Q1 2020 Earnings Call
[music].
Ladies and gentlemen.
Good day and welcome to they never talk first quarter 2020 earnings Conference call today's call is being recorded.
At this time for opening remarks, an introduction I would like to turn the call over to eye on Warner Vice President marketing and Investor Relations. Please go ahead Sir.
Thank you good morning, everyone and welcome to Manitowoc Conference call to review the company's first quarter 2020 financial performance as outlined in last evening's press release.
Speaking on the call today are very pennypacker, President and Chief Executive Officer, and David Anthony Senior Vice President and Chief Financial Officer.
Today's webcast includes a slide presentation, which can be found in the Investor Relations section of our website under events and presentations.
We want reserve time for questions and answers after our prepared remarks.
I would like to request that you limit your questions to one and a follow up and returned to the Q to ensure everyone has an opportunity to ask their questions.
Please turn to slide two.
Please note our safe Harbor statement in the material provided for this call.
During today's call forward looking statements as defined in the private Securities Litigation Reform Act of 1995, RB based on the company's current assessment up its markets and other factors that affect its business. However, actual results could differ materially from any implied or actual projections due to one or more of the factors among others described in the company's.
The SEC filings.
The Manitowoc company does not undertake any obligation to update or revise any forward looking statement, whether the result of new information future events or other circumstances.
And with that please turn to slide three and I will now turn the call but are you Barry.
Thank you I on and good morning, everyone I hope, everyone is safe and well.
To start I'd like to thank the Manitowoc team globally for their perseverance over the last couple of months. The team has done a superb job of managing the business day to day, while balancing challenging personal circumstances.
This morning, I'm going to comment on three topics.
Our managing today's increasingly difficult operating environment.
Our Q1 results.
And our current view and long term view of short term.
Market conditions.
First I'd like to discuss how we're managing the current situation is due to the global pandemic.
The top priority at Manitowoc is ensuring the safety health and wellbeing of our employees their families our suppliers and our customers.
We recognize the gravity and urgency of the present challenge and were resolute in working through these times with a sense of responsibility in the communities, which we operate.
We committed to three key actions in order to deal with the coded 19 crisis.
First and foremost do what it takes to protect the health and safety.
Of our employees in all Manitowoc facilities.
Second.
Keep our operations running in delivering cranes, and providing essential parts and services for our customers.
And thirdly preserve our liquidity and economic well being without sacrificing our future competitiveness.
Thus far our actions are succeeding.
Manitowoc has not been immune to the Corona virus, we've had a few employees test positive for co. The 19. However, we're pleased to say that those employees have recovered or our recovery in quarantine.
We continue to comply with all government guidelines. In addition, we've implemented safeguards to protect those employees and our facilities such as providing necessary personal protective equipment where needed.
Required and social distancing staggering breaks and start times, increasing sanitation activities and when possible have employees work from home to name just a few.
Our aftermarket support teams have stepped up during the crisis to provide critical parts and service support to ensure a maximum uptime for our customers around the world.
Thus far in the U.S., we've effectively managed to health and safety with out completely shutting down.
His resume our operations globally, we'll leverage these best practices and lessons learned to successfully operate in a post coded 19 landscape.
Our balance sheet is solid and position us well to navigate these difficult times.
We have sufficient liquidity and has implemented a prudent capital structure with no significant debt maturities until 2026.
We've transformed manitowoc during the past four years, eliminating significant amounts of fixed cost position us better to weather the storm.
And when market strengthened we are poised to continue achieving further margin expansion and profitability.
Turning to slide four.
I'd like to comment on our first quarter performance.
As David will explain we had a great start to the year from an EBITDA perspective, our operations executed well despite the headwinds of coated 19, which hampered our ability to ship cranes.
Our us plants remained operational while our China factory resumed production after a temporary shutdown in the month to February.
Our major facilities in Europe closed mid March.
Our German factory reopened on April Twentyth.
And the remainder of our factories in France, Italy in Portugal have reopened this week.
This is great news. However, we do anticipate it will take some time to become fully operational.
We see additional headwinds in Q2 in Q3, as we transition out of the quarantine into the new normal.
Restarting comes with a variety of challenges ranging from implementing new social distances standards and related safety measures supply chain disruptions and construction site delays.
We are working closely with our employees suppliers and customers to manage through this complex period.
