The Manitowoc Company, Inc. Presents at Barclays Industrial Select Conference, Feb-20-2013 02:10 PM

| About: Manitowoc Company, (MTW)

Manitowoc Company, Inc. (NYSE:MTW)

February 20, 2013 2:10 pm ET


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

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


Andy Kaplowitz - Barclays Capital, Research Division

Andy Kaplowitz - Barclays Capital, Research Division

Okay. I think we're going to get started again. I know a few people -- more people will shuffle in. Again, I'm Andy Kaplowitz, the machinery and

engineering construction analyst. We're very excited to have Manitowoc with us today, leader in global cranes and food service. Manitowoc has been one of

my top picks over the last couple of years, continues to be. I think there's still a world of potential in both the crane and food equipment business.

The way we're going to do this, again, is a fireside chat format. I do want to ask a couple of questions of the audience but some people are still

shuffling in. Maybe I'll do that in a few minutes.So maybe what we'll do is I'll start off the Q&A -- I'm going to come over and sit down, Glen. I'll start off the Q&A by sort of asking you a bigger

picture question, Glen. As I said, I believe still that Manitowoc has a ton of potential. Your margins are where they are. You've talked about them

improving over time. How likely do you think it is that you sort of reached your potential risk cycle, somewhere where -- like you were sort of were at

that '06, '07, '08 time frame, how likely is it in both segments? And when do you think you will -- like when would you most likely to do it now, I know

-- if we knew the answer we probably wouldn't be sitting here, but any sort of thoughts you could have on sort of that bigger picture question?

Question-and-Answer Session

Glen E. Tellock

Obviously, a good question. And I think the answer is 2 part. One, I give our team a lot of credibility when it comes to meeting the projections we put

out. The margin improvement, we've said on the Foodservice side, we could get to the high teens. The things we're working on right now, these aren't

planned initiatives, they are initiatives that are ongoing right now. It's some of the things we're doing in Mexico with the consolidation of some

facilities out of Southern California and Tijuana, the ovens consolidation. But then you go -- so we have a history not only in cranes -- or I'm sorry,

Foodservice -- but you look at cranes, of doing what we said we're going to do. And so when you look at the margin potential -- and in the meeting today,

we have a lot of questions. Where do you think cranes go? So it's the high teens on Foodservice. Then on cranes, people ask, "Where can you get to?" And

I think -- I don't know that necessarily from a revenue standpoint that in the next peak you might get to where we were on a revenue side and I've said

that maybe because the towers don't get back to that same peak that it was, but I think the rest of the product line, but I certainly believe the margins

get there. We have a lot of things going on in Europe right now, to consolidate and make our facilities more efficient there. We have the new joint

venture in China, which I think is a great opportunity for us. And many of the things that are being done in the couple of factories we have in the

United States. I give a high assurance to our margin opportunities. When that happens, I think -- I hate making those long-term projections. I know other

people don't mind doing it, but we're kind of a little squeamish sometimes to do that. But I think if you looked at what our 2015, '16 strategic plans

are, I think it's very global.

Andy Kaplowitz - Barclays Capital, Research Division

Okay, that's great. So now that we have more people in the room, let's do the first couple of

questions over our automated response system. We're going to just do the first 2. So the first one is do you currently own the stock? One, yes,

overweight; two, yes, equal weight; three, yes, underweight; or four, no?


Andy Kaplowitz - Barclays Capital, Research Division

Okay. So some people own it, but a lot of people to convince. Okay let's go onto question two. What is your general bias towards the stock right now?

One, positive; two, negative; or three, neutral?


Andy Kaplowitz - Barclays Capital, Research Division

It's pretty balanced. A lot of positive people but definitely some people that we can win over, over time. Looks pretty good in that sense. Maybe I could

ask you about sentiment in your customers. We had a lighter order quarter in 4Q than maybe seasonality would suggest, there are definitely preservations

within the quarter. So as you've gone over the last couple of months and talked to customers, where are the -- where's their heads right now, when it

comes to orders, especially on the cranes side?

