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

Good morning, everyone, and thank you for joining Manitowoc's Third Quarter 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 an overview of our quarterly results and business outlook. Carl will then discuss our financial results for the third quarter in greater detail. Following our prepared remarks, we will be joined by Eric Etchart, 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 For anyone who is not able to listen to today's entire call, an archived version of this call will be available later this morning. Please visit the Investor Relations section of our corporate website at www.manitowoc.com to access the replay. Before Glen begins his commentary, I would like to review our Safe Harbor statement. This call is taking place on October 28, 2014. During the course of today's call, forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, will be made during each speaker's remarks and during our question-and-answer session. Such 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. Yesterday, we reported our third quarter results and we were clearly disappointed with our performance. We continue to be faced with a challenging demand environment globally, driven by uncertainty across our end markets and a general lack of customer confidence, particularly in cranes. During the quarter, our Crane revenue was impacted by soft rough terrain and boom truck markets in North America, as well as ongoing weakness in Latin America. Additionally, our Foodservice segment experienced tepid demand in certain geographic regions, namely Asia-Pacific, coupled with macroeconomic factors that impacted the buying patterns of some key U.S. chains. Despite these headwinds, and consistent with what we have communicated historically, we are concentrating on the areas of the business that are within our control. As I look back at the difficult times we have faced as a company throughout various cycles, our team has proven its ability to manage the business without compromising our competitive position in the marketplace. Our response to these circumstances was to concentrate our attention on becoming a more agile organization through cost optimization, while maintaining our leadership position through innovation and quality, enabling us to maximize our performance in the near term. This commitment also positions us well to capture growth when the end markets improve. Last quarter, we updated you on our full $80 million gross savings target, more than half of which we had already realized. In the third quarter, we leveraged additional opportunities for savings. We remain on track with this initiative, which underscores our ability to execute on key areas that will improve our financial and operational performance. Most importantly, these savings will enable the team to identify other opportunistic investments to better position the enterprise for long-term profitability. Now let me spend a few minutes discussing…

Thanks, Glen, and good morning, everyone. We reported net sales for the third quarter of $986.3 million, which is a decrease of 3% from a year ago. This top line performance resulted from a 4% increase in Foodservice revenue and a 7% decrease in Cranes. GAAP net earnings for the third quarter were $73.1 million or $0.53 per diluted share versus earnings of $52.9 million or $0.39 per diluted share in the third quarter of 2013. Contributing to the year-over-year increase in net earnings is the benefit for income taxes of $18.1 million due to discrete items in the quarter, versus income tax expense of $17 million in the third quarter of 2013. Excluding special items, third quarter 2014 adjusted earnings from continuing operations was $50.1 million or $0.36 per diluted share versus adjusted earnings of $54.5 million or $0.40 per diluted share last year. During the third quarter, cash provided by continuing operations was $59.9 million versus $116.1 million in the prior year quarter, driven by cash from profitability and partially offset by seasonal working capital requirements in both segments. More importantly, we generated excellent results in terms of our cost savings initiatives, which resulted in over $12 million of product cost benefits, nearly $7 million of lower interest expense and approximately $26 million of tax savings. For the remainder of 2014, anticipated cash flow generation will be allocated to fund various growth and process improvement initiatives, as well as debt repayment. As previously communicated, we expect to reach a total debt-to-EBITDA ratio of approximately 3.5x by the end of the year. In terms of capital allocation, we remain dedicated to maintaining a strong balance sheet, while making prudent capital investments. As we continue to pay down debt, our lower leverage will enable us to evaluate our capital deployment…

Thanks, Carl. To conclude, we are operating in an unpredictable and stagnant global economy. While we can't control the broader markets, we will make opportunistic investments where we see the best areas for growth. Additionally, our focus will remain on becoming a more agile business that is able to succeed in the face of a turbulent market environment. The ongoing implementation of our cost initiatives, which will help us achieve our goals, will enable the company to take full advantage of improving demand through increased efficiencies on the manufacturing side as well as on the sourcing side. This concludes our prepared remarks for today. Randy, we will now begin our question-and-answer session.

[Operator Instructions] And we'll now take our first question from Andrew Kaplowitz from Barclays.

