Manitowoc Company Inc (MTW) 2013 Q4 法說會逐字稿

Good day, everyone, and welcome to this Manitowoc Company Incorporated fourth-quarter 2013 earnings call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. 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; Bob Hund, President of Manitowoc Foodservice; and Eric Etchart, President of Manitowoc Cranes.

Glen will open today's call by reviewing our 2013 accomplishments and our go-forward strategies. Carl will discuss our financial results for the fourth quarter and provide our initial guidance for 2014. Then our segment presidents will review their 2013 highlights and offer an outlook for their businesses in 2014.

For anyone who is not able to listen to today's entire call, an archived version of this call will be available later this morning.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 January 31, 2014. 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 Manitowoc Company does not undertake any obligation to publicly update or revise any forward-looking statement, 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. 2013 was a successful year for Manitowoc on many fronts, as we diligently focused on managing those areas within our control. Overall, we experienced margin improvement across the entire Manitowoc enterprise in 2013, as our investments to upgrade and rationalize our global manufacturing footprint materialized. In addition, we implemented various cross-segment process improvements, while continuing our innovation commitments. These initiatives were instrumental to our improved performance in 2013.

Looking at our segments, Foodservice reported year-over-year sales growth of 10% in the fourth quarter, with increases in North America and substantial growth in EMEA driven by success of our grills and blended-beverage equipment rollouts in Europe. During the quarter, we also experienced notable year-over-year margin improvement, which was a direct result of production efficiency gains and a streamlined cross-structure from our manufacturing strategies in Tijuana, Monterey, and Cleveland.

We achieved this margin expansion while also maintaining our investments in other key foodservice areas to further strengthen the business. Our strategy that centers around our customer intimacy, synergistic solutions, and leveraging our global scale, continues to position our foodservice segment for long-term success.

In Cranes, our fourth-quarter sales declined by 8%, due to the unusually strong shipments in the fourth quarter of 2012. We also saw strong order intake during the fourth quarter, which was the highest level since before the recession, driven by strengthening momentum for our crawler cranes and tower cranes.

Geographically, demand for our crane products continues to be the strongest in the Americas, complemented by improving activity in certain emerging markets. While our full-year margin expansion was substantial, at 170 basis points, we did experience a year-over-year margin decline in the fourth quarter, caused by the lower year-over-year volume described earlier.

Looking ahead to 2014, our enterprise strategic initiatives remain intact. Similar to 2013, we will balance our investments between long-term growth and driving meaningful margin expansion. Bob and Eric will discuss these investments and initiatives in greater detail. But let me highlight some of the key areas of our focus for 2014.

First, we continue to make strides enhancing and right-sizing our global manufacturing footprint. These efforts not only improve the cost structure of the business, but also enhance customer service and accelerate our product development processes. Second, we continue to emphasize our innovation imperative across the enterprise, which resulted in over 50 new products in 2013. And we will see a similar number of new products and technology launches in 2014.

In Cranes, we are particularly excited to showcase our innovative new designs, which will include an array of 10 technologically advanced products that will premiere at the upcoming ConExpo trade show. In Foodservice, we were introduced dozens of new offerings, led by the evolutionary Convotherm 4 oven, at several regional trade shows throughout the year.

Third, the ongoing implementation of operational excellence and quality initiatives remains a key priority for 2014. These initiatives include sourcing, lean, reliability, and organization efficiency gains. In total, savings from these initiatives should exceed $80 million and enable us to improve our enterprise margin profile throughout 2014.

Lastly, we remain focused on improving our capital structure. We have a much stronger balance sheet today, due to our continued focus on debt reduction. This, coupled with our new credit agreement, is proof of our commitment to proven fiscal management and our dedication to drive sustainable long-term growth. In 2014, our cash deployment strategy remains unchanged, as we will continue to fund various growth and process initiatives, while retaining our focus on debt reduction.

In conclusion, our 2013 results benefited from the operational efficiencies we implemented across the enterprise that expanded margins. We again proved our ability to manage the business through challenging market conditions, giving us confidence that our focused strategy will generate even more profitable growth in 2014.

I will now turn the call over to Carl to discuss our detailed fourth-quarter financial results and to share our initial thoughts on guidance for 2014. Carl?

Thanks, Glen, and good morning, everyone. We reported net sales for the fourth quarter of just over $1 billion, which is a slight decrease of 2.1% from a year ago. This top-line performance resulted from a 10% increase in Foodservice and an 8% decrease in Cranes, given the already mentioned difficult comparable period in 2012.

GAAP net income for the fourth quarter was $20.9 million, or $0.15 per share, versus net income of $34.5 million, or $0.26 per share, last year. Both periods included special items. EPS, excluding special items, was $0.47 per diluted share in the fourth quarter of 2013, versus $0.27 per diluted share last year. This includes an adjustment to GAAP EPS in the quarter due primarily to the forgiveness of a loan to our recently divested Chinese truck crane joint venture.

GAAP earnings for per share for the year also benefited from a lower full-year effective tax rate of 16%, which was the result of favorable earnings country mix, a favorable tax audit outcome, and other settlements. EVA in the fourth quarter of 2013 increased by 43%, versus the fourth quarter of 2012, which was driven by improved results from both segments. Full-year EVA improved 37% in 2013.

