Manitex International Inc (MNTX) 2008 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Manitex International, Inc. third quarter 2008 financial results conference call. (OPERATOR INSTRUCTIONS.) This conference is being recorded, today, November 13th, 2008.

I would now like to turn the conference over to David Langevin, Chairman and CEO. Please go ahead.

Thank you, Marisa. Good afternoon, ladies and gentlemen, and thank you for your interest in Manitex International.

On the call with me today is Andrew Rooke, our President and Chief Operating Officer, and a replay will be available until November 20th, which can be accessed by dialing 1-800-406-7325 if calling within the United States, or 305-590-3030 if calling internationally. Please use pass code 3938698 to access the replay.

As we've stated in our release, these are very challenging markets. And with my participation in the crane industry from just after the 1981-82 recession, while you can never fully anticipate how these down markets will develop, I can state that we have the Management Team and the balance sheet to weather this storm, and we will have a recovery.

We also believe that we have the products which will be in demand as we proceed with an economic recovery. So please let me try to explain where our focus will be in the near future, and Andrew will summarize our most recent quarter and operating initiatives regarding cost reductions and cash generation.

Our immediate goals are to maintain profitability, but we expect that we will be running at reduced production levels which will dictate that we will be placing a heavy emphasis on working capital management.

We've been diligently reducing our debt for the last several years, which puts us in a good position from a financial standpoint for '09. However, since we expect reduced production in the near term we also must use our experience to make sure we harvest cash in that time period and use that cash to continue to improve our long-term viability.

The use of cash during the first nine months of this year has all gone on into our working capital, especially receivables and inventory. This will start to reverse in the fourth quarter, which would have occurred anyhow, regardless of the economy.

Now, we'd like to make a few comments regarding development and current operations. As many of you know about Manitex, we have developed products which are unique to the boom truck world, and that has allowed us to continue to grow in spite of the significant decrease in North American markets.

We will continue to roll those products out to markets around the world. We will also continue to expand our product offering with newer higher tonnage lifting capacities. These efforts will certainly be of great value to our shareholders as the market returns to normal levels.

Also, as stated in our release, our Material Handling Divisions had better results due to the steps we took in the second quarter to reduce our costs.

Finally, we are also very excited about the acquisitions we made just after the end of the third quarter. These additions add to our product portfolio and expand the scale of our growing parts business, which is very important for the near-term success of Manitex.

And, with that, let me please turn it over to Andrew, who will cover the results for the current quarter, along with some of our initiatives.

Thanks, David. And good afternoon and welcome, everyone. I'm going to go over the details of our third quarter and nine months ended September 2008 earnings release.

Before I begin, let me remind you that we'll be discussing expectations and future events and the performance of the Company on today's call, and that such expectations are subject to uncertainties related to macroeconomic factors, interest rates, government actions, and other factors. A full description of the factors that affect future expectations is included in the press release and our other public filings, and I encourage you to read them.

Our third quarter results and activity were essentially dominated by five key factors. Continued strong revenues for our crane product despite the continuation of a very depressed market, rapidly accelerating material costs, especially steel, restructuring costs from the acceleration of the streamlining of our material handling manufacturing, continuing strategic activities, such as market development in Russia and the completion of the acquisition of the assets of Crane and Machinery and Schaeff Forklift in early October. And, fifthly, coordinating an enterprise wide response to the credit crisis that engulfed the markets at the end of August and the beginning of September. As I go through the details of the financial results, I'll refer to each of the above in more detail.

Net sales for the quarter were $28.5 million compared to $26.6 million in the three months ended September 30th, 2007. The increase in net revenue is due to an increase in crane sales of $2.7 million, which is offset by a decrease of $0.8 million in the forklift/specialist carrier revenues.

Approximately 60% of the increasing crane revenues is attributed to an increase in chassis sales, with the remaining increase the result of an increase in both part sales and crane revenues excluding chassis.

We've seen market share increases in all tonnage sectors, however. And it is our higher tonnage units that have been particularly strong. This performance is driven by the continued strength of the oil, energy, and mining and infrastructure sectors, and the cross-over of our larger tonnage units into these -- into areas traditionally served by truck cranes, where for certain applications we can offer an improved return on investment for our customers.

