The Manitowoc Company, Inc. (MTW) Q1 2016 Earnings Report, Transcript and Summary

Good day everyone, and welcome to this Manitowoc Company Q1 2016 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 Ion Warner, Vice President of Marketing and Investor Relations. Please go ahead. Ion Warner - Vice President, Marketing & Investor Relations, The Manitowoc Company, Inc.: Good morning, everyone and welcome to Manitowoc's first quarter 2016 earnings conference call. We're glad you can join us today. With me today is Barry Pennypacker, our President and Chief Executive Officer; and Carl Laurino, Senior Vice President and Chief Financial Officer. On today's call, we will provide details of our first quarter 2016 performance as well as our full-year business outlook. Following our prepared remarks, we will be joined by Aaron Ravenscroft and Larry Weyers, Executive Vice Presidents of the company. For anyone who is not able to listen to today's call, a recorded version will be available later this morning. Please visit the Investor Relations section of our website at www.manitowoc.com to access the replay. Before we begin, I would like to review our Safe Harbor statement. This call is taking place on May 5, 2016. During 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 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. We will be sure to reserve time for questions and answers after our prepared remarks. I would like to request that you limit your questions to one and a follow-up and get back in queue for further questions in order to ensure everyone has an opportunity to ask their questions. With that, I'll turn the call over to Barry. Barry L. Pennypacker - President, Chief Executive Officer & Director: Thanks Ion, and good morning everyone. I was generally pleased with the results of the first quarter. We reported revenues of $427.4 million, an increase of 5% from the prior year. Operating margin for the quarter was 2.2% compared to a negative 1.8% in the same period of last year. While we're encouraged by the year-over-year improvement in the company's operating performance, we understand there is a long way to go towards our stated goal of double-digit operating margins. We continue to be confronted with difficult macroeconomic conditions. And while we saw some growth in certain product lines, tower cranes in particular, the global challenges we're facing will likely persist. Despite these headwinds, we're making proactive changes throughout our operations that will position Manitowoc for improved financial performance in the future. Our results demonstrated continued growth within the tower crane business, offset by the anticipated softness in mobile cranes. As we discussed last quarter, our tower crane business started to gain momentum toward the end of 2015, driven largely by the resurgence of residential and non-residential construction markets in Europe. We experienced growth in select countries including the UK, Western Europe, Australia, South Korea, and the U.S. during the quarter. Our City Class tower cranes, which initially went into production last fall, are fueling some of this growth. They were the first series of tower cranes to have CCS. CCS stands for Crane Control System and it is the user interface for operating our cranes. This is significant for three reasons. One, it's our first step towards standardization across all of our major product lines. It's much easier for owners and operators and service technicians to learn how to effectively operate all of our cranes with this common set of operating parameters through our software. Two, CCS enabled us to increase the lift capacity of our City Class tower crane product line by optimizing the load movement of the crane without a substantial redesign of the hardware. And lastly, it allowed us to equip these cranes with remote diagnostic troubleshooting capacities, which we call CraneSTAR Diag. This feature is the first of its kind where our Crane Care service arm can access the crane remotely and diagnose and fix any potential problems with the unit. In addition to the City Class cranes, we introduced the new self-erecting product line called HUP at bauma. The new HUP, H-U-P, product line allowed us to consolidate five models into two models, enabling our customers to do more work with fewer cranes in their fleet. The compact footprint also allows it to be transported in only one shipping container for export markets. This is one example of how we're increasing the return on investment for our customers. In case you're wondering, HUP stands for hurry up, a great bit of marketing. As I mentioned, we continue to see weakness in our mobile cranes. Demand remained soft for this product line, driven primarily by the weakness in the U.S. and the Middle East as a result of weak oil and gas sector pricing and a challenging currency environment overseas. We are developing a corporate culture, built around The Manitowoc Way. That means we want to get closer to our customers and bring more value to the equation, and we will do so through greater innovation and velocity. Ultimately, our success relies completely on our ability to deliver value to the crane industry. Our presence at bauma this year reflected that enhanced view and we are encouraged by the feedback we have received thus far. Last quarter, I talked about a strategy that will lead us to double-digit margin growth. As we move forward, we will focus on four key elements. First, we utilize our Lean expertise to increase the flexibility of our manufacturing footprint globally. We'll accomplish this through Lean operations, adoption of the latest manufacturing technology to enhance our operations, improved procurement strategies, and ultimately the consolidation of our footprint. To accelerate the adoption of Lean practices throughout the enterprise, we have scheduled the first of many Manitowoc Way summits. These learning sessions will begin in early June for key operation employees where we will learn how to adopt and implement the critical tools of The Manitowoc Way. This training session includes classroom as well as hands on shop floor experience to reinforce the learning process. Second, we will reinvigorate our product development process to introduce new products and services that deliver enhanced productivity to generate greater return on investment for our customers. We will rationalize our product lines by increasing our standardization of components as we have already accomplished with our HUP products and bring these products to market with the quality and reliability our customers expect from us. We will deliver higher value to our customers more efficiently while at the same time enhancing our brand through an emphasis on innovation. One example of this effort I discussed last quarter wherein we formed a team of 10 full-time people to develop a next-generation crane that we pledged to develop in six months. This is a collaborative effort with our employees and customers to create a crane that meets the evolving needs of the market, while also allowing our customers to take ownership of the introduction. This is the first of its kind we had engineered from the bottom-up in the recent past with key differencing features for our customers who have been asking for, such as class-leading capacity, a longer boom, best load charts as well as us at the same time incorporating state-of-the-art manufacturing processes into the design to minimize cost. This new product will enhance our competitive advantage in the marketplace and I'm pleased to say we are on track with this initiative and I look forward to continuing to update you next quarter on its progress. Third, we will focus on gaining market share as a result of our improved competitive position. By executing on our first and second elements, we will give our dealer network a compelling selling proposition through to our end customer. This coupled with the support we're able to bring through our industry-leading Crane Care Group will position us on top of the industry once again. Fourth, we'll take advantage of our strengthened balance sheet to allocate capital to the most accretive options available at the time. Examples of this are deleveraging organic investments which include automation in our operations, stock buybacks and external growth. These four actions are supportive of our long-term stated goal to double-digit operating margins. I'm pleased to see progress towards that goal in the last several months and I look forward to observing this trend going forward. For the full year, our outlook remains largely unchanged; however, we evaluated our capital needs for the business utilizing the tools in The Manitowoc Way and we are adjusting our capital expenditures down to $45 million to $50 million. There is significant opportunity to further apply Lean principles throughout the business and in doing so becoming a more agile organization that's able to react more quickly to our customers' changing needs. We believe we are taking the right actions to align the business with current demand levels, while focusing on innovation and velocity in all of our business processes. These are the cornerstones of The Manitowoc Way. With that, let me turn the call over to Carl for a review of the quarter. Carl? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Thanks, Barry, and good morning, everyone. As Barry mentioned, we reported net sales for the first quarter of $427.4 million, which increased $20.7 million from a year ago. Operating earnings in the first quarter were $9.5 million versus a loss of $7.3 million last year. This resulted in a first quarter Cranes' operating margin of 2.2% compared with negative 1.8% last year. This year-over-year increase was due to actions taken over the last 12 months to right-size the business including plant rationalizations, reductions in force and other operating efficiencies. GAAP net loss for the first quarter was $204 million or $1.49 per diluted share versus a net loss of $8.4 million or $0.06 per diluted share in the first quarter of 2015. First quarter 2016 earnings were impacted by cost associated with early extinguishment of debt, restructuring and one-time tax items. An approximate $121 million tax expense was recorded in the continuing operations tax provision. The adjustment reflects a valuation allowance against the domestic U.S. federal and state deferred tax assets as a result of the separation of the Foodservice business. Excluding special items, first quarter 2016 adjusted loss from continuing operations was $5.3 million or $0.04 per diluted share versus an adjusted loss of $28.6 million or $0.21 per diluted share last year. As Barry mentioned, we undertook actions to balance capacity to demand in our North American operations. As a result, we incurred approximately $4 million of restructuring expense related to workforce reductions at our facilities in Manitowoc, Wisconsin and Shady Grove, Pennsylvania. The company expects to recognize cash outflows in settlement of these expenses by the end of the current year. The total savings as a result of these actions will be approximately $20 million to be realized in 2016, which will be split between cost of goods sold and sales, general and administrative or SG&A expenses. Additionally, there are reductions in additional expenses that are excluded from these restructuring activities, but will positively impact SG&A going forward. These additional reductions in cost are approximately $18 million for the full year. During the quarter, net cash flow from operating activities was a use of approximately $210 million, which includes continuing and discontinued operations, driven by $57 million in prepayment penalties and seasonal working capital requirements. Use of cash in the first half of the year is consistent with the normal seasonal pattern for the company. First quarter capital expenditures for continuing operations totaled $10.9 million. Crane backlog at quarter end was $502 million, a decrease of approximately $10 million or down 2% sequentially from the fourth quarter of 2015. For the first quarter, new orders totaled $417 million compared to $424 million in the fourth quarter of 2015 and $439 million in the first quarter of 2015, representing a one time's book-to-bill. As Barry mentioned, we received positive customer reactions to our new products at bauma last month, and while order intake at the show was stronger than three years ago, it still demonstrated that many of our customers, particularly those in North America, are staying on the sidelines until some of the global macroeconomic uncertainty abates. As we noted in our press release, we are reiterating the majority of our 2016 full year outlook that we provided on January 29, 2016, including revenue approximately flat, operating margins approximately 4%, depreciation between $45 million and $55 million, amortization expense between $3 million and $4 million, and capital expenditures approximately $45 million to $50 million, previously $55 million to $65 million. I will now turn the call back to Barry for some closing remarks. Barry? Barry L. Pennypacker - President, Chief Executive Officer & Director: Thank you, Carl. Whilst uncertainty remains, I am confident that we're taking the necessary actions to proactively respond to the market dynamics that we're currently experiencing in order to position Manitowoc for improving its financial performance. The core tenets of The Manitowoc Way are centered on innovation and velocity. As I mentioned, innovation will remain critical to our long-term success. And I'd like to give you an example. Our initiative to develop a new all-terrain crane that has state-of-the-art driveline retarder incorporated into the design is a great example of this progress. Our new GMK5250L enables the operator to use the traditional braking system much less, as the retarder enables braking in many circumstances. This increases the maneuverability and handling of the crane, while reducing the amount of routine maintenance that is required to operate the vehicle. This was one of the many hits with regards to innovation that was featured at bauma. On the other hand, our quest for high velocity in Manitowoc can be summed up by a quality initiative taken on by our cross-functional team who found a way in just a couple of days to test the luffing jib subassembly at the end of one of our mobile crane production lines without fully extending the boom. This new process dramatically reduced the testing time and even identified an issue that may have been costly to find with the old approach. I want to personally recognize this team and wish them great success in the future for more of these types of activities and a job well done with this particular one. Throughout this transformational shift that centers on our customers, employees and shareholders, there have been many changes internally. I want to thank our employees for the dedication and patience that they exist in this process. I know the end result will create value for all of our key stakeholders, and the strength of our team will be essential to our future success. We have a very strong foundation and look forward to communicating our progress over the upcoming quarters. I would like to close by referencing a recent leadership change we announced on May 3. The company and the board expresses its gratitude to Carl Laurino who has announced his resignation as Senior Vice President and Chief Financial Officer from the company effective May 31. Carl will continue with the company until the end of June to assist with an orderly transition of our new CFO. Carl joined Manitowoc in 2000 and has held positions with increasing responsibility throughout the years and has been instrumental in leading the separation of the Cranes and Foodservice business. I'd like to thank Carl for his dedicated service and wish him all the best in the future. Carl will be succeeded by Mr. David Antoniuk, who will assume the role of Vice President and Chief Financial Officer effective May 31 of this year. This concludes our prepared remarks for today. Taylor, we will now begin our question-and-answer session.

