Manitowoc Company Inc (MTW) 2014 Q4 法說會逐字稿

Good day everyone and welcome to the Manitowoc Company Incorporated fourth quarters 2014 earnings call. Today's call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to Mr. Khail. Please go ahead, sir.

Good afternoon, everyone. And thank you for joining Manitowoc's fourth-quarter and full-year earnings conference call. Participating in today's call will be Glen Tellock, our Chairman and Chief Executive Officer, and Carl Laurino, Senior Vice President and Chief Financial Officer.

Glen will open today's call by providing comments related to the planned separation of our Cranes and Foodservice businesses, our quarterly results, and business outlook. Carl will then discuss our financial results for the fourth quarter in greater detail.

Please note a supplemental presentation for today's remarks is available on our website and viewable via webcast. Following our prepared remarks, we will be joined by Eric Etchart, Senior Vice President, Business Development; Larry Weyers, President of Manitowoc Cranes; and 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For anyone who is not able to listen to today's entire call, an archived version of this call will be available later this evening. 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 29, 2015. 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 statements, whether as a result of new information, future events, or other circumstances. With that, I'll now to the call over to Glen.

Thanks, Steve and good afternoon, everyone. This afternoon we announced our intent to separate our industry-leading businesses into two publicly traded companies as well as our fourth-quarter and full-year results for 2014. I will begin by providing some context concerning the expected separation as well as the strategic rationale for our decision before we review our financial results.

Turning to slide 3, Manitowoc has a rich history. And over the last 14 years, we have transformed the Company into a global industrial manufacturing with two market-leading businesses: Cranes, and Foodservice. To understand how we arrived at today's announcement it is important to note how the business has developed since the last trough and the legacy of leadership we have built over the years.

Our recent history was marked by several transformational acquisitions -- transactions from 2001 to 2008, setting the stage for Manitowoc today. The acquisitions of Potain, Grove and Enodis extended our product portfolio.

While the divestiture of other businesses that no longer fit with our long-term goals, such as our legacy marine business tightened our focus around the two platforms. Having the businesses together at this time gave us the scale and cash flow to make these transformative moves While allowing us to grow them into industry-leading companies they are today.

On slide 4, you can see as we move through the last few cycles, that the most recent recovery has yet started to materialize. We focused on integration and operational efficiencies. In addition, we implemented strategic investments that further strengthen our competitive position and laid the foundation for sustainable growth.

As we will discuss in a moment, 2014 was negatively impacted by growing uncertainty among our customers due to macroeconomic conditions. However, as you can see on this slide, we have seen significant improvements over the last several years.

Following the comprehensive evaluation of our Company, which was completed with the assistance of financial and legal advisors and many months of thoughtful deliberation by our Board, we are undertaking a plan to separate the Cranes and Foodservice businesses to enable each to realize its full potential on a standalone basis.

Let me quickly provide an overview of the expected transaction on slide 5. We currently anticipate the transaction will be executed via tax-free spin-off of the Foodservice business. All shares will distributed to then current Manitowoc shareholders while the capital structure and credit rating for each company is expected to be consistent with that of Manitowoc today.

From a timely perspective, we expect the completion of the separation of the first quarter of 2016 and we will keep investors updated on our progress. As we work towards executing the separation, we expect to continue to execute our stated strategy and capital allocation plans, which will result in further deleveraging from now until completion of the transaction. The plan to separation is the next logical step in Manitowoc's evolution and we anticipate it will generate value for shareholders by creating two strong industry-leading Companies with distinct enterprise strategies.

As you look at slide 6, there are four main points that are intended to rationale for the separation. First, the businesses have different strengths and the strategies and a separation will allow each entity to pursue them.

Second, the two companies will have the ability to track long-term shareholders that are appropriate for the business profile. Third, a separation will also enable investors to value the Company separately and lastly, each business has different financial characteristics and a separation will allow each to optimize its capital structure and capital allocation.

Turning to slide 7, Manitowoc plans to leverage its established global footprint and a strong culture of innovation in both Cranes and Foodservice to position each Company independently to take advantage of an anticipated long-term improvement in demand. By creating two industry-leading Companies, our enhanced strategic focus is expected to unlock value for shareholders.

Foodservice has established a strong global presence, serving hundreds of well-known restaurant chains. We believe it has robust growth opportunities, such as those presented by the long-term chain growth in emerging market regions.

From a product line perspective, Foodservice has among the industry's broadest product offerings that features both hot side and cold side commercial Foodservice equipment, spanning 24 leading brands. This has positioned the business well globally and has been able to support all of our customers' initiatives with comprehensive manufacturing capabilities.

In Foodservice, innovative new products include customer-specific models and new categories across many of our product offerings, while, at the same time, operational excellence has played a vital role in strengthening this business, driving manufacturing efficiencies and positioning Foodservice for significant long-term growth and margin expansion.