Next I'd like to comment on the crane market conditions.
As explained in prior calls we saw a declining order rates in the second half 2018.
As we entered the quarter, we had anticipated a challenged set of comps due to the softening global market demand.
Orders for the first quarter were in line with our expectation, including those we see that the Conexpo trade show.
The global shutdowns related to the pandemic coupled with the recent drop in the oil and gas end markets cause a pause in the crane market during the second half of March and all of April.
Fortunately global warranties are beginning to relax around the world and construction sites are going back to work.
Our business in China has normalized and we see the South Korean market quickly returning to normal.
In Germany construction projects continued to work through the quarantine and we're hopeful for a quick recovery.
In our markets hardest hit such as France, We're seeing progress every day.
We track open construction sites weekly and are encouraged to see a marked improvement versus the prior week.
Finally in the US economy is beginning to reopen and we're starting to see increases in construction that was deemed non essential.
As we anticipate continued soft order intake, we're taking the necessary steps to adjust our production schedules to match changing levels of demand.
In addition, we've cut discretionary spending.
Eliminated base salary increases.
Expanded share repurchases reduce capital expenditures by 50%.
Although we are continuing to fund mission critical programs for future growth.
Despite these very difficult times, our liquidity position remains strong.
As of quarter end, we had a total liquidity of approximately 382 million.
With no outstanding borrowing under our revolving credit facility.
In summary, we expect the short term to be difficult with continuing declines in revenue and profitability, but expect the crane market to rebound.
However, we will execute our playbook to weather the storm our operational focus.
Healthy balance sheet and market, leading products positioned us well to capitalize when end markets recover.
Due to economic uncertainty, we announced the couple of weeks ago that were withdrawn or 2020 financial guidance for the remainder of the year.
We will reinstate our guidance when we have a clear line of sight on the business outlook.
And with that I'll turn the call over to David for further color on our financial results.
Thanks, Barry and good morning, everyone lets move to slide five.
Our first quarter orders totaled $375 million, a decrease of 15% compared to $441 billion of orders last year.
On a currency neutral basis, Q1 orders were down $61 million or 14% with most of the of the decline driven by year over year demand softening in the Americas, partly offset by improved orders in Europe.
During the quarter, we had approximately $10 million of order cancellations in the Europe and Asia markets.
Our Q1, ending backlog of $521 million was down 25% over the prior year, 24% on a currency neutral basis.
The decrease in backlog was mainly due to a decline in the Americas segment, partially offset by an increase in Europe segment, driven by stronger year over year orders and Kobin 19 shipment delays.
Net sales in the first quarter of $329 billion decreased $89 million or 21% from a year ago with each of our three segments reporting a year over year decline.
Net sales were unfavorably impacted by approximately 1% from changes in foreign currency exchange rates.
The largest year over year decline in net sales was in the Americas segment, driven by a lower shippable backlog entering the year. Additionally, net sales were negatively impacted by approximately $37 million due to shipping delays and plant closures associated with the coated 19 pandemic, which resulted in lower shipments of frames for Dom.
Finally in the Europe segment.
Gross profit decreased $17 million year over year, driven by decreased volumes on a percentage basis gross margins were flat year over year, mainly due to mix and a higher percentage of aftermarket revenue, which increased to 25% of net sales for the quarter up from 20% of net sales last year.
Our engineering sales and administrative expenses decreased approximately $4 million to $56 million due to lower headcount and lower short term incentive compensation costs, partially offset by the costs associated with the Conexpo trade show in March.
As a result first quarter adjusted EBITDA amounted to $16 million or 5% of net sales, which was in line with our expectations.
Our flow through on the year over year sales declined was 15%, reflecting good performance in managing our costs.
During the first quarter, we incurred approximately $2 million of restructuring expenses predominantly related to European severance costs.
Our GAAP diluted earnings per share in the quarter was a loss of 22 cents versus a loss at 75 cents in the prior year.
On an adjusted basis diluted earnings per share was a loss of 18 cents compared to income of eight cents in the comparable period.
The primary driver driver of the lower adjusted diluted earnings per share was the reduced year over year sales volume.
This was partly offset by approximately $4 million or 11 cents per share of lower interest expense, resulting from last year's debt refinancing.
First quarter adjusted operating cash flow was a use of $79 billion. Our first quarter is always the use of cash as we build inventory in anticipation of the summer construction season in the northern hemisphere.
