Terex Corporation

Good morning. My name is Lisa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Terex Corporation's second quarter 2019 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. Please remember, if you are asking a question, to pick up your handset. If you would like to withdraw your question, press the pound key. Thank you. Brian Henry, Senior Vice President of Business Development and Investor Relations, you may begin your conference.

Good morning, everyone, and thank you for participating in today's second quarter 2019 Financial Results Conference Call. Participating on today's call are John Garrison, Chairman and Chief Executive Officer, and John Sheehan, Senior Vice President and Chief Financial Officer. Following the prepared remarks, we will conduct a question and answer session. We've released our second quarter 2019 results, a copy of which is available on Terex.com. Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call, and it's also available on our website. All adjusted for share amounts in the presentation are on a fully diluted basis. We will post a replay of this call on the Terex website under Events and Presentations in the Investor Relations section. Let me direct your attention to slide two, which is our forward-looking statement and description of non-GAAP financial measures. 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. With that, please turn to slide three, and I'll turn it over to John Garrison.

Good morning, and thank you for joining us and for your interest in TEREX. First, I want to thank our global team for their intense focus on creating a zero-harm safety culture. Delivering value for our customers and their commitment to implementing our strategy. Tariffs continue to grow in the second quarter. Global demand for our leading products and services remains stable, and we continue to meet the needs of our diverse customer base. MP continued its excellent operating performance, increasing sales and expanding operating margins again in the second quarter. They achieved strong growth across their global portfolio. AWP markets in North America have moderated slightly, but remain at healthy levels. In Europe, demand is being impacted by the overall economic environment, leading to cautious customer sentiment. We continue to see strong growth in the Asia-Pacific region, including China. As John will discuss in more depth, AWP operating margins in the quarter did not meet our expectations. Margins were impacted by the weak Euro, Our decision to lower production volume to better align global inventory levels with demand and product mix. I was extremely pleased with our free cash flow performance as we generated $168 million in the quarter, more than double last year's Q2 results. This strong cash generation performance reflects our global team's continuing focus on improving working capital efficiency. Our improving financial results with adjusted operating margins greater than 10% and adjusted EPS increasing 23% from what we presented in our Q2 earnings release in July 2018 demonstrates the financial improvements we are realizing by focusing our portfolio in implementing our strategy. Turning to slide four, we continue to implement our strategy to focus the portfolio on great businesses simplify the organization and enhance the capabilities needed to win in the marketplace. A foundational element of our Execute to Win business system is the annual business strategy reviews. Over the past several weeks, I've met with the leadership teams of each of our businesses for comprehensive multi-day reviews on their strategic plans. These reviews ensure our investment priorities are aligned with the growth potential in our global markets. In developed markets, We expect industrial and non-residential construction demand, including the need for infrastructure investment and the size and age of the fleet to drive medium and longer-term growth. Looking at the developing markets, we expect economic growth and adoption of more advanced mobile equipment to fuel growth over our planning horizon. We are making strategic investments in production capacity and product and service innovation to ensure we capitalize on broad-based growth potential. Turning to slide five. We continue to make progress implementing our strategy. The sale of DMAG mobile cranes is expected to close in the coming days. We'll execute our plans to ensure a smooth transition for our customers and team members to Todano. We remain committed to the rough terrain and tower crane product lines in North America and around the world. We've implemented a new sales and service organization in North America and are investing in our capabilities to support our customers into the future. We continue to simplify Terex. The transition to a more focused two-segment structure, combined with the significant progress we made improving processes, tools, and leadership talent in our priority areas, enabled us to refine our corporate operating model. Each functional area is implementing plans to continue to deliver essential services in an efficient and cost-effective manner that reduces operating expenses. Implementation will continue into the second half of 2019. We continue to execute the organic growth element of our disciplined capital allocation strategy by investing in innovative products and services and global manufacturing capability. The new utilities manufacturing facility in South Dakota remains on schedule and within budget. MP's capacity expansions in India and Northern Ireland also remain on track. These investments enable simplification, improved manufacturing productivity, and growth. We continue to invest in our Execute to Win priority areas. Our commercial organizations operate with more process discipline, enabled by investments in training and systems. Our lifecycle solution strategy is taking shape. We have a world-class leadership team in place, and we'll be making investments to dramatically increase our share in the growing markets for parts, services, and related opportunities. Finally, on strategic sourcing, Teams in each of our manufacturing facilities are implementing their Wave 1 savings. Wave 2 savings are starting to be realized as certain opportunities are being fast-tracked while other savings plans are being developed. Based upon AWP's lower production levels and spend forecast, we expect savings of approximately $30 million this year. Turning to slide six. Based on our first half performance and changes to the outlook in AWP for the balance of 2019, including lower than previously expected sales growth, reduced production volume, adverse foreign exchange, and product mix, we expect full-year EPS to be between $3.40 and $3.80 on net sales of approximately $4.6 billion. We continue to focus on working capital and improving cash flow and we are reaffirming our free cash flow guidance of approximately 165 million. With that, let me turn it over to John.