Manitowoc Company Inc (MTW) 2014 Q1 法說會逐字稿

Good day, everyone, and welcome to today's Manitowoc Company Incorporated first-quarter 2014 earnings conference call. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. Khail. Please go ahead, sir.

Good morning, everyone, and thank you for joining Manitowoc's first-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 Eric Etchart, President of Manitowoc Cranes. Glen will open today's call by providing some introductory remarks about our quarterly results and business outlook. Following that, Eric will comment on our Crane segment results for the first quarter as well as sharing his longer term goals and strategies. Then Carl will discuss our financial results for the first quarter from an enterprise and segment perspective.

Following these prepared remarks, we will with joined by Bob Hund, President of Manitowoc Foodservice, for our 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 For anyone who is not able to listen to today's entire call, an archived version of this call will be available later this morning.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 May 2, 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 the speakers' remarks and during our 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 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. Our first-quarter results played out essentially in line with our expectations, as we are able to leverage our competitive advantages and benefit from the substantial investments we have made across the Manitowoc enterprise. In addition, our performance demonstrates the underlying strength of our core business and our ability to adapt to changing conditions, reiterating confidence in our full-year 2014 outlook.

Let me briefly touch on each segment in a little more detail. Foodservice reported sales growth of 9% for the first quarter. This year-over-year increase was driven by continuing progress in North America, substantial growth in EMEA, as well as increasing opportunities in Asia. Highlighting the positive performance was continued traction with our new grill and oven technologies, the ongoing success with our Koolaire ice machines, and our successful blended beverage equipment rollout in EMEA. In addition, KitchenCare, our aftermarket service and support solutions for foodservice, was officially launched and promises to be a strong contributor to this segment's performance.

Overall, our growth is a testament to our diverse product offerings across the globe as well as our ability to leverage existing customer relationships, affording us opportunities to continue demonstrating long-term growth. During the quarter, we also generated improved margins driven largely by our manufacturing initiatives discussed last year, which have increased production efficiency and produced a streamlined cost structure in the Foodservice segment. We have also taken steps aimed at enhancing our customer relationships. As a result, we are supporting their needs with a holistic portfolio of products and services with enhanced speed and efficiency.

Our support includes developing new products that deliver incremental value to our customers, maintaining our focus on lean improvements and product cost take-outs, strengthening ties with our customers, as well as pursuing opportunities within KitchenCare. Overall, we believe our focus on customer intimacy, synergistic solutions, and leveraging our global scale will further drive margin expansion as the year progresses.

Turning to our Crane segment. First quarter sales declined 14% due to the lower level of backlog at the start of the year, coupled with customer related project delays. Correspondingly, our Crane segment experienced a year-over-year margin decline as a result of the lower sales volume. That said, we experienced good levels of activity in the Americas region, coupled with ongoing tower crane growth in the Middle East.

Overall, we remain encouraged by the opportunities for our Crane segment and are confident in our full-year outlook. This is supported by our tremendous showing at ConExpo, which once again demonstrated the importance of innovation to our customers and to the construction industry. Eric will provide more detail on the Crane segment momentarily.

Looking forward, we are positioning the enterprise for long-term growth. First, we remain at the forefront of product innovation in Cranes and Foodservice. For example, in Foodservice, we'll be launching new products spanning all of our hot and cold categories throughout 2014, some of which we will showcase at the upcoming National Restaurant Association Show, validating the strength and competitive advantages within our product lines.

In Cranes, the recent introduction of our patented variable position counterweight, or VPC crawler crane technology, at ConExpo was a resounding success, which will positively affect 2015 and beyond. Second, we continue to invest in our global manufacturing initiatives with the ongoing enhancement and right-sizing of 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.

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, which should generate over $80 million of gross savings for the full year. And lastly, we remain focused on continuing to improve our capital structure.

To conclude, we are confident in our capabilities to enhance our market leadership positions, and we remain on track to deliver on our 2014 strategic and operational initiatives. We are committed to leveraging our core competencies and strengths to drive our performance, including new product introductions, industry-leading aftermarket services and solutions, and operational excellence initiatives in the face of persistent macroeconomic pressures. With that, I'll turn the call to Eric for a discussion on our Crane segment. Eric?

Thank you, Glen, and good morning everyone. Our Crane segment performed as expected during the first quarter, in light of soft overall market conditions and choppy demand in emerging markets. We remain on track with our strategies, the investments that we've made in the past few years, as well as our short-term and long-term objectives. As Glen mentioned earlier in the call, we experienced a good level of activity in the Americas despite customer related project delays triggered by the unusually cold winter weather.

Overall, we believe trends in the region are positive and as we see increased customer optimism we anticipate a greater level of activity as we move throughout the year and into 2015. We have also seen greater demand from Asia and the Middle East and to some extent Europe, driven by the activity in Germany and in the UK. The European demand improvement is an indication that the worst is (inaudible) us in this region.

