Manitowoc Company Inc (MTW) 2013 Q3 法說會逐字稿

Good day everyone and welcome to this Manitowac Company Incorporated third quarter 2013 earnings conference call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Khail. Please go ahead, sir.

Good morning everyone, and thank you for joining Manitowac's third 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, and Bob Hund, President of Manitowac Foodservice. Glen will open today's call by providing some introductory remarks about our quarterly results and business outlook. Following that, Bob will comment on our Foodservice results for the third quarter, as well as sharing his longer term goals and strategies. Then Carl will discuss our financial results from the third quarter from an enterprise insightment perspective.

Following these prepared remarks, we will be joined by Eric Etchart, President of Manitowac Cranes, for a question and answer session. For anyone who is not able to listen to today's entire call, an archived version of this call will be available later this morning.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 October 25, 2013. 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 the question-and-answer session. Such statements 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 Manitowoc 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'll now turn the call over to Glen.

Thanks, Steve, and good morning everyone. We reported solid top and bottom line results for the third quarter, driven by another period of year-over-year revenue growth in both Cranes and Foodservice. We have worked diligently to leverage our competitive advantages that are benefiting from the substantial investments we have made across the Manitowoc enterprise. In addition, our ability to navigate through prolonged sluggish growth that exists in the marketplace, is a testament to our unrelenting focus on our key strategic imperatives, as well as our diverse product offerings, [leading] technologies, and geographic reach. Looking at our segments, Foodservice posted modest sales growth during the quarter, as some customers deferred capital expenditures related to new store openings and other growth initiatives.

We continue to successfully penetrate new customer segments, and identify additional opportunities for expansion, which included the recent launch of the new ice machine line, with the successful rollout of our blended beverage technology in Europe. Bob will discuss our Foodservice strategy in more detail, shortly. While our margin profile of the business remains healthy, we did experience a year-over-year decline during the third quarter driven by the cost of our manufacturing initiatives in Tijuana and Monterey, Mexico, and Cleveland, Ohio, which are now virtually complete, and will incrementally benefit margins in the fourth quarter and throughout 2014.

Looking at our Cranes segment, our third-quarter sales grew by over 10%, driven by focused execution across all levels of the business. Our Cranes segment also experienced a significant improvement in operating margin, achieving year-over-year increase of 110% as our initiatives to improve and enhance our operations globally bear fruit. Results in our Crane segment were driven by sustained demand in the Americas region, with crawler cranes and large rough terrain cranes performing well. As higher Cranes utilization rates and strengthening rental rates drove our performance.

We also saw continuing success with Manitowoc Crane Care, given our strategic investments in this unique aftermarket product support solution for nearly a decade. In addition, most of our product lines continue to be driven by strength in the energy and infrastructure end markets. From a geographic perspective in addition to the Americas, markets of relative strength include the greater Asian-Pacific region, the Middle East, and Russia.

To conclude, we have worked diligently to leverage the competitive advantages across our business segments. We are beginning to see the rewards from our investments to upgrade and rationalize our global manufacturing footprint, implement cross segment process improvement and drive innovation throughout the business. While global economic growth will continue to be uncertain and challenged, our proven history to mange the Company in any market environment, coupled with our continuing focus on our strategic initiatives will set the foundation for long-term profitable growth across the entire Manitowoc enterprise. With that I will turn the call to Bob for a discussion on our Foodservice segment. Bob?

Thank you Glen and good morning. I'm happy to be on my first earnings calls as President of Manitowoc Foodservice. Today I want to focus my comments on the goals and strategies for the Foodservice segment. In addition to providing a brief overview of this segment's third quarter results and accomplishments. During the third quarter, we made sustained progress in Foodservice, despite some customers continuing to defer capitol expenditures, the segment posted modest sales growth.

Driving these results were sustained growth in North America, and increased demand in Europe, a direct result of the successful rollout of our Multiplex Blend-in-Cup product across that region. This success speaks volumes about the diverse product offerings across the globe, as well as to our ability to leverage existing customer relationships, all of which afford us opportunities to accelerate long-term growth in this segment. In contrast, the greater Asia-Pacific region remains somewhat challenged, primarily due to uncertainty in certain Asian economies.

However, as we continue to penetrate this market, we expect to see growth by the major chain restaurants in this region over the long term. Looking at our results from a product line perspective, we saw increased activity in select hot and cold product offerings. Year-to-date, sales in most product lines have shown modest growth, with the exception of our beverage in the US-based refrigeration and custom fabrication business, which has seen more substantial growth. In contrast, our retail walk-in refrigeration and our Asia-based custom fabrication businesses have witnessed declines.