To date, our customers have been North American based, but we are increasing our marketing presence and distribution efforts in international markets where these same sectors of oil, energy, and infrastructure have continued demand and are well suited for our products.

In September the Manitex 50-ton crane was the only North American manufactured crane on display at the CONEXPO Show in Moscow, and was very well received. We also expect to announce before the end of the year that our higher tonnage cranes have been certified, providing additional impetus to our international efforts.

Revenues for the forklift and specialist carrier product continued to show softness, driven by the continuing weakness of the North American economy. But this reduction was partly mitigated by revenue from the [four quarters'] contribution from the Noble product line.

Third quarter 2008 gross profit was $4.2 million or 14.7% gross margin compared to $5 million or 18.8% gross margin in the third quarter of 2007. This decline reflects a decrease in gross margin for our crane products, which was primarily due to higher material costs.

Additionally, the increase in sales of chassis, which is low margin, had the impact of decreasing overall gross margins by 0.5%. This was partially mitigated by improved gross margin for forklift/specialist carriers due to the recent restructuring activities and the adverse affect that the strengthening Canadian dollar had on 2007 margin percents.

Material cost increases continued to accelerate in the third quarter, with an adverse impact equivalent to approximately 5% of sales in crane products, driven by world steel prices and shortages of high-grade material.

Towards the end of the third quarter and continuing into quarter four headline steel prices have shown equally dramatic reductions, yet only limited reductions have been passed on by suppliers. In part, this is due to material working through the supply chain and continued restricted availability of certain steel grades.

We have implemented a three-stage action plan incorporating a sales price surcharge, increased negotiation with existing suppliers to obtain appropriate pricing, and allocating additional resources to accelerate the qualification of alternative lower cost suppliers.

Identification of low cost country sourcing has been an ongoing initiative, and we will have increased this to approximately 20% by the end of 2008 from the relatively low levels of 5% to 6% as we entered the year.

An increase in gross margin for the forklift specialists carrier product improved overall Company gross margin by approximately 1%. This improvement was generated by the elimination of startup costs associated with the integration of the Noble product line and the initial benefits from the streamlining and restructuring to align activity levels at our Manitex Liftking subsidiary that was implemented at the start of this quarter. Severance costs of $236,000 were incurred in connection with these actions.

Net income from continuing operations for the three months ended September the 30th, 2008 was $306,000 or $0.03 per diluted share, based on 10.3 million diluted weighted average shares outstanding, compared to 872,000 or $0.09 per diluted share based on 9.2 million diluted weighted average shares outstanding for the third quarter of 2007.

Net income was $306,000 or $0.03 per diluted share based on 10.3 million diluted weighted average shares outstanding, compared to 918,000 or $0.10 per diluted share based on 9.2 million diluted weighted average shares outstanding for the third quarter of 2007.

EBITDA for the three months ending September 30th, 2008 was $1.4 million compared to $2.4 million in the same quarter of last year. The reduction in EBITDA is primarily due to the lower gross margins caused by increasing material costs and from the restructuring expense in the quarter.

Moving on to the results for the nine months ended September the 30th, 2008, net revenues were $78.5 million compared to $79.7 million in the nine months ended September 30th, 2007. The decrease in revenues is primarily due to a decrease in the forklift specialty carrier product line revenues.

Crane revenues were ahead of the comparable period of last year by over 4%, with larger tonnage cranes ahead in the same period by 20%.

Net income from continuing operations for the nine months ended September 30th, 2008 was $1.5 million or $0.15 per diluted share, based on 10.3 million diluted weighted average shares outstanding, compared to $1.4 million or $0.17 per diluted share based on 8.7 million diluted weighted average shares outstanding in the prior year period.

Net income was $1.9 million or $0.19 per diluted share based on 10.3 million diluted weighted average shares outstanding, compared to net income at $230,000 or $0.03 per share for the prior year period.

