Good morning. My name is Kelly, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Q2 2018 Terex Corporation Earnings Conference Call. Thank you. I would now like to turn the call over to Brian Henry, Senior Vice President, Business Development and Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for today's second quarter 2018 financial results conference call. Participating on today's call are John Garrison, President 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. Last evening, we released our second quarter 2018 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 is also available on our website. All per 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 & Presentations in the Investor Relations section. Let me direct your attention to slide 2, 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 3 and I'll turn it over to John Garrison.

Good morning, everyone, and thank you for joining us and for your interest in Terex. We delivered very strong results in the second quarter. Our global team executed well and continued the trend of improving overall performance. We increased sales and backlog in all three segments. We improved our operating margin in AWP, MP, and Terex overall, and we delivered significant improvement in our second quarter earnings per share. AWP had an excellent quarter. The team continues to execute well and has done a great job increasing production to meet strong, broad based, global demand. Consistent with our expectation, cranes sales and backlog grew in the quarter. We reduced the operating loss compared to last quarter; however, challenges in our supply chain execution continued to impact our results. MP consistently executes very well, recording margin improvement for the seventh consecutive quarter. We also continued to execute our disciplined capital allocation strategy, generating free cash flow of approximately $66 million, and repurchasing approximately 3 million shares of Terex stock for $116 million. Overall, a strong quarter that positions us very well going into the second half of the year. Turning to slide 4, we have entered a period of broad based growth. Every day, our 12,000 team members around the world focus on meeting the growing needs of our customers by implementing our Execute to Win strategy. Overall, the team is doing a great job improving and increasing production in a safe and efficient manner. We're also planning for the future. A key element of Execute to Win is completing annual comprehensive strategy reviews. In the second quarter, the executive leadership team travelled to each segment, where we spent two days reviewing detailed five-year plans that covered all aspects of market dynamics, product development, customer service, operations, and capital expenditure plan.…

Thanks, John. I will spend a few minutes reviewing our Q2 financial results before providing more details on our full-year guidance. Overall, our financial performance in the second quarter was very strong. AWP increased sales by $158 million or 27% compared to last year, driven by growth in North America, Europe and China. AWP leveraged the higher volume to generate a 13.5% operating margin, which was 320 basis points higher than last year, representing an incremental margin of 26%. Bookings were down 13% in the quarter as the market digested the preceding six-month 34% increase in orders. Backlog grew, increasing by $54 million or 11% compared to last year, setting up a very strong second half. Moving to Cranes, consistent with the guidance we provided during our Q1 earnings call, issues in our mobile crane operations, principally related to the supply chain, led to an operating loss in our Cranes segment. As anticipated, this loss was lower than in Q1 and we expect to see continuing improvement over the second half of the year. Materials Processing continues to deliver strong financial performance. Sales grew by 14% to $319 million, driven by global demand for crushing and screening products and material handlers. The MP team increased year-over-year operating profit by 19%, representing a margin expansion of 60 basis points. This was an impressive accomplishment given the headwinds this segment faced from the stronger British pound and higher material costs. Backlog grew 75% over the prior year, reflecting strong market momentum. MP is positioned to have a strong second half. Turning to slide 8, consolidated sales were up 19% or approximately 15% on a constant currency basis. We generated over 40% more operating profit than last year and improved our operating margin by 130 basis points. Net interest expense rose by approximately…