Lastly, we have pursued growth initiatives and after-market services and solutions for Foodservice, including our recently launched KitchenCare offering, again, differentiating our business in the market.

With respect to Cranes, our global footprint and strong brands have been key to its success. The ongoing emphasis on the development of its diverse product portfolio has been critical. We have focused on product innovation within Cranes and relied on the voice of the customer as a key element and source of input into our R&D efforts.

The implementation of our lean initiatives has contributed to our financial resilience in Cranes, as these initiatives not only improve quality and product reliability but drove greater operational efficiencies to help reduce waste, improve lead times, and help them become more efficient and profitable business.

With Crane Care, Manitowoc offers a total lifecycle product solution for our customers. With 24/7/365 support, Crane Care complements our overall goal of customer focus. With this global after market initiative, we were able to maximize the uptime for our equipment.

All of these factors, Crane's global reach, strong presence in emerging markets, expansive product portfolio and unmatched product support, provide this business with exposure to attractive end markets that places risk in cyclical upturn.

As you can see on slide 8, we have had substantial growth in both sales and operating margins over the last six years with the Foodservice business. In fact, the margin expansion we have achieved in Foodservice, including the single-digit Enodis margins which we boosted to legacy Manitowoc mid-teen levels demonstrate the potential of this business.

In addition, our initiatives to grow the business globally as well as by end market has significantly improved our competitive position. These efforts have enabled us to establish leading market positions across multiple Foodservice categories, as shown on slide 9, which is underscored by the innovation that has been hallmark of a business.

To date, Foodservice maintains the broadest product portfolio serving the largest global customers. In addition, the ability to bring products to customers and prove their overall efficiency and create new revenue streams such as our Multiplex Blend-in-Cup workstation, Convotherm 4 Combi Oven, Garland Dual Platen Grill further extends the leadership profile of this business.

If you look at slide 10, we have established a strong organization for Cranes as well. We have successfully navigated the business trough through challenging times, and have always emerged stronger as a result of our ability to remain agile while investing in areas to strengthen our leadership profile.

This is reflected in the diversification of our business as well as the improvement and operating margins we have experienced in the demand periods in trough years. Currently, we believe this business is now rightsized for current demand levels and we have a very strong foundation to build upon as market conditions improve.

With 37 facilities in 18 countries serving customers across dynamic end markets, we are ready to capture the upside for significant reciprocal growth. As shown on slide 11, our ongoing focus on innovation as resulted in award-winning technology, leading positions across major Crane categories and a robust global customer base.

Before I review our financial results for 2014, I would like to touch on the corporate governance enhancements that we also announced today. As you saw in our press release, we announced that the Board has approved amendments to the Company's bylaws to eliminate its classified Board structure on a phased-in basis, starting with the elections occurring at the Company's 2015 Annual Meeting of Shareholders.

We believe strong governance supports value creation and as a result, the Board regularly reviews its corporate governance practices to ensure it is operating efficiently, effectively, and in the best interest of shareholders. These enhancements will ensure that our investors have a regular opportunity to express their confidence in the performance of the Board and management.

With that, let me move to our results for the fourth quarter and full year. As you can see on slide 12, we reported results that are essentially not in line with our guidance that were clearly disappointing.

During the majority of 2014, macro and economic headwinds put downward pressure on demand for our products and solutions. As a result, we took quick actions to maintain our financial strength during this period.

These actions included accelerated cost optimization programs and the initiation of headcount rationalizations. For the full year, revenues declined 4% to $3.9 billion. On a GAAP basis, we reported net earnings of $144.5 million, or $1.05 per diluted share. Excluding special items, adjusted earnings from continuing operations in 2014 were $159.2 million, or $1.16 per share.

Looking at the two businesses in more detail, Foodservice revenues increased 2.6% to $1.6 billion and operating earnings of $234 million produced operating margins of 14.8%. Despite some pockets of strength, multiple factors continued to weigh on our performance in Foodservice, including customer timing affecting new product rollouts, product mix issues, warranty costs, and challenges associated with the start-up of KitchenCare.

In light of these headwinds we took actions in the second half of the year, including consolidating our manufacturing footprint and rationalizing our product portfolio, which we believe will benefit our growth in margins in 2015. We are also essentially complete with the core elements of the remediation program in Cleveland and we are pleased with the performance of that operation as 2014 drew to a close.

While our fourth-quarter performance is not reflective of the growth we can achieve in this business, we are confident and committed to enhancing our operational performance by bringing the best product portfolio to our customers and ultimately driving improved performance for this business. Recurring -- we reported revenues of $2.3 billion for 2014 and operating earnings of $163.9 million, represented a decline of 8% and 25%, respectively.

