Manitex International Inc (MNTX) 2014 Q3 法說會逐字稿

Good day, everyone, and welcome to the Manitex International Inc. third-quarter 2014 results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Dave Langevin. Please go ahead, sir.

Thank you, Shannon. Good afternoon, ladies and gentlemen, and thank you for your interest in Manitex International. As usual, on the call with me today is Andrew Rooke, our President and COO. Please see our website for our release for replay instructions for this call, which will be available until November 13. We will again be using slides in this presentation which are available through the webcast or directly through the investor relations section of our website.

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.

I will lead 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 be happy to respond to any questions.

So now please refer to slide number 3. We ran a third-quarter production in line with our expectations, which resulted in revenues of $66 million, with over $6 million in cash flow from operations for the quarter. Net income of just under $2 million, which was $0.13 a share. Our book-to-bill was basically 1. And we saw a very good order flow for the month of October, as reflected in our announcement earlier this week of $17 million in new orders, which represent a part of our total bookings.

This was the best month for orders that we've seen since earlier in the year. Some of these recently announced orders, of course, are not in our September backlog numbers, will be produced in the fourth quarter. But the majority of these orders will be produced in the first two quarters of next year.

In announcing that we had a good order flow in October, we wanted to inform the marketplace that in spite of our operating in markets which we believe will be down for a second year in a row, somewhere in the range of 10% to 15%, our niche diversified product strategy is working, and we continue to gain market share where we compete. That is a real credit to our people and to our products.

Looking out to the fourth quarter, we are expecting the fourth-quarter production to look similar to the third; however, with one significant and positive difference in that we would expect to see a much improved mix of product sales, which will translate to an improvement in the margins and profitability for the fourth quarter. It has been broadly reported that we are experiencing a challenging market for many of our products, and it has been difficult to predict when there will be an increase in overall markets.

With only slight improvements in new-equipment commercial activities since 2006, other than the oil and gas boom for equipment which occurred in 2010 and 2011, an increase in activity has to happen sooner rather than later. All the old equipment sold during the last up cycle, which occurred from 2002 to 2006, in any market or activity you can name is showing real signs of aging. A replacement cycle combined with our growth strategy represents, we believe, a very positive outcome and future for Manitex and our shareholders.

However, with the difficulty of predicting sales growth in the short run, we are placing even greater emphasis on cost control for our entire organization. Our specific emphasis will be in the cost of goods sold expenses and even more specifically with our material purchases and plan efficiencies. Cost control is an area we believe is a real strength of our Company. We have demonstrated through our execution and implementation of stringent cost measures during past soft demand periods, and we would expect no less from ourselves in this area for the near term.

Regardless of what happens with the current markets, our stakeholders should be looking forward to the new year with great anticipation as a result of our expected closing of two significant additions in the fourth quarter. With our most recent announcement of the joint venture with Terex and the acquisition of ASV, and the previously announced acquisition of the PM-Group, we will be adding, combined, over $200 million in sales with significant increases in EBITDA and earnings for 2015.

We also believe that we put together these acquisitions on very favorable financial terms for Manitex. To refresh everyone on our respective financings, I would like to review again the financings that we put together. First, PM; it represents a refinancing of PM debt in Europe with its existing banks at the blended rate of 4.5%, with a number of term loans approximating $62 million in total with maturities and payments spread out to 2023. These term loans have no recourse to Manitex International.

Manitex will take out a $25 million, 7-year term loan at 3.5% for the PM investment, fees and working capital along with the issuance of approximately 1 million shares of Manitex stock.

Secondly, ASV is $25 million in investment, consisting of $12.5 million in stock sold to Terex, along with $7.5 million convertible sold to Terex, along with the $5 million cash infusion to Terex by drawing down our revolver, where we are paying a rate of 2.75%. ASV presently has no debt, but they will raise approximately $60 million, again, with no recourse to Manitex.

Therefore, upon completion of these two transactions Manitex will have approximately $200 million in total debt, of which $80 million will be a direct obligation of Manitex; approximately $500 million of total sales and approximately $50 million in consolidated EBITDA by using the 2014 numbers for ASV and PM.

And now, after those brief comments I would like to turn it over to Andrew to review the quarter in more detail. Andrew?