Inventory also increased approximately $25 million due to shipment delays caused by the pandemic.
Our quarter end cash balance improved by $55 million year over year to $104 million with no borrowings outstanding on our ABL as compared to $33 million outstanding at March 31, 2019.
In the quarter, we repurchased approximately 1.1 million shares for $12 million, including 2019 buybacks, we have repurchased a total of $19 million under the $30 million approved plan as Barry mentioned, we have suspended further repurchases at this time.
At the end of the quarter, we had $244 million of revolver borrowing capacity plus another $38 million of other debt availability.
Net of $4 million of outstanding letters of credit total liquidity was $382 million at March 30, Onest, an increase of $112 million from March 31 2019.
Our liquidity remains sufficient to meet our obligations for the foreseeable future and we do not have any significant debt maturities until 220 26.
As a reminder, when we refinanced our debt in the prior year, we reduced our cost of borrowing. In addition, the debt agreement simplified and east Covenant compliance affording us greater flexibility to access our liquidity.
With a significant amount of market uncertainty and disruption due to the pandemic. We withdrew our 2020 got financial guidance at the end of March.
We expect our second quarter and full year results will be significantly impacted.
As our manufacturing facilities resume operations and our supply chain and demand stabilized we will be in a better position to update our full year guidance and we'll do so as soon as feasible with that I will now turn the call back to Barry.
Thank you David as many of you are aware of US Department of Commerce initiated a section to 32 investigation of mobile Crane imports.
Manitowoc filed this petition to urges department of Commerce to investigate a recent and sustained surge of mobile crane imports that threatens domestic manufacturers.
We are grateful to departments saw the clear need to investigate these imports and their impact on national security.
Our petition is all about protecting our American workforce and preserving our long standing commitments to the us military.
These imports jeopardize the domestic industry's ability to supply cranes for us military and support critical infrastructure.
Therefore, underwrite undermining Americas National security.
Our motivation for this petition is plain and simple.
We wish to compete in the North American market on a level playing field.
Let me conclude my remarks by saying that we entered 2020 from a position of strength.
We are managing the business with the flexibility and agility needed while balancing the need to ensure the safety of our employees customers and communities.
We've adopted quickly by realigning our business to lower demand and are prepared to implement further measures as we monitor the progress through the second quarter.
This experienced leadership team has a proven track record and successfully leading businesses through significant disruptions, including Manitowoc.
And we have actions in place to manage through this unprecedented pandemic.
We are focused on continued prudent cash preservation and balance sheet management, while investing in the business.
We are confident that demand will return and manitowoc will be well positioned to deliver stronger financial performance for our shareholders based than our four key strategic priorities.
Using the principles of the Manitowoc way.
With that Abbvie. Please open up the line for questions.
Thank you if you would like to ask the question. Thanks for taking my questions Star one on the telephone keypad. If you are using a speakerphone. Please make sure. Your mute function is turned off till you signal to Jericho.
I guess just start one if you would like to ask a question and we will take our first question from Jamie Cook with credit Suisse.
Hi, good morning, Im glad everyone and a healthy while I'm sorry, I guess my first question on understanding you took some discretionary cost actions is is there anyway to sort of quantify how much that theoretically should help.
You know offset volume declines and then from the longer term actions, you're contemplating a model here about them and then I guess just my second question.
You know I understanding April and May will work.
Probably very weak in terms of orders et cetera, but can you just came a little more color there and what you're seeing how much orders were down and whether you're seeing any cancellations from customers. Thank you.
Yes very welcomed.
We saw some cancellations in the first quarter.
Since April 1st I can say we have not.
We have seen.
A number of customers with some potential liquidity issues come to us and ask for some relief on terms.
Is through the delay of payments for instance.
But other than that you know Jamie the market for us has been pretty stable.
April orders were just like everyone else is pretty much nonexistent, what I can say is that the aftermarket percentage of sales rose very high.
In the month of April.
Which only to be expected.
As far as the cost concern.
We have identified.
And taken actions.
In a short term.
The somewhere around the $8 million to $10 million range.
We have longer term actions that have yet to be implemented.
But as this pandemic continues to.
Where its ugly head, we have multiple scenarios that we've outlined and multiple restructuring programs available.
To preserve our future and.
Ultimately our cash.