During the fourth quarter, cash provided by continuing operations was $273 million, versus $236 million in the prior-year quarter, driven by cash from profitability and a reduction in working capital in both segments. During the quarter, we reduced our debt by $247 million, bringing our full-year debt reduction total to approximately $258 million. As those who have followed Manitowoc for some time know, our normal seasonal cash flow pattern is for the bulk of debt reduction to occur in the fourth quarter.

As we look ahead into 2014, we will remain focused on achieving our margin improvement and cash flow targets. And as Glen noted, we will direct resources to those areas that will deliver the highest returns on our investments.

Turning to our segment results, Foodservice sales in the fourth quarter of 2013 totaled $400 million, up 10% from a year ago. Fourth-quarter 2013 operating earnings in Foodservice were $69 million, a 38% year-over-year increase.

Operating margins of 17.2% were 350 basis points higher than the prior-year quarter, driven by favorable product sales mix and improved operating efficiencies across the segment. Foodservice margins also benefited from a reserve reduction of $1.8 million related to a previous acquisition.

Moving to the Crane segment, fourth-quarter sales totaled $705 million, a year-over-year decrease of 8%. Crane segment operating earnings in the fourth quarter were $55 million, versus $60 million last year. This resulted in a fourth-quarter Crane segment operating margin of 7.8%, down 10 basis points. This year-over-year decline was primarily impacted by the lower sales volume, which was partially offset by solid gains in procurement and operational efficiencies.

Crane backlog at quarter end was $574 million, a decrease from $756 million for the prior-year quarter. Fourth-quarter 2013 orders totaled $707 million, which represents a book-to-bill ratio of just over 1 time.

Overall, new orders during the quarter increased 30% year over year and 57% sequentially, reflecting better demand in crawler and tower cranes. We are pleased that we were able to complete the sale of our interest in TaiAn Dongyue earlier this month. Closing of the transaction this quarter will result in an approximate loss on sales of $10 million.

Before concluding my remarks, let me discuss our 2014 outlook. For the full year, we expect mid-single-digit revenue gains in Foodservice and modest revenue growth in Cranes. We expect operating margins in Foodservice will approach a high-teens level, while Cranes generate a high-single-digit operating margin. Capital expenditures and interest expense in 2014 will approximate $90 million and $100 million, respectively. Total leverage will decline to below 3 times debt to EBITDA, well below half of the peak level experienced in 2010.

Finally, we expect the full-year effective tax rate to be in the mid- to high-20% range, with a higher-than-average effective tax rate in the first quarter and a lower-than-average rate in the last three quarters.

Let me now turn the call over to our next speaker, Bob Hund, who will share his thoughts concerning our Foodservice segment. Bob?

Thank you, Carl, and good morning, everyone. We made great strides in Foodservice in 2013. During the year, we committed to making targeted investments to better establish practices and processes that would yield a more profitable business built for the long term.

In the fourth quarter, these investments began bearing fruit, demonstrated by our year-over-year operating earnings increase of 350 basis points. This positive performance to close out the year speaks volumes on our commitment to the successful execution of our manufacturing initiatives.

From a sales perspective, the positive performance in Foodservice was driven by successes in various product categories and select end markets. This included momentum with our Koolaire ice machines, which are built at our new Monterey facility; the successful rollout of our Multiplex Blend-in-Cup products in Europe; plus ongoing demand for our innovative oven and grill technologies.

Geographically, we experienced balanced growth across most regions, highlighted by increased demand in North America and EMEA. As has been the case in recent quarters, the greater Asia-Pacific region remains somewhat challenged, due to soft conditions in some countries. However, we remain committed to this region and its promising markets, as we anticipate major chain restaurant growth in the coming years.

In 2013, our investments in new product development yielded more than 40 new products and product variants. During the year, we also completed the acquisition of INDUCS that not only broadened our surface-cooking offerings, but introduced its innovative induction technology into other product lines.

Moving on, let me provide some color on 2014. 2014 will be a year of transition for Foodservice as we realign the organization to better underscore the three elements of our foodservice strategy: customer focus, solutions-based synergies, and leveraging economies of scale.

This realignment will allow us to achieve the following: first, we will continue to develop new products to ensure we deliver the incremental value our customers require. Our innovation strategy will remain a compelling aspect to the business, as we will continue to invest in our product categories and brands to provide significant opportunities to grow, along with our customers. As such, we will be launching new products spanning our ice, beverage, frying, refrigeration, ovens, hot-holding, and accelerated cooking categories throughout 2014.

Second, we will realize substantial lean improvements and product cost take-outs. As you know, we've been diligently investing in process improvements, such as our manufacturing and business consolidation strategies, to drive increased efficiency. In 2014, this strategy remains in place, with our focus on implementing world-class manufacturing standards.

Third, we will pursue growth initiatives in our after-market services and solutions for Foodservice, similar to the focus placed on Crane customers via Crane Care in our sister division, which will improve our customer loyalty and also help develop new revenue streams.