Glen E. Tellock

I think it doesn't matter whether it's cranes or food service. It's all about confidence, and its confidence in where things are going. And I think when

you look at what's happening in Europe, people understand that, that's going to be slower. So people are wondering what is going to happen in China? And

then when you get outside of that, I mean, in the U.S. there's a political-type side of it. And, yes, our customers, believe it or not, they choose

sides. They have emotions that -- some of these crane rental companies or the large rental customers, they have opinions. But I think what's happened

since the end of the year when they saw some of the -- at least a decision was made on some of the tax items, not so much the fiscal cliff. There's a lot

more discussion, I think a lot more inquiries as to our order board, where things are going, what do we have in development? So I think those types of

things play in the -- so Carl and I, when we're looking at the business, so much of -- the orders are the orders. That's a timing of when people feel

comfortable to put things in, but there's a lot other things that go into our forecast that they give us comfort that the guidance we're putting out

there is reasonable and not some just dreamt up numbers.

Andy Kaplowitz - Barclays Capital, Research Division

So one of the questions I get along those lines is you've got times of high single-digit growth but your backlog is flattish because of a slightly lower

4Q. So how did you get confident giving that guidance of high single-digit growth given your backlog sort of flattened out last quarter?

Glen E. Tellock

I think the orders are 3 months, a 3-month number, and our guidance is a 12-month number. And I think when you look at that, you have to ask yourself

where are things happening? And let's take, for instance, the U.S. I believe there are some things that are happening more as you go through the year

than there are in the near-term. I think if you go back to 2011 and 2012, there's a lot of euphoria at the beginning of the year and then it kind of

fizzled out. Last year, it was with Europe and China and the political scene in the U.S. Year before, it was mostly Europe. And I think people have said,

"Okay." Now when you learn from those types of facts, you sit back and you say, "Hey, if the manufacturer only has a 3 or a 6 month backlog, I know I can

go in there and work my way around the system to get what I need in a very short period of time." So I think that's the general sentiment. But if you

look at some of the dealers, whether it's in Europe or the United States, they're still there. They have some confidence because they look at the

engineering and construction backlog, the -- today, the ABI number being up. So I think the -- we look at it as, "Hey, what's the long-term trend?" And

again, I think we had a very good order rate in the third quarter, which was unusual, and then I think it kind of muted itself by the fourth quarter. And

so you -- over that 6 month period, was a typical trend.

Andy Kaplowitz - Barclays Capital, Research Division

I feel like I shouldn't ask this, but I'm going to ask it anyway. So like, we're sitting here in late February, does it feel pretty good so far to do a

seasonally normal order quarter?

Carl J. Laurino

You should always go with your first impulse.

Glen E. Tellock

We haven't reissued any guidance. So I mean, as we sit here, I -- I mean, look, we just did that little -- gave -- had our earnings release a little bit

ago, we're comfortable with it. I mean, I think with -- for us, the focus isn't so much on the top line this year. Let's say that we're wrong and it's a

little bit down, let's say we're wrong and it's a little bit up. The focus that we're trying to go with this year is there are some great opportunities

for us in the gross margin line and it's really some of the initiatives we have on new product introductions, the operational excellence and getting

those things that will show to people, hey, even in the non-high growth periods of cranes, we can do a pretty good job managing the bottom line.

Andy Kaplowitz - Barclays Capital, Research Division

So let's talk about that, Glen. You gave kind of a wide guidance range for what margins could be in cranes by saying high single-digits. What are the

things -- last year was a little frustrating, I thought, because you had sort of good growth and you were starting to show better margins. Should we

break out here? Is it reasonable to say that we finally are getting past some of these costs? You've doing ERP for a while, you've gotten past some of

the IT4 Costs, pricing should be pretty good. Is it time to break out?

Glen E. Tellock

Well, if you were frustrated, you should have been with Carl and I. And I've said that I was disappointed on the second and third quarters, not

necessarily with the overall business itself. But I think there were some things we control that we could have done a better job with. But I give the

team, again, a lot of credit. By the of the year, we've said in the fourth quarter, we still maintained our guidance in a lot of areas and we hit those

numbers. So it's what we see in the business. And I think some of those inefficiencies from the second and third quarter, having to take a product and

set it aside so you can get other products out because of the supplier deficiency or shortage or something like that, some of the things we had with the

Tier 4 engine, we are getting better at that. And you're right, you should see the benefit of those every year as we go along from an efficiency

standpoint. So -- but I -- when it comes to the ERP system, you just want to see the incremental growth. So you're not going to get a degradation but

it's going to be a flat number there year-over-year. And -- but I think, some of the areas that we control that we're a little disappointed with, I

think, those will improve in 2013.

