Good morning. Welcome to Terex Corporation's Second Quarter 2020 Results Conference Call. [Operator Instructions]. I will now turn the conference over to your host, Randy Wilson, Director of Investor Relations for Terex Corporation. Thank you. Mr. Wilson, you may begin.

Good morning, and welcome to the Terex Second Quarter 2020 Earnings Conference Call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. I'm joined by John Garrison, Chairman and Chief Executive Officer; and John Duffy Sheehan, Senior Vice President and Chief Financial Officer. Their prepared remarks will be followed by Q&A. Please turn to Slide 2 of the presentation, which reflects our safe harbor statement. Today's conference call contains forward-looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. In addition, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in the conference call materials. Please turn to Slide 3, and I'll turn it over to John Garrison.

Good morning. Thank you for joining us and for your interest in Terex. Safety is and will remain the top priority of the company. Globally, very few of our team members have tested positive for the COVID-19 virus. This reflects our Zero Harm safety culture of Think Safe, Work Safe, Home Safe. The vigilance of our team members, both inside and outside of work, and the rigorous COVID-19 safety protocols we implemented early on have made a real difference and have helped us to avoid any significant impact to our operations. We will keep our guard up as we remain focused on protecting the health and safety of our team members, their families and communities. Turning to Slide 4. After suspending production in most of our facilities around the world in March, we resumed manufacturing in all of our plants globally beginning in late April and increasing in May and June. This resumption was accomplished with a rigorous focus on safety protocols and production that has been calibrated to meet customer demand. Our teams are continuing to work closely with our customers to understand their demand, proactively manage their production operations, closely partner with suppliers to control the incoming supply of materials and maintaining supply chain continuity and utilize available government furlough programs. These and other actions have enabled us to tightly manage our variable manufacturing expenses, which make up over 80% of our cost of goods sold and dramatically reduce our cost base. In addition to rigorous cost control, we have remained focused on having ample liquidity to operate the business. As of June 30, we had approximately $1 billion of available liquidity. We may not be able to control the macroeconomic factors that drive the demand of our products. But we are aggressively executing on the levers that…

Thanks, John. Turning to Slide 7. Let me begin by reviewing our Q2 financial results. I would call your attention to our financial reporting structure. As you will notice, consistent with Q1, we did not report adjusted Q2 2020 financial results. Instead, we are identifying the specific financial impacts from COVID-19 and certain other amounts affecting our Q2 reported results. We continue to provide information that will help the investment community more easily compare our year-over-year results going forward. Looking at our second quarter financial results. Revenue of $690 million was down 47% year-over-year. As discussed during our last earnings call, we were operationally planning for a challenging quarter. That said, throughout the quarter, we did see the markets in which we operate stabilize and begin to recover. For the quarter, we recorded an operating profit of $7 million compared to adjusted operating profit of $132 million in the second quarter last year. The lower operating profit resulted from revenues being only approximately half of Q2 2019, combined with significant unabsorbed manufacturing costs. These costs were due to the combination of fixed costs associated with plant closures and production levels below customer demand to reduce finished goods inventories, principally within AWP. As John discussed a few minutes ago, with the onset of the pandemic, we took aggressive steps in April to reduce our overall cost structure to align with the current level of customer demand. While lower revenues impacted our gross margin and increased SG&A as a percent to sales, our aggressive cost-reduction actions allowed Terex to achieve an approximately 20% decremental operating margin for Q2, more favorable than our targeted 25% decremental margin. This decremental margin was achieved despite $22 million of gross profit charges, primarily associated with fixed costs at our manufacturing facilities for the periods they were…