And, finally, we will strengthen our ties to customers and leverage our unique ability to create new menu items and generate incremental value sources for them. The standards of technology that our products are creating across the foodservice industry will be a key ingredient to our customer successes as we look ahead.

To conclude, we expect the ongoing implementation of our long-term initiatives will generate solid, profitable growth across the global foodservice business in 2014. Our focus on the customer, new technologies, and greater innovation around our brands -- in addition to our manufacturing initiatives -- will not only drive our performance, but will continue to position us for long-term success in the foodservice industry.

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

Thank you, Bob, and good morning, everyone. We were pleased with Crane performance in 2013, as our solid order intake in the fourth quarter and the potential for further margin improvement -- as we continue to emphasize our cost initiatives -- gives us confidence as we move into 2014.

As Glen highlighted earlier in today's call, we experienced a sustained level of activity in the Americas regions, as well as higher demand in some emerging and selected developed markets, including Western and Southern Europe. From a product-line perspective, crawler cranes and tower cranes experienced improved demand in the fourth quarter.

More specifically, tower cranes remained high in emerging markets and parts of the greater Asia-Pacific regions -- notably in India, where we had record tower product shipments and order intake, despite the soft economy. Our investment in India to produce towers locally, expand dividends, and supporting our strategy of local manufacturing in long-term, high-potential emerging markets.

This is also consistent with our potent tower crane factory presence in China, which not only marks its 20th anniversary this year, but has enabled Manitowoc to become the leading tower crane supplier throughout the Asia-Pacific regions. Equally important, our recent investment in restoring crane production in Brazil has created a solid foothold for Manitowoc products throughout the Latin America region.

Lastly, Crane Care continues to experience steady growth, with solid gains across all regions, and will remain a key differentiator of product support and profitability for Manitowoc as we progress through 2014.

Looking ahead to 2014, and building on the 10 new crane products introduced in 2013, innovation and new product development will remain a key component to the success of our Crane segment to meet customer requirements, to drive the efficiency of their job sites, and the profitability of their businesses.

Our focus on innovation and an enhanced competitive position will be on display at ConExpo in March, as we introduce 10 new products to the global construction market. We will be introducing new technology at this show that we believe will significantly change the way our customers use lifting equipment. And we are excited about its ability to improve our customers' job site efficiency, cost, and profitability.

In addition to our strategy around innovation and products, let me reiterate some of our key initiatives for the Crane business for 2014 that will not only strengthen the business, but also enhance our margin profile. First, our focus on customer satisfaction for reliability and product quality continues to resonate well with our customer base. The positive results are reflected in the continuous progress made by our customer satisfaction index, an indicator assisting customer satisfaction for every crane shipped around the globe, regardless of the production plant.

Second, we are focused on continuing to streamline our cost of manufacturing and deploying the Manitowoc operating system globally to enhance our operational efficiencies, which include accelerating our lean manufacturing initiatives, undertaking vertical integration opportunities, and making further progress on our purchasing and supply chain improvement [droning].

2013 demonstrated that we have internally established [those keys] and processes to boost quality, while at the same increasing manufacturing efficiency, which resulted in a 170-basis-point expansion of operating margins. The implementation of Project I, our new ERP system, when fully deployed in 2016, will enable us to make an immediate and lasting positive impact on our business. We will enjoy common processes across the globe, enabling our Company to drive more value by aligning execution with strategy, while also improving our agility in adapting to new market conditions.

In order to accelerate these ongoing strategies, we will be making key organization changes in 2014. Consistent with my previous comments, the new organization is aimed at better serving our cost-reduction initiatives, improving our global product and service coordination, and providing our customers with greater [in Tennessee] services and responsiveness.

As we enter 2014, we expect another year of margin expansion and modest growth in Cranes, driven by new product introductions, ongoing demand in key product lines supported by our long-term partnership with our first-class distribution networks, and continued progress in our operational and quality initiatives. We should get further confirmation of our 2014 expectations at the ConExpo trade show in March.

Overall, despite some general market uncertainties that remain across the globe, our same focus on the items that we control -- coupled with responsiveness in adapting to changing market conditions -- will enable us to deliver improved financial performance in 2014.

With that, I return the call to Glen for his closing comments. Glen?

Thanks, Eric. To conclude, we are pleased with our performance in 2013, despite the modest global growth environment and some market-specific headwinds. While the global business environment remains challenging, we enter 2014 with optimism around our ability to improve profitability, due to the steps we have taken within our control. Our culture of innovation, combined with the operational excellence initiatives and consistent enterprise-wide execution, will continue to be a cornerstone to our long-term success.

This concludes our prepared remarks for today. Marquita, we will now open -- begin our question-and-answer session.

Thank you.

(Operator Instructions)

Schon Williams, BB&T Capital Markets.

Congrats on the quarter.

Thanks.

I wanted to address the order patterns on crane. Certainly Q4 is a strong seasonal quarter for cranes, but this was quite robust.

I just want to get a sense of how confident do you feel that this may be the new level of orders going forward? Was there anything one-time-ish in the quarter?