Looking ahead, let me touch on our strategy for the business. Our primary goal is to drive long-term profitable growth, by leveraging our strength and leadership of the Foodservice segment. This objective will be satisfied using a three-pronged approach of customer focus, new product innovation, and leveraging our global scale. I am confident in the strength of our products and brands, which provide significant opportunities to grow along with our customers. Not only do we aim to be their supplier of choice, but also their innovator of choice. Consistent with this strategic imperative, we'll be launching new products expanding our ice, frying, refrigeration, and accelerated cooking categories in both the fourth quarter and throughout 2014.

Our customers are constantly looking for new ways to enhance their menus and support menu rollouts, and with our significant R&D resources, complemented by a culinary department that is unmatched in the industry, we're at the forefront of that innovation. This strategy will remain a key ingredient for the Foodservice segment's long-term success. As we support all areas in the kitchen from hot offerings, to our accelerated cooking and grilling technology; to cold offerings such as our award-winning ice machines that provide significant energy and water savings; to our touch screen control systems and technology, which is being implemented across our product array.

Exemplifying our new product innovation efforts, our successes include, first, the completion of the Inducs acquisition, that will not only enable us to broaden our service cooking offerings, but also introduce this innovative technology into other product lines. Second, the launch of our new Koolaire ice machines, built at our new Monterey facility. Third, the launch of new hot holding technology, that allows customers to hold hot food longer without compromising taste or food quality. Fourth, the successful rollout of the innovative Multiplex Blend-in-Cup offering in the UK, that has enabled us to penetrate multiple markets across Europe. And fifth, the recent recognition of five Manitowoc Foodservice brands as the 2013 overall Best in Class awards from Foodservice Equipment and Supplies magazine.

As Glen noted earlier, we remain on track with the multiple manufacturing initiatives in Monterey, Mexico, Tijuana, Mexico, and Cleveland, Ohio. As a result of these manufacturing strategies, we expect sustainable and significant improvements to the both production efficiencies and our cost structure. These initiatives underscore a greater goal for this business, to operate as more unified business and to work more as one organization. By employing this one strategy, Foodservice will utilize streamline business systems, operating practices and processes, thus offering a unique value proposition that provides an efficient and consistent channel to our customers. In addition, by leveraging the success of our Crane Care business, we are pursuing growth initiatives in our aftermarket services and solutions for Foodservice.

In closing, while there are lingering concerns in various parts of the economy, the implementation of our long-term initiatives will help generate solid growth across the Foodservice business and around the world. That said, we will continue to invest in these initiatives, while appropriately managing expenses, enabling us to gain operating leverage as the business grows. The drive toward continued customer focus, new technologies, and greater innovation around our brands, plus improved operating efficiencies and investments to upgrade our global manufacturing network, should solidly position us for long-term success in the Foodservice industry. I will now turn the call over to Carl to discuss the detailed third-quarter financial results. Carl?

Thanks, Bob. And good morning, everyone. We reported net sales for the third quarter of just over $1 billion, which is an increase of 7.1% from a year ago. GAAP net earnings for the third quarter were $52.9 million or $0.39 per diluted share versus $22.2 million or $0.17 per diluted share of the third quarter of 2012. EPS, excluding special items, was the same as GAAP EPS in both quarters. EVA in the third quarter of 2013 increased by 35% versus the third quarter of 2012, which is driven by improved results from both segments. During the third quarter, cash provided by continuing operations was $114.4 million versus $49.7 million in the prior year quarter, driven by improved earnings and partially offset by the seasonal working capital requirements in both segments.

For the fourth quarter of 2013, we will remain focused on achieving our cash flow targets as we continue to prioritize debt repayment, while also funding our growth and profits improvement initiatives. During the quarter, net debt reduction totaled $95.4 million, and we will remain on target to deliver at least $200 million in full-year debt reduction, led by cash from profitability. To reiterate, our normal seasonal cash flow pattern is for the bulk of debt reduction to occur in the fourth quarter.

Turning to our segment results, Foodservice sales in the third quarter of 2013 totaled $402 million, up 2% from a year ago. Third quarter operating earnings and Foodservice were $69.5 million. Operating margins of $17.3% were 90 basis points lower than the prior year quarter. We continue to expect full year margins to be in line with last year's full year margins. Third-quarter Foodservice margin comparisons were driven by ongoing investments in our manufacturing strategies. Key brand initiatives, as well as new product development costs.