Uncertainty across our customer base and ongoing global softness continued to impact purchasing decisions, muting our results for the quarter and full year. More specifically, North American and Latin American weakness in rough terrain and boom truck markets translated into a significant decline in segment sales in the Americas region where our brands have leading market share positions.

In addition, limited demand in Europe also contributed to the quarter's decline. Despite these pressures, we continue to focus on the areas within our control. We achieved safety, quality, and cost reduction goals while concurrently executing on lean initiatives. We also captured further savings through sourcing and purchasing opportunities.

On a positive note, however, we didn't see an improved order intake, a strengthening backlog and a strong market acceptance of our VPC Crawler Crane technology. As we look at 2015, the reality is we are not likely to see improved market conditions in the near term. As a result, we continue to make prudent investments where we're able to achieve the most significant returns over the long term.

For example, we are improving the agility of our production processes from procurement through manufacturing, making further improvements to our cost structure through fixed cost reductions and improving our global market shares with new and existing products that drive demand by boosting the profitability of our customers. Lastly, I wanted to comment briefly on the leadership changes we announced earlier this month.

As you saw in our release, we announced several management team transitions in line with the Company's long-term succession planning, which included the appointment of Eric Etchart to Senior Vice President, Business Development and Larry Weyers as President of Manitowoc Cranes.

In summary, 2014 was challenging on a number of fronts. Despite our fourth-quarter and full-year results, we remain optimistic about the long-term prospect for both of our businesses.

While there is little we can do to affect change in the global macro economic environment, there are a number things we are doing to improve the overall financial strength and stability, including optimizing our cost structure to meet the demand levels we are currently experiencing, continuing our investments in innovation and after market product support, leveraging the extremely favorable market response for our VPC Crawler Cranes and further paying down debt. With that, let we turn the call over to Carl for a review of the quarter and full year. Carl?

Thanks, Glen and good morning, everyone. We reported net sales for the fourth quarter of $1 billion, which is a decrease of 6.1% from a year ago. GAAP net earnings for the fourth quarter was $33.6 million, or $0.25 per diluted share versus earnings of $20.9 million, or $0.15 per diluted share in the fourth quarter of 2013.

Unfavorable currency exchange rates had a $0.04 negative impact on EPS in the quarter. Excluding special items, fourth quarter 2014 adjusted earnings from continuing operations was $37.5 million, $0.27 per diluted share versus adjusted earnings of $63.9 million or $0.47 per diluted share last year. During the fourth quarter of 2014, adjustments included $3.9 million of costs associated with restructuring activities.

During the fourth quarter of 2013, the Company incurred $35.6 million in losses related to the Dong Yue disposal, $3.2 million in losses related to discontinued operations, $2.5 million of costs associated with restructuring activities and cost associated with early extinguishment of debt, totaling $1.7 million.

During the fourth quarter of 2014, cash provided by continuing operations was $237.6 million, driven by cash from profitability and improvements in working capital, particularly inventory levels within cranes. More importantly, we continued to progress in terms of our cost-saving initiatives, which resulted in over $20 million of reorganization and product cost benefits as well as a combined $8.5 million of lower corporate and interest expense.

Turning to the results for our two businesses, Foodservice sales in the fourth quarter of 2014 totaled $374.2 million from $399.5 million in the prior-year period. Fourth quarter 2014 operating earnings in Foodservice were $48.3 million, producing operating margins of 12.9% compared to 17.2% for the fourth quarter of 2013.

As mentioned by Glen, the fourth quarter Foodservice decline in operating margin was driven by customer timing affecting new product rollouts and unfavorable product mix, increased warranty cost, higher start-up costs for KitchenCare, plus costs and efficiency issues for certain hot side products.

Moving to Cranes, fourth-quarter sales totaled $663.2 million, a year-over-year decrease of 5.9%. Cranes' operating earnings in the four quarter were $45.3 million versus $54.8 million last year. This resulted in a fourth quarter Cranes' operating margin of 6.8% compared with 7.8% last year.

This year-over-year decline was due to the negative impact of foreign currency exchange rates, higher priced discounting, coupled with volume decreases and rough terrain Cranes and boom trucks which were only partially offset by ongoing operational efficiencies and cost reductions.

Decline in oil prices also contributed to the climate of caution and lack of confidence among certain customers during the quarter and second half of the year. That said, from our perspective, many of the projects currently underway are not linked to oil. To provide some context, approximately 30% of Crane revenue had some level of exposure to oil prices, with 30% of that being upstream, 20% midstream, and the balance downstream.

The guidance we have provided does take this exposure into account, with our assumption that prices will increase in the second half of the year. Crane backlog at quarter end was $738 million, an increase of $22 million, or 3.1% from a third quarter of 2014 and an increase of 28.6% from a prior-year period. For the fourth quarter, new orders increased 23.2% to $686 million compared to the third quarter of 2014, with a decline of 3% from the fourth quarter of 2013, representing a book-to-bill ratio of 1 times.

