Manitowoc Company Inc (MTW) 2004 Q3 法說會逐字稿

Good day everyone and welcome to this Manitowoc Conference Call Third Quarter Earnings Results. 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. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for today for Manitowoc's third quarter earnings conference call. Participating in today's call will be Terry Growcock, our Chairman and Chief Executive Officer; Carl Laurino, Senior Vice President and Chief Financial Officer; and Dennis McCloskey, President of Manitowoc Marine Group. In addition, Glen Tellock, President of Manitowoc Crane Group; and Tim Kraus, President of Manitowoc Foodservice Group are on hand to answer questions relating specifically to their respective businesses.

Carl will open today's call with an overview of our financial results this quarter, including a brief report on each operating segment. Our featured speaker on today's call is Dennis McCloskey, who will provide an update on our marine operation. You will recall that Tim Kraus was our guest speaker last quarter and Glen Tellock spoke on our first quarter call. Terry will then conclude our opening remarks with a strategic update. Following that remarks, we will open the call for your questions.

If you're not able to stay on the line for the entire conference call, you can listen to a replay beginning at 1.00 p.m. Eastern Time today until 12 midnight Eastern Time on November 4. The number to dial for the replay is area code 719-457-0820. Please use confirmation code 243240. You can also access an archived version of this call by visiting the investor relations section of our corporate website at www.manitowoc.com.

Before I turn the call over to Carl, I would like to review our Safe Harbor Statement. This call is taking place on October 28, 2004. 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 any 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 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 on Form 10-K for the year ended December 31, 2003.

With that, I will now turn the call over to Carl Laurino.

Thank you, Steve, and good morning, everyone. Today, we reported third quarter sales of $491 million, a 21% increase over the third quarter of 2003. Our net earnings were $12.7 million or 47 cents per diluted share compared with $7.2 million or 27 cents per diluted share last year. Earnings from continuing operations were 48 cents compared with 30 cents last year. Earnings from continuing operations in both 2004 and 2003 included special charges, primarily related to retirement of debt as well as restructuring and plant consolidation. Excluding these special items, earnings from continuing operations for the quarter was 50 cents, up 39% from 36 cents last year.

During the quarter, higher commodity prices net of product price increases added 9 cents per share to our cost, slightly below our earlier estimate of 10 cents. For the 9 months ending September 30, our net sales increased 21% to $1.4 billion from $1.2 billion during the same period last year. Net earnings were $33.7 million or $1.24 per diluted share compared with year-ago earnings of $9 million or 34 cents per share. Earnings from continuing operations before special items were $1.28, up from 76 cents in the first 9 months of 2003.

Now I will take a moment to review the third quarter financial highlights from each segment.

Cranes sales were $306 million, up 24% from the same quarter last year. The result continues to reflect strength in the tower and mobile telescopic crane sales on a global basis. However, the high capacity tower crane market in North America continues to be quite soft. Operating earnings were $13.5 million, up 34% from 10.1 million last year. Operating margins were 4.4%, up about 30 basis points from last year. Our recent consolidation and reorganization efforts to better position our crane segment to leverage our costs enabled us to better absorb increasing commodity prices, which had a $1 million impact net of pricing actions in the quarter.

Sales and operating earnings were both flat in the food service segment at $123 million and $20.3 million respectively, and operating margin decreased 10 basis points. Those results reflected soft demand at least in part reflecting the cold summer and the impact of the hurricanes on the Southeast as well as commodity cost increases, which net of pricing actions added a $1 million to our cost.

We continue to see strong result in our ice machine business which further expanded its market share and also in our beverage business that's benefited from an improved customer and product mix despite softer overall demand.

Net sales for the Marine segment were $63 million, up 70% from the third quarter of 2003. Operating earnings increased $3.2 million from $526,000 and the margin strengthened from 1.4% to 5%. For our margin increase, it remains below historic level reflecting higher steel prices as well as a change in business mix with the larger proportion of lower margin single unit contract. Steel prices had a net $1.3 million impact on marine costs in the third quarter.

