Manitex International Inc (MNTX) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Manitex International Inc. first-quarter 2012 results conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions). This conference is being recorded May 10, 2012.

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

Thank you Erin. 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 May 17. We will again be using slides to assist in this presentation which are available through the webcast or directly from the Investor Relations section of our website.

Refer to the first slide regarding the Safe Harbor statement. Please review this statement and our SEC filings for further guidance on the risks associated with our Company.

We've organized our call today similar as in the past with my leading off by making a brief opening statement followed by a review of our results by Andrew and a closing statement by me. Andrew and I will then respond to any questions.

So please now refer to Slide number 3. We enter 2012 with a solid backlog which has continued to grow. Our principal goal for 2012 is to deliver on our backlog, and the 35% increase in sales in the first quarter demonstrates the beginning of realizing our goal. However, we still have a long way to go.

Orders in the first quarter continued to come in at a rate which exceeded our production levels. This is, as we've stated on numerous occasions, being driven by the North American energy markets and primarily at our Manitex division. To respond to the demand for our products, we have increased production at our Manitex facility, where we will realize steady gains for the rest of this year that should translate to a sequential quarterly revenue growth for our group.

Going beyond 2012, we are exploring further expansion at our other facilities to assist us in meeting increases in demand. But realistically, these further production options will not be realized until 2013 although, in order to advance to the next level, we must begin the process now.

Also, orders are now extending into the second quarter of 2013. So, we believe it is prudent for us to look now for other ways to grow our production. However, to be clear on the subject, we are not looking to build facilities or buy facilities but to better use the facilities we currently have within the Manitex International system.

Further to our sales growth, and most importantly for our shareholders, is the continued growth of our profits at a rate which is greater than the growth of our sales. We see no change in this trend as we progress through the 2012 quarters. We will also continue to fund our growth as we've done in the past with current cash flow and use of our banking lines. Just as a reminder, our primary banking facility matures in 2015.

Finally, we believe we are poised to introduce several new products in the second half of 2012, which we believe will continue to expand our product offering in high-growth markets. However, we are not considering these introductions of these products in our 2012 results, but rather we believe this will further expand our business in 2013 and beyond.

With that brief overview, I would now like to turn it over to Andrew to review our results and discuss further our commercial development. I'll wrap it up with comments on our outlook. Andrew?

Thanks David, and good afternoon and welcome everyone.

Before discussing the Company's first-quarter 2012 results, I'd like to start out by providing a general business update which is summarized on Slide 4. Overall, we are pleased to say that the strengthening business conditions we saw at the end of 2011 continued in pretty much the same vein as we moved through the first quarter. Automation of the energy sector in North America in particular experienced high levels of growth in demand from the expansion of fields in several states and Canada.

Powerline construction demand has remained firm and general construction activity, which in historical terms is still low, has slowly increased during the first quarter and has also been helped by the relatively warm winter period in the Midwest.

European markets remain slow, being impacted by economic uncertainty and, where there is demand, the lack of available credit to customers and stricter bank lending continues to impact customers' ability to purchase.

In South America and other non-European geographies, inquiries related to general construction projects, mining and energy, are showing more positive trends and we have seen a favorable response to recent marketing activity in these regions.

In summary, with oil and gen and certain commodity prices still at a relative high, the energy and mining sectors continue to be the strongest demand sectors in the US, Canada and internationally, leading to demand for a range of Manitex products but especially for the larger tonnage boom truck cranes.

With regard to our products, the demand that has been driven by the energy and powerline construction sectors remains skewed towards our higher tonnage boom trucks and specialized trailers. These products show very favorable comparisons to the first quarter of 2011 in terms of revenue and order intake, some of which is also a positive response to our continued product developments. All our businesses continue to invest in R&D for new products and features to drive profitable growth in our target markets.

In this past quarter, we launched a new increased capacity 12,000 Noble brand rough-terrain forklift and new LoadKing trailer designs providing longer load and rougher terrain capability targeted at Oilfield Services. Also launched was a new trailer specifically designed around transporting the new tier 4 Caterpillar dozers which require higher load capacity. These products from across the Manitex International portfolio demonstrate our objective to fulfill a wide range of product requirements in target growth markets and provide customers more reason to choose us for their product needs.