Thank you, John. I will review the dynamics in each of our segment starting with AWP. As expected, the global market for Aerial Work Platforms remains strong. AWP team has done an excellent job, significantly increasing production to meet growing demand in every region. Our global operations are managing the challenges of higher production rate, including material and labor continuity. We're seeing the benefits of higher productivity in our incremental margins. Detailed market analysis continues to indicate that we have multiple years of growth ahead of us, driven by underlying market growth, replacement demand and increased adoption in Europe and developing markets. Genie innovation was on display recently when the team unveiled a prototype of the Lift Guard Contact Alarm system for scissor lifts. This safety innovation was previewed as part of the OSHA National Safety Stand-Down week in May, and also demonstrated at events in the UK and Australia. This is a great example of supporting our customers' commitment to improving workplace safety. In summary for AWP, we have a proven ability to meet the needs of our customers to scale production according to market demand and we have an experienced and passionate team that executes at a high level. We're excited about the prospects for AWP for the balance of 2018 and beyond. Turning to Cranes, our Cranes team is making progress. The mobile cranes team is focused on overcoming their material supply challenges. We are improving our materials management capabilities and better aligning production schedules with detailed commitment from our suppliers. We're beginning to see better production rates and improving productivity. The global crane markets are generally stable with growth in certain areas. Currently, oil prices are stimulating modest demand increases in North America and the Middle East. The global market for crawler cranes remains soft. Sales…

Thanks, John. As a reminder, during the question-and-answer session, we ask you to limit your questions to one and a follow-up to ensure we have time to get to everyone. With that, I'd like to open it up for questions. Operator?

Certainly. Your first question comes from the line of Jamie Cook from Credit Suisse. Please go ahead. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Hi. Good morning. Two questions.

Good morning, Jamie. Jamie L. Cook - Credit Suisse Securities (USA) LLC: One, on the crane side. Is there any way you could quantify how much the supply challenges weighed down on results and sort of what's implied in the back half and your confidence level we get through this? Second, on the orders, while the backlog was strong, the orders were down year-over-year. So, just any color on that and how orders are trending post the second quarter. And then my last question is on the guidance. I understand earnings in the back half should be about 50% of the total year. There have been times where Terex's earnings in the back half is much greater than 50%, as much as 60% and I'm trying to think about why that wouldn't be the case this year with strategic sourcing help, repo help, pricing actions, crane profitability. So, if you could just help me through the guide. Thanks.

Okay. Thanks, Jamie. I think there's obviously several questions there, so we'll try to pick them off in order and if we don't, please, jump back in. Starting on the cranes side, overall, the crane markets were stable. And as I indicated in my comments, we did see pockets of growth. We do have an intense focus on improving the continuity of the materials supply in mobile cranes. That is what is causing the disruption. We're starting to see progress in the second quarter. We'll continue to see progress in Q3 and into Q4. The reality of it is that elements of our supply base could not keep up with the ramp in the demand. And so, as a result, the shortages led to disruptions in our plants and in inefficiencies. We had the team member; they just could not work efficiently. So, as we move through the second quarter into the third quarter and into fourth quarter, that supply chain is going to improve. John, did you want to comment on the margins as it pertains to crane?

Sure. In terms of the margins, Jamie, what I would say is that the loss that we incurred in the second quarter which was lower than the loss in the first quarter was in line with the expectations that we had going into the quarter and the Cranes team is doing a good job of dealing with the supply chain issues that we've been incurring. We do expect an operating loss in Q3 in about the same range, maybe a little lower than we experienced in Q2, before returning to profitability in Q4. Now, I think your question was more so how much would cranes be earning. Jamie L. Cook - Credit Suisse Securities (USA) LLC: I'm trying to think about normalized margins on Cranes if you didn't have the supply chain.

Yeah. Understood, totally understood. And I would take you back to the guidance that we provided back in February for the Cranes business, for the Cranes segment for the full year was a positive 2% operating margin. And the negative results that we've been incurring year-to-date are solely the result of the supply chain issues in the mobile cranes segment. Absent those issues, we would be earning the 2%. So, that's how I would answer your question. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay. And then just the, sorry, seasonality, you know what I mean, just in terms of earnings in the back half imply 50%, but there have been times where it's been better than that. And you have a number of reasons why, you have strategic sourcing repo, like why the earnings in the back half could be greater than what you're implying?

