Manitowoc Company Inc (MTW) 2010 Q4 法說會逐字稿

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

Good morning, everyone and thank you for joining Manitowoc's fourth quarter earnings conference call. Participating in today's call will be Glen Tellock, our Chairman and Chief Executive Officer; Carl Laurino, Senior Vice President and Chief Financial Officer; Eric Etchart, Chairman of Manitowoc Cranes; and Mike Kachmer, President of Manitowoc Foodservice.

Glen will open today's call by reviewing our 2010 accomplishments. Carl will discuss our financial results for the fourth quarter, and provide our initial guidance for 2011. Then our segment presidents will offer insights into the market conditions and outlooks for their businesses for 2011.

For anyone who is not able to listen to today's entire call, an archived version of this call will be available later this morning. Please visit the Investor Relations section of our corporate website at www.manitowoc.com to access the replay.

Before Glen begins his commentary, I would like to review our Safe Harbor statement. This call is taking place on February 1, 2011. During the course of today's call, forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, will 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 markets and other factors that affect its business.

However actual results could differ materially from any implied projections due to one or more of the factors explained in Manitowoc's filings with the Securities and Exchange Commission, which are also available on our website. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or other circumstances.

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

Thanks, Steve and good morning, everyone. At the beginning of 2010, we communicated our expectations for a continued challenging economic and operating environment. Nevertheless, we outlined aggressive operational and financial goals, which we largely met or exceeded, in spite of the fact that our markets were every bit as tough as we expected them to be.

The second half of 2010 was weaker than anticipated, which hindered us from reaching our targets for crane sales growth and debt reduction. However, the progress that we made towards these and the achievement of other goals will have a positive long term impact on our business.

Our key priorities for 2010 were to successfully complete our foodservice integration, further position our crane operations for optimal performance, and to reduce balance sheet pressure to improve our overall financial health. We have been very successful in delivering on all three of these priorities.

First, we have exceeded the targeted cost in growth synergies associated with our foodservice integration, which is a testament to both the leadership and employees within our Foodservice business, as well as the strength of our process and ability to integrate acquisitions.

Although the integration is now complete, we see significant potential for additional cost savings and growth opportunities in 2011 and beyond. Our vision for this segment hasn't changed, and we are on track with our plan as a clear leader in the foodservice industry.

Second, our crane segment has taken full advantage of the opportunities presented by the downturn, to implement meaningful operational efficiency improvements and a greater adherence to lean manufacturing principles.

As a result of these efforts, operating margins in Cranes, in line with our guidance, remained well above those experienced in previous trough years, despite the significant investments we have made in support of emerging market opportunities.

In addition, we continued our commitment to delivering innovative products to our customers, with the announcement of several new products throughout the year.

And finally, we have made substantial progress towards minimizing balance sheet risk. Diligent management of working capital, along with the proceeds from the recent asset sale of Kysor/Warren, have enabled us to pay down more than $1 billion in debt over the last two years in an extremely challenging economic environment.

Additionally, our ability to refinance and extend our debt maturities with two separate bond offerings in 2010, took significant pressure off the balance sheet, allowing us to better position ourselves strategically to make necessary investments in our business as the operating environment improves.

Looking at our segment performance, Foodservice once again performed well during the fourth quarter, posting year-over-year sales growth that solidly outpaced the industry, coupled with healthy margin performance.

The fourth quarter also represented the first year-over-year growth in Crane segment sales -- that should be quarter-over-quarter growth in Crane's segment sales, since the third quarter of 2008, even though we fell short of our second half revenue target.

In addition, strong order activity resulted in a significant increase in backlog. We are encouraged by this recent increase in demand and improvements in some key indicators that signal a growing recovery and confirm our belief that 2010 was a trough year in Cranes.

When you look at the sum of our accomplishments over the past two years, amidst what may arguably be the worst economic turmoil in our lifetime, it is clear that we have the right strategy and the right people in place to drive long term growth and success.

Turning toward 2011, our seven company-wide strategic imperatives remain largely unchanged. From an operational standpoint, some of the areas we will be focused on include, first, continuing our longstanding commitment to improving safety targets across the enterprise.

Second, becoming a leaner and more efficient Company through expanded implementation of lean principals.

Third, furthering our investments in all emerging markets, particularly Brazil and China.

Fourth, maintaining our focus on innovation by investing in new product development and the advancement of product rollouts to our global customer base.

Fifth, continue to enhance our customer service and product support activities in both Crane and Foodservice.

And finally, generate continued improvement in shareholder value via our focus on EVA.

I will now turn the call over to Carl to discuss our fourth quarter financial results and to share our thoughts on initial guidance for 2011. Carl?

Thanks Glen, and good morning, everyone. We reported net sales for the quarter of $831 million, which is an increase of $33 million or 4% from the fourth quarter of 2009. Operating earnings for the fourth quarter totaled $53 million, which is a gain of $21 million or 68% compared to the fourth quarter of 2009.

Fourth quarter 2010 consolidated operating margin, before amortization and onetime items, was 7.6%, versus 6.2% in the fourth quarter of 2009. The year-over-year margin improvement in Foodservice and Cranes was the result of increased sales, productivity gains and cost saving initiatives.