As we reported in April, our backlog at March 31 increased to a record $133 million with order intake of approximately $50 million in the quarter, representing an order booking to revenue billing ratio of 2.2, even after accounting for the output increases we secured in the quarter. All product groups contributed to the increase, but boom trucks and specialized trailers in particular were very strong.

CVS was awarded a tender for almost $4 million for supply of terminal tractors to a major South African customer with an opportunity for a potential follow-on order. Also during the quarter, Liftking delivered the first military material handling unit to the Royal Australian Air Force and we expect the balance to ship during the second and third quarters.

As David has already discussed, our facilities, in conjunction with the supply chain, are ramping up output to match ongoing demand. This should convert to higher levels of sales each successive quarter in 2012.

Now, turning to the financial results, Slide 5 of the presentation shows the key figures for the first quarter of 2012 with comparatives for both the first and fourth quarters of 2011. First-quarter 2012 revenues of $42.8 million increased $11.1 million, or 35%, from the first quarter of 2011. Continuing strong demand for Manitex boom truck products, particularly from the energy and powerline construction sectors, was responsible for approximately 60% of the increase. For these sectors, the higher tonnage and higher reach boom trucks represent the principal product in demand, complemented by more specialized mid-range capacity units. The remaining increase in year-over-year revenues was generated by LoadKing trailers driven by strong end-user demand in the energy sector and the Equipment Distribution segment due to improved demand for used equipment in rough terrain cranes.

Material handling products were slightly lower than the comparable period as lower military and governmental sales were only partially offset by increased sales of CVS container handling equipment. Compared to the fourth quarter of 2011, the increase in revenues was 17%, driven by planned increases in output to support the demand for Manitex product, which accounted for almost 70% of the increase.

In general, we have been pleased with the response of the supply chain to our ramp-up. While this is still work in progress, we anticipate the pace of component deliveries will continue to accelerate in support of our objectives.

Quarter 1 2012 gross profit of $8.6 million was a $2.1 million increase, or a 33% year-over-year improvement driven by increased sales volume. Gross profit margin was 20% compared to 20.4% for the comparable quarter and 20.5% for the fourth quarter of 2011.

Our mix of sales has been relatively consistent over the recent periods, and we currently do not see any significant change to this as we look forward in 2012. Material cost pressures continue to be addressed through a company should sourcing changes and consolidation, sales price increases, and improved absorption.

Net income for the quarter of $1.3 million or $0.11 a share was an increase of $0.8 million, 183%, or $0.07 per share over the first quarter of 2011. The 35% year-over-year improvement in revenue resulted in the previously discussed increase in gross profit which is partially offset by additional expense for R&D of $0.3 million and SG&A of $0.5 million.

R&D activities focused on the launch of new product in the second half of the year, particularly again for the energy sector, but also a new product for the general construction market.

The SG&A increase reflects the impact of increased sales related costs from the expansion of our sales organization and expenses from increased volume, and additional performance-based compensation. Overall SG&A expense for the quarter improved as a percentage of sales and was equivalent to 12.6% of sales compared to 15.4% for the first quarter of 2011.

EBITDA for the quarter was $3.4 million, or 7.9% of sales, an increase of $1.3 million or 65% from the first quarter of 2011 and another record quarterly level for the Company.

Finally, as already discussed, backlog increased almost $50 million in the quarter, giving a record level at March 31 of $133.3 million.

Slide 6 is a bridge between the Quarter 1 2011 net income of $0.4 million and the net income for Quarter 1 2012 of $1.3 million. Walking through the reconciliation table, Quarter 1 2012 sales increased $11.1 million, which provided a gross margin benefit of $2.3 million, but there was a small negative impact of $0.2 million from product mix and material costs. The combination of the volume and mix provided a net gross profit increase of $2.1 million.