Thanks, David. And good afternoon and welcome, everyone. Following our usual formats, I'll start out by providing an update about the state of the markets we serve and make some remarks relating that to our performance, and then I'll get on to the comparative financials.

So let's start with slide 4. In the third quarter, we had some very positive contributions, particularly coming from steady conditions in Europe for CVS container handling equipment and steady activity for material handling equipment in North America. Also during the quarter but, of course, not reflected in the quarterly revenues, we saw a nice pickup in orders for higher-capacity cranes that hit the order book. And as Dave has commented on, since the end of the quarter we've also seen orders for higher-capacity cranes continue with the $17 million of bookings announced earlier this week.

Nevertheless, North America appears to be in a relatively slow growth mode. It is a long way from the peak years of 2007 and 2008, and the crane market is expected to be down year over year.

Since December 31, 2013, our backlog has increased 32% and stood at $102 million at September 30, 2014, level with that for June 30, 2014, which reflects a book-to-bill ratio for the quarter of 99%. The order book remains broad-based but does contain a higher level of military product than in recent periods at almost 18% of the total, and a higher level of orders for container handling equipment. Additionally, at September 30, 2014 the percentage of higher-capacity cranes in the backlog was 33% higher than at June 30, 2014, with higher capacity here meaning cranes with the tonnage of 40 tons or higher.

Demand from the energy sector remained relatively flat, although there remain certain geographies where demand is stronger. Rig counts as at October 31, 2014 showed a year-over-year increase of 10.4% and an uptick from the end of the quarter -- second quarter this year. But uncertainty remains in the marketplace with the recent decline in oil prices, as this relates to spending by the energy producers.

Our European markets have shown modest improvements year over year, which, together with improvements in our distribution, have had a favorable impact on container handling orders in 2014.

Towards the end of the third quarter, we completed shipments of military units under existing contracts. However, we are ramping up activity on military focus under the new contracts we received in the last 18 months and expect to ship progressively during the fourth quarter and into 2015. As a reminder, these new military contracts to which I'm referring are three contracts with the U.S. Navy awarded to our LiftKing subsidiary with total value, depending on mix and options taken, of between $75 million to $125 million for delivery over the next five years. Approximately $14 million of orders on these contracts are included in our backlog at September 30. Approximately $61 million to $111 million is not in the backlog.

Now turning to the financial results, slide 5 shows the key figures for quarter three of 2014 with comparators to quarter three 2013 and quarter two 2014. Third-quarter 2014 revenues increased $8.7 million, or 15.1%, from the third quarter of 2013 at $66.2 million, with approximately 20% of the increase due to the Valla and Sabre acquisitions, and therefore organic growth represented the bulk of that increase.

Material housing product sales showed a 46% year-over-year increase, with contributions across each of those branded product lines due to improved demand from the general construction market. At the end of the quarter, we also recorded a number of shipments of military focus under existing contracts with our Manitex LiftKing subsidiary.

Container handling revenues at our European CVS operation were sharply higher, increasing 50% from the prior-year quarter, resulting from increased demand from both European and international markets. While growth from lower-tonnage crane products resulted in higher overall unit volumes, Manitex crane sales were flat.

Gross profit decreased $0.3 million compared to the third quarter of 2013. The benefit from higher revenues -- largely driven by increases in material handling equipment and including a higher proportion of lower-capacity, lower-margin boom truck cranes -- was offset by the significant sales and exchange on margin, resulting in a 300-basis-point decrease in gross profit percent to 16.5%.

Operating expenses of $7.5 million, including costs from Sabre and Valla, compared to $6.5 million in the year-ago period, which, of course, did not include those two subsidiaries. SG&A expenses held steady at 10.4% of sales compared to 10.2% in the third quarter of 2013.

Net income for the quarter of $1.8 million was a decrease of $0.8 million year over year. Earnings per share was $0.13 compared to $0.21 from the year-ago quarter and included the impact of an increase of 1.5 million outstanding diluted shares in the third quarter of 2014 compared to the third quarter of 2013. Adjusted EBITDA for the quarter was $4.5 million, equal to 6.8% of sales, down from $5.6 million or 9.8% of sales in the third quarter 2013.