The GAAP net loss for the fourth quarter was $64 million, or $0.49 per share, versus a net loss of $24 million or $0.18 per share, in the fourth quarter of 2009.

Fourth quarter 2010 earnings included the reserve against the deferred tax asset of $49 million. This is a non cash expense that reflects a cumulative net operating loss position in France over the past several years.

Although we expect to be able to utilize this indefinite lived asset in the future, we have concluded that the proper GAAP action is to fully reserve for it at this time.

Excluding this and other unusual items in both quarters, fourth quarter 2010 EPS was $0.11 per share, versus a loss of $0.09 per share in the fourth quarter of 2009. We also wrote down the value of our Kysor/Warren business to its sale price, which resulted in a $10 million impairment charge net of tax, in discontinued operations.

Moving onto the balance sheet, we reduced our debt by $150 million during the quarter, bringing our full year debt reduction total to $164 million.

During the year we re-financed $1 billion of our debt by completing two bond offerings. Net of these, from these two bond issues, equivalent 2010 debt reduction was over $190 million. At the same time, the bond significantly improved our capital structure and financial flexibility.

During the fourth quarter, we posted cash flow from operations of $157 million, driven mostly by decreases in accounts receivable and inventory, versus $159 million in the prior year quarter.

Moving onto our segment results, Foodservice sales in the fourth quarter of 2010 totaled $340 million, which increased 7% from the fourth quarter of 2009. Fourth quarter 2010 operating earnings in Foodservice were $42 million, versus $40 million in the same quarter last year.

Operating margins of 12.4% for the quarter were equal to fourth quarter 2009 margins. The year-over-year comparison was negatively impacted by fourth quarter 2009 earning's strength resulting from the launch of our smoothie machine in North America. However, on a full year basis, 2010 operating margins were 14.7%; which was a solid improvement over full year 2009 operating margins of 12.5%.

Moving to the Crane segment, fourth quarter sales totaled $491 million, up 2% from $480 million in the fourth quarter of 2009. Fourth quarter results were favorably impacted by a ramp up in demand of customers finalized orders prior to the end of the year. Crane segment operating earnings in the fourth quarter were $30 million, versus $18 million in the same quarter last year. This resulted in fourth quarter Crane segment operating margins of 6.2%, compared to 3.8% in the fourth quarter of 2009.

The fourth quarter Crane results were positively impacted by a reduction in inventory reserves at year end. This change in estimate resulted in an approximate 110 basis point increase to Crane operating margins in the quarter.

Crane backlog at the end of the fourth quarter was $572 million, an increase of $124 million or 28% from $448 million at September 30, 2010. The significant increase in backlog was due to an uptick in orders toward the end of the quarter. In addition, our book to bill ratio was strong at 1.3, which was our best quarterly results since the second quarter of 2008.

Before concluding my remarks, let me discuss our 2011 outlook. In Crane's we expect to see low double digit percentage full year revenue growth. We anticipate a benefit from our dealer network in the first half of the year as they prepare for end market recovery as the year progresses.

For the full year, we expect Foodservice revenues will grow in the high single digit percentage range and operating margins will continue in the mid-teens, with moderate improvement verses 2010.

In the Crane segment, full year margins are expected to increase modestly. As we stated previously, both our Crane and our Foodservice businesses operate with seasonal strength in the second and third quarters.

Other 2011 financial expectations include capital expenditures of approximately $70 million, depreciation and amortization of approximately $125 million, interest expense and amortization of deferred financing fees of approximately $175 million, and debt reduction of $200 million.

Considerations affecting our 2011 profit outlook include higher SG&A due to non recurrence of second and fourth quarter benefits in the Crane segment in 2010, reinstitution of some compensation austerity measures, higher R&D and engineering expenses, as well as higher tax expense due to improved profitability and geographic mix of profits.

Our outlook for increased capital expenditures reflects our continuing investment in growth initiatives that we expect to benefit from in the intermediate term.

Let me now turn the call over to Mike Kachmer, who will share his thoughts on the outlook for our Foodservice segment. Mike.

Thank you, Carl. 2010 was a successful year for Manitowoc Foodservice, as we built on our 2009 successes, and further extended our leadership position within the industry. As a result of our successful Foodservice integration, we entered 2011 poised for significant growth and increased profitability. We achieved our plan and grew greater than the overall market, despite challenging conditions across many of our end markets.

With the integration now complete, we stand as an industry leader across the majority of our product lines, with customers spanning the globe who rely on us for equipment solutions, that help strengthen their businesses.

By manufacturing products of superior quality and innovation, we have created relationships with many of the fast growing and innovative foodservice companies, who will look to us over the next several years, as they continue to invest in their businesses.

While we have discussed integration synergies and cost savings in great detail over the past two years, we have also invested significant resources in product development, which has allowed us to grow on the top line as well as on the bottom.

Going forward, our key priority will continue to drive operational excellence across the organization by investing in our people, products, and processes.

