Manitex International Inc (MNTX) 2008 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Manitex International Inc. fourth quarter 2008 and year-end results conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded, today, Wednesday, March 11, of 2009. I would now like the turn the conference over to David Langevin, Chairman and CEO. Please go ahead, sir.

Thank you. 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 of this call will be available until 3/18/09 which can be accessed by dialing 800-406-7325 if calling within the United States, or 303-590-3030 if calling internationally. Please use passcode 4026658 to assess the replay.

We prepared this release and this call earlier than we have in the past in order to provide information out to the market as soon as possible. We expect to file our 10-K in the near future prior to our filing deadline of March 31. However, we of course as always are limited to discussing our public information, and any discussion of future events or expectations on today's call, are subject to uncertainties and risk factors which are fully disclosed in our public filings and which we strongly encourage you to read.

As stated in our release, Manitex performed well in markets in which we were severely depressed for the full year and especially in the fourth quarter. As we stated with our third quarter release, we took measures to improve our balance sheet over the past several years prior to this downturn by issuing stock on several occasions with the emphasis on reducing our outstanding debt and interest costs. We also introduced almost 20 new or modified products during this period which gives us the best products in our sectors. These steps have allowed us to grow and improve our market position to number two in the Crane sectors in which we compete, and within the largest capacity boom truck train sector, we hold the number one dominant position.

These positions are a significant improvement from where we started as of week number three just several years ago. We have also recompleted our international certifications which greatly expands the market served by our Company. All of these carefully planned steps in the last few years will allow us to participate in the infrastructure stimulus packages which have been recently passed and which are working their way into their respective economies. However, in the meantime we are managing for profitability and cash and expect to reduce operating levels throughout our various divisions. With these reduced operating levels there is shrinkage in our working capital which we managed during the fourth quarter. This shrinkage will continue in the first quarter of '09 and for what we can tell for the foreseeable future.

Our management continues to place a significant emphasis on working capital management and as we stated in our third quarter conference call we did generate cash from operations as well as through working capital changes for the fourth quarter, and our goal for '09 is continuation of that trend. Andrew will discuss this in more specifics during his prepared remarks. We also recently made an announcement regarding new international cranes, specialty equipment and military orders and with that announcement we commented on the cost reduction initiatives we have implemented to balance costs with the reduction in the aforementioned production levels.

Finally, and most importantly, I would like to thank the unprecedented sacrifice made by our team workers who is have maintained an excellent spirit and enthusiasm for our Company and our mission during these difficult times. With that I would like to turn it over to Andrew for comments and then we will be happy to take questions. Andrew?

Thanks, David. Good afternoon and welcome, everybody. I am going to cover the details of our fourth quarter and 12 months ended December 2008 earnings release. 2008 was certainly a year of contrasts. The first three quarters were focused on growing market share, expanding internationally, and dealing with the unprecedented increase in material costs. In the fourth quarter, the focus was on managing the impact of the dramatic change in the marketplace, and the increased uncertainty caused by the distresses in the financial markets and rapid deterioration in economic conditions that followed which resulted in curtailment of credit for some of our customers, customers delaying their deliveries and canceling existing orders.

The specific actions taken to manage the current situation are discussed later in the presentation. Also in the fourth quarter we moved forward with our strategic plan for growing the business by completing the acquisition of the assets of Crane & Machinery and Schaeff and by continuing to develop products and distribution channels for international markets. It is against this background that I will review with you the details of our financial results.

Looking first at the results for the fourth quarter, net sales for the quarter ended December 31, 2008, were $27.8 million, an increase of 2% compared to $27.3 million in the three months ended December 31, 2007. The acquisition of Crane & Machinery and Schaeff in October 2008 contributed $3.7 million to fourth quarter 2008 revenues. Compared to the fourth quarter of 2007, revenues for our Crane operations and material handling operations were down 4% and 34% respectively. Net income from continuing operations for the quarter ended December 31, 2008, was $0.3 million which includes restructuring charges of (inaudible) and $0.1 million in income from the Schaeff acquisition. The fourth quarter 2008 gross margin improved to 16.3% from 14.7% for the third quarter of 2008 and 18% for the fourth quarter of 2007. The improvement from quarter three was driven by a limited reduction in material prices, the benefit in our material handling operations from restructuring in quarter three and the benefit of an improved mix from the Crane and Schaeff acquisitions.