I think the real key there, Jamie, is the fact that the Cranes business is losing money, has an operating loss in the third quarter, and is effectively breakeven in the second half of the year. When you look at the guidance change that we provided here today, moving from the $2.70 to $3 up to the $2.80 to $3, there are puts and takes there. Very importantly, AWP, we increased the guidance by $0.24 and for MP, we increased the guidance by $0.04. But unfortunately, as a result of lowering the Cranes guidance to negative 1% to 1.5%, that was a $0.17 reduction. So AWP and MP are more than – increasing guidance are more than offsetting the reduction in Cranes, and then there are some other puts and takes, whether it be corporate or interest and other with the FX loss that we incurred in the first half of the year and the share repurchases. So I would say that in terms of looking at first half versus second half of the year, Cranes only being breakeven is the difference that I would attribute the difference versus historical norms to. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay, that's helpful. Thank you. I'll get back in queue.

Thanks, Jamie.

Your next question comes from the line of Steven Fisher from UBS. Please go ahead.

Thanks. Good morning.

Good morning, Steven.

Good morning. I wonder if you guys can just talk about the factors driving the higher margin assumptions in AWP for the year. I think John Garrison, maybe you mentioned volume comment, but just curious how much was the Q2 strength versus price actually maybe being ahead of cost in the second half of the year versus just ongoing restructuring benefits?

Thanks, Steven. I'll start more broadly on the AWP markets and talk a little bit about bookings, and then, I'll ask John to specifically address the margin comment. As I said in my comments, we believe that the overall AWP market demand is strong. We saw the sales increase of 27% and backlog being up. We had the highest Q2 backlog that we've had in six years. With that said, we believe we've got multiple years of growth ahead of us in North America, Europe and Asia. When we talk to our customers, if you look at North America, we've seen sales and backlog increase. That demand is really being driven by the rental companies across the spectrum of rental companies that are seeing improving utilization and improving rates, while being disciplined in their CapEx, strong underlying fundamentals I think we're all seeing in the U.S. The other thing that's positive for us that we think is a strength is used equipment values. Used equipment values have remained strong. And finally, as we look going forward, the replacement cycle really hasn't kicked in yet, so we've got to replace – the positive benefits of the replacement cycle before us. So we think those are driving demands in North America, and we've also seen a similar thing in Europe where we're seeing strong demand really driven by underlying economic activity, the replacement cycle and increased adoption. And then, the final region for us that's becoming more important as we go forward is really Asia Pacific and China, where we're seeing significant growth in China due to economic activity and adoption as well as Asia. So the overall markets, we believe, look quite strong. I know there was the question around bookings and in the book-to-bill ratio. As we look at that,…

Sure. In terms of the margins, what I would say is that Matt Fearon and the AWP team have been executing really well. When you look at their Q2 margins at 13.5%, they're up 300 basis points year-over-year. That's really being driven by manufacturing productivity that they've been – being able to generate on the higher volumes that they have been benefiting from this year. When I look at price cost, you had the question about price cost, I really break price down into two pieces. The price for the business – price cost for the underlying business this year is 1% to 2% positive, excluding the steel surcharge, and the steel surcharge is intended to and is offsetting the increase in the price of steel that we've seen since last October. So, overall, with a 13.5% operating margin in Q2 and incrementals of 25%, 26%, as I said, the AWP team is doing a great job. We also expect that our Execute to Win priority areas, whether it be Lifecycle Solution or our Strategic Sourcing are going to drive additional growth and margin improvement for the Genie business out over the next several years.

Great. That's very helpful. I wonder if you can now talk a little bit about some of the cash flow headwinds and tailwinds that you see beyond 2018, going into 2019. I'm just looking at your cash usage for buybacks versus the cash flow and just kind of wondering what level of buyback you can support on a go-forward basis.