Any pull-ahead possibly ahead of pricing increases? Or just something around depreciation as well? Any pull-ahead there that you may have gotten a sense from your dealers or your customers?

I'll start with that first, Schon, and then let Eric follow up. But I think when you look at the order pattern, you go back to where we were in the third quarter and some of the guidance that we had. While the orders are very good -- and we also needed some of the orders to be taken and shipped within the quarter. And you can see that in the backlog -- that it's okay, but it's not great.

And I think we're excited about where we're headed. And I think we're certainly pleased with what happened in the quarter.

But I think as you look in advance of ConExpo, I think it's one of those where there's a little bit of relief and caution that we can get into the first quarter and get to ConExpo. I think as we've had a lot of meetings and things with customers and our distribution base, you have that fourth-quarter order rate from the distribution. But at the -- in North America.

But at the same time, I think, as Eric said in his prepared remarks, it will confirm itself at ConExpo, which we're expecting to be a very good show. And again, I think when you look at the number of people that have signed up for ConExpo -- the attendance over 125,000 expected, and 2500 exhibitors -- I expect it to be a pretty good show. So Eric, I don't know if you want to add anything.

We haven't seen much from the bonus depreciation compared to what we've seen in previous years. I think the orders in Q3 were not very good. But Q4 is when the orders materialized.

Of course, it's a very good order intake. It's hard to say that we will keep continuing at these type of patterns. But again, ConExpo will be very critical.

We have seen in the past this kind of winter optimism, and then coming to summer, the lack of confidence. So this is why we've got to be very cautious in being too assertive that we will continue at that kind of order rate.

Okay, thanks. And then a follow-up for Carl. The new revolver, a new credit facility, certainly allows you to lower your interest expense. And it also is going to leave you with some excess cash here.

I just wanted to get some thoughts on why expand the debt facilities at this point going into 2014? What was the strategy there?

Well, I think the obvious one is what we've already announced: that we intend to call the bonds that are the highest coupon-level of debt that we have, and replace it with obviously a much more attractive interest rate with the bank deal.

So in terms of the sizing of the facility, the revolving component of it is five years. And there's certainly an expectation over that period of time the Company is going to continue to grow. And we thought it would make sense at a good time in the market to have an appropriate sized facility, given the expectation that we're going to continue on the growth path that we have been.

But in terms of capital allocation, I think it's pretty consistent in the near-term as to where we've been. Investing in the businesses for the opportunities that we see near-term, but also keeping a pretty strong focus on continuing debt reduction. Because there's value we can derive from continuing to get the leverage down and reducing our interest expense.

Andrew Kaplowitz, Barclays.

Nice quarter.

Thank you.

Can you guys talk a little more about what happened in the Crane segment in the quarter? Your sequential margin was down a bit on higher sales.

We know you were going to sell a large number of cranes out of inventory. So is that all this was, that you had some under-absorption in the quarter? Or did something else happen?

And then going forward, you talk about high-single digit margin percentage in cranes again. Eric talked about expecting better margins. So should we expect normal or maybe a little bit better than normal incrementals, given the lack of the Chinese JV losses in 2014?

Obviously the evaluation of that last part of your question on the JV losses there out of the 2012 numbers, now is a discontinued operation. But I think the other question that you have relative to the fourth quarter performance is right on point.

The absorption is clearly the issue. And I think our ability to drive only a 10% reduction in the margin, given the top line decline, and the fact that a lot of the conversion of the sales levels was essentially moving the inventory that existed. And not getting the absorption benefits to anywhere near the same extent that we did last year is really a testament to the procurement and the manufacturing efficiencies that we had in the quarter.

Carl, is the inventory where you want it now, so that 1Q shouldn't have that effect? Or is it not where you want to yet?

No, I think there's continuing opportunity for us to improve the turn characteristics of our working capital. Obviously as you look at it and the success that we had from the end of September through the end of the year, some nice progress.

And I think as you think about an expectation for -- certainly not robust growth -- but maybe the opportunity if we do see sustained activities in both the segments. That and coupled with the things that we're doing in the manufacturing side in both segments, I think we can improve the turns and therefore the working capital efficiency.

Andy, I think it goes to still some of the lumpiness that you have in the crane industry. You look at where we were at the end of -- and this is enterprise-wide -- at the end of the third quarter, with our debt reduction, and then end the way we did. Certainly we don't want to have these large quarters like that.

Again, it's nice. But it would be better if we sustain that throughout the year and get a little more traction on a more consistent basis than to have the momentous fourth quarter. And I'm certainly not taking anything away from the fourth quarter, because our people did a bang-up job to do everything they could for the year.

But I think to your point, there are opportunities on the manufacturing side, both in cranes and foodservice, on the working capital management. And we expect that to happen in 2014.

Just one other quick comment, Andy. Because on the 2014 expectations, as you know, the seasonal aspect of the business, both foodservice and cranes, is a little slower in the first quarter, and stronger activity in the second and third. So we would expect to see much stronger incrementals in the second and third quarter than we'd expect to see in the first and the fourth.