Before concluding my remarks, let me now discuss our 2015 outlook which you can find on slide 13. Noted in today's press release, we expect Crane revenue declines in the mid-single-digit percentages, Crane operating margins to be high single-digit percentages, Foodservice revenue to experience mid-single digit percentage growth.

Improving Foodservice operating margins in the mid-teens percentage range, capital expenditures of approximately $85 million, depreciation and amortization of approximately $110 million, interest expense of approximately $80 million, amortization and deferred financing fees of approximately $4 million, total leverage to be below 3 times debt to EBITDA, and effective tax rate in the mid-to high 20% range.

Restructuring charges of approximately $4 million in the fourth quarter resulted from internally announced global workforce reductions primarily affecting salaried, office and indirect employees in the Crane business. The estimated cost savings from these actions in 2015 are expected to be approximately $19 million.

Opportunity for margin improvement in Foodservice in 2015 is expected be driven by full-year benefits from factory consolidations, lean manufacturing initiatives as well as cost price benefits. I will now turn the call back to Glen for some closing remarks. Glen?

Thanks, Carl. To conclude, the macro challenges we are seeing are likely to persist throughout 2015. We do have a strong record of navigating uncertain market conditions while maintaining and eye on the opportunities ahead.

We believe that the plan and timing we have laid out for the separation of the two businesses to prepare each for ongoing success enables us to allow each business to pursue individual strategies, equip each business with the appropriate resources to achieve continued growth and profitability, enable each business to attract a long-term investor base appropriate for the particular operational and financial characteristics of each business, and enhance the flexibility of each business to pursue distinct capital structures and capital allocation strategies.

As we execute the separation of Cranes and Foodservice, we will remain steadfast in the execution of our key initiatives for over the next 12 months. This concludes our prepared remarks for today. Vicki? We will now open the call up to our question-and-answer session.

(Operator Instructions)

Jamie Cook, Credit Suisse.

Good evening. Thanks for keeping it interesting. I guess, two obvious questions. One, separating -- splitting up Manitowoc has been out there forever and a day, and your view it always had been it didn't make sense. Food and Crane, there were diversification benefits, et cetera. What changed your tune? All of a sudden to make you comfortable that Food and Crane should be separate?

And, I guess it's also interesting, just given the recent reduction in crude prices and what that means for the Crane business. Obviously, it means the Crane business is pushed out. Why shouldn't -- why would it be a good time to -- for Cranes to be a standalone company?

Hi Jamie, it's Glen. Obviously a logical question. When you look at what changed, I mean, it's really the -- I think, as I said in my remarks, a logical evolution of the businesses. I mean, we -- if you look at these over a long period of time, and we have ever since the acquisition of a notice, and the divestiture of Marine, and our strategic planning process.

So as you walk through those, and we look at some of the initiatives that we laid out last year in the cost optimization structure that we talked about, we believe that many of those initiatives that we started at the enterprise level are in place or will be fully in place by the middle of this year. And it gives us the opportunity then as you move forward, at the time that the separation occurs, that they can pursue their own strategies.

They will take advantage of the markets that they're in and they may have different market dynamics. So, that's why we look at where we were, where we're going to be in this year based on our guidance and that made sense at the first quarter of next year.

Okay. I guess just -- can -- obviously the Crane -- I'll let someone else ask, let them ask a question on the splitter. Just on the Crane side, on the orders, the orders were a little stronger than probably most had anticipated. I would probably order -- argue that the orders were probably backwards-looking because things really started to collapse the end of December. Can you talk about what you've seen in the month of January? If things deteriorated? Conversations with customer, have you seen cancellations, just any update there?

Well, we typically wouldn't give a lot of internal customer comments.

Except you are splitting up the Company and so it's probably more relevant. Well, I think -- but I when you look at it, Jamie, the conversations are still pretty good despite what you see throughout the world. But I will say, from a product line perspective, the conversations around the Crawler Cranes are very solid because of the new products.

Conversations around Tower Cranes are pretty good. I think the two product lines that are -- we already talked about them are the RTs and some of the mobile hydraulics but the RTs and the boom trucks. Those are the two that give us that guidance that takes us down that we have for 2015.

But the conversations in January are still pretty good. I don't think people -- while there are actions being taken by a lot of the energy companies to slow things down, I don't think it is like 2009 and 2010 when they stopped things completely.

Andrew Kaplowitz, Barclays.

So Glen, the noise level in Foodservice has ratcheted up a bit over the last year. Foodservice looked like it was well on track, as you know, in the second of 2013; has been pretty off-track in 2014. So can you talk a low bit more about why these issues have cropped up this year versus last year and what kind of confidence can we get that you really got your arms around the execution here in 2015?

