Manitowoc Company Inc (MTW) 2002 Q3 法說會逐字稿

Good day, everyone, and welcome to the Manitowoc Company, Incorporated, Third Quarter Earnings Results Conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Steve Khail, Director of Investor Relations. Please go ahead, sir.

Good morning everyone, and thank you for joining us today. Participating in today's call will be Terry Growcock, our Chairman and Chief Executive Officer, Carl Laurino, Treasurer and Interim Chief Financial Officer, and Glen Tellock, president of Manitowoc's Crane Group. Tim Krauss, President of Manitowoc's Food Service Group, and Tom Bird, President of Manitowoc's Marine Group, are also on the call to answer your questions about their respective operations.

Terry will open our call with a brief overview of the third quarter. Carl will then discuss our financial results for the quarter, and Glen will provide an update on our global crane operations. Following these remarks, we will open the call for your questions.

I want to mention that if any of you are not able to stay on the line for the entire conference call, you can listen to a replay of this call, beginning at 1 p.m. Eastern Daylight Time this afternoon, until 2 p.m. Eastern Daylight Time, October 29. The number to dial for the replay is area code 719 457 0820. Please use confirmation code 509796. You can access an archived version of today's call at our web site, at www.Manitowoc.com.

Before we get started, I would like to review our safe harbor statement. This call is taking place on October 22, 2002. During the course of today's call, forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, may be made during each speaker's remarks and during our question and answer session. Such comments are based on the company's current assessment of its market and other factors that affect our business. Actual results could differ materially from any implied projections, due to one or more of the factors, as explained in Manitowoc's filings with the Securities and Exchange Commission, including but not limited to, the company's annual report and form 10K, for the year ended December 31, 2001, our form 10Q for the second quarter of 2002, and our 8K filings, made earlier this year.

With that, I'd now like to turn the call over to Terry Growcock.

Thank you, Steve, and good morning, everyone. During the third quarter, we achieved year-over-year double-digit increases in sales, earnings, and cash flow. Let me cover some of the important highlights during the quarter. As you already know from our announcement made earlier this month, our crane segment experienced a dramatic slowdown in U.S. demand for Crawler Cranes. During the first half of the year, our domestic Crawler Crane sales out performed the market and remained relatively stable, compared to the overall industry, which was declining at a rate exceeding 10 percent. But in the third quarter, our sales declined closer to industry rates. We have taken a number of steps to address this, which Glen will highlight later in the call, but we believe this slowdown is likely to continue into 2003.

It's important to note, however, that global demand for Crawler Cranes is still healthy, as is the demand for our tower cranes, boom trucks, and lighter construction equipment. In addition, we have some exciting new products in the pipeline that should help us pursue our growth goals.

Our food service segment performed very well during the third quarter, posting healthy increases in both sales and earnings, while also gaining market share. We attribute this growth to the host of new products that we have introduced this year, particularly in our ice and beverage business, which are being very well received in the marketplace. To date, the continuing issue with Diversified Refrigeration, to update the continuing issue with Diversified Refrigeration, the arbitration process we discussed in last quarter's conference call is underway, and we hope to resolve this issue by the end of the year.

Turning to our marine segment, it also performed well, even though the Great Lakes repair market remained relatively weak during the third quarter. However, we are expecting a stronger level of repair activity over the next several months, as a whole complement of vessels will winter at our yards and will require a wide variety of repairs that should help increase margins in the fourth quarter of 2002, and the first quarter of 2003.

I'd also like to mention that Tom Burn, president and general manager of this segment, will be retiring at the end of 2002. While will certainly miss Tom, we will turn management of this segment over to Dennis Mukloski, who currently runs Marinette Marine. Dennis will pick up where Tom left off, in continuing to grow our legacy marine business.

Throughout this year, we said our businesses were positioned to grow, even if the economy remained stagnant. Based on our latest earnings guidance for 2002, our new estimate represents an earnings level equal to last year, in spite of a very difficult market. This demonstrates the strength of our diversified business model, our ongoing commitment to EVA, market share gains in each of our segments, and a strong management team that moves quickly to address changes in the marketplace.