Moving to the Crane segment, third quarter sales totaled $613 million, a year-over-year increase of 10%. Overall, Crane segment operating earnings in the third quarter were $56 million, versus $27 million last year, which is a 110% increase. This resulted in a third quarter Crane segment operating margin of 9.1%, up 430 basis points. This favorable year-over-year comparison was primarily led by higher sales volumes, solid gains and operational efficiencies, and results from our procurement initiatives.

Crane backlog at quarter end was $568 million, a decrease from $726 million for the prior year quarter. For the third quarter, new orders totaled $450 million, which represent a book-to-bill ratio of 0.7 times. Overall, new orders during the quarter declined 23% year-over-year, reflecting cautious posture of many of our customers, despite the improved results in their businesses.

Before concluding my remarks, let me now discuss our remaining 2013 outlook, as noted in yesterday's press release, we are lowering our Crane and Foodservice revenue guidance, as well as our full-year effective tax rate while reaffirming margin guidance and all other key full-year financial metrics. For the full-year, we now expect modest single-digit revenue gains in Foodservice, and mid single-digit revenue growth in Cranes. The fourth quarter of 2012 was an unusually high revenue quarter in Cranes, which we do not expect to replicate in the fourth quarter of 2013. However, we do expect to achieve our full-year margin guidance of high single-digits given improvements in manufacturing efficiencies, procurement efforts, as well as favorable year-over-year crawler mix.

In Foodservice, we expect to achieve a full-year mid teens operating margin, despite the margin decline in the year-to-date period. This is primarily due to realizing the benefits from our manufacturing changes implemented earlier this year, being fully realized in the fourth quarter. Other guidance expectations include capitol expenditures and interest expense of approximately $100 million and $125 million, respectively. Debt to EBITDA, will once again, decline more than one full term, to below 4 times, approximately half the peak level experienced in the 2010. Finally, we expect the full year effective tax rate to be below 30%. With that, I will return the call to Glen for his closing comments. Glen?

Thanks, Carl. To conclude, we delivered another quarter of solid sales and operating performance amidst increasing uncertainty and pressure in the global macroeconomic environment. In times such as these, it is important to note that we will continue to diligently manage the business in areas we can control. Over the years, we have proven our ability to navigate through tough environments.

Our efforts will continue to emphasize expanding margins, generating strong cash flows, and focusing on our strategic imperatives, such as new product introductions, aftermarket solutions, and operational initiatives. We are confident in our ability to drive our long-term profitable growth as we look ahead to 2014. This concludes our prepared remarks for today. Shannon, we will now begin our question-and-answer session.

(Operator Instructions)

Our first question from Andrew Kaplowitz with Barclays.

Glen or Carl. One of your competitors mentioned an uptick in crane orders in October. Maybe you can talk about if you've seen any uptick in 4Q so far, and do you expect customers, as they usually do, to buy more crawlers in 4Q, and can you talk about whether customers may -- your opinion on whether you think customers will defer orders until US CONEXPO or how are you're thinking of the potential for orders at CONEXPO?

I'll take the first one. You know, I think we've been very consistent. We report our backlog on a quarterly basis, report our orders on a quarterly basis and will continue to do that. I think -- I mean that's just the best way to say that.

Now, what do we expect in the fourth quarter? You know, Andy, it depends sometimes on whether -- we've talked about this in the past, whether you have price increases, if they're mid-year, if they're late in the year, if it's first part of next year, so people will -- if they think there's a price increase coming, they'll put their orders in, they'll put their projections in for 2014. So, yes, we haven't had any price increases, so we expect that our dealers in North America will start giving us their orders for 2014? Yes. Do we expect the people in the other regions, India and Asia to do the same thing? Yes. So, yes, there's that expectation that we have, that obviously orders would be better in the third quarter.

And then lastly, you asked about CONEXPO. That's a wild card. I think we have some great products that are going to be shown at CONEXPO. We're looking for -- I can make a pitch for CONEXPO being the Chairman of CONEXPO that we are expecting record attendance at CONEXPO. It's going to be -- we've sold the most space that we ever had for CONEXPO, so we are expecting it to be a very good show and I think the our crane segment would be at the forefront of having a very good show for that. It all depends, if people know what's going on beforehand.

Again that, that's why you try not to say much about orders receives at that, because you don't know if it was received in January, February prior to CONEXPO, or if they want the attention at CONEXPO and come in with the order at CONEXPO. So, again, one thing I want to say that is so odd right now, when you talk to a lot of the customers, and it doesn't have to be just in the Americas -- people aren't as pessimistic as our orders showed over the third quarter. We mention when I say crane rental companies, contractors, and customers on the crane side, they're more optimistic than what our certainly orders would show, but obviously you don't feed your family on quotes. So, that's one thing that's a little bit of a challenge to us right now as you look at trying to plan for 2014. Obviously, the numbers are the numbers. Eric, I don't know if you have anything to add to that?