Turning to the balance sheet, we feel confident that we will meet our objective of $60 million in net debt reductions for the year. We posted a net debt reduction of $17 million during the quarter which brought our debt to cap ratio down 61%. This is well below our peak debt to cap of 73% and puts us well on our way to achieving our net -- our near term net debt to capital objectives of 55%.

Overall, we are pleased with our performance this quarter in terms of sales growth, earning and market share gain. Steel and commodity prices remain a challenge and we continue to focus on reducing their impact through pricing actions, engineering initiatives and procurement actions.

For the fourth quarter, we currently anticipate that higher material cost will have a net impact of $0.12 on our earnings, but we also believe that the continuing strength of our operations will enable us to still achieve the earnings guidance we provided at the beginning of the year. We are refining our guidance for full year earnings per share from our previous range of $1.30 to $1.50 to a tightened range of $1.40 to $1.50. I will now turn the call over to Dennis McCloskey for an update on the marine segment. Dennis.

Thank you, Carl. As you have already heard marine group sales increased 70% for the quarter and operating earnings were up more than six fold to 3.2 million. For the 9 months, revenues were up nearly 60% and operating earnings more than double. In general, we are pleased with the progress we are making in the marine segment and with the performance we're achieving. We have a good mix of government and commercial projects, the utilization is good across our shipyards, we have secured business that sets us up well for 2005 and beyond, and the repair business looks good for this winter, and we are seeing a robust set of bidding opportunities. The primary negative continues to be steel prices, which are having a significant impact on our cost and margins as Carl mentioned, and our outlook is for an approximate 1 million additional challenge for the fourth quarter.

Now let me drill down a bit into the businesses -- the areas rather. A year ago following the work stoppage at Marinette, we won several significant new contracts and those projects are keeping us busy this year. Work at our yards during the quarter included double-hull tank barges for Penn Maritime and Moran Towing as well as the first double-hull tank barge for Hornbeck. As we told you earlier, we received an order for a third barge from Hornbeck this quarter, the second of three options to their existing contract. We also continue to work on the INLS, a floating causeway system for the United States navy and we delivered the first Staten Island Ferry and expect to send a second ferry of this three-vessel contract during the fourth quarter.

One of our strategic priorities at marine is to leverage the capabilities and capacities of our shipyards. And we are seeing increased project work that utilizes multiple facility. For example, we built three modules of the INLS and our Sturgeon Bay shipyard and we delivered them to Marinette where the total system is being constructed. We built the first Hornbeck barge at Toledo, and we will build the next two at Bay. We also built a super structure of the Staten Island ferries at bay with final construction at Marinette. In order to capitalize on our numerous opportunities, staging projects at multiple shipyards has positive effects on our utilization rates and margins.

During this year we continue to win contracts that will keep the momentum going in 2005. The examples include the exercise of the second of three Hornbeck options, I mentioned earlier as well as our win as part of the Lockheed Martin team of a contract for the United States Navy prototype Littoral Combat Ship. We are excited about multiunit potential of the LCS and the INLS programs.

Bidding activity remains brisk. During the quarter we continued to invest in a variety of government and commercial opportunities including submitting bids for several ocean-class tank barges and tugs plus a self-loading cement tug-barge combination for Great Lake services. In Q4, we will submit our final bid for the Response Boat Medium project to the coastguard along with bidding on an ocean-going ferry for an east coast customer.

We also see positive signs for our repair business. There are about 60 U.S. vessels standing on the Great Lake, many of them old carriers, and when things are looking good for the old carriers we of course have added repair opportunities. As a result our winter repair season is shaping up to one of the best in recent years. That's the good news.

Now let's talk about steel prices. Compared to last year, marine steel prices doubled in the quarter and our steel costs are up about 2 million year to date. Looking ahead, steel prices seem to be stabilizing. Going forward, we will manage our exposure to higher steel prices by leveraging our buying power as a corporation through global sourcing and our ability to negotiate plus, plus contracts. We expect to be able to offset some of the increased prices, but the reality is that there are limited sources for the steel we require. At this point we believe our best strategy is to aggressively seek global sources that can meet our material requirements.