In Brazil, activity remains slow. However, our recent investment in rough terrain crane production helped us maintain and grow our market share leadership in the region and positions us well to take advantage when the market improves. Our Passo Fundo factory also enhances our ability to serve other Latin American countries.

The highlight for the first quarter was our recent participation at ConExpo. Our interaction and engagement with customers during the show centered on several of our Company-wide strategic initiatives, including the new standards of innovation and technology that our products are creating in the market. In fact, we introduced 10 new products that will greatly improve customers' job site efficiency, operating cost, and profitability.

A key contributor during the event was the introduction of our patented VPC crawler crane technology. Strong orders for the VPC crawlers coupled with orders for various Potain tower cranes and Grove mobile cranes, drove order intake to its highest level since before the recession, further supporting our belief that the market is beginning to rebound. Last July, we communicated that we believed crawler cranes had reached an inflection point in North America. Our ability to launch these new VPC products as the market continues to improve should provide significant benefits for Manitowoc and our customers as we look ahead.

Moving on from a product line perspective, tower cranes activity continues to recover, driven by a greater number of projects in the Middle East, sustained demand in Asia, and improving conditions in North America and emerging markets, most notably in India, despite a weak economy and upcoming elections. We have secured some substantial orders in the Middle East, which supports our belief that tower crane activity in these regions is likely to see solid demand. We are also seeing improved global demand for all-terrain cranes, while rough terrain cranes experienced ongoing market challenges in the first quarter.

We also experienced continuing success with Manitowoc Crane Care, given our strategic investment in this unique aftermarket product support solution for nearly a decade. Overall, Crane Care remains the key differentiator of product support across the construction industry and a meaningful source of profitability for our Crane business. To update you on strategic initiatives, our continued focus on lean manufacturing and achieving initiatives drove solid operational efficiency.

We have also completed our internal reorganization, which included several cost reduction initiatives, improvements in our global product coordination, and enhancements to our world class customer service. While this process has taken a considerable amount of time and effort, I am pleased with our team's progress as we are better positioned for sustainable long-term success. We also completed another go-live in our project one ERP global deployment with our Italian factory now online.

Looking forward to the balance of 2014, we remain confident in our Crane business and our full-year expectations, given the uneven demand across product lines and regions, we will remain committed to controlling what we can and enhancing our profitability in the segment. I will now turn the call over to Carl to discuss our detailed first quarter financial results. Carl?

Thanks, Eric, and good morning, everyone. We reported net sales for the first quarter of $850 million, which is a decrease of 5% from a year ago. This top line performance resulted from a 9% increase in Foodservice, and a 14% decrease in crane sales. The GAAP net loss for the first quarter was $8.8 million or $0.06 per diluted share, versus earnings of $10.4 million or $0.08 per diluted share in the first quarter of 2013. Excluding special items, the adjusted earnings from continuing operations was $23.7 million, or $0.17 per diluted share in the first quarter of 2014, versus adjusted earnings of $14.6 million or $0.11 per diluted share in the first quarter of 2013.

During the first quarter, cash used for continuing operations was $265 million, versus $103 million in the prior year quarter, driven by working capital requirements to support both segments. For the remainder of 2014, we will emphasize achieving our cash flow targets as we continue to prioritize debt repayment while also funding our growth in process improvement initiatives. We expect the pace of our debt reduction to be similar to the seasonal pattern in prior years, meaning that the bulk of our debt reduction will occur in the fourth quarter.

Turning to our segment results. Foodservice sales in the first quarter of 2014 totaled $383 million, up 9% from a year ago. First quarter 2014 operating earnings in Foodservice were $57.9 million. Operating margins of 15.1% were 110 basis points higher than the prior year quarter. The first quarter Foodservice margin comparison was driven primarily by new products and the benefits realized from ongoing investments in key manufacturing strategies.

Moving to the Crane segment. First quarter sales totaled $467 million, a year-over-year decrease of 14%. Overall Crane segment operating earnings in the first quarter were $22.6 million, versus $34.9 million last year. This resulted in a first quarter Crane segment operating margin of 4.8%, down 160 basis points. This year-over-year decline was a function of lower sales volumes, but was partially offset by ongoing operational efficiency improvements. Crane backlog at quarter end was $842 million, an increase of $267 million from the prior-year quarter.

For the first quarter, new orders totaled $733 million, which represent a book-to-bill ratio of 1.6 times. Overall, new orders during the quarter increased 29% year over year, reflecting the positive showing at the recent ConExpo trade show. Approximately 26% of the backlog will benefit 2015 and later with less than 10% extending beyond 2015.

To conclude, let me reiterate our full-year 2014 outlook. As noted in yesterday's press release, we are affirming our guidance for 2014. 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 generates a high single digit operating margin.

Capital expenditures and interest expense in 2014 will approximate $90 million, and $100 million respectively. We anticipate total leverage will decline to below 3 times debt to EBITDA, which is well below half of the peak leverage experienced in 2010. Finally, we expect the full-year effective tax rate to be in the mid- to high-20% range. With that, I'll return the call to Glen for his closing comments.