No, I think you covered all the topics pretty well.

Glen, that's helpful. Maybe one for Carl. Your income rental margins and claims were very strong. Now for the year you're well over 30%. Can you talk about if there's anything unusual in 3Q margins or is this really just good execution and positive mix from crawlers helping, and then going forward do we expect that mix to continue to be positive, as we go into the fourth quarter and then 2014?

There wasn't anything real unusual I think that the ability to get there -- the only thing that I might point out, that is a little bit unusual is, obviously, the comparable period. 2012 third quarter was a light quarter. And we talked about the push out of some of the top lines of revenue that benefited the fourth quarter last year. That was a little bit unusual and obviously that affects the absorption that was detrimental to last year, that we didn't suffer this year. So, really, the drivers are the types of thing that you probably would expect, procurement, safe costs --.

When you say procurement, you mean steel, Carl. Basically --

Input costs. Not necessarily just steel. The manufacturing costs, savings that Glen talked about in his prepared remarks and the things that -- those would be the two primary drivers to the performance.

I mean, we are working very, very hard on our journey. We have -- I had a team of great manufacturing folks and working very hard in improving our productivity, efficiency in appliances, and the reach really starts bearing some very good fruits. The other things we are embarking to -- a quality program, two or three years ago, and if you look at the cost of poor quality, we see now some good improvement, so that's also a good contribution I think to our improved margins.

Thank you, guys. Appreciate it.

And now we go to Alex Blanton with Clear Harbor Asset Management.

Good morning. I'm going to get away from some of the numbers for a minute and ask you -- you mentioned that at CONEXPO you would be showing new products with new technology. Could you be a little more specific and just give a little description of what the new technology is, what it does, what the benefits are and so on?

That's a good question. We had a lot of discussion on how to say it in the script. But the best way to say it, Alex, is we're not ready to fully reveal what some of that stuff is, and I think that's where some of the surprise will come out at CONEXPO. But, I think, it's suffice to say that we do have some things that go across all the product lines, that people will be happy to see.

Well, let me just ask, is it electronically related, new electronics and new --.

It could be -- it's some of that. It's different types of innovations in lifting solutions. You know, it's all of the above that we -- common controls. All of the above.

Okay. Well, we will look forward to seeing that. The second question is this. You mentioned lean initiatives in the press release, lean practices helped you improve your margins. Which lean practices has the biggest impact on your business the last year or two? Your margins?

Well, I think what starts -- I'll letter Eric give a more specific description of what's happened. But I think, Alex, the big thing is -- lean is a journey. It's really -- I mean, we've been on this for a long time, but when you really start to get the benefits is when everybody starts buying in and everybody gets it, when it becomes a behavior, as opposed to a management philosophy and a -- sometimes people want to look at it as a oh, here we go again with another program. It's really when people start buying in and get it. We've seen this in a lot of things, whether it's EBA, or safety, whatever it is. When people make it behavioral, that's when you start to see the benefits and I think that's what's happening a little bit in the crane segment. But, Eric, do you want to speak to some of the specifics?

Yes, I'd say it's about value stream managements, material flow, obviously 5S that we have started many years ago. But, that's a good one. You see our safety metrics have improved drastically. So, it's all about that. When working also we've a supply chain that has helped us really improve, not only on the inventory returns, but on our efficiency, as well. And given that globally across all the points at a certain point around the globe, so we have some common practices that you can see in France, Germany, the US, Brazil, and China.

Yes. Let me ask you, have you been able to shorten your lead times because of this? And if so, in your small and medium size equipment, what is the order to shipment time? Not the assembly time, but the time when you get an order that you can deliver?

Well, we have made some improvement -- actually, it depends on the product line because it's difficult -- on the crawling crane you still have some specific confidence that is a very long time, but overall, yes, we definitely have improved our lead time with the suppliers. Definitely.

What would you say? Weeks or months? Give us an idea of what that is. I just want to compare with others in the industry.

Well, Alex, that goes by product. Obviously, it is different for a 70-ton RT than a self-erecting car crane than it is for a 400-ton crawler crane, but I would say you are certainly looking at several weeks, easily, in many of the product lines.

Okay and next we will go to Nicole DeBlase. Please go ahead.

Yes. Thanks, guys. So, just a question on the competitive environment. I'm curious what you're seeing on the pricing front within the cranes segment. Any big changes versus what you've talked about in the past few quarters.

No, I think it's still pretty much the same, Nicole. There are deals where some people get very aggressive and -- I don't see it any different. I don't think pricing' s been an issue across the board. Eric?