Let me close by repeating my positive outlook for our group. We continue to enjoy good order flow, a substantial backlog and an attractive array of new business opportunities. We are making good progress in managing the capacity utilization of our facilities and we see positive signs for our repair business this winter. Steel prices remain a real issue, but we are working to reduce their impact as much as possible. With that I will turn it over to Terry.

Thank you, Dennis. This was a solid quarter with sales up 21%, net earnings up 77%, and continued progress towards achieving our full year targets. Our focus on our key growth strategies of new product development, global expansion and strategic acquisitions together with our strong management focus on lean operations and value creation enabled to us to improve our consolidated operating margin to 6.4%.

Our crane segment led the way with substantial improvements in sales, operating income and operating margin. The global penetration of our crane business together with our successful sales and operations integration enabled us to more than offset the drag at the continued softness of the domestic crawler crane market. Our marine segment achieved dramatic improvement in sales and operating profit over last year, primarily due to higher capacity utilization in our yards. Foodservice continues to gain market share and introduce new products to fuel future growth. We are pleased with the penetration we have seen in our new S series ice machine. At the same time, cool weather and higher material cost together contributed to flat sales and earnings for the segment for the quarter. Nevertheless, our foodservice group continues to outperform the industry which is consistent with our stated expectations.

In addition, we have made substantial progress against our four strategic priorities. First, our efforts to increase global crane sales and market penetration are paying off. Our claim segment currently derives more than 65% of its sale from global markets in which we were not a significant factor 4 years ago. Our ability to offer a full line of products and services globally and to source these products in a strategically advantageous fashion is having a very positive effect on our performance. This was clearly demonstrated this quarter when our performance improvement was driven by global sales of tower and mobile telescopic cranes and by the growing strength in the U.S. market for small capacity crawler cranes. We continue to be on track to launch 16 new products this year and our backlog at $289 million is up significantly from about $150 million a year ago.

Second, we are strengthening our foodservice business and market share through a strong new product development strategy. We remain on track to introduce 50 new products this year. New products such as the new S series ice machine enabled us to increase our market share in the third quarter despite flat sales.

Third, we are leveraging the strengths and capabilities of our multiple shipyards to service commercial and government customers. As Dennis noted our ability to better utilize the capabilities and capacities of all of our yards has boosted margins and we continue to see a good mix of government and commercial projects. The winter repair season is shaping up to be one of the best in recent years and bidding activity continues to be very strong.

Fourth, we are continuing to strengthen our financial structure. We achieved net debt reduction of $17 million in the third quarter, which enabled the Company to retire the remaining portion of its senior bank term debt and reduce our net debt-to-capital ratio to 61% moving as ever closer to our target debt-to-cap ratio of 55%. We continue to meet our debt reduction target -- we continue to expect to meet our net debt reduction target of $60 million for the full year.

In closing, we believe our solid results reflect the benefit of our global and product line diversification along with our management's response to the challenges we are facing in our markets and supply lines. We are very optimistic about the strength of our strategies and our long-term growth prospects. With that I will now turn the call over to Kim for question-and-answer session. Kim.

The question-and-answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the "*" key followed by the digit "1" on your touchtone telephone. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We ask that you limit yourself to one question initially and one follow up question. You are welcome to queue again for any follow-ups. Once again press "*" "1" to ask a question. And we will pause to compile the roster.

And our first question is from Charlie Rentschler from Langenberg & Company.

Yes, good morning, everybody, and I want to congratulate you on a really impressive quarter when a lot of your peers were achieving substantial earnings gains but doing it with very strong volume and margins flat or going down and it's a very impressive performance across all three segments. So, the question -- first question about steel because I think, the last conference call if I -- I don't have my notes in front me, but I think, we were led to believe that the steel cost increase impact would enumerate in the fourth quarter so now we are saying 12 cents would be -- which would be from 9 cent impact in the third quarter. Could you talk about '05, is this going to carry over into '05 or do we think that we have got programs and things in place that will pretty much offset this starting the first quarter?