In 2010, our investments in new product development and innovation yielded more than 50 new products and product variations, including our Blend-In-Cup smoothie unit and the Merrychef eikon oven, both of which were recognized with kitchen innovation honors at the NRA show.

In 2011 we expect to launch more than 50 additional new products, including a new line of ice machines that are an evolutionary upgrade to our S-Series cubers and provide enhanced reliability, sanitation, and serviceability.

We also continue to focus on accelerated cooking and smoothies as growing disciplines in categories, and we will continue to capitalize on growth opportunities within each of these areas.

In addition, several of our brands, including Frymaster, Delfield, and Fabristeel, have been recognized for their innovation, quality, and product support, in supply award programs sponsored by several major chain customers.

Finally, we have also invested in processes, such as our manufacturing and business consolidation strategies, in order to drive increased efficiency. In 2011, we will continue our consolidation and right-sizing initiatives, and also focus on implementing world class manufacturing standards.

From an end market perspective, the Americas and Asia continue to show the greatest growth, while Europe remains challenging. We expect this trend to continue in 2011.

According to recent reports by the National Restaurant Association, consumer spending in restaurants has been on a positive trend, as reflected in same store sales. And over the past several months, NRA has also reported higher operator expectations for additional capital expenditures, led by the quick service and limited service sectors.

These trends are reflected in the public reporting of many of our major chain customers, many of who are reporting strong sales growth, accelerated building plans, and continued investment in Asia and other emerging markets.

As we enter 2011, we remain true to our vision for Manitowoc Foodservice and will continue to drive growth by gaining additional market share, embracing growth areas as customers make new investments in their businesses, and leveraging multiple global opportunities as the market expands.

With that, I will now hand the call off to Eric Etchart, for his views and the outlook on the Crane segment.

Thank you, Mike. In 2010, the global Crane market remained depressed, and at times volatile and unpredictable. However, as the year progressed, we saw increasing signs of market improvement, which resulted in a strong order pattern in the fourth quarter, that drove quarter-over-quarter revenue growth, plus a sequential increase in backlog.

From our vantage point, it appears we have reach an inflection point, as emerging market demand continues to be strong in areas such as Latin America, the Middle East, India, and the Far East.

Our Crane Care business also continues to show solid growth, as increased parts shipments are signaling that more Cranes are going back into service. We are also seeing dealers beginning to restock their inventories in the US and portions of Europe, as their customer prepare for an uptick in new product start-up later in 2011.

Additionally, the Architecture Billings Index increased to 55.2 in December; its highest level since November 2007.

As I have discussed on prior calls, we have taken advantage of a recessionary environment by focusing on productivity initiatives, innovation to strengthen the operations, and product portfolio of the segment, and increasing our focus on customer support ahead of a macro economic rebound.

During 2010, we introduced several new products and product enhancements, across all our Crane brands. We expect to see the benefits of these new products throughout 2011.

More importantly, we will introduce more than 12 new products this year, spanning our crawler, power, and mobile telescopic categories to enhance our competitive position globally.

We also draw further improvements in our manufacturing efforts for the year by embracing lean six sigma principals to drive improved quality and product reliability, as well as greater operational efficiency to help reduce waste, improve lead times, and become a more efficient and profitable business.

As we look to 2011, we are excited about the opportunities for our business, as customer confidence is growing in all the geographies we serve. And while we don't expect a sharp recovery like the previous cycle, we know that things are moving in the right direction, and we will certainly work to maximize the opportunities that the market presents.

With Crane's utilization rates now nearing re-investment levels, coupled with improved rental rates and dealers now starting to restock, we believe that 2011 will be a year of marked improvement. We should get further confirmation on that expectations at the ConExpo trade show next month.

With that, I will turn call to Glen for his closing comments. Glen.

Thanks, Eric. Although continued economic weakness in 2010 posed significant challenges to both of our segments, we did set aggressive targets to improve the long term health and positioning of our business. We enter 2011 a much stronger organization. With our Foodservice integration complete and the belief that 2010 was a trough year for Cranes, we view the next 12 months as a transition year for Manitowoc.

There are several opportunities for additional investment within our business that will further position us to extend our leadership position and deliver meaningful results for all of our stakeholders. As such, while we anticipate year-over-year growth to return to both our operating segments in 2011, our expectation is that we will see significant acceleration in both top line growth and profitability in 2012 and beyond.

This concludes our prepared remarks. We will now begin our question-and-answer session. James?

(Operator Instructions)

Seth Weber, RBC Capital Markets.

Good morning, guys.

(multiple speakers) Good morning, Seth.

I guess, just first a clarification. The 110 basis points of margin benefit in the Crane segment -- can you just -- what was that, again?

It was essentially a change in estimates, Seth, from a -- by virtue of the fact that you're -- not atypical of the trough, especially when you reach an inflection point and the consumption starts to get a little higher.

The amount of reserve you get under those lower historical volumes end up being way too high based upon what the true value of the inventory is. We had a -- essentially what amounts to a one-time benefit to that level of impact of 110 basis points.

Okay. And then when you talk about the modest increase in margins for 2011, does that -- is that off of the full year number that includes the 110 basis points of benefit?

Yes.