Thank you. We'll go first to Steven Fisher of UBS.

Thanks. Good morning. Barry L. Pennypacker - President, Chief Executive Officer & Director: Good morning. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Good morning.

In some of your filings, you laid out a three-year to five-year cost savings plan, aiming at achieving more than $200 million in cost. Can you just maybe flush out your latest thoughts on how those savings could be achieved in the first three years and maybe how quickly you think you could get the double-digit margins if the crane markets don't really pick up much from here? Barry L. Pennypacker - President, Chief Executive Officer & Director: It's an excellent question, and I'll answer it the best that I can. One of the issues that the company has and I think it's well understood is our global footprint. When you compare that to world-class companies of the types of products that we manufacture, we have too much and I think that is going to lead to a substantial portion of the goal that we have stated forward. We have a substantial opportunity with regards to productivity. As we implement the principles of The Manitowoc Way, I think a third of the number will come from productivity that we will exist and be evident in all of our plans. And I think a substantial portion of the balance is going to come from productivity in our sourcing activities. We have been talking about sourcing for a long time, but I think we've got the horses in place now to ensure that the numbers that we are talking about from a savings perspective are in fact going to hit the bottom line. So as we continue to progress, I think you can imagine that a third of this could come from sourcing, a third of this could come from productivity and a third of this could come from structural reductions.

And so I mean are you thinking of this as even possible in 2017 to have double digits or is that more likely a 2018 timeframe? Barry L. Pennypacker - President, Chief Executive Officer & Director: No. We are going to target 150 basis points to 200 basis points a year. We're not going to do anything that's going to affect our ability, should the market come back quicker than what we anticipated. We want to make sure that we maintain the agility in our manufacturing operations that are necessary to handle a potential pickup as well as at the same time ensure that we're taking the structural costs out that are necessary.

