Manitowoc Company Inc (MTW) 2003 Q2 法說會逐字稿

Good day everyone, and welcome to the Manitowoc Company second quarter earnings results conference call. Today's conference is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to Mr. Kyle. Please go ahead, sir.

Good morning everyone, and thank you for joining us today. Participating in today's call is Terry Growcock, our Chairman and Chief Executive Officer, Tim Wood, Vice President and Chief Financial Officer, and Glen Tellock, President of Manitowoc's Crane Group. Tim Kraus, President of Manitowoc's Food Service Group, and Dennis McCloskey, President of Manitowoc's Marine Group are also on the line to participate in our question-and-answer session. Tim Wood will open the call with an overview of our financial results for the quarter, including a brief report on each operating segment. Glen will follow with an update of our Crane operations. And then Terry will conclude with a strategic commentary and updated earnings guidance. Following these remarks, we will open the call for your questions.

I want to mention that any of you were not able to stay on the line for the entire conference call, you can hear a replay of our call beginning at 1 pm Eastern time today until 1 am Eastern time August 6. The number to dial for the replay is 719-457-0820. Please use confirmation code 704 855. You can also access an archived version of this call by visiting the Investor Relations section of our corporate Web at www.Manitowoc.com.

Before we get started I would like to review our Safe Harbor statement. This call is taking place on July 30th, 2003. 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 speakers' remarks and during our question-and-answer session. Such comments are based on the Company's current assessment of its markets and other factors that affect our business. Actual results could differ materially from any implied projection due to one or more of the factors explained in Manitowoc's filings with the Securities and Exchange Commission including but not limited to the Company's annual report on Form 10-K for the year ended December 31, 2002. With that, I will now turn the call over to Tim Wood.

Thank you, Steve. And good morning everyone. Today we reported second quarter revenues of 434 million, which is a 33 percent increase over the same quarter last year. We reported net earnings of 1.3 million, or 5 cents per share for the quarter. numbers report tough conditions in the Crane and Marine segments. Excluding special charges of 10.8 million, earnings per share were 33 cents, which is well within the range we estimated in our preliminary earnings announcement. Cash flow contributed to a reduction in debt of 28 million through June '03 versus an increase of 10 million last year. Given the seasonal nature of our business this is an exceptional first-half performance.

We have also received a bank amendments which waved second quarter financial covenants and revised our future covenants to levels we consider appropriate in the light of market conditions.

Earlier this month we said we would be taking a special charge of 15 to $20 million related to consolidation, restructuring and other actions designed to limited excess manufacturing capacity and improve our operating efficiency. These activities are concentrated in the Crane segment. We took the majority of the charges, 10.8 million or 28 cents per share in the second quarter, and will take the remainder in the second half. We're undertaking these actions to lower our operating costs and improve our margins and, of course, increase our cash flow. These special charges include a restructuring charge of 4.8 million for further rationalization and facility closures in the Crane segment, along with a 4.9 million goodwill impairment charge in the Company's aerial work platform operating unit. Although these transactions reduced earnings, they will generate positive cash flow in the aggregate when completed. They are designed to complete the integration of our Crane acquisition, eliminate excess manufacturing capacity, improve efficiency and enhance financial performance.

Perhaps the largest of the new actions is the announced closing of National Crane Plant in Waverly, Nebraska for a production to Shady Grove, Pennsylvania, which Glen will discuss later. We expect that the final outcome of transfer to be cash positive with a solid impact on future performance. Additional headcount reductions in Europe and United States will also help reduce costs. We will see increased benefits from integration efforts along with the further restructuring and consolidation in this segment as the second half progresses. Next year we will the full benefit of both, including better earnings and additional cash flow. Lastly, we will are considering the divestiture of certain other noncore assets which will also benefit our cash flow.

Crane segment sales were 260 million for the quarter, well above sales for the second quarter of last year. But there were boosted by the acquisition of Grove Worldwide. Excluding Grove sales, overall Crane sales would have dropped about 19 percent. Crane's operating earnings declined to 9 million, up approximately 12 million from the same quarter last year. The impact of lower volume and competitive pricing has been substantial. Fortunately integration and other savings are softening this somewhat.