Yes, and Andy -- Eric. The deployment of the Manitowoc operating system that we have already started two or three years ago. But the new organization that I mentioned earlier is going to accelerate the deployment of the Manitowoc operating system.

And in that respect, I think that we should see improvement in our plant turns, with a lot of initiatives like PSEP with the suppliers of other things. So we should expect definitely improvement in our turns.

Okay. And then just a quick one for Bob. The growth rate picked up pretty dramatically in the fourth quarter. We know you made an acquisition, a smaller one in 3Q. But we also know that you are introducing a bunch of new products.

So is that what this was in 4Q? Was it just a combination of all of your initiatives plus new products? Or did the market actually accelerate on you?

On the top line for sales, Andy, it was the new products -- product introductions, rollouts. The big hitter areas were in some of our hot side on the ovens and service cooking. And then the blended ice category as well, too, where we've just had a lot of demand and rollouts in those areas.

And Andy, I would say on the margin side, if you recall, early in the year last year we kept saying that the fourth quarter, you're going to see the benefits of the things that I noted in my comments, from Tijuana and Cleveland and Monterey. And that happened.

They came to fruition as we expected. So yes, from the top line to what Bob said, but the bottom line is certainly our expectation, and that's what we had forecasted.

Jamie Cook, Credit Suisse.

Just a couple questions. One, last quarter, some of your competitors talked about excess inventory in the channel. Can you talk about how you feel about inventory in the channel?

And then, obviously the order numbers were good in the quarter. Can you talk about how we should think about profitability of backlog or the pricing environment, relative to three to six months ago?

And my other question goes to you, Carl. I feel like in 2013 you guys were able to pull a number of different levers to grow your EPS in the absence of phenomenal top line growth, through taking out the debt, the China JV, a number of different options.

Can you talk about what you think is left in 2014? If for some reason the crane business is less -- your forecast is off, or it's worse than we would expect? Thanks.

Well, Jamie, I'll start with a little bit on the pricing in the channel, and if Eric has anything to add. But I think the pricing is -- it's unchanged. It's still competitive. And you talk to any customer and every deal or distributor, and every deal is still competitive.

So I don't think the pricing and the backlog is really different than what the pricing that you've seen over the past two quarters or three quarters. So we're pretty comfortable --

How about the mix of the product that's in backlog today, relative to where you were sitting last year?

That's the comment that Eric and I think Carl made. When you see the mix has gone to the orders, more crawlers than towers. And when you start throwing the towers into the backlog, it gets to add a little better margin to the mix. And the same with the crawler.

So you could assume there's probably a better margin in the backlog than what we've had in the past with the mobiles. You get to what the inventories in the channel -- we watched that, and I would argue, probably better than any of our competitors. Just because of our distribution network.

And we have pretty good access to that. And I know our people are watching it on a weekly basis. And so we see what the inventories are out there. And I don't know that I would call it -- I wouldn't call it overweight.

It's probably a little bit above average. But I certainly wouldn't call a lot of it overweight. So I'll let Eric make a comment on that. And with respect to -- and I know your comment was directed at Carl -- with the initiatives, and how do we continue to improve the business. I mean, those items are in our margin forecast.

But there's always things that we're looking at, and opportunities that -- how do we accelerate things? We have our current year, 12-month activities that we have out there. But the question we're constantly asking Eric, Carl or Bob -- how do we accelerate some of these activities and how do we pull them forward?

So those are some of the opportunities that we get. And we're constantly looking at different things. Whether there's sourcing initiatives, whether the reorganization things that Eric and Bob have gone through, new product introductions -- it can be the whole thing.

So there's a lot of things that go into that. Eric, I think you want to make a comment on inventory channel?

Yes, Jamie, on the inventory side, we did very good in terms of what we see for the crawlers or the GMK. We are in a very good shape.

Where we could be living in excess in inventory right now, it's maybe the product -- the rough terrain. In North America, it's probably a bit high. This is why we're going to watch very carefully the retail activity that's going to take place in first quarter.

And also of course, in terms of pricing, I think it's been okay. But if you look at the Middle East or Asia in terms of its rough terrain product lines, we face the competition of the Japanese. And obviously they have a tailwind with the currency -- the yen is weak.

And that's where we see a little bit of pricing and aggressiveness. But overall, not a big change, to confirm what Glen said.

All right, thank you. I'll get back in queue.

Mig Dobre, Robert W. Baird.

Glen, I thought I heard this in your prepared remarks. Correct me if I'm wrong, but did you mention something like $80 million worth of cost savings? And would that be incremental in 2014 versus 2013? Did I hear that correct?

You did, and that was the number. Again, that's -- I would say the one that's probably offset to that $80 million would be any inflation you have maybe on the procurement side of the business, of material inflation.

But other than that, everything else should be incremental to 2013. And those are the initiatives. Those are the things we talked about.

It's the reliability, it's the organizational effectiveness, it's the lean savings, it's everything that we see in that -- mostly the gross margin line. But some in the SG&A line. So we put it out there because it's part of the guidance, and we're held accountable to it.

Oh, sure. Can split up between the two segments somehow?

