Fourth Quarter and Year End 2014 Earnings Release Conference Call
February 18, 2015

Ron DeFeo - Terex Corporation - Chairman and Chief Executive Officer
Good morning ladies and gentlemen and thank you for your interest in Terex Corporation today. On the call with me is Kevin Bradley, Senior Vice President and Chief Financial Officer; Kevin O'Reilly, Vice President of Operational Finance; and Tom Gelston, Vice President of Investor Relations. Also participating on the call and available for your questions is the Terex leadership team, including our business segment presidents.

As usual, a replay of this call will be archived on the Terex website,, under Audio Archives in the Investor Relations section. I will begin with some overall commentary and highlights. Kevin will follow with a more detailed financial report and then I will give some comments on where we are heading going forward and summarize before we open it up to your questions. We will be following the presentation that accompanied the earnings release and is available on our website. I would like to request that you ask one question and no more than one follow-up in order to give everyone a chance to participate.

Let me direct your attention to page 2 of the presentation, which is the forward-looking statement and non-GAAP measures explanation. We encourage you to read this as well as other items in our disclosures because the information we will be discussing today does include forward-looking material.

Turning to Page 3, 2014 had many positive developments and a number of challenges as well. Operationally, our Material Handling & Port Solutions (MHPS) segment improved profitability by $54 million, as they executed the ongoing integration plan, delivered on the large port automation projects and launched some newly designed products as anticipated. Our Construction business returned to profitability, and today is a more focused business following the divestiture of our off-highway truck business and 51% of ASV. These transactions together deliver cash benefits in excess of $275 million to Terex. In addition, our cash flow performance in the year was very good, delivering $329 million in Free Cash Flow. We partially used this cash to repurchase 5.3 million shares of Terex common stock during the year, with just under 70% of this done in the fourth quarter, while also reducing our leverage to 2.1x EBITDA. Lastly, our Return on Invested Capital improved 310 basis points to 11.2%. We believe that Terex, even when operating in a challenging environment, continues to strengthen.
On page 4, we highlight some of the challenges we faced. End markets for much of our equipment were unpredictable, if not declining. This was especially true with our Cranes and Materials Processing (MP) segments. Our AWP segment, conversely, had improved sales performance, but the combination of manufacturing inefficiencies, rising material costs and the start-up costs of Oklahoma City muted the margin performance. Company-wide, the recent sharp move in oil prices has caused uncertainty for some of our customers, especially in the fourth quarter. Lastly, we saw a significant move in currency exchange rates also in the final weeks of 2014.

Page 5 highlights the net sales and operating profit bridges for both the fourth quarter and the full year periods. While Q4 sales were fairly similar on a year-over-year basis, currency did negatively pressure the Cranes and MHPS segments enough to hide slight growth on a constant currency basis. The largest change in our fourth quarter results was the lower profitability of the AWP segment. We did expect below-year-ago performance as AWP focused on cash generation in the fourth quarter of 2014, whereas in Q4 2013 we built inventory preparing for 2014 growth. Other factors were higher steel costs and the product mix shifting towards telehandlers versus a higher mix of booms in the year ago quarter. Some of this was influenced by Tier IV engine conversions in both periods.

For the full year, AWP and MHPS segments posted sales growth rates of 11% and 5%, respectively. The Cranes segment finished the year down around 7%. Mobile crane customers continued to be hesitant to place orders for fleet in the face of uncertain market conditions. Incremental profitability for our Construction and MHPS segments were very strong, as both reflected the ongoing effort to streamline operations and remove overhead costs. AWP’s results were disappointing, as less profit was made on more sales. As I mentioned on the last slide, staffing decisions, input costs, product mix and startup expense for a facility all contributed to that result.

On page 6, we’ve presented our geographic footprint. You will see our largest market remains North America, which showed a slight 3% growth for the year. Our most improved market was Western Europe, which was up 28% for the year and now accounts for 31% of net sales. The balance of our markets were negative, resulting in a decline in sales from the rest of the world markets to 28% of total sales, down from 34%. In the fourth quarter, however, we saw a slight improvement in Latin America and the Middle East, which seems to point to a more stable market in those areas for 2015. Let me now turn it over to Kevin Bradley, who will go through the detailed financial results for the fourth quarter and full-year period.

The following information was filed by Terex Corp (TEX) on Friday, February 20, 2015 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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