Foodservice generated operating earnings of 21 million, as operating margins improved approximately 1 percentage point despite a 5 percent drop in sales to 127 million for the quarter. The strong operating earnings of the Foodservice segment helped offset declines in our other two segments. The drop in sales is due to a new model promotion last year under a private-label production contract. The other units continue to perform well and improve market share.

On the Ice side of business we are outpacing the market boosting our North American market share almost 2 full percentage points for the first half of the year. The Beverage business is continuing to reap the benefits of recent consolidation and cost control efforts. We continue to invest in this segment, particularly in product development. And you can expect to see more new product introductions in the third quarter.

Marine sales were down 23 percent to about 40 million, in part due to lingering effects from the strike at Marine Marinette earlier. And operating earnings were up 50 percent, approximately 3 million. Reporting activity in this business is improving, but economic uncertainty and difficulty in obtaining financing has meant that new construction work remains slow during the second quarter.

Debt as of June 30th was 663 million. This includes a 17 million increase from December 31st due to euro exchange on our euro bonds, as well as about about 8 percent -- excuse me, 8 million on other euro denominated debt. We will generate strong cash flow in the second half of 2003 and for the year. We continue to target an operating cash flow of $100 million or more. And we're confident that we will reduce debt by 60 million by year end. Our net debt to capital at the end of the quarter is 67.6 percent. And our target is 55 percent within the next 12 to 18 months.

I will now turn the call over to Glen.

Thank you, Tim. Good morning. we continue to execute our core strategy which are quite clear. First, we will aggressively protect our traditional market share by providing our customers with the best overall value in the industry. This means we will continue to invest in new products, product support and service. And we will work closely with our customers on the issues that they face in this economy to find ways that provide mutually and beneficial solutions.

Second, we will work to grow market share globally by leveraging the strengths and gains of the acquisitions of Grove and Potain. While our integration efforts are mostly complete, they're just beginning to exploit the possibilities that our global reach now afford us.

Third, we will focus on continually streamlining our cost structures by reducing inefficiencies, improving processes and improving our manufacturing throughput. We believe that one of the byproducts of this book will be significant cash generation as we improve our processes and minimize our working capital investments.

I would like to talk about each of these strategies in a little more detail. In total, eight new were introduced either globally or regionally during the quarter. We expect this level of investment in new product to continue. During the first half of 2003 our global market share is growing in five of our seven major product lines. We believe that this is a direct result of our willingness to continue investing in the industry to provide service and support designed to address the unique needs of each of our customers.

Leveraging our strength is the next strategy I would like to discuss. We spent a tremendous amount of time and energy in resources integrating Potain and Grove acquisitions, and as previously mentioned, have now completed much of the integration activities. Our organization is streamlined and in place. Our key processes are integrated, and our distribution systems are combined. We're proud of the fact that we've done this in a manner that is transparent to our customers.

In total, the actions are completed to date, will allow us to exceed $30 million of savings in calendar 2003. They have also provided our customers with a single source for all their global crane needs. Most importantly, these actions have set the stage for us to use our global reach and brand strength to grow in areas where the three companies have traditionally been weak.

A good example of leveraging this strength is in Asia. Prior to the acquisition of Potain and Grove, Manitowoc and Grove each dedicated the marginal amount of resources to the region. Potain's more significant resources, including Chinese manufacturing capacity, combined with Manitowoc and Grove resources are giving us enough scale so that we can take advantage of the growth in the region.

Through the first six months of 2003, our revenues are up 50 percent over prior year in the regions primarily due to leveraging our strength. Another example of leveraging is our drive towards local manufacturing of products. We are beginning to build tower cranes in Europe, while expanding our tower and all-terrain production in the United States. This drive not only puts us closer to the customer, but will help us lower our cost structure and working capital requirements.

I would like to mention that there are two previously announced integration actions that are still underway. In May we announced the move of our National Crane operations from Waverly, Nebraska to our manufacturing facility in Shady Grove, Pennsylvania. This was a very difficult decision for us given the outstanding group of people that have been involved in the business. However, given the state of the industry and excess capacity, it was the right long-term answer to the larger Company. Equally important is the need to continue to provide the customer with the quality products and support that have made National the number one boom truck in the industry. As a result, the organization, assembly and critical manufacturing components will report independently of the Shady Grove operations. In essence we intend to make a great product greater. The other previously announced integration actions are still in process. And the closure of several small tower crane assemblies in France. All closures will be completed by year end.