Thank you I appreciate your insight Dave.
You too Jamie Thank you for your question.
And we'll take our next question from and to begin with JP Morgan.
Hi, good morning.
Good morning, and.
I think I can you talk a little less about Q2, your expectation PARP free cash flow.
And we had a intelligently you're expecting to cut inventory by about 80 million.
Our flat year over year so.
What what actually pull take to lift environmental timber against inventory and arc and can you generate positive free cash in Q2.
I'll, let David talk about the actual cash flow in Q2, but I can tell you that operationally we are aligning our plants.
To deal with the flexibility that weve.
Weve into them with the implementation of our lean principles through the Manitowoc way to be perfectly aligned with what our customers expectations are.
This is not the company that will build inventory.
Through finished goods as a result of trying to keep absorption where it needs to be.
We will react accordingly, we will take build rates down we'll use all the tools that are available to us through the different operating principles of different countries and we will manage it accordingly.
And with that I'll turn it over to David to give you some more color on the actual cash usage through the out the year.
Yes, so and thanks to the question and generally speaking the company is a user of cash in Q1 in Q2 with slight.
Increasing cash in Q3, and a larger increasing cash in Q4, so Q2.
To be expected is going to be a use of cash that determination to that is going to be how the sales topline flows through we we've seen.
Order push out a little bit and we anticipate so our topline being impacted so generally speaking, yes, we will be a use of cash we're trying to mitigate that to the greatest extent possible but.
All in all we will be a cash usury few Q2.
And we expect to make money indicate to you.
Sure.
Our sales company, so weak, but based on our way into.
I mean, I generally speaking, we always where we strive to make money on EBITDA basis, and that's really dependent upon.
Factors that we'd wherever our out of our control at this point of time. So it really is depended on top line and what we can get out the door to our customers at the construction sites, Yeah, I mean as as these construction sites come back to life, particularly in Europe.
What happens in Europe is we we build the product to order and then the customer tells us which job site to ship too.
As of now.
Over the course for last week, we've seen a little activity in telling us where to ship this product too, but not nearly close to where I would say is a normal amount.
On a normal normal amount.
Based on historical data.
If that continues through the month of May in the month of June than David's absolutely correct, we will.
Still strives to be positive EBITDA, but I think it might be a.
Task that is just too tall, but we're still rest assured that our customers that we talk to our are very interested in getting our product and using our product they want to get back to work as much as we do.
So we're just going to have to watch it.
And.
As as it continues to evolve, we'll certainly try to communicate that yet and and just to add I mean, we have very very difficult comps year over year in Q2, So I would imagine we're going to see a significant.
Deterioration in the top line from on a year over year basis.
Well if I appreciate that and just one quick follow up by Anda filing to the department of Commerce can you tell us how many cranes were important the l. totaled 14, and how many were uncomfortable 19.
And Jeff Stanlis second lien don't kill Unquote cranes Cronto terminate.
We certainly do in portrays from Germany, but Germany as it necessarily the name major issue that we're facing with regards to this petition.
We're facing in this petition where you know when I first came onboard back in 2016, I would never even think about trying to say that.
Based on the feedback that we've gotten from our customers that we were anywhere close to be enable from a quality delivery or technology perspective to compete on a global basis.
Over the course, the last three years, we spent tens of millions of dollars to fix that.
And I feel like now our product portfolio is is one of the best in the world.
But when I see cranes being imported to the us.
That are 20% below our cost.
When we have very similar.
Types of weights of material very similar labor costs.
When I see that and I know that some of those cranes are being.
Underwritten by local policies from different countries.
It's time for us to stand up for the United States and for our workers.
And all I want is what I said earlier is a level playing field werent we're not.
In a situation where.
We believe that we need anything other than just a level playing field.
Because our products and services have evolved and there are what I will call state of the art now.
When you see a crane being imported.
And a sale price equivalent to our.
Manufacturing cost and this crane is nothing more than a hammer.
Little Hammer.
There's a problem and when you see financials of some of these companies that are importing these crane.
Where they knowingly are making money in their home country and losing money in.
In the United States in North America, it's time for us that.
To be irresponsible for us not too and I am certainly happy that day. The Commerce Department has seen the data that we've submitted and so far have agreed with us.
Okay area, but I haven't thats total rent so not that styling dollar doesn't have to your K. There. So I look at Darren. Thank you I'll get back line.