Thanks, Carl. We continue to have great confidence in our business and the strategies we are implementing across the entire Manitowoc enterprise. Overall, the growth we experienced in our Foodservice segment during the quarter, coupled with our very successful showing at ConExpo in March, underscores the strength of our offerings as well as the level of innovation we bring to our customers.

While we expect global economic growth to continue to be somewhat uncertain and challenged, our proven track record to manage the Company in any market environment will further position Manitowoc for greater value creation and competitive success as we move ahead. This concludes our prepared remarks for today. April, we will now begin our question-and-answer session.

(Operator Instructions)

We'll first hear from Charley Brady of BMO Capital Markets.

Thanks. Good morning, guys. To the Crane business, you called out the amount of backlog that's going to be in 2015 and beyond, which is not something you normally do, and I guess I'm just trying to understand is that a function of customers coming into CONEXPO and ordering and saying give it to me on this date, or is it a function of the mix has shifted so the lead times on building these cranes, more crawlers, more towers, is stretching that lead time out a little bit?

Charley, obviously a good question. The real -- I would say desire to put the backlog out there past 2015 or the 12-month period is we thought it would be a disservice if we didn't do it that way because of the strength of the orders. I would say most of it, almost all of it is the crawlers. And given the fact that this is arguably the best new product introduction I think we've had since I've been here, since 1991, I think it's two things.

One, people love the technology. They understand what it's going to do to their business. And two, when you look at the distribution of the customers around the world, you know there are capacity constraints as to how much you can do. And the reason we pointed out 2015 is the product has to come back to Manitowoc. We're going to finish testing it and that kind of thing.

So really, the full production of this doesn't start until maybe late fourth quarter, but more -- I would say probably more realistically the first quarter of 2015. But I think it shows the strength of the confidence in this product by our customers and some of them did say that, if you have -- we've had where one customer had upwards of double-digit numbers of these. They're not going to take them all in 2015. They want them spread over four, five quarters.

That's why we put it out there to say, hey, it's relevant and it shows you the confidence that people have in that crawler backlog, which is always kind of the late comer to the party on expansion of the industry. So that's why we did it that way. And it's mainly in the VPC technology cranes.

Thanks. That's helpful. Just as a follow-up, can you talk about what's driving the strength in towers in the Middle East? That's an area of the world that last peek had considerable crane activity going on. What's driving that currently?

Go ahead, Eric.

Charley, the Middle East in fact is really rebounding very, very strong for crawlers. There are different things. Saudi Arabia is playing a big role in that region. Last year, we didn't see a lot of projects but this year we've seen started probably the end of last year, we've seen a lot of mega projects where it's the expansion of Medina or the unit of city that's coming, the Metro in Riyadh. A lot of infrastructure projects that are taking place in Saudi Arabia.

But it's not only Saudi Arabia, it's the UAE. Obviously, the 2020 World Expo is driving confidence and Abu Dhabi, they have this master plan for 2013. You have a kind of very changing situation in the Middle East. If you add up Qatar finally, we have seen the business in Qatar moving up, finally I would say in Q4 2013 but now we see a lot of projects coming up out of Qatar. And you add up a two-way in Oman and Iraq.

That's really give us the confidence with the amount of projects that really it's rebounding. If you add to this that we have our presence in [Jabrin not only] with our own team but historically we have a very strong distributor in that region that's has been performing very, very well. And then we can offer cranes from Europe but also from China from our wholly owned factory in Zhangjiagang. If you put that together, that puts the Manitowoc franchise in a very good position in this rebounding situation with the towers.

Thank you.

And next we'll hear from Seth Weber of RBC Capital Markets.

Good morning, everybody. Just wanted to go back again to the reclassification of the orders in the backlog. I guess my first question is, is this a unique situation? You've had obviously product launches in the past.

Have you done this type of thing in the past where you've had -- taken orders for something but the orders have been for more than a year out? Then I guess my kind of related question is, are you taking deposits or how are you vetting these orders to make sure that they're good and that they're sticky?

Seth, I'll take this and I'll have Carl add some color to it if there's anything. But with respect to the past, if you go to before 2009 when even though we had deposits and a lot of the backlog eroded when the markets crashed in 2009 and 2010, since then even with new product introductions, it's never been material. And I think if you go back before -- if you go into 2006, 2007 and 2008, there was always a lot of talk that everybody wanted to talk about, quote, shadow backlog.

Well, we've put a light on the shadow is really what we're trying to do because I think it -- before, the backlogs were such that it was strong enough to say here's what we have and some people we believed, and that's why we only went to 12 months, you didn't know if some people were just putting in production slots or if it really was that legitimate backlog. I think that was always the question you had when you were out to 14, 15 months. And so that's why we always did it that way.