The rapid change in economic conditions during the fourth quarter generated significant uncertainty and led to the cancellation of orders which had an immediate impact on our manufacturing operations. In addition, the level of new orders received grew significantly resulting in a reduction in our backlog to $15.7 million at December 31, 2008, which will affect our manufacturing operations going into 2009. During the quarter we responded to the market conditions and took action to match our capacity to demand through elimination of overtime and reduction in headcount including temporary employees. These actions required restructuring costs principally severance of approximately $0.1 million, actions and costs that were additional to those implemented in quarter three.

Diluted EPS from continuing operations for the fourth quarter of 2008 was $0.02 per share, based on 10.6 million diluted shares outstanding. This was after restructuring costs equivalent to $0.01 per share, and compared to $0.07 in the fourth quarter 2007 and $0.03 in the third quarter of 2008. EBITDA from continuing operations for the fourth quarter of 2008 was $1.3 million, compared to $1.4 million in the third quarter of 2008.

Moving on to results for the full-year of 2008, net revenue of $106.3 million for the year ended December 31, 2008, was essentially flat with a $106.9 million for the comparable year period in 2007. Revenue for 2008 was favorably impacted by approximately $6.2 million from acquisitions. The full-year of Noble product line revenue and having three months of Crane and Schaeff revenue in 2008 contributed an additional $2.5 million and $3.7 million respectively. Without these benefit, revenues would have decreased approximately $6.8 million, the result of a decrease in sales of forklift and specialized carriers which is partially offset by $1.7 million increase in Crane sales. The increase in Crane sales is attributed to an increase in chassis sales. The majority of the decrease in forklift and specialized carrier sales is due to a decrease in the sales of military forklifts principally attributed to the timing of government orders although there was also a decrease in sales of commercial rough terrain forklifts as a result of the slowing North American economy and the decrease in special carriers.

As David has already commented, we are very pleased to see the market share of our Manitex Cranes increase during the year and are particularly pleased with the strong performance in the higher tonnage sectors where we believe we have a market-leading position. However, this market share gain was against a backdrop of a market that was severely contracted from 2007. By our estimates by over 36%. Gross profit as a percent of net revenues decreased to 16.4% for the year ended December 31, 2008, from 18.6% for the comparable 2007 period. And erosion of 2.2%.

The decrease in margin percent is due to a decrease in the gross margin for Crane products caused by significant increase in the cost of raw materials and components for most of the year. Partially offset by a modest increase in the gross margin for forklifts and specialized carriers, where the increased cost of materials was more than offset by restructuring in the third quarter. The elimination of start-up inefficiencies for the Noble product line, and the weakening of the Canadian dollar.

Although we have seen material price increases during the first half of the year these were not nearly the magnitude that we saw starting late in the second quarter and into the third quarter. Through the second quarter of 2008 increases in material prices were largely offset by increases in the sale of Cranes with higher lifting capacity which have higher gross margin. The benefits of sourcing materials from lower cost countries, a price increase that was instituted in mid 2007, and an improvement in product production efficiencies.

It became clear during the third quarter these rapidly accelerating material price increases were going to continue and were going to adversely impact the Company's margins during the balance of the year. We instituted a material cost surcharge on cranes shipped in the latter part of the fourth quarter of 2008 to help offset the material price increase.

Net income from continuing operations and diluted EPS from continuing operations for the year ended December 31, 2008, was $1.8 million $0.17 respectively compared to $2.1 million $0.23 for the year ended December 31, 2007. Restructuring costs incurred in the 12 months ended December 31, 2008, were equal to $0.3 million or $0.03 per share on diluted EPS compared to 0 for the year ended December 31, 2007. EBITDA from continuing operations for the 12 months ended December 31, 2008, was $5.4 million compared to $8.5 million in 2007.