Hi, Charlie. Carl. The -- you are accurate in the characterization of what our expectations were in early August. We did have an expectation that we would be able to get through the commodity and it's not that just steel, it's commodities overall that we will get through it in the fourth quarter about breakeven against our initiatives. As it turned out we did see some additional increases. We also had some longer term arrangements fall away that we were getting some benefit out in the third quarter that we won't in the fourth, so all in we're expecting the impact today to be at 12 cent level that we comminuted.

Charlie, I would like to just also add to that, going forward we are very aggressive in many fronts on this. Obviously, pricing is one of the actions but leveraging our overall volume, our global sourcing initiative and also being much more active in from our engineering side, material alternative substitutions, etc. So, I think we are on top of it but certainly behind the curve on the quarters for going forward, but we are getting there.

Okay. Can I ask a follow up question? Dennis, since he was the guest speaker this time, if you guys are blessed with the Littoral Combat Ship and the Response Boat Program, you are going to have the capacity to deal with all that plus all your commercial and repair business?

Yes, that's why we leveraged our yards, without the ability to build at different yards we couldn't do that. Moreover, the RB-M is, obviously it's -- we are sharing that with Kvichak Marine, our partner -- they have built half of those ships, we built the other half, they don't affect the Marinette yard at all, that would be done as a separate facility because they are all aluminum boats. The Littoral Combat Ship will be built at Marinette, and we're sure that would -- as going forward with bounder shipyards, we'll build the -- we build one, they build one back in force, so, yes, we have the ability to meet those commitments.

Okay. Thank you.

Our next question is from Ken Mortenson (phonetic) from Trident Financial.

Hi, good morning and I would also add to that comments on job well done in navigating a tough quarter. I wanted to know specifically how the Hurricane impacted you -- and I know that on the food service side, you guess have some pretty sophisticated systems in terms of what demand is and I remember correctly you've build just in time, so can you quantify how bad you were hit in the southeast in terms of order trends from the Hurricanes and if that's bounced back in October?

Yeah. Ken, this Tim Kraus. Good morning.

Good morning.

Florida, Georgia and the Carolina are three of the top southern states of the U.S for refrigerated food service sales, and obviously, it's also an area that economically was doing quite well and you have lot of new construction projects underway. The Hurricane -- first of all it delayed all the new construction projects, we are just now starting to get releases on some of those orders, although in other cases we are still getting some pushback. There hasn't been any significant increase in activity to replace damaged properties yet. We are expecting that perhaps December again -- I don't know if that answers your question but it's three or four of our top market and a valid equation for a period of time

So, I mean, there is -- I mean were there substantial drops there in order rates versus the rest of the country?

Yes, it's Terry. There was a significant change primarily, in the new construction type projects. We are sitting on -- it's been walking floors are scheduled for delivery during this period and so they can get power and sphere lot and all that stuff.

Tim, on the crane side, I would imagine that -- well, I have been hearing about the dolphin and all the issues with regard to pipelines and what not, is that started to improve utilization rates in the Gulf for your equipment?

Ken, excuse me, you were saying the pipelines working to gulf, is that your question was about?

Well, I was just wondering -- I know that a lot of the pipelines that service the offshore oil rigs and what not have been knocked out and that there is a significant amount of repair going on there. And I am wondering, if utilization rates for your equipment at the rental firms down there are improving substantially or not is that something we can --?

I understand, Ken. In general utilization rates in the past, probably three to four months have been going up and there -- when I say it's because of the Hurricane at south, I think -- I don't think that's true, I think, that helps but I think, there is territories throughout the United States where the utilization rates are in fact picking up. But if I can just add a comment about something the rates are still getting any better so that -- you again, if you follow a trend that the thing that will follow after the utilization because it's certainly a supply and demand initiative, so we are excited about what we are seeing and it's across the board, it's a small cars as we factored even some of the large dollars, and so, I think, there is some optimism that sold into 2005.