We can. That's doesn't mean we will. (laughter)

But I think you can imply that, with the guidance that Carl gave, I think it's really -- I look at it from an enterprise standpoint. If it's a little bit lower on cranes, you will make it up in the foodservice. If it's a little bit lower in foodservice, we will make it up in cranes.

So that's really what we're looking at to try to give it. But I think the guidance that you have on the margins for foodservice and cranes are adequate.

Well, the last one for me here, and it's going to be on crane margin. Because if I'm looking at your cost savings -- I'm looking at your comments on mix. And frankly, everything else that you seem to be doing in that business -- you had 8.7% margin in 2013.

I'm trying to figure out what we all should be thinking for 2014. Because to me it looks like your guidance is a little bit conservative. Is that the takeaway here? For high-single digit margin?

My comment is, we certainly would prefer to under-promise and over-deliver. But we certainly look at the specific initiatives in place. And I think that one of the key variables is, what does the top line do?

I think we're taking an appropriately conservative view of that, given the fact that we're bringing a much lower backlog into this year than we did last year. And by virtue of that, we'd expect the start of the year, from a shipment standpoint, to be a slow start, if you will, to what might be the ultimate market opportunity.

I think the other thing, Mig, is -- and we talk about being in a challenging environment. I think one of the things that gives us -- I don't know that it's a big concern, but it's the assumptions that we've made on what are the material cost increases.

Obviously both foodservice and cranes, on the material side, deal us a big one. And that's: the steel companies go out and they announce price increases. But it's a matter of what sticks. And that's been certainly a positive for us in 2013.

Hopefully, we have some upside there. Maybe we're a little conservative in some of those forecasts. But I think you have to start the year that way, because of the uneasiness of these entire markets.

Steve Volkmann, Jefferies.

You mentioned ConExpo a couple times. And I'm hoping to just get a sense of how you think about that. And I know you've been out there for many years.

Is this a situation where orders will essentially dry up between now and ConExpo, and then you get a lot of them in around ConExpo, and so therefore the first quarter should be fairly weak? Or is ConExpo not so much an order-taking show from your experience? How should we think about that playing into the cadence of the year?

Well, I think, first off, it's all within the first quarter. So any orders we get -- whether it's none between January and February and then the first week in March -- it would all be in that same timeframe.

But Steve, the funny thing about the trade shows -- I'll let Eric talk about more what his expectation. But the funny thing about trade shows is, depending on what region you're in, the customers want to get a little bit of credit for their business with whoever it is.

There's an opportunity to thank the customers with a glass of champagne and take some pictures. And you get a lot of the senior management there.

And so the orders may be in hand and the sales guy has it in hand already. But they're going to bring it to ConExpo and get some recognition for that. And I think that's okay.

But I think when we look at some of the new product we have coming out, not everybody has seen some of that, and they will for the first time. So then it's a matter of how the acceptance is of that. But with respect to the order rates, I'll let Eric (inaudible).

Well, Steve, if you look back in the past, in 2005 ConExpo we had a 35% increase in our order intake at the time. But that was really when the market turned. And we had a really uptick, and it was the start really of a strong recovery.

If you go back to ConExpo 2008, it was slightly up single-digit. But then everything was kind of people trying to buy capacity. So I don't think that this is a good reference.

So finally, if you look back at the last ConExpo in 2011, it was flat, versus -- I'm comparing versus the previous quarter. So it's really hard to say and get to some conclusions.

What we know: we have a strong order intake in Q4, no doubt. We are extremely excited because we're going to bring some new products that are going to be -- some of them are going to be game-changers.

So yes, we are very excited of what we're going to be seeing at ConExpo. Now, there are a lot of other things that should play out before we can be very certain that you're going to see a big boom in orders at ConExpo.

But Steve, I would caution -- and I'll go back to the guidance we gave with Crane. Keep in mind, some of these products that you're going to see at ConExpo won't come into play until late fourth quarter, and then the majority into 2015.

So don't front-end load that and think it's all going to happen this year. I want to be careful that we don't get over our skis on that one.

Okay, great. That's good color. I appreciate it and I'm glad to hear you'll be offering champagne out there. (laughter) The follow-up -- if I can add a quick follow-up, just on the food side.

What inning of the game are we in, in terms of the cost saves that you can control on the food side? If you just assume that we're in some sort of low- to mid-single digit growth rate for the next few years, how far can this thing go?

I could take that. I think that if you look at the innings, I would say we're probably in the third or fourth. We have had successes with the manufacturing efficiencies we've had so far. I think we can go farther with that.

And some of those efficiencies -- some of the new factories, we've left room for growth. So we can achieve more. I think there is still room for some more efficiency gains, lean improvements, consolidations, left.

We do have plans for those in the short-term and the long-term. And we'll continue to execute. So I'd say there's still room to grow.

Ted Grace, Susquehanna.

I had a question for Bob. Bob, we can see the top line guidance for Foodservices. Could you just walk through on your expectations in the geographic markets, either for your own business or the entire industry, with a focus on North America? Where you see the strength, whether it's the larger chains, the smaller chains, how we should think about the institutional client base?