Our final strategic focus is on streamlining our cost structure. This relentless drive allows us to remain competitive in turn down cycles, positions us to grow our our margins as the industry turns around, and we also generate cash by reducing our working capital investments. A prime example of this streamlining is conversion of our collar production facility here in Manitowoc towards demand flow philosophy. This conversion recently completed is beginning to show results through reduced in-process inventories in manufacturing . The global introduction of our new product development resources is another example of improved results at a lower cost. This integration allows Eastern European engineers to do design work on new products being developed in any of our businesses.

In summary, we expect the current market conditions that we're facing to continue well into 2004. We are confident that the strategic focus will help see us through this environment. Our actions are designed to improve operating margins and boost cash flow. Longer-term, we're in the a great position to outpace the market when it rebounds.

With that, I will turn the call over to Terry for his comments.

Thank you, Glen. As we said earlier this month, we believe that the conditions currently affecting the crane market will continue through most of 2004. Glen and his team are managing the integration of Grove at the same time as they take further efforts to align our organization and operations to match the anticipated market conditions.

Our Crane strategy is rock solid. We're diversified globally with distribution and more than a dozen manufacturing facilities on three continents. We're diversified by end market serving heavy construction, commercial construction, general contracting, energy exploration, industrial applications, utility services, material handling, and crane rental applications. We have the industry's best brands and our product line is second to none. We have, and we are committed to maintaining, our leading positions in all of the product and market segment that we serve. The new products Glen mentioned have all been developed in close corporation with our customers who have expressed their desires to have cranes with the capabilities Glen described. These developments keep us in front of our competition and help strengthen our position for a rebound in the crane market.

Diversification is also key to our Foodservice segment. Our Foodservice equipment product line, which is focused exclusively on the cold-side products, is the broadest in the industry. We have diversified end markets as we serve foodservice, lodging, hospitality, healthcare, convenience store, institution and supermarket operators. And our geographic diversification is another strength. We manufacture in North America, Europe and Asia. And we have distributors in 90 countries. We have the largest North American market share of commercial ice cube machines and walk in refrigerators and freezers. And we are recognized as the industry leader in ice cube machine technology and innovation. In fact, we will be introducing a new generation of products in the third quarter to respond to customer needs and to reinforce our market leadership.

Although the Foodservice market isn't showing signs of strong growth, the actions we've taken in recent years have paved the way for us to outperform the industry. We have consolidated operations. We have instituted Six Sigma and other manufacturing programs to achieve operational excellence. We have leveraged our industry-leading brands. And as noted, we continue to introduce new products. Our strength in the Foodservice segment is evident in our ability to gain market share in this industry. The performance of our Foodservice segment this quarter demonstrates the overall strength of our diversified business model.

In our Marine segment, quoting activity is brisk for commercial and government shipbuilding projects. Although quoting activity was strong, only a few projects were actually contracted. Eventually many of these projects will be funded and built. And we're in a strong competitive position to maintain our market share leadership on the Great Lakes. We're optimistic about the longer-term opportunities for additional commercial, government and homeland security shipbuilding work, as well as the upcoming repair season, which appears healthy at this point.

During the quarter, we were selected as one of three companies to participate in the Response Boat-Medium project for the U.S. Coast Guard. We are currently building one of these boats in partnership with Kvichak Marine for customer evaluation. In addition, we were recently chosen as one of the three teams to complete a funded engineering phase for the Navy's Littoral combat ship.

Before we turn the call over to you for questions, I want to once again review our strategic priorities for this year. First, we will increase operating efficiencies in our Crane business. We have completed actions necessary to realize $30 million in annual savings due to the integration and consolidation steps already taken. And I'm comfortable that Glen's focus on improving the Crane cost structure will lead to greater efficiency and savings, leveraging the global and brand strengths that the Crane business provides us with tremendous future opportunities.

Second, we will maintain our innovative edge in Foodservice segment through a new product introduction at the NAFEM trade show in September. These products will help us to increase our Foodservice business, while our improved operating systems are helping us increase margins.