Thanks, Duffy. And turning to Slide 11. First, let me take a moment to acknowledge Matt Fearon, who is leaving the company after 25 years of service. Matt is a dynamic leader who has helped Genie grow from a regional brand to a global powerhouse in the Aerial Work Platform industry. As announced, I have assumed responsibility as President of AWP for the foreseeable future. I'm excited to work even more closely with the Genie and Utilities teams to improve profitability and growth. AWP's future success will be driven by investing in new technology and industry leading products, investing in world-class manufacturing at Watertown and Changzhou and rigorously following our Zero Harm safety culture. We like our global position, global brands and long-term prospects, and we are investing to enable future growth. But investment can only happen when you execute, which the AWP team demonstrated by safely ramping up production and driving sequential and year-over-year revenue growth in China, proactively and swiftly taking significant SG&A reductions in response to lower demand and aggressively managing working capital by delivering strong inventory performance. It is a competitive industry. So we must be laser-focused on controlling what we can control: superior execution and aggressively reducing costs to improve margins and win in the global marketplace. Turning to Slide 12. Materials Processing demonstrated again this quarter that it continues to win in the marketplace. As MP continues to grow by finding product adjacencies and new geographies for its leading products and brands, all while demonstrating strong operational execution. The MP team has integrated the Cranes business into its portfolio of specialty businesses. As an example, our Australian-based Franna business is growing globally. Pictured here is a Franna crane being delivered in Mongolia, an excellent example of how the MP team continues to find new…

[Operator Instructions]. With that, I'd like to open it up for questions.

[Operator Instructions]. Our first question comes from the line of Mig Dobre with Baird.

My first question is really sort of a clarification on the disclosure you have on Slide 7. I'm curious to learn more about the $22 million of fixed manufacturing charges. Is this -- are you essentially adjusting the footprint and that's what that refers to? Or is there something else going on there that we need to be aware of?

So I'll take that one, Mig. This is Duffy. And under U.S. GAAP, which is what are -- we're reporting U.S. GAAP results. We're not adjusting anything out of the reported results. So under U.S. GAAP, when our manufacturing facilities are closed and not producing, the fixed cost of shops, which a lot of them were in the -- especially during the month of April, beginning of May, U.S. GAAP doesn't permit you to capitalize those costs into inventory. So there was $22 million of fixed costs, which were charged directly to the income statement for the periods when those manufacturing facilities were closed. I hope that helps to explain.

It does. And then I guess my follow-up, I'm looking for you to put maybe a finer point on your cost savings. You talked about better than $100 million. But I'm curious as to how much of that was realized in the second quarter. What else is there still to come in Q3 and Q4? And is there maybe a view here in terms of what percentage of these costs could potentially reverse as we look beyond 2020?

Mig, this is John. I'll take the first part and then if Duffy can add, follow-up with any clarifications. We have been decisive, Mig, in adjusting our cost structure to the market demands that we had. And as we said, and we're using all available opportunities to do so, things like furloughs. Our great team members have had salary reductions, MIB type of reductions. So some of the reductions are "temporary." I will say the salary reductions in MIB are temporary, and those will be reinstated as we move forward into the '21 time period. Other of the cost reductions are permanent. We had reductions in force in our AWP businesses and our Utility businesses as well. So we are committed to exceeding, frankly, the $100 million that we laid out and as Duffy said in our outlook, our target, as a team, as an organization, is to drive to this 25% decremental margin level, and we will continue to adjust the cost structure of the organization, such that we can deliver on that target. That's the focus. That's the target of the team as we go through this down period.

Yes. The only thing I would add, Mig, is that, that aggressive cost reduction of taking the actions to reduce the cost structure really started at the beginning of Q2, end of March, very beginning of Q2. And that's what allowed us to achieve the better than 25% decremental margins in Q2. And they will -- and those savings will continue through Q3 and Q4, which, as John said a moment ago, allows us to have the confidence to be talking in our outlook about our commitment to the decremental margin targets.

Our next question comes from the line of Joe O'Dea with Vertical Research.

First, just if you would elaborate a little bit on back half revenue expectations at the segment level and whether we're looking at a narrower gap in trends between the 2 segments and MP that might be down high teens and AWP down sort of low 20s? Or is it a bit wider spread than that? So just trying to understand kind of what you're looking at for the different segment trends.