Well, I think, when you look at 2014, we had some initiatives, whether it was operational issues, any issues that we talked about in Cleveland. We had some new product introductions, things that were deferred and delayed, and again, we are accountable for that. So I think when you get past some of those, the backlogs that we had in certain product lines, and coming late in the year and not being able to get some things out, as you are optimizing some of the other areas, Monterrey comes to mind. I think we had probably a slower start at Monterrey than we anticipated.

Those things, as we mentioned in my remarks, Cleveland is behind us towards the end of the year performing well. And, I think the ones that you get behind you, in the Monterrey, and the one that we see currently, that we still have some work to do, but I think it's well on its way, is KitchenCare. I think once we get that, I think it's a normal process for us and you saw Carl's guidance for the margins to get that back.

Got it. Okay --

The confidence is there, Andy, because we've done it before. These are things that --

Right. You had good performance. So in 2014 was a setback but you have had good performance. Let me shift gears actually and ask you one other Crane question.

You're talking about high single digit margin for Cranes in 2015 but there, too, it does seem to be quite a few moving variables. You've got the VPC Cranes you're going to deliver. You've got cost take-out initiative and you also mentioned price competition.

So can you update us on the progress of your cost-cutting initiative in Cranes in 2015 and if I'm thinking in terms of how much it could be worth to margin, is it 100 basis points or something like that and -- or should we be concerned that it could be absorbed by price discounting or underabsorption during the year?

I'm going to touch that last one a little bit. And then I'll let Larry maybe talk about some of the manufacturing initiatives and his confidence of those. But, what I would say is, in the latter half of the year, in 2014, the benefits of our manufacturing sourcing initiatives were eaten up by pricing.

And, I think there's less of that impact built into the 2015 than you would have seen in 2014. SO I would agree it was probably up in the back half portion, but I think what -- absorption is the other one that Carl has mentioned that I think -- we, with the rightsizing and the way the plan is laid out this year, I think that's inherent in the guidance.

Larry, you want to give some confidence on what you're doing?

Yes, Andy, this is Larry Weyers. I think the biggest thing we've been working on over the last 8 to 9 months is clearly with our SDI and our Supplier Development Initiatives, which has -- it's driven a lot of the purchasing savings and the material costs going forward. But I think the other one is we spent a lot of time with what we refer to as establishing a balanced attack in the factories.

By doing so, it's really allowed us to save on our material costs and our handling and it really enabled us to leverage our direct to indirect ratio in the factories and control our inventory. I'm thinking Glen's early comments. We saw a lot of the benefits of that really come to light in the fourth quarter with our (inaudible) an inventory control.

The key there, Andy, is really becoming more agile in that business where you don't -- You're not bringing different levels of direct support every time there is an increase or a decrease in the product build.

Rob Wertheimer, Vertical Research Partners.

If I may ask a question on the transaction. Is it -- could you just discuss the timing and year-long process? Does it need to be that long legalistically or did you think it was better just from a -- coming out of market standpoint to see what happens with oil and so forth? And have you authorize your advisors to offer division for sale in the meantime?

Well, on your first question, Rob, the length of the process, when we looked at it we looked at some of the things I think, to Jamie's point earlier, there are things that we've done since the acquisition of Enodis that are enterprise led. There's a lot of the synergy that you have between the two businesses.

It is going to unwind [nose] and it's almost turning the ball backwards and going the other way. So those are going to take time and we didn't want to commit to something we don't know how long it was going to take. We certainly had our advisors give us precedent transactions and we can see all of those.

We just felt, from some of the things that we have going into 2015 that the first quarter was the best timing from a shareholder perspective to get the best value. With respect to your other question, we're not going to speculate as to what happened during this process. But, I can assure you that the Board and everybody else looked at a lot of different alternatives and decided that the separation of business was the best alternative.

Thank you. One quick question, just to clean up on Cranes. Is the order number clean or was it impaired by any currency that adjusted the backlog and/or flowed through the orders?

It's clean. It may have been better if we wouldn't see have some of the currency pressure.

Mig Dobre, Robert Baird.

Glen, I remember you arguing in the past that the Crane business cannot really be a standalone entity and really belongs within a larger organization. And, you put out a slide deck call it, six months ago, that was looking at some of your peers and making that point. What changed? Can this business be a standalone business?

Absolutely. I think you're referencing the Investor deck that was, that we put out mid-year. I don't know that it was in reference to Cranes not being able to standalone but I think when you look at where they are today, and that's the thing is we've evolved down this process with the initiatives we have in place.

I'll tell you that it's a constant evaluation of both Foodservice and Cranes. When you look out and say to yourself, what are the things you are doing in the business that are going to impact this business in two or three years.

We're talking about the rightsizing of the organization. We're talking about operational improvements. We're talking about taking fixed costs out of business. We're talking about the balance that affects that Larry just gave you. The change to a product line organization in both Foodservice and Crane.

