks over the last three months trying to come up with the next generation if you will of how we're going to advance this. And the key mission that we have charged them with is how do we extend this into the customer base and how do we extend this into the supply base on a much more meaningful level, as well as continuing to make sure that it does not fall into the trap of being "a manufacturing process improvement."

I think our teams have done a great job during this downturn sustaining lean activities and improvements at the manufacturing engineering levels. But we need to expand that into the supply chain side and into our sales teams and into our customers if we're really going to make this kind of jump to the next level of performance.

And the IT side of things, Tom?

The IT side of things actually is going well. We've got -- as I alluded to briefly, a very robust, and frankly we've accelerated our schedule for 2011. And the big piece of that, frankly, will be moving our Aerials business on a global basis into the system over the course of the next 12 months, which, frankly, I'm very excited about, and I know Tim Ford and his team will be, simply based on the amount of intelligence and analysis capability we will have for them to see the world on an instantaneous basis.

Well, it drives disciplined business process. And it's hard, it's complicated, it's not always well-liked. But, it is going to provide us with much better processes across the range of the Company's activities.

And last but not least, and I was negligent on my comments earlier, but I also want to put in yet another plug for our safety process improvement programs, we continue to be very much on track for our goal of 25% annual year-over-year reduction in injuries. And frankly, I'm very proud of the team and the efforts they've done despite the downturn and then the recent rebound that we have seen, which has caused a lot of churn in different activities in our plants. But I think our teams have done a great job in keeping our team members safe.

Thanks for the update, Tom.

Matt Vittorioso, Barclays Capital.

Good morning. Phil, I was hoping you could just touch on a few cash flow items as we head into the fourth quarter. Do you have any high-level targets for where inventory might go? I think you were talking about working capital builds in three out of the four businesses; CapEx for the full year, any update on the guidance for that?

And then additionally, it looks like you paid a bunch of cash tax probably related to the Mining asset sale. Any update on future cash tax payments over the next few quarters, that would be helpful. Thanks.

Yes, the -- let me go kind of reverse order. The tax on the Mining sale, cash-wise, won't go out until next year. I think if you read that from the cash flow statement, that's really next year in terms of when the actual cash. And also, we have the use of the NOL, which affects some of that activity and change on the tax side.

CapEx for the year, I would say we're -- I would consistently go with the run rate we've been doing per quarter, order of magnitude. We're starting up our CapEx on the Brazilian manufacturing facility. Pretty much China is done with Changzhou, and Hosur in India is pretty well done. So we are starting the build related to that.

But again, CapEx is still very modest for us in the grand scheme of things. And I would say on inventory levels in the fourth quarter, while the three recovering segments will show some very modest level of increase, I'm expecting a pretty significant decrease in the Cranes business achieving the production schedules and delivery schedules that we have.

So I expect free cash flow positive in the fourth quarter, and certainly we're keeping the pressure on the cash side.

Going into next year, as I mentioned earlier, working capital to cash in Cranes, if they are a smaller mix of the total, they use more relative to the other segments. So overall I think we'll see continuing improving trends in that activity.

Okay, that's helpful. And then just a real quick follow-up on cash usage, you talk about 2011, there being a mix of continued debt pay-down and certainly possible M&A. On the debt pay -down front, you probably won't get any tenders for the 7.375% and the 10.875% given where they trade in the market today. As far as pre-payable debt that you have on the balance sheet, I guess you could go after some of this other bank debt sitting there or call the 7.375%. What are your thoughts around those 7.375%notes? Is that what you would be targeting in 2011 for debt repayment?

Well certainly, they are the ones that would have the least frictional cost I'll call it, in terms of upfront nature. Buying the other notes that are out there in the open market, certainly, would have more frictional cost in terms of the premium to par, certainly on the 10.875%.

The small debt that we have that's not in our bank facility, usually for local needs, typically reasonably placed out there. That's not so much a US issue as it's --

And pretty low-cost.

And pretty low cost relative to what we have. So we're looking at all the options. And, at this stage, we would pay down debt if we can't have acquisition opportunities that we would see.

Okay. And then lastly for me, I know you've talked about a small rebound in the Crane business for the fourth quarter. Is there any way you can help us -- is that rebounding to second-quarter levels? It's moved around quite a bit, and I understand you probably can't be too specific, but is there any way you can kind of give us an order of magnitude on the rebound in sales for the fourth quarter for the Cranes segment given some of the delays you saw in the third quarter?

Well, what I would say on that is that the third quarter is almost always difficult to handicap because of European holidays. So, you get a little bit of a push between one quarter and the next that's almost always natural. But there's a pretty big increase in revenue. Phil?

I would say that relative to the second-quarter level, we're probably in excess of the second-quarter level, to give you a feel for that, which I think was $450 million roughly.

[$415 million]?

Okay. No, that's helpful. Thank you.

Joel Tiss, Buckingham.

Last and least, how you doing? I will save my tougher ones for later, but just quickly, can you give us just a sense of the sizes of some of the opportunities say by 2012 or 2013 for the backhoe, the skid steer, the China AWPs, some of the other things you are working on?

Why did you say that wasn't a tough question, Joel? I think it's difficult for us to handicap just how high, high is. When you're coming out with a brand-new product in a big product category like skid steers, rubber-tired skid steers, with entrenched competition -- Bobcat -- we want to be moderate in our expectations.

On the other hand, we have good customer intimacy in a lot of places, and our customers are egging us on to see if we can help them out.

China -- China in Aerial Work Platforms is very much unknown. By that I mean, we kind of know what the big ship-building booms are going to be, but the opportunity to develop a China for China product, which is what we want to do, is still very much in its early stages. And it's in its infancy. So, in theory, the China market for Aerial Work Platforms 10 years from now should be as big if not bigger than the United States, okay? But, there's no guarantee we can get from here to there.

So, that's the kind of aspiration we have. So, it's hard to quantify that, Joel, but I think these are big issues with big opportunities.

Okay. Yes, I was just thinking that you guys have done a lot of work and sort of outlined the sizes of the market and the potentials and could just give us a sense of even the low end of those. All right, I'll -- thanks for staying on the phone so long.

My pleasure, Joel.

Okay, thank you.

All right. Well, thank you, everyone, and we appreciate everybody's interest in Terex today. I think we remain optimistic about our prospects. We're going to continue to work hard and deliver you a better company tomorrow than we have today. Thank you.

Thank you for participating in the Terex Corporation 2010 third-quarter financial results conference call. You may now disconnect.