I'd now like to comment on the Company's balance sheet and liquidity position. The Company completed the quarter ended September 30th, 2008 with $23.3 million in working capital, and the current ratio of 2.2 to 1. Working capital has increased principally due to receivables, some higher levels of sales, an inventory of raw material and finished goods, including chassis.

Total outstanding debt was $26.2 million at September 30th, 2008 compared to $25 million at December 31, 2007.

As David referenced in his opening comments, we've been focused on our debt and strengthening our credit position for some time. And in this period of uncertainty we have increased our focus on cash and working capital management.

Availability under our lines of credit at September the 30th, 2008 was $5.7 million. We have two debt covenants, the first at tangible net worth coverage that we exceed by over $9 million as of September 30th, and the debt service coverage ratio that we exceed by over 80%.

As we have for the first nine months of 2008 we would expect in the fourth quarter to continue to generate cash from operating activities. Additionally, with internal actions in place and an increased cash focus, we expect to reduce our investment in working capital.

To finish, I would like to add a comment regarding a couple of other strategic initiatives that we have completed. Firstly, at the beginning of the fourth quarter, we announced the acquisition of the assets of Crane and Machinery and Schaeff Lift Truck for $3.6 million. These acquisitions add scale to our operations, expand our product portfolio, and our parts business, and provide additional international experience in distribution. They're an excellent fit to our lifting equipment strategy, and we expect to be able to leverage these acquisitions as we go forward.

Secondly, with credit availability potentially impacting our customers, we have recently partnered with Wells Fargo to provide equipment financing to dealers who qualify and who wish to take advantage of it for Manitex International Equipment. Through such strong financial partnerships, we believe we can assist our customers through this period of uncertainty.

With that, I'd now like to hand back to David.

Thank you, Andrew. Marisa, would you please open this up for questions?

(OPERATOR INSTRUCTIONS.)

Our first question comes from the line of Ned Borland. Please go ahead.

Good afternoon, guys.

Hi, Ned. Good afternoon.

I -- let's see, the $100 million to $110 million that you talk about for the full year, does that make any assumption for the acquisitions in there, because it looks to be the same as what you gave out last quarter?

Yes, it is the same as what we gave out last quarter. And based upon the backlog that we have and the production levels we expect to get into that area, I think we probably will, we'll be in that area regardless of the acquisition, but certainly the acquisition will help. So that would probably keep us from the mid level to the higher end of the level with the acquisition. So to answer your question, yes, we also have the acquisition numbers in there, as well.

Okay. And then on the heavy tonnage crane market, you've benefited quite a bit from energy customers. Oil has come down. I'm just wondering what your thoughts are on the outlook with those customers going forward?

Well, I think, you know, as -- you're right. I mean obviously everybody knows the energy prices and the energy has come down, but there still seems to be at least from our order book and from inquiries still good demand in that area. Will it be as high as what it's been over the last nine months? Probably not, but in the near term it looks like those areas will certainly continue to help us.

And I just had a ...

Go ahead, Andrew, I'm sorry.

... yes, I just had a comment there, as well. Some of the talk in the market with oil, and investment thresholds of around sort of $50 a barrel is still something that it appears that the oil producers are looking at. So, you know, we haven't reached those levels quite yet, so I think that's still a reasonable sort of position for us, as well.

Okay. And then last quarter you said that next year international sales would represent about 10% of your sales in 2009. I was just wondering given the international exposure of the acquisitions and the success of the Russian Trade Show if any change to that figure?

Well, since we last spoke to the group the first week of August, there's been a lots of change to above the domestic and international basis. And I tried to give a low number that wouldn't -- I certainly didn't anticipate what has occurred in the market, so I can't say I had that foresight to do that. But I certainly wanted to give a number that I didn't think was too extreme and one that would be just kind of showing some promise for our international basis.

I don't have any reason to believe that that still doesn't apply, but that clearly it's very hard to predict. You know, what you read about Russia is a lot of issues that they have, and since we've last spoke to the entire group. So in answer to your question, yes, but with a caveat that assuming we have some normalcy in the markets.

Okay. Great. Thanks.

Sure.

