The Manitowoc Company, Inc. (MTW) Q4 2015 Earnings Report, Transcript and Summary

Steven C. Khail - Director-Investor Relations & Corporate Communications Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC Carl J. Laurino - Chief Financial Officer & Senior Vice President Lawrence J. Weyers - Senior Vice President; President - Manitowoc Cranes

Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker) Jerry Revich - Goldman Sachs & Co. Nicole Deblase - Morgan Stanley & Co. LLC Charley Brady - SunTrust Robinson Humphrey Chad Dillard - Deutsche Bank Securities, Inc. Steven Michael Fisher - UBS Securities LLC Michael D. Conlon - JPMorgan Securities LLC Michael David Shlisky - Seaport Global Securities LLC Mig Dobre - Robert W. Baird & Co., Inc. (Broker) Seth R. Weber - RBC Capital Markets LLC Ted Grace - Susquehanna Financial Group LLLP Larry T. De Maria - William Blair & Co. LLC

Good day, everyone, and welcome to this Manitowoc Company Q4 2015 Earnings Conference 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. Steven C. Khail - Director-Investor Relations & Corporate Communications: Good morning, everyone, and thank you for joining Manitowoc's Fourth Quarter and Full Year Earnings Conference Call. Participating in today's call will be Ken Krueger, our Chairman and Interim Chief Executive Officer; Carl Laurino, Senior Vice President and Chief Financial Officer; Hubertus Mühlhäuser, President and Chief Executive Officer of Manitowoc Foodservice; and Barry Pennypacker, President and Chief Executive Officer of Manitowoc Cranes. Ken will open today's call by providing comments related to our quarterly results and business outlook. Hubertus and Barry will then provide detailed overviews on their respective segments' performance and outlook. Finally, Carl will discuss our financial results for the fourth quarter in greater detail as well as providing initial 2016 guidance. Following our prepared remarks, we will be joined by Larry Weyers, Executive Vice President of Manitowoc Cranes, 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 For anyone who is not able to listen to today's entire call, an archived version of this call will be available later this morning.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 Ken begins his commentary, I would like to review our Safe Harbor statement. This call is taking place on January 29, 2016. 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 Ken. Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer: Thanks, Steve, and good morning everyone. Before I discuss the results for the quarter, I'd like to update you on our progress toward the planned separation of our Crane and Foodservice businesses. We continue to make significant progress toward implementing the spin, and remain on track to complete the separation during the quarter. Operationally, we are ready for the separation, with the sole remaining challenge being continued weakness in the credit markets. Carl will update you in a few minutes on our activities in those markets. I would also like to highlight the recent appointment of Barry Pennypacker as CEO of Manitowoc Cranes. Barry brings three decades of global industrial leadership to his new post at Manitowoc. His results-focused leadership style has transformed several complex businesses through continuous process improvements to deliver significant operational and financial performance improvement and increase shareholder value. Now let me shift gears and turn to our fourth quarter and full year results. For the full year, revenues declined 11.6% to $3.4 billion. On a GAAP basis, we reported net earnings of $63.5 million or $0.47 per diluted share. Excluding special items, adjusted earnings from continuing operations in 2015 were $96.8 million or $0.70 per share. Performance within Foodservice during the fourth quarter significantly improved. Fourth quarter operating margins were the highest since the mid-1990s when we were an approximately $100 million sales company. The business has decidedly turned the corner and we have a much stronger foundation on which to build as we move into 2016. Hubertus will provide more color in a few minutes. In Cranes, tough macroeconomic conditions, particularly in oil and gas, continue to put downward pressure on demand for our products. While we are seeing some stabilization in certain markets and product lines, our 2016 outlook assumes a relatively static environment given the uncertainty that exists globally. That said, as we stated last quarter, we believe operating margins have bottomed and the corrective actions we've taken over the past 12 months position us well to generate improved profitability, even with a flat top-line expectation. These actions should also position the company for improved operating margins as sales rebound. In summary, we are very pleased with the progress we are making in Foodservice. In addition, we expect the aggressive actions we've taken in Cranes, as well as the execution of Barry's strategy that you'll hear about shortly, will drive significant improvement in profitability. With that, I'll turn it over to Hubertus and Barry to discuss their respective businesses in more detail. Hubertus? Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Thank you, Ken, and good morning, everyone. As Ken mentioned, our fourth quarter results were pretty encouraging. The strong operating momentum we saw in the third quarter continued well into the fourth quarter and the announced simplification actions, right-size initiatives and improvements in KitchenCare have begun to finally generate meaningful results. In the aggregate, these initiatives fueled the impressive 570 basis points year-over-year and 200 basis points sequential improvement in our operating margins. From a sales perspective, we exceeded our internal expectations during the fourth quarter, driven by improvement in our KitchenCare business, but also continued strength in cold-side sales, particularly in North America and Asia, resulting from strong ice machine and blended beverage results. The softness on the hot side of our business that we experienced early in 2015 seems to be largely behind us as we generated significant traction with our key new products: the award-winning Frymaster, low-oil volume fryer, which made very strong inroads in North America and Europe; The Merrychef eikon e2s, which is geared towards convenience stores and quick-service restaurants or QSRs with smaller footprints; and the Convotherm 4, which is the best-performing combi oven on the market. As a side note, we're also very pleased that our Frymaster low oil volume fryer was recently chosen as the exclusive fryer to serve the Japanese market for a major QSR chain. This success demonstrates our ability to provide customers with truly innovative and differentiated products, which help them lower cost, reduce weight, and deliver a better meal to their customers. A last word on the top line. We are very encouraged by the recent trends within large chain restaurants in Asia, which are finally showing signs of stabilizing as their capital expenditures are beginning to return to more normal levels. Now, let's switch over to the operational perspective. We are on target with our announced right-sizing initiatives. The shutdown of our Ohio facility and the relocation of all products currently manufactured there is very well underway. At the end of December, we also completed the consolidation of our Irwindale distribution center into our facility in Covington, and we finalized the sale of our non-core Kysor Panel system business. Also, the announced head count reductions are mostly implemented and adds to the improved operating margin profile. Further, our 80-20 product simplification initiative is well underway, and we're also seeing progress in our strategic source initiative. The totality of savings from all our initiatives is reflected in our improved operating margin guidance that Carl is going to discuss in a second. As we move forward with these and other initiatives, we will continue to spend in important areas, supporting top-line growth and bottom-line growth, such as product and system innovations. Last but not least, we have also now completed our senior leadership team with industry-leading talent. John Stewart has been hired as our Chief Financial Officer, and John brings a wealth of knowledge to the Foodservice business with more than 20 years of experience in the food and beverage industries. John also led the Dr. Pepper Group IPO as Chief Financial Officer. His expertise will be invaluable in driving improved financial performance for the business. We're also very pleased that Rich Sheffer has joined John's team as Vice President of Investor Relations and Treasury. Rich brings deep experience to board's function, having previously served in the same role at Donaldson Company for 14 years, and many of you will know him. In addition to John and Rich, we have also hired Andreas Weishaar as Senior Vice President to lead our Strategy, Marketing and HR functions. I've personally worked with Andreas around the globe for more than 15 years and I'm truly excited about him joining Manitowoc Foodservice. So in summary, we have made significant progress executing on our strategy to drive margin improvement and to gain market share. We continued to work on additional areas to improve efficiency and reduce cost as we proceed with our business simplification and right-sizing initiatives, all of which will position us to grow profitably. As we move towards separating the two businesses, we are pretty optimistic about our future. With that, I hand it over to Barry. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Thank you, Hubertus, and good morning everyone. I'm excited to participate in my first earnings call as CEO of Manitowoc Cranes. Although I've been with the company less than a month, it is already clear to me that the Cranes business has a great potential, and there is significant opportunity to improve its performance. There is no question in my mind that while we continue to face some tough market conditions, there are still opportunities for growth and earnings. I've already begun to communicate what I refer to as the Manitowoc way. This strategy focuses on our three key stakeholders, those being customers, shareholders and employees. The goal is to create a culture that is driven by innovation and velocity at the core of every aspect of our business. Our lean initiatives are in their infancy stage, but rest assured in the coming months, it will become obvious what we are doing and we will communicate the impact of this program on our results for all to see. While improving the margin profile of the business, we need to ensure that our industry-leading position with regards to innovation remains in place, and in a number of cases, accelerated to stay ahead of the competition. We will be introducing multiple new products and technologies at the bauma show in Munich in April that will underscore Manitowoc's technical leadership. Going forward, we will sharpen our focus on developing new products that deliver fundamentally more value to our customers and enhance our brand. This culture of innovation will result in a strengthened competitive position and more compelling growth opportunities for our Crane business, both from an end-market and customer standpoint. In fact, let me tell you about an effort that we began this week. We have formed a team of 10 full-time people to develop a next-generation crane in three months and bring it to market three months later, so a total of six months to develop and deliver this game-changing product. We have listened to our customers and we will incorporate all their feedback into this new design. In fact, a number of them will be asked to participate throughout the six months to make sure that we are on the right track, but more importantly, allowing them a sense of ownership upon the introduction. This is product development the Manitowoc way. There's a significant opportunity for us to further apply lean principles, and in doing so, become a more agile organization that's able to react more quickly to our customers' changing needs and operate profitably in any demand environment. To that end, we will pursue key initiatives to enhance operational efficiency, rationalize our capacity, and leverage our procurement. As a result of these efforts, we expect to generate double-digit margins in the future, regardless of top-line performance. I know you're wondering when this will occur. Give me a few more months to develop the plan in which time I will provide a roadmap for our future earnings expectations. Over the last few weeks, I've had the opportunity to visit with a number of our customers to personally listen to their needs, and to get their feedback on how we're doing. I have a great deal of optimism and enthusiasm, and firmly believe in the long-term growth opportunities that lie ahead. I'm confident that we're on the right track and look forward to executing on the necessary changes to bring about long-term, sustainable earnings growth and shareholder value. Now let me turn the call over to Carl for a review of Manitowoc's financial performance. Carl? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Thanks, Barry, and good morning, everyone. We've reported net sales for the fourth quarter of $935 million, which is a decrease of 9.9% from a year ago. GAAP net income for the fourth quarter was $43.8 million or $0.32 per diluted share versus net income of $33.6 million or $0.25 per diluted share in the fourth quarter of 2014. Our fourth quarter results included restructuring and asset impairment charges associated with our efforts to improve performance totaling $12.4 million and $24.4 million respectively. These charges have resulted from consolidation and rationalization efforts in both segments, as well as corporate, encompassing our global operations. Excluding special items, fourth quarter 2015 adjusted earnings from continuing operations were $59.7 million or $0.43 per diluted share versus adjusted earnings of $37.5 million or $0.27 per diluted share last year. During the fourth quarter, cash generated from continuing operations was $171.8 million compared to cash generated from continuing operations of $237.6 million for the fourth quarter of 2014. The decline was primarily due to lower sales, product mix and resulting lower profitability. Total debt reduction of $223.6 million was enhanced by $78.2 million in cash from the sale of Kysor Panel systems. Turning to the results of our two businesses, fourth quarter Crane sales totaled $543.1 million, down 18.1% from $663.2 million a year ago. The decline was most pronounced within several mobile crane categories, most notably our rough-terrain cranes and boom truck product lines. Conversely, we saw tower crane demand improve in Europe, fueled by improving residential and commercial construction trends. Crane operating earnings in the fourth quarter were $24.1 million versus $45.3 million last year. This resulted in a fourth quarter operating margin of 4.4% compared to 6.8% last year. The margin decline was fueled by continued under-absorption as well as ongoing pricing pressure, driven largely by currency headwinds. These factors were only partially offset by ongoing operational efficiencies and cost reductions. As Ken mentioned, operating margins improved from third quarter levels as a result of the cost cutting initiatives we have undertaken and will continue to implement. We expect further improvement in our operating margins, even in the face of flat sales. Crane backlog at quarter end was $513 million, down from the fourth quarter 2014 backlog of $738 million, reflecting a book-to-bill of 0.8 times. Fourth quarter new orders of $424 million decreased from $686 million in the year-ago period, but improved sequentially by 26% over the third quarter. Foodservice sales in the fourth quarter of 2015 totaled $391.7 million, up 4.7% from the prior-year period's $374.2 million. Sales were driven primarily by continued strength in cold-side products, particularly ice, as well as in KitchenCare. We also saw a modest uptick in hot-side sales and large chain sales firming. Fourth quarter 2015 operating earnings in Foodservice grew an impressive 51% from the prior year to $72.7 million, which resulted in an operating margin of 18.6% compared to 12.9% for the fourth quarter of 2014. The improvement was largely driven by the impact of right-sizing initiatives, product line simplification, and improved KitchenCare efforts previously discussed. As we noted in our press release, our full-year outlook is as follows, beginning with Cranes: revenue approximately flat, operating margin approximately 4%, depreciation between $45 million and $50 million, amortization expense between $3 million and $4 million, capital expenditures approximately $55 million to $65 million. For Foodservice: revenue up 2% to 4% on an organic basis, operating margin 16% to 17% on an organic basis, depreciation $21 million to $24 million, amortization expense $30 million to $33 million, capital expenditures $23 million to $27 million. The guidance figures included incremental costs associated with separating into publicly-traded companies of approximately $30 million for each company on an annual run rate basis. For Foodservice, this outlook also nets out 2015 sales of $122.1 million and operating income of $12.8 million from the divestiture of Kysor Panel. Thus the 2015 pro forma operating margin for Foodservice would be approximately 13.6%, factoring in the KPS removal and corporate dyssynergies addition. Similarly within Cranes, adjusting for the incremental cost, the operating margin in 2016 would show more than 200 basis points of expansion over 2015. We continue to anticipate that our total pre-tax separation expense will aggregate at $130 million to $140 million. The majority of these expenses, most notably debt breakage cost and financing fees, will be realized at closing. I will now turn the call back to Ken for some closing remarks. Ken? Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer: Thanks, Carl. We've made great strides to realign and rationalize both of our businesses. That said, we are continuing to work hard to position them for future success as we march toward the planned separation that will create two industry-leading, publicly-held companies. This concludes our prepared remarks for today. Kim, we will now begin our question-and-answer session.