You are absolutely correct. The strong dollar does not help our case. However, there are countries that import cranes to us that are very well known for currency manipulation and that's exactly the type of things that the department of Commerce, the United States has to be care has to be concerned about and.
Order to protect our national security.
And we'll take our next question from Jerry Revich with Goldman Sachs.
Hi, good morning, good long and Nike there won't be as well.
I'm wondering if we could just talk about the aftermarket business in the first quarter pleasantly surprised that the performance can you talk about what programs you rolled out that way.
Strong growth.
Three type environment and then.
In April and can you just talked about the year over year performance of the aftermarket business. Thanks.
Yes, it aftermarket business remains strong in April from a year over year perspective, So we're very pleased by that and where that means that.
Cranes in a number of situations are working and are requiring parks. The strong performance in aftermarket in the first quarter was driven by a number of factors, but the largest one was that we had a significant increase in the amount of cranes that were being erected.
In Europe on job sites, which we get we get paid to do which is part of our aftermarket percentage of revenue. So a significant increase in overall.
Job site construction that required our people to ensure that the cranes were safely directed.
Okay.
Just a clarification neutral.
In April.
Slide show much much strong being down 10 would probably be pretty strong for April. So can you just say more about what you mean.
As shown in April just quantify that is a bit acuity, yeah, what year over year, our aftermarket percentage our after market dollars in April were not necessarily affected that much.
Yes.
Thats very nicely here and when we were a tonnage. So we chatted about you folks with the quality improvements.
Having potentially made up some lost ground for the market your standpoint versus the global competitors.
In the U.S. can you just said square that out so you folks have been able to be competitive is your point, even though.
Pricing point for the container prices at much lower can you just expand on that because given that pricing. After you just mentioned the markets where the schedules.
You extend that is contracts. Thanks.
Yeah, Yeah, I mean in that in the targeted areas in North America, where we have decided to gain market share through targeted investments in our product portfolio, we've been very successful.
In our truck mounted product where.
Our portfolio was over 20 years old before it was refreshed the refreshing of its the of that of our our Tms products.
Over the course of the last two years has gained substantial amount of market share the.
The necessity of us to enter the 100 ton 150 ton.
Crawler market in the us.
You know has been very successful for us.
People that have been buying the Manitowoc brand and the growth bran.
Over the course of the last 30 years know that there is a premium sometimes to be paid.
For the for the name that we have because of the history behind the.
Value of our products.
Five to seven to eight years down the road.
That that phenomenon still exist in the guys that bleed yellow and the guys that lead red Manitowoc, but there are other customers out there that we'd like to share with share our products with also and when you know the we have a a technology that is superior to some of the input.
Works.
But the cost disadvantage we have is so substantial.
It's time for us to react.
And that's exactly what we did through this petition and as I said I'm very pleased that the government season, our way also.
Appreciate the discussion tanks.
You are very welcome.
Well take our next question from Stephen Volkmann with Jefferies.
Hi, Good morning, guys I'm just wanted to circle back very to something you said at the outset, where you're seeing a few of your customers who might not be as strong asking you to help them a little bit on terms etcetera can you just expand on that a little bit and and kind of your ability to to provide that kind of help in this.
A tough times.
Sure I'll, let you know that really falls under our trade Finance group with David manages on the day to day basis. So I think I'll, let David answer that for you.
Hi, Steve Good morning.
No I think there's there's two to two two items on this one number one it's.
The company's that financed through Manitowoc cranes.
Whereby a financing is in place and and us in Europe, it's a little bit different but we've seen a lot of instances whereby they are asking for a 90 day extension in those extensions are typically just locked down through the end of the lease for any any cranes that are out there on lease.
With regard to the receivables that we currently financed there's anywhere from a 30 to 60 to 90 day, depending upon the customer in the region.
Requests to extend payments a little bit but.
Overall these are not typically ukraine, they've been out there in awhile. So I would say that overall you know the value the cranes are significantly value than the receive more valuable than the receivables we have on the books at any point of time.
Okay, all right great. That's helpful. Thanks, and then.
Maybe very this as a question for you, but I'm wondering this may not be something you can do but obviously, we have two issues with the sort of shorter term covert related issues and then we have the oil and gas issues, which are probably longer term. So I'm curious if you have any commentary around.