Third, we will grow our Marine operations by leveraging the strengths and capabilities of our multiple shipyards to serve commercial and government customers. Fourth, we're maintaining a sharp eye for ways to consolidate and rationalize existing operations and to divest noncore operations and facilities. Fifth, we are managing the business for cash flow generation and debt reduction. As Tim has said, we expect to reach our target of $100 million in cash from operations once again this year. And we are confident that we can achieve $60 million in debt reduction this year. Finally, as previously announced, our fully diluted earnings per share target for 2003 is in the range of 80 cents to $1 dollar.

I will now turn the call over to the operator to conduct our question and answer session. Candace?

(CALLER INSTRUCTIONS) Robert McCarthy Robert W. Baird.

I wanted to ask Glen a question about the Crane business. First, I need a little help. The comment about share being up in five segments, I'm not sure I know how to properly identify the seventh. So the first question is, could you identify the seven and then identify which of those two are the only ones that you didn't gain share?

Excuse me. And the seven markets that we serve, Rob, all-terrain, rough terrain, truck mounted, boom trucks, crawlers, and towers, .

So you're not including the aerial work platform business in that?

No.

Which were the two -- what I want to know is the five where you gained share in. It just seems easier to ask about the two that you didn't.

The two that we didn't gain share doesn't mean that we lost share, we just didn't gain share on the crawlers and the RTs.

Okay. My second question, in a sense, Glen, I think you spoke to this already, although maybe not in terms there were perfectly clear, at least to me. You are now competing against principally against two European based competitors that have traditionally, and in the case of one more so recently become very aggressive in taking in trade as part of the transaction of selling a new crane. That traditionally has not been a business that Manitowoc has been interested or practiced -- that Manitowoc has been interested in competing in. I'm interested in what impact you think that has on the market. Does it create any risk in your mind of market share loss if it continues over an extended period of time? And is any of that forcing you to rethink your posture about taking in trades?

Rob, just from our perspective, in Europe we have the Grove organization has taken cranes for quite a while. Potain has done trade-ins before. We're seeing, probably you're right it is more aggressive posture by most of the people. I know more of our competitors probably taken in 500 last year, or probably 20 percent of that in total. So it is a matter of how aggressive you get in valuing the trades, and that is something that we won't do. We put the fair market value. And if the people get competitive, you're not going to see things go on the balance sheet at an overinflated value, and then dumping things on the market. That is just not our strategy. But we do have a used crane strategy. We stick to it and we use it when necessary. But you are correct, you are seeing this -- I wouldn't say more often, but you are seeing it you know frequently in a lot of the deals that are coming out, because people want to get into the new equipment and get out of some of the things they've had for previous years.

Joel Tick with Lehman Brothers.

I was wondering if you could provides some color around the end market for your Crane business? Is there anywhere right now?

Joel, we couldn't hear that. Could you restate that?

Sure. Can you hear me better now?

That's a lot better.

This is actually Harry Curtin calling. I was wondering if you could provides some color around the end markets for your Crane business. Is there anywhere where you have seen some strength or some pickup?

I would first take that, and then I will let Glen give you some more detail. But in our discussion we did say that we're seeing some opportunities for us in Asia that we have been able to capitalize on because of our new combined strategy between Grove, Manitowoc and Potain, using the well-established position that Potain had there. So we are pleased with the improvement that we're seen in our overall business in Asia. Glen, I will let you...

I think you know the advantage we have is there is a lot of not only just product diversity, there's a lot of global diversity also. And so there are some markets that are up, some are down. And without giving a lot of detail as to what some of those are, I mean you are seeing a little bit in maybe some of the energy markets, not the big energy, but some of the wind towers. You see some in the oil gas and special cam industry. But in overall where some are up and some are down. But I guess we would rather look you know in the overall market. There is some but they certainly are few and far between.

And also have you seen any July pickup in demand for the Crane business?

No.

John McGinty with CS First Boston.

You mentioned that the Crane business, X acquisition of Grove, was down 19 percent. Was the Grove business of conceptually -- was it down more or less. In other words, you didn't own it a year ago, but just on a like to like basis, what kind of market did it see relative to the 19 percent that the two Manitowoc businesses showed?

The decline in the Crane business was overwhelmingly in the crawler side of it. The Grove business was held up relatively well. And it is down, but not by a lot.

But Grove wasn't in the year ago, right?