Thank you. We'll go first to Jamie Cook with Credit Suisse. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Good morning. Can you hear me? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Yes, we can. Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer: Yes. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Hi, Jamie. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Oh, hi. Good morning. I guess my first question, I guess, would go to Barry just because you're new and you will become the CEO of the Crane business. I guess just a bigger picture question in terms of what attracted you to the Crane business. Why you think the Crane business should be a standalone business or perhaps you don't longer-term? And then I guess the other question is, I think in your prepared remarks, you mentioned the Crane business being able to generate double-digit margins in a less robust cycle versus previous. What gives you that conviction level? And what are your assumptions around the competitive market in particular with the Zoomlion-Terex recent announcement? Thanks. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Wow, that's a lot. Let me try to peel that onion a little bit at a time, Jamie. What attracted me to the position was, I've been an operationally-focused CEO in my prior life and my prior jobs. And when I look at the Crane business here at Manitowoc, along with the discussions with the Board, I think this is an operational turnaround business that requires some leadership with regards to how you implement lean principles and drive margin expansion at the same time. And this is a great opportunity. The global footprint is too large, as I think everyone knows. When Carl did his prepared remarks, he talked about under-absorption. A way to look at under-absorption simply is that we have overcapacity. And we will be addressing that very quickly here in the next few months. And as we do, we will be very forthcoming with what those costs will be and what the returns will be so that you can track our progress with regards to our overall implementation of The Manitowoc Way. The company is a – it is a great company. It's a great business that needs some improvement in a number of areas, which we will continue to recognize and deal with. The brands that we have in the portfolio are very well recognized globally as leaders, which is always a good thing to attract a new CEO with regards to trying to turn the business around. Our dealer network that we have in the U.S. and globally is the envy of all of our competition. And so, they are very dedicated to Manitowoc. Most of them are exclusive to Manitowoc, so they are very important to our long-term future. And I'm absolutely convinced that after my first four weeks here, that lean implementation will in fact drive substantial results for the future. Which leads to, I think, your final point of my commitment to double-digit earnings growth here regardless of what happens with the top line. I am absolutely convinced that we will have the ability to do that. And with regards to the Terex issue, I really don't have any comment on that because quite frankly, I have a business here that needs to be turned around. I have a business that has a substantial opportunity for new product introduction this year, that we have to ensure that we focus on and deliver on time in order to get some of the growth that we're counting on in the latter part of the year. So quite frankly, we're concentrating on the things that are within our control, which are the things that I just mentioned. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): All righty. Thanks. I'll get back in queue.