I would now like to comment on the Company balance sheet and liquidity position. The Company completed the quarter ended December 31, 2008, with $23.6 million in working capital, and the current ratio of 2.4. Cash flow generated from operations in the fourth quarter of 2008 was $1 million. Working capital compared to December 31, 2007, increased solely due to the acquisitions of Crane and Schaeff. With the change in economic conditions during the fourth quarter of 2008, we placed even more focus on working capital and excluding the Crane and Schaeff assets acquired in October of 2008 we reduced our operating working capital, that is trade and other receivables and inventory less accounts payable by $4.1 million in quarter four. Total outstanding debt was $28.1 million at December 31, 2008, compared to $25 million at December 31, 2007. The increase of $3.1 million is associated with the Crane and Schaeff acquisition, that occurred on October 6, 2008.

Availability under our lines of credit at December 31, 2008 were $7 million. We have two debt covenants, the first a tangible net worth coverage that we exceed by over $7.5 million as at December 31, and the debt service coverage ratio that we exceed by 60%.

To finish I would like to add a comment regarding our operating activities. As I've discussed already during quarter four of 2008 and continuing into the first quarter of 2009, we implemented restructuring activities over and above those we commenced in quarter three to improve operations at our material handlings operations. These additional actions were announced in a press release in February of 2009 and we expect them to yield approximately $5 million in the annualized cost reductions. The associated costs were approximately 0.2 million to $0.3 million of which $0.1 million was charged to expense in quarter four of 2008 and the balance will be expensed in the first quarter of 2009.

The specific actions taken comprise head count reductions of salaried and hourly employees, virtual elimination of overtime, suspension of additional hires and merit increases, reduction in executive and salaried, pay, bonus and benefits and the introductions of shortened work weeks. These actions although difficult are required to ensure the Company adjusts to current conditions and is positioned to respond quickly when the market recovers. In the same release, we indicated that we have increased our focus on several new North American and international sales initiatives as we rigorously pursue continued market share gains, margin improvements and profitability. The announcement that we had received orders for international boom truck cranes, specialized transporters and military forklifts with a total value of $6 million is evidence of some success in these efforts. With that I would now like to hand back to David.

Thank you, Andrew. Could we now open it up for questions.

Yes, sir. (Operator Instructions). Our first question comes from the line of [Phillip Anderson] with Pinnacle Fund. Please go ahead.

Hey, Dave, how are you.

Thanks, Phil. Good.

So reading the release looks like you did a pretty good job in this horrible economy we are in. Do you expect to continue to generate net income and cash flow from operations during the balance of the year?

I think as we have stated several times our goal is to continue to generate earnings per share and cash through the balance of the year. The answer is yes.

So you expect even in this environment to remain positive and the going concern and continue to make money?

That's correct.

Okay. So in looking further in the release, the $8 million that we expect to generate of cash flow this year through claiming working capital, will that be somewhat linear throughout the year or is that front-end loaded or how is that going to play through?

As I said in, in my remarks and Andrew also stated, you obviously as you shrink some of the operations and the business you have to really manage that cash flow on the way down just like you do on the way up. So I would expect it to be more front end loaded. I would expect especially with some of the orders that we have announced which are, which require some work in order to start getting those out the door, except for the international orders which we will do more rapidly, I would expect that the working capital will shrink at the beginning, we will harvest working capital and cash and then potentially use some of that as we hopefully start to grow again.

Most of the million, the $8 million is front-end loaded and if business picks up again later in the year obviously you will reinvest your working capital to support that new business?

That's correct.

Adding back the D&A. the Company made about $800,000 in the quarter which is about $0.07 a share on a cash basis, what is your CapEx budget for the year?

I would say it is and I don't know Andrew if you have a specific number from our budgets which are evolving constantly. It is minimal, it is, Andrew, I would say 200,000, $250,000 but you probably have a better feel for that?

We have plenty of wish lists but in these times we will only invest in what's absolutely essential and to maintain the growth of things that we want to do. So you are absolutely right and it is certainly in that type of range, Dave.

Okay.

Things we can control.

So if business were to stay flat, say the 261 from continuing plus the 550 of D&A which is about 800, annualize that times 4, that's 3.2 minus $0.25 million in CapEx, the business itself could generate about $3 million in cash plus the $8 million you would recover of working capital prior to any reinvesting working capital the second half of the year if business picked up?

That's a fair assessment, yes.

Just from my observations.

Yes.