R&D increased by $0.3 million from our development activities and SG&A increased $0.5 million. Although we did not have the expense of the ConExpo exhibition of Quarter 1 2011, as we have previously disclosed, we have invested in additional sales and marketing resources in several of our operations to improve geographical coverage and support to our dealers and to drive further revenue increases. These costs, together with volume related sales expense and increased performance related compensation, account for the SG&A increase.

The other key contributor to the net income movement between the two periods is an increase in tax expense of $0.4 million generated from an increase in taxable income since the effective tax rate remained relatively constant, decreasing to 34% from 34.6% for the first quarter of 2011.

Slide 7 shows our key working capital and liquidity ratios. Working capital increased $3.5 million from December 31, 2011, with increases in receivables and inventory totaling $12.6 million being partially offset by increased Accounts Payable, short-term revolving credit facility, and accrued expenses totaling $9.1 million. This increasing working capital helped support first-quarter growth of 35% in revenue and further projected quarterly revenue increases as we move through 2012.

Our current ratio of 2.1 and other working capital ratios remain strong as we have moved through this growth phase, although this quarter the current ratio was adversely affected as our specialized Canadian revolving export finance line moved into current liabilities from long-term due to its renewal date in March 2013.

Inventories increased since the end of 2011 as we have ramped up production and to our operations and the supply chain has started to respond to our schedule increases. Increased work in process reflects the improvement of the pipeline of product for the shipment in the next quarter with some longer lead time military orders in the backlog prepared to ship.

Slide 8 shows our capitalization and liquidity position. Our total debt increased $3.1 million in the first quarter from December 31, 2011 to $45.3 million, or 3.6 times trailing 12 months EBITDA. Increased borrowing of $4.2 million on lines of credit and the Italian working capital financing were offset in repayments on other long-term debt of $1.1 million. Borrowing availability under the North American lines of credit was $5.8 million at the end of the quarter. Trailing 12 months EBITDA of $12.5 million provides an interest coverage ratio of 4.8 times at the end of the first quarter, an increase of 0.4 times from the end of 2011.

Now, I'd like to hand back to David for his final summary.

Thank you Andrew. As I stated in our last quarterly call, our outlook and plan for 2012 is quite simple. That is to execute on the growing demand for our products. This point became a little clearer to external parties with the recent announcement of the large increase in our backlog. If we deliver on our orders as we expect we will, 2012 will be a substantial growth year for Manitex.

We're also hopeful that the breadth of the economy -- breadth of the economic recovery will continue to expand to more conventional commercial markets as we go through 2012. If we continue to see consistent demand for our products as we continue to increase our production capabilities, we see no reason why we should not see consistent growth in sales and profits extending beyond 2012 into 2013.

With that, Erin, we would like to open it up to questions.

(Operator Instructions). Fred Buonocore, Rodman & Renshaw.

Good afternoon. Could we talk a little bit more about your utilizing available capacity in some other facilities outside of your Georgetown, Texas facility, just in terms of what that will entail, where the opportunities lie? Realizing you are not building new buildings or anything, what kind of investment will be involved there, and is that an opportunity maybe to absorb some more overhead and possibly improve margins going forward?

Sure Fred. I'll try to make this relatively simple, which of course, as you know, is a complex process as you try to manufacture products that are similar but are different from one location to another. As you know, we have several plants which most -- I guess the most obvious one is Badger Crane which obviously makes cranes, straight-mast cranes similar to the cranes that we make at Manitex. We have a facility which is very similar in size as what we have at Manitex but is producing at a much lower level. So we have a significant capability there to expand, and we are in the initial stages to review that, which, again, it will be -- we won't be taking our most complex products from Manitex and trying to produce those at other places but we will be taking the more standard products and just increasing the amount of our capabilities, so some of our backlog and some of our future orders we are considering to look at some of those from some of our other facilities. I gave an example of one. But that will have a significant impact for us as we roll into 2013.

In terms of your ability to get sequential throughput improvements and execute on the backlog?

That's correct.

Good. On that note, just as we move closer and closer to 2013 and the backlog extends farther into next year, can you give us a sense for how you've seen order trends going since the end of the first quarter? Do you -- is there any sense that things may slow down in terms of the intensity of orders, or are you kind of continuing to see the same demand levels, particularly from the energy market?

