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Executives

Steven C. Khail - Director of IR & Corporate Communications

Carl J. Laurino - Sr. VP and CFO

Glen E. Tellock - President, Director and CEO

Eric Etchart - Sr. VP and General Manager - Crane Segment

Analysts

Charles Brady - BMO Capital Markets

Nigel Coe - Deutsche Bank

Seth Weber - Banc of America Securities

Charles Rentschler - Wall Street Access

Paul Bodnar - Longbow Research

Robert McCarthy - Robert W. Baird.

Manitowoc Co. Inc. (MTW) Q3 FY08 Earnings Call October 29, 2008 10:00 AM ET

Operator

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

Steven C. Khail - Director of Investor Relations & Corporate Communications

Good morning everyone and thank you for joining Manitowoc's third quarter earnings conference call. Participating in today's call will be Glen Tellock, our President and Chief Executive Officer, and Carl Laurino, Senior Vice President and Chief Financial Officer who will discuss our financial results for the third quarter. It has been our practice on this call to feature one of our segment President's to provide an in-depth view into their business. We're going to the depart from that customer on today's call by asking Glen to be our featured speaker.

The current global economic situation is unprecedented and Glen would like to use this opportunity to provide some insights into how external factors are affecting Manitowoc's business. To discuss how the Manitowoc management team is controlling operating cost as well as sharing his outlook for the future of our crane and food service businesses. Glen and Carl will also provide some additional information about the integration of a notice as you know became an official part of the Manitowoc Company on October 27.

Following these remarks, we will be joined by Eric Etchart, President of Manitowoc Cranes, Mike Kachmer, President of Manitowoc Food Service and Bob Herre, President of Manitowoc Marine. All of whom will participate in our question and answer session. For any of you who were not able to stay on the line for today's entire call, you can listen to our replay of the call beginning at 12:00 noon, Central Time today until 12:00 midnight, Central Time on November 5. The number to dial for the replay is area code 719-457-0820. Please use confirmation code 4835607. You may also access an archived version of this call by visiting the investment relations of our corporate website at www.manitowoc.com.

Before Carl reviews Manitowoc's third quarter financial performance, I would like to review our Safe Harbor statement. This call is taking place on October 29, 2008. During the course of todays call forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 maybe made during each speakers remarks and during our question-and-answer session. Such comments are based on the company's current assessment of it's market and other factors that affect our business. After results could differ materially from any implied projections due to one or more of the factors explained in Manitowoc filings with the Securities and Exchange Commission, including but not limited to the company's Annual Report on Form 10-K for the year ended December 31, 2007. With that, I'll now turn the call over to Carl Laurino.

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Thanks, Steve. Yesterday the Manitowoc Company reported third quarter net sales of $1.1 billion and operating earnings of $140.6 million from continuing operations. Net sales and earnings increased 19.6% and 19.2% respectively. Earnings per diluted share was $0.80 before special items compared with net earnings of $0.66 per diluted share in the third quarter of 2007. After special items which included a loss from currency hedges of $198.4 million or $0.99 per diluted share the company reported a third quarter 2008 net lost of $26.1 million or $0.20 per diluted share. The hedge loss represents the market-to-market accounting treatments of currency hedges that were necessary to remove the risk of currency movement between the US dollar and the Great British pound required for the Enodis acquisition which was concluded on October 27th.

Third quarter 2008 Crane segment sales totaled $991 million an increase of 22% from the third quarter of 2007. Operating earnings for the latest quarter were $139 million, at 24% increase from the third quarter of 2007. Despite the challenging materials cost and environment, operating margin in the third quarter of 2008 were 14%, 20 basis points higher than the comparable period last year, driven by control of SG&A spending. As we stated in our Q1 conference call, the biggest impact of commodity pressure is in the fourth quarter. Crane backlog at September 30, 2008 was $3.3 billion nearly 26% higher than the third quarter of 2007. In the food service segment third quarter sales totaled $115.8 million, a 2.6% increase compared to the third quarter of 2007. Operating earnings rose 2.8% to $18.4 million, operating margins of 15.9% were unchanged quarter-over-quarter.

The marine segment which is being treated as a discontinued operation pending in expected sale for the fourth quarter, generated sales of $103.5 million in the third quarter of 2008, a 28% increase from the third quarter of 2007. Operating earnings grew to $15.8 million from $6.4 million during the previous quarter. This improvement reflects an incentive award payment for the on-time delivery and successful sea trial of the Littoral combat ship coupled with other payments related to the settlement of previous contracts. The improved results also reflect continuing on schedule production of double hulled tank and barge projects.

I'll conclude my comments by reiterating our revised guidance for 2008 which was lowered less than 5% to a new range of $3.15 to $3.25 per diluted share including the marine segment. As mentioned in yesterday's press release, this revision was prompted by the impact of the credit crisis on our markets and the weakening Euro along with factory absorption and product mix issues. This guidance excludes any unusual items as well as any effects from the Enodis acquisition which I will address a bit later in today's call.