Okay. Then just a quick question on the balance sheet. What is your expectation for where you will be on cash in the second quarter? I mean, is there any particular cash usage in Q2 you are aware off and maybe how quickly do you think you can delever the business for the most part? Barry L. Pennypacker - President, Chief Executive Officer & Director: Well, one of the things that – I said I was generally pleased with the performance in the first quarter. One of the things I was not pleased with was our inventory. We are focusing on that dramatically throughout the balance of the year. And I think that's going to prove to be a substantial portion of our increased cash flow, as we progress through the year. I will let Carl add a little more color. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Yes, Steven, if you look at the historic pattern for Manitowoc, we do tend to be users of working capital in the first half of the year and harvesters in the second half. We don't expect that to change. It's typically most pronounced in terms of our cash generation in the fourth quarter. So I am not going to peg a specific cash number for you, but obviously that's going to depend a little bit on the demand levels and the timing of getting units shipped throughout the factories, but we don't see anything, and Barry's comment certainly stands, relative to trying to generate additional working capital efficiency as an ongoing initiative, I think, will enable us to perform reasonably well from a cash generation standpoint in the second quarter.

Great. Thanks, guys. Barry L. Pennypacker - President, Chief Executive Officer & Director: You're welcome.

We'll go next to Mike Shlisky from Seaport Global.

Good morning, guys. Barry L. Pennypacker - President, Chief Executive Officer & Director: Good morning. Mike. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Good morning.

So, could give us maybe just a bit more detail about Crane Care in the quarter because maybe just tell us if you can give us what percentage of sales that was and what percentage of sales of the operating profit as well, if it all possible? Barry L. Pennypacker - President, Chief Executive Officer & Director: Well, I can answer the first part, but not the second part. The first part is, our Crane Care mix in the quarter is consistent with what we've reported in the past, 16.5%. And we vary quarter-to-quarter, but between 16% and 18%. But overall, I think the 16% to 17% range is where we ended up. And as you know, I think I've talked about, as time goes on, to have a critical activity internally to figure out how we can capitalize on that wonderful asset that we have in the marketplace to get that up north of 25% of our overall revenue.

Okay. Great. Another question was on the backlog. I think last quarter you had mentioned there was a pretty big military order that was sort of pending. Was it in the last quarter's backlog, is it in this quarter's backlog or will it be in the backlog shortly? Barry L. Pennypacker - President, Chief Executive Officer & Director: It's not in the quarter this backlog. I am hoping the next time we talk to be able to update that.

All right. Thanks, Barry. Barry L. Pennypacker - President, Chief Executive Officer & Director: You're welcome, Mike.

We go next to Jerry Revich of Goldman Sachs. Jerry Revich - Goldman Sachs & Co.: Hi, good morning everyone. Barry L. Pennypacker - President, Chief Executive Officer & Director: Good morning, Jerry. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Good morning, Jerry. Jerry Revich - Goldman Sachs & Co.: Barry, can you please comment on your Lean initiatives, which of your facilities globally are furthest along to where you would like them to be? And just frame out for us what type of cycle time reduction do you think is feasible and relative to that three-year to five-year time horizon, how quickly do you think the Lean initiatives can play out? Barry L. Pennypacker - President, Chief Executive Officer & Director: The Lean initiatives, really we're in preschool and we want to get to a doctor degree in the next four years to five years. We are starting in our largest global facility in Shady Grove, Pennsylvania. I think you heard me mention that we're starting with a summit there of The Manitowoc Way in early June. And that is how we kick off in a manufacturing operation the Lean initiatives. We go there for a week. We sit in the conference room for an hour, learn the tool, then we go to the shop floor and we practice it for four hours, and then we go back to the shop, then we go back to the conference room, we learn the next tool for an hour and then we got to the shop floor and we practice it again. This is the way that you get buy-in. This is the way that you get people to fully understand. You could sit in the conference room and talk to your blue in the face about 5S and about standard work and about problem solving, but until you can actually take those tools out of the conference room to the shop floor and truly practice them and see before your eyes when a transformation can take place in the matter of hours, that's when you truly get the philosophy ingrained and that's when we'll start seeing the productivity improvements that we're expecting. We've got a big goal there, as you know. But as I travel around the globe and I see our facilities and I know what we've been able to accomplish as a management team in the past through Lean. I am a firm believer that you will see substantial productivity improvements in the P&L as a result of our Lean. Jerry Revich - Goldman Sachs & Co.: And can you talk about the type of changes in incentives that you're setting up at the plant manager level and other key parts of the organization; what sort of cycle time improvement do they need to deliver to hit the performance benchmarks 2016-2017? Barry L. Pennypacker - President, Chief Executive Officer & Director: Yeah, we're in the very early stages of what I call policy deployment (26:42). We now have, at my level, agreed on the breakthrough objectives. Those objectives get cascaded down to all levels in the organization and those critical few are what our compensation system for folks below the executive level are going to be based upon. One of the elements that I can tell you is a change and that we're communicating to everyone is that everyone who is on an incentive plan has got a piece of return on invested capital. When I look at our return on invested capital compared to our peer group, that is a huge opportunity for improvement for us, and so everyone in the organization that's on an incentive plan is getting a substantial portion of that. Jerry Revich - Goldman Sachs & Co.: Okay. Thank you. And lastly, Carl, you mentioned at bauma the product reception was good. The end market uncertainty was a concern. Can you talk about, if you have, the backlog and orders in hand to raise production seasonally like you typically do? I take normal seasonalities for sales to be up 20% 2Q versus 1Q, and I'm wondering if you have that on hand. Barry L. Pennypacker - President, Chief Executive Officer & Director: Yeah, I mean as you know, Carl did state that we have a seasonal element of the business. The incoming orders that I've seen in April and the first couple of days of May are indicative of what our guidance has been, and it is our responsibility, as we go forward, to ensure that the flexibility in our plants that is necessary in order to deliver that continues as we transform them. Jerry Revich - Goldman Sachs & Co.: Okay. Thank you. Barry L. Pennypacker - President, Chief Executive Officer & Director: You're welcome.