Now, because of the fact that -- and since 2009 it's never been material or it's never been that significant. That's why we decided to do it this time, to show the strength of the crawlers, which have the longest lead time anyway of any of the products. That's what gets you out past that. And I think, again, now with respect to deposits, we do have a significant amount of deposits for these cranes because of the acceptance of this new products in people's rental fleets and businesses.

So, hopefully that answers your question. Carl, I don't know. Did I miss anything on that?

I would just say specific delivery dates is one criteria that we use, as well as underwritten finance is another criteria that we scrutinize. The other comment that I would make is if you go back to the Bauma trade show in the second quarter, April of 2013, this was not relevant. We didn't really have anything material that extended beyond 12 months.

Okay. So just going back to the deposits, is it -- how should we think about it? Is it like a 10% kind of number?

Yes, I think that's -- .

Ballpark?

That's a ballpark, about what it is.

Okay. And do you think it's fair? I mean, do you get the sense that some of these orders may have siphoned off, if a customer would have otherwise ordered a regular crawler crane that would have hit in 12 months but decided to not order that product and instead take the VPC. Did you get the sense that there was any of that happening?

Well, I think any time you have a new product introduction, you worry about the cannibalization of the current product you have. But I would say when you look at the 18,000 or you look at the 2250, which are the two that are being replaced, I mean, there are some customers that are saying, hey, can I continue to get that. The 2250 has been a workhorse in our stable for a long, long time, and there were comments at CONEXPO saying hey, I hope you keep the 2250. So, I don't know that it's been significant.

When we looked in our plan for 2014, when we put it together last year, we assumed here's how many 18,000s we'll sell, here's the 2250s, here's the 999s, knowing that some people like that crane. We have the ability to continue to make it. That's why we talk about the late production of 2014 or early 2015 for the new VPCs. There's going to be a little bit of cannibalization but I think it's not significant in this instance. Eric, do you -- ?

I agree. I just want to add one thing, Seth, back to those orders. We have firm orders with down payment. But if you look at the orders, they are in ENC. They are rental houses, and you also have some distributors but these distributors have already kind of retailed those. I think they are fairly strong orders.

Okay. Thank you. Can I slide one more in? Is there any way to quantify these project delays that you talked about and are they going to -- do you expect them to slide to the second quarter or does that just get pushed out further?

That's a good question. When you talk about weather delays, and especially cold weather, I guess the question is if it gets warm, does that mean it's better? I don't know that we can quantify it other than the fact that -- it's mostly obviously North America. When you sit and talk to your dealer base and I know Eric's coming off a dealer meeting that they just had in Chicago earlier this week, it's a matter of when they can get in and continue to start some of these things.

In the Midwest, look, it's still not very nice weather-wise. But I think the rest of the United States, I think that kind of makes itself through the second and third quarter and I think it works its way through by then.

Okay. Thank you very much.

My add there, Seth, this is Carl, that obviously the top line was not exactly what we had planned, and it's for the reasons we talked about and we're reiterating our full-year guidance. So we do think it comes back.

Okay. Thank you very much, guys.

Next we'll hear from Andrew Kaplowitz of Barclays.

Good morning, guys. Glen or Eric, you obviously had a good crane order quarter in 1Q after a good quarter in 4Q. But now you're going into your seasonally slower period in 2Q and 3Q, and especially after CONEXPO. Do you think there's enough demand out there to grow your crane backlog during this seasonally slower time of year? I'll start with that.

Well, I think you don't want to hear this as an answer, but I'll give it. It depends. I think what you have, Andy, and we hear this a lot, whether it's in North America, whether it's in Europe or even -- I wouldn't say so much China but I would say other parts of Asia or even South America, is I think this is an unusual year because I'll take South America, for instance, just being there. You have the elections down there.

People are waiting to see what happens in Argentina. People are waiting to see what happens in Chile. They had the election but now the person, the lady that's the president, she talks about what some of her plans are but there's no specifics so the people are waiting on that. You go throughout parts of the world and elections seem to be playing a big part. India is another example of where we see this. So I think there's an opportunity for some of that to happen.

So I think a lot of the people that we talk to and we go, it's not a matter of if, it's a matter of when. And I think some of that plays out here in North America when you go to the parts of the Southwest or the Gulf Coast, what's going to happen politically here in the United States. A lot of money on the sidelines and people want to put it to use. But again, that's why I say it depends. I feel good about where we're sitting today in our Crane segment because we have those opportunities. The tower crane business, believe it or not, picking up a little bit in North America, and so I think there's that.

And when people get past CONEXPO and they get into their summer months, I think people are going to see when you get past the weather that we're talking about, people are going to start putting those jobs into play and I think there's a lot more bidding that comes out. I don't use the word hopeful because hope is not a strategy, but I think I'm confident that there are a lot of projects that will be put into play in the next 12 and 18 months. The dealer inventory, you know that we track this on a weekly basis here in North America, but that's a great indications. And the dealer inventory was, I would say, a little high when we enter the January, February, and even March and because of our project was delayed, the retail activity has obviously taken a headwind. Just in the last two to three weeks, we've seen, obviously, the dealer inventory depleting and of course, we have to see that continues.