Now, I'd like to turn the call over to Glen. Glen?

Glen E. Tellock - President, Director and Chief Executive Officer

Thanks, Carl, good morning. The last time, I was a featured speaker on the quarterly conference call was the second quarter of 2007. That was my first conference call as CEO and I used that opportunity to describe my approach to managing the company. I affirm my confidence in Manitowoc's long term strategic direction. I also talked about the five management principals that I've learned overtime in promise to follow as CEO.

I'd like to take a few minutes this morning to reestablish these basics as the foundation of our outlook and plan for the future. I'm more convinced than ever that our long term strategy is appropriate, not only for the current situation but it is the right approach to realize the full benefit from the opportunities that we envision for the future.

As we maintain our quarters, those basic management principles are making more sense everyday. No surprises, bad news first, full disclosure, know your cost and my favorite, do you say you're going to do. We have a good track record of keeping our stake holders well informed about the direction and progress of the company. We have provided full disclosure as a matter of course and we have not avoided or sugar coated the negatives.

During the past few years rising steel and other raw material prices has sharpened our attention to cost. We're also driving at some new innovations in what we buy and how we buy it, without compromising quality or value. The following are some examples where we have successfully achieved our 2008 objectives. First, completion of the crane capacity expansion on time and on budget; second, growing our food service business through continued product development and expand the segment's global footprint. Third, deliver the Littoral combat ship on time and optimize our shipyards in both ... in terms of both military and commercial contracts. We have and won a million dollar award for exceptional performance. Fourth, pursue operational excellence and we have delivered on this through lead manufacturing initiatives that have lessened the impact of rising material cost.

Lastly, we recognize the need to keep our business model flexible, which would enable us to work through difficult economic cycles, like we are facing today. Manitowoc's success has been the result of focusing on the right long term goals. Following the rules and conducting our business in a disciplined manner, in both good and challenging times, and we will take the decisive actions that are warranted in the face of a challenging macro economic environment. Most recently we have, rebalanced the production schedules at our factories, eliminated temporary workers in certain factories, reduced the number of shifts at factories where demand has slowed, internalize a variety of previously outsourced manufacturing activities; instituted a global hiring freeze of salary employees, instituted reductions in deferrals of other SG&A cost; and accelerated the ramp-up of main manufacturing initiatives in our global crane facilities. Furthermore we are prepared to take additional actions as circumstances warrant.

Now let us look at the impact that the global economy had on our third quarter and then discuss how it is likely to affect our longer range view of the future. Demand for our high capacity crawler and mobile telescopic cranes remain strong in the Americas, the Middle East, India and Asia where publicly funded investment in large infrastructure and energy projects continues.

Demand has softened in China consistent with the anticipated post Olympic pause in commercial construction. Even with the lower short term rate of economic growth, China's need for energy, power generation and broad based infrastructure continues. Our Zhang Peizhang facility is producing the right products for that market and our TaiAn joint venture gives us additional avenues of opportunity to serve China's future growth and development.

A major residential correction in Western Europe aggravated by reduced availability and higher cost financing is impacting a demand for our Potain tower crane products. Incoming orders have softened and some tower crane orders have been cancelled. However to date, there have been no cancellations on our crawler crane and mobile telescopic product lines. Even though, our total September 30, backlog is up significantly year-over-year. It is down about 5% from the record high of 7 in the second quarter this year, due to taller crane demand. However, another aspect of the backlog decline reflects our decision not to open the 2010 order book until we finalize our pricing decision, based upon steel and other material cost forecast.

The global environment also was affecting the food service industry. Capital investment is down for the 8th month as some base of tightened lending to restaurant from the slowing economy has reduced existing restaurant sales. This pattern is most produced in North America.

The good news for Manitowoc is that we did complete the Enodis acquisition, as expected. This acquisition not only expands our product offering with a complimentary rate of market leading, hot-side equipment but it will enable us to globalize our food service segment following the same successful blueprint that we used to globalize our crane segment a few years ago. We will contribute approximately one-third of our total consolidated revenues and become a significant component of our corporate growth strategy. Also during the third quarter we implemented a long term strategic decision by entering into a definitive agreement to sell our ship building business. We expect to complete this $120 million transaction during the fourth quarter which will result in an estimated $0.60 per share after tax gain.

While it will be emotionally difficult for us to sell our legacy business, this action is good for the marine business and its employees who will become part of a leading designer and builder of ships. And good for Manitowoc which can focus it's resources and attention on its two growth segments. That's where we stand today.

Now let's look at how we will meet the challenges presented by the current period of economic uncertainty. First, we expect to manage our way through the current situation by doing that make sense both for the immediate and longer term future of the company. Manitowoc is a much stronger and better balanced company than it was just 5 years ago. Today we have a broader mix of products, a wider geographic scope, and much higher levels of efficiency.