Duffy, if you could take a shot at that, and then I can perhaps talk a little bit on the market commentary.

Sure. So when you look at our second -- let me try to frame your question or my response to your question from what occurred in Q2 to what we see in the back half of the year, so -- right? So when you look at the second quarter, our AWP segment revenue, down 52%. The MP segment revenue, down very high 30s. So MP was not down as much as the AWP segment. I think that as we move into Q3 and Q4 for that matter, the trend that the MP segment will not be down as much as AWP will continue. And then number two, that neither segment will be down as much in the third or fourth quarters as they were in the second quarter, right? We're providing an outlook. I don't want to -- so I can't give you exact percentages here. Obviously, the world is highly variable and volatile at the moment. What I would just simply say is that as we went through the course of the second quarter, we saw a stabilization in the markets in which we operate. Orders increased, especially within the AWP segment -- excuse me, especially within the MP segment as we went through the course of the quarter, and that will allow the Q3, Q4 revenues -- Q3, Q4 revenue change, I want to be clear about that, Q3, Q4 revenue change year-over-year will be not as negative as it was in Q2.

And does the outlook for flattish embed that -- the $100 million of sort of cancellations delays you saw in AWP is fully recovered in the back half? Or only a portion of it? How are you thinking about that in a flattish back half?

Right. Joe -- yes, go ahead, Duffy. I'm sorry. Go ahead, Duffy.

I was just going to -- I would say we use the word most, and so the answer is that the outlook does contemplate that most of those orders are both rebooked and machines delivered in the back half of the year. John, you can expand, sorry.

Yes. And I think just to add on that, Joe, is, again, it's an outlook. But as we look at the market now in our AWP segment, we did see utilization improve as we went through the quarter, likewise in our MP segment around the world. So again, it's just an outlook. As we sit here today, that's our outlook. It's not a financial forecast, it's not financial guidance, but looking at the business as we're seeing everything here today, that's how we see the back half unfolding. And obviously, it could change, as we said, dramatically either way, depending how the COVID pandemic plays out. But as we sit here today, that's the outlook that we see.

And then last one on AWP inventory. A lot of sort of attention and effort on getting that to comfortable levels. Can you talk about where you are today, the degree to which you've got any more work in the back half of the year and your comfort level with exiting the year and allowing you to produce to retail?

I'll take that one, Joe. We've talked a lot over the course of time here about aligning our AWP inventories with the market demand. And we have been underproducing to retail demand for quite some time, and we continue to do that in the second quarter. Our production sales were down, but our production was down 66% in the quarter after being down 47% in Q1. As a result of that, we are seeing our inventories -- and the teams did a great job, we are seeing our inventories come in line. We saw a reduction in the inventory sequentially and year-over-year, which is helping to drive our cash flow performance. So this is one, Joe, and now that I'm there as part of the business, it will continue with the same degree of intensity. We're really close with the customers, understanding their demand day-by-day and adjusting our production schedules such that we're continuing to underproduce to retail demand. Yes, we do have finished goods inventory, but we're closely managing finished goods inventory by model, by category around the world to ensure that we're not overproducing to that retail demand. So we've had to take dramatic production reductions this year to get the inventory in line. And we will continue -- that is our strategy. We're not going to overproduce to retail demand, such that we end up in an adverse inventory position. And as we move through the year, Joe, it is important to understand, especially in the AWP business, and this is where we have to be close to our customers and understand what they're seeing, what we're seeing, is because the market will rebound and it can rebound sharply. So being on top of this consistently and constantly will be a focus area for us as a team as we go forward. And again, I'm pleased with the team's performance in terms of what they've been able to do to align our inventory with what our current outlook is for the segment.

Our next question comes from the line of David Raso with Evercore ISI.