No. I think there is pricing discipline for most of the people. Of course, you can see deals -- you can see people being more aggressive on specific deals, but overall I would concur with that. The only thing that we have seen is because of the suffering yen, it has definitely helped our Japanese competitors in some part of the world, particularly in the Middle East, where I think they are more aggressive than they used to be. I think it is really driven by the country.

Okay, got it. Thanks. And just maybe one for Carl on tax. I know you guys said less than 30% in the press release, but can you provide anymore details around what you are expecting for the fourth quarter, or what we should be modeling?

Well, I think there's an opportunity for us -- obviously it's difficult to project on the tax front because of the different jurisdiction that are the drivers. It could be significantly below 30%, but if I was going to bracket it, it would be somewhere in the -- maybe as low as the mid 20%s if everything went the right way, but we think it's probably best to express it as that it will be below 30%.

Okay, got it. I will pass it along. Thanks.

And next we move to Seth Weber with RBC Capital Markets

Good morning, guys. I'm just looking at your guidance for this year for the crane business, mid single-digits revenue growth, which suggests something north of $700 million for the fourth quarter. I am trying to reconcile that number with the crane backlog of $568 million. Can you help me connect those dots there? Are you booking and shipping more stuff per quarter. You mentioned Crane Care a couple times. Is it Crane Care incrementally stronger than what we had used to think about, or how do you get to a $700 million revenue number off of the $568 million backlog?

I think, Seth, first of all, good work on the roll-forward. Secondly, yes. You hit it on the head. It's what is going to be ordered and shipped within the quarter. That's the big -- that is the big unknown, but based on some of the things we do know and some of the things we are comfortable with, that's the expectation. I would say -- we've talked about orders and how things have been ordered and shipped within the same quarter. The percentage that we would have in the fourth quarter to get to that $700 million number is a little bit higher than it has been in previous quarters. And there are a lot of things that go into that.

Again, I will go with conversations with customers. Some of the past history that we've had as we have gone towards the end of the year with the accelerated depreciation. That all plays into it. So, it's really the number that we're focused on is what's ordered and shipped within the quarter.

Can you frame what that's been historically as a percentage?

Well, again, in the trough, that gets upwards of 50% - 60%. When there's a backlog it gets down to 10% -15%. I would say you're looking more towards -- right now, somewhere right in the middle of there.

Okay. That's helpful. But does that mean that -- does that infer that it will be smaller cranes, because you have the ability to turn those out more quickly, or can you book and ship a crawler or a bigger crane inter-quarter the same as you could a smaller crane?

Seth, I'll jump in here for Carl. The progress that we made from a cash flow standpoint was good in the quarter, but we still have some more inventory than I would like to see. We've got finished goods that, obviously, are in various categories of cranes, not all very large cranes, but kind of across the product line and that, I think that will enable us to, obviously, deliver very quickly on some of the orders we expect to receive this quarter.

That actually makes sense. Thanks. I guess if I could follow-up with another question. One of your competitors, this week, talked about some excess channel inventory in North America, across the industry. Is that something you are seeing, or is that something you would have any comments on?

I'll let -- it's funny you say one of our competitors -- there's only -- I think we know who it is. You know -- and we know this because we've talked about it in the past. We track our dealer inventory on a regular basis. And I'll letter Eric give more specifics if he feels like it, but when we look at the dealer inventory channel, I think we're at levels that are very reasonable for what we track on, on every one of the product lines.

Yes, Seth. We track the inventory every week and the dealers report that on a special web application that we have developed, so we know exactly where we stand. And frankly speaking, we have not seen anything different than the other quarters. I think the elementary level is at the right level for Manitowoc.

And next we move on to Charley Brady, of BMO Capital Markets.

Good morning, guys. Just on the crane orders, the second quarter, some of the crane orders tailed off as you went through the quarter. Can you give me a sense of the tender of orders through the third quarter and insight? Has it changed? Has it gone up, or down, or flat going in out of the quarter?

I would say, you know, it was probably a little better early in the quarter. You get August with the European holidays and that kind of thing. I think, historically, you see a little bit of pickup sometimes in September with the European holidays, but I would say it probably wasn't as good as it had been in the past. I would say it was okay in July. And you probably saw August and September being a little lighter, again, than, I'm going to say what we had expected. And that's to Carl's point on some of the inventory.