Okay. Thank you. Our next question comes from the line of Rick Hoss with Ross Capital Partners. Please go ahead.

Hey, Rick. Rick are you there?

Yes, can you hear me?

Okay. Sorry. Yes, I've got you fine. Thanks.

Okay. Sorry. Kind of in the same vein as Ned, my concerns around Russia as an emerging market, three, four, five months ago a great opportunity, and now it sounds like things are falling apart. Their energy market is getting very weak. Canadian oil sands, Andrew said 50 bucks a barrel, if that's the -- if that's what producers are expecting these projects to at.

I was hoping you could provide more of a description on who your customers have been in the last few months? What sort of end markets do they support? And then if you could just explain geographically where they're coming from, as well? If it's all U.S. or if it's North America or what you're seeing?

We haven't really -- in the last few months we haven't seen any significant change from our end markets, but realizing that we had at the end of the last quarter a very significant backlog that we were going into the third quarter with. And, as we have said in the -- in our release, we have a $39 million backlog at the end of the third quarter.

So we haven't seen much change, but clearly as you well know and as everyone knows, there has been a significant disruption in the worldwide markets since we last spoke the first week of August.

So I don't -- I mean that's why I'm trying to give the impression that we will adjust and that we will continue to strive and work for profitability in the markets in which we serve, which generally are pretty good markets.

And we also believe, as we said in our prepared remarks, that our products do fit very well for whatever type of recovery and stimulus that is generated around the world because, as we've already seen, there's a number of different ideas being thrown around. And I think that the administrations around the world will have to implement stimulus, and we should be -- our products should be in the forefront of whatever stimulus packages are passed.

Right. I agree with you there, I think that there's been discussion of infrastructure type pact, you know, centered around infrastructure improvements, that sort of thing.

On that backlog of $39 million, what's the timing on the recognition of that, six months?

Well, it's spread over the next nine months. What happens is customers will order and then depending on when they want to have those equipments delivered, they give us certain time periods in which they want to have that delivered. So you have three to six months is the bulk of it, and then some going out into second quarter of next year.

Okay. And then I may have missed it in the release, but I didn't see anything about the military orders. Have those come in?

No, they have not, and I've purposefully have been trying to -- where I can't give something of some solidity to my statements, I've been trying not to emphasize that. In the past I've, you know, we were receiving reports from our Management that it was imminent, and so far we have not received those orders.

Okay.

Nothing has changed. Nothing has changed as far as the information that we've received, but we still do not have the orders so I didn't want to stress it in any of our releases.

Okay. And then the outlook, the last question I promise -- the outlook for gross margin in the near term, we were pretty low this quarter. Talk about the -- not being able to benefit from a recent decrease in raw material prices. How do we look at gross margins going forward in the near term?

Well, I think as has been the same for our other competitors in our industry, there obviously has been a significant increase in material costs that has been prevalent throughout all the reporting companies. And certainly we're no exception, and it was fairly rapid and surprising as to the size of some of these increases.

And, as Andrew stated, we are working diligently to cut into those increases and where we can find alternative sources, and we also expect as we all know that it's kind of a two-edged sword. There'll be less demand for these materials around the world, so those prices should start to reduce, and that should flow-through to our cost of goods sold and our materials.

But at this point, as we stated in our release, because of the fact that a lot of the inventory that was sitting in customers' shops are still at high prices, that to the extent that we are taking material from them, that material is coming through still at higher prices. But I do expect, we do believe that margins will start to improve as steel prices and other material costs come down.

Okay. So maybe a three-month lag to decreases in prices then?

Well, I'm hopeful that we have some in the fourth quarter, but again to the extent of it, is the degree of it is what we're trying to determine, but the -- certainly, in the near future, as we stated in our release, we expect those prices to start to improve from our vendors.

Okay. Thank you.

Thank you.

Thank you. Our next question comes from the line of [Dimitri Kernazowski] with [First World Fire Securities]. Please go ahead.

Hi, David.

Hi, Dimitri. Hello, again.

And how are you?

Fine, thank you. Dimitri, go ahead.

