Manitex International Inc (MNTX) 2010 Q4 法說會逐字稿

Thank you, ladies and gentlemen, for standing by, and welcome to the Manitex International fourth quarter and 2010 results conference call. During today's presentation all parties will be placed in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions)This conference is being recorded today, Thursday, March 17, of 2011. And I would now like to turn the conference over to David Langevin, Chairman and CEO. Please go ahead sir.

Thank you Mikela. Good afternoon ladies and gentlemen, and thank you for your interest in Manitex International. On the call with me today is our President and Chief Operating Officer, Andrew Rooke. Please see our website or our release for replay instructions for this call, which will be available until March 24. We will be using slides again to assist in this presentation which are available through the webcast or directly from our Investor Relations section of our website.

Please refer to the first slide regarding the Safe Harbor statement. Please review this statement and refer to our SEC filings for further guidance on the risks associated with our Company. With regard to our SEC filings, we are designated a small reporting company by the standards of the SEC, and as such, our filing deadline for our year end report and 10-K filing is March 31. We will file on or before our due date. We released our earnings today which was as soon as our board and auditing group had signed off on our numbers. We've organized our call today with my leading off by making a brief opening statement, followed by a review of results by Andrew, and with a closing statement by me. Andrew and I would then be open to questions from any participants.

So please now refer to slide three. As I stated in our release, we are encouraged by our 2010 results which show significant improvements from 2009. Highlighted by the near doubling of revenues and our record EBITDA margins. And are looking forward to beginning a growth period in 2011. We, of course, must still be very diligent in our cost control, but our emphasis will now be on driving sales, expanding our footprint through our many brands, and in continuing to expand our international presence. In many ways, 2010 was a confirmation of our business strategy with very little help from the overall economy. Many of you have heard me state our operating goals on numerous occasions. But since we've had a significant increase in new shareholders, I would like to briefly repeat our long-term objectives.

We are building a manufacturing company with a specialized lifting equipment emphasis with applications throughout the world. Our equipment has superior engineering specifications and are not considered commodity products. We believe this gives us a price and margin advantage. We also believe that we have some of the best products in the industry, with the best people delivering those products to the markets we serve. We started this process in our North American markets, developed and exported our products globally, and are now extending this strategy throughout our acquisitions. Our plans are to continue to do what we have been doing.

In regards to our most recent opportunity in CVS Ferrari, we are pleased with the results of CVS, and as we've stated on several occasions, it is operating in line with our expectations. To refresh everyone on the CVS process, we signed a two-year exclusive agreement on July 1, 2010, and formed a new Company in Italy to operate CVS Ferrari. CVS is primarily in the manufacturing equipment for the port industry. We stated at the closing of this transaction that we had approximately $10 million in backlog from the old company. We started producing in September and disclosed in the third quarter that our sales for that quarter from CVS were approximately $1.8 million. We produced approximately $6 million in the fourth quarter from CVS with margins consistent with the rest of our Company. We did not assume any liabilities from the old company with our operating agreement of CVS.

Finally, we stated at the initial closing that our agreement included a purchase option. We intend to proceed with the process of acquiring the assets of CVS through the Italian bankruptcy process, which is proceeding, and requires the approval of CVS's creditors. We stated that we did not expect this purchase to take the entire two-year operating period to be completed. With those opening remarks, I'll turn it over to Andrew to review our results.

Thanks David, and good afternoon and welcome everyone. Slide four provides an overview of the fourth quarter, in which we continued with the momentum generated in quarter three and added a full quarter's contribution from CVS Ferrari. Year-on-year quarterly revenues were up 98%. Net income was $0.9 million, equal to $0.08 per share, and EBITDA $2.9 million. US markets remained weak but our niche sectors were strong, and our non US revenues are now 38% of total revenue. Our focus on costs, working capital and liquidity remain in place. Our operating leverage is well demonstrated by the incremental operating income rate of 15% in the quarter.