As you sit here today and you focus forward, you say to yourself, are these businesses able to stand by themselves and make that happen and throughout the year, the determination looking at it and say, yes, they can do that based on the initiatives we have in place. I think when you fast forward and look at what we've given for guidance in 2015 and where you think maybe the markets can go for Foodservice and Cranes in 2016, 2017, it gives us that comfort that they could pursue those strategies on their own.

Okay. If I may ask a question on Foodservice here and you talked a little bit about margin, but I recall you saying that the Cleveland execution issues have hampered margin by at least 100 basis points in 2014. And that price cost was also, if I recall, about 50 basis points worth of headwind. Is it fair to say that we should be expecting at least 150 basis points if these things are no longer an issue in 2015 in terms of market potential, margin expansion, or is that too optimistic?

Mig, I think the number you threw out from -- concerning Cleveland certainly is a fully loaded number from a perspective of the absorption that went along with that. We stand by those numbers.

I would say that there were some other things relative to the business that we talked about a little bit on this call that also are relevant when you look at the 2014 performance. Some of those things, have a little bit of uncertainty that's surrounded them, like mix of the business which was headwind for us.

But as we look at, despite the fact that we're not making any significant pie in the sky assumptions about the market, when we look at the things that we can control relative to the cost and fixing some of those -- the headwinds that plagued us in 2014, we feel good about the guidance that we can improve margins pretty significantly.

Nicole DeBlase, Morgan Stanley.

Good evening. Just a question on debt and I don't know how much you guys have thought about this yet but you said that you kind of expect the same amount of debt on the Cranes and Foodservice businesses because it's better you have, but I'd just like to know.

But I'm curious why you wouldn't think about levering of the Crane business less given extreme cyclicality and then putting more debt on the Foodservice business. Is that something you've given thought to?

Well, I'll let Carl answer this, Specifically, but we did say on the call is, is that we would probably look at similar credit statistics for each one of them. I think it's probably a little premature to say how much of debt we would put on each on but we certainly would have the same credit statistics and profile. Carl, I don't know if you want to add to that --

I think that's spot on. It's recognized that obviously the Foodservice business does have more stability through the cycle than the Cranes does, very obvious statement there, By virtue that, I think the objective, the logical objective would be to try to make the credit profile consistent.

Obviously, we are going to delever as an enterprise between now and then as well, but the overall debt should be lower when we get to the first quarter of 2016. But the objective would be to keep the two separate credit profiles at or better than the current Manitowoc credit profile and that, I think it's logical to assume that there would be more debt placed on Foodservice and Cranes in that instance. Okay, got it. Understood. That's helpful. And then I don't want to beat the dead horse because this question has come up in a couple of different ways on the call, but I mean let's say that the [bear case] does play out with the Crane business and you have more of like a double digit, I think if it can decline in Crane sales in 2015. Would you still go ahead with this transaction or would that be a risk to completing the split?

Well, our intentions are certainly to complete the split. So, that's really where it is. I mean, you are going to look at the macroeconomic environment but I would go back, Nicole, to look at the history of the Crane segment.

You go back to 2002 is the first time we were ever profitable in a downturn. 2010 -- I forget, maybe 2010, the margins were even better in a more significant downturn. That is what we've been trying to do, make this situated that every downturn would be more profitable.

I think the other beauty is, in both Foodservice and Cranes, we have good people. They've been through it before. It's a lot of the same people so the organization is well-managed with those types of business. So I feel pretty comfortable with the timing and the way they could handle the pluses and minuses in any cycle.

Ted Grace, Susquehanna.

I wanted to start following up on Andy's line of questioning on Foodservice. I think we all understand the industrial logic of breaking the Company and I don't think anybody would dispute that. I guess what I'm hoping to understand a little better, either from Glen, or maybe Bob is, on a standalone basis, where do you see Foodservices in 2016?

I know there's 12 months til we start really knowing what 2016 look like, but if we were to look at the public appears and obviously whatever it points to, the Company has put up meaningfully different growth trajectory. It's been structurally more profitably, now the (inaudible).

Just as we think about the standalone business, could you maybe just frame out where you see that business going in the future and how does it benefit on a standalone basis? How does that improve your organic growth, your new product introduction and maybe we can just start there?

Well, Ted, I think what you have to do is you have go back to the rationale of why we did this. I mean, they are going to have that opportunity to pursue their own plans, their strategies. They will have probably a capital allocation policy that will be determined.

But I think one thing you have to do is you have to look at it and it's too early for us to determine. There are costs of this separation as we go between now and the first quarter of next year. There are just synergies of things that we have that are done at a corporate office.

We don't -- we haven't determined what that number might be. So again, I -- we will keep you informed as we go along with that but we certainly recognize the opportunities that are ahead of us. That's why we feel the timing of this separation is good right now.