We haven't had a whole lot of periods since the end of the quarter, but I think I'm probably better off just staying consistent with what we kind of said in our remarks. But that should be enough. What we have said is we have continued to receive orders which exceed our ability to produce, and so we continued up to this point to receive orders at a good pace.

Understood. Thank you. I'll get back in line.

Mark Tobin, Roth Capital Partners.

Hi, thanks for taking my questions. I guess, just to help characterize the backlog and your throughput capability at this point, can you give us a sense of what your current leadtimes are for equipment, and what you would view as typical leadtimes? I guess just trying to get a sense of how much is sales being impacted right now by the bottlenecks in Georgetown?

So I want to make sure I understand, so you're asking if -- when generally we could be delivering on orders that we are receiving today?

Correct.

In general, while we have increased our production, and as I have said, we will continue to increase our production between now and the end of the year. That's all built into our production capabilities. And so, generally speaking, orders that are received today will be produced or will be delivered in 2013.

So kind of a six- to nine-month leadtime as far as orders to shipment?

Today at our Manitex facility, that's right.

Okay. What would you view as I guess a more optimal or healthy level?

We've been as high, if you look at -- obviously the cycles that we are in are different than the cycles -- this is a different cycle than what we experienced in previous periods for us because, in the 2002 to 2007 period, we had some long leadtimes there as well. But it was based on different dynamics because of course we had commercial residential, lower tonnage, higher volume but not as specialized equipment as what we've developed and located into now. So we've seen these kind of levels, and it's consistent with where our competition is at.

But typically, obviously, I'd like to, within the next three to six months rather than the six to nine months, produce product and get it out. So I'm hopeful that we can increase or expand our production, both internally and in other facilities, shorten that time period, and continue to, if we are lucky, have an expansion and as I said a continuation or a growth of the economic cycle, the breadth of the cycle to include other areas and have this go for a couple of years.

That's helpful. And also looking at the backlog from a gross margins standpoint, can you give us a sense of the margins of the orders that are in your backlog versus what you've been reporting, or have you implemented price increases to help offset some of the material cost increases that you've seen?

Yes, I'll try to be pretty general overview about this, because I'm trying to not -- I want to control our expectations and keep -- and if you're modeling or anything like that in the marketplace, I would not significantly expand our gross margins. But because we have a mix of products, obviously, we have the higher-margin products that are the more specialized ones that we have at Manitex, and that represents a certain percentage, a good percentage and a growing percentage of our backlog. Clearly we stated that many times recently. But we still have a large batch of other products which have not experienced, or are not participating in the same growth period that we are in Manitex and to a certain extent on LoadKing. So you just have to blend all that together in the mix, and you come up with -- we are hopeful that, as we go through this and as the percentage of Manitex product gets larger in our production, we should see improvements. But we are just trying not to be -- we are just trying not to be too exuberant in our projections.

Okay. Then on a price adjustment side, can you comment on that?

We did two price increases last year, in the middle of the year and at the end of the year. So all of our backlog has -- I would think the majority of our backlog has those price increases built in, certainly as it relates to the Manitex products. We have announced an increase for products that we are taking now for delivery into 2013.

But on the material side, prices have been under control. So we haven't -- so right now, we are in a good environment from the standpoint that we certainly -- you certainly have suppliers that are taking advantage where they can, but overall material prices are holding pretty firm.

That's helpful. I'll jump back in the queue. Thank you.

Benjamin Sexson, First Wilshire Securities Management.

Good afternoon. Congratulations on a great quarter. I was wondering if you could just dig a little bit more into the SG&A of -- and give us a sense for kind of going forward maybe how we should think about fixed versus variable costs in the SG&A.

I'll take a stab and let Andrew respond to that as well. But I mean, generally of course the variable part of our SG&A, generally speaking, is the selling part, of course. That's not a huge percentage of the SG&A obviously. The biggest percentage is the G&A. And as Andrew mentioned in his remarks, we had some increases year-over-year in those areas, primarily related to some additional people that we've added on which we think is a good investment for the long-term benefit. But it's not -- while certainly I can't remember exactly what you said, Andrew, $300,000, $400,000? What was the number?