Order intake in the quarter is well balanced with current levels of output and resulted in a backlog at September 30, 2014 of $102.1 million. This represents an increase of $24.8 million, or 32.1%, from December 31, 2013, and flat on a sequential quarterly basis. Order intake in the third quarter reflected an increase in demand for higher-tonnage truck-mounted cranes as compared to that seen in the previous quarter.

Moving to slide 6, this is a bridge for the net income of $2.6 million from the quarter-three 2013 to the net income for quarter three of 2014 of $1.8 million.

Moving through the reconciliation table, compared to the third quarter of 2013 higher revenues of $8.7 million, combined with a decrease in gross profit percent from profit mix -- sorry, product mix, generated a decrease in gross profit of $0.3 million.

Operating expenses increased $0.9 million, including $0.7 million related to companies acquired since the third quarter of 2013. SG&A expenses were 10.4% of sales compared to 10.2% of sales in the third quarter of [2013] and remained controlled within management's target range.

The other principal factor influencing operating income was $0.3 million of reduced tax expense attributable to lower income but also adversely impacted by an increase in the annual effective tax rate, excluding discrete items, to 32% from 30%. The principal factor accounting for the increase in the effective tax rate was the absence of R&D tax credits as such provision expired as of December 31, 2013.

Slide 7 shows our working capital has increased from $74 million at December 31, 2013 to $84.1 million at September 30, 2014, with the principal movements being an increase in receivables and inventory, partially offset by reduced cash and increased accounts payable and other short-term liabilities. Our working capital ratio has remained relatively stable. Days sales outstanding has increased by nine days, reflecting a higher proportion of international sales and timing of payments on military shipments. But our current ratio improved to 2.7 times compared to 2.5 at December 31, 2013.

Slide 8 shows our capitalization and liquidity position, with a net debt to capitalization ratio of 35.2% compared to 36.1% at December 31, 2013, and an interest coverage ratio of 7.4 times compared to 7.3 times.

During the third quarter of 2014 we generated $6.4 million of cash from operating activities, reflected in reduced utilization of our working capital facilities. Total debt at the end of the quarter shows a modest $0.5 million increase from December 31, 2013. And with 12-month trailing adjusted EBITDA of $21.8 million, our debt to adjusted EBITDA ratio remained constant at 2.5 times.

And now I would like to hand back to David for his final summary.

Thank you, Andrew. The last part of 2014 is a very important period for the growth of Manitex. We announced the acquisition of PM-Group in the beginning of the third quarter. We believe PM will be a defining addition for our Company as it expands in sales and profits over the next several years. PM's recent expansion has occurred on an international front in all the areas where our Manitex group does not participate. Conversely, Manitex's growth and strength is in North America, where the knuckle crane market is experiencing real advancements in acceptance in utilization and where PM has minimal sales. Further, we will now be able to offer product to our distribution with many possibilities of expansion for the PM-Group in these markets.

PM also represents a profit profile which is very positive. Their products are specialized, which should represent a solid upside potential in our earnings. Simply stated, our strategy with PM is clear: leverage our two respective products and our distribution and use our combined manufacturing strengths to produce and increase our earnings.

Regarding closing of PM, while it's a little more difficult to predict because it is working its way through the Italian courts, we do expect to close PM in the letter part of this quarter.

We are equally excited about the possibilities around the recently announced acquisition of ASV and a joint venture with Terex Corporation. ASV's products are in a sector which we believe will show steady growth for the next several years. The products are best in class with excellent management, distribution; and we have a strong partner that has put a lot of effort into building ASV to be successful going forward. It will add over $100 million in sales to Manitex in 2015, with EBITDA and earnings equal to if not better than our historical numbers. This will also close in the latter part of the fourth quarter. We really look forward to welcoming both companies into the Manitex organization and to their benefit that they will add to our shareholders.

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

(Operator Instructions) Matt Koranda, ROTH Capital Partners.

This is actually [David] (technical difficulty) on for Matt Koranda. So you've mentioned you've gotten a lot more demand in recent months for your higher-tonnage cranes. And I was just wondering if you could give us a little more color on how demand is shaping up for your 70-ton crane.