Okay, but just -- I mean I think this is obvious and intuitive but I'd rather just ask it point blank. You do expect that you'd see an acceleration and underlying growth rates on a standalone basis as Foodservices pursues its own strategy and presumably margin expansion trajectory after you get through these synergies?

Well, I certainly feel comfortable with the guidance that we've given for 2015. And, I don't want to comment on where I think the 2016 markets are.

But, it's safe to say that they have a very healthy pipeline of new product introductions. You have macroeconomics that fit into it and you also have what's in the new product development pipeline. So, again, go back to the rationale of why we have done this is, isbecause we see it as an opportune time to make this separation in 2016.

Jerry Revich, Goldman Sachs.

Good evening. I'm wondering if you could just talk about what public company corporate cost would look like or what's your best assessment as you break up the businesses versus consolidated basis? Glen, you mentioned it would be a headwind. Can you just help us understand the magnitude of it?

I think it's a little bit too early to tell exactly what those are. Obviously, we look at the corporate cost and we look at the office here and what needs to go on to a single entity from a corporate side. It really is too early to tell on that, but that's probably a couple of quarters away before we really know that.

Okay. And then for the Crane business, I'm wondering if you could talk a little bit more about the guidance, what it assumes by region, presumably North America, up significantly, Latin American and Asia down, and currency a drag. But I'm wondering if you could flush that out and maybe comment on any changes in manufacturing footprint that you might consider longer term if the recent currency moves continues so-called towards parity in the Euro?

I'll address the capacity footprint first. And then I'll let Larry just give an overall general view of where he sees the markets, the pluses and the minuses. But there is always the opportunity, Jerry, when you look at your footprint from a manufacturing side.

The -- for instance, we moved the assembly and manufacturing of our 777 Crawler Crane to Shady Grove because there's an opportunity there with the downswing in our key market to and the upswing in the crawlers we have in Manitowoc to make those and utilize the assets and the resources you have.

Looking out, what we're going to be in three or four years, yes, I think, when you don't -- when you do or don't meet some of the expectations that you have and you implement many of the lean initiatives we have, it does create excess capacity. So really that's -- we're looking at that on a regular basis.

So, people -- with -- it's really if the markets don't spike substantially, we should see additional areas where we can take advantage of capacity footprints. Larry, do you want to mention some of the markets?

The markets overall?

Yes, just --

I think generally, the markets for 2015, when think of our downward projection in revenues, it's driven primarily by our caution to the price of oil. Obviously, it's -- whether it's the drilling work that slowed down, what's going to happen with the shale oil projects, but we have not seen any of the refinery maintenance work or turnaround work slow down or any indication of it which is good.

LNG plants still look like they're going to be positive. And then I think when you look around the globe, it's obviously a mixed bag, but we've seen good activity and projections for Saudi Arabia, UAE, Qatar, Kuwait, some of the activity in the UK. Germany is stable with its rental activity.

We haven't seen it develop into a lot of Crane sales yet but it's positive. And then obviously, on the flip side, France is flat, but little activity as far as new Cranes. Russia is negative clearly, but, we've got some other areas. Vietnam has been strong. It looks like they will be strong next year. It's probably a little bit too early to tell on what's going on in India. I think I'll be there next week. But I think that one -- all the signs are positive but it's probably still a little bit too early to tell.

Seth Weber, RBC Capital Markets.

Good evening, everybody. So I wanted to -- on the transaction, so you have this $140 million to $195 million program cost benefit program that you've talked about previously. So, my question is, how much of that leaks out in this transaction would you not be able to get if the Company split?

And then kind of a related question, I think you had previously talked about that number being predicated on a stable end markets, which it sounds like maybe we're not seeing in the Crane business at this point. Can you talk about how we should think about that $140 million to $195 million over the next couple of years? Is that number now become haircut by some level?

Seth, it's probably not to the higher end of the range but I don't know why you certainly wouldn't see it at the lower end of the range. The reason I say that is because a lot of it is process-driven. As I mentioned earlier today, a big event here in Manitowoc to kick off a lot of this from the purchasing and the sourcing initiatives from a process standpoint.

So, I think when you look at it, there are some synergies when it comes to the MROs, when it comes to the indirects, but that's not the majority of where you're going to see it. I think if you go back to the sheet that we had in our Investor presentation, it was broken out specifically by Cranes and Foodservice. I think you can certainly expect us to be at that lower end of the range at least. And then it's a matter of what's the high end of that and that's to be determined.

Okay, thanks. And then I guess on the Crane business, how much of the weakness that you're seeing in the RT business, specifically is end market-driven? And how much do you think is just competitive, some of your competitors taking advantage of currency to be more aggressive or -- and take your losing share to some of your foreign competitors?

Yes, this is Larry again. I think when we started 2014, we ran into what everybody was calling the polar vortex. One of the markets in North America, we have really high market share. I think we all assumed that as we got through that, the market would pick up.