Andy Kaplowitz - Barclays Capital, Research Division

Got you. And another thing that you talk about, you talk about the E&C backlogs. I'm an E&C analyst in my other life. Clearly, all of our companies are

talking about a big ramp-up in pet chem projects here in the U.S., everything that has to deal with low natural gas prices. And one of the things that I

sort of noticed from you guys is you sort of talked about crawlers as seasonally strong in the fourth quarter for the last couple of years. But crawlers

are also associated with these big energy projects as they come. So is there any validity to the view that we're starting to see more quotation on large

crawlers because of these large energy projects that are sort of on the docket for the next couple of years?

Glen E. Tellock

Definitely. I mean that's -- again, a lot of the conversations we've had and some of the one-on-one meetings today, we -- obviously, we're not

forecasting what types of projects, but only do listen to the energy-type projects that are coming about. And we talk to our customers. Some of the

products that we have that will be coming out in 2014, 2015, 2016. On the crawler side of the business are 4 of those types of projects, and so we think

there's an opportunity there if energy continues to be a big -- if we do what we say, the country does what they say, and that's to be -- become more

dependent on our own sources of energy. If that happens, that's a huge boon for our crane business and especially the crawlers.

Andy Kaplowitz - Barclays Capital, Research Division

And let me ask you sort of the opposite end of the spectrum, around mining. Mining is one that people focus on as more weakness, especially out of

Australia. What kind of impact in mining have on your business over the next 1 or 2 years?

Glen E. Tellock

Well, we don't do a lot on the mining, the extraction side of the business per se. What our products are mostly involved in, in the mining are going to

be on the mobile hydraulic and they're going to be involved in the maintenance. They'll be involved in the setting up of the mine site, they'll be

setting the maintenance and some of the big pieces of machinery that are there. So it's not -- it's a good piece of business, but I don't think it's

really -- we're not looking at mining to drive our business, we watch it as an ancillary piece. And I think if you look at South America in some of their

mining that goes towards the rest of the world, or you look at Australia, I mean those are probably the 2 biggest areas that we have an impact in mining.

Andy Kaplowitz - Barclays Capital, Research Division

Great. So one of the questions that I got today was sort of the evolution of your U.S. non-res business. Like it's hard to separate cranes from what they

do, but at the same time you mentioned the ABI being where it is today. When does -- how many -- how much in the way of housing starts do you need to

sort of really start to use your cranes? Is it you got to get back to more normal and that's when you see the more sort of non-res infrastructure around

the residential and then we're just not there yet? Or are you...

Glen E. Tellock

Yes. Housing in the United States is not a big driver for our business. What housing is in Europe, that's where you're using a lot of the self-erecting

tower cranes, the smaller self-erecting towers. But in the United States, you'll see the boom trucks on single- or multifamily housing. And that's the

delivery of the supply, some things like that. So that can help the boom truck, which is basically a North American product. But what's really carried

that business for the last few years is the frac-ing and things that are happening in the North Dakota, the Southwest and in the East part of the United

States. So -- but I think what happens with the housing is that people get confident there -- again, it's built on the confidence. People look and say,

okay, if we go into the nonresidential type of things, it could be institutions, it can be schools, it can be universities and then there's all of that.

I don't know necessarily, it's office buildings, but it's corporate offices. People expanding their own businesses in the United States. If the energy is

coming back, you're going to have different employment -- places where you haven't had it before. That's where some of that helps.

Andy Kaplowitz - Barclays Capital, Research Division

Got you. I know you have a big tower business in Europe, I'll get to that. But like tower business in the U.S., what does the utilization look like? What

does the dealer inventories look like? Are you starting to see signs of better times ahead for U.S. towers.

Glen E. Tellock

You're seeing signs that the utilization is improving. The rates, I don't think are still all that great, but I mean you're seeing the utilization

improve. But we aren't looking at towers in the United States to move the needle in our business in 2013 and probably well into 2014.

Andy Kaplowitz - Barclays Capital, Research Division

Got you. And then on to sort of the European business, I know you're taking costs out of business, you continue to. I mean I hate to say it like is there

any hope for that business because that's how I kind of feel. Like -- you kind of already mentioned that maybe that business doesn't participate in that

sort of Goldilocks scenario that we envision for you in '15, but what are the chances that it does? I mean, is there anything you can do to really impact

that business more than you're already doing.

Glen E. Tellock

In Europe?