And on the, if you have the $17 million in LLC debt and the $5 million of note payable, okay which is $22 million, I presume that on the LLC of the note payable, particularly on LLC that's just interest only right now, there's no obligation to repay principal?

That's correct.

What is your additional line of credit capacity or other sources of credit funding at this point in time?

Well, what we announced last summer when we announced a credit facility and expansion of our credit facility, we have a Canadian dollar and a US facility rough numbers, it is roughly $25 million US is a total but our line of credit facility. And that is, that is where we say we have, a total availability at the end of the year and that fluctuates depending on how much in receivables and inventory. It is a borrowing base going against our receivable and inventory but most of it was available at the end of the year. So it is, it is total $25 million line of credit.

The 25, so less the 17. So there's around 7 million or $8 million of availability at this point in time?

Yes, that's right. That's what we stated, that's correct. And that's US, remember that's US and Canadian. So you have as you know, the Canadian to US equivalent fluctuates with the Canadian dollar to US ratio.

Well, the discounts now what it used to be on the Canadian dollar.

No, the Canadian dollar has weakened and it was, it is crazy the fluctuations we have seen in that currency over the last couple of years, but it is true with a lot of currencies.

So I mean, we would love to see you to continue to be acquisitive, you have a $6 million market value and if you are going to generate, if you are going to recapture $8 million of cash or generate millions of cash on the balance sheet, and by my mathematics, $3 million from the business, which totals $11 million versus a $6 million market cap and your debt is interest only, no principle repayment, that's $11 million of capital coming in plus your 7 million to $8 million available to you. So that is 18 million, $19 million of capital which will be available at some point in time, given how everybody has been decimated here, [Terex] has been killed and [Manitowac] has been killed I would think that there are properties which are coming up available to you, either from the what used to be the megacap companies in this space who maybe want to divest or other privately held companies. Can you give us a sense as to what the M&A environment is like right now in terms of opportunities and valuations?

I think you summarized it very well, Phil. We have certainly opportunities and we are positioned but I want to be obviously very careful. We have a good franchise. We will benefit from all the packages as I stated in my comments from the packages passed around the world and I want to make sure we take advantage of all of those opportunities within our Company to drive, to drive more sales and profits, but also of course strategically to the extent that we can very opportunistically pick up businesses that add to our franchise and finally receive some benefit in our stock price then obviously, as you know, this is very important to our management and to our company, our share price is very important to me and we want to do what's right to generate value for our shareholders. So we will continue to be acquisitive like we have in the past but very selectively and very opportunistically.

Well, I know most of your net worth or I would characterize it as your diminished net worth.

Don't remind me but as I have said on many occasions I am comfortable with, I'm obviously as all of us are long-term shareholders and I don't believe the -- you don't drive, you don't manage the Company for the stock price but we don't feel the stock price fairly reflects the value of our business clearly.

Well, I mean you're kind of all-in in this Company, you have got a $6 million, or actually it's less than $5 million market value based on today's close with $11 billion of cash coming to you over the next, the majority of which is going to come early but over but other the next ten months plus the borrowing ability, that's -- that $5 million, that's 3.5 times, you have capital availability equivalent to 3.5 times the market value of the Company. So you would certainly think given your track record at tariffs that there's lots you can be doing. I personally know we at Pinnacle would encourage you to be out there and building value which is obviously if you just double the market value of the Company it is double from here. Andrew you mentioned in the press release, that there is $5 million of annualized cost reductions, are those cost reductions largely in place at this point in time?

Those actions have been taken and implemented, yes. Clearly that's an annualized number that we talked about but those actions have been done.

We will see the full benefit of that. We saw a contribution in the fourth quarter but we will see the full benefit in the March quarter?

Some of the actions took place in, during the first quarter this year. So you won't get a full benefit in the first quarter. There's a slight timing we announced in February what we've done but you will get a good start to get good benefit through, yes.

Okay. Well, I guess right now cash is king. You have lots of cash coming in and lots of credit available to you. So, go get them.

Thank you, Phil.

Thanks, guys.

Thanks, Phil.

Our next question is from the line of Ned Borland with Next Generation Equity Research. Please go ahead.

Hi, Ned.

Good afternoon, guys. Want to focus a little bit on the parts business, what was your parts revenue per month exiting the year?