Moving to the more detailed numbers, slide five of the presentation shows the key figures for the fourth quarter of 2010, with comparatives for the third quarter of 2010 and the fourth quarter of 2009. Sales for the fourth quarter of $29.5 million were up 98% or $14.6 million, compared to the fourth quarter of 2009. Acquisitions, the CVS Ferrari operating agreements, and new operations started in 2010, contributed $9 million of this increase with the balance of $5.6 million representing organic growth of 38%. The increase in organic revenues reflects increases in all major product categories with cranes up 28%, material handling up 46%, and equipment distribution up 100%. Crane sales continue to reflect strong demand from new product introductions, with the specialty energy and utility markets in both the US and internationally, while material hamming products benefited from strong governmental and military demand for specialized equipment.

On a sequential quarter basis, revenues increased 19%, largely due to material handling equipment, including a strong performance from the first full quarter of CVS Ferrari operations. Quarter four gross profit of $7.7 million and gross margin of 25.9% were $4.2 million and 288 basis points respectively, above the fourth quarter of 2009. The improvements in gross margin percentage resulted from higher margin product mix and sale, particularly in the military and material handling and high capacity and specialized crane products, and from the restructuring and cost control actions taken during 2009, which, with increased volumes led to improve absorption.

On a sequential quarter basis, gross profit increased 31% on sales that increased 19%, as we were able to leverage our facilities and obtain improved efficiencies as well as benefiting from improved product mix. Operating expenses for the fourth quarter 2010 were $5.6 million, which included operating expenses of $1.6 million, relating to acquisitions of CVS Ferrari operating agreement and new operations started in 2010, giving an underlying cost of $4 million. This compared to the fourth quarter 2009 of $0.8 million which included the benefits of a $2.9 million gain on bargain purchase with the Load King acquisition which there gives an adjusted cost of $3.7 million for 2009. The year-on-year quarterly increase from $3.7 million to $4 million arose from the $0.4 million increase in SG&A expense, deriving from reinstated compensation cost and volume related selling costs, offset by a reduction in restructuring costs of $0.1 million.

Net income from continuing operations for the quarter ended December 31, 2010 was $0.9 million, equivalent to $0.08 per share, an EBITDA of $2.9 million, or 9.6% of sales was our highest quarterly EBITDA to date. Slide six shows a bridge between the quarter four 2009 net income from continuing operations of $3.8 million, to a net income from continuing operations for quarter four of 2010 of $0.9 million. Walking through the reconciliation table we have shown quarter four 2009 net income of $0.9 million after adjusting for the benefit of the 2009 bargain purchase gain on Load King of $2.9 million. $14.9 million of increased sales provided a gross margin benefit of $3.4 million. Additionally, through improved product mix, increased absorption and cost management actions, we improved our margin percent 280 basis points, providing an additional gross profit of $0.8 million giving a total gross profit increase of $4.2 million.

Operating expenses, that is R&D, restructuring costs and SG&A, increased by $1.6 million from acquisitions and new operations and a further $0.3 million from existing businesses. The other key contributor for the net income movement between the two periods was an increase in tax expense of $2.1 million. Quarter four 2009, had a tax benefit from reversing deferred tax valuation allowances of $1.7 million compared to a tax charge in quarter four of 2010 of $0.4 million.

Slide seven shows the summarized key figures for the full years of 2008, '09, and '10. For the full year of 2010 sales were $95.9 million, a 72% increase compared to 2009. This reflects organic sales growth of $17.1 million or 31%, achieved through our commitment of continued product development and launches and targeted international expansion, and in spite of the continuing depressed condition at the core US markets. Our backlog of $40 million at December 31, 2010, reflects this activity also, and shows an 80% year-on-year increase. Gross margin percent for the year was 24%, an improvement of 430 basis points compared to 2009, and operating expenses of $17.8 million including $3.7 million from new operations and acquisitions, with $6.3 million higher than 2009. This movement is discussed later.

For the full year 2010, we reported net income from continuing operations of $2.1 million, or $0.19 per share, compared to a 2009 net income of $3.6 million, or $0.33 per share, which included benefits and gains on bargain purchase of $3.8 million and a taxation benefit of $2.1 million. EBITDA for the year was $8.7 million or 9% of sales, our highest annual level achieved to date. Slide eight shows the familiar bridge, but this time between the full year 2009 net income from continuing operations of $3.6 million, to the net income from continuing operations for 2010 of $2.1 million. Briefly, after adjusting 2009 net income for the 2009 bargain purchase gains and acquisition, 2009 net loss was $0.2 million. Our improvement in gross profit was $12.2 million which was partially offset by increased operating expenses of $6.2 million, of which $3.7 million was from new operations. Increased interest and other expense impacted by $0.6 million and our movement in tax was a negative $3.1 million, as 2010 was a charge of $1 million compared to a benefit of $2.1 million in 2009.