Yes, just on the backlog, how does that number compare to the previous quarters?

Well, we had $45 million at the end of the year, the end of December. And we reported in the second quarter that we are up, and I'm going from memory now, but as I recall, something like 16% -- does that sound right, Andrew?

Yes, that's right. That's right.

And so we didn't give an exact number but we said we were up over the end of the year, but we thought it would be better for informational purposes to give the actual number for the third quarter, so we indicated it was 39 compared to, as I said the last time we gave a number was the end of the year and it was 45.

Okay. And what's the composition of the backlog?

It's principally cranes, so it's not -- we don't have, we don't run generally a large backlog in our Material Handling Division, so it's principally, the majority of it is cranes.

And is that mostly the high tonnage cranes, or all over the place?

I would say mostly high tonnage cranes, yes. Is that your belief, as well, Andrew?

Yes, mid to the higher tonnage, not so much in the lower tonnage cranes, absolutely right.

Yes, we haven't had that much demand for low tonnage cranes this year, so the bulk of it will be in the, as Andrew said, the mid to high tonnage cranes.

Sure, sure. And how would this sort of change in product mix, what impact would it have on your margin?

Well, I mean theoretically we -- as we've stated all along, which is obvious, that it's to and everybody in our business has the higher tonnage, the higher engineering, the higher complications of the lifting capacity of the crane, it's better margin.

Right.

But having said that, we also, as we also state, we still have some high material costs coming through the cost of goods sold, so we have to balance that out.

And do you guys have any visibility into next year?

We don't -- I would say with the -- until we see how the worldwide economies are going to stack up, and obviously our biggest place of business is North America, so until we see some improvement in the North American market the visibility that we have is the backlog that we're running.

Right, right. And I think you guys mentioned in your press release that there is some substitution going on in which you are benefiting from, you know, with a truck crane being substituted by your--?

Yes, of course. Dimitri, I think we've talked about this in the past, and it's -- I'm glad you brought it up, it's a very important part and one that really helps us have confidence as we go forward is our products and certain applications, as Andrew has stated in his prepared remarks, have lower cost applications for companies that generally in the past would use a truck crane.

And if you recall from the slides that we filed with the SEC and that we put on our website, a comparable 50-ton boom truck, which is what we sell, is significantly less than a comparable 50-ton truck crane or [alter in] crane. Sometimes substantially, so we're moving into markets which as we've stated several times is markets that have never been in before in the boom truck market.

So as we continue to explore and expand those, the acceptance of these products into those markets, we hope that as we've done all this year, because this year has been a very bad, down year for boom trucks, we can continue to expand sales and expand market share in a very depressed market. Because as I've said in the release and in my comments, the market this year has not seen these kind of levels in North America since 1992.

Okay. Thank you. Our next question comes from the line of [David Glass] with [Glass Capital]. Please go ahead.

Hi, good afternoon.

Hey, David.

I wanted to ask you a quick question on the shareholder base and the current stock price. I think it's pretty well documented at this point that certain of the large shareholders of the Company are either in liquidation or liquidating their positions in the Company. Can you discuss how you're dealing with shareholder issues in light of what I just mentioned? And I'd also love to hear you address your current stock price, if you're willing to go there?

Sorry, it's not funny. I mean it's just that everyone on the call knows I have I'm sure as much invested of anybody on the call, and we've -- and, as David said, we do have several large funds. But generally I would say I don't really know, there's a lot of factors that are completely external to the business operations and our strategy and our plans and our optimism of our business and the stock price.

It's just it's a very, it's been a very difficult month-and-a-half to try to evaluate what's happening with our stock, because of margin calls and redemptions and all those other factors, which we as Management just have no control over.

So I can't say that I've -- I certainly have not ignored the stock price, that's certainly not the case, because we spend time trying to figure out what the right strategy is. But it's not something that I can totally control.

Okay. Thank you.

Thank you, David.

Okay. Thank you. Our next question comes from the line of Philip Anderson with Pinnacle Funds. Please go ahead.

Hi, David.

Hey, Phillip. Hey, Phil, how is it going?