It was $400,000 on the quarter, yes.

Yes, $400,000. I wouldn't think that we would have increases from G&A to that magnitude as we go forward. I think we'll have more consistent G&A quarter-over-quarter as we go through 2012. However, we also have a performance-related plan for our people, and as they continue to hit those performance-related goals, we will have performance-related bonuses that we accrue on a quarterly basis. That was certainly a percentage of the increase as well.

Okay. So do you think, as a percentage of sales, we could potentially see it continue to move down, or --?

Yes. We were 12.6% in the first quarter, and as we said, our sales we expect to consistently grow quarter-over-quarter. So while I wouldn't think it would -- I don't think you are looking at 2% or anything, but you certainly would have some percentage as your sales increase and your costs stay relatively constant with maybe an increase to the selling component of that, and continuous performance related bonuses that -- but your overall percentage would probably be down from the 12.6% as you model it.

Okay. That's helpful. Is there anything you can say about in terms of just them mix in the backlog? What percentage of your business do you think Manitex will represent going forward or anything you can kind of talk about in terms of your product mix expectations?

Yes. I think, consistent with what we've said, is that clearly as a percentage of our backlog, the biggest percentage of the growth in the current backlog is in the Manitex products. Those are, as you would expect, the higher-margin products. So I would hope, and we are -- our expectations are that as we go through and roll through the quarters, we will be producing more Manitex as a percentage of our overall sales. But again, I would caution you that we do have other products that don't participate or don't enjoy the same amount of margin that we have at Manitex. So you have to look at a blended rate.

Okay. Is the time to delivery pretty comparable across the product lines, or --

As you would expect, there are some that have very short periods, and we have others that we have already mentioned are six- to nine-month periods.

Okay. That's really helpful, thank you.

Kristine Kubacki, Avondale Partners.

Good afternoon. I'm just wondering maybe a little bit more directly, you talk about the capacity expansion. Can you give us a little bit more granularity about the cadence of this capacity expansion, particularly as it relates to Manitex? Over the next few quarters on maybe just a percentage basis how we can think about how much capacity can come online?

Yes, I'm glad you asked, Christine, because, again, I want to mention it won't be -- we won't be adding more facilities in the next couple of quarters. We'll be going through the process to increase that capacity outside of Manitex, if I understand your question correctly, outside of Manitex for next year because the process will take -- in order to make sure that we have similar quality, consistency, the whole process will take some time. We are just starting that process now.

Now, the Manitex expansion in the Manitex facility, we've started at the end of the third quarter of last year. So that's well underway. That will just be consistent growth. We mentioned that we've added more personnel; we've added another shift. We are just consistently growing. We've increased our purchase orders from our suppliers, from our vendors, as you know. We run the variable cost model, so we buy up all of our components to our specifications. Then once we receive all those components, we then assemble which is not a very long process, but it just takes time to receive all those components, so that will just be, again, consistent growth as we saw in the first quarter throughout the rest of the year.

Okay. That's helpful. I guess a little bit on the component ramp-up, is it more specific in terms of your suppliers that are constrained, or is it just generally broad-based that the suppliers need to ramp up?

We had specific suppliers and we mentioned on some of those in the past, and most of those have worked their way through. But we still have fabrication issues because, as you know, you've seen our facilities, everything from outriggers to each individual bar or each individual piece has to be fabricated someplace. A lot of those fabricators significantly reduced their capacity or went out of business after the '09 period. So that's taking some more time, but, again, we are making progress on all that and we continue to expect to make progress as we go forward. But the main -- we've had issues over the years with chassis -- not years, but quarters -- of chassis, cylinders, and most of those things have worked their way through.

Then I was just wondering in terms of end markets, generally there's been some comments this earnings season around some of the natural gas activity has slowed down. I know your backlog continues to grow. Are you seeing anything out there with commodities or any activity out there that suggests things might weaken here, at least in the near-term?