It's Vlad Bystricky, on for Andy. Can you guys talk about -- how would you characterize channel inventory in North America today? And maybe more specifically, did you see any incremental weakening in mobile hydraulic and boom truck end markets during the quarter and since? Or did demand just not pick up as you expected it to?

Andy, I'll take the first shot at that, and if Eric has anything -- to say anything. That's -- you're touching on what's the frustrating part of the whole dynamic here. You talk to end users, you talk about the years they're having, you talk to the Crane rental companies with -- and we mentioned it, the utilization rates and rental rates, the utilization, and then we look at the inventory in the channel. And that's where -- our expectation when we came out of the second quarter, we figured there was opportunity because it was on the low end. And I would say it's -- we have a range where we look at. It's anywhere from the middle end to the low end of that range still. And that's the frustrating part is some of our forecasts are based on what we see, the people we talk to and the expectations we have. And I think a lot of the people you talk to, I mean -- and Eric and I, and our people have had a lot of conversations with just different customers over the quarter as it hasn't come to fruition asking, why? And a lot of it is -- some of it, as we say, they're just not confident. The only thing they can see out is 4, 6 months, and that's not enough for a lot of them to turn our POs into purchases. So you see in some of our rental fleets that it's pretty much the same. It hasn't gone down. So that's why we -- I'll be honest with you, we sit and shake our heads sometimes, and you talk to the customers, they're having great years. And even had one customer say to me, out of the Midwest, he said, "man, we're just -- we're doing great. You guys must be having a great year," and all you can do is smile and laugh. I mean, that's -- because it is a different dynamic than what we've seen in previous cycles. And Eric, I don't know if you have anything to add?

No. I mean, you hit all the key points on the head. I think on an inventory standpoint, it's -- we're still pretty low in the channel, but we haven't seen the traction that we had expected before, Andy. On the boom truck side though, we were -- the total industry was down in North America by 11% at the end of Q2. And if you look at the end of Q3, it's -- year-over-year, it's down 15%. So we have seen on the boom truck side some kind of deteriorations. And our key business, total industry in North America is down 27%. So we haven't seen the end of the tractions. And as Glen mentioned, I mean, there is clearly a disconnect because we see the utilizations in the 80% for the rough terrains and still, the rental rates are not getting the traction that you should see in that kind of environment with that kind of utilization.

Okay, that's very helpful. Maybe stepping back more broadly and focusing in on the cost initiatives and operational improvement efforts that you have going on, do you think that, over time, as these take hold, that decrementals can be better than sort of the 30%-plus range, and then on the upside, when you see growth, could we see incremental margins be better than sort of the mid 20%-plus range on the upside as these initiatives take hold?

Yes, Vlad. That's absolutely what we're trying to get to, is to make sure that we're sizing the business at a reasonable level. Obviously, this is an industry, in our Crane business that is quite cyclical and the trick is to make sure that our capabilities don't necessarily get to the anticipated peak of the cycle, but that they're very efficient at the lower levels of the cycles. But then you still have the agility to get, and the byproduct of that from a margin standpoint should be that our decrementals will decrease and our incrementals will increase from where they have been

And we'll now take our next question from Charley Brady from BMO Capital Markets.

Just back on the comment that Eric made a moment ago on the industrywide for RTs, down 27% in Q3. What was that in Q2?

Charlie, this was -- this is for the full year, year-to-date end of August in actual fact; we didn't get September yet. So it's 27% down, but it's been -- this trend has been consistent quarter-over-quarter, I would say.

Okay, great. And just can we focus on the new order number for a minute. Obviously, a better number than we were looking for. But I wonder, can you comment on the duration of those orders? You commented a lot of it is going to get shipped in Q4. Does anything go beyond 12 months? And can you talk maybe about the makeup of that and what you're seeing on the crawlers and the towers? Is that continuing to kind of go up? Or is it flatlining out or going down?

There really isn't anything that we received in terms of orders that extends very far at this point. Obviously, when you look at the backlog, that's a different question, because we have the VPC in there that's really weighed to the second half of the -- of 2015, but the orders we received in the quarter were more along the lines of within -- delivery within 6 months.