I was on the Terex call this morning and they were talking about how they need to be more aggressive on pricing in this segment and they had mentioned worrying specifically about you there and not really understanding your pricing strategy, are you seeing any pressure in terms of whether or not really coming along in price increases or can you speak generally to that topic?

I can't -- I am going to let Glen answer that specifically, but we typically would not respond directly to a specific competitor or a customer but we would talk in generality how we are addressing the market. I think Glen can do that pretty well here.

Fair enough.

Glen Tellock If you recall, Ken, that, I think April during our first quarter call I mentioned that and this was before the real steel price increases going up and things, we felt just as the market leader we needed to rise prices because we thought markets were going to get better this year and we went out with general price increases pretty much across the board. Then due to the steel prices, we've had additional price increases in mid-year July -- August, a lot of a towers and some of the -- both in Europe and Asia. And then we also have announced price increases for orders that are taken after November 1 but we have done that earlier. Again, it's because we believe that's a need to be done, but comparing it to -- you are saying that am I seeing one competitor or another, I don't think that -- I think there is like anything else there are some people want to market, they are going to protect it, they are very strong in it and so we watch that very closely. But again, I want to go back to what I said back in April is that we believe there is a lot of places we are the market leader and sometimes you have to act like this and you have to do the right things, and again act close on price. And I would say -- I would tend to believe that we are in front of the curve in comparison to the competition.

Okay. And just one last question, the raised interest rates in China today for the first time in a long time, are you worried about that effect in your business at all at this point or is that really not a worry?

Are you talking about the crane business in China?

Right.

I would -- you know, I think for the last what has it been three, four months, China has in fact said that they were going to put the slowdown in place. We see that impact but a lot of it, you have to remember, a lot of it's from consumer driven product, a lot of it, it will impact some of the construction. Again, its going to be a deferral not a postponement, but the good thing that we're seeing is a lot of the infrastructure works, some of the bigger stuff, which a lot of our specialty type cranes go on in addition to more [inaudible]. I think, I can scale KS I don't think -- it's a big increase but I still think that you'll see increases in those market.

Great. Thank you.

And just a reminder its "*" "1" to ask a question.

And we will take our next question from Hillel Olshin from Deutsche Bank.

Hi, good morning, gentlemen. My questions for Carl, company mix referenced to a net debt reduction of 79 in the quarter -- I just wanted to know how to get there -- I am sort of at a $6.5 million net debt reduction in the quarter. I know, you guys did some notes receivables, how does that play into your calculation?

Alright. If you look at the cash flow summary and look at the term debt reduction and the cash build that gets you to the $17 million, and if you're trying to reconcile with some of the individual balance sheet items, it becomes challenging from the perspective of the non-cash issue with the interest rate derivatives that kind of artificially pushes up the debt?

Okay that makes sense. What are your plans in terms of note receivables financing in the fourth quarter, do you guys -- are you guys going to be doing any more of that and that I guess plays into service home and the net debt reduction of 60 million for full year?

It's likely to be a little bit more. That really becomes a -- something that does not go through our cash from operations for accounting purposes because of some of the recourse arrangements that we've put in effect and how they are treated from U.S. GAAP perspective, but it is something that we do on a pretty targeted basis and wouldn't expect it to be a significant issue for us in the fourth quarter?

Okay. And just finally, you guys are a pretty healthy generator of free cash flow, now that you have really all three payable debt out of this structure, what will you be using free cash flow for in the future?

As you know we do have some additional debt outside of the senior bank facility that we can essentially take out some of the externally financed items and do some self funding that will absorb a lot of what was generated in the fourth quarter and then we get into the seasonal issue where we tend to be a user of working for -- user of cash in the first typically 6 months roughly of the year and generate in the second half, so it becomes -- the real issue for us on really building a significant liquidity position comes in the second half of the year, next year and then obviously we are not that far away at that point to getting to the non-call period on some of the senior subordinated notes that we have.

Okay. Great thanks.

And at this time we have one question remaining in the queue. Once again if you'd like a question or if you have a follow up question please press "*","1". We'll go next to Tom Klanta from Credit Suisse.

Good morning.