No, but if you pro forma it in a year ago you would probably have seen a little bit of a decline, but certainly far less than we have seen in the crawler crane business.

Okay, so Grove was obviously then -- thank you that is exactly what I wanted.

It was not in there at all a year ago. So we got the full benefit .

And then within -- another clarification. Was the tower business as bad as the crawler business?

No.

The tower was okay too, or closer?

In relative terms, it was -- all the businesses were down. But the most precipitous drop was in the crawler crane business.

Okay. And then one clarification. The $30 million of benefit that we get this year from the actions that you're taking, have you delineated the timing of that? Is that pro forma? Is that in the second -- I mean pro rata, is at all in the second half? How should we look at that 30 million coming in?

John, this is Glen. The 30 million -- our basic integration efforts with respect to that were, the action plans were all completed by the end of June. So there were things that were done right away last year that you're getting the full year benefit. There are some things, such as purchasing items, that you know that by the time you get the engineering changes and whatnot they will come through in the latter half of year. But that 30 million is, in fact, a realized number for the entire year. And I think you are seeing the greater share of it is going to happen over -- stay with us the rest of the year. \

There is some things and that we talked about the closures of some of European facilities. Those don't happen -- this can really take place and see the benefit at all until the latter part of the -- probably in the fourth quarter. But then you have the full year benefit all next year. In National, there's really not a lot of benefit in sales during the latter half of this year, but then all of next year.

John, if I could just -- on an order of magnitude, without being precise, probably somewhere in the neighborhood of 40 percent first half, 60 percent second half, just because of things rolling into place over time. It will be greater in the second half than it was the first.

But Tim, does that mean if you don't do anything else, that you also get an even greater benefit in '04?

Yes, it does. For example, we will not have completed the National consolidation in the Shady Grove, Pennsylvania until the end of this year. And those benefits will be received in '04. And that is in addition to what we have talked about.

Could you give us an order of magnitude of what the carryover is? And then I will get back in queue. In other words, the increment in '04 over the 30 million, another 10 or 15 million in '04?

I think it is probably on the low end of that . That depends on, you know, I would say the low end of that.

Tom Planka with CS First Boston.

Following up on John's question, Glen, can you give us an update as to how is the integration of National going at the Shady Grove? And what is the status of the tower crane consolidation?

The consolidation of National is going unbelievably well, as things go. The plans that we laid out, the things that we did to make sure that this was going to happen -- I mean this is a great product and we need to continue to make sure it is a great product. And one of the things, more importantly, is what the expectations from our customers as to what they're going to get when the products is starting to be manufactured at Shady Grove. And we're ahead of schedule on a lot of things, and the data transfers and systems work. As a matter-of-fact we're even -- we've got a unit that are currently being manufactured, assembled then and some components being manufactured in Shady Grove right now. And we have actually delivered a couple of units out of there already. It was critical to get some of the engineers to go over on the Shady Grove. The salesforce has stayed intact. We have had some customers through the operation at Shady Grove to see that here is the independence of it from the local Shady Grove operations. And so far the people that have seen this have received it very well. So we're very happy that the progress that we've made to date.

Is there an interim earnings impact from that, or how do you deal with that, aside from the charges, or is it all captured in the charges?

It is all captured in the charges. That really represents a big chunk of the low end of the remaining charge to be booked of about 5 million. Because what happens there, you have to book all the charges relative to transfer itself and the startup in Pennsylvania. Anything associated with this transfer that isn't specifically related to the closing of the Nebraska plant has to be booked through expense when you incur the costs. So that is why we've got some delay in our special charges.

And then the status of the tower crane consolidation?

Are you talking about the consolidations in Europe?

Yes.

I would say there's kind of a two phase issue. When we put the transition plans together last October -- I'm sorry, September, October. We did it in a 30 day period and we thought we could get it done a little bit sooner than we thought. The issue is when you start dealing with the Works Counsel and everything else, and then we got some of the legal folks involved to give us a much better indication of how this whole process would go out. We probably are six to eight weeks behind what we originally thought. But everything is going -- other than it just takes more time, everything is happening in the way we expect it to happen.

Manish Samia with J.P. Morgan.