We'll go next to Jerry Revich with Goldman Sachs. Jerry Revich - Goldman Sachs & Co.: Good morning. Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer: Morning. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Morning. Jerry Revich - Goldman Sachs & Co.: I'm wondering if you could talk about in Foodservice, obviously nice progress there and we see your targets for 2016. Can you update us on your longer-term cost reduction opportunities beyond this year? Where do you stand on the key initiatives that you've spoken about on prior calls that are longer-term focused? Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Well, we've given guidance now for 2016 and we don't want to give guidance beyond 2016. And we stated also that our long-term aspiration is to go to industry margins, industry average margins. And we believe that the initiatives under the header of simplification and right-sizing will bring us there. Plus the innovation that we have brought to our business will drive the top line. So we are confident that aspirationally we can achieve what we want to do. Jerry Revich - Goldman Sachs & Co.: And Hubertus, manufacturing consolidation as well? I didn't hear you list that. Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Yeah, rightsizing is, for me, manufacturing consolidation. And as we have said, we have overcapacity. We feel that with the announced measures, we have addressed a very good portion of that. If we conclude those rationalizations successfully, we might want to announce more consolidation going on, but for the time being, this is what we have announced. Jerry Revich - Goldman Sachs & Co.: Okay. And then to switch gears to the Crane business, I'm wondering if you could just flesh out your regional outlook a little bit more so to get sales flat for 2016. Can you talk about which regions do you expect to drive growth for your business? Which regions do you see as challenged for 2016? Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Yeah, I'll start that and then I'll turn it over to Larry to give you a little bit more color. But from my perspective, what I'm currently seeing is that in the Middle East and Africa and some of Asia, we're seeing a substantial increase in tower cranes, which is a good sign for us and consistent with some of the macroeconomic conditions that have already been communicated. In the U.S., it's a mixed bag. We are still challenged, but I'm also encouraged by some of the new products that we're going to be introducing at bauma in April, that should help drive some growth for us in the second half of the year. Larry, you want to add anything to that? Lawrence J. Weyers - Senior Vice President; President - Manitowoc Cranes: Yeah. Just to reiterate what Barry said, I think that the biggest change we've seen from Q3 is the significant order activity on both self-erecting and top slewing tower cranes, probably to a level that we haven't quite seen since 2008. And it's clearly not oil-related. It's high-rise apartment, residential construction. And the positive sign there too is it's within some of the core markets in Europe: France, Germany, that we haven't seen, as well as the U.S., Korea, Vietnam, Australia. So, while we have obviously headwinds with some of the mobile crane RT and boom truck, the impetus on this tower crane order trend is positive. So, some of the ins and the outs, you kind of end up back at flat revenue.