Okay. Thanks. Interesting times we live in.

Yes, speaking of stock prices. Sorry, Phil, go ahead.

That's okay. Listen, on page 3 you mentioned that you intend to bring down your working capital levels.

Right.

And I noted that between inventory and receivables they consume $3.5 million of cash in the quarter.

Right.

And that you mentioned this 23.4% figure, what is your -- I would expect given the current worldwide economic environment that working capital would begin to generate cash rather than consume cash, that you can collect more receivables than are created and begin to work down your inventory. Is that your expectation?

Yes, I think obviously what we have to do and, again, because of our Management Team's experience, I mean we are carefully, carefully monitoring cash that's coming in from the collection of our receivables, making sure that the purchases that we make are -- because we have to adjust reproduction schedules as you kind of smooth out your backlog, and you make sure that the purchases that you're making, which is what goes into inventory, are not purchases that are based upon production levels that may be obsolete.

So you're really trying to wind, not wind down but reduce your inventory as your receivables come in, and then, therefore, reduce your leverage, so that you have plenty of availability under our revolver, which is a good solid strong revolver with availability that goes up and down but right now it'll be going down. I mean our availability will be going up and our line of credit will be going down.

So it's just a balancing act between receivables, inventory, purchases, payables, and our line of credit. Sounds simple, but it's an equation you have to really watch on a daily basis.

That's the business of managing your working capital right now.

That's correct, Phil.

What is your sense as to how much capital is contained within inventory and receivables that you may be able to extract and turn into cash over the next two or three quarters as you manage the business for a lower level of volume than it's had in the last trailing 12 months?

Well, we've done some analysis internally, and we think that we have locked into our receivables, payables, and all the various factors that I mentioned earlier, and a substantial amount of cash. And it's obviously a moving target, but it would, it puts us in a very solid position for '09 because we just want to make sure that we're in a good position.

And I don't know if I want to -- Andrew, I know we've got some models and numbers internally that we've worked with. It's not something that we've -- I'm trying to think of any time in any of our slides or anything we've said anything publicly about the amount of working capital and what percentages we want to drive to.

Yes, but, David, you have $40 million invested in receivables and inventory. I mean do you think you could draw that down by approximately 25% as you manage the business to -- in the current environment over a -- you draw it down that much over a period of time as you manage the business in the current economic environment?

I would answer that yes.

Okay. Well, that's a lot of money right there. Speaking of money, I noticed there's about a quarter of a million dollars of what looked to be severance payments made in the quarter.

That's correct.

Would the -- so the -- I don't know when those reductions were made, but the full benefit of those reductions probably were not reflected in the third quarter cost to operate the business, would that be correct?

We did receive some benefit. These are, one of the very tough things as you know, Phil, and we've talked about this, very tough things about trying to right size your business to these production levels are the fact that you have to control your labor cost, and the other thing is those labor costs return fairly quickly. So you get a very quick return on the cost savings from the severance area.

So we started to see some, as we mentioned in our release, we had improvements in our Material Handling Division's margins because of the severance cost. But to answer your question the full benefit did not go through in the third quarter, but we did receive some benefit, and we'll start to see -- we'll see some of those benefits go through in the future.

Sure. And then on the replacement parts business, particularly with the recent acquisitions, can you give us a sense as to what that business was on a trailing 12-month basis?

Well, what we have released publicly is that on a proforma basis the -- our parts business is now up to 18% of our sales.

Right.

And that's up substantially, and as we did say in our release we are seeing increasing parts business spot, our crane operations, our material handling operations. So all our businesses as you would expect, and this hasn't happened totally proportionately but as you see reduced demand for whole goods, you see increased demands for parts business.

And so we're starting to see that and with the addition of a substantial amount of new parts business, that's only improving the percentage of parts business that we have in the whole. So it's -- I would expect it to, you know, we believe it'll move up into the 20s as we go forward in the near term.

Now, I would think that people would -- if people are holding off replacing a crane, they're going to have to fix the crane. The more they use the crane the more the parts get consumed.