Andy Kaplowitz - Barclays Capital, Research Division


Glen E. Tellock

Yes. You have to remember, when we talk about Europe, I mean that's -- as Carl, I think, defines it, it's our center of excellence for tower cranes, but

it's also the center that we have for Europe, Middle East and Africa. So you have to have those people in place. We have them in Lyon, France, but

they're also running the Middle East. They're running Africa, they're running Russia. So when you look at Europe as -- we call it EME, yes, okay, Spain

and Italy, Portugal are a little tough, but they've been tough for since 2010. So I don't see that business getting worse, but where we're putting our

efforts in our -- are in Africa. We now have a facility in South Africa. We're looking -- I was just in the Middle East, from there last week. Russia,

there are some nice things happening in Eastern Europe. And Northern Europe is okay. It's not -- I would target it as somewhat -- you're worried about

what happens in France. But what's already happening in Greece and Portugal and Spain and Italy, I mean that's -- I mean me, I'd never say it can't get

worse, but it certainly -- even it does get worse, it's not going to be much of an impact to us.

Andy Kaplowitz - Barclays Capital, Research Division

So what are the chances -- I think you mentioned on your previous call that places like Russia and Algeria were getting pretty good compared -- so what

are the chances that you can fill your tower crane business in Europe with these other parts of the EME as look over the next couple of years?

Glen E. Tellock

I don't know. Tower crane business in 2007 was pretty strong. You're not going to fill it the way it was. So I think what we have to do is be flexible

and put our -- the size, our business to the market. And you have to remember, we also have -- we have a tower crane facility in Portugal. We build

self-erectors in Italy. We're in Slovakia, India, we will be building in South America. So what we have to do is downsize, as we're doing, and we talked

about the restructuring already. And hey, let's be honest, if you have told me this is a tower crane business in 2013, if you'd have said that in 2009

and '10, we'd have made some different decisions back then. But we had some different projections, so now we're making the moves and we'll get that

behind us and -- but what we're really doing is taking one of our, arguably our best factory, which is Milan. And we're going to make that for all of the

French tower crane manufacturing and use one of the other facilities as a component manufacturer. By doing that, we bring some things in-house, we

improve our efficiencies, improve our costs and we're not outsourcing it.

Andy Kaplowitz - Barclays Capital, Research Division

One thing I noticed was -- and maybe it was actually talked about, the emerging markets did look better in the past quarter than the quarter before. What

sort of spurred you to make that comment, was it China, was it one of the other emerging markets? I know you're doing pretty well in India, what


Glen E. Tellock

Yes. I don't think it's China as much. I think Eric was pretty excited on the last call with respect to the joint venture that was coming together, and

so that gives us some excitement. And I think it's a huge benefit and a positive that we have a much stronger JV partner than somebody that really didn't

want to participate in the businesses all before. But I think when you look at -- you look at Africa, you look -- South America again, you look at

Colombia. Again, Korea. I mean there were some things -- we had some good activity in Korea towards the end of the year. I mean that's where our big

31,000 is going to go. So I think that's where -- I mean, we hadn't seen, in the second and third quarters, some of that. And I think people got past

some of the political transitions and those kinds of things.

Andy Kaplowitz - Barclays Capital, Research Division

Maybe you can just talk about your Brazil market a little bit more. I think it's been one of your sort of jewels as you've gone forward. But what have

you done so successfully there? Why haven't the Chinese competitors been able to make good inroads to you in Brazil? I know they're there. And what do

you keep doing to sort of maintain your momentum in Brazil?

Glen E. Tellock

One of the things that we find culturally in some of the emerging markets that if you can get that first mover advantage, you get a lot of loyalty. And

then -- and I realize that will change overtime, but you get some of that and you can -- you have the relationships. You have local people that are

managing the business. You understand what they're trying to do. You can -- you -- we put the factory. When we invest $35 million in a factory in Brazil

and people see that investment in Mexico -- or I'm sorry, in Brazil. So you commit to that region and people see that as, "Hey, these guys want -- they

want to be part of us." And so I think as long as you're competitive, you continue to give them good product and reliable safe product -- and the other

thing is you're starting to see an expansion of crane rental companies in Brazil. And by doing that, they want things that have good transportability.

They want reliability. They want support. They want quality. And I think some of the competition that comes from the Far East has a ways to go and

getting there, I think they'll get there. But I think that's the advantage we have.

Andy Kaplowitz - Barclays Capital, Research Division

So you've been taking rough terrain cranes in Brazil, what about the towers that you're talking about? Is that an opportunity for 2014? Is it more of a

longer term opportunity? How would you...