Meanwhile, on the shop floor, our operating teams are taking every prudent measure to maximize our performance. For the Crane segment, this takes the form of using our global manufacturing facilities to produce products closer to our customers at a more competitive cost. It also means a tight control on SG&A, a material cost of all kinds. At Foodservice we're managing the cost of materials and taking advantage of the increased demand to replace some parts at a companies and economic slowdown.

As we manage through the rest of 2008 and into 2009, were making sure that our short term decisions do not compromise our ability for success when the world's economies regain their balance and get back on course. I'll now ask Carl to update us about the acquisition of Enodis including the financial benefits that we expect Enodis to bring for the balance of the year as well as updating our guidance. Carl?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Thanks, Glen. We're naturally pleased to have been able to bring the Enodis acquisition to fruition. I'll update Enodis's 2008 performance then provide some color about our expectations for the combined business.

For the fiscal year ending September 30 2008, pre exceptional items, sales and operating earnings were up 9% and 15% respectively. This solid performance reflects both the stability of the food service industry as well as the market leading attributes of Enodis. When we fund the Enodis acquisition, our total leverage ratio as measured by our debt to EBITDA will be 3.1 times. This is more than one full turn of leverage less than we incurred when we've completed the Grove acquisition. Despite the fact that the crane business was contracting at that time we were able to quickly de-lever and we expect to do so once again.

Expected total leverage should be approximately two times by the end of 2009. This reflects our strong cash flow expectations as well as proceeds from the divestitures of Enodis's global ice business and our marine segment. We expect the divestiture of Enodis's ice business to be completed by the end of Q1 2009; we have been fielding enquiries about the business since our bid was formally accepted in July. Those discussions have evolved into a formal sales process which has received robust interest from several qualified and well capitalized buyers. Given the attractiveness of the ice business including; stable end markets, the replacement driver to the revenue stream, strong market position and solid cash generation, we expect to receive a fair price for the business, despite the challenging economic environment.

As stated earlier we expect the Enodis acquisition to be accretive to our earnings per share in 2009. We expect to realize over $20 million of synergies in year one, and over $80 million in annual synergies and benefits in 2011, which will help us achieve EDA positive results in that year as well. Profit synergies many of which will be incurred this year are estimated at over $30 million. All of these metrics remain as previously stated except for our expectation that Enodis's ice business will be sold by the end of Q1 2009.

Our financing for Enodis is obviously in place and it is fully syndicated. Given our comfortable leverage profile at closing and our outlook, we will reiterate that we do not expect to issue equity. At current market rates the effective interest rate for the debt will be approximately 6.75%. This assumes a 50% fixed to floating interest rate mix. While the current economic environment will undoubtedly pose challenges for us in intermediate term we expect our strong backlog, diverse end markets and geographic graph to service well.

Contracts between Manitowoc today versus the last downturn are worth of note. Global penetration of our products, spreading economic risk, consolidation within the Crane industry, higher percentage of variable to fixed cost structure, percentage of manufacturing in low cost countries, notably China, India and Slovakia. Cost take-out initiatives achieved as part of our integration including five factory consolidations, one in food service and four in Cranes.

The development and introduction of dozens of innovative Crane products that are creating broad based demand across the global construction industry and the scale of our food service business and it's stability. Because of these differences, we expect to be able to generate total company operating margins at or near 10% in the next trough of the crane cycle, which again we wouldn't expect to see for at least a couple of years.

With that, I'll turn it back over to Glen.

Glen E. Tellock - President, Director and Chief Executive Officer

Thanks, Carl. Before we open the call to your questions, I like to share a few more thoughts about the road ahead for our business. A recent report by the CGLA infrastructure group, examined the future of such projects in light of the current global financial crisis. They noted that global infrastructure projects are obviously, critically important to economic growth however, equally critical to social and political stability. Global spending on such projects is forecasted at over $6 trillion over the next 5 years. With regard to the food service industry, global long term growth prospects remains solid, especially in the developing world.

If you notice, we are now a full service provider of innovative solutions for commercial kitchens worldwide. In conclusion, we are confident in our ability to manage through the current economic challenge while generating significant value from future opportunities.

Manitowoc Company is in good shape. Our finances are strong, our credit facilities are solid and we have the right people in the right jobs to execute our strategies. Finally, we are responding and we are also prepared to take whatever actions are required by changing market conditions that proved to be in the best long term interest of our shareholders, customers and employees.

Lisa that concludes our prepared remarks, we will now open the call for your questions.

Question And Answer

Operator

Thank you, Sir. [Operator Instructions] And we will take our first question from Charlie Brady with BMO Capital Markets.

Charles Brady - BMO Capital Markets

Hi thanks, good morning.

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Hi Charlie.

Charles Brady - BMO Capital Markets

Hi. With respect to the Enodis and the global ice business, can you give a sense of what size that global ice business ... I know they do $153 million in the U.S. but how much of that is U.S. Can you quantify a little bit on a global basis and also on the margins where are the Enodis margins today or at least as of end of September and how does divestiture of global ice impact those operating margins?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Well Charlie the global ice business in fiscal 2008 was less than $400 million roughly, $350 million and the EBITDA for the business in the 40's quote 45.