Yes, if they're using the crane -- yes, if they're using the crane, if they have a used crane, and they have a project where they can use a used crane, and they're hesitant to buy a new crane, then we will receive more parts business, as long as that crane is being utilized. That's absolutely correct, Phil.

Okay. And then last question, what do you think your market share has increased to at this point in time?

Well, it varies depending on the, you know, in the higher tonnage cranes, the 40-ton and higher, obviously, we have a very substantial marketplace, our market share, 40% to 50% type numbers. Overall, we think we are now in the 30s.

30s.

Which is up substantially from where we were a year ago, because as we've said in the release we are working in an environment where the overall market is down to almost unseen levels.

Right, sure. Well, you seem pretty well positioned today from a capital perspective. If you can get $10 million of cash out of working capital, and you have $5 million or $6 million available to you on your line of credit right now, you can continue to have this backlog and continue to run at a cash flow breakeven or even generate cash business on the income statement then you seem to be pretty well positioned for this downturn right now.

We think so, we just have to manage it properly.

Yes. That's why you get paid the big bucks, David, to manage it properly.

Yes, I think so.

Thanks very much.

Thank you.

Okay. Thank you. (OPERATOR INSTRUCTIONS.)

Our next question comes from the line of [Jeffrey Long] with [Tuxedo Rod Associates]. Please go ahead.

Hi, Dave.

Hey, Jeff.

A couple of points, if I could? Number one, given the fact that you did institute a surcharge at the beginning of October, should that not have a positive impact on margin or affect those higher steel prices in the quarter and going into '09?

You should have some impact, yes.

Second question is while you've given us a little bit of color on Schaeff and Crane and Machinery, could you give just as a general statement what kind of gross margins or industry applicable to the spare parts business versus what the margins are in our existing material handling and the boom truck business?

The spare parts business, what we have said publicly generates approximately 40% gross margin.

Right.

So obviously to the extent that we can continue to grow the parts business, that really helps absorb any type of downturn that we will be facing in '09. But the one thing, the one thing that we have said publicly about the acquisitions were that they were '07 basis was $21 million in sales, and but I don't think we've broken that out, Andrew? I don't recall that we've broken that out in any of our charts between whole goods and parts and all that kind of stuff?

Right.

The third thing is as some of us have known you, probably longer than most people on this call, you have made reference to the last down period that you went through, which was 1992. And given the current stock price some people might be concerned about the economic viability of the business, can you just without going into minutia detail kind of give us an overview of what '92 was like at Terex and what lessons you learned from that as you were applying it to the current environment with Manitex?

Well, I mean I'll try to be very brief. In '92, of course, we were, there were different circumstances. We had, at that time there was a bond crisis, S&L crisis, but what we had, a company that was very highly leveraged, larger worldwide company, but I don't think as well, certainly not as well positioned as we are in the marketplace, because it had a different number of products.

I should also say it was prior to a lot of the previous, a lot of the administration that are at Terex today, who are wonderful partners of ours and we have the utmost respect for their organization, so I don't want anybody to get the impression that it was caused by anybody involved with Terex today.

But anyway it was a highly leveraged company and we had -- we were losing money, and it was working -- very, very working capital intense. So I think we're in a much better position today because we did not have the equity base, we did not have the margins that we have today. And so I think we're in much better position today to weather this storm as I have said, than that particular downturn.

But we also had one after 2001 that we were involved with, as well, and so there's been a number of these things over the years. And, as I say, each one is different, but we're prepared for it. And we have the Management Team to operate properly within the parameters of what we're faced with.

The point that I was trying to get to, David, is that this is a Management Team that's been there, seen that, done that, and is not likely to repeat mistakes that were made under different regimes and different downturns.

That's what we're striving for, Jeff. We will be there. Thank you.

Okay. Thank you. (OPERATOR INSTRUCTIONS.)

Okay, Marisa. Thank you very much, everyone, on this call for your interest in Manitex International, and we look forward to the future. Thank you, Marisa.

Thank you. Ladies and gentlemen, this concludes the Manitex International, Inc. third quarter 2008 financial conference call. Thank you for your participation. You may now disconnect.