Slide nine shows the movement in operating expenses in our 2009 operation, or business excluding acquisitions or new operations started in 2010. These 2009 operations generated $17.1 million of incremental sales and in these businesses we increased SG&A costs by $2 million from the combination of partially reinstating compensation costs that have been significantly reduced in 2009, and from increased selling and legal costs. Our incremental SG&A to sales ratio for 2010 was 11.7%. Slide 10 shows our key working capital and liquidity ratios which remain in good condition. Operating working capital, reduced as a percentage of annualized last quarter sales to 31%, although as we managed the 98% growth in revenues both operating working capital and working capital increased in dollar terms. Our medium term goal is to return to the 2008 levels of operating working capital of 25% of annualized last quarter sales. Slide 11 shows our capitalization and liquidity position. Our net debt to capitalization continued its positive improvement trend to end at 43.5% at 12/31/2010, and as mentioned previously, our EBITDA for 2010 was $8.7 million.

We continue to manage liquidity carefully as we continue to respond operationally to the increase in sales demand. And as a result, usage on our lines of credit increased. However, we continue to reduce term debt with a reduction of $1.8 million in the year. At December 2010, we had cash and availability on our credit lines of $4.3 million. Slide 13 provides the commercial update. US market sectors have shown and continue to show differing profiles. General construction activity is still limited. Our announcement of $13.5 million of new orders earlier this month, did however, include orders for specialized US based rental fleets which is a positive sign. Energy, military, and utility sectors, in contrast, have shown a positive increase in demand in 2010, and they're also well reflected in the backlog at December 31, 2010. Non-US markets have shown stronger activity in 2010, and our targeted markets of Canada, the Middle East, and parts of Europe have followed this trend. As a result of our international expansion effort, non-US sales have increased 20% from 2007, and represented 38% of our revenues, or approximately $36 million in 2010.

Quarter four represented the first full quarter of activity for our Italian based subsidiary CVS Ferrari with operating the container handling equipment sector. These markets concentrated in the container ports and intermodal facilities are showing increased activities, global economic activity increases and the volume of shipments across the world increases. CVS benefited from this, and contributed approximately $8 million in revenues in 2010 at margins that are comparable with our other material handling and crane operations. We are continuing to incrementally build our commercial and operational activities commensurate with market demand. And finally, as we approach the end of March 2011, like many in our industry, we are planning a strong presence with the largest trade show for our sector that is held every three years. While this will require a not insignificant additional expenditure in the first quarter, that we discuss later, we consider it a key opportunity for us to market our product to the largest trade community that will be assembled all in one place, and we expect this investment to significantly add to our brand awareness and value and ultimately to our future revenue growth. We again have a prime booth location and we're looking forward to a highly productive show. I'd now like to hand back to David for his final summary and outlook for 2011.

Thank you, Andrew. Now with regard to our outlook. With the increase in our backlog and the additional orders we've recently announced, assuming our production schedules hold true for the first quarter, we expect a significant increase in our first quarter sales for 2011, when compared with the same period in 2010. And while we expect our profits to be somewhat tempered by the costs associated with the large first quarter equipment show, which is held once every three years as we have stated, we believe that our -- we will beat our EPS from a year ago first quarter of $0.03 per share. Predicting the outcome for the rest of the year is a lot more speculative, especially with our belief that we will see slow growth in our overall economy. However, assuming the demand for our products from our key markets continue to perform as they have, we expect a double-digit growth in our overall sales.

Our operating agreement with CVS Ferrari will result in additional sales on top of this growth. On the negative side of the ledger, we are experiencing supplier and raw material price increases. We are passing some of those increases on in the form -- on in the form of increases in our product prices where we can, and we expect the realization of absorption benefits from the increase in our sales to also assist in lowering our operating costs. The net of all this is we are optimistic as we enter into 2011. We are gratified with the rebound in our results in 2010, and most importantly, we remain committed to continue with the growth and expansion of our Company in order to deliver superior results to our shareholders. With that, Mikela, I would like to turn it over to questions.