We'll go next to Seth Weber of RBC Capital Markets.

Hey, good morning, everybody, and best wishes to Carl. I'm wondering if you can help us with – a little bit with going back to Steve's question on the cost savings. Just on the cadence, the $20 million that you're splitting COGS and SG&A, and then the $18 million, how much of that did you recognize in the first quarter and how should we think about that kind of rolling in through the year if it's possible to give us any help there? Barry L. Pennypacker - President, Chief Executive Officer & Director: It's in the rounding in the first quarter and it will be phased in over the next three quarters as Carl, I think, had alluded to in his prepared remarks. Do you have anything else you'd like to add to that? Carl J. Laurino - Chief Financial Officer & Senior Vice President: That's good.

Yes, sir. Okay. I must have missed that in the prepared. So there was nothing really then in the first quarter of that $38 million? Barry L. Pennypacker - President, Chief Executive Officer & Director: In the rounding.

Okay. And I guess separately, can you just talk to us how you're thinking about material cost going forward, if you've see anything on an increase, for example, on high tensile steel, how you're calibrating your margin thoughts around that? Barry L. Pennypacker - President, Chief Executive Officer & Director: Yeah, I mean high tensile steel, there's a few mills in the world that make that; however, we do purchase a substantial portion of the production that comes out of those mills and we are working very diligently to ensure that we have the cost in place in order to achieve the types of margins that we're communicating. We know and I think everyone knows that there hasn't been the same types of reduction in material costs with those high-strength steels that we utilize, but we still have some leverage. And we're utilizing that, and I think as time goes on, we'll continue to update you on what we believe our expectations are for materials globally.

Okay. I guess on the other side of that, can you just talk about the pricing environment for new cranes that you're seeing, that you saw at bauma or just kind of from an industry perspective, what's the appetite out there for pricing? Barry L. Pennypacker - President, Chief Executive Officer & Director: I think it depends where you are at. At bauma for the new tower cranes that we introduced, price was not talked about as an issue. For the GMK5250Ls that we booked where we had the innovation with the driveline retarder being able to improve the maneuverability of the crane in certain situations, price was not an issue. When you move to the Middle East, then you're trying to sell RTs against yen-denominated product lines, price becomes a discussion. But we have put discipline in place that ensures that we're not going to reduce our margins to the point where we're giving away cranes. That discipline in pricing is being instituted in the business and I think will, over time, yield well for us. But I still go back to my earlier comments that say that when I'm talking to our customers in North America about our Grove and Manitowoc brands, the question of price does not come up. The issues that we've talked about in the past and things that we have to fix with our product development and things we have to fix with our overall manufacturing processes to ensure, as I said, that we're giving them the best product in the world to sell.

Appreciate it. Thank you very much. Barry L. Pennypacker - President, Chief Executive Officer & Director: You're welcome. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Thanks, Seth.