I guess -- I mean I'm trying to square up -- when you say you're looking at the fourth quarter crane sales, what is your sense of visibility, given that we're a third of the way through that quarter anyway in terms of -- you talked about a little over a $700 million number. We can all do the math on that. Obviously, it's dependent, you say, on what's going to be booked and shipped in the quarter, but what is the extent of your visibility on exactly what's getting booked, and what will you ship out in the quarter and book for revenues?

Well, the visibility is the conversations with our sales people and dealers. And I think -- I'll use the same term you did. One of our competitors in North America talked about the amount of quoting activity, and we see the same thing. So, it's really what goes from quote activity to actual shipments. And I think that's one of the things that is a little different now, Charley, than what we have seen in the past.

People -- this is the third year in a row where the first half of the year was pretty good, then all of a sudden the third quarter, and my comment is that the new norm? I mean, after three years in a row, maybe perhaps it's a trend. And I think if people realize that the inventory's available, their decision process is a little bit quicker, and then they expect the manufacturer, the OEM, to have the inventory as opposed to them having it. I think what is happening you are seeing that little bit of, well, I think if the manufacturer has it I don't have to go out as far. An so, when we -- when you put all that together and look at the expectations, that's why I said it's a little different than what it has been in the past. The expectations, or the conversations have a lot of customers -- it isn't as bad as what our order intake appears to be.

Right, but at some point there's a lead time to make a crane. I'm guessing it's generally more than two months, so I am just trying to square that up.

Yes, but that's to Carl's point. I mean, I wanna go back. We've said it a bunch of times and you've heard other people say it. I think there's an expectation for the market to be a little bit better, so we do have units in inventory. I'm not going to say we build the stock, that's not what it is. But, based on conversations with customers and what they think they need, and what projects they have coming out, there are certain products that can be ordered and shipped within a couple of weeks. All it is, is the final touch-up and the testing on certain products, so, that -- when you look at the inventory numbers of finished goods, that's where some of it's coming from.

Okay, thanks.

Yep.

Next we move to Rob Wertheimer with Vertical Research Partners.

Good morning, everybody. Let me just start with Foodservice real quickly. Could you just talk a bit about -- given the production improvements that you've done, can you mention what you feel like the margin improvement in the next year is? Is it better or worse than you thought, and does it look just as good as it had when you planned it all out?

Yes, I think it is pretty consistent with our expectations. I think you'll see some of that in the fourth quarter, obviously to the guidance that we've given. Implicit in that, is that there's a pretty good pickup that takes place in the fourth quarter, and that will sustain in 2014. So, obviously, we'll give our formal guidance when we have our Q4 conference call, but we'll definitely see some year over year because of the manufacturing changes and the costs that is are associated with that, not being in place late this year, as well as 2014.

And 4Q would still have some tailing effect of investment changes and disruption, et cetera, and continue to improve from there? I know I am boxing you in a bit. Sorry.

No, pretty minimal for this quarter. We're getting to the gravy time on the changes that we've made.

Great. Thank you, Carl. And then Glen, if I can ask -- I know everyone's harping on the same issue. But, you mentioned something that -- it feels like people are inquiring, quoting, doing more and more activity, but yet the orders have been, as you said, falling off in the back half for a couple of years, or really just not as good as they were a couple years ago. Are there pockets of strengths people needed to order for and did that, and they've gone away, so you're seeing that mix change? Maybe I can ask specifically about US petroleum, whether it was fracking or something else, that was a pocket of strength, that really made it good and that faded away, and you're waiting for the other pocket to pick up, or is there anything else you can do to help bridge that gap between the interest and the activity?

Rob, I just think it's the uncertainty in the economy. I think people thought we would get through -- I am just keeping it to North America for right now. But I think you looked at what was happening through the summer with some of the political things in the Middle East. You come to the Americas. You have -- are we going to have a government shutdown? How does that impact everything. I don't think people are seeing things as its a long-term negative. I think people are just uncertain.

So, they're saying hey, if I don't need to buy something right now, why would I go put in an order, make an order to get something in the fourth quarter. Why don't I just wait to see what's going to happen on October 17th. Why don't I wait to see where some of these things come out, and I think there is just a cautiousness. I mean, it's no different than us with some of the capitol expenditures we have. I mean, we're looking at our business and saying, okay, if we want to do some of these things, I mean we use the phrase pause as a strategy. And that I think is what's happening, is people are pausing.