But that was an encouraging sign that it's now just about at that level. If we see the retail activity and the RPO is also kind of encouraging because they're turning to sales typically with a higher rate. Was talking to our dealers earlier in the week, as we mentioned, and 70% or 80% of the RPO turns into sales. That's kind of indicator, also kind of a level of confidence that's out there. If we continue to see that trend, I would say yes, we should see more activities.

Eric, we're two months really after CONEXPO. You didn't see a big fall-off in activity after CONEXPO, did you? Like sort of a pull-forward at CONEXPO, if you may?

No, we did not, Andy.

Okay, and then just how much of an inflection are you really seeing in your European tower business? Your competitor yesterday talked about a much better business there. We know you're very underutilized in that French factory. I think that's a big opportunity. Maybe you can talk about that a little bit, the level of improvement you've seen at that particular factory in that particular area.

Okay. My comment related to Europe is not specifically tower crane related. It was also mobile crane related. But however, a lot of cranes that we are producing there, for sure the French factory are going to benefit for the order intake that we have seen in North America because this is one product line getting tractions and typically in the US we're talking about big [lifting] cranes, so big cranes. So obviously, this French factory are benefiting from this.

But specifically, your question is the tower crane business in Europe. I think it's good in Germany. It's good in Switzerland. It's really picking up in the UK. It's bad in France. The rental rates are terrible and housing would not exceed probably 350,000 whereas the [balancing] would be exceeding 500,000 but it's not materializing. So we continue to struggle, definitely in France and Italy and Spain, which were great tower cranes markets.

I would say that we have seen more orders coming from the countries that I indicated before, and the French factory for the absorption, of course, they will benefit from the increased business, as I said, in North America and also from the increased business that we are seeing in the Middle East because we can -- we are sending this market with the French factories and the Chinese factories.

But Andy, the other thing from -- we talk a lot about the operational excellence initiatives. This is the area where at the beginning of 2013, spent a lot of time, you recall. In the last upturn, we had three locations in France and that was consolidated to two at the same time leaned out many of the areas of the factory in Ecully or Moulins and brought many of the activities that we had outsourced back in-house.

And so I think when you look at it, the factory's a lot different today than it was five years ago. So while, yes, it's underutilized, the costs are a lot less. So I think that's where we have a lot of confidence that when that market picks up a little bit, you have the benefit of the absorption but at the same time, we're in a pretty good state of mind right now in those factories at a lower level of activity.

That's correct. And last, Andy, one of the factory's really a feeder plant for -- we replaced a mechanism that we ship for the cranes we produce in China as well, and that activity is fairly strong right now, given the uptick in demand for the cranes manufactured in China.

Thank you, guys.

Next we'll hear from Schon Williams of BB&T Capital Markets.

Wanted to maybe start on foodservice here. Margin's showing some nice improvement on a year-over-year basis, but year-ago levels were impacted by the consolidation by a couple million dollars, and I'm just wondering kind of an apples-to-apples basis, I would have maybe expected more expansion given how robust the sales growth has been. Can you just talk about where we are in terms of the gains on some of the restructuring? Are we still early innings? Is there more to come, and kind of what should we expect as we move throughout the year here?

I'll start with that and Bob, if you guys have any comments. Schon, I think the answer is obviously the expectations for the improvements we expect, given the manufacturing changes that we've made are inherent in our guidance to get to that near high teens level, And as I would describe it, I would say that's certainly when you look at it from a year-over-year perspective, it's going to be skewed to the first three quarters of the year, given the success we had late last year in completing those activities. As you know, we did have that unusual item that you referenced in the fourth quarter as well. But the expectation is that it will continue to take flower, particularly this quarter and next quarter.

But I would add to that, Schon. Some of the activities that you're talking about, we mentioned some of the things that get at the $80 million that -- whether they're lean initiatives or organizational initiatives, those are going to benefit mostly the back half of this year. They do not impact much the first of half of this year, and those remain on track.

The other thing I think, whether in of our comments or in the release, we talked about really the growth at foodservice being in new products, the margin improvement from new products and the manufacturing initiatives. We stay away from the mix because when you look at the overall mix, some of the positives were offset by some of the negatives. So mix really didn't benefit us much in the first quarter. Going forward, that can have a better opportunity. But you didn't see much in the product mix standpoint in the first quarter.

All right. Thanks. That's helpful. And then maybe a question for Carl. Interest expense, a bit lower than what I expected in the quarter and then the run rate that we're at, we were at in the first quarter seems to be below where you guys are guiding for the full year, the $100 million. Just can you help me understand what's going on there?

I would say the refinance played into that because of the GAAP treatment of the swap that we had in place that goes through the interest expense line. So probably similar level to what you modeled in the balance of the year. We would expect an uptick just on that basis that there was roughly $8 million that benefited the interest expense line in the first quarter a little more than that. That won't recur for the -- and I would say also the $100 million probably is a bit conservative., I would expect us to end the year with a level starting with a 9.