I think, Ted, if you look at where we're going -- and we follow a lot of the trade associations, what they're predicting -- growth in that area of around 4%, if you look at NRA and Mossy and some of those associations, is what they're predicting in the market. Where that will happen -- the largest growth area that we're seeing and that we hear about is in the fast casual segment. Also the general market's doing well.

In terms of chains, the biggest area of growth is in menu expansion. There are still chain growth areas.

If you look in Asia, in particular, they're still growing the chains. They're looking at more smaller footprints than they had before, to cut on costs. But they are growing in that area.

In the other areas of the world, if you look at -- Euromonitor came out with their report saying they're predicting about 3% global growth. But in the European or EMEA markets, Russia, Turkey, Middle East are going to be more of the hot spots predicted in the year coming up.

But that doesn't mean we're not growing in the rest of the markets. In the rest of Europe, because of some of our new innovative products -- if you look at what we're doing with our European ovens, with blended iced, even in surface cooking. We're making some gains in those markets as well, too. So we have a little bit of share growth in that area.

Asia, in particular, still is -- I wouldn't say flat. But it's still not as growing as fast as we'd like. We are making investments to be able to follow change in that area. Because they're -- we're working with them on growth expansion.

But Americas is still -- like I said, is still quite well. It looks healthy for this year. EMEA as well.

Asia's down a bit. But there's specific markets that we're following in that in area. And overall, it's menu expansion and growth in particular segments, or in particular machine categories.

Got it. And then on the new product introduction side. Can you walk through the highlights for 2014? And just in terms of absolute numbers, how many new products should we look for in 2014 versus were introduced in 2013?

Yes, in terms of new products, we have a few more in 2014 versus 2013. We've got some interesting things that we'll launch, especially in the combi ovens. That's going to be one of our highlighted products for the year. Glen had mentioned that earlier in his remarks. A whole new platform that's coming out in that area.

We also have some new products specifically that will be interesting for chains and surface cooking and growth. That's an area.

We'll continue to expand in the blended ice area. Hot holding is another area, too, that we'll continue to work in. We've got some new products in there.

We've got some new technologies that we're introducing on fryers. Not a whole new platform, but new technologies in that area that will help.

And then also our whole new product line with the Koolaire ice machine line that we make down in Monterey, is seeing some good signs for growth. On the refrigeration side, we're coming out with some products that we think will have a greater, broader appetite on the world market. More so than being a North American player, we want to expand geographically on refrigeration.

Got it. And then the last thing, and it's probably a question for Bob, Carl, and Glen as well. As you get the balance sheet down to sub 3 times debt to EBITDA, you are in a position to maybe go back on the offensive from an M&A perspective, and augment organic growth.

Can you just talk about how you're thinking about that? How we should think about that? And what the landscape looks like, particularly on the foodservice side?

Yes, Ted, I made a comment I think maybe at the third quarter call. And we don't want to be offensive, but we want to go on the offense.

But I think that's -- to the comments that Jamie made, what else do you do, what do you look at to improve the businesses? And that's what we talk about on a regular basis.

As I said in my comments, though, as you look into 2014, we have some initiatives. Whether they're manufacturing initiatives, whether they're the lean initiatives, the organizational changes, the consolidation. There's some things that we want to do to put money in the business. And then it's a matter of paying down our debt.

And you're exactly right. And then strategically, we have to look at how we're going to allocate the excess cash as we get below. But I think -- and you say below 3 times. You're talking end-of-year and as we get into 2015.

And so obviously, we certainly have our strategic initiatives that look out to 2016 and 2017. But I think you're right. There's other ways to deploy our capital.

And it's all the things we've ever done before. I mean, shoot, we've done stock buybacks, we've done stock splits.

We've done all sorts of things, and we'll continue to look at every one of those. But right now, I think in 2013 -- I'm sorry, 2014, it's really funding the initiatives we have and getting down the debt, and improving the denominator of the earnings.

Nicole DeBlase, Morgan Stanley.

Nice quarter.

Thanks, Nicole.

I'm just curious what you guys are hearing from your crane rental customers. Have you seen a pick-up in demand from them during the fourth quarter?

And do you think that we're on the precipice of an investment cycle there? And then also, just anything they've said on utilization?

Eric and I looking at each other, trying to figure out who should answer. I'll start.

Eric and I get the opportunity to tag-team the customer sometimes. And I still think, Nicole, there's a healthy cautious optimism. I think what we continue to find is, when people are pretty sure that they have worked for the cranes, they will embark on the purchases.

But I think if you go across North America on the distribution channel, I think the majority of them feel pretty good about 2014. I think there's some regional discrepancies. But I think if you go to anybody that's in the Gulf Coast, and all the things that are happening there, you get into Canada, some of the things in the Southeast, you're seeing the tower cranes pick up a bit.

I think there's a healthy optimism that 2014 certainly brings at the start of it. It feels better than maybe it did seven or eight months ago, that's for sure.

And when it comes to the utilization, I've got to tell you, I was with some people last week. And I know someone was looking for a crawler crane, and they said -- and it's here locally, in Wisconsin. And they were very frustrated because they want to put it on a pretty good project. And they said -- we need to get that, quick. Because some of the crawler utilizations for a lot of these people are very high.