What we have stated publicly and what we put in the public filings is kind of an average monthly summary of $1.75 million a month.

Okay. And then on the $8 million cash flow from operations target for the year, is that, is some of that a function because the parts business turns a little faster than the rest of the business or?

We are, we are not seeing a fall off to the extent that we have in the whole goods business or the parts business. That's pretty much I would assume what you expect. Clearly there's utilization. The utilization of equipment in the marketplace is down. So you see, you do see some fall out but not to the degree that we have mentioned in the whole goods. So you do expect good cash flow from the parts business and that's what we have stated publicly in our releases and our presentations is your gross margin there is kind of an average 40%.

Okay. So, well above the base business?

Right.

Switching over to the international distribution picture, looks like you had done some recent orders internationally. Can you give us a sense of what the chatter is out there from international distribution? I know you have been active in Russia and the Middle East. But anything to elaborate on that?

There's certainly more activity, again this is all brand-new business for us. So I know, I think it is the second quarter, I made a statement that I would expect our '09 sales to be 10% internationally, I certainly expect that to be true. And because of the fall off in business in North America, we are working on a number of international projects and international sales. So it probably, that number would probably be understated but to answer your question, I would think that there's more, there seems to be more activity on international basis, I know I get summaries from Andrew of what all of the sales people are working on. Andrew you are closer but it does appear there's a number of project that is are still out there from our international contacts.

Okay. And then finally, military business looks like you had a little bit of a taste of some military business in terms of orders recently. As best you can describe it, what are we looking at for this year, I mean are we looking at military orders that are the level of '08 or closer to the stronger year you had in '07?

Well, if you remember in '07, we had a, that was a big reason for the fall off between '07 and '08 in our material handling sector, was because of the fall off in military, if you remember for several quarters, we have kind of kept indicating that we thought that there was more military business coming and fortunately or unfortunately it just took forever to come. So now we are starting to see some of that be released by the military and my expectations are that will continue so that we will see an '09 year better or like the '07 year versus the '08 year because obviously our percentage of military business dropped significantly between '07 and '08 and I expect that to increase.

Okay. That's all I had. Thanks.

Thanks, Ned.

Thank you. Our next question is from the line of Rick Hoss with Roth Capital Partners.

Hey, David, Andrew.

Hi.

Dave, on the gross margin, can you give us a little more detail where the improvement was, if it was a product mix, if it was more contribution from aftermarket parts, led contribution from lower margin, lifting, et cetera?

Andrew, do you have -- I think you are better suited to respond to that than me.

Sure. The quarter four pick up against quarter three, was -- I talked about this briefly in the, in my notes. We did start to see some benefit from material prices, not as much as you probably recall, the market price for a lot of steel products started to fall rapidly but of course it has to work its way through the pipeline. So we started to see some benefit from that. We also because we are still receiving in some cases surcharges coming through, we put a surcharge through on sales in the fourth quarter, that certainly helped as well. Then we started to get some of the benefit to a handling group from the restructuring that we incurred, and started in quarter three. And then the other piece really was the benefit from Crane and Schaeff, particularly their parts piece brought us some of their product sales. That led to some favorable mix for us as well in that fourth quarter.

Okay. So the assumption is from 16.3% where we saw in the fourth quarter we will see continued improvement in 2009?

That's certainly our objective, yes. As I'm sure you are aware, one of the key elements of gross margin is also the manufacturing piece with activity levels the way they are, with, having to change rapidly through, as customer requirements change. That's always a challenge for us, but I do see that I would say that our margin should be improving as we go into 2009, yes.

Okay. And then as far as backlog goes, the decrease from was it 39 and change, 39.2 to 15.7, how much of that was worked off versus cancellations?

The majority of it was worked off. We did have cancellations in the period, but we have this real sort of impact with the slow down in orders that took place as well.

Okay.

So it was less of an intake, rather than significant number of cancellations. But we did unfortunately get approached with several cancellations that we had to deal with which were obviously very painful.

Okay. So, looking at the difference between the two numbers and then factoring out revenues for the quarter, I mean bookings were near standstill?