Now, I'll turn the call over to Carl Laurino for a review of the financials and a more detailed look at our business segments. Carl?

Thank you, Terry, and good morning everyone. Highlights in the third quarter included excellent contributions from the food service and marine segments, coupled with strong cash flow of approximately $52 million. We remain on target to achieve cash from operations for the full year of approximately $100 million. Revenues were up 36 percent, to $410 million, with most of the increase coming from Grove Worldwide, which was acquired by Manitowoc on August 8th.

Sales for both the food service and marine segments also grew at double-digit rates. Net earnings of 57 cents per diluted share represented an increase of approximately 12 percent above EPS for the third quarter last year. EVA for the quarter was $420,000, which is down from the third quarter of 2001. As we expected, negative EVA results from Photon and Grove virtually offset the positive contributions from our legacy crane business, and our food service and marine segments.

Food service EVA jumped nearly 70 percent, compared to last year's third quarter, and Marine's EVA remained positive, but tracked down about 25 percent from last year. Although Photon reported negative EVA this quarter, we still project positive EVA for Photon in 2003. This expectation remains in line with our prior guidance and our acquisition criteria.

Now let's look at the individual segments. With the addition of Grove's results, crane sales rose approximately 54 percent, and operating earnings rose 4 percent. Excluding results from Grove, however, crane sales and earnings decreased approximately 12 percent and 29 percent, respectively. Including Grove, crane's segment backlog was $139 million at September 30, 2002. Excluding Grove, the backlog stood at $67 million. This compares to a backlog of $82 million at the end of the second quarter. Cranes ordered and shipped during the quarter represented 66 percent of the segment's revenue.

We are very pleased with our food service segment's performance. Sales increased about 17 percent, and operating earnings rose 16 percent. Without the results from DRI, our contract manufacturing business for residential refrigerators and freezers, the food service group would have reported a sales gain of 14 percent, and operating earnings would have increased 27 percent, an outstanding performance in light of the current food service market. We are still in the midst of arbitration with DRI's sole customer, but as Terry noted, we expect a resolution of this issue by year-end.

Our beverage business gained market share this quarter, with the help of many well-received new products. Both sales and margins improved from the same period last year. New products are also boosting results in our ice machine business, which reported a strong gain in sales and maintained its outstanding margins.

In our marine segment, the shipbuilding business remains healthy. In contrast, our ship repair work is still weak. Segment sales rose about 21 percent compared to the same quarter last year, while operating earnings decreased approximately 16 percent. With project work running somewhat stronger than last year, we are expecting improved margins in the fourth quarter of 2002, and in the first quarter of 2003, due to an improved slate of winter repair work. As previously stated, the backlog of new shipbuilding projects extends into 2005, and the group is actively quoting new jobs as well.

Turning to other financial items, our debt-to-capital ratio as the end of the third quarter was approximately 67 percent, which is equal to the ratio at the end of June, 2002, despite the acquisition of Grove during our latest quarter. We anticipate full-year depreciation and amortization will approximate $29 million, which includes Grove since its date of acquisition. Interest expense will total $52 million, and capital expenditures, excluding crane rental fleet assets, should be approximately $25 million.

Looking at the full year, new product introductions are helping to boost in our crane and food service businesses, and cost containment measures are enhancing markets. Shipbuilding opportunities remain strong. Despite those positives, we expect the falling demand for Crawler Cranes that began in the third quarter will continue into the fourth quarter. As a result, we now expect 2002 earnings to be in the range of $1.90 to $2.10 per diluted share, which is approximately equal to last year's earnings before an extraordinary loss. In addition, we are reiterating our expectation that Grove will be neutral to earnings for 2002, and 20 to 30 cents accretive in 2003.

And now I'll turn the call over to Glen Tellock. Glen?

Thanks, Carl, and good morning everyone. First, I'll discuss the Crawler Crane market, then comment about our progress regarding the integration of Grove.