John, now that you're even closer to the AWP business being out in Washington state at times, and obviously, it's under your watch, 100%. For the stock to really work, right, it's about AWP kind of having a real up cycle. And just given the last couple of years, the divergence between AWP margins versus your largest competitor, it's been really stark. So just given you've gotten even a little closer to the business, can you explain kind of the last couple of years, kind of what happened and diverged? Because you used to not be that different in the competitor on the margins. And what are you looking at to give us comfort that you could get the margins back to where your competitor, even where they are right now, even in a down market?

Thanks for that question, David. And let me start by saying, as I said in my opening remarks, I really am excited to be working closely with our AWP team, both our Genie team and our Utilities team. And I can do this because I've got a great team at corporate that can cover a lot of our corporate opportunities and workload. And we've got a great team at Genie and at Terex Utilities. We also created a new position in our Genie business, our AWP Aerials business with Simon Meester as the COO, again to give us the focus that we need. So we are going to be -- and the team and I will operate the business, David, with a laser focus on process efficiency and execution, so that we can significantly drive margin improvement. There's no doubt, David, our underproducing to retail demand for quite some time has contributed to a margin -- our margin challenges at AWP. So as we begin to bring that in line, that clearly will help. But we're going to be looking at every aspect of the business, reviewing all opportunities that we have to be more efficient in all aspects of the business, from SG&A to manufacturing and selling. And one thing that won't change, David, is the Genie team has an intense focus on customers and customer satisfaction. So we'll build on that as we go forward. But I and the Genie team understand that we have to address underlying cost issues and challenges in the business such that we can and we will deliver future margin performance improvement.

I appreciate the comments, but can you just help us a little bit more to understand? Because underproduction obviously hurts, but even your competitors had similar, say, sales declines this year, as you're seeing. And again, the margin spread is really wide. So I was just curious if you've seen something being even closer to it, that the expansion in the Chinese facilities is a big cost save coming versus other facilities in the past. Something glaring within the business that maybe we don't see in the disclosure when it comes to SG&A or whatever it may be, just because it's such a wide gap. I think it's a question people are going to have. How do I gain comfort in the margin improvement? Because clearly, if you go back to where you were on the margins, the operating leverage is huge. But is there something structural that you're seeing that you feel you can attack? Because we know the competition is getting harder this decade in aerials than we've probably ever seen over the roughly 25-year history of the product being of real full scale. So I'm just curious, if there's something you're seeing that can explain the big margin gap and why it can be gotten rid of.

Right. Again, David, that underproduction to retail demand and lowering inventories in a rapidly declining revenue environment is a big driver on the AWP margin. So that's obviously something -- as we move forward, we have to do a better job in making sure our sites align to it with retail and production demand because we've actually had to cut harder to bring inventories in line. So that is clearly a process that we will continue to focus on and drive improvement. But David, again, all I will say is we're going to look at every aspect. We understand aspects of the business. We like our footprint. As you mentioned, in places like China, it is a good footprint for us, not only for the growth in China, but it is an opportunity for us to export out of China to the Asia Pacific market and into Europe. We think that will give us a good cost advantage as we move forward in time. And no stone is going to go unturned, David, as we look at every aspect of the business. And it's not lost on the team that there's a margin differential, and it's not lost on us, that there's a margin differential between our margin performance and other participants in the industry. And we will work to close that gap.

Our next question comes from the line of Jerry Revich with Goldman Sachs.

John, I'm wondering if you could talk to us about what utilization levels you're seeing for your equipment in the field based on your customers' reports. It looks like they're running roughly 10% down year-over-year in terms of fleet on red. And I'm wondering, is it similar for your products? Can you just give us some context? And can you talk about the cadence that you've seen into July? Any areas, any let up in areas where we've seen the coronavirus pick back up?