Charles Brady - BMO Capital Markets

And where all you notice these margins today on an all end basis as of end of September, you said that they were up, but what is the actual margin number they're giving?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Little less than 10% EBIT margin.

Operator

And our next question comes from Nigel Coe with Deutsche Bank.

Nigel Coe - Deutsche Bank

Thanks, good morning. Just Carl, just to follow up on that question on Enodis, it seem that you sold it, given that its somewhat of a come down since you've bought Enodis, it seems you got little multiple for the ice machine sale. That ... I am assuming that there would be a taxable loss on that given the spread and the multiples. How could you use that tax loss? Is there any ... could you utilize it against still a couple of gains or would you be able to absorb that loss elsewhere? If indeed it was a loss?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Nigel, I certainly given those scale and continuing profitability of the crane business and an expectation that we divesture the business in 2009, we would think that there would be other places for us to put that.

Nigel Coe - Deutsche Bank

Alright. Okay, so you could use it against operating earnings, is that right?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Yes.

Nigel Coe - Deutsche Bank

Okay. That's good news. You did talk about the way that the bookings in crane progressed through 3Q; can you just characterize July, August and then September, perhaps if you could give us some color on October as well?

Glen E. Tellock - President, Director and Chief Executive Officer

Well, I think Nigel when you look at it, we talked about the backlog being down a bit but at the same time we haven't put anything in primarily in North America and for the North America produced products throughout the globe. So was backlog, as we watch what happens, vis-à-vis closer to year-end. So, the order rates are still good, as we say in the crawler and the large telescopic crane. Again, it's the demand for the tower cranes, certainly the self-erecting towers, and the smaller top-slewing towers, and a little bit on the low capacity, anything in the mobile side, is really a little bit slower than we've seen in the past. But, again, anything that's in the higher capacity is, the order rates are still being good, and the inquiries are still very strong. That's ...I think that's what's propping up as you can see, the backlog at the end of the third quarter.

Operator

And our next question comes from Seth Weber with Banc of America Securities please go ahead.

Seth Weber - Banc of America Securities

Thanks, good morning. Did the ... does the third quarter backlog include any inclusion of shadow backlog that was out there for '09 that kind of got put into the backlog as you set prices for '09?

Glen E. Tellock - President, Director and Chief Executive Officer

No.

Seth Weber - Banc of America Securities

Okay. So, there's still a shadow backlog for '09 and '010, is that what you're saying?

Glen E. Tellock - President, Director and Chief Executive Officer

Not so much for '09 not anything in ... no, no it for ... yes, it is for 2009. And then really nobody's at this point in time looking out in the 2010 for much of anything.

Seth Weber - Banc of America Securities

Okay. And can you just remind us what you're policy is for taking deposits and or progress payments on either stuff that goes in the backlog or these shadow backlog?

Glen E. Tellock - President, Director and Chief Executive Officer

Yes, the ... I mean, just for your reference, we don't talk much about shadow backlog obviously, internally. I know that it came up somehow in the industry over the past few quarters. But what I would say is we basically are putting things in that with deposit on those that have the higher contents of the higher strength feels which are primarily the higher capacity crawler crane. And then, certain large orders that have ... that spread out over the year and across many of the different product lines but on specific individual product lines for whether maybe dealer or a customer ordered the smaller capacities we don't take deposits.

Operator

And our next question comes from Charlie Rentschler with Wall Street Access.

Charles Rentschler - Wall Street Access

Hi, good morning everybody.

Glen E. Tellock - President, Director and Chief Executive Officer

Hi Charlie.

Charles Rentschler - Wall Street Access

Glen, you listed all of the belt-tightening moves you're making in cranes, as if you expected a broad downturn, but you're saying you've seen no cancellations in mobile hydraulic and ... big mobile hydraulic and crawler cranes. But then I thought I heard Carl say something about a trough. Do you guys see this, the Crane market, broadly moving lower over the next couple of years?

Glen E. Tellock - President, Director and Chief Executive Officer

Well, I think when we look at the change in any of the outlook that we had, and this product primarily the credit market driven. If you go back to history as an indicator, we wouldn't believe that the trough would be for probably another couple of years. But given the fact that all of a sudden you have a liquidity issue, we're trying to figure out, and I think everybody else is also, Charlie, is when is credit available. When will these things come back; when we talked to a lot of the customers, whether it be in the foodservice or the cranes, and even in the marines.

People are saying, hey, I have these projects, but I'm backing off of this for right now. The projects are still there. People want to still do these things, but they're just saying time out until I figure out how available the credit is going to be and where we're going to get the money. So, in the interim, let's take, for instance, in some places in Europe, I mean, if we go from a ... we've been running a hundred miles an hour, you're going from three shifts down to two. If it's self-erecting towers, where Spain is a big user of some of that product, you may go down to one shift. So, we are doing the belt-tightening. We're doing it very quickly, and I think we have to do those things to be prudent, because I don't know when credit is coming back, but I can tell you that what's different now than the last down turn is the projects are still there, it is just a matter of when are they going to get financed.