Got it how those two end markets, saying kind of kind of recover I assume the oil and gas will be a longer term. One then how important that that too right now and kind of how much of a headwind might that be even after coded kind of passes.
I'll add to that in two different ways.
First let me start off by saying that it's been no secret.
And we have talked about it ever since I've been here about our loss of market share in the oil and gas business, specifically in the middle East.
We were very close and had signatures on a page for a very sizable order our first one in a long time.
I would have went to Saudi Arabia directly to the oil patch.
That has been delayed.
But it has not been canceled it is not in our backlog.
We feel it prudent to keep it out but that is our first success since I've been here penetrating the oil and gas market in Saudi Arabia.
Secondly in the last.
It, particularly effects one product line of ours, which is our all terrain vehicles that.
That come from Germany.
So we saw we did not see $23 per barrel oil, but we did see with the number of all terrains that were put into the U.S. market last year, we factored into our planned Fortunately a significant reduction this year and that's.
Going O b, what it's going to be this year and shouldn't have a lot.
When a year impact to us longer term I mean, we got to get the economy's moving again get people driving again, we've got to get oil being consumed again and I think the long term fundamentals are going to be solid.
The crane age in the oil and gas space is relatively high.
So I think any spur in activity.
Any uptick in activity will spur a demand for cranes that we'll be ready to satisfy but.
When you have sub 30 oil prices.
The amount of investment that happens as you are well aware.
Is virtually nil.
So we just got to standby and watch and get the economy's Rolling again get people driving again and get that oil backup to sustainable levels that we can all.
Enjoy prosper Simeon.
Okay. Thank you I'll pass it on.
[music].
Well take our next question from Seth Weber with RBC.
Hi, Good morning, this is Brian Im on for Scott.
You mentioned orders being pushed out including the one in Saudi Arabia.
And your discussions with customers do you have a sense for how many projects are simply being delayed but as being outright cancelled.
But a large portion, particularly in North America.
I have not seen any of the large projects that we had been working with our.
Our customers and partners on.
In cancelled, but I've seen then move dramatically to the right.
Okay. Thank them one more fine may just any color you can providing us on the used crane market, particularly in terms of pricing.
I think pretty pretty stable I think theres been been some cranes in the market that of drove driven the price down because of the fact that there's an exiting happening in that particular brand, but I'd say fairly stable right now we're seeing.
Okay, great. Thank you.
Youre welcome.
We will take our next question from make delay with Baird.
Thank you very much good morning, guys.
Good morning make.
So just trying to.
Clarify your your earlier comments, it's obvious that but Q2 is going to be pretty tough, but can you give us a sense here or.
I was thinking revenue might trend sequentially or how youre production is trending sequentially.
So Mig I say that we're anticipating as you know we sold about $500 million and sales in Q2 19, So were I anticipate that will be significantly down.
As Gary indicated you know a lot of our European plants.
We're just reopening.
So we're going to have adverse variances associated with the plant closures, which are going to be challenging coupled with with move outs. So we've run multiple scenarios in that regard, but since we withdrew guidance you know, where it's a wait and see as to which customers. We are going to be able to shift too and that's going to be at big.
A big driver in how we fair in Q2.
Fair enough, but.
At this point.
It is fair for us the thing that revenues are probably going to be down sequentially. We don't have the AG generally, yes, yes, yes sequentially sequentially.
If they're down sequentially it'll be it won't be as obviously as dramatic as year over year, but.
Yes sequentially that it's likely it will be down.
Okay and.
You sort of granular analysis and stress test and so on there.
Revenue.
Figure that you can share with us where you would be.
Breakeven from a dedup standpoint.
Well, maybe got great question, we've talked about that in the past we have going I will say, we did we have run our modeling as to where we anticipate that we would be from a breakeven standpoint under various scenarios. Each scenario has what I'll say is contingencies based upon what we can do that triggers we can pull to maintain breakeven levels at.
What I'll say abnormally low levels at this time, we're not at Liberty to say, where that is but I will say that we want to be a company that exits this downturn in a better position to capitalize when the market rebounds.
Well I would say I'd make is I think David's right, we can't really disclose that but I will tell you that it's substantially less.
From some of the actions that we've taken.
Through.
The SGN a reductions we've done from the plant closures, we've done from the refinancing of our debt agreement we've done.
So it's it's substantially lower.
Than what it has been in the past.