Good morning, Tom .

Hi, Tom.

I was frankly surprised that steel impact was as small as it is what you were talking about but given the run up in steel and given a lot of other companies that have reported the impact is quite minimal I think. Is that the gross number or is that a net number against price increases?

That's net against pricing increases, Tom.

Okay. So, that 3.3 million is a net number.

That's for us.

What would the gross number be?

The gross number is -- it's on the order 14 million.

Okay. And it sounds like you have taken price increases in cranes on the marine side, price increases are basically as you bid on new projects you build in an escalator, is that how that stands up there?

On many of the project we have an escalator, at some we don't and that's where we see the impact.

Okay.

And we did expect that we were going to be ordering steel for some of those and that's how we would have this issue which one is to our expectations.

Okay. And then on the crane business, you gave some general narrative. I am wondering if Glen can give us a little bit more directionally when you talk about the different product segments may be in the order of magnitude as far as sounds like towers are up pretty strong, is that single digits, double digits and what's happening on the mobile crane market?

I think you've answered your question for the most part, I am going to probably reiterate some of that, I don't know how much further to add that on a global basis, the benefit we have on the towers is obviously since you have diversity, so there are some good things in Asia, there are some good things in Europe. I would stay we're -- we had some positive projects in the Americas last year, but on the big towers and off a little bit, the self directing, it is doing very well in the United States so. Then in case of the mobile hydraulic, that market is very good for us right now from both the truck trains and the RTs-- [DAT] is down a little bit in Americas, but in Europe there was a good start at the beginning of the year and that's trended off a little bit. So I would say Europe in the mid-single digit in the 80's and in Europe. So again on a worldwide basis, I think exactly what we said is what we see.

How about mobile cranes in North America?

The mobile hydraulics?

Yeah.

It's very good for us. The RTs are double digit, above last year the 80's, offload some and the boom truck market is up about I would say 10% a share.

And is that driven by anything -- is it driven by commercial construction or is it driven by Gulf Coast or where do you see these cranes going?

A lot of it is contractors, you see a lot of the on a mobile hydraulic side is the general construction, the infrastructure, some of it is back into the fab yard, into the petrochem, there are some good things happening in Latin America. So it's really a -- it's not the people doing well fine it's the general pick up just in a lot of the contractors activity. So it's across the board. So anyway that's in the wrong side, some of it -- they haven't been buying for so long, they are they are looking at upgrading their fleet and the other thing is we have some good products we have introduced -- the truck crane market, we have the [TMF-908] which has been very successful and then we have two -- last year with the introduction of an RT and another introduction this year of another RT. So, I think that we are driving from that our self as people get into to newer and better products.

Great. Thank you.

And we will take a question from Robert McCarthy from Robert W. Baird.

Good morning gentlemen.

Good morning Rob.

I'm sorry if this has already been answered right, I spend about 15 minutes trying to get back on your call. Can you talk a little bit about crane profitability ignoring the raw material hit which you all appear to be handling very well, it's surprising to me that with the kind of volume trends that you are getting that you are not getting more operating leverage. Is it strictly a function of mix or are we still talking about some kind of predatory pricing environment that's making it difficult to get margin?

You now, Rob, it's really a combination of both -- obviously its as Glen said we, from a pricing strategy prospective we attempted to get ahead of the curve and obviously that can have some consequences, but generally speaking we think that what we have done is the right thing to do in the long term and it is going to bode well for us. Obviously we have got the issue with the highest margin portion of the crane business still not enjoying the same type of recovery we are seeing in some of the other divisions and product lines, and that has the effect of not being able to really realize the same type of leverage on the volume increases like the wood-wood or not the case..

Okay. What I'm looking at is even if I add a $1 million back to income the contribution margin on the operating income line is less than 10%. That's with very healthy volume trend, so what am I missing here, is it pricing level, is it --?

Rob, again you do have some price competition, you have also got some geographic mix issues with they are trying to target some emerging markets and establishing some of the non-traditional brands for those environment and the pricing effect on that. And obviously we have got some pretty extreme focus on new product introductions that we've gathered extensive resources for in order to complete and to satisfy the strategic initiatives that we have on our new product strategies.