Charles Rentschler - Wall Street Access

Right. And a couple of quick questions about Enodis, how are you going to organize to handle that? Are you going to go to the matrix approach, like you used so successfully for Potain and Grove, or what?

Glen E. Tellock - President, Director and Chief Executive Officer

Well, that's a good question, Charlie, and I think what has to happen, since they've now been a part of the family for an entire two days; as part of the integration teams Mike we had a day one kick off on Monday, and then he spent time with the senior leadership team, Monday and Tuesday. That is all part of the integration. They want to sit town and say okay, as a team, when we put these together, what is the best organization for the foodservice group. The reason we went to the regional approach and in cranes, way back when was the majority of the synergies were all within the region. You didn't ... there aren't a lot of global customers, you could focus within the region and it made a lot of sense to do that.

I don't think that I am in a position right now to say what the best organization structure is for the Foodservice group but I know they'll do that in the next 60 or 90 days. They will get it right and we are all looking forward to how they go about it because the Enodis organization was a little bit different than ours, some similarity, but I think what they want to do is get together and pick what the best of both worlds are, get everybody on board and then move forward with it and obviously with not only what's best for Manitowoc but keeping the customer absolutely forefront and how they go about it.

Charles Rentschler - Wall Street Access

Carl just one small clarification you said regarding a Enodis in '09 there would be $20 million of synergies but the cost would be about $30 million, was that right, so net 10 negative?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

No I think that a lot of the negative synergies would probably be realized in 2008.

Operator

And our next question comes from Paul Bodnar with Longbow Research.

Paul Bodnar - Longbow Research

Yes, question on the I guess the crane market broadly, now what is the chance that some of these things, these projects do get delayed and did they ...did they get pushed out. Some of the cranes now, in parts is here wrapped up and they cannot be redeployed, versus what they would have originally had to order a new crane, is that kind of what you are waiting to see on at this point?

Glen E. Tellock - President, Director and Chief Executive Officer

That's, certainly going happen every time you have one of these periods of slow down. People are going to ... you will see more of rental purchase options, you will see more going into the crane rental fleet, you will see people for instance on the tower cranes, they are just going defer the purchase. So you do have ... you have people moving cranes from one region to the other. We want to watch that because where one region may still be pretty good, you want to see whose has got available cranes that may take them to another region. But I think that is in previous down turns, we have seen a lot of that. Sometimes we have used equipments, but the used equipment markets have strengthened much better over the last five years, than they had in previous downturns.

So, I think you're watching all of that as we go along. So, I think yes the projects are deferred and pushed back, you are going to see customers trying to get the best utilization and that's why we were looking to see where as Charlie, we just talked about some of the belt tightening until we can understand how some of the fallout of the credit comes about.

Paul Bodnar - Longbow Research

Okay, any kind of numbers you give us in terms of what percent, the larger, larger callers, as the larger capacity cranes, make up of revenue and in what particular of operating profit?

Glen E. Tellock - President, Director and Chief Executive Officer

We typically don't give out that type of information publicly to product lines or to sometimes the geographic areas.

Paul Bodnar - Longbow Research

Okay. And just one last question on the 4Q guidance, any kind of just rap [ph] on the revenues side and I think you implied the crane was something about 30%. And I'm sure obviously, currencies turning around had some impact. But what are you kind of looking for on the revenue growth side?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Well, I think because ... in part, because of the currency head wind because as we look at the overall, top line for cranes. We're going to see a much more modest growth level in fourth quarter than we expect it. So, you look at all full year-over-year increase of mid 20s.

Operator

And our next question comes from Robert McCarthy with Robert W. Baird.

Robert McCarthy - Robert W. Baird.

Good morning guys.

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Hi, Rob.

Robert McCarthy - Robert W. Baird.

My first question has to do with Enodis. I just want to make sure that we understand exactly what or well, I mean as close to exact as possible what we're going to see in the fourth quarter. The $30 million would be, the number that you were talking about Carl, would be to generate the synergies. But, I assume that there's a massive purchase accounting adjustments and other sort of non-recurring expenses that you'll have to recognize. Is there anyway for you to give us an idea of what kind of magnitude, what kind of overall effect to look forward from Enodis either with or without non-recurring items?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Well, without non-recurring items, remember Rob that you had a ... not unlike our own foodservice business you had the seasonal low ebb.

Robert McCarthy - Robert W. Baird.

Right.

Carl J. Laurino - Senior Vice President and Chief Financial Officer

In the foodservice business. So, we would actually adjust from operations, probably expect to see earnings head wind of roughly $0.10.

Robert McCarthy - Robert W. Baird.

Okay.

Carl J. Laurino - Senior Vice President and Chief Financial Officer

The $30 million figure that we throw out on the cost of synergies would be inclusive of those purchased?