You mentioned natural gas, and of course that's quite obvious that with the prices the way it is, people will be converting some of their rigs from gas to oil. But you know this business very well. It's long leadtimes, long projects, and so far it seems that the demand has stayed consistent. Certainly, again, depending on who you read and who you believe and all that stuff, oil rigs are expanding significantly over the next few years, and so we -- at least they are proposed to expand significantly, and so we expect that, for now, our growth will continue.

We have not seen any -- while we certainly have seen slowdown in the gas line, that's more than made up by mining and oil business.

Then finally, you call out in the recent news here you call out the European market. I was just wondering. Is a general -- has it been weak ongoing or did something worse than this quarter around the European markets?

I think it's been -- again, this is not just something unique to us. It's been a slow process, but a difficult process in Europe. I kind of relate it to North America in 2009 from the standpoint that Spain, Italy, France, England, just a number of places that are in a slow period, whether or not Germany is -- it's probably not in a recession, but they certainly are cautious. And so you just have a lot of port activity because most of our activity in Europe is port activity through our CVS Ferrari business. Fortunately for us, that company has, for many, many years, expanded beyond just the European core base. Andrew mentioned in his remarks a nice order for South Africa. We announced an order for Brazil not too long ago, and so it's -- but the fact is Europe is in a difficult period, and it looks like that's going to last for a while. So fortunately, we don't have a big investment there and we are doing fine and we expect to do fine. But our real growth, our real strong growth is through our other businesses right now, which are more than compensating for anything we experience in Europe.

That's more than helpful. Thank you very much.

Josh Goldberg, G2 Investment Partners.

Just commenting on a couple of things, one was you mentioned on the call today that your competitors are seeing the same sort of constraints that you're seeing. My first question is can you talk a little bit more about that, what's going on in the industry right now?

Again, our competitors, at least the public companies, are much, much, much larger than us. And so they have a much different product profile than we do. But in the niches that we are in, they are certainly in the same competitive -- have the same competitive situation as we have. So they have small areas where they manufacture similar products that we do, and they are experiencing the same leadtimes and that type of thing. That's the point I was trying to make. Thanks for clearing it up for me.

Your comment about significant growth ahead, I would think that the first quarter is a significant growth quarter, 35%, 180% earnings growth. Do you think that can continue at that pace or maybe go faster as it we kind of proceed through the year? Because I know last year you kind of leveled off at the end of the year and it sounds like you're going to continue to grow now throughout the year.

Yes, I'm really glad you asked that. That's a good question and one I am happy to clarify. Last year, we made a conscious decision to level off and just be consistent because, if you remember, you really had the situation last year where people were really concerned about what was happening after the first quarter. 2009 was very fresh in our memory. We had -- it was very, very painful, and so we just didn't want to get caught with -- again, we run a model where we buy our inventory prior to production, so we have to invest, if you will, in our inventory, bring it on board, produce it, ship it, collect it. We just didn't want to -- we were very cautious about -- so we started looking in the third quarter to say, geez, it really looks like things are starting to happen. So we consciously then increased our production, or at least our anticipated production going into 2012.

The point I was trying to make was we are going to continue to -- because of what we did at the end of the third quarter and beginning of the fourth of last year, we will see that production go through, and of course our backlog has supported that. So that's the point I was trying to make was. Whether or not we will see 35% and 180%, that's some questions I can't answer at this point because we need to see how fast and how hard we can deliver on it this year.

Last the question for me. Clearly, with what you are seeing out there in your business, you've talked about in your investor presentations that your best year I think was either -- I think it was '07, you were able to do about 10% EBITDA margin. Would anything hold you back to get to that same 10% EBITDA margin, call it like a $50 million run rate right now?

I think our best -- and Andrew, correct me if I'm wrong, but I think our best was 8.9%. Does that ring true?

Yes, I think that's correct.

Kind of ring true with what you remember? I don't see any reason why, as we continue to operate through 2012, that we can't return back to those levels now.

Okay, great. Keep up the great work.

(Operator Instructions). Mark Tobin, Roth Capital Partners.

Just a housekeeping question. Do you mind giving us the revenue by business unit for the quarter?

Have we ever done that?

No, we don't actually put that information out. We do split it out to segments, and that will -- I can give you that. But we don't break it down by the individual operating units.