Okay. And then, the question is really -- is there any more color on the order number that came in for the quarter? Obviously, I think, stronger than what I was looking for, certainly. Any color on type of equipment or region, and you know, is there something significant that happened at the end of the quarter? Do you think that there was some tax buying, or is there any other color you can give us?

And then the follow-up to that is, we have one month of the first quarter in the books already. Do the trends continue into January?

Good question. Good morning, Seth. I think when you look at -- and I will let Eric mention a little bit about the strength of the orders in the fourth quarter, but when you look at, across the base, it was broad-based on a lot of the products and geographies.

The one thing that we did see in the fourth quarter, which is a normal event for us, which is called a winter stocking program on some of the tower cranes in Europe, that was a -- when you compare this year versus last year, a much better story this year than it was last year.

But, again, you mentioned the tax activity. I know of a couple situations where that took place, but I don't think some of the orders that we got -- I don't know that they necessarily said that one way or the other, but, I do know just a couple specific instances, but that is not what was driving -- I think the majority of it.

Eric, do you have anything to add on that?

No. I think these orders came from a broad base. We had some -- obviously restocking in North America. We were expecting that, following the trend on the inventory in the last couple of months. But it is nowhere near it has been in the past. Let's be very clear.

We were pleasantly surprised by the [under] intake in towers in Europe, which is typically -- we have a winter campaign. And that reflects, I think, the better shape of the tower crane business, because that was the first product lines really dropping two years back and now we see some countries where the demand is stronger and I think our dealers are preparing for some kind of uptick. But globally, obviously the emerging market also draws a loft orders in the quarter.

Is there any particular commentary on the crawler business that you could share?

I don't think there is any particular comment -- I think --when we look across that, it is pretty general, just like it has been over the past six/nine months. So, I don't think there is any particular comments that we have on that.

So crawlers were -- crawlers contributed to this increase in orders?

Oh yes, Yes, yes. No doubt, no doubt.

And just lastly, I mean -- were there any $50 million orders? Were there a couple of large orders -- $50 million-ish type orders, that kind of hit in the quarter, that maybe -- one-off type stuff, or was it all business as usual?

No, it was more business as usual. There was no real significant order that moved needle.

Okay. And then for January?

We report our backlog quarterly, Seth.

I mean -- could you just -- have trends continued into January here?

What I would say, and obviously Eric can add to this, but my belief is that, I think, a lot of the things we had been seeing in business, that we viewed as signs of optimism, that we would see an inflection point, and start to see the business grow in the second half of 2010, has been manifesting. So, I think it is a reflection of what is going on in our market.

Okay. Thanks. I will get back in queue. Thanks, guys.

Next we will hear from Charlie Brady, with BMO Capital Markets.

Thanks, good morning. With respect to the Foodservice business and the Kysor business, now discontinued operations, in your outlook for 2011, can you give us what the impact that Kysor was on Foodservice revenues on operating income for the first three quarters of 2010, so we can compare it with our 2011 outlook?

I can give you the full year. I have that right in front of me, Charlie. It was roughly a $190 million -- little over $190 million in revenue, and about $7.5 million in operating earnings.

Okay.

Roughly $10 million of EBITDA, full year.

Okay. That is helpful. With respect to the commentary about continued right sizing in Foodservice, can you expand on that? What are you really referring to that? Is it just small -- kind of -- small stuff you are looking at, or is there something more there?

Charlie, we have a publicly stated plan and vision, that will drive the reduction in the number of operating companies that existed when we acquired a notice. We see an opportunity not just for cost reduction associated with those consolidations, but really, a business strategy so that products can evolve together.

A good example would be the combination of three ovens companies this past into a singular, larger operating company. It will also include, over time, the continued implementation of a manufacturing strategy that will upgrade manufacturing plants, it will reduce our footprint, and it will put more manufacturing capabilities into the markets that are being served. So it is a combination of issues.

Thanks. I will hop back in queue.

Robert Wertheimer, with Morgan Stanley.

Hi, good morning. It is Joe [Odeao] on Rob's team. Maybe first, if you could just -- touch on Chinese competition in Crane's globally and the extent to which you are seeing Chinese manufactures competing for business outside of China, and then, maybe in those regions, the sort of level of pricing competition.

Well, I don't think, Joe, it is any different than what we have seen in the past. I mean, the business in China is very robust right now. And so many of the Chinese manufacturers are competing within themselves in China. Where you will see most of the Chinese competition is in the emerging markets, and you are not seeing them dramatically in the mature, either western Europe or the United States yet.

But, the pricing is more aggressive, but I think that is -- as any new entrant comes into a market, I don't think that is unusual. So, I think it is no different than what we have seen from the middle of the year, or late last year, or -- it is pretty much what we have seen on a pretty consistent basis there.

Eric, do you have anything to add on that?

No. I could add maybe that the Chinese are now offering all terrain cranes in China market and this market has grown, but they have no -- they have not make any significant success in the export market with all terrain cranes. So their success really has been in emerging markets, primarily in [full] towers and small crawlers, I would say.