Robert McCarthy - Robert W. Baird.

Oh the...

Carl J. Laurino - Senior Vice President and Chief Financial Officer

That's not all expense.

Robert McCarthy - Robert W. Baird.

Yes, okay, all right. And can you, in comparison with the $45 million of EBITDA roughly that is represented by the global ice machine business can you tell us how much the company reported in total for total EBITDA for the year this if you noticed?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

A little over $200 million for the year Rob. And I should tell you also, I am glad you asked the clarifying question because I think I was maybe a little bit low on the ice element of the EBITDA, you could probably push that into 50s.

Operator

Our next question comes from Matt Jones [ph] with GeoSphere Capital.

Unidentified Analyst

Yes, hi, guys. I was hoping you could talk a little more geographically on what's happening in certain markets on the Crane side, what you're seeing specifically Middle East, Asia; you said China was a little bit slower. So, I'm curious what's going on there. But more specifically the Middle East seeing that that was the big boom market?

Glen E. Tellock - President, Director and Chief Executive Officer

Matt, when you asked that, we were just in the Middle East, and I'll let Eric give you a little more color, but the take I had on it is they felt pretty insulated from some of the things that were happening around the world. Unfortunately, when we were there, and some of these liquidity issues they started to see them a little bit, and so I think they're ... where they're not feeling the impact, many places else around the world are, they're very nervous or cautious about it, but I'll let Eric give a little more color on that.

Eric Etchart - Senior Vice President and General Manager - Crane Segment

Yeah, we continue to see a lot of projects ... infrastructural projects in the Middle East, and this is going to be, and will remain, one of a booming area. Really, the slowdown that we see is definitely in Europe, and I mean the last three months has been very obvious. And again, it's primarily the tower cranes business that is impacted. But now the French market has slowdown following UK and Southern Europe.

Regarding Russia, actually there is probably a temporary blip, and again, it's linked to the credit... to tightening. We are of the opinion that this is only temporary because obviously, what happened in Russia and the military action in Georgia, that you had this, some investors concerns about the political risk. But the projects are there. Russia it's only full of reserves and currency, so we believe that Russia, after that slowdown should pick up again.

If you go to obviously, Asia, yes, we have a slow down in China. That was expected after the Olympics, now it's definitely a decelerating growth. China has again achieved again 10% until the mid 2008. So, we expect that slowdown but I mean again it's certainly not going to be a recession in China. So, opportunities, gains will remain in China.

Latin America, so far we have not seen anything happening. Latin America continue to have a strong demand maybe because of the currency situation and the strengthening of the US dollar some ...changed our prospect a little bit. We've seen that a little bit on towers but again the demand for mobile cranes and large RTs remain very, very strong.

Finally, in the US again Glen mentioned that the demand for large crawlers and large rough-terrain cranes is not slowing down. So, this is my takeaway out of all the markets.

Unidentified Analyst

Can you guys talk as you look into these markets, can you talk about your customer base and just who is securing, who is buying these cranes because I mean, it is obvious that the growth in the emerging markets is very strong. But what is not obvious is the ability to fund that growth and just who the customers are and how they are reliant on the banks and what not. Have you broken down your customers in terms of who might be somewhat susceptible to credit issues and who ... and which clients on a percentage term have ample liquidity and are going continue to work through this global slow down?

Glen E. Tellock - President, Director and Chief Executive Officer

That I mean ... that's a obviously looking at the end user on a regular basis and their credit position. I mean we'd do that even in good times. So as we go through and talk to many of these people whether it be in Europe or Asia or the Americas, a lot of what's being said right now is more from the liquidity of the project and financing of the project than there is the financing of the customer. We have our Manitowoc finance which is ... in good times everyone wants to extend credit but our Manitowoc finance, where we have partnerships with a couple of large financial institutions around the world and they have continued to tell us, that they're open for business. Their balance sheets are good and there are names that don't popup in some of these other issues.

So, yes, we do watch what's going on with our customers and a lot of them are very well capitalized customers. They're very well capitalized businesses. And so they're not just one off or two off type crane company. I think if you go back to the 90's and the ramp up until we got to 2000, 2001. I think primarily in the United States and a little bit in Europe, you saw people getting into the crane rental business that shouldn't have been in. And I think during this last ramp up of crane activity, it is a much better and a much stronger base of customers.

Operator

[Operator Instructions]. And we'll take a follow up question from Charlie Brady with BMO Capital Market.

Charles Brady - BMO Capital Markets

Hi Thanks, just with respect to incremental margins and kind of what your guidance is on Q4, from a straight operating margin, that guidance would imply a pretty sharp down tick in the margin in Crane in Q4 sequentially year-on-year. And you've talked in the past about where you see incremental margins going in the back half of '08. Can you just speak, sort of, where your expectations are now?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Yes, I would say ... obviously the issue there Charlie, would be somewhat currency related would have an impact, as well as the commodities, which we had signaled earlier. And then you've got the mix issue. The tower crane slowdown is, we don't provide ... Glen's earlier point, we don't provide product line financial information, but I can tell you that the tower cranes as a general category is above our margin for the segment.