All right. Thanks, guys.

Jamie Cook, Credit Suisse.

Hey, guys. This is actually Andrew Buscaglia on behalf of Jamie. So just going back to cranes, at this point if you exclude the portion that's coming in 2015, it would seem that your visibility is a little bit -- or actually the question is, I guess, would you say your visibility is a little bit more limited than you would expect at this point of the year, after CONEXPO?

No, I'm not sure I would draw that conclusion. But to understand your question, you're saying the visibility on the remaining product lines, other than crawlers, that's the way I took your question. Is that it?

Yes, visibility, specifically for 2014.

I think when you look at it, the rest of the backlog is -- and that's why you have 70%-some, which doesn't extend past there. So I think that -- if you go -- as I said earlier, you go back to post recession, that's what it's been ever since. So I think it's pretty consistent with what we've seen the last four, five years.

Okay. And then just a little more color on -- in terms of your profitability that's in your backlog. Margins were maybe a bit lower than we were thinking this quarter, but what are you seeing in terms of those ramping over the next few quarters? And then when do you really expect improvement to flow through from that backlog?

Well, I think the incremental margins will be very much a second half of year story in Cranes. That's where we're really going to be able to get to our guidance level that we talked about. It's going to be more skewed, given the nature of the orders we received, and some of the efficiency improvements that we're putting in on an ongoing basis is going to be really a second half of the year margin improvement story to a much greater extent in Cranes.

Okay. So Q2, you probably would think would be more in line with what we saw in Q1?

Tough comp in Q2, given the -- we did have a pretty strong benefit from material costs in Q2 2013 that we wouldn't expect to recur.

Okay. All right. Thanks, guys.

Ted Grace of Susquehanna.

Hey, guys. How you doing? Great. The first thing I was hoping just to ask is the incremental color on the orders in the backlog is helpful. I know that you said that 26% of the backlog gets delivered in 2015 or beyond. And if we were to play with some numbers and try to estimate what the next 12 months deliveries in backlog are, would it be fair to say those orders in the quarter were something on the order of like $540 million?

I would say if you just want the number for the 12 months, it's not much different than [benefits universe]. Obviously the first quarter tends to be a lower top line quarter, just by the seasonality of the business. If we were going to put a metric out there for 12 months, it would be 24%.

Okay. So something in the $540 million range for forward 12 month, I guess, deliveries? I know you said that 1Q was largely in line with plan. Is that also true of kind of those call it the legacy order rates that you got or the legacy orders you got in Cranes?

I can take this. The order intake that has been a little bit shy of expectations, but this is the rough terrain crane product line. This is the one that probably struggles a little bit right now and, again, it's -- I think I'm hopeful that the situation will improve in North America. But the utilization is pretty high on this product line in the US. However, the rental rate still struggles to get some traction.

So that's one of the issues. And as we move to the Middle East and Asia, obviously the Japanese competition is very aggressive benefiting from the yen. That's one of the product lines that we are a little bit nervous. Again, it's mitigated by what we see on the other product lines.

Okay. And then Eric, maybe you could just elaborate -- I know Glen mentioned you had the dealer meeting recently. Can you just share with us kind of the highlights what you're hearing from your US dealer base?

Yes, the highlights is they see a lot of work coming. As Glen said, it's more a matter of when this is going to happen, but they see a lot of work coming in the US. Again, I mentioned the RPO, that's a good indication, when your RPO your cranes and you see you have 70% or 80% turns into sales. That's only a very good one.

When you see that kind of commitment on the orders of the large crawlers, that's obviously a sign of confidence and what they see also is before the rental houses are trying to more purchase on specific needs projects and the owners now seems to be looking ahead and planning for changing base and probably on anticipated future needs. In the wind also, there are expectations that we see a sharp uptick also on the winds. Overall, that's why we have these positive feelings here in the US.

I think another comment that was made to me from someone that attended was the dealers, it's just -- it's lumpy. They'll go two or three weeks and the activity is a bit slow and all of a sudden the next thing you know you have anywhere from 5 to 11 orders on different product lines. So that's the key for us, is how do we maintain that flexibility to keep people because that's what's happened ever since 2009. The people don't want to commit long term but when these projects break, it's all about availability in certain instances. So it's business as usual, but to Eric's point, the outlook is pretty darn good.

That's really helpful. The second thing I was hoping to ask is a question of Bob. Bob, great job on the sales number there, up 9%. Is there any way you could help us understand what was the contribution from the new products, the grills, the newest ice machines and the Blend-in-Cup that drove that 9%. Was it 4 points attributable to new products? Just so we can get a sense for how those products are doing.