No, I think the fourth quarter I mean we stated in the third quarter that we had bookings not positive compared to our production but as a number of other companies have reported fourth quarter and you've heard from, I'm sure, all of your holdings and accounts, to quote the oracle of Nebraska, we fell off a cliff in the fourth quarter. So, it is certainly in the fourth quarter was not positive.

Okay. Andrew, you talked about the Noble contribution, you said $2.5 million; is that annually? Or is that--?

That was increase year-on-year of $2.5 million, yes.

Okay. Do you have an actual growth number you share or no?

We don't, no.

Okay. Last question. One of the exciting parts of this story was the emerging market opportunity, at the time that we had talked about it, Russia and the Middle East and there's a lot of energy products going on, there's some Canadian oil sands projects going on. Different picture now, Russia struggling, Canadian oil sands projects being shut down, Middle East still probably status quo or slowing down a little bit but not too much. What's your outlook for these emerging markets?

One difference and I'm glad you asked this because it gives me a chance to talk about it for a second. One difference about us is you remember we are providing a lower cost alternative to the truck crane market at the higher end capacity crane. As I said earlier we are still seeing and are involved in new business for us and I would say mostly in the Middle East area. As you state, Russia is reeling and it will probably be a while before they turn the spigot back on again, but they will. So all of these opportunities from a long-term perspective are still very positive. It's just that in the near term they're just not taking and buying anything at this point. So, I would say more of our focus right now is on the Middle East.

Okay.

Which happens to be where we sold those cranes that we announced in February.

Okay. thanks for taking my question, guys.

Sure. Thanks.

Thank you. Our next question is from the line of [Dmitry Krenazasky] with First Willshire Securities Management. Please go ahead.

Hey, gentlemen.

Hi, Dmitry.

Good quarter in a tough environment.

Thank you.

Most of my questions have been answered, just a couple of other things. In the cranes you said went down 4%, but if we take the high tonnage cranes out of that separately, how did they do?

Well, the high, I mean I guess it depends on, what we have stated is that we have, had a significant improvement or significant amount of sales in the high tonnage cranes for the year compared to the previous year when we were just introducing those cranes. Those cranes were introduced in the second quarter of '07, and we really gained momentum in '08. So we had good results in the high tonnage cranes for the year. But I think that, and again as I just stated to Rick, the opportunity that we have going forward is continue to demonstrate to the marketplace that those Cranes are a very good alternative in all ways to higher cost truck crane. And we will as we have stated before continue to expand the capacity of our cranes so we continue to make in roads into what is a much larger market bing the truck crane market. So again long term, not so much in this kind of current environment but long term that is going to bode very well for us as the market begins to turn.

Got you. What's the progress with the R&D on the 60, 70-ton cranes?

We are moving along very well. I'm not -- I don't have the pedal to the metal on those right now because as you would expect, there, you continue to move that along, we will make some announcements in the future about that, but you want to introduce that a time when you have a little bit better market to introduce it to.

Could you give me the backlog numbers before and after again I think I missed that?

Andrew, you have the precise numbers. Generally at the end of the third quarter it was $39 million, at the end of the fourth quarter it was 15. I don't remember the exact ones.

That's all for me. Thanks gentlemen.

Our next question is from the line of Charles Neuhauser with (inaudible) Asset Management.

Just one picky question first. The way I read the press release it seemed to say that you generate $8 million of cash flow from both net income and working capital.

That's correct. It's a combination.

Could you talk a little bit about what the constraints or covenants on all that other stuff having to do with your revolving credit agreement is? And if I assume it is, something you said earlier led me to belief it is some sort of asset based thing. If you work down your inventories and free up millions of dollars of cash which ordinarily would be terrific, it is going to cut into the availability of the line?

Yes, what I was trying to allude to and I am glad you asked this for clarification is we have to manage -- we always keep availability. So what we have to do is manage as you take down that working capital to make sure that we keep good availability from our assets because you're right, it is a borrowing based formula. You have to really be very cautious about what you bring in from a purchasing standpoint because obviously it turns into a payable and just make sure you balance it so that you have plenty of availability going back up on the upside. So we have done that well and we have gone through this period and will continue to monitor that as we go forward. But there's going to be other opportunities to add more assets. So we are always very cognizant of really managing that very well. That's kind of my life, but work on a borrowing base formula for 25 years. So I know it better than my wife. I know how to manage this, and Andrew is very very good as well. So we have been really working this hard.