We haven't provided any forward guidance yet for the '09 time frame, but I think as we attack these issues on from a pricing policy standpoint, from a supplier management standpoint, and the other things that we could do in managing the business, we certainly are expecting to be able to perform well from a margin standpoint. And get on the right side of this, just from the pure commodity impact, and get on the right side of that from a pricing perspective.

Charles Brady - BMO Capital Markets

How much in the change in your guidance would be related to slowdown in crane and how much would be headwind from foreign exchange relative to prior expectations?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

I would say that the foreign exchange issue for us, looking at the fourth quarter is a little less than $4 million on the earnings side. And the balance of the rest would be split pretty evenly between the volume absorption issues and the ... and the mix issue.

Operator

And our next question comes from Seth Weber with Banc of America Securities.

Seth Weber - Banc of America Securities

Hi thanks. Just a quick couple of follow ups, have you finished all of your capacity expansions or is there opportunity to slow that down if haven't finished anything? And separately Carl, have you thought about what tax rate will be for the combined company?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Again, we haven't provided anything for the '09 as far as the capacity I think Glen would want to answer that question.

Glen E. Tellock - President, Director and Chief Executive Officer

Yes, Seth, the capacity expansions that we started are all kind of the majority of what we've done by the end of the third quarter. We just had the facility opening of Niela earlier this month and the only one that I think remains open is really what is happening here in Manitowoc. And that is the extension for the crawler cranes, large crawler cranes we have obviously the 31,000 that we have introduced and that's what that expansion is for. To slow that down would be crazy, but everything else is pretty much behind it. But I would tell you those were still have the right decisions, a lot of it is not ... wasn't all that capital intensive, when it comes to brick and mortar, but a lot of it was equipment, a lot of it was efficiency improvement to some of the lean manufacturing things we are doing and talking about the volumes through the 11,000 [ph] factory.

So, in the areas that have slowed down those its Slovakia, India, those are the low cost countries and I said in previous calls, when things did slow down, these expansions when we turn around this is where you're going to put the additional volumes through these type factories and that's, I mean, this is playing out little sooner than I think we thought but this is exactly why we did some of those expansions.

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Hi Seth just to comment on the tact, there isn't anything that is structurally inherent that would have a big swing by virtual bringing on a notice?

Seth Weber - Banc of America Securities

Okay. Thanks for the clarification, Carl.

Operator

And we will have a follow up question from Robert McCarthy with Robert W. Baird.

Robert McCarthy - Robert W. Baird.

It occurs to me ... thanks for taking another question. It occurs to me that the change in foreign currency translation may have had a negative effect on the backlog number, the $3.3 billion, did it and if so, how much or do you know?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

It's roughly 4%, Rob.

Robert McCarthy - Robert W. Baird.

Okay. And then I have to admit I'm just confused about the discussion of '09 and 2010 crane orders. I believe last quarter we've talked about a significant level of potential orders that were not booked into backlog because you were holding off on pricing them. The release specifically said something about delaying opening the 2010 order book, yet Glenn, you said that obviously nobody is really talking about 2010 right now. So, can you help us understand what ... I mean is there a piece of business out there that you don't have booked into backlog but under normal circumstances you would have expected to and what was the effect of the order book, that is talked about in the release?

Glen E. Tellock - President, Director and Chief Executive Officer

Yes. You are right Rob. I misspoke on that. You are ... I mean thanks for pointing that out. It was some of the back end of '09 and into 2010, as you look at what a lot of the dealers are putting out into their projections as we move forward. So you're right.

Robert McCarthy - Robert W. Baird.

Okay, alright. And okay, that straightens it out. Thanks

Operator

[Operator Instructions] And we'll take a question from Nigel Coe, Deutsche Bank.

Nigel Coe - Deutsche Bank

Yeah, thanks for the follow up. Carl, interested in your comments about the 10% trough Crane margins. I remember you used to have in your slides a reconciliation of prior peak Crane margins too, where you thought they would go. And within that you had the impact of commodity price inflation versus price. I just wonder if you have an update on what has been the impact of high steel prices versus ... the high steel cost versus price, and if that were to unwind over the next few years, what potential benefit that might have on Crane margins?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Well, I can tell you for the quarter Nigel, looking at it year-over-year was probably on the order of $6 to $7 million of headwinds for us.

Nigel Coe - Deutsche Bank

Okay. And over the last four, five years you've got no sense on the basic points in that?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

No, I think it's a dynamic situation what the customer does ...what we ... the arrangements that we make on a pricing side with customers and what we can do on a procurement side. I would say generally speaking during this upturn we had some significant headwind in 2004 when commodity prices started to really go up significantly. But when we got in the 2005 timeframe and during most of the upturn until we started talking about it earlier this year. We've really been at least even relative to margin impact from commodities. And then obviously you know that we've got significant impact in 2008 from commodities to the tune of probably around $100 million.