We'll go next to Mig Dobre of Baird. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Thank you. Good morning, everyone. Barry L. Pennypacker - President, Chief Executive Officer & Director: Good morning. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Hi, Mig. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Barry, maybe going back to questions around the demand environment. So if I look at your guidance in 2015, in 2015 revenue ran about 15% ahead of the company's bookings as you burned through some backlog, and it looks to me like your bookings are still sort of stuck in the same range as 2015, so keeping flat revenue for this year would either imply higher bookings or a little more backlog burn. I'm trying to figure out how you're thinking about the mix between the two as the year progresses and what your visibility is around this. Barry L. Pennypacker - President, Chief Executive Officer & Director: Well, keep in mind, my entire approach has been that – I've spoken about two words since I've been here, innovation and velocity. And as we increase our velocity through our plants, which we are working extremely hard to do, you're going to see our backlog come down. So I'm anticipating that in the latter part of the year as we become more nimble in our manufacturing processes, I'm anticipating a backlog burn and a backlog reduction, which is normal in a company that's transitioning itself to a Lean enterprise, because as we are able to take down our overall lead times, particularly in this environment, it becomes a competitive advantage. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Okay. I appreciate that. And then maybe a question for Carl. Carl, can you clarify what cost of goods sold and engineering and selling and admin expenses were for the full year 2015? And is there any help you can give us with regards to interest expense and tax for 2016? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Sure. Cost of goods sold for us in 2015, a little over $1.5 billion. And our SG&A expense was about $317 million. As far as interest expense, it's a little bit unusual, in particular in the first quarter because the separation event did create an environment where there was benefit from some derivatives we had in place from an interest rate risk management standpoint that did credit the interest line. So we actually had a negative interest expense in the first quarter. But our run rate interest expense on a monthly basis going forward is going to be about $3.3 million, a little over that. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): And you said monthly. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Monthly, yes. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Okay. And tax? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Tax expense, obviously it's a difficult one to predict on a forward basis, but we would anticipate somewhere in the high 20%s, low 30%s effective tax rate. But for the obvious noise, I would call it that we have in the first quarter. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Sure. I appreciate that. Thank you, and good luck. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Thank you.

We'll go next to Charley Brady of SunTrust Robinson Humphrey.

Hey. Thanks. Good morning, guys. Barry L. Pennypacker - President, Chief Executive Officer & Director: Good morning. Barry L. Pennypacker - President, Chief Executive Officer & Director: Good morning, Charley.

Just want to circle back and focus on the orders again, and a little bit kind of tag on to Mig's question. I get the backlog burn, the backlog is $502 million. Can you give us some sense – you talked about towers being up, you talked about bauma being better than it was three years ago, which I was pretty depressed at bauma three years ago. I guess I'm really trying to wrap my head around, you've got your shoes for $1.8 billion plus revenues, your $500 million backlog sounds like backlogs got to be ticking up pretty meaningfully, particularly in Q3 and Q4, given ship times. And I'm just trying to really understand the metrics and the mechanics of what your expectation on order growth is, looking out for the next couple of quarters? Barry L. Pennypacker - President, Chief Executive Officer & Director: Yeah, I mean I'm not looking for a substantial order growth. I know there are some things that we're talking with customers about that are going to hit in the second half, so if you look at our order rate, you multiply it by four and you take $150 million out of backlog, you're at $1.8 billion.

Okay. Fair enough. On the $18 million in SG&A, you talked the other $18 million comes out, can you flush out a little bit what the $18 million is consisting of, where the savings comes from? Barry L. Pennypacker - President, Chief Executive Officer & Director: It's primarily reduction in force. Its actions are just taken to streamline the organization.

Okay. And that's beyond what's in the $20 million that comes out of COGS and SG&A, correct? Barry L. Pennypacker - President, Chief Executive Officer & Director: Correct.

Okay, thanks. Barry L. Pennypacker - President, Chief Executive Officer & Director: You're welcome.