...take your next question from Nicole Deblase with Morgan Stanley. Nicole Deblase - Morgan Stanley & Co. LLC: Yeah. Thanks guys. Good morning. Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer: Hi, Nicole. Good morning. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Hi. Nicole Deblase - Morgan Stanley & Co. LLC: Hi. So my first question is around the Foodservice margin guidance. And Carl, can you first confirm to me that you said that the 13.6%, was that Foodservice margin in 2015 if you were to include the company cost like on a pro forma basis? And then if that's the case, what's giving you guys conviction in expansion to 16% to 17% next year? How much of that is kind of underwritten by cost-cutting action? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Yeah. You're exactly right, in terms of what the 13.6% represents, it's a back-out of the Kysor business as well as the corporate dyssynergies, I guess they call it. And in terms of what drives the margin expansion, yeah, I think Hubertus can talk to that. Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Yeah. What drives it is the rightsizing and the simplification actions that we have announced already in the last call, and we're basically delivering against those promises that we have made. We started to deliver in the fourth quarter, and we continue to deliver into next year, and these initiatives will drive $50 million of bottom-line improvement, roundabout, that's what we're guiding to. Carl J. Laurino - Chief Financial Officer & Senior Vice President: There is one other thing to mention there, Nicole, and that is, obviously, we did have some execution issues in 2015 that we have addressed, and that will contribute to the margin expansion that we're able to generate year-over-year. Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Plus, we have established now, I think, a very, very strong team, under the leadership of our COO, Josef Matosevic. The sales and the operations team are working perfectly well hand-in-hand. It's really a nice team effort and we feel comfortable about our guidance. Nicole Deblase - Morgan Stanley & Co. LLC: Okay. Got it. Thanks. That's really helpful. And then my second question is around the Crane business. So, the debt was announced today, it seems to me that you're putting about two times leverage on the Crane business based on what I'm backing into for EBITDA for 2016, and I guess I'm just curious. What gives you comfort with putting that much leverage on such a cyclical business? Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Well, yeah. Obviously, we've been at higher levels. We would kind of view the EBITDA levels as certainly at low levels through the cycle, no question about that, and that's been demonstrated if you look back over time. And it's a business that does generate significant cash, even when the markets are difficult. So, we feel good about where we stand. And without commenting on the EBITDA conclusion, because obviously that's going to be subject to a little bit of interpretation as you think about the differences between segment EBITDA and public company's EBITDA. Carl J. Laurino - Chief Financial Officer & Senior Vice President: I think if I had one thing to add, what brings me a certain level of comfort is that as we continue to progress with The Manitowoc Way, we'll see substantial improvement in working capital.

We'll take our next question from Charley Brady with SunTrust Robinson Humphrey.

Hey, thanks. Good morning, guys. Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer: Hey, Charley.

Can we just talk about Cranes for a second? I just really want to understand a little bit better the Crane guidance for flat Crane. And I know you're saying towers are great now, and that's really up a lot. But look, at the end of the day, orders of $513 million or $424 million in a quarter were down 38% year-over-year. We know fourth quarter is always sequentially a very strong uptick from Q3. How do you get to a flat number? Are you expecting, can you give some commentary around what you're seeing on crawlers? And maybe what's your expectation on RTs? Are you expecting them to flat line out and maybe tick up in 2016? I'm just trying to understand the math to get flat numbers, even if we have a strong tower market, which I would argue is probably partially reflected in the orders we saw in Q4. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: That's a very good question. And let me try to give you some of our current assumptions and thoughts around that order rate. Thus far in January, our number of units are up substantially year-over-year, which provides us some level of comfort that in some of the markets that we expect the turn for the order rate that we put forward in order to make our guidance is, in fact, trending the way it should. We are expecting a substantial increase as a result of the products that we will introduce at the bauma show. If you look at our historical order rate and you look at the effect of CONEXPO as well as bauma, you can see the following quarter where we've had a substantial uptick in orders. And I think this year, based on the product portfolio that I've reviewed so far, should be no exception to that. Also, we have a substantial military order that we are not allowed to put in our backlog as of yet, simply because we have to deliver three prototypes to – in order to satisfy the letter of intent before that actually hits our backlog. So, we're relatively optimistic about flat orders. But what I said in my prepared remarks, I am absolutely resolute to that if we don't have flat orders, we certainly will meet our guidance with regards to earnings.

Okay. Thanks. And just as a follow-up, just on the – sorry, go ahead. Lawrence J. Weyers - Senior Vice President; President - Manitowoc Cranes: This is Larry. I think the one thing, Charley, when you talked about our expectations, the RT market, globally, was down 22% year-over-year, and North America was down 32%. And our assumption does not assume that we're going to see an improvement in that market as we look at our plan for 2016. Boom truck market was down 43%, and in our expectations, we perceive that to be flat, especially for the large population of, what I would call, short-boom oil field cranes in the market. I think the offsets to that is the crawler activity is good with the VPC cranes. The AT market continues to – we see a little bit of order improvement. And obviously, the tower cranes are running way ahead of what we would have expected. And we're also seeing some different, larger deals in markets like Kuwait and Egypt, Turkey, Panama and Thailand. So, there's different pockets of the pluses and minuses that get us back to neutral.