Yes. Thanks, Jerry. And there's really two avenues of information we gain. One is being very close with our customers and trying to understand what our customers are seeing in terms of their utilization. The next aspect, and this is newer, we have now a little over 20,000 machines with telematics information. And the combination of our telematics, the information our customers are sharing with us through the telematics, is giving us better insights. And over time, we think it's going to help us when it comes to forecasting and things like that. So if I just go around the world quickly, Jerry, first and foremost, China. China was closed as we talked early in the first quarter, but we've seen the China market recover. Their utilizations have increased dramatically, and we've actually seen sequential and year-over-year sales growth in China. So China is absolutely on the road to recovery in the China market. In North America, what customers have told us and what the publicly traded companies have said is they saw utilization and our telematics data confirm that -- or I should say, our customers' telematics data confirm that the low point really was somewhere in that April time frame. I will say, Jerry, it did vary slightly by region within the United States, i.e., the East was slower to start back up when we saw the utilization. Other parts of the country increased. We have seen a significant decline in Texas, not surprised based on both COVID but also the oil and gas market area. So we did see a decline in utilization in Texas. So what's happened is it's increased over the quarter and it's stabilized. In most cases, Jerry, slightly less or lower than pre-COVID levels. I don't want to give you a percentage, but we could say it has not recovered fully to pre-COVID levels. And then I would say in Europe, Jerry, a similar story with what customers are saying and then also what the telematics data is indicating. Similar story, again, varied in timing based on when the COVID crisis hit. So Southern Europe hit earlier, utilization was down and then recovered. Northern Europe, where the COVID hit a little bit later, several weeks later, you saw that in the utilization data. So that's how we've seen the markets unfold. So the good news is, is we've seen utilization increase over the course of the second quarter. We have seen it stabilized over the course of the quarter. And it is below COVID levels, but in some cases, they're getting close to pre-COVID levels in certain markets like China, in other parts in the U.S. and a few markets in Europe as well. So it has improved is what we've seen. And that's what customers are telling us, and that's what our telematics data is showing as well.

And John, just to make sure we're on the same page. That pace of improvement, it sounds like, has continued into July. Is that correct?

I'm going to be careful, Jerry, not to go in-quarter commentary. So my comments were to the second quarter. So I'm going to leave it there, if that's okay, Jerry. I'm going to try to avoid an in-quarter commentary.

Okay. Fair enough. And then as we think about incremental margins in '21, obviously, really nice decremental margin performance this quarter. Anything we should keep in mind? Because things like no travel will obviously unwind or hopefully, I should say, will unwind. So any of the steps that are driving attractive decremental margins in 2Q that we should think about that potentially don't follow through into higher decrementals in '21? And hopefully, price cost will be a tailwind depending on how pricing sticks? But can you just talk to those points, please?

Yes. Duffy, could you comment on that real quick?

Sure, sure. I mean, I guess I would start, Jerry, by saying our primary focus quite obviously right now is about the second half of 2020. So with respect to 2021, first of all, I hope we're talking to you about incremental margins as opposed to decremental margins, because they -- with COVID-19, becomes hopefully in the rearview mirror that where the markets in which we operate are growing, and as such, our top line is growing. Obviously, time will tell with respect to that. I would say as it relates to the margins in 2021, we're going to continue to be vigilant on our cost structure and taking out costs to match with the demand -- commercial demand environment in which we're operating. We are fully committed to 25% incremental or decremental margins. And the other thing, I guess, that I would say investors should have on their radar screen is, obviously, incremental or decremental margins are a factor of the year-over-year change. The year-over-year change in revenue and the year-over-year change in operating income. And so with the low levels of operating income that we've been seeing here in 2020, at least in the first half of the year, as a result of the COVID-19, I'd say does portend well for incremental -- decremental margins in 2021.

Our next question comes from the line of Jamie Cook with Crédit Suisse.

So Duffy, just to -- and I apologize because I'm working through multiple earnings calls this morning. But to follow-up on Jerry's question. I mean, so the view on 2021, if the volumes came back and who knows, right? But just given your comps, your incrementals should be much better than the 25% that you guys target? That's my first question. My second question is, I know you're underproducing retail and aerials. What is the expectation when you start to produce in line? Is it the fourth quarter? Or is it 2021? And then -- or as we approach 2021? And then my last question, can you just give an update on sort of where we are in the strategic sourcing and the potential cost savings associated with that? Maybe it's not 2020, maybe it's 2021, but any color you could provide there?