Okay, thanks. Then just a follow-up to dig into Crane Care a little bit and the extent to which you are hearing from customers, with early indications of orders, that Crane Care is contributing to your winning orders, and any extent to which you are able to, sort of compete better, even against lower priced competition, because of Crane Care?

Well that is -- I mean, that is the strategy of that. I mean, you look at whether it's Crane Care or any of the -- even the initial product itself. I mean we talk about cradle to grave, and that is what the total cost of ownership goes towards.

One of the things that people forget about in the long term, is really what is the residual value? And that is still where we have -- we have products that -- with brand names that are worldwide, and people can sell their products on a used market worldwide, and that has helped through the downturn.

Again, that is what we have to go through, and you are seeing a little uptick in the Crane Care side of the business as we chatted about. Because the utilizations are coming up, the cranes are going back to work. And, I think, when that happens, again, that gives us the one-up to say, hey, look at how this has been supported, look at how you have the opportunity to continue to use these cranes in good times and bad.

So, again, we look at it as a differentiator, and we will continue, as I said in my remarks, to focus our objectives in 2011, both on the Crane Care side of the business in Crane and the global expansion of the service strategy and Foodservice.

Okay, thanks, and just a clean-up question. What was the FX impact on Crane orders in the quarter?

Nominal.

Okay. Thanks very much.

Nicole DeBlase, with Deutsche Bank.

Yes, good morning, guys. So, I just wanted build a little bit on Seth's question from earlier, on the crane orders that you saw during the quarter. If you could talk a little about the imbedded margins and the pricing that you saw in those orders.

Well, I think the pricing overall for us recently, as you would expect in a trough year, you have pressure on pricing -- as is always the case when there is available capacity in the industry. That -- it is -- I think we have reasonably good margins for the types of products that are in the backlog.

But, there is pressure in this environment that we are just building off of -- obviously the early signs of recovery with the first year-over-year growth in the quarter that we have seen for quite a while.

Okay. But the backlog margins -- are in line with your outlook for full year Crane margins in 2011?

Yes.

Okay, great. And then could you elaborate a little bit on the impact of raw material inflation that you saw within both Crane and Food during the quarter, and then what your outlook is there for 2011?

It's not -- on the quarter, it is not significant. I think pretty much -- many of the -- much of the inflation anybody has talked about has been in check throughout most of 2010.

As we go out into 2011, I mean we -- as Carl said, when you look at the margins going out, he mentioned some of the things with the commodity costs being one of the variables in that. I mean, you are seeing things, whether it is in foodservice, on copper, aluminum -- we are looking at steel. We can make our best projections, and then we look at the overall market.

So, I think we have some of that, that goes into our projections and the margins, but again, if you just look at the broad global markets, inflation shouldn't be a huge factor, but it will be a little bit of a head wind in 2011.

Okay, got it. That is helpful. And then, one more, if I may. The debt pay on guidance you guys have given, because you are getting that -- the income from the Kysor sale, that implies only about $50 million organic free cash flow.

Is that correct, and is that really being driven by working capital, not really much room to reduce there?

Well, you will get a little more on that, because obviously on the Kysor/Warren, you have the tax effect of that. So, it doesn't all just drop to the reduction of debt, but it is a balance between what is the income and then what is the use of working capital in 2011, as the business picks back up.

But, I mean, that is the challenge we have as we start to ramp up. It is that happy medium between making sure that you have the supplies on hand as the suppliers ramp up also, versus what do we hold in inventory. And I think we have tried to be a little conservative on that to say that we will have use of working capital for those benefits in 2011.

Okay, great that is helpful. Thank you.

David Wells, with Thompson Research Group.

Good morning everyone.

Hi, David.

Just jumping back to a comment that was mentioned earlier in the call, did I hear correctly that you are seeing some actual rental houses -- see their rental rates turn positive on a year-over-year basis?

Yes. There is some of that. I wouldn't say that it's -- I think the comment that Eric made was, you are seeing the utilization rates that get near re-investment level and there is a -- there have been some improvements in the rental rates now.

I don't -- again, they are certainly not to where they were in 2007, 2008, but they are better than what they were 12 months ago.

And from that perspective, do you feel like that that customer then, has enough, I guess, visibility or certainty to effectively do kind of an IRR calculation on bringing a new asset onto the balance sheet?

Well, I think you have to look at everything in total. You have to look at what the person has in inventory, you have to look at what the rental fleet is consisting of -- is it smaller pieces of equipment? Is it the bigger pieces of equipment? When was it bought? What did they do during the downturn? Many people sold off pieces on their fleet. They are trying to get -- they're trying to energize their fleet and get less -- get a newer overall age of their fleet. So, everybody's got a different perspective as to what is happening.

The other one that Eric talked about, with respect to orders, is the restocking of the dealers in the United States. Other than the large towers, everything goes through a distribution. And when those people -- their customers are coming to them, it is hard to sell out of an empty cupboard.

So, they have to restock to a certain level. Now, it is not going to be where they were in 2008, but it is certainly going to be a happy medium between 2008 and where they are today.

So, that all plays into it and the last thing is, some of the financing has improved. Some of these people have their balance sheets back in order and they are looking at it and saying, hey, this is a good time to buy. And, that's where -- whether it is on the outside or whether it's through Manitowoc Finance, I mean, we have that as an alternative.