The 70-ton, similar to what we've experienced when we introduced the 50-ton several years ago, has a lot of interest. We produced more in the third quarter -- not a lot, but a couple of months. We have orders for 16 of them now, at this point, and obviously it goes for a sales price which is significantly higher than any of our other cranes because of the size. And I'm sure, as it gets out in the marketplace and gains acceptance, it will continue to build and grow, just like we experienced in the past.

Right. Okay, that's helpful. Then I wanted to ask about recently you've had a dip in the oil prices below $80. And I was wondering what you are hearing from your dealers that sell into the oil and gas market about the boom truck demand currently and then about how CapEx spending could change going forward.

It's obviously very difficult to predict that. It's a question that's being asked every day; certainly is a topic of conversation, as you say, as we discuss this on a daily basis with customers and dealers. And at this point it seems that everything is staying status quo. But again, obviously, it's an item of concern that everybody is watching. So some people think that it has bottomed and it's going to go up from here. Some people feel it has more room on the downside. I think it's very hard to predict.

Okay. All right, thanks. That's it for me.

Kristine Kubacki, Avondale Partners.

Hi, guys. This is Jamie jumping on for Kristine. So we've been hearing a lot about truck backlog and obviously tracking those numbers pretty closely. And wanted to feel you guys out on what you are seeing from the supply side, on the chassis side, if you are having any difficulty there.

The chassis market is as positive as it's been in years. We experienced this right after we came out of the 2009 recovery in 2010 and 2011, but that was because we had taken so much capacity out of the marketplace. But my understanding is that capacity is back and just demand is very high. It seems like trucks and autos are the only thing in the US presently showing big demand.

But anyway, it is causing some issues. We have to occasionally shift because our customer will want the crane but may not have the chassis on a timely basis. So we have to modify production on a monthly basis, which obviously isn't efficient. But we understand it's not just unique with us, but all over in the sector right now. And I'm sure that as this works its way through it will correct for 2015.

Great. That's really helpful. Thank you. One other quick one -- I know you guys have a lot of runway left in your five years of military contracts. Has production ramped up as you expected it to? And how do you see that going forward?

It is -- the answer to your question, yes. And how we see it going forward is somewhat determined on how the orders come in from the contracts. But it's ramping up. As Andrew referred to, we did some orders in the third quarter relating to old contracts, which still have some room to run on those. But then on the new ones, we start that in the latter part of the fourth quarter and then run into next year. So I guess I would say it's on plan as expected.

And do you foresee those being spec'd to the upper or bottom end of the range? Do you have any read on that?

I expect to be on the upper end of the range. But that's pure speculation based on conversation; it's not based on orders at this point.

Perfect. Thank you very much for your time.

Shivangi Tipnis, Global Hunter Securities.

So I'm sorry, I'm just a little under the weather, so I'll just talk (inaudible). Okay, so you called out how much it seems is expected in total from the PM (inaudible). Can you just provide some breakup of how much is expected out of [ASU] of the sales and (inaudible). Can you just give us some color on the 2015?

Let me make sure I heard that correctly so I answer it properly. You were talking about PM and ASP sales? Is that correct?

That is correct. And then I just wanted a bifurcation because you've given in total $500 million in total sales. Right.

Right.

So I'm just looking for some bifurcation, a breakup of ASU.

Yes, okay. So what has been reported -- and that's what I'll, obviously, comment on -- is ASP trailing 12 months is $128 million, as I recall, has been reported. And $106 million is what I recall being reported on PM.

Okay. But then is it difficult to give us some idea on what is going to be the break-up for 2015? The total sales that you are expecting are $500 million; right?

Right. And that is obviously based on, at this point, expected plans which we've received that I would prefer to wait until -- to break them down into detail, I would prefer to wait until all that information is public so that we are not getting into an issue here. But it's taking -- it's launching off of the numbers that I gave you, which are public, and then slight expansion into 2015, although not that much. Just slight expansion is, I guess, the best way to describe it for all the entities.

Okay. And then one last second question on the military contracts. You said that most of the new contracts' forklifts would be sent out by Q4 and some of it in Q1 and Q2 of 2015? Or was that the other way around?