Glen E. Tellock

It's more near-term. We're actually going to start building towers in Brazil at the end of this year. That was the original plan. So last year, just as a

little bit of an input, in the Brazil factory we probably were 2 or 3 cranes short of what our target was back in March when we opened the factory. And

so then, we'll start building towers for the South America market towards the end of this year. And so the further along we can go to localization,

product localization, in that arena, we get a huge benefit when it comes to duties and tariffs of the imports.

Andy Kaplowitz - Barclays Capital, Research Division

Great. So I want to open it up to the audience in case anybody has questions in the audience. And then we can move on to more automated questions.

Unknown Analyst

Yes, guys -- there we go. If you guys could just talk about what you're seeing in terms of price by region and also in terms of hitting your margin on

the crane side, how dependent is that on price?

Glen E. Tellock

The margin by region is -- I don't know that it's all that different with respect to as you go across the different regions. I would say, where you have

the larger margin differentials on the product line. And so you can -- the margins we have, that's how -- we said this publicly many times, the -- in

order of margin, I wouldn't say importance, I would say just size, there's towers, crawlers and then mobile hydraulics. And so you can see the impact

that towers, and lower tower and mix of towers and crawlers has on our business from a margin standpoint. But I think when you go into -- you go into

China, you go into parts of Asia with respect to if it's a product that has a big transportation cost to get there and it's not produced somewhat

locally, you're going to have margin degradation. For us to ship a large crawler from the United States to Asia, you're competing maybe with some Chinese

competitors, you're competing with some of the German manufacturers. That's where really -- it's really in the transportation costs. Or what you have,

sometimes if it's Japanese, that again you have -- it's availability and transportation. So I think it's more by product line than it is by region.

Carl J. Laurino

Pricing-wise, we -- as a late-cycle company, we started to see some recovery in some of the other earlier cycle construction equipment manufacturers. And

from that perspective, we weren't able to get the prices or lag effect to the backlog that we don't reprice in an increasing material cost environment,

and so we lost about $30 million price costs in '11. We got on the right side of that equation last year, probably benefited us about 50 basis points.

Because of some of the actions we were taking throughout 2011, that didn't really benefit that year in full flower but did benefit '12. Then we took

additional actions in '12. We announced some pricing for '13, effective in January. So we feel like we're in a pretty good position from a price cost

standpoint currently based upon the expectation for the cost side of the equation.

Andy Kaplowitz - Barclays Capital, Research Division

Carl, you've seen your competitors being rational about price as well generally speaking?

Carl J. Laurino

Generally, I would say the environment has been pretty reasonable versus what we've seen some previous cycles. I mean, there's always going to be very

aggressive pricing when there's capacity availability as there is in any industry, but I think it's overall been pretty rational.

Andy Kaplowitz - Barclays Capital, Research Division

Okay. Any other questions from the audience? Okay, how about we ask 2 more of these fun polling questions. Can we go to question 3, please? In your

opinion, through cycle EPS growth for the Manitowoc Company will be: one, above peers; two, in line with peers; or three, below peers?


Andy Kaplowitz - Barclays Capital, Research Division

In line. So I guess, let me ask you a question on that like -- so when people think you're going to sort of go along with the cycle, what do you think

you can do to sort of enhance your reputation to be above average performer for the cycle?

Glen E. Tellock

And that's interesting to me, to see that. And I'm okay with, obviously, with the answers. But that's the whole intention of ours when we put our

strategies together. And that's why I would be honest, I was -- it's interesting from our perspective. Internally, we have things that we want to do. And

you look at what the Street's expectations are, they don't always match up, let's be honest. And -- but the fact is we want to be at #1, above the peers.

And that's where you get, that's where you get the value in the share price. That's where you're creating value for your customers. You're creating value

for your employees. And so our strategies are put together with that. So you can see many of the things we're doing, whether it's a solutions-driven

business, both in cranes and food service. You have to get your quality right. When we were seeing some of the things on quality that we've done in the

Crane side of the business and on the Foodservice that are going above some of these -- but you have to do it at a cost that's competitive and so that's

why we like some of the things that we have inherent in our business to globalize a lot of the initiatives that we have. We can take some of these

international chains to Asia. We can take them to India because we have an infrastructure there both in food service and cranes. And I think that's

difficult for many of our competitors, whether cranes or food service. So I think what we need to do is continue to put strategies in place that are the

voice of the customer. What are they willing to pay for? And if they're not willing to pay for it, why are we doing it? And I think that's where we'll

continue to drive the business. And so I can assure you that just in last year, I mean, again, we -- or this year, when you look at where we might come

out, if -- everybody says that high tide rises all boats, I mean you want to be above that. And that's not acceptable just to do what the market does.