Okay, just as a follow up. On the Crane margin, in your assumption, how much of that improvement or flattishness is due to the suspension of operations in Brazil? And has a write-off been taken for that facility at all? Carl J. Laurino - Chief Financial Officer & Senior Vice President: The answer to the latter part of your question is, yes, it has. That is part of the asset impairment that we took in the fourth quarter. And the expectation for margin expansion is certainly heavily contributed by the consolidation activity that we've embarked upon including Brazil, but also other locations.

We'll take our next question from Vishal Shah with Deutsche Bank.

Hi. This is Chad Dillard on the line for Vishal. Thanks for taking my question. So, can you give an update on where you are with sorting out the VPC manufacturing issues? Is it already taken care of in the fourth quarter? Or should we think about some margin drag into 2016? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Yeah. I think we're over the hump with VPC manufacturing issues. And the level of revenue that we expected to ship in the fourth quarter, we were able to do. And that's one of the reasons why our backlog has substantially reduced.

Okay. And then also, can you give an update on where you are with the cost saving initiatives? What percentage are you complete? And then how much are you baking into your 2016 expectations for both businesses? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Yeah. Look, certainly part of the margin expansion that we were able to generate in the – or the decremental margin and the sequential increase in margin was driven by realizing the savings that we expected to see in 2015. And the margin expansion is part and parcel; I think it's fair to say with a month on the job that Barry has got some things that he's looking at that will probably change the picture a little bit. That, I think, will be essentially a forward look as to what the opportunities are. And as he stated in his prepared remarks, we'll get a little bit more granular about those in the intermediate terms as we lay those plans down. But in terms of the historical aspects of the cost savings that drove the 2015 margin performance as well as our guidance for 2016, well in hand.

And we'll go next to Steven Fisher with UBS.

Thanks. Good morning. Barry, you mentioned the six months to bring a brand-new product from idea to market. How are you balancing the preference for bringing these products to market quickly versus getting the product into launch exactly correct? Because I think historically, execution on these things has not always been perfectly smooth. And I'm sure you are absolutely trying to build long-term customer confidence. So, how do you balance that? Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: That's an excellent question. If you recall, I said that I spent a good portion of my time over the course of the last four weeks meeting with and talking to our customers. And it's very obvious to me that one of the issues we have is within the ability for us to be on time with a new product that allows our dealer network to fully enjoy the ability to sell those features prior to some of our competition knocking them off. This product that we're developing is in fact an immediate market need that we have recognized as a result of meeting with our customers. It is in fact a breakthrough for us to do this in six months. We have elected a team in our Shady Grove facility of 10 of our elite people with regards to multi-functional team. They are in place. They started meeting on Wednesday of this week. I have already gotten reports from this group after two days of meetings that indicate that we are in fact on the right track. And I'm absolutely convinced that when you take great people and give them a process which we have done on how to develop and build a product in an expedited way, you take good people and you give them good processes, you're going to get great results. And to do this in six months is a great result.

Okay, that's helpful. And then what targets do you have for Crane Care in 2016 and maybe what's the next steps for it beyond as you think about medium and long term? How do you view what the right mix of parts and services versus original equipment is in your view? Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Yeah, Crane Care is an opportunity for us, the way I look at it. I think Crane Care finished below 20% of our total revenue in 2015. I'd like to see that north of 30%, not only because it carries a very good anti-cyclicality for us, but as you know, the aftermarket generally has much higher operating margins and we would like to see that become part of our product portfolio. And I think you'll see as time goes on here that we will organize around that. We will source that appropriately, and we will change the margin profile of the business as a result of helping us grow the aftermarket.

We'll take our next question from Ann Duignan with JPMorgan.

Hi. Good morning. This is Mike Conlon on for Ann. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Hi, Mike.

I just wanted to follow up on one of the other questions. You closed a facility in Brazil during Q4. Is there any risk that their product, that there's products from that region that flow into other regions putting additional downward pressure on demand? Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer: No. We're not concerned about that at all. Carl J. Laurino - Chief Financial Officer & Senior Vice President: No, the – no. Because of the import duties and the taxes that are between the countries, it's not an issue.

Okay. Thank you.

Go next to Mike Shlisky with Seaport Global.

Good morning, guys. And Barry, good to hear your voice again. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Yes, hi, Mike. How are you?