That's fair.
Last question for me.
I appreciate your comments on to 32, I guess I'm just wondering how important this RT business.
Can you at this point.
Maybe you can give us a sense for what percentage of your business or sales. However, you want to you on a frame it that'd be helpful. Thanks.
Could you restate your question make I'm not sure I followed you.
Yes, so on the.
Department of Commerce action that you talked about earlier as far as these specific products are concerned I'm trying to understand how relevant how important they are to your business.
What percentage of your business is associated with them. Thank you.
Well I won't I won't tell you as a percentage, but I will tell you that it's the lion's share.
Okay.
Got it.
Yes, very lucky.
And we'll take our next question from Stanley Elliott with Stifel.
Good morning, everybody. Thank you guys for taking the question and nice to hear your and your voices.
Great just talk a little bit more got the parts into services piece, certainly had a higher pressure was down a lot of new products. You guys are working diligently over the past couple of years.
I've really kind of put an emphasis on on a proprietary parts you is that really what you're seeing in the business or is it kind of mortgage or expanded services offering just curious how to think about that.
Well, it's a combination of both Stanley, but I will say that it was no secret that back in 16 17, and the early part of 18 timeframe. When you walked around a crane manufactured.
In either Shady Grove, we're in a Williams hobby, Germany, you would see you know.
This.
Consumable items that say call one 800.
Yes.
Supplier to get the aftermarket part now if you walk around our cranes, you will see call one 800 manitowoc spare parts.
For oil filters for.
Oil for <unk>.
Other types of Greece, and other disposable items.
That typically we had not participated in because we allowed our supply base.
To take that so we've we've consciously made a decision internally to change that dynamic and I think that dynamic is paying off I also would be remiss in saying that we did not price.
Effectively our aftermarket.
In the past.
We've used a number of tools to help us with that and I think it's showing up in our results.
And and family just to add on what Barry says, we've actually made.
Investments in our aftermarket inventory to support the the growth in that category.
Great and then secondly, kind of more broadly you are you hearing anything within all the various markets for operating about any sort of stimulus programs plants, what have you that would be beneficial to the business.
Well, we are here, even though we are hearing stimulus plans in the U.S. I mean, we are hearing.
A lot more talk about infrastructure that I think we'll be a positive.
In Germany.
The if you're talking about stimulus programs.
For growth I'm, not too familiar with any country that I know has done that yet, but what I am familiar with is how places like Germany, France.
Italy Korea.
As.
A loud certain things to happen that would offset.
Coated 19 type expenses.
But as far as the actual stimulus plan.
I don't think we've seen those yet.
Perfect. Thank you very much.
Thank you very welcome.
And we'll take our next question from Larry de Maria with William Blair.
Hi, good morning, everybody.
Can you just remind us the current status on let's say deposits terms progress payments et cetera has it changed and have you had to recurring any cash from some are more cancellations yet.
Hi, Larry No no I mean to cancellations, we didnt have any deposits on any of those cancellation. So it was just the predominately 2019 late in the 19 orders.
That the customer canceled in Q1, so the answer is no.
I know you currently with new orders now in terms of backlog et cetera, do they all have deposits with them or is there I'm just trying to understand some of the risk there.
Yes deposits on orders are not the norm.
It just it busy exception, depending on the customer and that circumstances in the customer, but thats not the norm.
Okay.
And then secondly.
The inventory, obviously picked up a little bit in part because of delays, which obviously helps ship I'm just curious.
There is only going between your backlog.
They are holding a rather did that have caused for name and very named attached to it or is there anything there that considered maybe speculative for all four quarters in there. So again trying to understand the risk in the inventory in backlog.
Don Don worry about the risk in the inventory because quite frankly, we don't.
We don't make the stock.
And over the course of the last three years, David and his team have done a very good job of analyzing and.
Disposing of inventory.
That would not be considered sellable so.
As far as the.
The.
Value of our current inventory and its ability to be sold I get that im very very very high confidence anything to add David Yeah, Larry It's I'd say the key component. There is that we continually look at our order intake on a daily basis, and then we marry that up with our build schedule by plant and then we.
We adjust our build schedule accordingly to as Barry said it earlier, you know to not have that build of inventory you know there as circumstances will remain strategically do something but I would say in general we build to what we sell.