Andy Kaplowitz - Barclays Capital, Research Division

I think it's a good segue to talk about Foodservice business in the sense that I always feel like at least when data's in, people sort of penalize you to

some extent for food equipment, and maybe that's one of the reasons for these answers here. Is it realistic to say that -- let's say you just had a

food equipment business that, that would be an above average performer, too? Can you make it an above average performer versus peers?

Glen E. Tellock

Well I would -- I think in some product lines right now, I'd argue it's significantly above average performer. And that's really the intention is how do

you -- and that's the strategy. The whole strategy with our Foodservice group is if we can focus on the chains and we can work with the chains on -- and

if they have new store growth in emerging markets, if they have new equipment growth through menu changes, through product innovation that are

energy-efficient, water-efficient, I mean you were at NAFEM, you saw some of the things that we're doing. The -- some competitors can't do that. Now the

thing about the food service industry is you have many, many small -- it's a very fragmented industry so you have very many niche players. Let's be

honest, sometimes we can't be as nimble as a $5 million niche player. But I think if it's -- these people want to get outside of a region or an area, we

have the ability to do that with them. That gives us that above-average opportunity. And so you look at going into let's say, for instance, regionally

into the Philippines or let's use China again, they don't necessarily want the equipment that they're parent might be bringing over to that region

because, yes, it's nice where it is but it's a little bit expensive. How do you make it more economical for the size of the store and the amount of

revenue they're doing over there? We have the ability to make those changes.

Andy Kaplowitz - Barclays Capital, Research Division

To the plan about the food equipment business, I mean your business was kind of flattish in 2012. And maybe it's because -- but I mean you tell me -- but

was it really just because Europe so underperformed and -- then you can have easier compares this year, so you should be better off that's why we should

feel comfortable with the forecast of mid single-digit growth. And then maybe, just one more question as a follow on, how much of that mid single-digit

growth will come from new products versus the market itself?

Glen E. Tellock

Well, go ahead, Carl.

Carl J. Laurino

Yes. So the flat was, obviously, from a top line standpoint, we were pretty pleased with the margin progression that did come from -- essentially

reacting very well to the top line not coming to fruition to the extent that we expected to. The biggest part of it really was kind of the roll-on

success, the roll-off. And there's going to be a varying amount of that in any given year, and we're not pleased with the pacing that we got in 2012 to

some of the roll-out opportunities. Not that they failed to still be in front of us, but they just pushed to the right a little bit. And that in a

normalized environment certainly can be helpful. That's -- what was the other part of your question?

Andy Kaplowitz - Barclays Capital, Research Division

It was about new products versus market, like how much [indiscernible]

Carl J. Laurino

So if you look at just the pure market growth that we expect this year, it's low single-digits, probably 2%, 2.5% market growth for the balance of what

we expect to bridge that, so there should be a little bit of pricing as well as some of the new product opportunities that are identified.

Glen E. Tellock

You have to remember on the Foodservice side, 55% of that business is replacement business. So that's a nice base just to start from every year. And then

you take that menu changes and maybe new store construction, which you can argue is 25%, 20%, 20%, 25%, give or take, that's the rest of it. And so the

new store construction isn't necessarily in the United States or Europe. It's really how do you improve that traffic through the store. And that's the --

to Carl's point, that's where people are looking at the innovation. And again, the size of our business gives us that opportunity to work with many, many

larger chains that get that opportunity.

Andy Kaplowitz - Barclays Capital, Research Division

Well, I get asked this question all the time. And I've asked you guys this question before. I'm going to ask it again because this is a public forum and

we've got some people who probably don't know your company that well. Why are the 2 companies together? I mean, can you just talk about that? And what

makes it good for you guys to have the 2 companies together?

Glen E. Tellock

Well, I think, well you have to look at -- which I know you don't give a rat's backside, but you got to start with how they got there? And so when you

look at cranes, we could not have gotten to the scale we've got without a marine business and a food service business. Fast forward, we did the

acquisition. You couldn't have done that just with a $400 million food service business. So the scale of those 2 together gave us opportunities to get

where we are today. We sold up our legacy marine business. So we're not opposed to doing what's right for our business. But as you sit here today, and I

said this a couple of times today in the one-on-ones, and I know everybody, as I look across that audience, everyone of you are better modeling a

business model within forecast and things than we are. But if you sit here today and you believe that with the depth that you have and the 2 businesses