Yes, and maybe I can chime in, Charlie, in terms of trains. Towers are exactly where we thought they were going to be. That means that the activity is keyed on the low side but exactly as we are forecasting now. You see more demands coming. Definitely, North America, if you talk to the rental channel, their rental utilization is extremely high. It's at 90%, 95% for towers, and they are going to invest next year. Their rental rates are really gone up and they are not very far from previous peak. Now the -- in the rest of the world, we have seen very good order intake and activity in the Middle East. And not only coming from Saudi Arabia, but coming from the whole core Middle East. And I would say in Europe, it's where we anticipated. It's flat on the very low level due to the situation in Europe.

Can you just make similar comments on the crawler market?

Yes, sorry. I forgot that piece of the question. Yes, crawlers continues to be a fairly good story. The large crawlers, this is definitely a positive for us. While we are not taking more orders right now, most of the orders we have are for the rental channels with end users, or whatever our users have ordered now, they have retailed those cranes. So I mean, it's a pretty good picture and we're very -- again, very excited to the valuable positioning counterweight and the receptions. Now everyone is expecting to kick the tires out in the field, and we have to start shipping, as you know, end of Q1, or starting Q2. The small crawlers have been very strong overall through North America, and we continue to see good order intake, and including also in APAC regions. So overall, I would say the crawlers is a decent story.

And we'll now take our next question from Seth Weber from RBC Capital Markets.

So just -- on the near term, the crane revenue outlook, I just want to circle back, I guess, to Vlad's question. Are you -- does the fourth -- the implied fourth quarter outlook, does that assume that some of the RT dealer restock that we kind of missed in the third quarter happens in the fourth quarter? And can you talk about your expectations for book and ship in the fourth quarter? And then my other Crane question is have you seen any back-off or cancellations related to the volatility in the energy markets?

I'll let Carl do a little on -- a little more on the -- what's translating from the quarter 3 to quarter 4. But I would say, to answer your second question, we've had a lot of conversations with customers about that also, on the price of oil as it was dropping. And quite honestly, we're not hearing anything back on those types of comments that projects have been delayed. I think to almost -- almost to the contrary, everybody's got their number that they're looking at as to what the price of oil has to be. And at that $80 price, it seems like a very doable number. There's a lot of projections that are coming out of the southwest part of the United States right now, and watching a lot of different studies and a lot of people are talking about maybe not a lot of change in 2015, but the expectation is for 2016. But who knows, again, on that? I mean, I think we've proven pretty well that it's tough to forecast. So I'm not going to jump on that bandwagon. But what we see in Q3 to Q4, I don't know that you -- again, a lot of the dealer inventory, but I would -- just because of what we see, I mean -- as I said in my first comments that this is the frustrating thing. You would see, if people believed that 2015 was going to pick up, they would be ordering for that part of the cycle, but -- which was the anticipation last year. I mean -- and so I think the dealer stocking we'll watch very closely. I think some other things that may change the dynamic in the fourth quarter that we've talked to some customers about is what's the confidence after next week's elections? I mean, do -- does anything change in the tax ramifications of the bonus depreciation? Is there a little more confidence in the direction of things? Don't know that I'm going to hang my hat on any of that. But again, it's conversations that take place. So Carl, if you want to add to that.

But just -- but Glen, just so -- so you're not assuming any kind of a big pickup in the restocking relative to kind of what we've seen here so far in the third -- in the second half, kind of -- so I think that was a big part of your adjustment to the guidance for the year, right, was this restock didn't happen. So I just want to make sure that, that's not something that's embedded in the -- in your fourth quarter outlook.

You're spot on. I mean, that's -- and that's what I said. When you looked at the second quarter, you believed people, had to. Didn't have to, but we expected them to make some of their adjustments to their inventory levels and they basically said, "I am comfortable where it's at." And at the low end of the spectrum. So yes, they haven't made that adjustment. And so that expectation is not there, to your point.

And, Seth, I chime in for the cancellations. There, we haven't seen any cancellations. And I would say to the contrary, in the Gulf area, some projects I've studied, when we discussed about so many projects being in the pipe, some projects are studied, okay, maybe they are more gas-related, but they -- we have not seen any cancellation.