Thanks, Steven. Actually cash flow, I'm really proud of what our team has been doing there. When you look at our working capital performance, this was the second quarter in a row where our net working capital as a percent of sales was below 20%. We were actually in the 18% range this quarter. We generated $66 million of free cash flow in the second quarter. That's about 150% higher than last year. We did maintain our free cash flow guidance at $100 million, which is equal to the original cash flow guidance that we provided back in February, double last year, and it also includes increasing our capital expenditures by $30 million versus our original guidance back in February. Our disciplined capital allocation strategy starts with maximizing free cash flow and then investing back in our business. And we've been doing that to drive growth in our business in the future, investing in capital expenditures, and that's a primary component of our disciplined capital allocation strategy. In terms of free cash flow and available for share repurchases, we will continue to invest in our – in capital expenditures I would say at the kind of levels that you're seeing here in 2018. And – but that will, as we grow our business, John said a few moments ago, we continue to see a multi-year period of growth in front of us. So as we continue to grow our operating earnings, grow our EBITDA, and to reduce the transformation expenditures, that will expand our free cash flow that will be available for investment in our business, and then also investment and return of capital to our shareholders.

Okay. So just to summarize that, it sounds like you're thinking higher cash flow next year and buybacks in line with the cash flow or still could be ahead of it next year?

You know, Steven, I would – look, what I would say is we have to maximize cash flow. And when we maximize cash flow, subject to market conditions, our disciplined capital allocation strategy says return capital to shareholders. I'm not going to, in this call, say how much we would buy back because it obviously will depend upon what our share price is and all of that. What we have to do first is drive cash flow. When we drive cash flow, we will have the capital available, subject to price of our shares and all to execute on our disciplined capital allocation strategy.

Terrific. Thanks, guys.

Thanks, Steven.

Your next question comes from the line of Ann Duignan from JPMorgan. Please go ahead.

Good morning, Ann.

Yeah. Good morning. If my memory serves me right, I don't think you've ever sized the opportunity associated with strategic sourcing. At least, you didn't up front. Could you talk about what the scope of the opportunity is for strategic sourcing as we move forward, because it is a very important part of the story? Should we take your COGS and take some percentage of COGS as the material spend and then take 10% or 15% of that as the opportunity? How should we think about it from a modeling perspective? Thank you.

Thanks, Ann, and you're absolutely correct. The strategic sourcing initiative is critical as part of our Execute to Win strategy. We are executing the process. As we said, we've moved through the process now where we're – with Wave 1. We're in the supplier award decision process and in final negotiations. The good news is the savings are in line with our expectation. From a timing standpoint, as we've said previously, it is taking us a little bit longer. More suppliers engaged in the process. And we're seeing that more parts are transitioning to suppliers, not necessarily new suppliers, but parts transitioning. So, the supplier transition process is going to take a little time. The good news is this is fairly substantial reduction in the number of suppliers that we're using. So, that's going to clearly help as we move forward. In terms of quantifying it, Ann, I think the best way I'd do that right now is if you look at where we are today, we're at about 7% operating margin, and in Investor Day, we said we're going to drive to 10% operating margin. Just kind of rough math today to get to that point, I'd say about half of that is we've got to drive the improvements in our Cranes business and drive the operating margin improvements in Crane business. The other half of that has to come from us executing our strategic sourcing initiative. So in terms of the quantification, that's the way I look at it. We're at 7%, we committed to 10%, that's where we've got to drive to. Half of it comes from driving improvement in Cranes, which we absolutely have to do. The other half comes from strategic sourcing and executing our strategic sourcing program. And Wave 1, we'll begin to see – as we've said, we're – this has been the investment phase. Modest savings are starting to show up in 2018. Clearly, they're going to show up in 2019, 2020 and beyond. And as I said, we kicked off Wave 2 in June here in Redmond, so we'll begin to see Wave 2 in the back half of 2019 and into 2020. That's how I'd quantify it at this point in time. As we get further into it, Ann, we may refine it, but I think that gives people a good – kind of a good understanding of what we've got to deliver to hit those commitments that we've made.