Now, what it is is we have contracts going out for five years from various military and quasi-military operations. And we recently announced in several different releases some large orders with the Navy. And what Andrew reported on was how much we have in exact orders at this point that are in our backlog on a percentage basis and then how much is left to be received. But again, that's up to the -- it's a contract, and then we have to build against orders that come in against that contract. So it's still up in the air as to when they will order those. But, as I said on the last question, it appears that they may be on the high end and they may be accelerating it faster than -- usually what happens is they accelerate it faster over the long-term period of the contract or they expand the contract over the period. So we're just giving you the information of what we have at this point.

Okay, fair enough. Thank you, guys.

Alex Silverman, Special Situations Fund.

You guys have had a very busy quarter.

Yes, we have had -- really busy. That's right.

Just to bounce around a little bit, the $17 million in orders -- was that a single customer or was that an aggregate of a bunch?

It was multiple customers. It's just that we had a good book in October, and we haven't seen that in a while, so we got a little excited.

Okay. The $12.5 million in stock that was issued for ASV, can you tell us that what price that was issued?

Well, we filed an 8-K on that earlier this week. And it's on a band; it's a price to be determined. But it's based on 30-day booking average.

Got it. And can you tell --

There's an up-and-down ceiling and floor, so it has a little bit of a range to that.

Understood. And then finally, can you tell us how PM has done since this was announced in July? Not necessarily absolute numbers but general trends?

We just returned back from -- or I just returned back from a trip there, and Andrew was there as well, during this past quarter. And they are right on plan. They will have a good year this year, and we expect them to have a good start going into next year. So everything is on plan there.

Very good. Thank you, guys.

Brandon Hemmelgarn, Shaker Investments.

Just wanted to talk a little bit more on ASV, just hear a little bit more about their products, their end markets, how that fits into the broader Manitex portfolio. And what sort of benefits do you see of having it be in Manitex's control in terms of the cross-sell opportunity? Is it manufacturing efficiencies? What are the opportunities going forward?

Sure, Brandon. Thanks. Good question. It's very interesting. Obviously, as you try to move up -- we started this Company roughly 10 years ago -- very, very small, $20 million in sales -- and then have been adding small pieces, pretty much low entry points. And then, as you get larger, you look for opportunities like this, which are just phenomenal for us because it clearly gets us into a place where we don't have experience in the housing area or we don't have a lot of exposure in the housing area. Clearly, some of our equipment goes into that market but not to a great extent.

And it seems like a market that has been beat up pretty bad. Obviously, it was a public company at one point, so you can go back and look at its history. We are teaming up with a great partner. It expands and gives us exposure to a lot of different management, a lot of distribution possibilities to put products into our distribution that can help distribute it to a larger base some of the areas where right now they might not have distribution and we may. And then, conversely, obviously areas where they have distribution and we don't, it may help us on the other side. So it's just -- it's a wonderful opportunity, profitable company and very low entry point for us. Hopefully, that answers some of the questions.

Yes, that was great. Thank you, and good luck in the upcoming quarters.

Peter von Schilling, Polar.

Can you -- a two-part question, so I'll ask first one to start with. Can you give us some color on the current-quarter results by product line?

In what regard? What area do you want?

Well, just -- you know, as you've gotten bigger, now you've got different groups of product lines. And so I was just looking for a little bit of color. Revenues were up 15% year over year, just a little bit of color in terms of which product lines would have been up year over year versus down year over year.

Sure. The ones that were flat -- as Andrew mentioned, Manitex is relatively flat. LiftKing was probably up a little bit. Badger was up. Load King was certainly up. CVS was up quite a bit. I can't remember if you mentioned it this quarter, how much it was up.

About 50% growth.

Right. And Sabre is down, but that's really dependent on -- when we acquired Sabre, we had one major customer. That customer has not been adding volume this year. But as we said when we did the acquisition, we have been diversifying that customer base. So we expect that company -- and it's a very good, profitable company -- to expand as we go forward.

The margins for the quarter specifically -- 90 days is a tough period to try to measure anything. But we mentioned last quarter that there was a very low percentage -- a high percentage of low-margin equipment in our main driver, which was Manitex. And so the Manitex margins on a quarterly basis, on an annual basis, however you want to look at it, were down significantly. And that clearly had an impact. But then that rebounds in the fourth quarter, so we should see a nice improvement. And over time, nine-month basis compared to a year ago, we were at 18.8% on gross margin, and now we are at 18.1% for the nine-month period. So on a nine-month period it's not nearly as volatile us what you see on a 90-day period because of the mix going through the facilities.