I think to Eric's point earlier, the Rots are probably at a normal utilization. But some of the other higher capacity cranes are pretty heavily utilized. Eric?

The RTs, Nicole -- the utilization is good. But the return on investment is a little bit shy of what it should be.

Now, in terms of utilization -- yes, the big crawler's utilization is fairly high, no doubt. And it's good on the GMKs. And especially on the large capacity cranes, it's pretty high.

The other thing [to me] you ask, now we see the tower crane's utilization being extremely high. And several companies that have not invested in several years now are thinking to invest in 2014. So utilization is good.

We would like to see the rental rates a bit higher so that the investments in the ROI for our customer would be higher. But yes, there is optimism of the [ashee].

Okay, got it. Sounds pretty good. And then, after everything that's happened with the China JV over the past few months, I'm just curious what your longer-term plans are in China within the crane business.

Well, I think our comments on China have always been -- we want to play in that market. But we don't necessarily want to lead in that market. And I think that's a -- for us to think we're going to lead in that market against some of our competitors, the Chinese competitors, that doesn't make sense.

But I think what we did is, we looked and we said -- okay, given how the Chinese market has responded, what -- really -- product lines to we want to have opportunities to play in those markets? And that joint venture -- when you look at what our investments were in that business versus what our long-term opportunity to get things back out of that market, it held a lot of promise as long as we had a good partner. But when that fell through with Shantui and their troubles that they've had, it just didn't make sense for us to try to continue to do it alone without a solid partner.

So we still like what we have in crawlers. We'll still continue to do it in the GMKs. We'll still continue to do it in the towers.

Don't forget, we have a very good tower crane factory in Tai'an, Shandong, which -- it's a world-class factory for that. And we can compete very well there. So whether it's foodservice or cranes, China's still a market that we will participate in.

Rob Wertheimer, Vertical Research Partners.

I had a quick combined question on the foodservice. 4Q is often a seasonally lighter margin quarter, and obviously the margins were very strong here.

Is there anything with the change in production that changes in the seasonality of that business? I'll just stop there.

I think from a margin performance standpoint, Rob, it was really what Glen talked about a little bit earlier. Essentially, bearing the fruit of the manufacturing changes that we made that were creating costs for us in the first three quarters -- that pretty much diminished in the fourth quarter. And then we got the benefit of really concluding a lot of those activities. That was the key driver.

I also mentioned in my prepared remarks a little bit of a windfall from a -- essentially, an earn-out that we had that we did not have to pay, that we had reserved on an acquisition we did several years ago. That enhanced the foodservice margin as well.

Rob, I would also say, what goes it to show is, many of the things that we've done -- and for instance, we talked about the operational excellence initiatives. When we do get these rollouts, if you take the normal seasonal pattern, I think they stay the same.

What we don't control sometimes -- and I think this is going to be where you're going to see these spikes -- is exactly what we have with a rollout. When you get that opportunity to have a short-term rollout, we'd like it probably a little bit longer term. But the customer needs it when the customer needs it.

That's the benefit you get in those rollouts. So I think that's the change that we have, from a seasonal pattern, than what we've had before when it was legacy Manitowoc back in 2007 or 2008.

Maybe I'll just reiterate or underscore what Glen and Carl were saying. If you look at the mix of our margin improvement in the fourth quarter, a little less than half was due to the efficiencies that we finally came home, we got in. The other part had to do with volume and mix.

But if you look at the areas -- the particular product categories where we really scored big, those are areas where we introduced innovative new products that gave us an edge. It could have given us an edge on price, but also gave us an edge on volume.

The surface cooking area, the oven category, the beverage category, the custom fab and refrigeration at Delfield -- those were the areas where we got some really big gains on margin. And a lot of it had to do with introducing innovative new products. It could have been in a rollout, or it could have been not.

So I wouldn't say it's seasonality as much as it's a combination of the recipe working. The manufacturing efficiencies coming in, and innovation working, too, to give us an edge.

Great, thank you. And then one just quick follow-up on the tax rate guidance. Is there anything -- I'm curious what you think your structural tax rate is right now. It's obviously a reasonably low rate. You've had a varied tax rate over the years.

I'm just curious what you think it is really settling in at. And whether the Mexico facility changed it, or anything else changed it. Thanks.

It can be very volatile, Rob, from the country's income. And that's really the reason for the broad range that we've given for 2014, is the variability that can occur on that front.

But I think there isn't anything else that's really unusual from what we were able to do this year. We obviously had discrete items this year that you wouldn't expect to recur. So as we look at 2014, it's at a pretty normalized level, based upon the guidance that we've given.

We were fortunate because we -- we were unfortunate because we did have some inefficiencies, from a tax standpoint, from ineffective losses that we were able to get a double benefit. We were able to get profitability in some of those jurisdictions that gives both the operational and the tax benefit in 2013.

And at this time, I would like to turn the call back over to Mr. Khail for any additional or closing remarks.

Before we conclude today's call, I'd 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 May. Have a good day.

That does conclude today's conference. We appreciate your participation. You may now disconnect.