Okay. And then if I could ask a question on the Foodservice margin, is it possible to put a number around -- so you're looking for 15% or so this year. The number, I think -- we started the year at a higher level, I think upper -- mid to upper teens. Is it possible to quantify how much of a headwind the Cleveland issue was to margin for this year, so we can get an idea what next year's ramp could look like?

Seth, it was over 100 basis points for us this year when you look at the costs that went in, as well as some inefficiencies as the factory was operating.

And we'll now take our next question from Mig Dobre from Robert Baird. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: I just want to clarify a little bit from Seth's question that, in Foodservice, if we assume product mix to remain the same and revenue to remain flat going forward, based on your cost stock -- actions and all the headwinds that you have with Cleveland that supposedly go away, how should we be thinking about margin here?

The -- obviously, we haven't provided any kind of specific guidance yet, as we're completing the business plan and typically do that as we announce our fourth quarter results, but I think the description that you gave of how we're looking at '15 is appropriate, given the earlier comment I made about managing a cyclical business to make sure that our expectations about what the markets are going to be are conservative, and that we are taking the cost action such that we can make the business operate efficiently. The elements that we saw is some headwinds for us. You mentioned Cleveland, but also product mix was pretty significant for us in Foodservice. And then obviously, you know about the big absorption hit that we took in Cranes that perhaps is going to be a little bit of a wild card on those 2 fronts. But the other kind of one-time elements are going to help us in that margin progression, coupled with some of the things we're focused on, on the cost side that will continue.

Yes, Mig, I would -- I want Bob to say a few things here because I think we have a pretty decent story on some of the items that we're working on that will be positive, and then I also talked about some of the headwinds. I think what -- we also didn't talk about on the headwinds, right now, just in the quarter, I mean, you had -- there's a little bit on some new product costs, which we have some -- and I don't want to call them rollouts. We'll call them new products that are coming out next year to the general market. And so the cost of that will be behind us. You have -- some of the benefits you have and the initiatives we've already talked about. And I'll say in Foodservice, because that's who you asked about, but in would be Cranes also, the savings that we've had from an organization standpoint that we've talked about this year, you get the full year benefit next year, which we only had in certain respects, 50% of those because they were done over time. So there are some things that turn into positives next year throughout the enterprise on some of the initiatives we've already taken. Bob, do you want talk about some of the...

Yes, I would like to maybe make a few comments. One is in the release, we talked about absence of any new product rollouts, and I just wanted to clear up confusion. That doesn't mean absence of new product introductions. When we refer to a rollout, we mean a chain rollout. It could be an existing product. It's an absence. Right now, there isn't any major chains that have a major rollout. Well, actually, we have one starting right now, but we had quite a few in the beginning of year that have slowed down. There are more tailwinds behind us right now than headwinds in front of us. Glen mentioned earlier the Convotherm 4. That, we've just started releasing this month. It was supposed to be out earlier this year, but now it's out and the factory's at full production. Majority of our SKUs transferring down to the Monterrey plant on ice are down there now, well over 90%. It will be 100% very soon. We announced the closure of our La Mirada foundry in California and moving it to Tijuana, which will be done in the early part of next year. KitchenCare, Glen mentioned in his remarks, is now -- all of the inbound parts are coming into the warehouse and all the outbound parts will start flowing out within the next 60 days. That will be done by the end of the year. In terms of products, we do have some exciting new products that are coming out. We have about a dozen big product programs right now. About half of those will be released, and then we'll bring about another 6 or 7 more in next year. We've got some fryer technologies that are coming out, particularly in some overseas markets. We do have one major…

Well, I mean, you're right, Mig. I think as you look at it historically, that's true, and it still holds true. But again, I think what you have from the mobile hydraulic side is, while those have that, it's the offset of what some of the absorption is on the mobile hydraulic side. And that's where -- we're looking at the actions in those areas to impact pricing that we're seeing on the RTs, very aggressive pricing on the RTs, and then also on the ATs in certain areas. So yes, I think when you put it all together, we'll still expect those new cranes that are coming out, I think, in 2015, should have a positive effect on margin as any increase in towers do. And we're trying to fight off and make adjustments to the mobile side of the business with respect to some of the other -- as we just got done talking, headwinds that you're seeing, I think, mostly from a pricing perspective.