The most challenging development in the third quarter was the drop in demand in the Crawler Crane market. To put that drop in perspective, consider the health of the broader construction equipment market, which continues to deteriorate, according to recent reports. Throughout the year, the crane industry has been declining at a rate of over 10 percent. Through the second quarter, our crane businesses had been declining at a much slower rate, approximately 1 percent. We were unable to sustain that comparatively strong performance in the entire third quarter, during which time our Crawler Crane unit shipments decreased by about 35 percent, and earnings decreased about 57 percent. Despite the drop in Crawler Crane volumes, this unit continues to be the business to benchmark the remaining crane group businesses. Cash from operations for the Crawler Crane business unit was nearly $13 million, while gross margins and operating margins exceed the other businesses within our segment. This is where the opportunities begin in the crane segment. Since July 19th, total headcount in the crane segment has been reduced by over 400. While many reductions were related to sizing the business to the market, fixed costs have also been taken out of the business. These reductions are all part of the transition process.

The state of the Crawler Crane market is similar to the state of the boom truck market last year. At the end of last year, we consolidated our boom truck operations and lowered our break-even point. As a result of those actions, we have been outperforming the market this year. In fact, while boom truck sales for the third quarter were flat, operating margins increased 13 percentage points.

I mentioned the boom truck business as an example of how we have successfully managed our business in down markets before. While the Crawler Crane market might require different tactics, our strategy will be the same, to lower our break-even point to improve our margins.

With respect to the Grove transition, we have completed our two-phase planning process. The first step was to focus on North and South America. This phase was completed in early September. The second phase, which covers Europe, Africa, and the Middle East, and Asia, was completed earlier this month. Aggressive implementation of these opportunities has begun.

Keep in mind, our acquisition strategy is to acquire good companies and make the sum of the companies much greater than the parts. The changes we are making are more strategic in nature, as opposed to a turn-around situation. Despite the volume declines in our core crane business, we fully expect to meet our synergy expectations. In fact, we may even be able to outpace our initial accretion assumptions for the Grove acquisition. We expect to complete our transition phase by year-end. All strategies and action plans that carry into 2003 will be included as part of that region's business plan.

I can tell you that we will continue to invest in new product development. We're introducing two new cranes in the fourth quarter, the model 18,000, which has a capacity of 660 U.S. tons, and a foundation crane, the model 1015. At our open house for crane dealers and operators in early October, these products were very well received. New product development is a core competency that we see as the lifeblood of our business. Our product voids matrix, combined with our EVA analysis, gives us an excellent foundation for developing the right products to sustain growth, even in a down market. With that, I'll turn the call back to Terry.

Thanks, Glen. In closing, I'd like to reiterate that we still expect to post strong sales and earnings results for 2002, and Manitowoc is well-positioned for growth going forward, thanks to our diversified business model, strong cash flow, market share gains in each of our segments, a strong management team, and growth initiatives that include strategic acquisitions, new product development, and global expansion.

With that, we would like to open the call to your questions.

Thank you, gentlemen. The question and answer session will be conducted electronically today. If you would like to ask a question, please do so by pressing the star key, followed by the digit one on your touch tone phone. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will proceed in the order that you signal us and take as many questions as time permits. Once again, if you would like to ask a question, that is a star-one on your touch-tone phone.

Our first question comes from Tom Klemka with CS First Boston.

Can you talk a little bit, Glen, about-- you mentioned the integration of Grove is on track. Can you talk about what's actually happening there, on a people basis, on a plant basis? What are you do doing as far as-- are you rightsizing that operation on its own, or are you actually consolidating it in with the rest of Manitowoc? And then also, within the Grove businesses, talk about, you know, National versus the rest of the business.

Tom, good morning. With respect to the Grove business itself, I think that's why-- that's why we believe the regional focus is the best way to go. As we look at North America, there's different issues in North America, Europe, and Asia, that present themselves. What we're doing in North America is, at Shady Grove itself, I think a lot of that is rightsizing the business, but at Manitowoc Cranes, here in Manitowoc, a lot of that is doing some of the same, because of the drop in the Crawler Crane demand, but it's also looking at what are the opportunities, from a manufacturing standpoint, to do product at either location? There are purchasing opportunities on a regional basis, as well as a global basis, that we're looking at. We have product support. We're looking at, you know, combining the product support to go and utilize the Crane Care brand name that we have that'll go all the way across North America, and then each region has its own, but taking a lot of that on a global basis. So every function, you know, functional area that there is, is being combined here in North and South America to better take advantage of the knowledge of not only the people at Shady Grove had, but combining that with what we have in Manitowoc and the rest of our organization, and every function has their own transition plan.