My first question is for Glen. Glen, I guess you may have touched upon this earlier. But you know I had a bit of difficulty understanding the gap between the increase in backlog for the Crane business in Q1 and then starting to see some weakness in the second quarter. I mean, what is going on? What is the disconnect?

I think the disconnect is the seasonality of the industry. And what is happened in the first quarter we had some pretty good orders that came in from the AT side of the business. We had some tower crane orders that came in. And just a seasonality of the business.

We also had, if I recall there was a 18,000 . I think if you look at the seasonality of the business and some of those onetime things, it goes up. It gets stripped out and that goes back to the -- you know then we're faced again with the -- what we've said for a long time is that you see our business, the majority of our business coming in during the quarter and being shipped during the quarter. And this, I think, just happened to be a few of those things that came in and boosted it, but still nonetheless you know business that we get for the entire year.

Okay. And then I have two quick questions for Tim. Tim, would you have to the D&A number for the quarter?

What I have the what?

Depreciation and amortization?

Roughly, 11 million.

Okay. And then you said you got the amendment from the bank. Can you give us a sense for what the covenants are for this year at least?

Sure. As a matter-of-fact I am going to let the expert, Carl Marino do it for you.

Okay.

We had the EBITDA covenant is no longer a covenant, it has been dispensed with. But we have the senior leverage covenant remains as it was at 225. Total leverage goes up to 575. Interest coverage down to 2 times. And a fixed charge of 1.25 times. And we did file an 8-K that contains D&A.

Brian Verona with RBS Greenwich Capital.

I had a question regarding the amendment and it was answered.

Sorry, we couldn't hear that.

regarding the amendment has been answered. Thank you.

Sarah Thompson with Lehman Brothers.

Just a quick question. I'm not trying to beat a dead horse on the cost savings, I just don't totally understand it. You guys recognized about 40 percent in the first half, so that means -- I know they are just rough numbers, but you got about 12 million of cost savings in the first half and you expect about 18 in the second half. Is that the right way to think about it?

That is exactly the right right way to think about it, Sarah.

Okay. And then on the bank covenants, I think you guys closed Grove the first or second week of August last year, correct?

That is correct.

So on the main covenants do we just need -- is the only adjustment we need to make now just for an extra month of growth? Other than that we should be able to just use straight EBITDA numbers?

Yes.

Can you just give me an idea -- I know you guys didn't Grove. And I know one of the earlier questioners asked you this, but can you just give us a sense of the magnitude of change in the Grove numbers year-over-year?

No, that I really can't do. Because as Glen talked about earlier, Sarah, we monitor our sales by product line now, and our product lines are amalgamated geographically in the Americans, Europe, Middle East, and Africa and the Far East. And so we are pretty much committed to reporting on that basis because that really reflects the strategy of the Company. But as you know, by having said that, the all-terrain and rough terrain business has held up better than the crawler business.

with Deutsche Bank.

First question to Glen. You know, 19 percent reduction in Crane, excluding growth, give you lower volumes, competitive prices. What was the impact of the pricing and what was the impact of the volumes?

Would you repeat the question please?

Of the 19 percent reduction, what part of that was the pricing pressures, what portion of that was volumes?

I would say that the lion's share of it was volume. We did experience pricing pressures, but not anywhere near the magnitude of the impact of the volume pressures.

So like a mid single digit decline, is that appropriate from pricing pressures in the quarter?

I don't have the exact number for you, but it was certainly the lion's share of the 19 percent.

Glen, in the last conference call you guys discussed how you were targeting positive operating cash flow for each quarter of the year. And I wonder, we didn't get that, but was the negative operating cash flow a function of the shortfall in earnings or was working capital maybe not as -- the direction as positive as you had planned for the quarter?

You know will if I left anybody with the impression of quarterly guidance on the last call, I apologize because I'm not. The guidance is for the full year. And the point we were trying to make about the timing aspect of it is how significantly our cash flow improves in the second half. The second quarter, the first run working capital, frankly, is probably as strong as it gets during the year, because we're kind of in the middle of the second or third quarter seasonal peak. So you can take a look at our balance sheet and see that our working capital actually increased. And you can look at our income statement and see that we're disappointed with earnings. But I don't think that should be taken in the context of any prior comments. The fact that our debt is down in the first half is something that gives us a positive real optimistic for the second half.

with Deutsche Bank. John McGinty with CS First Boston.