That's a lot of questions there.

Yes, lots of questions. Jamie, let me -- I'll try to -- I guess -- go ahead, Duffy.

Why don't I just cover the first one surrounding the question on incremental, decremental margins in 2021. And only to say is that I understand the point you made, I think I was effectively making the same point, Jamie. Go ahead, John, sorry.

Yes. And as it pertains to production levels, Jamie, we're going to be laser-focused on ensuring we have the correct level of inventory as we felt that we had too much finished goods inventory. So we've been underproducing to retail demand to bring that inventory level in place. Again, where we end up at the end of this year, Jamie, is -- a lot of that is going to depend on what the forecast -- what we think about 2021. It's too early to call that as we are here right now. But again, the strategy of ours will be to show the same discipline that our customers are showing, which is not to overproduce. We're going to be disciplined about what we produce, so that we have a good price cost environment that we don't feel compelled to do anything on pricing, because we're sitting on incremental/excess inventory. So we're going to be very disciplined on our production schedules to match what's needed for retail demand, while recognizing that these markets do pick up and can pick up quickly. And so that's where we've got to be in close contact with our customers from a production level standpoint. But that strategy will not change. And Jamie, in terms of the strategic sourcing initiative, in my prepared remarks, I called out our sourcing teams. I think they've really done a great job in an incredibly challenging environment where we're asking suppliers to reduce the amount of products coming into our facilities, the raw and whip as our production levels have been cut, while also simultaneously ensuring that we have continuity of supply, with a significant amount of supply chain disruption around the world. And so the teams have done a great job with that. As it pertains to savings, Jamie, I will just say that the savings rates, the percentages that we're getting, are in line with what our expectations were. Obviously, with the volumes being down so dramatically, the actual dollar savings are not there, but the rate savings are. And so as volumes continue to pick up, we would anticipate that, that would be a tailwind for us as we go forward. In terms of implementing the strategic sourcing process in the COVID pandemic period, Jamie, the teams continued to move their sourcing activities. It has slowed in some cases, especially if we're in a position where we're thinking of changing a supplier, and we need to do on-site visits to check the quality systems, production systems, so on and so forth. So COVID has impacted the timing of the strategic sourcing initiatives. But even with that said, the team is continuing to progress it and where we can go with existing suppliers and vendors, we're making those types of awards as well. But we would anticipate it being a tailwind for us as we move forward into the future.

Our next question comes from Courtney Yakavonis with Morgan Stanley.

Maybe just first on cancellations, appreciate you gave us some color on utilization through the quarter. But I think last quarter, you kind of talked about taking a pretty heavy hand with the cancellations and the pushouts, yet it continued this quarter. So I was just curious, is that kind of something that was more at the early part of the quarter and has since stopped? Or did you see it kind of reaccelerate as we've seen some of the utilization trends maybe falter a bit in some of these areas where the outbreaks have been? Just any color you can kind of give us on how cancellations are trending.

Yes. I'll take that one. As it pertains to AWP that was earlier in the quarter, we have advanced purchase orders. And when customers weren't -- either had an issue with financing or timing of financing or we're not able to give a ship-to types of addresses, we decided to administrate and remove them. And we anticipate, as I said, that they will be booked back. So it was, accordingly, more earlier in the quarter in AWP. I can say, as we've tracked through the same quarter, we track it daily, the number of cancellations and delays decreased as we went through the quarter. In the case of MP, they scrubbed their backlog really hard at the end of the first quarter and really took out orders where dealers were not willing to say when and where the product needed to be shipped. And so they didn't have the same level of cancellation and/or delays in the backlog and order books with our MP team and again. So that was pretty consistent throughout the quarter. So that's how I'd quantify the changes in the backlog as we progress through the second quarter.