Okay.

And I can't remember what the other question was.

Just what the terms of the line of credit is?

Terms of the line of credit, yes.

Your interest expense for the year just ended was a couple of million bucks.

Yes, we have a 1.2 interest coverage ratio and so that's where Andrew said we exceeded that in his prepared remarks by 60% then we have a net worth covenant ratio where we exceed that by 7.5%, $7.5 million. I'm sorry, $7.5 million.

Okay.

And did I say that right, Andrew?

Yes.

I guess the question is if you free up cash from working capital and you continue to make the money you have been making which is the working assumption at this point?

That's right.

You would use that to pay down some of the borrowings I assume, but the interest expense should be when you take into account the other notes and a few other things it shouldn't be that much different this year than last year?

Well, we have, as you know we have some a new 6% note that we picked up in the fourth quarter.

Yes.

That's the (inaudible) note. So that's at 6%. And we have as we also have mentioned we have a small line with an outside vendor for purchase of some cranes that we do through Crane & machinery, I would say generally I don't know -- it would probably be a good assumption to say that the interest cost would be roughly the same. It would probably be down a little but it's probably a good assumption to say it would be roughly the same.

Okay. So you're comfortable at the moment with whatever relationship you have with whatever group of banks is providing this line of credit that you are not going to have them breathing down your neck any time soon?

We have one bank, and we have, I think, obviously we have taken the loan down significantly since we started this process in '06. And I would describe our relationship as being very positive.

Okay. Very good. Thank you very much.

Thank you. Our next question is from the line of [Jeffrey Lund] with Tuxedo Associates, please go ahead.

Hi, Jeff.

Hello?

Hi, Jeff.

Phil stole most of my thunder. The only question I have for you at this point, knowing you for a very long time is, on a scale of one to ten, how excited would you be about having the opportunity to acquire a profitable business at 1 to 2 times EBITDA?

I mean this as you often, as you hear often and I think it is really true, these are the opportunities to make or break yourself as you go forward. And I would say, and again obviously you know I'm biased I am very excited about the opportunities that we have and that we are working on. But again I don't want to have people with expectations beyond a good franchise that we have. We have a great franchise, wonderful businesses, good management, and that alone should, we should be able to lift our poor shares an poor stock price as a result of just performance of our business as the economy improves. But on top of that I think this is an opportunity that we have to take advantage of on a selective basis so that we are being very opportunistic in order to create some deals that you just don't see at market values that are significantly below, just like we are significantly below any carrying value for the business.

Thank you, Dave.

Thank you, Jeff.

Thank you. Our next question is from the line of (inaudible) with (inaudible) Investment Corporation.

Hey, David.

Hey.

Most of my questions have been answered. I just have one quick question.

Sure.

The last we spoke you said the -- your market share for the mint was about 26% and it was closer to like 80%. Is -- when you say now you are gaining more market share, can you expand on those numbers?

Well, it is, I don't know, Andrew if that's anything that we disclosed yet. But we will disclose it in a week with the 10-K, and I would just say that we have continued to gain market share.

In both areas?

Well, certainly what we have been quoting is the overall, is the overall market share and I would just say we have continued, what we have said we have continued to increase market share.

Okay. I will look for those number in a week.

Thank you.

Thanks.

Our next question is a follow up question from the line of Dmitry Krenazasky with First WIllshire Asset Management.

Hey guys just a quick question, what's deferred gain on sale of building on the balance sheet?

When we -- when we did a sale lease back on our main facility in Texas in 2006, we did not recognize the gain and generally what happens is every month you amortize that gain over the life of the lease; is that correct, Andrew.

That's correct.

That's what it is, Dmitry.

How long was the list.

12 years.

Okay. I couldn't remember exactly but it has been a number of years.

Okay. That's it. Thanks, guys.

Yes.

Thank you. (Operator Instructions).

I think we have got everybody. I certainly appreciate everyone's interest in Manitex International and look forward to future quarters. Thank you so much.

Thank you. Ladies and gentlemen, this does conclude our conference for today. We thank you for your participation and for using the conferencing center. You may now disconnect.