So, I think all of those go into play, not just one -- not just the rental rates by themselves.

Good. That is helpful color. I appreciate that. I guess, looking at the CapEx forecast for next year, still running meaningfully below the DNA levels of the business, do you feel like you are going to reach a point where you have a pretty significant amount of catch up CapEx that we have to do in 2012? Or is DNA effectively, maybe overstated, given some of the efficiency cost cuts that you have done?

No, I think, when you look, David, at many of the things that we did in 2006, 2007, and 2008, with respect to the Cranes, a lot of improvement was made in the manufacturing processes. It was made in manufacturing equipment.

In 2002 -2003 we consolidated a lot of facilities. We got into India. We got into Slovakia. So, all those investments have been made -- you know, China -- we had a new factory in China. We did the same with Foodservice.

But, many of those are behind us, where you are seeing, the maintenance CapEx, but a lot of these are specific investments. We talked about additional investments in China, Brazil. There is the things that Mike just talked about on his strategies within -- whether it is operations or manufacturing. So, I don't think -- we are not under investing in our business, we are just making investments at the right time.

The other thing that Cranes has going on is the worldwide SAP implementation, which has been kind of muted a little bit over the past 18 months, but that again will take some of the CapEx as we get to the latter part of this year and into 2012, but I don't think we are under investing at all.

That is helpful. Thanks for your time.

Ann Duignan, with JPMorgan.

Good morning. It's Ingrid Aja in for Ann. I was wondering if you could just talk about the incrementals you are expecting in Foodservice. Are there any strange, onetime items in 2010, that would make it not an apples-to-apples comparison that we should be aware of?

Yes, there is. We had the rollout. That was significant in the 1st quarter of 2010 , that makes that -- that specific quarter a difficult comp. And then as you look at our comment that we expect to show year-over-year margin growth, that's-- could go throughout the balance of the year. That overcomes that -- that headwind that we expect in the first quarter of

Okay. So, that takes into account that. And will you be restating the other three quarters in the future for Foodservice?

Restating?

For the sales of Kysor/Warren?

Yes, we will actually do that.

And then I just -- finally, on the Crane side, what kind of incrementals can you get there once you kind of get over the hump of these onetime items you had in 2010? I know you had this quarter 110 basis points, and then two quarters ago there was a onetime item. So I am just trying to get an idea of what kind of incrementals you could get maybe going into 2012.

Right, and I think part of the reason for that commentary is, between those items and the investment that we do expect to make, in a growth environment versus the contraction environment, will drive what we are characterizing as much more modest incremental margins, that we expect as we get a little bit further into the upturn.

Okay. Great. Thanks so much.

Joel Tiss, with Buckingham Research.

Hi guys, how is it going?

Hi, Joel.

So, two questions. One on Crane's. Do you think there is enough strength in the industry that it is kind of an across the board, the competitors are going to feel the same kind of uptick? Or is there anything that is a little more specific to Manitowoc, like your Shady Grove Open House Day, and things like that?

Well that is -- I mean, I certainly can't speak for the competitors. They didn't tell me anything over the last quarter --.

Why would they?

We didn't tell them anything either. I don't know, Joel. I think, to Eric's comment, I think that is what you are going to see at CONEXPO. My guess is that -- the one thing that may drive some of the people at the end of the year would be on the mobile side with the tier four engines. That is -- that could have driven some -- some of that -- but, you know what? I just don't know. I don't know enough about it. I think some of the things we talked about mid-year are what we were focused on.

So -- but I think, if we are seeing the up-tick, the people are talking again, we are competing on deals -- I mean, yes. I am sure we didn't get every deal. Other people have gotten some product out there, so I am sure that anybody else you would talk to in the industry would say, yes, we are seeing better conversations, we are seeing better trends. Whether it is come to fruition or not, I don't know, but I would tell you that the folks that I talked to in the industry are all -- you smile a little bit more today than you did 12 months ago. That is for sure.

Then a similar kind of question on Food. Is the competitive environment changing a little bit? And I am really just asking because we saw a real divergence between what you guys are seeing and what we saw from IQW yesterday.

I know they are in a little different segment, but they changed out their CEO. You know what I mean? It seems like there is enough divergence here where maybe there is a little bit of color you can give us on the competitive environment.

Yes. I don't see any major changes. I think we have got a strong set of competitors out there. There are certainly are more evolving trends occurring in Asia than there are in the America's markets. But we've got a vision that is multi-year outlook, and so far we are on track, and we're going stick to our plan, and it is focused on all the things that we've conveyed strongly so far.

Yes. I think, Joel, the one I would add is, and I just recently came back from China, is when you look at some of the conversations I have had with our people in the Foodservice side, the fact that they can combine many of the product lines, instead of being a smaller, one off, they get to combine -- what Mike was trying to do is you are trying to get that cross-selling of all the product lines. And I think that has taken hold in some of the regions and some of the geographies. But, I think that is driving it.