It has been a major contribution, Ted. If you look at the spread across, we had four major roll-outs in process at the moment, all contributed by new products. As we mentioned in the remarks, a good portion of it was savings coming from the operational enhancements but the new products did have a major contribution. And if you also look at it too, you look at the industry in total, estimates are 3.5% to 4% up. We went up 9%. A big part of that was roll-outs. A big part of that was EMEA with those products as well.

General market was down a little bit because of the cold weather in the states. You could factor that in. The new products were a major contributor for it, mostly in the areas of surface cooking and grills. We had the blended ice was another one. A little bit on the roll-out on carbonated soft drink area and hot holding.

Okay. That's really helpful. Just so we can appreciate it from the modeling standpoint, when did you start seeing those benefits of the new products and are we close to lapping that or are we going to get a couple more quarters of kind of quote, unquote, easy comps on that basis?

Those particular roll-outs are going to be phasing out on those particular ones but then if you look at the new products and we get the NRA, you'll see some of that too. We've got the Convotherm 4; we've got Koolaire. We still have some room to grow because of the cold weather we had at the beginning of the year. We're starting to see that pick up a bit. Some new fryer technology and then hot holding is still going and then we've got later in the year some refrigeration stuff. So we've got a pipeline that's coming as well, so as those phase out, new things will come on.

Okay. Great. Thank you very much, guys. Best of luck this quarter.

Thanks.

Thank you, Ted.

Next we'll hear from Mig Dobre of Robert Baird.

Good morning, guys. I think I'm going to stick with Foodservice because we sort of beat the Crane segment to death here. Bob, I saw some workforce adjustment announcements for your US-based workforce throughout the quarter, and I'm wondering if maybe you can sort of remind us kind of where you are as far as what inning maybe you might be as far as consolidating some of your manufacturing footprint in that business. And maybe give us a flavor as to how you're thinking about this going forward.

Let me touch on that first, Bob, and then I'll pass it on to you. I would say, Mig, when you look at what the announcement that was made in the first part of this year was here in Manitowoc, we made the announcement that we intend to or give us the ability to move some of the ice machine production to the facility in Monterey and of about the 425 jobs we have in Manitowoc at the ice plant, that would affect about 150 of those jobs.

That's really what the announcement was. That would take place between maybe starting late this year, fourth quarter this year and into the fourth quarter of 2015. So really, that's what that announcement was about. When you look at the manufacturing initiatives that we have throughout Foodservice, and we talk again a lot about the operational excellence piece, when we acquired a notice, I think, Carl, help me if I'm wrong here, we were upwards of almost 40 manufacturing locations, down to about 25 right now and I think the -- I would say long-term, we believe that could be in maybe the high teens.

So that gives you a little bit of indication where we're at in that process. And so we're knocking them off one at a time. Everything doesn't happen overnight. It gives us -- that's all part of that reasoning that Carl mentions, long term the margins in Foodservice being in the high teens. Bob, if you want to add anything to that, feel free.

I guess in terms of the innings, if you look at, as Glen mentioned, our overall manufacturing strategy, I'd say we're probably in the early to mid innings. We have other things to go. For instance, we announced we're consolidating two of our fryer factories together down in Louisiana later this year. That will eliminate one factory, built into two.

The ice in Monterey was part of our ability and we mentioned to get closer to our customers in Latin America. That area, there's a few more that will happen. We've got some other growth areas in the same time, so I would say we're probably in the early to mid innings in terms of an overall global manufacturing strategy.

That's great. Thanks for that. Sticking with food here, I'm wondering if you can gives us maybe an update as to what you're seeing in terms of demand from China. I know that's been a headwind for you for a while.

Go ahead, Bob.

I guess just to start, I'd say for the quarter, our biggest growth area for us was actually in Europe and Americas was okay, offset by the weather. China and Asia were down a bit, mostly due to a little bit of a slowdown in some of the chain growth that's there in Asia. It still provides for us in terms of strategically, there is a lot of promise there because of the projected increase of food sales in that area in restaurant and people going out is still relatively high. So I think across the board in Asia, we haven't retreated from our more bullish stance on where we stand on Asia. It's just in the first quarter, the chains there haven't grown as fast as we thought they would.

Great. Thanks.

Next we'll hear from Jerry Revich of Goldman Sachs.

I'm wondering if you could talk about the cost optimization efforts in a bit more detail in Cranes now that you're farther into the program. How much savings have you achieved in the first quarter and just give us an update for overall the shift that you're making that you can talk about publicly at this point?

Yes, Jerry. I think you're referencing the comments that I've made about the $80 million in those type savings.

Exactly.

Again, it's the organizational piece; it's the lean piece; it's the reliability; and it's a little bit similar to what we said for Foodservice with respect to the organizational changes. You're going to see the majority of those happening over the back half of the year. We have not given the detail of what they are between the segments.

I'm not sure that that's just because I think competitively we don't want to, and I think when you look at the reliability and the manufacturing measures, as I mentioned earlier in the call, what we did in Europe is those initiatives were taking place early next year. We're getting the full run rate of those this year. The new initiatives with respect to the PVC, the reliability, those are all taking hold. It was late last year, some of this year, but what I would say is the one thing we mentioned is -- and I said it first right in my comments. We're basically where we thought we would be at this point in time in the year, based on our expectations, other than as Carl said, maybe a little bit lower on the crane sales.