They're not stopping. They're just pausing to see what's going on. And I think when you go back to the basics in the crane side of the business, and look at utilization rates and look at rental rates, they're improving. You look at some of the performance of some of the people in the rental business, it's pretty good. And I'm not saying that -- they're not doing back flips, saying business is great, back to 2007, 2008, but their businesses are a lot better today, than they were a year ago. So, I don't -- that's the struggle -- I want to say one quarter doesn't constitute a trend, but we're certainly going to watch it very closely to see how 2014 we think it's going to shape up. Eric, do you have a --

I think back to the conversations -- large rental houses in the US are really starting to talk about their rental thinking in 12-18 months. This kind of conversation didn't happen before. So I think there is some level of confidence that 2014 should improve in the US and crawlers in particular, because we think that 2013 and 2014 for the wind business should be good. We know that.

And, again, I mean oil and gas should continue to be a strength. So, I think there is a lot of positive, but that doesn't translate into orders. And I think this is lack of a nature, is a lack of confidence of what is going to happen. So, a lot of positives, but there is a kind of [dischronic] with the order rate right now.

And next we move to Sean Williams with BB&T Capital Markets.

Could you talk specifically what was the year over year drag for food margins just from the restructuring consolidation?

In the nine months, Sean, it was $6 million. There was obviously some of these projects began in 2012, so there was spend. But if you look at the year over year change it's about $6 million.

That is year-to-date?

That's year-to-date, correct.

Okay. That's helpful. And then, last quarter -- and perhaps the quarter before that -- you talked a little bit about some issues on the crane side of the business, possibly holding up new product development and possibly orders. Can you just give us an update on where we stand with that?

You cut out there for a second, Sean.

Yes, the question was, in the past, you talked about you had some new products coming out in the back half of the year, but you were kind of holding off on introducing some of those products because of quality control issues that you had identified ahead of time. Is that still an issue? Is there any update to that?

No. The thing that we talked about with respect -- I think it was the RT770 at the end of the second quarter, those have worked their way through the system and I think there's probably a little bit left here early in the fourth quarter, but, no, we're good to go.

Can that alone be a needle mover for orders in the fourth quarter? Or it's a small piece of the mix at this point?

It's a smaller piece, but it will -- it certainly will move it. It didn't go out in the third quarter. I mean, that was kind of the bottleneck we had, and how did do you get the fix that we had early in July, and then get everything out the last part of August and September? So, yes, it moves it a bit, but I would say that's a known factor to us. As I said earlier on the call, the unknown factor is what we have to order -- you know, to get orders and ship within the quarter, the bigger wild card there is that piece.

Next, we move to Ted Grace with Susquehanna.

Hi, guys. How are you doing?

Good.

Quick question for Eric or Glen. We talked about kind of crane orders in the [caden] throughout the 3Q, but do you track inquiry levels and is there any characterization you could share on, kind of, how that pattern looks throughout 3Q, and maybe even some more perspective how it's progressed 2Q into 3Q by month, and give us a flavor for that?

I'm not sure I completely understand what you are saying. When you said the gray --.

Inquiry levels.

Inquiry level.

Yes. We talked about inquiry levels for customers calling either asking for quotes or -- I don't want to call it tire kicking, but kind of that kind of concept.

As I said earlier, I think it's the same as what we talked on in the second quarter call. Conversations are good. The conversations are upbeat. But I don't think it's any different now than it was in July, when it came to the order trends. Yes, as I said earlier, the order trend was a little better than July, August, September, but I think all the conversations that -- Eric was all over in Europe and the Middle East during the third quarter. I mean, I had a lot of conversations with customers here in the US, and we compare notes on a regular basis and I think we're both on the same page with respect to the conversations.

So, the volume of conversations didn't change materially?

No. And, of course, it depends where you are. But if you take the Middle East, I think we see more discussions over activity in some countries which were very quiet before in the first part of the year like Saudi Arabia, or Qatar, or Iraq. You see more activity there, if you look to the far east, Korea, there is a lot of activity going on both from [Towers] and [Mumbai Prince] taking place in Korea. That's really happening in Q3. There's maturity and a lot of orders influx, but there are more activities taking place in Hong Kong, for [towers], for example, Singapore. So, these are the hot spot, of course. Australia is down and India is also down, and Brazil is also down no doubt about this, but overall I think the level of activity and discussions over cranes is solid I should say.

Okay. Great. And then one quick question for Bob, or as quick as you can summarize it. Bob, I think you've been in the suit for 90 days. I'm just really curious to get a quick snapshot of your first 100 days observations, and if you were to force rank your number one focus and where you think you can make the biggest difference or will make the biggest difference? I know you talked about focusing on the customers, new product introductions, and leveraging the scale. But what will be the number one opportunity you see for yourself?