Again, not to rehash, but we have only been at this with Foodservice acquisitions since October of 2008. We are still pretty young in this infancy, and so far, so good. That is why I think we expect more to continue in that -- in those efforts as we get into 2011 and beyond.

All right. Thank you.

Robert McCarthy, of Robert W. Baird.

Good morning, guys.

Good morning, Rob.

I wanted to follow-up on the earlier question on incremental margins. If you look historically, I think there is some evidence that the Crane business, in a recovering environment, is capable of at least 15% to 20% incremental margins. Is there any reason -- I mean, I hear you on -- recovering some deferred spending from this past year, etc. in 2011, rising R&D. But is there any reason you would dissuade us from expecting at least a 15% incremental in 2011?

Well, I think it is -- obviously this downturn was a little bit more severe than previous ones that we have seen. We did defer some things and take some actions in a more highly levered balance sheet circumstance.

True.

That obviously you can do, in the short term in a crisis mode, but when you are in recovery, some of those things need to be put back in place for you to maintain the same kind of competitive footing in the market. That would be my comment to that question.

My thought was that -- potentially offsetting that, is that you've got a larger, fixed cost base in place today. As Glen referred to, the -- the capacity that you were putting in place, 2006 through 2008.

That is a true statement, as well. And the other thing that is obviously a wild card, as it always is, is mix and some of the commodity pressure that we talked about -- that obviously nobody has got a perfect crystal ball on those issues.

Sure, of course. Thank you for that. And then, I wonder if you could help us with profiling a couple aspects of the business? In Foodservice, there was reference earlier to a particularly strong outlook, at least from some prognosticator, in quick serve and limited service segments. I am wondering how much of your business today serves those markets in round numbers?

It is around 60, Rob, globally. It's not a precise number, but in round numbers it is in that range.

Okay, that is great. And similarly, you have talked in the past about your emerging market exposure in the Crane business. Could you update us there Carl or Eric?

Well, we totally have a very global presence. And that is certainly one of -- the strong assets that we have, and that is a result of our investments. So we have a broad coverage and we are very active and we continue to invest, as we said earlier, in China and Brazil, and other emerging markets because the demand is very strong there.

Yes, but my understanding is that -- aren't we up -- haven't we gotten to about 30% of that business in emerging markets?

It is actually a little bit higher than that.

Yes, it is higher than that, Rob.

Is 50% too high?

Yes. Yes.

All right. I am just trying to get -- then last clarification, if I can just squeeze this in, can you give us any kind of help on your expectation for tax rate in 2011?

That is a great question, Rob.

We need some range here, Carl. Help.

Yes, I think if you wanted to bracket a number, I would say US statutory rate would probably be reasonable based upon where we expect the revenues and the profitability to come from around the world.

Okay. Very good, thank you.

In 2011.

Yes, in 2011 only. Understood. Thank you.

Ted Grace, with Susquehanna Financial Group.

Thank you. Just a couple quick follow-up on 4Q orders. If we were to talk to the dealers, would they highlight any material changes in your terms, whether it is extended payment dates, or unusual incentives in the quarter, relative to recent history?

No. There was nothing different than the normal business.

Okay. And then, just turning towards the material side of things. Could you just, maybe, calibrate our expectations, specifically on where you are priced now for high tensile steel and hot rolled, and any supply chain constraints we should be thinking about?

I think two that come to mind -- one is the steel that you mentioned, that is low -- that's probably mid to low single digits, is what we have baked into our plan on the impact for 2011. The other one is a little bit on the transportation or logistics.

I think we have had some very good successes over the past couple of years. And I think just from that industry as a whole, picking up a little bit. You are in a fight to maintain some of the benefits you had over the past couple of years, but other than -- again that's not huge, but it could be low single digits, again, so those are two that quickly come to mind.

Okay. Then whether it is Glen, or Eric, or Carl, just, I mean, could you give us a ballpark for where you are pegged right now in terms of what you are paying on either high tensile or hot rolled, so we can calibrate mark-to-market, if you will?

I'm going to have to get back to -- we will have to get back to you on that one, specifically. I don't have it off the top of my head, but we do get it on a regular basis. We'll get that --.

Okay. And then the last thing I will just ask, in terms of delivery times, if you could just give us a sense for -- how you should think about -- kind of on the core side of crawlers, whether it is the 777's, 999's, 2250's, or 14000's -- and kind of the other key products, whether it is the AT's or the towers, kind of what delivery times look like at this point?

Oh, delivery times across the product line?

Yes.

Obviously those are spread across regions, they are spread across the product line. It is certainly not anywhere where it was, again, at the end of 2008 or 2007. But I -- other than anything that is of enormous size, I can't think of anything that has gone out more than four, five, six months.

Okay. Great. Oh I'm sorry -- the last thing I wanted to ask is, could you give us some specifics on the dealer utilization rates. I know in prior quarters, Carl has kind of spoken to some statistics there. I didn't catch if Eric had mentioned those.

But -- any insight you can give beyond the public eyes, like an Essex or H&E where if you were to look at their dollar or time utilization statistics, they are still, fairly, healthily depressed. That would be helpful, because it is hard to reconcile it to what I interpreted as more positive comments, on what you are seeing across the dealers.