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) And our first question comes from the line of Ned Borland with Hudson Securities. Please go ahead.

Hi. Good afternoon, guys.

Hey, Ned.

Nice quarter.

Thank you.

I -- I just want to sort of parse your statements on the guidance again. You said you will exceed the $0.03 you did the fourth quarter of last year, and then you said something about CVS being on top of that. You know, I guess if we could just sort of think about maybe where the CVS -- what that contributed you know from a profit standpoint in the fourth quarter, and would you expect a similar amount in the first quarter?

Yes, thanks, Ned, for the question. I think it's always good to try to figure this stuff out. What we said was, our sales will be up significantly in the first quarter. Those include CVS, and when we compare to the first quarter of a year ago, not the fourth quarter, but the first quarter of a year ago, we had $0.03, and we expect to beat that even though we have the cost of the -- of the CONEXPO which is coming up starting next week. So, and I would expect our operating agreement for now, what we've stated was, we had $6 million in the fourth quarter, and I would expect a similar number in those first quarter numbers that we -- you know, the first quarter numbers that we will report, and I would expect the margins from that business to be consistent with all our other margins. So it seems like for now CVS is -- is earning -- is reporting profits at the same level as the rest of our Company.

Okay. And just speaking to SG&A related items, it looks like the fourth quarter you had, I don't know whether we could call it catch up from the reinstatement of certain compensation items, or whether that's a new run rate, and then you have these additional expenses in the first quarter with CONEXPO and the -- and the audit fees -- audit and legal fees. Just trying to think about SG&A on an absolute basis. I mean, should we think about the first quarter SG&A being consistent with where you were in the fourth quarter, or -- ?

Well, we had in the -- in the fourth quarter -- you know, you're right, we had -- we had catch up from previous years. We did accrue bonuses in the fourth quarter, which we haven't done in several years, and -- and, but I think, you know, the reinstatement of normalized compensation is -- is what's necessary to make sure that we have our employees satisfied as we -- you know they were there for us very loyally and appropriately during the downturn and we of course want to make sure that they are compensated with commensurate with their abilities and with the industry. And, I don't know Andrew, other than the expenses that we identified in the first quarter, I don't know of anything else. We do have -- we did have -- we do have one more -- we didn't catch up on all the increases in salaries last year. We had one more go in the first which was 5%, which is a small addition to the SG&A in the first quarter but shouldn't be -- I mean in relation to everything else, it's not terribly significant, but there's one -- one more increase that went into the first quarter to catch up to 2008. We're basically back to 2008 salaries.

Okay. So, I mean, just to sum that all up, I mean should we be looking for operating expenses in the you know $5 million level in the first quarter?

I don't have that specific information. I don't know, Andrew, I think we should probably say it would be -- I think it's going to be lower than the fourth because of the bonus accruals that you had in the fourth.

Five wouldn't be too far off I shouldn't have thought.

Okay. And then on gross margin, I mean obviously very impressive gross margins in the fourth quarter, but you guys did call it out, raw materials, and I'm just wondering about underlying factors such as product mix and -- and increased volume leverage, you're coming in with a much stronger backlog than you have in the past. You know, is -- is gross margin you know looking to be -- you know I mean, I guess if you could just sort of help us with the -- ?

As you're building your model, Ned, I wouldn't -- the mix continues to be positive. Obviously as -- as Andrew noted, our commercial crane business, which, of course, is some of our best margins, continues to be good. However, we do have price increases that everyone in the industry, including us, are experiencing. We're offsetting some of that with price increases and absorption, but I -- I wouldn't, for modeling purposes, see anything higher than what we've done in the -- in the fourth quarter, because I think it's just -- it just -- you know as you go through these cycles, you have -- you have continued pressures. But, you know, of course as we said, we'll get some absorption benefit, but I wouldn't build a model with any higher gross margins.

Okay. And then just finally on -- on the military products, it looks like you got some orders in that last batch that you guys announced. I mean, what's the outlook for your military business there?