And we'll now take our next question from Ted Grace from Susquehanna.

So I wanted to actually dovetail right into what you said, Glen, which is pricing has been challenging, particularly in the RT and AT markets. But could you maybe, you and Eric, talk about what are really kind of the broader competitive dynamics in the crane market? And maybe isolate it to RTs versus boom trucks, competitively, you talk about the market share numbers. Is Manitowoc outperforming those or underperforming those? Are you losing share? Are the -- you look at some of the currency dynamics could benefit, whether it's the Japanese or potentially Liber, do you see that as a challenge right now that could be impacting your numbers?

Yes, I think the -- for the most part, our market shares are holding okay in this market. The one that we have seen a little bit of falloff is exactly in the RTs, and I think it is a product, probably due to the exchange rate is what we believe, and that gets down to a pricing. But that's the conversation we've had is we're not going to sit back and just let it happen. I think we are going to take advantage of the areas that we think we need to, and at the same time, our entire organization knows that I tell everybody, you can't feed your family on market share. I mean, you can see what some of the results are from our competitors who have okay increases in sales and very slim or less increases in operating earnings. And so that's -- there are certain areas where you've got to protect, and there are certain areas you're going to let go. Sometimes the best deal you get is the one you don't take. And we need to be cognizant of that, and our people are doing it on a regular basis. But I think with respect to the other market shares, we're doing very well. And I think -- what happens in -- thinking about this just this morning, when you look at some of the dynamics competitively in the crane side of the business. This is like the third year in a row, Ted, where things were okay in the first half of the year, and we had a little bit of expectation in the back half, and like the third year in a row, the third quarter for us and every one of our competitors has fallen off in the third quarter. And I think when that happens, people that have a lot more inventory than we do get very aggressive, and that's what you see. So I think some of that is -- some of that's happening again. But I mean, we anticipate it. We watch for it, and we certainly can combat it. But Eric, I mean, do you want to add to that?

Yes, maybe I want to qualify a little bit more. In the Middle East and in Asia, we've lost market share on the rough terrains because of the yen, and the presence of the Japanese competition is very strong and they are well-established. We've lost a little bit in North America, but that's not really significant. In the boom trucks, though, while the market has been declining as well, almost 15% year-to-date, as I've said, we have gained market share, and this is thanks to some of the new products, like the NBT 40 and 50 that were launched.

Okay, and then just as a follow on, could you just walk through what the impact of currency was, both on revenue and profits for each of the 2 segments so we understand that?

Sure. From a currency standpoint in Foodservice, about $6.3 million on the sales line. And in cranes, not significant.

And on profits?

Total, about $1.5 million.

So total of $1.5 million. Okay, great. Listen, I'll get back in queue.

We'll now take our next question from Jerry Revich from Goldman Sachs.

This is Brandon Jaffe on behalf of Jerry. How should we think about the magnitude of the pricing and mix headwinds in the Foodservice business in the coming quarters?

I think as you look at what our track record is, we have, I think, done a pretty good job of getting the requisite pricing to cover at least the material costs, and then try to get that further margin enhancement by operational efficiencies. In the short term, yes, as with some of those steep ramp that we saw in, particularly in stainless in the quarter, that was a pretty significant headwind. But over the long term, I would say that we've done a pretty good job of making adjustments. I think that there are some things from an end market demand standpoint that are going to probably be some challenges for us to work through as we look forward. But from a pure price cost standpoint, market-driven issues, we hold our own.

Yes, I think in terms of -- I can also add to that. The Foodservice markets in general are continuing to rise, and with our results this quarter, we exceeded that market demand. It's just in terms of that product mix, selling more fryers and less hot holding, selling more blended ice and less carbonated soft drink equipment is -- was really dependent. And I don't really see any reason why that mix wouldn't continue to shift a little bit upward. We had a bit of a decline, particularly because some of the rollouts that we had earlier in the year were more skewed towards a higher weighting of those higher-margin products. We're starting to see other areas of the world that are interested in those same products. And we're also taking some measures to stimulate demand for the higher margin products, too.

Yes, and could you talk about the progress made on the Foodservice plant integration strategy and the extent to which there's some duplicative overhead costs in the quarter?