Okay. How about the two segments?

What's the segments?

Just bear with me while I try and find it. So our Lifting Equipment segment was, in the quarter, $39 million. Distribution was just under $5 million.

So predominantly manufacturing, Mark.

Got it, that's helpful. Thank you.

Fred Buonocore, Rodman & Renshaw.

My question was very similar to Mark's, though I don't know, but maybe you'll answer it anyway. Similar question on the backlog. Can you give us a sense at least how much of the backlog is comprised by Manitex orders that are yet to be delivered? (multiple speakers)

I think we have said on previous calls -- I'll answer it this way -- more than 50% of our business is now in the energy related area. Certainly, that is principally evolving in the Manitex Group, so I believe that our backlog is -- I don't believe, I know our backlog is more than 50% Manitex. Is that -- do you remember if we said anything more than that Andrew?

No, that's about what we've disclosed, yes.

Okay, right. You did actually say that on the last call, so it would be pretty reasonable to assume that whatever it was last quarter, that level has increased, likely.

That's correct, yes.

Okay. That's good. Can you talk a little bit about your cash flow expectations for the year? Presumably, you would have to continue to build working capital, but do you expect to generate positive cash flow later in the year?

Yes, it's a challenge, of course, as we are growing at these levels. But as I said in my remarks, we've been funding everything. We've gone from $95 million to -- these are annual numbers -- $95 million to $140 million, and if you just annualize the first quarter, it's over $170 million. We funded everything through cash flow, our own cash flow and our own working capital lines, and we expect to do that as we go forward. We also anticipate that if we should see positive cash flow this year, and any positive cash flow that we experience beyond using it to grow our working capital, we will use that to retire what I call our non-transactional debt, which is our debt related to acquisitions, which, if you added that up out of our 10-K or 10-Q, or quarterly filings, it's around $7.8 million.

Okay. That's very helpful. Thank you.

Dennis Scannell, Rutabaga Capital.

Hi guys. Just a quick question on the sales growth from here. Dave, I think you said that because of what you guys did at the end of the third quarter that you can continue to grow sales on a sequential basis, kind of looking quarter-over-quarter.

Yes, we will continue to grow. I think we've said that in our prepared remarks. We'll continue to grow this year quarter-over-quarter on a sequential basis throughout the year.

Can you kind of size what would be reasonable in terms of expectations for us? Is it kind of 2% to 3%? Is it 5%?

I think it's going to be higher than 2% or 3%.

To get out of that backlog, I think it would be.

Yes, I'm sure! But as an earlier question -- I'm not sure if it's going to be 35% or if it's going to be -- it really depends. We obviously have -- and quarter-to-quarter, as you know, we have large pieces of equipment that go out. So if you've got three or four pieces that are going down the line and don't get out for the quarter, that could be $1.5 million in the quarter for that quarter.

Yes.

So quarter-to-quarter gets a little dicey but clearly it's going to be what we expect to have significant growth quarter-over-quarter.

Maybe ask that a slightly different way. As you look to your supplier base now, and before you look to other production facilities within your entire footprint, kind of what you've got in Texas, what do you think your effective annual capacity is?

In the entire group, or --

Yes.

Gosh. It would be --

I guess really then I'm thinking more about just the Manitex line.

Yes, what we look at internally is Manitex's -- that plant has had a range of the high range in the last cycle was $80 million. We will significantly increase that and expand that through this period.

Yes.

So it's also kind of strange where capacity with lean manufacturing and all the things that people do these days, it just seems like it continues to expand.

Yes.

So, I'm not really sure exactly how to answer that other than to say I know we have more room. We are accomplishing that, will continue to accomplish that, but we also have other facilities which are significantly under-utilized which should allow us to continue to grow so that we have hundreds of millions of dollars in capacity and sales as we roll through the years.

Yes, got it. Okay, great. Thanks a lot.

At this time, I'm showing no further questions. I would like to turn the call back to management for any closing remarks.

Thank you very much. Thanks everyone for your interest in Manitex International.

Ladies and gentlemen, this does conclude today's conference call. This call will be available for replay today through May 17. You may now disconnect.