But, clearly, the market overall, forget about share, the market was down significantly in just the number of units that were purchased by customers. And I think we saw a lot of things that didn't materialize that we thought we would, whether it's the lack of the highway bill, nonresidential construction was lackluster, and clearly, we didn't see anything in the residential construction.

So, I think when you roll all of those together, the other factor that we saw is a lot of the end users, they're looking at more toward rental than purchase, with a lack of clarity that they were seeing in the markets. Their decision was, more or less, why don't I rent and RPO Crane rather than actually pull the trigger and buy one. So, I think we all -- as part of that we saw a use of capital from our dealers to expand some of their rental fleets and RPO offerings. I think as they consume that capital, it limits maybe how many more cranes they want to stock. So our real focus going forward, is, as Glen's mentioned, we will approve our agility, reduce our frozen windows, increase our efforts on balanced attack. So our key to success there is going to be our agility to handle these markets as they go up and down depending on where they are in the world.

Charley Brady, BMO Capital Markets.

Sorry about that. It's the -- on the Crane margin outlook in 2016. The guidance applies; margins going up. We've got revenues dropping, again, around 5% to 6%, we never where it's going to be. You talked about some pricing pressures that you still are going to have, I think as much as you're having them. And then, I would imagine you guys still have some absorption issues, particularly since revenues in Crane are declining 2015. So I'm trying to square that off with, how do margins go higher given all of those factors in 2015?

Charley, it's really some of the things that we were talking about on some of these initiatives that probably were further along in Cranes. Purchase and cost savings. Manufacturing cost savings that are substantial that can -- will enable us to earn through some of the lost absorption that will come from the decline of topline if we experience it (multiple speakers) --

Recognizing a majority that in Q or is there still more? You're going to pick it up more in 2015? And there's more restructuring going to do that offsets all of that absorption in pricing.

Yes, that's where you saw, Charley, some of the restructuring cost in the fourth quarter so you get the benefit of that and pretty much and the reason we did it, so we had the benefit for the full year. The other thing I would say is, I mentioned earlier, I think the pricing on some things in the back half of 2014, more so than what we anticipated.

I think that's because of it was probably more of a surprise in the end markets by all competitors and all Crane manufactures. And then lastly, I think you have a better for the margin standpoint. You have a better mix of products this year than what you had in 2014 As you look toward the Crawler Cranes and the Tower Cranes as opposed to the mobile hydraulics. I think mix has an issue also.

Ann Duignan, JPMorgan.

My question, two questions. One quick one. Can you talk about the debt covenants? I believe that the word, debt covenants, did not allow a breakup. Have those been renegotiated or will they need to be renegotiated or have we already gotten through that problem?

Well, I don't think it's really a problem, Ann. Obviously, the debt package is to the Manitowoc Company. There will be a negotiation that's market-driven that we expect to be able to effect as we go through this transaction next year. And, you'll essentially have two new credit packages for the two new companies. It's not as though you have to transfer the debt that exists today.

Right. okay, that's helpful. And then on cranes, can you talk about what you've embedded in your guidance for the potential for a slowdown in all your rich nations like the Middle East? I know you said that activity is still pretty strong today but surely a year from now, if oil prices stay that where they are at, wouldn't you expect a slowdown at some point late 2015 or into 2016 in construction activity in places like the Middle East? That begs the question of why now, like others had asked.

I'll answer your first question. I think the inherent price of oil, where it is today is baked into the price. As Larry said, okay, the Middle East is probably one of the, as you see it today, is a bright spot. But, you can look at and see the guidance we gave is actually down, in two weeks, mid-single digits.

So, maybe we're confusing the terms of bright spot. If it's only down 3% that would be a bright spot compared to 5%. So, I think that's the way we're looking at it, Ann, because we -- these are put together with inherent price of oil, and very low.

And then to answer you other question, you ask again, why now? I think when you, again, we go through a strategic planning process that is as good as any company that there is. This didn't just start last year.

This has been done every since we started acquiring companies back in the late 1990s. That's how we got the global footprint in Cranes; that's how we got to the global footprint in Foodservice. And, in talking with management, these are management recommendations.

Where we believe we can take these businesses and the Board, looking at our assumptions, the advisors, giving the Board direction and helping them with their decisions. Putting it all together and saying, where do we think the markets are going to go long-term. Right now is the best time to do it for them to perceive with their own strategies.

Now I turn the call back over to Mr. Khail for closing remarks.

Before we conclude today's call, I would like to remind everyone that a replay of our fourth quarter conference call will be available later this evening. You can access the replay by visiting the Investor Relations section of our corporate website at www.manitowoc.com. Thank you everyone for joining us today and for your continuing interest in the Manitowoc Company. We look forward to speaking with you again during our first quarter conference call in April. Have a good evening.

That does conclude today's conference. We thank you for your participation.