Tim, what was the impact in the quarter, if any, of currency? I mean, you have got all of the operations in Europe. Your translating them back. You are bringing some of the all-terrain cranes over and so on. Was currency a -- helps sales, hurt sales, help earnings, hurt earnings?

You know you brought all the elements of it together very well, John. And the bottom line is, it didn't have much impact at all. Because the ability to translate our EME earnings and EA earnings at a higher rate was largely offset by the cost increase on the imports of the all-terrain United States. So it was almost negligible on earnings, but the impact on debt, as I said before, was negative for a fairly significant amount. And what was the impact on sales? About 2 percent of increase in sales and translated in Europe. (multiple speakers).

If I could just recap. That 10 percent increase in sales -- about 25 million hit to increased debt and almost zero impact on earnings.

Okay. And then on the crawler business that you said was the lion's share of the decline in cranes, if we were to look sequentially taking the seasonality out of it, I mean this is more a gut feel, is the crane -- is the crawler crane market, is it bottomed or is it still kind of softening as you look at it kind of over the last three or four quarters looking back?

I'm not -- I think it depends if you look in unit or dollars. I think it may have bottomed in units. Possibly it could go down a little bit more, but I don't think since the last half of 2000. But I think what is happening is, you're going to start seeing -- my guess and some of people I talked to -- I think that you're going to see more of the units flattening. And it is going to be the smaller units that are going to be sold as you come out of this period. It is not going to be the 250, 300 ton, 600 ton, 800 ton . So the units may stagnate a little bit or may flatten. But I think the dollars could go down, because you're going to have a lower average price per unit.

Dollars could go down for another -- when do you hit bottom on that, like another maybe some time in the second half?

Second half of this year?

Yes, in other words, by the fourth quarter or is this -- does the dollar weakness kind of continue into '04?

I think it would -- you would see the dollar -- I think it could go into maybe the first part of 2004. But I don't think it will be much past that.

Okay. I guess the question, without putting a number on it, about the pricing, without trying to -- I guess the question is, if you look at your variances versus your costs, you have two competitors who are very aggressive, one of them private, one of the public. Is the crane business substantially more price competitive than it was a year ago? And do you see any easing of that, or would you say that we've gone down to a level that we're now sitting at? Or how would you characterize it qualitatively without trying to be quantitative about it?

I think what is was different, John, is there aren't as many deals, so the ones that come up are bigger deals, and everybody knows about them. I think sometimes you don't get by with just being the only guy on the quote sheet. So what happens is it starts with the quotes, and then somebody else -- it seems like a price that might be this or that. I mean then it goes to another competitor. And is almost sometimes it depends on how badly somebody really wants that business. You know it is not -- you talk about two other -- two main competitors. Well, you really throw in the wrenches when when somebody considers one of the two main competitors needs the mark and you get another guy that throws in a quote. And then it is a matter of where's the bottom. And sometimes the best thing to do is take it as low as you go and walk away and make sure somebody else gets hurt.

(CALLER INSTRUCTIONS) Van Worth with Cost Asset Management.

A couple of quick questions. The first one. What would be the cash cost of restructuring this year? Secondly, you obviously pledged to pay down 60 million in debt, to reduce debt by 15 million this year. Can you explain how much of that is regular amortization, the Bank and how much of that you expect from free cash flow?

And finally, and may have been asked before on the call earlier this month. Your previous structuring guidance was $80. What would that equate to in EBITDA terms? Thanks a lot.

The restructuring charges that we talked about in our latest communication will not cost us the cash because they involve the sale of real estate and assets that more than offset the cash costs associated with the various moves. As to whether or not those sales are completed in 2003 or 2004, that would impact maybe whether they were cash negative or cash positive this year. And I can't answer to that. I can't pinpoint the . What I can tell you is when everything is done, these actions will be cash positive.

As far as the pay down of debt is concerned, the debt that we will pay down will be principally our senior debt. If I understood you right, you were asking if we're going to take down senior debt to pay down other debt. That's -- no, it is all going to come from free cash flow and strategic (technical difficulty). We won't borrow to do it. And EBITDA, $1 -- I just -- I will have to get back to you on that one.

Robert McCarthy with Robert W. Baird.