Okay. I guess I guess I'll get my computer out and figure out actual opportunity. And then secondly, just my follow-up question around Material Processing, I mean the 75% increase in backlog is significant. Can you just talk about what's in that backlog, what the duration of that backlog is, was there pent-up demand going into Hillhead? Just describe what's going on in that business so that, again, we can get our forecasts more accurate for 2019 for Material Processing? Thank you.

Thanks, Ann. Again, Material Processing, as we indicated in our comments, continued the trend of fantastic performance. In terms of the backlog, Ann, with the segment backlog being up 75%, really the growth is across all of the MP segments. The global crushing and screening market is up globally and that's at all regions of the globe. The material handling, the positive side of significantly higher steel prices has been scrap metal prices were up dramatically. So, we've seen a broad based growth in our material handling business across the globe. And then our new products in our new businesses that Kieran and the team have introduced over the last couple of years in the environmental space, in the conveyance space. So, really what we're seeing, Ann, is the portfolio of businesses with their strong global underlying economic fundamentals and strength, we're seeing growth. In terms of the backlog, Ann, most of that backlog, it's – our backlog, as we reported, is delivered in the next 12 months. But I would say in the case of MP, most of that will be this year and into early Q1 of next year. So, the team's executing well. They're having their challenges as we all are on production ramps, but they're doing a great job on that, dealing with that. So, we feel good about where we are in the MP business based on the backlog, the order flow rate going forward.

And what kind of incremental profits should we anticipate as we head into next year unless businesses' incrementals were down a little quarter-over-quarter this quarter?

Yeah. As it relates to the incremental margins from Materials Processing, we expect them to be at the 25% incremental margins that quite honestly we think about for all of our businesses when they're performing well. The Materials Processing team has been challenged especially in the first half of this year by the strong British pound and the comps year-over-year. So, I would think about a 25% incremental margin on the business. The MP team has demonstrated that they're a consistent performer and we expect their markets to hold strongly, their revenue to be up. And when it is, they will deliver that 25% incremental margin.

Okay, thank you. I'll get back in line. Appreciate it.

Thank you, Ann.

Your next question comes from the line of David Raso from Evercore ISI. Please go ahead.

Hi. Good morning. I was curious about your comment on July orders for Aerial. First, if you can maybe give us some sense of are we up year-over-year or down year-over-year in July orders relative to the June quarter or it was down? And also, are those orders, are they starting to be for 2019 at this stage, are they still filling in the back part of 2018?

Thanks, David. Again, we saw a nice bounce back, double-digit growth in year-over-year orders in July in our AWP segment. So we feel good about that. Most of the delivery is for this year. There may be some that extends into early next year, but most of the orders that we have are for our calendar year 2018 delivery. So again, there's a natural sequential fall off from Q1 to Q2 that we see historically. We saw that, and the team feels pretty good about what our pipeline looks like and executing on their pipeline.

And the price increases/surcharges for 2019, where are we in those negotiations and maybe some parameters you can give us around that?

Thanks, David. I think right now, it's too early to talk about parameters. Obviously, as manufacturers, we're dealing with steel, freight, labor. Our job is to offset as much of that as possible through our manufacturing productivity. So we have not made any final decisions yet on our 2019 pricing. The teams are obviously working on that now. As you know, we'll engage with our large rental companies in the back half of Q3 and into Q4 for the 2019 program agreements. So, we'll be engaged in those conversations at that time. So, right now, David, there's a lot going on. It's a dynamic environment. Clearly, we're looking at it, but we have not made any determination yet on 2019 pricing. But clearly, we are facing material, labor and freight headwinds that we're going to have to address.

And last question on the surcharges that you put in in March, obviously, it wasn't last quarter. Which quarter do you see a majority of the shipments in aerials going out with the surcharge? Is that not till 4Q, 3Q and obviously the implied incrementals for the back half of the year, you're still expecting strong margins. I'm just trying to understand the price dynamic relative to when the costs show up to give that kind of strong guide.