We would typically see some seasonal softness in the utilization rates, obviously, given the normal seasonality, and we saw that in 2010. But, overall, I don't think there is anything from an end user demand standpoint that seems to be concerning.

But, could you actually point to specific -- you know, I think before you've talked about, I think 70% was the threshold at which you typically see new order cycles continue, or I am sorry, kind of increase. I certainly --- I would be surprised if you told me we were near those utilization rates, but any clarification would be great.

Well, I think -- you mentioned H&E and Essex. I know Essex does theirs on a little bit of a different -- you talked about the dollar utilization, when we give you the statistics, we are looking at just the specific number of cranes versus what is out on rent. So, just from a unit utilization, those numbers are upwards -- they had been over the past six months, upwards of the 70% range.

Now, when we talk about whether they are going to be re-investing, that gets up to the 75% the 80% range of just unit utilization. So, I can't speak for H&E and Essex specifically on theirs because I know they have a different method of how they are going about it, but I can tell you that on a unit basis, those numbers are, I think Carl or Eric mentioned it, that they are approaching those reinvestment levels. So, we are still seeing them up around the 70% level.

Okay. That's -- because I guess the way that they disclosed it is time utilization. I think last quarter they were more like in the 40's or 50's.

That is always going to be a little lower than just the unit utilization.

Yes, yes. No, that is helpful clarification. Great, thanks guys. Best of luck this year.

Thanks.

Charlie Rentschler, with Boenning & Scattergood, Inc.

Yes, I have one question, but before that, I would just like to extend my congratulations to you guys, as a management team that has really put up an incredible performance in the last couple of years, a really tough grid of years, and I think it is a real testimony to you guys.

Thank you.

Can you discuss how you are going to allocate cash from operations in 2011? You've mentioned CapEx, Carl mentioned paying down the debt $200 million, but I was particularly interested in accounts payable. And also, I guess, you are going to have to reinvest in accounts receivable and inventories as you start to grow?

Yes, Charlie. I think we continue to believe that there should be some benefits in an expansion environment, where we might have some opportunities with some of the lean manufacturing principals, six sigma, to improve some of the turn characteristics. So, hopefully the pressure, depending upon the growth rates, won't be too extreme for us to consume a lot from a working capital standpoint.

But the priority, obviously, at this level of leverage, will continue to be on debt reduction. As a key priority, obviously, we are guiding to a higher capital expenditure rate, which we think is appropriate based upon the opportunities that we see.

As you know, when we find something that fits the strategy, we are not shy about investing. But, I think the key priority -- the first priority, will be to get -- continue to get the debt down.

I think, Charlie, going back to, just from a strategic stand point, you look at how we managed the balance sheet, and you talk about that from our EVA culture, Mike and Eric and their teams, they recognize what they need to do on the balance sheet as well as they do on the income statement.

We measure a lot of the metrics from a cash GAAP standpoint. So, we are looking at the days in inventory versus the days in receivable. And I think, while we can get some benefits, you have got to remember, when the markets went down as severe as they did, we did hang onto some inventory; we have worked our way through some of that.

And to Carl's point, many of the manufacturing things that we are doing now, with a plan for every part, and a lot of the inventory issues, those can offset some of the increases you may see in receivables or -- and payables. People stretch their payables during the downturn, just like they stretch their receivables, and we get caught up in that too.

So, I think we are trying to manage that cash GAAP in the same metric that we had, and actually improve it if we can and that is less inventory and faster turns on receivables.

So, there is going to be -- we want to minimize that increase in working capital, but we know it is evident, if the business is going to grow like we think.

Thank you.

Henry Kirn, with UBS.

Good morning everybody.

Hi, Henry.

With respect to the Crane revenue guidance, is it possible to quantify how much of that growth is expected to come from the dealer restocking?

It is not significant. We have seen, and we expect to see a little more, but, again, it is nowhere near what we have seen in the past, so there is a better confidence. And I think our dealers are positioning themselves to be able to capture some of the business that is coming on Summer project that have been identified for 2011, but, again -- I mean -- those order intake is really a broad -- a broad and the reasons of our global presence. So, it is not very significant.

And switching over to Foodservice, as the customers attempt to grow in the emerging markets, what kind of mix are you envisioning for your 2011 revenues between developed markets and emerging markets?

I will make the comment that obviously we are much less global in Foodservice than we are in the Crane business. I think we have got some great opportunity to exploit some of the things that are going on in the emerging markets.

But, I think as you look at it as a percentage of revenue, defined the same way as we do on the Crane side, it is probably a low double digit percentage of the overall business today.

Thanks a lot.

That will conclude the question-and-answer session. I will turn the conference over to Mr. Khail for any additional or closing comments.

Before we conclude today's call, I would like to remind everyone that a replay of our fourth quarter conference call will be available later this morning. You can access the replay by visiting the investor relations section of our Corporate website at www.manitowoc.com.

Thank you everyone for joining us today and for your continuing interest in the Manitowoc Company. We look forward to speaking with you again during our first quarter conference call in April. Have a good day.

This does conclude today's conference call. Thank you for your participation and have a nice day.