Okay. That's helpful. And then just within AWP as well, just on the Utilities business. I think you mentioned that it stabilized but still soft in certain customer segments. Any more color you can kind of give us there? Just quantify how much that market is down relative to aerials more broadly and just how you're thinking about that business in the second half of this year relative to the results.

Courtney, so overall, the Utilities business in this environment has been more stable than the aerials business. So its rate of sales decline was not at the overall segment level. So that's how I would -- I'd say it there. And really, there's kind of 3 principal customer segments in that group, and they're all exhibiting different dynamics. One customer segment that's been very steady is the investor-owned utilities, the major integrated utilities. Their CapEx plans have not changed. We did have some delays, Courtney, in deliveries because a lot of these are customized vehicles and the customers couldn't come because of travel restrictions and the like to accept their vehicles. But that part of the market remains -- I would say, remains buoyant. The market that we have seen some contraction is there's a specialty utility contractor market. And that has softened a little bit as most rental channels have as we progress through the pandemic, and we're looking to see that stabilize. And then finally, we have some specialty products in there like our tree care-type products. That's actually been buoyant as well because electrical utilities have to spend money on the maintenance side. And so we haven't really seen much of an impact there. So overall, yes, it's been impacted by COVID, but not nearly to the same level as our AWP, Genie side of the business.

Okay. And just any comment on the outlook for that business, given that you opened the new utilities facilities?

Yes. The team's in the process here in the late second quarter and into the third quarter of moving into the new facility. They're excited. We do still believe, Courtney, that this business will -- is a good growth business for us, given the dynamics of electrification, 5G requirements that are ongoing. And then we also have the opportunity, as China has picked up, with reserves manufacturing space in our Phase 3 Changzhou expansion for manufacturing of the utilities products. So the Utilities business within AWP is a strong business for us, and we anticipate it to continue to grow as we move forward.

Our last question is from Seth Weber with RBC Capital Markets.

Just squeaking in here under the wire. I appreciate it. I guess I wanted to go back to the $100 million cancel/pushout comment. Can you just talk to -- are you seeing distress among some of your smaller customer, rental customers, the independents or whatnot? And then I guess the follow-up is, if it's a financing issue for them, would you consider getting more aggressive with Terex Financial to step in and help them there?

Duffy, could you take the financing side of that one? And I'll follow up at the end.

Yes. I would say is that the financing were actually a fairly limited set of situation and that in general, I would say, our independent customers have been operating very successfully through the pandemic. We're not seeing a ton of financial stress. I think they have taken advantage of government programs where available to them. And there were a limited set of situations where as a result of the pandemic, the customers needed extra time to put the funding in place for their -- the orders that they wanted to make here in 2020. And so as a result, until such time as they had the funding in place, we took the order out of the backlog, and we have seen progress with that limited set of customers and expect that they will both have the financing that would place the order, and we will ship the equipment here in the second half of the year.

Okay. But you're not inclined to get more aggressive with Terex Financial then on your end? You're just -- you're leaving it up to the customer?

No. Look, I think we work very closely with our customers to provide financing where appropriate, recognizing that it's a combination of third-party funders as well as their own balance sheet. And I think we've been exercising an appropriate level of aggressiveness to support our customers through this pandemic.

Okay. And have you seen any uptick in bad debt or orders during the crisis?

No. I mean, we did have an individual situation that we handled in Q1, and we talked about that during our Q1 earnings call, but we've had no additional situations stressed that -- over the course of the pandemic.

There are no further questions at this time. I'll turn the call back over to Mr. John Garrison for closing comments.

First and foremost, thank you for your continued interest in Terex. Please stay healthy. I would encourage all of us to please continue to follow the COVID-19 protocols, so that you can keep yourself, your families and your community safe. If you have any further or additional questions, please do not hesitate to follow-up with Duffy and Randy. And operator, you can now disconnect the call. Have a great day.

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