I'm sorry. I couldn't quite understand. Could you repeat?

Yes, the progress made on the Foodservice plant integration and the extent to which there are any duplicative costs in the quarter?

Well, the initiatives we have going on, I think -- we've talked about pretty extensively about Cleveland. And then we have announced the La Mirada closure into Tijuana. Those costs were minimal. Right now, I think you'll see most of it in the fourth quarter. And then the other one is really what's happening with respect to our facility in Monterrey. And you still have -- while it has gotten significantly better as we continue to put more product there, we'll get that benefit. So you still have some of the absorption, I would call it, as we keep using the word headwinds, but the more product that we put down there will reduce itself as you head into 2015 and beyond. But I wouldn't say there's a lot of duplicate of costs. There's a little bit on the ice side. But Cleveland, that's just what I would call an execution issue and not duplicative costs.

Maybe I can also chime in. Go ahead.

Yes, sorry. Please continue.

I was just going to say there, yes, there's another one where we are still continuing on our plant consolidation in Shreveport. We have 2 factories there that we're working on right now. And one other area in terms of that particular topic is our ability to have additional production in some of our low-cost country factories, particularly in Asia. We are asked to take more of the North American product and build it in Asia. And we have the ability to do that in existing factories over there, and those are continued initiatives. It's not moving the product over there. It's making the product over there so we save on shipping and other costs that could take cost out of the product that's sold in that market.

Great. And I just -- one final question. What regions do you see as the key geographies expected to drive crane order growth over the next year or so?

Well, I think it's probably the same as it is this year, in all honesty. It's probably going to be North America. I think there could be some in Latin America, but I think the Middle East is still okay. I mean -- but I think it's really -- you look at the rest of the geographies around the world, whether it's Europe, I think is flattish. I think China stays flattish. I think there may be some other parts of Asia and the rest of Asia. You talk about Korea or even Philippines, Singapore, some of those, the outlying countries of Asia. I think there's opportunity there. But again, it's not going to be a big hope in Russia. I mean, that's been a tough area for us this year. It has been for everybody, and I just don't know politically what happens there. So I think it's really kind of where we're seeing the bright spots today.

And we'll now take our next question from Vishal Shah from Deutsche Bank.

This is Jerimiah Booream on the line for Vishal. I was just hoping you could touch on the Crane segment and order visibility? And also, what kind of quotes or order activities you're seeing in the different categories?

Well, in terms of the order activity, again, we continue to see a lot of tractions on the crawlers solely [ph]. And I would say, small crawlers. I mean, our large crawlers are doing great. We expect the same trends in terms of towers. And we continue to be, of course, worried with the rough terrains and the boom trucks being -- given the trend that we've seen. TMKs [ph] is pretty steady overall.

And do you think that you'll be able to see visibility into 2015? Or how much of your backlog do you think could ship in 2015 at this point?

Well, obviously, the strong backlog that we have, as you know, is the large crawlers that we start shipping in Q2. That's really the big backlogs that we currently have for '15.

Yes, and the rest then kind of flows into the fourth and first -- first or second quarters of next year, and that's what we were saying earlier. It doesn't go out much past 6, 7 months. But to your point, in 2015, I'll say it again that, look, when you look at where our head is at, and Carl mentioned, we're not fully vetted around where we think some of the bottom line stuff is coming out, but I'm not -- when you read a lot of things that are happening, whether it's people in other companies in the construction industry or you read what else is happening, I don't know that we're going to forecast a lot of improvements in the markets. But what I can assure you of is the things that we've talked about in the cost initiatives and that we've put out there for our long-term targets, I'm very confident in our ability to look at those. So our big focus is -- we've certainly had a track record in the last few years of struggling to try to forecast where these markets are, and we're not the only one. So I'm not -- I mean, I'm not apologizing for it. I'm just telling you. We recognize that, hey, instead of being really good at forecasting, we just have to be more agile to be able to focus on getting the incrementals on the upside and minimizing the decrementals on the downside. And historically, we've done a good job of that. I think we've -- haven't anticipated this flat a market. If somebody would have told me that our key market was going to be down 30% this year at the same time last year, I would've challenged that assumption very heavily. But what I will tell you, the focus on the gross margin that we have and a lot of the sourcing initiatives, the LEAN initiatives, our people are laser-focused on that, and that's where we got everybody's heads around in 2015. And that's why, to Carl's point, we're still trying to find what the right target is for 2015, but we'll get there by the time we have another call.