Okay. And that's partly addressed my second question, which is from here in terms of going forward, you think in terms of additive to the margins are going to be the better mix at Manitex and then likely in terms of Load King beginning to ship under the new contract? Would there be anything else that you would put in the plus or minus column in terms of margin mix as we look forward in the next quarter?

All of our businesses have been -- except for Manitex -- have been improving on their margins from this year versus last year. So we've seen -- while you've seen a significant reduction in margin at Manitex, you've seen a nice increase in margin at all our other companies. So all the other companies -- and including Manitex, of course, which is that they had such a nice mix coming out of 2013 because our backlog was much bigger at the end of 2012. And so that really flowed through in 2013. So they just had several years of a very nice mix of business, and now it's a little bit -- it's more reflective of what's happening in the marketplace.

But overall, the margins seem to -- and the business mix seems to be improving. So I would expect a steady improvement as we go. And then, of course, next year you have PM, which has a very good margin profile and product profile.

ASV has a little bit less gross margin. But because they run with so many shared services from Terex, they have a higher EBITDA margin and higher operating margin because they have lower SG&A. Also, they have a higher parts percentage. And so higher parts percentage allows for a lower SG&A because obviously you don't take as much selling or general administrative cost to sell parts through a distribution facility.

Great, great. And then I know I probably missed it in the opening remarks, but did you comment about production plans for Q4?

I did. I said in the remarks that we would expect production in the fourth quarter to be similar to the third. Book to bill in the third was 1 to 1, roughly, and we expect to maintain that in the fourth quarter. So we will run our plants at an efficient level, and we will have higher margins and higher profits in the fourth is what our expectations are.

Okay, great. Thanks for taking my questions.

Les Sulewski, Sidoti and Company.

Hi, guys. Were there any NOLs from the ASP partnership that are come in that perhaps benefited Terex or yourself?

No. ASP as a C Corp. will convert to an LLC. And it will have taxes, which will be paid from the cash that they will put on their balance sheet. So it does not, to answer your question, no.

Okay. That is helpful. Do you have an idea what the order flow has been from ASV in, say, 2012-2013?

I don't know what is public. Obviously, we have that information. I don't know, Andrew, if you have any knowledge of what's public in the marketplace. The only number I know that we've quoted on it is $128 million. Is that correct? Or do you know --

That's the only number that has been put out there, to my knowledge. Yes.

Yes, $128 million is like a trailing 12 months.

Okay. I know you can't really give much out (inaudible) prior to that?

As I said earlier, I would prefer to let all that information -- the audits are being done on ASV now. All that information will be included in the 8-K when we file the acquisition because we will, in time, put together the audits, have those filed so you will have all the information in short order.

Fair enough. And then, looking at just overall operations in the Company, do you have an ERP system in place that's capable of managing your business with the added acquisitions? Any, perhaps, reorganization into where you report your segments looking forward? Any idea there, if you could?

I think that we may have some -- we haven't finalized this yet. But I believe -- and Andrew, correct me if I'm wrong -- we will probably have some segment review because of ASV. We have adequate systems. We obviously will be sharing whatever is necessary with Terex. Terex will be heavily involved, will have service agreements, sales agreements, parts agreements. So I expect a very smooth transition because of the fact that we have such a strong partner that we are partnering with.

Okay. And as far as headcount, do you have a current number handy? If not, it's okay. But (multiple speakers) --

We were around 500 people at the end of the year, and we are down slightly from that for full-time employees at the end of September.

And then for looking at, let's say, at the end of 2015, do you have a rough idea what it could be?

Well, it will be -- there's approximately 160 at ASV. I think we will be somewhere slightly north of 1,000 when you add all the businesses together. We will be basically doubling the business, so we will be doubling the employees.

Got it.

For different spots, obviously, in different spots in the world.

Sure. In terms of revenue, if you are looking at $400 million to $500 million --

Right.

-- In 2015, is it going to be kind of like a step up of each quarter, or perhaps first quarter will have a little bit lower and then third -- preceding three quarters?