With respect to National, there are changes being made out there also, but we manage the business as we can under the agreement that we have with the Department of Justice, so that one, right now, we have not named a general manager. Steve Cripe, the former CFO of Grove, is the interim general manager there, and we're continuing to head down the track of selling the boom truck business down in Georgetown. So, I mean, we're still managing it, and we've made some headcount reductions at National to size that business to the market. So all those things, in addition to sizing businesses to the demand, which is necessary, there are a lot of transition things that are in place also which are just-- you know, they are part of the synergies that we talked about, as you combined these three businesses on a global basis.

Alone in North America, as I mentioned in my report, we've probably taken out over 400 people since July 19th, of which half of that probably is SG&A and indirects.

OK. And in your narrative, Glen, you talk about how your own crawler business had outperformed the market for the first half, but in the third quarter, it sort of caught up to the market. What happened there that you were able to outperform but then you kind of fell in line?

I think during the first half of the year, we just-- we continued to see the same live deals and the work that was being performed over the first half of the year, and continued to bring out from Bomlay, if you remember, we introduced the Triple Five, and we still had some of the things that, you know, carried forward from last year, the 2250, and the Triple Nine. I think what happened, we saw in July, and it was a very rapid decline, was the number of live deals that we-- you know, we look at 'em and we give a percentage to how we think the deal is going to go. I mean, it just-- it dried up, just very quickly in July, and I don't think that's inconsistent with some of the other things that we were reading in the market and what happened in the third quarter. And what's why-- what we did, is we went into the third quarter with an understanding that things-- there were-- you know, there's always two sides of thought. One was, the market's getting worse, and one, the market is going to be OK, and we watched the month of July, and that's when, you know, when we started taking the corrective actions. So, really, that's, I think, you have a lot of things happening in the economy that really-- some of our customers just sat back and said, ``OK, we need to take a look,'' and financing is another one that really, I think, deteriorated in the third quarter.

OK. And using your percentages, I think you kind of back into, for Grove, about $100 million of revenues in the quarter and a little over $6 million of operating income? Does that sound right?

I'm going to--

Maybe that was Carl - without Grove.

That's about right, Tom.

OK, and what kind of depreciation do you associate with Grove, so we can look at what EBITDA impact there was, sort of normalized to the two quarters?

About $3 million for the quarter.

OK. And this is my last question -- Carl, can you just give us what the cap table looks like at the end of the quarter, as far as the bank borrowings and the rest, and also what D&A was for the quarter?

On the cap borrowing side, we had a little over $19 million borrowed on our revolver, down from 30 at June 30. The term A borrowings were about $112 million, the term B is pretty static, at 173. Of course, we issued the senior sub notes of $175 million, and the U.S. dollar equivalent of our Euro is $173 million. I know we've got some other debt of about $29 million, for a total debt of 682, which brings the debt to cap to a little below the 67 percent I had mentioned on the announcement. And D&A for the quarter is about $7.5 million.

Our next question comes from Aaron Ravenscroft with Janney Montgomery Scott.

Good morning, gentlemen.

Good morning, Aaron.

If we could look into the cranes business in the fourth quarter of '02, are you expecting the flow through of many of the deemed restructuring charges, through the P&L in that quarter?

Just let me-- Aaron say that-- you're asking, do we expect a restructuring charge in the fourth quarter?

Just the flow through the P&L -- I mean, are there going to be additional costs in the quarter related to the repositioning?

Yeah. You know, certainly anything we do with respect to the Grove businesses, we'll use purchase accounting, but any of the things we have to do in our legacy businesses, yes, those are-- any changes there will be restructuring charges, as a one line item, and that's just part of the entire transition, and that was part of the acquisition.