[Operator Instructions] And we'll now take our next question from Steven Fisher from UBS.

This is Cleve Rueckert on for Steve. Just turning back to the Gulf coast projects and looking specifically at the big LNG and ethylene plants, when do those projects need cranes? And when do you think they're likely to get ordered? And just wondering, how much of those orders were part of ConExpo or earlier in 2014?

Yes, I don't think a lot of it was probably at the ConExpo phase. I think -- here are the comments that we get out of the Gulf Coast, it's not a matter of if, it's when. And that doesn't help us much in planning. So what -- we're trying to figure out the same thing as -- you want to be -- you want to make sure that our dealers and our customers are being taken care of. And they tell us a lot of times when there are activities that are coming up, for instance, I think Eric had a call yesterday with somebody that said, "Hey, this is what's happening. We're seeing some of the dirt business pick up on a bunch of projects down there." And the cranes will follow in, I would say, 6 to 9 months." What's that?

Yes, that's good.

Yes, I would say 6 to 9 months. And so at the same time, where people used to plan ahead and buy ahead, they listen to what we say, and they know that they don't have to put in an order 6 to 9 months. They'll wait 3 to 6 months, and then it becomes what's the availability? And so again, we talk to a lot of people that have focus on the energy markets in the Gulf Coast and where they believe the peaks and valleys are going to be. And as I said earlier, a lot of people are talking about '16 and '17, but as we're told very often, unfortunately, the short-term comes before the long-term. And that's what we're -- that's what we have to focus on right now. Keeping in mind that we need to position our business to make sure that we take advantage of those things long-term, we also know that we need to deliver on the short-term.

Okay, that's helpful. And then just turning back to non-res construction. The U.S. office construction category has been a pocket of strength this year, and I'm just wondering how much crane demand has been for that particular market? And is that driving new crane demand? Or is that construction still relying on existing fleet?

Yes, and that's a good question because, I mean, you pick up magazines like ENR, Engineering News-Record, and they put out their it's almost weekly or monthly report on the different markets. And yes, you'll see the non-res picking up a bit, but really, it's, to Carl's point, and I think Eric's point earlier today, the utilizations are very strong in the tower crane, and a lot of that is using existing tower cranes. Eric, do you have anything to add on that?

Yes, I mean, the rental channels of -- are happy with the residential -- non-residential because they have seen a lot of their cranes going there, and that's why they can display utilization levels, which have been good. And again, as I said, they see rental rates getting a little bit -- picking up in way of tractions. And overall, they will see the revenue growing. Now as an OEM, we feel a little bit frustrated because this has not translated into new crane sales so far. So that's really a frustration for us. But utilization, if you talk to the rental channel, they're very happy. They -- and they have improved from last year, and their forecast is it's going to be better in 2015.

Yes. You mentioned strong utilization earlier. What do you think is a peak utilization for the rental channel?

Well, typically, -- and again, typically, we'll -- we've seen in the past is anytime you start getting above 80% on the rental side, people are going to be buying for their fleets in the crane rental side of the business, which, again, is about 80% of our sales in North America to that channel. So if you see them at those levels, you'll have that. But I think where the disconnect is a little bit in this channel, even though utilizations are good, the rates started out pretty low, and from the bottom of the market. And to get those rates back, I think that's where people are a little uncomfortable buying and having the confidence that they get the returns that they're looking for on new equipment. So we're watching it. And I think that it just hasn't kept up with the utilization. And you would say to yourself, well, heck, if utilization's high, people should raise their rates. And that's a very legitimate question, and that's a lot of what they're asking in that channel themselves. So I think if you get that combination of higher rental rates, the utilizations continue to climb and the non-res market picks up, that's a -- that bodes pretty well for us to sell new equipment.

And this concludes the question-and-answer portion. I would now like to turn the call back over to Mr. Steve Khail for closing comments.

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

This does conclude today's conference. Thank you for your participation.