Good. What you said sounds (43:10) awfully, awfully familiar. I guess, I wanted to touch briefly, Barry, I know it's only been a month or so, but do you sense in your kind of travels around the company's facilities, there's any kind of like major cultural overhaul that has to be done here at the company? Or is it really more about getting people simply to focus on their tasks in the facility to kind of get things done faster or with a lot less movement or parts or things like that? Can you give us just kind of a sense of the scale of what you're trying to kind of do here? Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Yeah, I think it's an excellent question. And what I would say is that yes, the culture here is going to change because quite frankly, the operating margin profile of the business over the course of the last five years is just not acceptable when you're trying to create a world-class crane company. So the margin profile, in and of itself, indicates that there's going to be a cultural change. And that cultural change is going to be that we're going to do things according to what our customers want and not what we want. And I will say that that culture isn't for everyone. And there will be some people who just cannot adapt to the new way of operating and they will unfortunately have to leave the business and find another way to make a living. But we will in fact make sure that the people who are here; we're going to invest in them in training. We're going to give them every opportunity that we possibly can to try and make sure that they do things the way we need them done in order to satisfy not only our customers, but satisfy our shareholders and ultimately our employees also. And that change will in fact happen.

Great. And my follow-up is on the fast-track product development cycle you've got planned here. Is there any kind of risk here about things that are kind of maybe out of your control, like getting safety certified, trying to certify the wear and tear on exposure to the elements, et cetera, over a six-month period? Or is what you know about how those processes work still within the six-month period? And then I also want to ask how fast were you guys in the past developing your products in cranes? Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Yes. The product that we're currently developing would've typically taken two years to develop and introduce to the market. When you use Lean product development techniques and say that you're going to cut the time down by 75%, as we're doing in this case, of course, you cannot have a substantial amount of bottleneck technology that needs to be developed in order to do so. But there is a lot of technology that has been developed across our entire product line, from crawlers to RTs to ATs to tower cranes, that can be brought into this new product as non-bottleneck technology that can be applied very quickly and become a product much quicker than what we've done in the past. So I'm absolutely convinced that with the team that we've formed and the follow up that I'm doing every week with them, we will in fact make this happen.

Your next question comes from Mig Dobre with Robert Baird. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Yes, thank you. Good morning, everyone. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Good morning. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Carl, this for you is – just one question, some clarification for my benefit, if you would. At the midpoint of guidance for both Foodservice and Cranes, what exactly is the guided EBITDA number? Can you help me with that? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Well, yes, the guidance we gave are essentially based upon the standalone company on a 12-month perspective. So with the dissynergies associated with making that separation, we're under, again, 12-month, not necessarily exactly what will happen in 2016, given the calendar, would be a little less than $100 million in our Crane business from an EBITDA standpoint. In Foodservice because it's kind of laid out there with you under the guidance that we gave on an organic basis, you're talking about... Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Just adding $21 million to $24 million depreciation, you add that to your operating margin and you're there. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Right. Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer: Mig, I just want to make an observation. While all that math works, giving the guidance in terms of an operating margin percentage was purposeful. And that means that we're committed to hitting those operating margins irrespective of where we find ourselves with the sales volumes. So not sure if you were asking that question, but I just wanted to comment that the margin percentage was a purposeful effort, so is our commitment to hitting those margins despite sales levels. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Sure. I appreciate that. It's just I'm trying to get to clear my mind as to whether or not your operating margin includes or excludes amortization and whether or not Crane is going to experience $30 million worth of public company costs which to my understanding that was not the case previously. Carl J. Laurino - Chief Financial Officer & Senior Vice President: You're correct. It's inclusive of all the costs in both businesses. And the operating earnings does include amortization. It's before amortization, essentially. Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: It's before amortization, it's EBITA. Carl J. Laurino - Chief Financial Officer & Senior Vice President: It's basically EBITA. Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Yes. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Okay. And what about the second portion, the $30 million worth of cost in Crane? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Yes, that's in. Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: That's in. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Okay. Thank you, guys. Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: It's all within the Foodservice guidance.

We'll take our next question from Seth Weber with RBC Capital Markets.

Hey. Good morning, everybody. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Good morning, Seth. Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Good morning.

Wanted to go back to the footprint rationalization discussion again, if we could. This is a business that at one point did about $4 billion of revenue, the Crane business. So how are you thinking about what's the right size for this business going forward? Maybe can you tell us what your capacity utilization is today? And what do you think is really the right size for the business? Are there opportunities? I'm sure there's opportunities with Lean and what not, but are there opportunities for maybe outsourcing to go more asset-light, or can you give us more color there? Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer: Hey, Seth, you're absolutely right. We find ourselves in a position where the volumes where we're at not having really reflected what's happened in the marketplace through the cycle, but it gives you an opportunity to step back and say, as a general model, we ought to be at about 80% one-shift capacity when we're in the trough of the market. We weren't there. We aren't there, and that's part of the effort that you saw in the last couple of announcements on the restructurings. That allows you the opportunity to put on a second shift as you move up the cycle, and ultimately as you get to the peak, you start going into the outsourcing and the contracting arena. So, yes, we're essentially trying to size this thing so that when we're at the trough we're operating our plants at or above 80% on one shift, then adding a second shift, then adding some outsourcing and contracting as we get to the peak and that's the model we're pursuing. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: And just as a follow up, as a Lean practitioner, the word underabsorption is taboo, because quite frankly I don't even know what that is. However, we will in fact make sure that the business is sized according to the revenue levels that we have, and remember we're in the infancy stages of Lean introduction here. And as we continue to proliferate Lean throughout all of our organization, we're going to find just like we found in many instances in the past that we can do a heck of a lot more with a lot less.