Thanks, David. So, we will begin seeing that in this quarter, in Q3 and through Q4. We did implement the surcharge as a result of the 232 tariffs. That surcharge has been in effect, as you indicated, since March. We did not re-price any backlog across any of the business. So we'll begin to see the surcharge take effect in Q3 and into Q4.

But, again, the majority of shipments will have the surcharge by fourth quarter?

Yeah, I would say, yeah.

I think the majority in third quarter.

Yeah, by the end of the third quarter, David.

Majority third?

Yeah, by the end of the third quarter and into fourth, for sure, yeah.

That's helpful. Okay. I appreciate it. Thank you for the time.

Thank you, David.

Your next question comes from the line of Joe O'Dea from Vertical Research. Please go ahead.

Hi. Good morning.

Good morning, Joe.

John, I wanted to go back to your comment when you talk about the 300 bps of margin expansion and kind of split between cranes and strategic sourcing. I think what you've talked about is $2.4 billion of sourcing that you're going after. So, that would imply something like 3 points of savings. And then the other side of it is that it looks like you're implying something like mid single-digit improvement in Cranes margin. So on one hand, the sourcing looks like it could be on the conservative side. The cranes looks like it could be on the aggressive side. So, maybe just kind of thoughts around that observation and line of sight to those crane margin improvements.

So, I'll break it down into two questions and then the two parts of the question. In terms of the strategic sourcing, yes, the overall spend was that. Wave 1, we said it in the range of about $800 million of spend, and it has taken, as we've been clear, it has taken us longer than we anticipated, but we do and we are now beginning to see the savings based on awards, right. And so, I think that that guide from 7% to 10%, 150 basis points that come through strategic sourcing is a reasonable guide given the current timing that we're seeing, Joe. In terms of the crane margins, again, on the crane side, we're committed to this turnaround program. We made good progress last year reducing with fixed costs and restructuring activities with three quarters of profitability. And we have to get our supply chain and supply chain execution up and running. And in doing that, as we introduce some of the new products as well, we're going to get significant improvement in manufacturing productivity, better overall product gross margins with our new products as we go forward. And those are going to help us drive that crane margin from where it is today, which is not acceptable to us as a management team. So, I would say that the execution on the cranes margin, as well as the strategic sourcing, now, and they are intertwined. Strategic sourcing is going to help drive some of the cranes margin as we go forward, as it will help with AWP and MP. So, that's how I'd answer it. Duffy, you want to comment any further on that?

No, I think that that's correct. I think that really, when John was talking about going from 7% to 10%, it's really about between now and 2020. The strategic sourcing initiative will have much greater benefit to us over the long run. But the fact that it's taken us longer to get to the realization of the savings has hampered how much will be in the 2020 target, achievement of the target.

And just to quantify from a timing standpoint, most of the agreements that we're entering into, new agreements that we're entering into with suppliers are of five-year duration. And so we're setting ourselves up for an extended duration of good performance on the supply chain side.

Got it. And then just thinking about the back half of the year, cranes margin and the improvement from 3Q to 4Q, are you still embedding some supply chain constraints in the 4Q margin? And really just trying to think about how that sets up as a carry forward into next year and how to kind of appropriately calibrate what the margin should be. I think the comments about 2% is where you'd be ex these issues. But I'm trying to think about some of the productivity you would have gained this year as well in the supply chain savings on strategic sourcing, what the right margin number is as we get through these supply chain issues and into 2019?

So I'll take that, Joe. In terms of, as you think about 2019 or as you think about Q4 and what that means for 2019, right, if we incur a loss in Q3, let's say, relatively in line with Q2 and we're going to be slightly profitable for this back half of the year, that means we have to be meaningfully profitable in the fourth quarter. We do expect that we will normalize our production schedule in the fourth quarter, that suppliers will be back on schedule. And that that profitability that we have in the fourth quarter will carry over into 2019 once we get the supply chain issues resolved here at the end of the third quarter, that the business will operate properly. And then the strategic sourcing initiative will contribute to 2019, as well as the strong order book that cranes has, the mobile cranes business has. Their all terrain – the Demag all terrain 5-axle crane new product introduction here in the second half of 2018 is sold out all the way into 2019, so we have a very strong order book that will also support us. And my last point was the cranes markets really haven't inflected yet. They've been at a stable, but low level. And therefore, we do see that 2019 will be another strong year for the cranes business at the top line. Our key is to drive that top line performance to the bottom line.