Okay, good to hear I'll, Andy refreshing it I, usually the financing I mean, obviously you for Andrew patch, maybe your cancel or you're not going and you're not ordering period, but if customers want inventory or for some reason are there any issues with financing that that are out there right now.
I would say that generally we've been pleased with with how refinance as you know we have Manitowoc finance program that that continues to operate and we have a great relationship with the with the company that underpins that financing. So at this point in time, while we do look at you know a customer's credit worthiness.
For sale.
We look at we look at satisfying those needs as well in ER and look at you know servicing as best we can.
Okay. Thank you good luck.
Thank you. Thank you very much.
Well take our next question, Mike Shlisky with Dougherty and company.
Hi, guys I don't like Hey, good morning, guys, sorry about that.
One follow up first on the on those 232 petition you'd be talking about.
Let me tell us.
He died in 30 days if they.
So.
If they see fit to do so there will probably be.
You know more data gathering there could be congressional hearings.
There, there's a lot of potential things that could come out of this that would die you know increase the timeframe, but at the outset.
You know is you know 100%.
Euro days for 265 days and as far as the remedy is concerned Mike I would tell you that is 100% discretion to the present in the United States.
And that is at this point.
100% up to him based on the data and then he is provided from the Commerce Department.
Okay. Okay.
I also want to touch on it.
You must as far as in the corner.
And very impressive.
Percent.
I think your comments is thrown in the corner.
You know an environment, where we're down to 25% governmental.
Baptist quarter.
Oh, Hi, Chris New Jersey, any kind of framework as to what might happen in June.
You just kind of.
Given that stronger declines.
Yeah.
So we've always you know we've always always kinda as articulated that under down market. You know, 25% to 30%. Sacramento's is is is typically what do we consider the norm understanding that and cute to last year. We did have one side benefit of of just over $9 million associated with illegal settlements.
I would say that overall, we want to stay within our guidelines and we do everything possible to stay within those guidelines.
Okay.
So much.
So he Mike.
[noise], we'll take our next question from Stephen share with yes.
Thanks to come on guys.
The money Yeah I got on this morning, I got on the call late so what you've covered this already I can just catch up you guys. Afterwards off line do I need to repeated but it conexpo you said customers Barry were telling you that they had robust plans for 2021 and that any curtailed orders from 2020 would be.
Taken up in 2021 and in addition to the robust 2021 order. So are they telling you anything different now about how those orders might be parched out.
No sticky exactly with what they said the only thing I would say is that I think 2021, you know assuming that you know some stability happens in the oil and gas market I think 2021 has the potential too.
Exceed my prior expectations that we had back in <unk>.
Because we are we are having discussions with a number of very very.
Long time loyal customers that had no choice, but to to delay and or cancel orders that are absolutely looking forward to getting those orders back again in 2021.
Oh My view has not changed on 2021 and I don't think based on what our customers are telling us there's anything to substantially change that <unk>.
Greatness helpful. And then I guess, along the same lines specific maybe that infrastructure more in the near term.
Since I apologize I. The states are obviously in a bit of a tricky position right now do you have any feedback on.
Orders, specifically destined for a highway projects, but you know what's what's the experience or sitting there is a is it a mix of some going forward and some being deferred nothing being deferred what have you seen their.
Uh huh.
Sure.
It's it's a mix.
M.R.
Dealers are you know very anxious to see some of the states.
Reopen their construction and re apply some of their cash flow to infrastructure.
You know, we're going to have to wait and see how cool bid expensive effect that.
You know we were planning some very nice infrastructure projects in Louisiana.
And as you know with the coded expenses that that state has had to undertake it could affect in the short term some funding for the infrastructure projects I suspect that California, we'll pull back on some.
Result of coded.
Illinois has already told us that some of the projects that they were planning for the third and fourth quarter of this year will leak into next year. So I would say the states are right now.
Focusing on how they can maintain cash flow through coded while at the same time delaying infrastructure.
Right helpful like like ours.
Thank you Steve.
And at this time I would much trying to convince back to and what not for any additional are closing remarks.
Before we conclude today's call. Please note that a replay of our first quarter 2020 conference call will be available later this morning by accessing the investment relation section of our website at W.W.W. Dot <unk> Dot com.
Are joining us today and for your continuing interest in the management company. We look forward to speaking with you again next squirt please be safe.
Thank you think animals can think today's call me. Thank you for your participation.
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