Well, thank you, Ted, for asking. I've noticed in the first 100 days there's a lot of opportunity across Foodservice. We have a lot of talent across the world in our different operating companies, leveraging that talent to help innovate on our customer's behalf. It seems in Foodservice, Manitowoc in particular, we really shine when we can help a chain or a specific customer expand their menu offering, when we can differentiate their product to their customers in a certain way. And that's why we have this team of culinary people and R&D people. If you look at where we really excel, it's in those areas, and we're doing that. Expanding in that direction, to be able to provide discernible value for customers, I think, is an area of growth that we have, and I think a lot of major chains realize that for us.

Okay, great. Well, we look forward to seeing the progress. Good luck with the quarter, guys.

Thank you.

And next we move to Jerry Revich with Goldman Sachs.

Hi, good morning.

Hi, Jerry.

Carl in cranes -- can you talk about how challenging is it to run the business operationally in this environment where you've got a lot of quarter activity, but a lot of book and ship have to happen in the fourth quarter, and what are you doing operationally to manage the process in that environment?

Well, the guy that actually has to face that issue is sitting to my left, so I'm going to let Eric tackle that one.

Well, it's not necessarily a walk in the park, I would say. You've got to be very, very focused in what you do. And we, again, stay very focused on our key strategic initiatives. And again, improving our manufacturing efficiencies and the changing initiative is very, very key. The customer focus is very important. I'm very pleased with the new product.

The product we have introduced has made a very good impact in the market because of the quality, reliability, and the features. So, that's something that we will continue to invest in our R&D because it's a recipe for success, and I cannot wait that we are over with the power because of our engineering efforts. But overall, I mean, it's not as easy. We know back to the peak of the cycle we're still very far from the 2008 situation. So it's kind of -- you cannot have any waste in your organizations, and you've got to be efficient. And the lack of visibility makes it, kind of, always very challenging.

And, Jerry, I would add one thing that makes it challenging as an enterprise. Is that the fact that we have some other initiatives and goals that we're trying to initiate and that is debt reduction. Some of the imperatives that we have on the innovation and making sure that we're investing in the after market, and we are doing all those things. So, in a perfect world if everything's working together, we have a pretty good plan. It's when different pieces of the plan don't come together, and you have changes in the environment, and that's why I said a couple times in my remarks, we're pretty good at doing this. We've shown a pretty good history of being able to navigate through the ups and downs of our markets.

And the beauty is the crane segment has been together as a group after we did the acquisitions at [Platonia Grove]. Since 2002, they've been through these before, and it's a lot of the people that have navigated through and they pulled out their play book and they know the right moves and levers to pull. In Foodservice, it's a little bit of a different story because, as we come together, we're into this for four or five years. You have a group of people that did it individually, but not as the enterprise we have today, that's across the globe with the product breadth that we've had. So, it's some of that learning that we have and spreading that across the enterprise. And I think it makes us -- I think the one thing we're going to say going forward, whether it's our competitors or the rest of the people in construction equipment, they're no better at forecasting than we are. And so, what has to happen is who's more flexible, and who can navigate through these times, and I give our team a lot of credit for it.

One thing I would like to add with the cranes, we have this SAP project one deployment and stay the course. Gosh, it's a big project. I think we should outline how many [affords] and (inaudible) are going into these deployments. We know that it will pay off when we are fully deployed in 2016, and we stay the course. Because know it's the right thing to do.

Okay. And a follow-up on the orders in the quarter. Where there any regions at all where your book-to-bill was close to 1, or over 1, and where was -- which regions saw the biggest backlog, just to help us understand?

I don't believe that anybody was over 1 time book-to-bill. There's obviously specific countries within regions that are better than the average, but I don't think an entire region was over one time book-to-bill in the third quarter.

And next we go to Stanley Elliott with Stifel.

Good morning. Thank you for taking my questions. Quick question, we talk about the crane activity and conversations in general. Do people tend to be more optimistic on the smaller side of the crane market or more on the larger side of the crane market?

I would be more optimistic on the larger side of the crane market. I mean, if you talk to customers, they want bigger and bigger and bigger. So I think we will see as we go through the up-cycle, I think the mix will be very different from what we have seen in 2007 and 2008. It's so bigger cranes. Definitely.

Great. And then, in regard to the project one, will the spending -- should we think about the spending being fairly consistent all the way through 2016? Are there any ups and downs, gives and takes, along these lines?

It will drop a lot in 2016.

Yes.

But it will sustain until then.

Very good. Great. Thank you very much.

Thanks.

And that does conclude today's question-and-answer session. I would like to turn the conference over to Mr. Khail for any closing remarks.

Before we conclude today's call, I would like to remind everyone that a replay of our third 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 fourth quarter conference call in January. Have a good day.

And that does conclude today's conference. We do thank you for your participation. You may now disconnect at this time.