you have, and the forecast you have, you look at what the businesses can do and you say -- and we do this with the board on a regular basis because it's

our fiduciary responsibility -- you say, holy cow, what I can do with this business through 2014, 2015, 2016, you take some of the impediments to

splitting this up whether it's the cost of splitting up the debt, whether it's the tax leakage you have on either one of these businesses, it's easy to

look at just the solid numbers but it's hard to get into the details of it. As you sit there today and look at the organic value we can create with this

business, if you believe we can do what we say we're going to do both from a market standpoint and an operational standpoint, you'd see it's a

no-brainer. And I think what happens then, at some point in time, and I don't know when but it certainly is in my opinion isn't now, you have to sit

there and we, as you know, are managed by EVA, there's really only 3 things you do, either manage the business more efficiently, you put more capital

into it to get a better return on the cost of capital or you divest. With -- those are the 3 things we look at on a regular basis. And yes, we understand

there's -- a lot of people ask us that question because now we have the scale. We never got this question several years ago when there wasn't a scale on

food service. And now, you can understand the question but it certainly is a timing to me wouldn't make any sense. But I think when you look at -- and

we're in our food service at our Tampa facility yesterday, Carl and I -- you look at all the initiatives that our people are working on together, common

control systems, some of the engineering things, the solutions part of the business, the aftermarket side of the business, taking food service into

India, taking food service into China, taking food service into South America, Mexico, all of the things, these are soft synergies that, you're right,

there's not a cost takeout but we're accelerating some things that food service or cranes would do by themselves because each one has their own

experiences. And I think we're accelerating some of those opportunities.

Andy Kaplowitz - Barclays Capital, Research Division

Okay, that's helpful. Could we do a couple more automated questions. Let's do question 4. In your

opinion, what should Manitowoc do with excess cash? One, bolt-on M&A; two, large M&A; three, share repurchases; four, dividends; five, debt pay down; and

six, internal investment?


Andy Kaplowitz - Barclays Capital, Research Division

So that one was obvious for you guys. Let me say it like this though -- well, a couple of questions here. Sort of when will you actually be comfortable?

I mean you've been taking it down the last couple of years now. You're getting to pretty reasonable levels. Another year or 2 and you're where you kind

of need to be. So the question is when you get comfortable, when will you get comfortable? And then, once you get comfortable, then what do you?

Carl J. Laurino

We're comfortable today.

Andy Kaplowitz - Barclays Capital, Research Division

Good answer.

Carl J. Laurino

I mean we're comfortable today but that doesn't change the answer, right? Debt reduction is still a priority. It's still something that probably -- we

need to continue to make those, the appropriate investments in the business. The things like Brazil, like Mexico. That will enhance our returns and

enable us to grow in the markets that we're in. But we still have a lot of leverage. So we need to normalize the earnings levels, rate the denominator,

continue to pay down debt. And because of the way the debt is structured today, even though we do have a lot of leverage, we're comfortable today.

Glen E. Tellock

Yes. I mean, look, I took over cranes in 2002. The market went down the tank, became steel in 2007, and market went down the tank. Those are both after

acquisitions. I'm a little shy. But, no, seriously, Carl is exactly right. And the thing that I would add to this where you ask how long? In 2013, given

the initiatives we have on the focus on the gross margin line because I'll tell you, I know people, you could -- we can argue whether the market's going

to go up, 8%, 10%, 15%, 20% or down 10%, we can all argue that. But the thing that I know very certain and you ask me, we will focus on improving the

efficiencies and the infrastructure in our business this year because of the initiatives we have in place. So to move somebody's focus away from those

this year -- because when you start doing acquisitions everybody wants to be involved, they want to be part of the team, I think until we really get

through a good portion of this year, I think that Carl is exactly right, the debt pay down. I know we'll start -- and then we can get back to some of the


Andy Kaplowitz - Barclays Capital, Research Division

Are there any holes in your portfolio either in Foodservice or Crane that you eventually you're going to get this question and what would you do?

Glen E. Tellock

Yes. I -- there's in both. There's holes in both the product lines. But I think mostly, there's gaps regionally. There are some things that we can do, I

think, that would accelerate some of our initiatives on a regional basis, and that's where some of the focus. I think when you look at, again, some of

the aftermarket, things that we could do in Foodservice, I think that has some opportunity. But then on the other side, I don't want to really get into

some of the products because we have our sandbox that we like to play in and so we know what those products are. And there's products and there's

regional bolt-ons.