We'll go next to Jamie Cook of Credit Suisse. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Hi, good morning. I guess a couple of clarifications. Your forecast for revenues is more optimistic relative to some of your peers. I'm just wondering was there any way you could help me characterize your view of what the market demand for crane should be relative to whether this is more of a market share story for Manitowoc in 2016? Then outside of that military order that you talked about last quarter, that hasn't hit yet, but it was sort of like a one-time help. Is there anything else that's sort of a larger one-time order that gives you confidence in your revenue forecasts? And then my second just follow-up question, the 150 bps to 200 bps a year in margin improvement in Crane, I just want to clarify that what does that assume in revenue, does that assume a flat revenue environment? Thank you. Barry L. Pennypacker - President, Chief Executive Officer & Director: You're welcome. Good question. I'll answer your last one first. Yes, it assumes the flat revenue environment. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. Barry L. Pennypacker - President, Chief Executive Officer & Director: That's the only thing that I can assume right now. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. Barry L. Pennypacker - President, Chief Executive Officer & Director: Until we see the dynamics of the rental market change, until we see the dynamics of utilization change particularly in North America, I've got to assume that I need to get to that double-digit margin with flat revenue. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. That's helpful. Barry L. Pennypacker - President, Chief Executive Officer & Director: Any help to that will fall quicker with the cost actions that we are taking and would be very much welcome. But at this point, we are certainly not banking on that. To the first part of your question, I think the best way for me to answer that, assuming you're looking at the same peer group that I am looking at, we've got the number one tower business in the world. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. Barry L. Pennypacker - President, Chief Executive Officer & Director: And that business is fueling our incoming order rates year-over-year particularly with the new products that we introduced, our hurry up crane product line going from 5 miles to 2 (sic) [5 lines to 2 lines], that's huge for a rental house to be able to have two models that they can send out on rent as opposed to having five models, it is absolutely huge, coupled with the fact that when that crane is out on rent, should there be an issue? One of our Crane Care aftermarket people can sign into that crane and tell the operator exactly what he needs to do to have that crane up and running. Those competitive features that we've brought to market with our tower crane business, I think, is different than some of the peers that you're looking at in our space. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. And then sorry, Carl, just one clarification. When you're talking about the 4% margin target that includes the benefit of the $20 million and $18 million and excludes any restructuring – and it includes amortization, but excludes any restructuring charges. I just want to make sure on an apples-to-apples basis, I am thinking about your 4% margin correct on what's included and excluded? Carl J. Laurino - Chief Financial Officer & Senior Vice President: Right, Jamie. It's 4%. It's essentially EBITDA. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. But it includes the $18 million and the $20 million and then any restructuring charges it would exclude? Carl J. Laurino - Chief Financial Officer & Senior Vice President: No. The restructuring charges will be out – no, the restructuring charges would hit that EBITDA number. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): It would hit, okay. Carl J. Laurino - Chief Financial Officer & Senior Vice President: That's right. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. And what's the amount this year, sorry? Barry L. Pennypacker - President, Chief Executive Officer & Director: We're still finalizing that number, Jamie. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Yeah, in the first quarter, it was $4.4 million. Barry L. Pennypacker - President, Chief Executive Officer & Director: Right. In the first quarter, it was $4.4 million. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Yeah, I know, I know, but that's a big – just – is it why you are still finalizing, is it the first quarter run rate? I just want to make sure because that has implications for how we get there. Carl J. Laurino - Chief Financial Officer & Senior Vice President: It's – do not assume that that is a run rate. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Because it's not. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. Carl J. Laurino - Chief Financial Officer & Senior Vice President: And I think I've been pretty clear that we pay as we go with restructuring. That's my model. And when we are prepared to announce what we are thinking about from an individual restructuring activity, we will be sure to give you that number as soon as we have it. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. Great. Thank you so much. Carl J. Laurino - Chief Financial Officer & Senior Vice President: You're welcome.

We will go next to Ann Duignan of JPMorgan.

Hi. Good morning, everyone. Barry L. Pennypacker - President, Chief Executive Officer & Director: Good morning, Ann. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Good morning.

Just clarification on exactly that topic. If the guidance includes restructuring, but you don't know yet how much that's going to be, why don't we take... Barry L. Pennypacker - President, Chief Executive Officer & Director: Then I have to offset it, don't I?

Or why don't we take guidance off the table until we know how much restructuring we're going to do? Barry L. Pennypacker - President, Chief Executive Officer & Director: Well, I think it's very clear that I pay as I go. So if I've given you 4% operating margin for the year on flat revenue, then if I take $20 million in restructuring, that I got to cover it.

Okay. That's fair. Barry L. Pennypacker - President, Chief Executive Officer & Director: I don't know what else to say.

Well, it's just when you don't know how much you're going to spend yet, that's interesting, but I guess... Barry L. Pennypacker - President, Chief Executive Officer & Director: But you know how much we're going to target from an operating earnings perspective, correct?

Yeah, yeah. Absolutely. Barry L. Pennypacker - President, Chief Executive Officer & Director: So, if I spend $20 million or I spend $2 million or I spend $600 million, what difference does it make for this year?

It might make a difference on timing if you do it early and you get time to cover it. Anyway my real question was really around bauma and I am curious just given how new you are to the organization, what kind of lingering impressions do you take away from bauma about the business, about Manitowoc in particular, any key learnings that you take away from the show. Barry L. Pennypacker - President, Chief Executive Officer & Director: Yeah. I think when you look at what we were able to present there and for us to position ourselves as an innovation leader in the industry and to have the booth centered around how we're helping our customers increase their return on capital, I was extremely pleased with the organization and what we put forth. And I will tell you that the competition in some cases has noticed. And we're seeing some activities in the market that are atypical for some of our competition. So I think we hit a homerun.