And the- you know, when you look at that, you know, vis-à-vis the comments that Glen has made relative to the things that have been done since July, you think about that, what we expect for the balance of this year is that the benefits that we're going to receive out of those actions are going to be neutralized by the costs that Glen just referenced, and going forward, into 2003, you know, we will see significant benefits there, to the degree that, you know, when we look at the accretion guidance that we had given when we made the Grove acquisition, we said that we would realize synergies of $8 million to $12 million. With what we've done, to date, we are about at the middle point of that range and as Glen mentioned, the integration action plans are still being put together, and are expect to be completed by the end of the year, so there's additional opportunity for '03.

But you won't see a significant drop in operating margins in the fourth quarter, related to additional cost actions, related to Crawler Cranes?

No. No.

All right. And if we could just look at the Grove acquisition for a second -- what have been your biggest challenges in the first two and a half months, and were there any surprises, positive or negative?

The biggest-- I think the biggest challenge shift is the market itself, in trying to-- what we've done is looked at it and said, ``this is what we think the market is going to be, and we're sizing our business to that size of a market, not just trying to take it as it comes, and catch that falling knife.'' I mean, we need to size the business to where we think it's going to be, and that's really the way we've looked at it. The biggest challenge was getting, you know, the people across the board, on a worldwide basis, and that's why we went to a two-phased planning process, one in North America, and the other one in Europe, and that's because of the timing of the closing of the transaction on August 8th. The people in Europe are mainly on vacation. So now that the planning process is over, now the execution starts. Was there anything that was a big surprise to us? I don't think so. We- I think-- I think the due diligence that we did during that transaction, the openness that the people at Grove gave to us during that process, I think we pretty much went in with our eyes wide open and it's been a very, very good process that we've undertaken.

Yeah, Aaron, I would add to that -- I think the excitement that the management team has seen as they've been able to pull this together in the integration process has been a very solid impact for us. We feel good about that management team coming together.

Next, we'll take a question from Manish Samaya with JP Morgan.

Good morning, it's Manish Samaya at JP Morgan.

Hey, Manish.

Hi, Manish.

Hey, ah--

We can't hear.

Hello?

That line is open.

Hi. Can you hear me?

Yes.

Now.

The first question I have is, on the Crawler Crane market, essentially you know, what percentage of your sales come from that market?

From purely just the Crawler Crane, on the total dollar side?

Right.

I don't have-- what is it?

It's about 19 percent of the crane segment, for the quarter.

And is it pretty much even for the year, on an annual basis, or does that vary because of seasonality or other factors?

Well, it's going to vary, based on seasonality. I think the difference you have in these cycles, and that's one of the beauties of having the tower cranes and the Crawler Crane and the mobile hydraulics, I think on average, you would see that to be a little higher than the normal 20 percent, or the 20 percent that you saw this quarter.

OK. The other question is, I think in the press release, you highlight that essentially to the year, you're still looking for operating cash flow of about $100 million. Year-to-date, through September, that number is approximately $53 million, $54 million. I'm just trying to figure out how you get to, you know, $100 million in the fourth quarter -- is that all working capital, or do you have something built into that?

Well, that's all the elements of cash from operations, but you know, much of it certainly comes from working capital. We still see significant opportunities, particularly in the crane segment. To a lesser extent, in beverage, on some working capital reductions.

And finally-- in terms of '03, do you have any sense for, you know, '03 guidance? I think the street is at $2.73, $2.75, in terms of EPS.

I guess where we are on '03 is certainly when we look at the marine and food service segments, we've got a lot of stability there and there's a lot of good things happening, you know, in both of those two segments. Certainly you've got much more of a wild card on the crane side, but we have talked about the good things that are happening, relative to integrating, essentially, the entire segment, but the three companies of Manitowoc Cranes, Photon, and Grove, in particular, and we're in the midst of completing those integration plans, as well as the business plans for the entire company, and you know, we really finalize that process typically in about mid-December, and we'll be in a much better position to provide some better guidance for '03, you know, after we get through that process.

OK, thank you.

Next we'll hear from John McGinty with Credit Suisse First Boston.

Good morning.

Hi, John.

I'm confused; if we take the Crawler Crane market, over 100 times, you guys have arguably 70, 80 percent of that, so it's almost mathematically impossible for that market to have been running down 10, 15 percent, and you guys being flat, so you would kind of talk to what you were talking about in terms of the market being outperforming in the first half -- are you talking about the total crane market, or-- I'm trying to understand exactly what's going on there. And basically, to understand what's changed in the third quarter.