Can I get back to him on the EBITDA? It is somewhere in the neighborhood of 140 million.

Are we ready now?

Yes, sorry.

Minor question, Tim, on the table of restructuring charges, delineates the charges in the press release, these are all tax numbers. We can find, of course, restructuring charge and the goodwill impairment on a pretax basis in the income statement as separate line items. Can you tell us where the 386 and $420,000 items are in the income statement, and what the pretax amounts are?

The 386 I think is in discontinued items? Right?

Discontinued is 405.

No, you've got the 405 and discontinue that. The rest of it is largely in SG&A. And I think you can just gross that up to 65 percent, right? Gross it up to, let's see, about 1 million 2.

Okay. I'm sorry I don't mean to be dense about this, but I'm still confused about the $30 million savings target. I understand that all actions that would generate the 30 million savings will be complete this year. But I think I hear you saying that you won't see the full year benefit of the 30 million this year carryover next year?

If I could kind of take what Sarah was alluding to one step farther and give you my answer, let me . As she said, if we got $30 million in savings this year on an order of magnitude, you would have about 12 of it realized in the first and 18 in the second. Okay? And so going into next year, Rob, you will be at that $18 million run rate for the full year. That gets you up to 36 million. And we said that on order of magnitude we would probably be up another 10 million over the 30, because we've got some more stuff coming in that doesn't start until next year. Again, these are quick and dirties, but this gives you an idea of the relative strength in between periods of the savings program.

Okay. That's what I want to confirm. You expect to see the full 30 in the numbers this year?

Yes, yes, sir. And that translates to 36 next year, if you get 40 in the first and six in the second.

Tom Planka with CS First Boston.

You mentioned divesting noncore assets. Her those just the plants that you have consolidated or are those actual businesses?

It relates to businesses, but it also relates to decisions that we haven't finalized yet, Tom. That is why it is kind of up in the air in both the commentary and the numbers.

Okay. Is there...?

We're not talking about gigantic transactions here. We're talking about you know parts of businesses within our businesses.

Okay. The statement you guys make about reducing debt by 60 million, are you talking about net debt? So you're looking for a year-end debt of 575 You started the year with 30 million of cash, so I just want to make sure we're speaking the same language.

We're talking net debt, but hopefully to keep the cash at 30 million or lower. And get it all applied to debt.

And a quick question on Foodservice. I guess the weather was somewhat you know not cooperative in the second quarter. How are things looking so far in July as far as activity?

Actually most of our Foodservice -- in all of our Foodservice business is a noncontract manufacturing business. But July is weak. The weather is certainly having an impact. But, as you recall, last year's July was very hot. So it doesn't mean the quarter -- we don't have a view to the quarter yet, but July has been tough.

We have time for one final follow-up question from John McGinty with CS First Boston.

Could we just talk for second about the Marine business. How should we look at the second half? In other words, you talk about lower orders and so on, but you also talk about some lingering effects of the strike. I guess, can we sustain -- should we see an improvements in this $3 million plus -- should $3 million rate or 2.9 million rate in the third and fourth quarter on average. Or can you give us any kind of a flavor of what was non-recurring in that versus the weaker business?

Let me just give you a little bit of the financial side of it, and then turn you to Dennis McCloskey on the business side, John. There were lingering effects of the strike that went into the second quarter that are now past us. But there are enduring effects of the deferrals in the orders, particularly in the commercial business. And even if we are able to generate some significant order acceptance in the second half, due to delays in starting up our engineering and things of that nature, we won't see the profit on it until 2004. So I think that you can -- financially you can look for the second half to be difficult in the Marine business, because of the referrals more than the strike.

(multiple speakers) You answered the question.

Okay. I just wanted to make sure he understood the number .

And that concludes our question and answer session today. Mr. Kyle, I will turn the conference back over to you for any additional or closing remarks.

Before we conclude today's call, I would like to remind everyone that a replay of our call will be available beginning at 1 pm Eastern time today until 1 am Eastern time August 6. The number to dial for the replay is 719-457-0820. Please use confirmation code 704 855. You may also access an archived version of today's call on our website at www.Manitowoc.com.

Thanks again for joining us, everyone. Have a good day.

That concludes today's teleconference. Thank you all for your participation.

(CONFERENCE CALL CONCLUDED)