Okay. Well, thanks, that's helpful. Let me follow up by asking if we could take care of a couple small housekeeping issues if they haven't already been asked about, is the -- is that small prepayment penalty in your interest expense line in the quarter?

Yes.

Okay. The 60 million of net debt reduction that you expect to see, what do you anticipate that, that will show up net of the impact of currency on the balance sheet?

You know, at the end of the year when we do the calculation it won't be --

It will be not significantly different.

Really.

That's net of currency.

Okay. Alright, very good. And can you tell us what the restated four year number for sales and operating income for the crane segment is for 2003? You know, instead of the 985 million for example last year with the discontinued businesses moved out, what's the revised number?

Sales will be $985 million -- 985.2 in 2003.

That it is, that has both Delta and Manlift both taken out of it.

That's -- excuse me 960.

Okay. 960 and the operating income number -- that is 34.2?

33.

33. Okay. Thank you, very much.

And we have another follow up question from Charlie Rentschler from Langenberg & Company.

Not just competing on this, but it is important, the impact of the steel cost increases, can you give us a little bit more help to understanding what the lingering effect of this is going to be going into '05 -- I mean are we -- do you see this staying with you the whole year or do you think that maybe after the first quarter this will kind of abate or what?

Based upon our outlook right now, we don't anticipate a significant lingering issue for us in 2005; although that does not suggest that we expect to see a significant easing at the pricing level for the commodity.

Right. Charlie, it's not -- what we have seen is it's an overall commodity issue, steel is certainly one of the large contributors there but there are other contributors as well. And again I will go back to what I said earlier that we have aggressively addressed these issues on a multi basis with our engineering efforts, with material substitutions, with leveraging our overall volume looking at our global sourcing capabilities as well as pricing actions. And -- so I believe that we're doing the right things to position ourselves for 2005 --

We certainly see obviously the biggest effect in the first quarter because this year-over-year difference there would be the greatest and then in the second quarter of 2004 is when we really start to see things ramp up considerably.

Right. Thank you.

And we have a follow up question from Robert McCarthy from Robert W. Baird.

Yeah, making up the lost time guys. Did you already talk about a little bit of your deeper dive on what the major businesses did in the food service segment? I gathered from your prepared remarks that the ice machine business was more or less flat year-to-year in a market that was down, it sounded like the beverage dispensing business, some nice customer wins but probably down compared with prior year that would suggest that the other refrigeration businesses were up. Is that a reasonable characterization?

The ice machine industry -- just give you a kind of -- ice industry is up double digit in the first time after it tailed off in mid single digits year-to-date. So that we saw slowing all those market industries, so up year-over-year.

Okay.

Refrigeration is up slightly, and beverage we have had a favorable mix, but a slight downturn in our volume, and the refrigeration is up slightly. Now there is one remaining business which is our contract manufacturing piece and that's down.

Yeah, that's the missing piece, okay. Alright, thanks, Tim. And as a follow up, did somebody already ask about currency translation impact on total sales for the Company and for the crime segment in particular?

Currency is about 3% per crane and a little less than that for the total company.

Alright. Thanks, Carl.

And one final reminder, if you have a question today, please press "*" "1" now. And it appears there are no further questions today. Mr. Khail, I'll turn the conference back to you for additional or closing remarks.

Thank you. Before we conclude today's call I would like to announce that Manitowoc's fourth quarter earnings conference call has been scheduled for January 27, 2005. During that call we will review our fourth quarter and full year financial results as well as having each of our segment President provide an outlook for 2005.

I would also like to remind our listening audience that a replay of today's conference call will be available beginning at 1 p.m. Eastern time today until 12 midnight Eastern time November 4. The number to dial for the replay is area code 719-457-0820. When calling in for the replay, please use confirmation code 243240. You may also access an archived version of today's call on our website at www.manitowoc.com. Thanks again for joining us. Have a good day.

And that concludes our conference call today. Thank you all for your participation.