Nigel Coe - Deutsche Bank

Okay understood. And then just one more quick one on just the for EPS, it sounds like Enodis is fully neutral on earnings, is that correct?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

I'm sorry, I did not understand.

Nigel Coe - Deutsche Bank

Enodis, it sounds like Enodis doesn't have a big impact on 4Q guidance?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Well, the guidance that I gave in my prepared remarks were ex-Enodis. And we indicated through our Q&A that ex-special items that there would be about a $0.10 headwind from Enodis in 2008, because of the seasonal low out that they're in, in November and December.

Operator

And we have a follow up questions from Paul Bodnar from Longbow Research.

Paul Bodnar - Longbow Research

Just a follow up on steel prices for next year. Are you starting to see a softening at all in the higher strength of steel that you use, or can be at that price, and what will be interim [ph] statement, what's the outlook on it?

Glen E. Tellock - President, Director and Chief Executive Officer

The steel, I think you read a lot about that. And there are on the mild strength steels, you are seeing things come down. But I think what ... when we look at it, and the latest information that we have. Yes, it will come down, but I'm not sure that it comes down much further than what it went up in 2008 in some of the big spikes and that you saw in the last half of that we talked about in April and May of this year.

So, and that's the high tensile strength steels, and again, going back to proving that the high capacity type equipment is still very strong, it's because of that. So, I think we will see a little bit of relief. But I don't think it gets back down to where it was in, if you want to talk in 2004, 2005, I don't think it gets near that.

Paul Bodnar - Longbow Research

Okay, thanks.

Operator

And we have a follow-up question from Robert McCarthy with Robert W. Baird.

Robert McCarthy - Robert W. Baird.

Sorry, got a million of them. I'm sorry, I didn't quite catch the $67 million headwind was for the third quarter?

Carl J. Laurino - Senior Vice President and Chief Financial Officer

For the, that ...no, that was inherent in the Q4, in the full year guidance.

Robert McCarthy - Robert W. Baird.

I'm sorry, that's what is in the 4Q, okay, alright. And then I actually, thinking along the same lines as the last two questioners, wondered more on the Foodservice side, if you weren't starting to see, a little bit of softening in material costs there?

Glen E. Tellock - President, Director and Chief Executive Officer

We are, Rob. I ... again, I go to the word slight. It's a matter of ...for every time you see where there's a softening read the next paragraph of anything that comes out of the steel people, as in they're going to cut back on the output. So I think there's a happy trade out there but yes, we are seeing some slight benefits on the steel for that's being purchased in Foodservice. But at the same time you're seeing a little bit of benefit on some of the commodity cost also.

Carl J. Laurino - Senior Vice President and Chief Financial Officer

One thing I'll also bring up Rob is that in Foodservice because you have hedge-able commodities, aluminum, copper, the nickel both Anotas and Manitowoc do have hedging programs so that obviously take some of the sting when the markets are moving up but it's just muted generally so that you're not seeing huge effects on bigger movements either direction.

Robert McCarthy - Robert W. Baird.

Duly noted. Thanks for the clarification Carl.

Operator

[Operator Instructions] and we have a question from George Reese with George D. Reese [ph].

Unidentified Analyst

Good morning, all excited this morning.

Glen E. Tellock - President, Director and Chief Executive Officer

Hi George.

Carl J. Laurino - Senior Vice President and Chief Financial Officer

Hi George.

Unidentified Analyst

You clarified the tax benefit of the Anotas situation. Could you also address if there ... clarify if there's any implications of the write down on the goodwill?

Glen E. Tellock - President, Director and Chief Executive Officer

I guess my question George would be, when you talk about just a specific goodwill itself or were you talking about other intangibles or...what?

Unidentified Analyst

No, the $198 million.

Glen E. Tellock - President, Director and Chief Executive Officer

No, that's not a write down what's happening is it is purely the accounting entry that we are going to have to make when we book the transaction instead of showing the fact that it was $2.7 billion and it will be $2.5 billion and so that is really, it just reduces the amount of goodwill that we would have in the transaction.

Unidentified Analyst

Okay, well thank for the clarification.

Glen E. Tellock - President, Director and Chief Executive Officer

Okay Liza?

Operator

And there are no further questions sir.

Steven C. Khail - Director of Investor Relations & Corporate Communications

Before we conclude today's call. I would like to remind everyone that a replay of our call will be available beginning at 12:00 noon Central Time today, until 12:00 midnight Central Time on November 05. The number to dial for the replay is area code 719-457-0820. Please use confirmation code 4835607. You may also access an archived version of today's call on our website at www.manitowoc.com. Thanks again for joining us everyone. Have a good day.

Operator

And that concludes today's teleconference. Thank you for your participation. Have a good day. .

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Source: Manitowoc Co. Q3 2008 Earnings Conference Call Transcript
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