Military is always been a tough one to call, because it doesn't seem like the -- the companies that we have contracts with, which, as you know, we've stated in the past are military and quasi government organizations, things that are happening around the world all impact that, but they don't seem to work on a quarterly basis. So they -- they give us the orders when they want to give us the orders, and we expect to receive more orders, but it's -- it's lumpier business, and it's not as easy to predict. So I would say that, you know, I wouldn't expect huge increases in military orders in 2011 over 2010.

Okay, thanks.

Thank you, Ned.

Thank you. And our next question comes from the line of Joe Best with Roth Capital Partners. Please go ahead.

Good afternoon. I'm curious, did you give a number on what CVS contributed to the backlog for the quarter?

What we contributed to the backlog? Do I understand the question, Andrew? I don't quite understand the question.

I think the question is how much of the backlog is CVS.

Oh, I'm sorry, excuse me, I didn't pick up that piece.

CVS is around about $6 million.

Okay. And then can you talk a little bit more about the markets that you are trying to -- that you see good growth in for CVS?

Well, CVS, as we mentioned, is in -- you know the intermodal and the -- and the part business, and -- and that business, is of all the businesses we deal in, probably some of the more robust markets right now. It's -- you know it follows the movement of -- of goods around the world. That's you know, that's obviously when you have a lot of container movement, which is what we're experiencing now. Concentration clearly in Europe, which is not a bad place to be in the port business these days, because again, as you have crises and issues in North Africa and other areas, Europe looks a lot more stable, and so that business is very, very strong and we expect it to the result in some good business for us as we go forward. And as we stated we expect our operating agreement to -- to continue to proceed into a purchase. So you know, while the immediate near term quarter will probably be somewhat flat, of course, it is still a very nice contributor to our overall business. We expect that business to have some good vitality as we proceed.

Okay, great. And then you've had some -- some conversations with people in -- in Russia and Ukraine. You kind of commented a bit about that last quarter. Could you give us an update on that?

We -- we had some -- some visitors. And again that -- that crane market is also showing some better life. We've had some visitors. We've had another order or two, as I recall, Andrew. I don't know if you remember anything else specific, and we expect that -- expect that business to finally show some life after being pretty knocked down pretty hard by the 2009 downturn.

Okay. And lastly, could we get a number on how much you think CONEXPO's advertising is going to add to the quarter?

You know, I don't think we really know specifically. That's the -- and you mean in -- in new -- new sales?

Just from a SG&A standpoint.

How much -- well what we said is we have $450,000 in costs associated with CONEXPO which is in our release. Is that the number you're looking for?

Okay, yes, that's the one.

Okay, that's in our release.

Thanks, Joe.

Okay, that's it, thank you.

Thank you.

Thank you. And our next question comes from the line of Alex Blanton with Clear Harbor Asset Management. Please go ahead.

Good afternoon.

Hi, Alex.

Good afternoon. I'm new to the Company. I did attend one session with you a few months ago.

I recall, I recall, of course.

But, could you just comment on the -- the overall nature of your business in terms of whether it's concentrated or fragmented? I know that in some parts of the lifting business, like AWPs, that's very concentrated. There are only two suppliers. Telehandlers is less concentrated, but in the US it's -- it's concentrated. Truck mounted booms in the US, you have -- I think Elliott and Altec as biggies. I don't know who else -- ?

I don't know how biggy they are, but they're -- what we say in that business, Al, in truck mounted booms, as you say, in that business we say we are number two, and the real competition for us is Manitowoc. Elliott and Altec are in the business but not -- Altec is much more of a utility oriented company, and of course Elliott is much more of a sign crane oriented company. But -- and it's fragmented from the standpoint that in each one of our products, we -- we don't have the same competition for every product, so you know, when you look at AWP and say okay, Genie and JLG, but we -- we have different -- we have different competition.

Is Elliott a lot larger than you are?

No. I shouldn't say that. They're a private company, but I know the owners, and they're -- they're wonderful people, and -- and all I get -- all I get is rumors and scuttlebutt, so I shouldn't say -- I shouldn't say anything, because I haven't seen their financials so I apologize.

Okay, so their sign business, Altec is utility, do you compete in those markets?