Generally speaking, your first quarter is always the toughest quarter because it's just -- it's first quarter, it's winter, it's all the things that occur in the first quarter after you close the year end. And then, generally speaking, your second quarter is a stronger quarter. And the third and fourth are sometimes harder to handicap because, as you start to look out, that's gets beyond that -- but I would expect a slow, steady improvement next year. We were hoping this year would be a solid, steady, quarter-over-quarter improvement, but it's been similar to 2013, where we had -- we just didn't come to fruition. We had a lot of up and down from quarter to quarter. So hopefully, next year we will have a steadier flow.

Okay. I guess one last one from me -- did the most recent acquisitions of CVS, Sabre and Valla -- are these performing up to your expectations?

Well, they are performing in line with what we thought. Valla is a very small company, but we are integrating it. And it has shown, on a percentage basis, a huge increase this year over last year. But again, it's very small. And as I mentioned earlier, Sabre has, from a profit, from a percentage standpoint is second -- a very profitable piece of our business. But, as we expected, it is transitioning from a one-customer company to multi customers. And we are confident it's going to build back to a very solid business because it's running off of a very profitable base.

Great. Thank you. Appreciate it.

John Curti, Singular Research.

On the acquisition of PM, with your stock price down a little bit, do you anticipate having to issue more shares? Or might you have just to pay a little more cash?

No. That transaction was not based on a set price but based on just number of shares. So the reality is, unfortunately your stock price is down from the time that we announced the acquisition. But on the positive side, you are paying less for the company.

And just drilling down a little bit more on their outlook in 2015, obviously kind of underrepresented in North America.

Right.

I guess my concern is how are things shaping up in Europe versus rest of the world excluding North America?

Well, it's very interesting, John. We put a slide together in our investor deck where we looked at where PM had transitioned from the 2008 period when, obviously, it was a European-centered company. And then it has done an excellent job of moving away from the 50% business in Europe to now 20%. So you are down to a level where, if it goes down another 1% or 2% it doesn't really matter.

And they had minimal business in North America. They are now about 10% in North America. But that's insignificant when you think that they do many times that in South America, for example. And so you just really see the opportunity because the knuckle crane market -- while our straight boom crane has seen a deterioration in markets over the last couple years, the knuckleboom crane has accelerated and increased in the markets over the last couple years. So we are getting into a product that is in more demand. And they have very little exposure and presence in that market.

So that's why we are really excited about it. We think we can significantly grow their North American market. And they have less exposure in Europe. But Europe is not -- Europe is a big market that's going to come back. So it's not some place where you want to just ignore, but we are not really expecting much from the European markets over the next couple of years, either.

Then with respect to the ASV operation, are there some benefits on the materials side in hooking up with this joint venture with Terex that somehow might float to the rest of the Manitex side in terms of costs?

We are clearly addressing -- what I mentioned in my remarks as we are really going to focus -- and we have, over the years. But when you are in a slack period like this it's really time to double up on your -- is so we put together a team to really go after our material costs that when it takes on a global basis. And clearly, as we learn and develop and gain access to more information at ASP I'm sure it's going to have a positive impact to us. Although, as you know, the products there are different than the products that we have in some of the other businesses. But they are -- all these products have a certain commonality.

And as a result of these two acquisitions coming on board, might you be moving some product production around to various facilities?

We will be, as we develop, more likely between PM and Manitex because Manitex has several -- the Manitex straight mast crane, which is all North American-based, has multiple production facilities where we manufacture the product now. PM has multiple manufacturing facilities where they manufacture the product, but those are Eastern and Western European based. And so as we move into the North American market, I'm sure we will be addressing some of those issues.

And on the other side, as we try to move some of the Manitex products outside of North America, which we also have very minimal sales on, I'm sure there will be some that we will address in their products as well and their facilities as well. So to answer your question, yes.

Thank you very much. That's all I have.

(Operator Instructions).

Shannon, if there's nothing else we will wrap it up. But I don't want to have anybody not ask.

And it does appear there are no questions at this time, sir. I'll turn it back over to you for any additional or closing remarks.

Thank you, Shannon. Thank you again, everyone, for your interest in Manitex going forward to our year-end call and the developments of our activity for the fourth quarter. Thank you very much.

And that does conclude today's teleconference. Thank you all for your participation.