We were talking, John, at the end of the second quarter, was really the total crane market, our total crane segment, with respect to tower cranes, boom trucks, Crawler Cranes, everything being off only 1 percent.

But the market you were pointing that against was the entire crane market as well, right?

The 1 percent, yes.

No, the 10-plus percent that you were talking about the market being down.

Yes.

OK, so if we look at the Crawler Crane, the large Crawler Crane market, which is what caused the havoc here in the earnings, is that because the utility market-- I mean, we're basically finishing up all the utilities, what caused that-- that's a big project, that's a process-- traditionally, that's been a process, power, hydro-carbon, large, very large project kind of market. What changed there in the third quarter?

What changed is I think you have people deferring-- what's happened is, you have a lot of projects being deferred, and you also have people deferring their spending habits. More than once during the quarter, I heard people and customers say, ``You know, I just don't understand the current market economy that we're in, and what's going to-- '' and what you heard already in July is that ``I'm just going to wait until 2003,'' and I think, John, there's still a lot of activity out there--

So lifts -- in other words, if you could measure the tons lifted, or some kind of quantitative measure of the usage of the stuff, that hasn't changed?

No, from a utilization perspective, what's been out there is, in fact, staying very strong. The utilization is strong, what has changed in the third quarter is the rental rates have come off about 10 percent, so you're seeing-- you're seeing people trying to figure out-- now you have a rental rate that's a little bit less, you have an uncertain economy, and there are some-- you know, a lot of the stuff is some older technology that people are saying, ``for right now, OK, I'll use that for right now,'' before upgrading to the newer equipment. There is that factor in there, but I think, John, it's a big uncertainty as to where the market is going.

The other thing is, people would love to-- we go down the deals quite a bit get to the financing side of it, interest rates, you know, are at an all-time low if you want to buy your house. If you want to buy a crane, the credit criteria gets a little tougher when you're buying into the construction market, even the financing authorities, you know, find that market very uncertain right now, so that's a tougher sell for us also. And that's what we're seeing the market, and that's why I say the live deals really, you know, as we've talked in the past, we're typically around 50, 55, you know, deals at any one given time, and that probably dropped off a good 30 percent.

Our next question comes from Mike Kinder with Salmon Smith Barney.

Hello?

Hello? There seems to be something wrong with the line here.

If anybody does have a question, you may re-queue by hitting the star-one on your touch-tone phone. Again, that is star-one on the touch-tone phone. And our next question comes from Michael Harris from Deutsche Bank.

Good morning, guys.

Good morning, Michael.

Good morning, Michael.

Carl, just a quick clarification -- when you were reading your script, at least going through your script for Grove, you mentioned that expectations for Grove were still neutral in '02. If we look at Potain, how has the contribution expectations changed there? Are the end lines better, worse than expected? Can you help me out?

They're in line, Mike.

In line?

Yes.

And remind me -- was that still -- was it 12 to 15 cents a share, in '02?

Yes.

OK. And Glen, not to put any pressure on you, but if I look at the food service equipment guys, and you know, back, I think it was around the first of '01 when the market didn't really bounce back as anticipated, you know, Tim waived his magic cost wand and you know, next quarter, you saw a significant improvement in margins. I know you've done a lot in the crane business in terms of getting it right sized, you know, taking some headcount out. How long before we see that at the margin line? I mean, is that quarter two, three, can you help me with that?

No, Mike, you're going to see that in the first quarter of 2003.

OK.

The- the- yeah, the reason you wouldn't see it in the fourth quarter and have those opportunities is because some of the things, as Carl mentioned, we do have some one- some costs that are offsetting some of the savings that we have to implement some of the things that we want to do, but come January 1-- I mean, that's why we've said we want everything behind us by December 31st, because come January 1, you know, I think, you know, hopefully you're saying this about me next time and then Tim is on the phone, but that's really-- that's-- there's no reason why we shouldn't expect that.

Michael, this is Terry. I'd just like to go back to a statement I made. Our management team is not only good, but they move fast when the conditions warrant, and I think you saw that-- you saw that in early 2001, in food service, and that's exactly the process that we're underway today in cranes.