Sure. So I guess what I'm trying to get at is do you envision that this business can get back to almost a $4 billion revenue run rate at some point, or is that just an extraordinary occurrence and you're working towards a lower number than that? Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Well, I'm going to size the business according to what customers' needs are. And we'll make sure and I think what Ken said is right on the money. We're not going to size and take the infrastructure and the business down to the current levels of revenue. However, we are going to size the overhead and make what typically has been fixed overhead variable.

We'll take our next question... Kenneth W. Krueger - Interim Chairman, President & Chief Executive Officer: Seth, Kenneth. To your point, one of the, I'll call it an innovation but one of the things we're doing is in our Passo Fundo plant, we're actually mothballing it. So we are suspending operations there. To your point, if we ever get into a situation where the South American demand picks up to the point that we need it, that will be available to us in the future. But we made the decision that in the interim we need to just keep the fixed cost down to a minimum and shutter that plant for a period of time.

We'll take our next question from Ted Grace with Susquehanna.

Thanks, guys. Let me begin by saying congratulations to Barry. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: Thank you. I appreciate that.

Sure. Shifting gears, couple questions on Foodservices. Hubertus, could you perhaps maybe decompose your 2016 growth expectations? I know you're talking about 2% to 4% organic. Can you help us appreciate how you're thinking about cold? It seems like the momentum's been there more recently, but it sounds like maybe you think hot could be coming back. How to think about new product introduction, the contributions from NPI in 2016? And how you're thinking about pricing and FX headwinds, just as we think about that forecast? Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Yes. I'm happy to do that. Well, regionally I think it is across the board growth. It's growing with the market in all America and outgrowing Europe and APAC. I think we have the potential to gain market share there. If we look at the size, you mentioned it. We've been a bit shy on the hot side this year. So I would see a bit more growth on the hot side and continued growth on cold side. But relatively hot will be growing a little bit more. And then you mentioned innovation. I see us as the most innovative company in our industry space. So the new product introductions that we've planned for this year, which are north of 20%, will add around 20% to 30% to our sales mix for this year. That's kind of what we're seeing.

Sorry, could you just clarify that, the 20% to 30% of the growth will be new products? Just want to make sure I understand that. Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Yes. That's what we think. And we've been traditionally around a bit shy of 20%. But what we have in the pipeline right now, we feel very comfortable that we're going to have a very, very fresh and updated product line. And we see a lot of growth coming also in the whole area of our fitKitchens initiative, which is the outfitting of the entire kitchen for convenience stores mainly. And the KitchenConnect. The whole concept of industry 4.0 that you have in Europe is going to come from the kitchen. Kitchen 4.0 is at our doorstep, and we are at the forefront of that development. That's going to drive sales.

We'll take our next question from Larry De Maria with William Blair. Larry T. De Maria - William Blair & Co. LLC: Hi. Thanks. Good morning. Just couple questions. First, what are your assumptions on pricing for the businesses? And what kind of competition are you seeing on pricing given the currency dynamics? And then secondly on Cranes, what's the organic growth we're looking for, for Cranes? And how do we think about the first half versus second half split in sales, because it sounds like it's obviously mostly geared towards the second half after bauma. Thank you. Hubertus M. Mühlhäuser - Senior Vice President; President & Chief Executive Officer, Manitowoc Foodservice Inc.: Let me take on the pricing because I didn't answer that in the other question as well. We see that our competition is not on price. It's total cost of ownership and innovation. And that is rewarded by our customers. And so this is basically also what we then see in our margins. And our consumer value that we reinvest a lot of the margin that we make into innovations for them that benefit them. So therefore we don't see a lot of pricing pressure right now. Barry L. Pennypacker - President & Chief Executive Officer, Manitowoc Cranes LLC: No. We see pricing pressure particularly in the rental market. And we don't see any dynamic that would indicate that that's not going to continue with the current utilization rates through 2016. We do believe, however, that in order to grow in this environment, we have to have a better mousetrap and we're going to prove through our product development that we're doing that we will have a better mousetrap. One of the things to consider, and one of the things that's driving our product development and innovation activities here is that these cranes, as you know, are very heavy, and they require a substantial amount of effort to transport across the roads in U.S. and Europe. And anything you can do to take tens of thousands of pounds away from a crane and still be able to lift according to the profiles that are necessary is really something that our customers are willing to pay for. And our development activities and our innovation activities that we have going for this year are aimed strictly at that.

Ladies and gentlemen, that concludes today's question-and-answer session. Mr. Khail, at this time I will turn the conference back to you for any additional or closing remarks. Steven C. Khail - Director-Investor Relations & Corporate Communications: 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 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. This concludes today's call. Have a good day.

That concludes our conference. Thank you for your participation.