We have a -- we have a sign crane product. Elliott is -- is much more dominant in that than we are. We have products that go into the utility business of course, but Altec is much bigger and stronger, those are both private companies in that sector. But those businesses are very small in relation to our total business.

Okay. Well, I can go into more offline. One other thing along these lines is, in the port business, which you seem to be getting into, this is your first entry?

This is -- well, in my case, I had the experience from the port area in my years at Terex, and liked -- I the sector, I like what I perceive as being -- what we perceive as being growth going forward in that business, and I only -- but I only like certain aspects, I don't want to be -- at one time, at Terex, for example, we owned SeaCo which is, you know, a massive, massive you know ship-to-shore cranes, and that's -- that's not something I'm interested in.

Okay. Well again, it's an interesting area. I think it's rather fragmented, is it not?

We again, in the kind of -- you know, we get very specialized in the equipment that we produce, because we're trying to -- I mean, that's part of our strategy, as I stated in my prepared remarks. And so we're trying to get into areas where it's -- there's not -- there's Terex and Calmar are the two principal players in the area that we try to -- try to get involved with.

In -- in the port business?

In -- in equipment that we supply to the ports and to the -- and to some of the other equipment --

Are there other acquisitions you could make, I guess is what I'm getting at?

The answer is we think we can, but we also want to be very disciplined in our acquisitions, just like we have been in the past so that we maintain a balance between our acquisitions and the growth of our company.

Okay. Couple other things. What is this bargain purchase?

In 2009, we bought Badger Crane, which is a lovely crane out of Winona, Minnesota, and deals principally in the railroad market, and -- and in -- and then at the end of the year we bought Load King, which is a material handling equipment we bought from Terex, from Genie. And in the -- in the wonderful world of accounting these days, they have a rule, and Andrew, I'll surely get in trouble here, but I'll give it a try, where, we purchased -- we purchase for a stated value less than assets of the value on the companies books, so therefore they book a gain in the period in which you purchased the asset.

You buy at less than book value, so that's -- okay.

It's an immediate gain in the period in which you buy. Not like the old days where you amortized those and I think that was a -- I think it was a good change actually -- .

So, it's a nonrecurring gain.

That's right, exactly.

Okay. And finally, how much leverage is there in SG&A? Because you've got a great gross margin to almost 26% here, this year, this fourth quarter, I mean.

Yes.

But -- but the operating income is only 7%. So the difference is 19%, and that's -- that's about double what -- what you normally see in a mobile equipment company.

We tried to -- we tried to explain some of that. Obviously there's more to be done. We tried to kind of identify what some of those things were, some of it of course was the fact that you had more -- more acquisitions and more companies reporting to that SG&A, so you initially have some -- as you restructure and kind of get these companies in line with the rest of our Company, you have some costs that go through, and we had some catch up because we had all taken -- you weren't around for the benefit of the 2009 year when we all took reductions in salary and then stayed there until we could see that we were on a solid recovery so we reinstated some of that during the year. And I think -- I think as you go forward, you will see we have internal goals which significantly reduce our SG&A as we go forward, because of the fact that we think we're -- I think we're around 17% for the year, in 2010. Is that right, Andrew? Is it 17.1%?

Correct.

And our goal is to -- is to drop that down to you know maybe more in line with 14%, 15%. We're never going to reach the 8%, 9%, and 10% that you see in some of the -- some of the more companies that -- you know one of the reasons why we do have higher margins is because we have higher engineering costs, higher engineers, more engineers, because we need to make sure that the business model that we have is being followed, and then -- and then of course, what we have to try to do is to have less G&A. And that's -- that's the goal, and that's the challenge as we continue to proceed.

Okay, thank you.

Thank you.

Thank you. (Operator Instructions) Your next question comes from the line of Jeffrey Loan with Tuxedo Road Assets. Please go ahead.

Hi Dave. Congratulations on completing the Dale Carnegie class.

I probably should take that, right, Jeff? Oh, Jeff.

Andrew, Andrew, can I get some comment on the increase in accounts receivable, please?

On the year-on-year basis?

Yes, please.

Absolutely. As you saw our revenues increase on the quarterly basis, 98%, and on a -- a full year basis, I think it was 72%. So we've seen a significant increase in -- in accounts receivable purely on the -- on the back of our volume basis. If you look at -- let me just turn to the slide, the working capital slide. You can see that days sales outstanding at the end of quarter four was 60 days, which is an improvement of seven days on the same period last year. So I think those are probably the -- the key relevant facts for accounts receivable.