OK. I know you've had a track record of moving pretty quickly on these things, but I didn't know if you were giving Flynn a reprieve, since he had a couple, you know, acquisitions, he was trying to juggle also.

No, Mike, this is the opportunity to do it. You know, people within our organization are expecting change, the customers are expecting changes, and this is the time to do it. The longer we wait, the less effective it's going to be, and that's why we're doing it quickly, you know, we're doing it effectively, and we're doing it for all the strategic nature of the what we said this transaction was all about. Terry is exactly right; the people in our organization as we move forward, looking at, you know, being part of the number-one lift crane business in the world, I mean, from Shanghai and Singapore all the way to here in Manitowoc, every one of our employees is extremely excited of being part of it, and there's a lot of excitement out there, and we just came back from Europe, and you know, it's very well-intact over there. So this is the time to do it, we need to get it behind us, because we have to move forward. You know, the rest of this quarter, and starting in January 1.

OK. And one last question for you, Glen -- Intermat, and that's coming up first of-- or middle of next year.

That's in May.

May -- any new products scheduled for that?

There will be a couple.

OK. All right, I'll get back in the queue.

Thanks.

Thank you. And as a reminder, we are coming up towards the end of our question and answer period. We will take a question from Michael Shohenshein with Credit Suisse First Boston.

Yeah, hi, it's Mike Shohenshein with Credit Suisse First Boston. I'm wondering if you can tell me a little bit about your cycle of receivables, inventory, and payables now? What kind of percentages of sales do you generally expect in each of the quarters for those-- for those items?

On a consolidated basis, we're probably in the mid 50 days, and I just don't have the information to give that to you on an inventory turns, to give that to you on a quarterly basis. That's just a September measure.

Fifty days-- fifty days for receivables?

That's right, and--

Similar number for receivables-- I mean, for inventories?

Inventory turns are-- or inventory days are about 70, 73 days right now.

Seventy-three days.

That's-- both of those, you know, are obviously, you know, inclusive of Grove, and with that acquisition, we certainly, you know, view, as I said before, some significant working capital opportunities.

Um-hmm. And your payables?

Payables are at 63 days.

Sixty-three days. So about 50 days receivables, 73 in inventory, 63 in payable, and that works against full-year, full-year, or 365-day sales, typically? Yeah?

The-- yes.

OK, and what kind of seasonality do you attach to your working capital?

The first quarter is the lowest; that's the biggest working capital usage that we have, followed by the fourth quarter, and then pretty neck-and-neck on the second and third quarter, but the third quarter is typically our largest cash generation months.

Third quarter is typically where you generate most of your cash, and fourth quarter-- let me just make sure I heard this right -- first quarter is a fairly usage month-- quarter, fourth quarter is somewhat heavy, third quarter is--

Fourth quarter isn't heavy. I was thinking of the seasonality in terms of volume. From a working capital perspective, fourth quarter is a pretty significant cash generation months, with reductions in working capital in the fourth quarter.

OK, so back half of the year, you're generating working capital, and front-- first half of the year, you're putting into working capital?

Right. And the other thing that we have with the fourth quarter, which is a little bit unusual for us, when you equate it to previous years is, is the Grove acquisition and the opportunities that that, you know, has brought us thus far and will bring us, going forward in the fourth quarter.

OK, excellent. Thank you very much.

And due to time constraints, that was the last question. This will conclude the question and answer session. If you queued for a question that was not asked, or if you have a question that was not answered, there is a contact, a name and number at the bottom of your press release. Again, there will be a name and number at the bottom of your press release for any questions that were not answered. At this time, I'll turn the call back over to Mr. Khail.

Before we conclude today's call, I would like to remind everyone that a replay of today's call will be available, beginning at 1 p.m. Eastern Daylight Time this afternoon, until 2 p.m. Eastern Daylight Time October 29th. The number to dial for the replay is area code 719 457 0820, please use confirmation code 509796. You can also access an archived version of today's call at our web site, at www.Manitowoc.com. This concludes Manitowoc's third quarter conference call. Thank you for joining us. Have a good day.