I appreciate the details. Thank you.

Your next question comes from the line of Seth Weber from RBC Capital Markets. Please go ahead.

Hey. Good morning.

Good morning, Seth.

I wanted to go back to the chart on slide 9, the earnings cadence chart and for the back half of the year. I mean, I appreciate the crane margins are getting better and MP has some seasonality. But to get 3Q EPS and 4Q EPS about equal, I mean, are you suggesting that AWP margins are pretty close 3Q and 4Q which would be I think unusual relative to kind of historical pattern? Is that how we should be thinking about it? Hello?

The AWP – yes, AWP – when I look at AWP for the second half of the year, we are assuming that the incremental margins are – remain in the 24%, 25% range and that the AWP margins will remain strong as a result of the high volumes that they're seeing and the improved productivity that Matt and the team have been generating. We don't provide quarterly guidance on the actual margins for each of the individual segments. So, I won't go farther other than to say, look, when you look at the incremental margins for AWP at 24%, 25%, when you look at the operating margins that we're projecting at 11% to 11.5% for the full year, Matt and the team are really performing well.

I'll just add that the key is really driving from an operating loss in Q3 to an operating profit in cranes in Q4. That's the delta, I would say, historically and kind of in line with normal patterns, if you will, on the AWP side.

Okay. I mean I think if you're in line with normal though, it sort of suggests 3Q's earnings should be better than 4Q, but maybe we could take it offline. And then maybe on the – just on the lower crane bookings, I mean I appreciate that AWP bookings had been strong in the last couple – several quarters, but the crane business is coming off of a very low level as you talked about. So, were you surprised that crane bookings were down year-over-year and do you have any kind of insight into what might have triggered that to flip negative here in the quarter?

Yeah. Thanks. In terms of the bookings – the backlogs up 31%, but the bookings were down in the quarter, not really – we were actually up slightly in mobiles and towers in North America. The big reduction that we saw really was in EMEA and that was really on the lower all terrain cranes. Again, the sales have been good, but the production commitments of those are now into 2019 and customers just don't really have – with the market not inflecting yet, they don't feel the strong need to put their orders in. And then the other area that I would say, as we've said in my comments, is the crawler, especially the large crawler crane market has been softer and we've seen softness in crawler cranes in Europe associated with the wind side as well. So I think those are the things that are driving it. And then as the market picks up, we're seeing some positive things down in Australia. I was down there in Q2 and they had the best month they've had since 2014. So there is some positives on the booking side and the headwinds are – all terrain cranes were basically build out into 2019, so customers don't feel that compelled now to put the orders in. So, that's how I'd look at the booking side.

Okay. That's very helpful. Thank you, guys.

Your next question comes from the line of Mike Shlisky from Seaport Global. Please go ahead.

Good morning, guys.

Good morning, Mike.

So – hi. So, I know that cranes and sourcing are half and half of the margin improvement through 2020, but you didn't mention much about parts initiatives. Can you help us quantify the impact of volumes in margins if Boris is successful in getting the parts business to improve? And is this all gravy on the 2020 goals or is it embedded in the one half or the other of your current outlook?

Thank you. On the lifecycle solutions side, perhaps gravy is not a perfect word, but it's close. We do not have a lot factored in in our 2020 analysis in terms of what we think we can do on the lifecycle side. So, bringing Boris in and the work that he's doing with the teams here in the first couple of months is really helping us to identify the opportunities. And it really is twofold. One is improving our performance, which is absolutely essential for our customers. We do a good job, but we need to do a great job as a capital goods manufacturer. And in doing that, that's going to help drive some revenue. It's going to help drive some margin. And really looking at that as a business and intensely focused on the lifecycle solutions as a business, we think is going to improve our performance. So we're excited about Boris joining the team. He's done an incredible amount in a short period of time and we do think that there's opportunity for us to improve our business with lifecycle solutions. And we did not factor – we factored some in, but we did not factor a great deal in – on lifecycle solutions in our 2020 outlook.