Okay. That's helpful. And just... Barry L. Pennypacker - President, Chief Executive Officer & Director: I wish the market was better, but I think with what we were able to put forth and the current market conditions and the feedback that I've gotten from customers globally, I think it was a homerun.

Okay. And just to that point, one final clarification. Where do you see the biggest downside risk to flat revenue in the next couple of years, either regionally or product application? Barry L. Pennypacker - President, Chief Executive Officer & Director: Well, I would say for sure, it's in our RT product line that is very critical to the success of the oil and gas industry. That's where I see our biggest risk.

And do you think U.S. is at a bottom, maybe Middle East has further potential downside? Barry L. Pennypacker - President, Chief Executive Officer & Director: Yeah, there's a lot of used cranes all of a sudden showing up in the Middle East at low pricing. That's a new dynamic. So we're observing that very closely. But as those cranes show up in the Middle East, on the used market they are not in the U.S., so any activity that we get as a result of pickup here will be extremely good for our business; however, I'm just not going to call that $55 to $60 oil. I don't know where that's at.

Okay. I appreciate it. Thank you. Barry L. Pennypacker - President, Chief Executive Officer & Director: You're welcome. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Thanks, Ann.

We'll go next to Larry De Maria of William Blair. Larry T. De Maria - William Blair & Co. LLC: Hi, thanks. Curious strategically your guys' thoughts on the possibility of Terex and Zoomlion, the competitive dynamics obviously far from certain. Does it make sense for you guys to engage with them at all and what do you hear from customers about the potential impact in the market? Barry L. Pennypacker - President, Chief Executive Officer & Director: All I know is that I focus on our customers and what our customers are worried about is whether or not a standalone crane company with a level of debt that we had is going to be able to continue to satisfy their needs going forward. So what I've been doing is spending my time with our customers sharing our strategy for the future and ensuring them that irregardless of what happens with the merger that you had mentioned or the acquisition that you had mentioned, we're going to be a standalone crane company that is looking forward to continuing to innovate the industry and we're going to perform better than we've ever performed in the past. And that's what I promise our customers. And anything beyond that is totally out of my control. Larry T. De Maria - William Blair & Co. LLC: Okay, thanks. And then obviously you mentioned tough Middle East market, you also mentioned Crane Care a couple of times. Just curious how does Crane Care come into the discussions in some of these tougher markets where price is competitive, but is Crane Care enough of a differentiator or are they too hard to reach in some of these emerging markets? Carl J. Laurino - Chief Financial Officer & Senior Vice President: No. In some of the emerging markets, it's just too hard to reach and it takes a substantial investment to have our product verification centers available and staffed. People in the Middle East have all the ability in the world to access our Crane Care globally, but we don't have the boots on the ground in the Middle East like we have in the balance of the world in order to ensure that that's a differentiator for us. Larry T. De Maria - William Blair & Co. LLC: Okay. Thanks and best of luck, Carl. Carl J. Laurino - Chief Financial Officer & Senior Vice President: Thanks, Larry.

We'll go next to Mig Dobre of Baird. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Yes. Thank you for taking my follow-up. And I'm sorry to go back to this restructuring issue, I'm just confused here. If I look at the way you report and I'm looking at your last schedule on a press release on a margin analysis, okay, the 2.2% operating margin that you reported excludes restructuring. Now my understanding is that your 4% margin guide is consistent with this schedule, this margin analysis which excludes restructuring. Correct me if I'm wrong. Carl J. Laurino - Chief Financial Officer & Senior Vice President: You're absolutely correct. Barry L. Pennypacker - President, Chief Executive Officer & Director: You're absolutely correct. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): So 4% excluding restructuring? Barry L. Pennypacker - President, Chief Executive Officer & Director: That's what the schedule indicates. Yes. Mig Dobre - Robert W. Baird & Co., Inc. (Broker): Very well. Thank you. Barry L. Pennypacker - President, Chief Executive Officer & Director: You are very welcome.

That does conclude our question-and-answer session. At this time, I would like to turn the call back over to Ion Warner for any additional or closing comments. Ion Warner - Vice President, Marketing & Investor Relations, The Manitowoc Company, Inc.: Thank you. Before we conclude today's call, please note that a replay of our first quarter conference call will be available later this morning. You can access the replay by visiting the Investor Relations section of our website at www.manitowoc.com. Thank you everyone for joining us today and for your continuing interest in The Manitowoc Company. We look forward to speaking with you again during our second quarter conference call. Have a good day everyone.

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