Andy Kaplowitz - Barclays Capital, Research Division

You mentioned that somewhere it's a delicate question, I think a lot of investors don't think of you as having a big aftermarket business because they

just think of the crane business more than food equipment. But -- so maybe if I could ask you about Crane Care, how successful really has it been so far,

in sort of building an aftermarket business in cranes?

Glen E. Tellock

Well, I think it's been very successful and I think that the whole strategy behind it, in addition to improving it is typically, you see a manufacturing,

the aftermarket piece is run by the people that are running the manufacturing. And they're 2 different business models. One is very people-intensive,

that's the service side and the parts and service, and then there's the manufacturing. And so if you go to, if you say, hey, we need -- especially in

cranes, a cyclical business, I've said keep the engineering, keep the aftermarket. If you got to let people go, let's do it in the manufacturing. You can

flex those areas. And I think that's become a differentiator and will continue to be a differentiator if we see some of the competition come out of the

Far East because I think it's a difficult model to replicate, and it's costly. I mean it is a cost to have call centers in 4 or 5 different parts of the

world, have the parts on-hand for our customers. But we think that's our business model and that's -- we're not going to have a 100% market shares where

we like to improve what we have and it's a very profitable piece of the business. So again, it's that customer focus that -- that's what these people are

asking for. We have this called CraneSTAR, which is just like you can imagine, in just like in some of the cars, you push the button, you can talk to

somebody in the call center, some people don't like that. They want to talk to an old service guy that they knew and blah, blah, blah. So you got to be

careful that it's not just all process driven -- very successful. And I think it's not going to be the same in food service but there's going to be a lot

of similarities. And you're seeing the food service people talk to some of the things in cranes, how are you doing some of the remote diagnostic testing?

How are you staying in touch with -- how are you delivering parts better than having each individual location have to have part shipments on a regular

basis? So a lot of these efficiencies in that to grow that side of the business.

Andy Kaplowitz - Barclays Capital, Research Division

Any other questions before I go with some more automated, anything else? Okay. So let's do question 5 if we could. In your opinion at what multiple of

2013 earnings should Manitowoc trade? One, less than 10x; two, 10 to 12; three, 13 to 15; four, 16 to 18; five 19 to 21; six, higher than 21.


Andy Kaplowitz - Barclays Capital, Research Division

Okay, so they say 13 to 15, which I guess makes sense given sort of where your current valuation is, that always sort of ends up like that. But the

question is, you've got a very high quality food equipment business, when it comes down to it. So do you think that that's -- I mean, it's hard to ask

you, it's not fair to ask you if you think that's the right multiple, but do you think you deserve more credit for the recurring business that is food

equipment and the ability that you have to take the margins up over time still?

Glen E. Tellock

I mean , Carl, maybe you can answer, too, but I think people are starting to finally catch on to the earnings potential that food service has. I think

when you look at -- and this is what I talked about, the 2- or 3-year earnings potential. And let's say we don't get to the total dollar value we had in

the last peak at cranes, when you add a much bigger food service piece, it's a heck of a lot more earnings and a heck a lot more EPS than we had in the

last peak because you have a much bigger piece of the business. I think people are starting to get that. The other thing is there's more -- people

understand the construction equipment business better and it's hard to get their hands around the other side, but I think they're starting to get it.

Carl J. Laurino

Over time.

Andy Kaplowitz - Barclays Capital, Research Division

One more question. Question 6, what do you see the most significant investment issue for Manitowoc? One, core growth; two, margin performance; three,

capital deployment; or four, execution/strategy?


Andy Kaplowitz - Barclays Capital, Research Division

So core growth is still more important to people but I think would you answer that question, and say either #2 or #4, right now? I mean I assume that's

what your answer would be, but you tell me.

Glen E. Tellock

I'm not surprised again by the answer based on how the markets -- what they value. But I think given the fact that we have a Foodservice business that I

mean you're going -- if we have 5%, 6%, 7% growth is going to be good for us on a regular basis given that earnings potential. And then you have the

cycles of cranes. So I think people like it when it's going up and that's why we get that value. But I think if we continue to focus on 2 and 4, and hit

home runs there, and you do a little bit better than the market, the markets, that's the core growth. And I mean I think that's where you would have the

-- I think that's the benefit of what we have.

Andy Kaplowitz - Barclays Capital, Research Division

Great. Well, thank you, guys, for joining us. We really appreciate it. Thank you.

Carl J. Laurino

Thanks, Andy.

Glen E. Tellock


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