Okay, great. And then secondly, I wanted to ask, with the Brexit coming up and some of the political instability in the UK or some changes that are being made there, do you ever do anything differently in MP going forward, whether it's some inventory build or FX contract changes – if not that then, either in cranes or in Aerials, too?

We have not taken any definitive action as it pertains to inventory builds or have not changed our corporate policies on our FX and FX hedges that we have in place. Clearly, we're watching it quite closely. Our operations are principally in Northern Ireland and it's a great manufacturing location for us. We've got an incredible competitive advantage there. We believe that competitive advantage is going to continue post-Brexit. So right now, we're watching what's going on. We have not changed any corporate policies as a result of the ongoing Brexit negotiations.

Okay. Thank you very much. I'll leave it there.

Thank you.

This will be the final question. Your next question comes from the line of Courtney Yakavonis from Morgan Stanley. Please go ahead. Courtney Yakavonis - Morgan Stanley & Co. LLC: Hi. Thanks for fitting me in. Just heard from the new tariffs, I think you mentioned that you developed some plans to limit their impact, and it's going to just be minimal impact on 2018. But can you just give us some color on that, how much of your COGS are actually being impacted and how much of it is just from changing suppliers, et cetera?

Thanks. Thanks, Courtney. We are being very aggressive in taking action to limit the impact of the 301 tariffs. And first, let me say, our cranes and MP business are not significantly impacted by the tariffs because most of their manufacturing is outside of the United States. So clearly, the greater impact is on our AWP business. But the global nature of the business really allows us to mitigate large portions of the tariffs by adjusting our trade flows, shifting our production and taking available use of offsets. So on our import/export strategy, we export significantly more from the U.S., the non-NAFTA countries, and we import from China. And so we believe we're going to be able to utilize the duty drawback mechanism to help offset that. We're working with our suppliers as we speak. This has also been factored into our strategic sourcing analysis which is taking – also adding to the time element, working with the suppliers to mitigate the impact. And then finally, Matt does have not unlimited capability, but he does have capability on certain models to move production from one location to the other. So, we could move a model that's being currently produced in China and imported into the United States and build that unit here in the United States. So, it is an issue, but right now, we're working aggressively to mitigate the actions and the impact on our margins and the potential impact of any pricing that we'd have to put, so we don't adversely impact our customers. So, it's a dynamic environment. As you know, there was a talk today of increasing it. So, it's fluid, but we think we've got an aggressive plan to mitigate it to the maximum extent possible. And based on what we know now, we've factored in what we know into this year's guidance. As we get into 2019 and beyond, that could change. But those were the steps we're taking to deal with the 301 tariffs. Courtney Yakavonis - Morgan Stanley & Co. LLC: Okay, great. That's very helpful. And then just back on the comment about July orders seeing double-digit growth in AWP, just curious I think you guys have mentioned that I think you should see more independents show up in the back half of the year for orders. Was that them showing up or have you seen the national guys after the orders that they placed in the first half kind of showing up in July?

I don't have a specific mix right now. Overall, we haven't seen any major historical shifts in terms of the makeup of our backlog in order mix, but I don't have the specific breakout yet. I'll get that here for a while. Courtney Yakavonis - Morgan Stanley & Co. LLC: Okay. Understood. Thanks, guys.

Thank you.

And I will now turn the call back over to Mr. Garrison for closing remarks.

Again, thank you for your interest and your time in Terex. If you have any additional questions, please do not hesitate to follow-up with Brian. Thank you.

This concludes today's conference call. You may now disconnect.