But when you look at the margin, you can tell that the margins are holding in there even a little better than we thought. All of those things that we're talking about are giving us the benefits to hit the earnings number, have the margins a little bit better than we thought, despite the lower sales volumes. So I think that gives you an indication that those initiatives we have in place are in full force.

Okay. And then on the crane order outlook, I'm wondering if you gentlemen can just talk about in broader terms what you're seeing in Latin America, Glen, you touched on it around the elections but I'm wondering if you could talk about what inquiry levels are like in that market broadly and talk about your expectations and bookings over the next year in that business.

Given the fact I was there last week I'm an expert on it now. But I'll let Eric answer the question.

I would say that we are seeing Brazil really struggling right now. I don't think that we will see a major improvement this year. But we know that we will see improvement. Again, our market share in Brazil is very strong. All of the product of rough terrain cranes now can have the finance which give us a tremendous competitive advantage there. But it's slow.

Chile is slow as well, I'm not sure more than last year. But this is offset by more activity in Peru, Colombia, and definitely Mexico is fairly strong for us. So that's pretty much what we can see in Latin America. So overall, we might somewhere down in Latin America in 2014, but with a footprint we have and the product line and investment we made in these regions, I think our market share will hold pretty well and again, you have some project base where it could change overall but again, this is an important piece of our footprint.

Thank you.

Eli Lustgarten, Longbow.

Good morning, everyone. Quick question, can we talk a bit about pricing across and around the world? It sounds like with some of the sluggishness that's up, pricing's just holding, your improvements come from initiatives, is that a fair statement around the world?

And second part of that is, as you priced the new crawler with the PVC, is that being introductory priced and the combination of getting deposits will give you decent profitability, or do you expect profitability to probably maybe 2016 to be much better than the existing product lines?

Well, I think when you look at any new product introduction, first off, with respect to the margins on those, I can assure you that when we put our plans together, there's the understanding that we should be improving our margins on any new product introductions that we have. Now, you're exactly right, Eli. The initial ones that go out, whether it's a prototype or anything else, you have those start-up type things that as they get through the factory, there's always those costs that are upfront.

But that's more of a -- that's a variance to the standard cost and those are the initial phase and we'll get past those. But when you look at something at the 300-ton and the 650-ton, the bigger you get, typically the margins are better on those so the mix is better. Your comment on the pricing around the world, on current products I think it is holding steady. I would say the one we see very aggressive, though, is on some of the Japanese product lines on the RTs. They are being very aggressive because of the exchange rate and so I think that's probably a little more unusual than we've seen in the past.

But that's really the only thing we've seen with respect to competitive pricing that's unusual for from many of the other products.

I guess what I'm driving at, you gave us some guidance for Crane operating margins in the high single digits this year. I can understand as line gets better and mix is better, why that will happen. If you I take it out to 2015 where we start getting the new products being a more important part of the mix, it sounds like that you really can't expect the next step-up in margins in Cranes to take place until sort of the second half of 2015 into 2016 because of the lead times and the big impact of new products. Is that fair?

I don't know that that's necessarily true. Obviously, we're not giving any guidance yet on 2015. But I would say when I talk about -- let's use the VPC technology, for instance, as a product roll-out because it's very near to us. You got to remember that we talked about the shipments going out starting in the first quarter of 2015. A lot of those manufacturing variances are already going to be impacted into our variances in 2014.

So then you have the mix, if you have the crawlers picking up, you have the towers picking up, arguably those are typically the better margin products for us. So I wouldn't say that you can have that expectation that it's to the back of 2015. But you can see how it can play out and it can vary, depending on volumes and mix.

All right. Thank you very much.

And next we'll hear from Nicole DeBlase of Morgan Stanley.

Good morning, guys. Maybe a question on just EPS seasonality, and I know you guys don't give quarterly guidance but 2Q is normally your strongest quarter of the year and I think though that given the crane backlog suggests a stronger second half as well as Crane margins is it fair to say that the second half of the year is probably going to see stronger EPS than 2Q?

I think that that's a reasonable read-through.

Okay. Great. And then maybe just taking the Foodservice question a step further, Bob pointed out a number of new products that you guys have entering the market, and I don't know a reason why just market Foodservice growth would fall from here. So do you think that there's scope to potential upside here in the single-digit Foodservice guidance throughout the year?

We're maintaining our guidance on the top line in Foodservice.

Okay. Thank you.

And that will conclude the question-and-answer session for today. Mr. Khail, I will turn the call back over to you for any additional or closing comments.

Before we conclude today's call, I'd like to remind everyone that a replay of our first 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 second quarter conference call in August. Have a good day.

Once again, that does conclude today's conference. Thank you all for your participation.