You feel comfortable with the ratios?

I always look at -- I always look at several rations, Jeff. One of the big ones is receivables to payables, which I'm very comfortable with. Days outstanding of course is very critical. But on the other hand, as we expand European and international business, there are -- there are some norms that are different internationally than there are in North America. We pay -- we pay everything a little faster by -- by standard and by practice, where as around the world, they have a little bit of a different practice, which is not -- you know I'm not talking huge, but you'll see -- you'll see some -- some sliding of our days outstanding, I think to a -- to longer period. I don't know what your expectations are Andrew, but, of course we'll fight that tooth and nail. That's what my expectations are.

My assumption would then be, Dave, that given the financial performance so far, which has been terrific, that you might be in a position to have a conversation with Go America about your lines?

We're always in -- not always, but generally we have a lot of conversations with our -- with our banker who has been buying and solid behind us throughout the -- the last couple years, or of actually since the beginning we started this with our banker. And you know, I'd also like to mention that, of course, we've had an increase of sales from $55 million to $95 million, so $40 million. And actually a decrease in our availability, and we've had an increase in our availability from the fourth quarter to the third quarter, so we manage our cash as, you know, we're squeezing that nickel as hard as we can. And I think if we see similar growth going forward, you know, we'll continue to do that same thing we've been doing. Our expectations are that we will manage and our bank has been fully -- fully supportive, I can't say enough about how our bank has been supportive of our efforts around the world, and whenever we need something, they have been working with us. So, thanks for the question, Jeff, appreciate it.

I just want to add that the whole team, down to the guys doing the floors, have done a great job, and thanks.

Thank you, Jeff.

Thank you. And our next question is a follow-up question from the line of Ned Borland with Hudson Securities. Please go ahead.

Hi, guys.

Hi, Ned.

Some CVS related questions here. First, just some clarifications. CVS sales contribution in the quarter was $6 million?

That's correct.

And the backlog was $6 million also?

It's $6 millions, is that right Andrew?

Yes.

Okay, and then finally, if you were to you know, effectively purchase CVS, you know, would be the additional cost issues be with that? You know, would there be some purchase accounting issues involved, or you know? I guess just help us, because this is kind of a different deal than a standard acquisition.

Yes, you're right, you're right Ned it's a little -- and because of that, I don't think we have all the answers yet. My expectations are, that there would not be -- because you're not buying -- you know this is not a case where you're picking up a lot of -- you are picking up some assets but you're not picking up a bunch of assets like we have in some of the other situations. Because some of those assets are staying. With the course of course to pay for -- to the creditors. I don't expect a bargain purchase or huge amortization. As we've said in the past this will be a pretty immaterial event when we close the transaction.

Okay. And just one last one. I've noticed that the rental fleets are starting to upgrade some of their equipment, and I think you guys referred to it in the release as an area that's kind of slow. I guess if you could just give us some color on the rental fleets. And then, finally, just, you know if rental activity is that generally a good indication for you guys in terms of a pickup in demand?

I'm really -- I'm really glad you asked that, Ned, because what I think we said was, that in the last order that we announced we did have some pickup in the rental fleets in that order and that group of the orders that we received, and we are seeing some increase in the -- in the rental. Now, the -- now the rentals for us, of course, as you know, are not you know the type of rentals that you see at United or Sun Belt or some of those type of places, because it's more specialized heavy duty crane rentals, but those -- those rental fleets are also starting to see some life. So, I think, you know, we're cautiously optimistic that-- that means we're going to start entering a period where they will start to replenish some of those fleets that they've depleted over the last 18 months. And there's some significant opportunity there. So, hopefully we will start to see more of those orders come through.

Okay, thank you.

Thank you, Ned.

Thank you. And at this time I would like to turn the conference back to management for closing comments.

Thank you, Mikela. Thank you everyone for your interest in Manitex International. We look forward to speaking with you again in the future. Thanks again.

Ladies and gentlemen, this does conclude our conference for today. We thank you for your participation. And at this time you may now disconnect.