Dave Langevin - Chairman and Chief Executive Officer Michael Schneider - SVP, Financial Operations and Administration Andrew Rooke - CEO, ASV.

Mike Mork - Mork Capital Management Jeffrey Long - Tuxedo Road Associates.

Welcome to the Manitex International Fourth Quarter and Full Year 2016 Results Conference Call. Today’s call is being recorded. And at this time, I would like to turn the call over to Dave Langevin, Chairman and Chief Executive Officer. Please go ahead, sir..

Thank you, Jenny. Good afternoon, ladies and gentlemen and thank you for your interest in Manitex International. On the call with me today are Michael Schneider, Senior VP of Financial Operations and Administration at Manitex and Andrew Rooke, CEO of ASV.

I would like to welcome Michael who joins us today on this call, his first occasion to join us even though he is now working with the Manitex team for a little over a year. And Andrew, as everyone knows who follows Manitex has been with Manitex for approximately 10 years has recently been promoted to CEO of ASV our joint venture company.

He has spent a great deal of his time over the last two years at ASV and we thank Andrew for all his efforts on behalf of Manitex and wish him continued success with ASV. Now please refer to our first slide regarding our Safe Harbor Statement.

We ask that you review this statement and also refer to our SEC filings for further guidance on the many risk factors associated with our Company. I will start with a brief overview, Michael will follow with a quickly financial natural summary and we will conclude with Andrew summarizing the operational activities of ASV.

Let's begin with slide number three. As you all know to say its 2016 in the corporate world was not a great year would be an understatement.

In fact with the crush of the used equipment market entering the new equipment market as residual effect of the energy equipment overhang it will go down as one of the worst years in my over 30 years in the business. However for Manitex it was a year in which we accomplished a great deal.

Some examples, our reduction in expenses and restructuring the company for its future growth and as we reported today we are starting to see signs of improvement as documented by the expansion in our backlog.

We have been consistent in our message for over a year we're working to transform the company by increasing our margins and reducing our debt by selling off our lower margin businesses and concentrating on our higher margin companies and products which also give us a larger scale for future growth.

While we have not completed this mission you can start to see the results even in the fourth quarter which was a very difficult period to analyse lack of business coming into the quarter as a result of a very low point for backlog at the end of the third quarter and with all the restructuring and write offs from our sold businesses.

However these signs of improvement can be seen for example in a significant increase in fourth quarter gross margins on an adjusted basis as well EBITDA increases when compared to the third quarter on a similar basis. I will do a quick review of where we started, where we are going as a company by returning to slide four.

We started in the beginning of 2015 with approximately 225 million a debt, and today we reported our consolidated debt at slightly under 135 million or an approximate reduction of 90 million.

The source of funds for this debt reduction came from our selling material handling businesses which generated trailing 12 month sales of approximately 90 million and EBITDA of 4 million. We received proceeds from these sales of 40 million with the remaining 50 million in debt reduction coming from working capital and operating cash.

This leaves us with one large step in our strategic plan which we address in our recent announcement where we stated that we would be reviewing strategic alternatives for ASV joint venture holdings.

We are now more focused company anchored around our highest margin products and are among the world leaders in all types of mobile cranes and commercial chassis and with world class brands in Manitex and PM.

As we start to come off the bottoms for these products it is important to note that we are approximately 175 million of their previous peaks as standalone companies before any benefit of consolidation.

We believe of course that this recovery will not occur overnight, but we are planning for a slow and steady business increase beginning in 2017 and some of the anticipated external benefits do materialize in the marketplace then we anticipate further expansion in 2018.

Based upon this we believe we have significant upside and as reported our backlogs are just now starting to improve off of very low numbers. In summary, we believe we are just getting started in this cycle. We believe that we will recover sales over a future multi-year period.

We still have more work to do in a cost reduction area along with one more large piece to implement in our strategic transformation, but to end on a positive note we're entering the year with a solid order increase which should translate into continued improvement in our financial ratios as we go through the New Year.

With that brief opening overview, I would like to turn over to Michael to summarize our financials and Andrew for an update on ASV after which we would welcome any questions.

Michael?.

Thanks David and good afternoon. Moving to the financial results, today we reported to Q4 2016 GAAP net loss from continuing operations attributable to Manitex of 7 million or $0.44 a share compared to a GAAP net loss of 3.8 million or $0.24 a share in the fourth quarter of 2015.

Q4 2016 results include the previously announced 2.2 million of write off of deferred finance costs from the refinancing of ASV debt that occurred during the quarter. On slide five, I will concentrate on discussing the adjusted results for the quarter as compared to Q4 2015 which adjusts for both ASV finance costs as well as other nonrecurring items.

Our adjusted results for Q4 2016 for net income from continuing operations is 0.3 million or $0.02 a share. Net revenues for the three months ended December 31, 2016 decreased 10.5 million or 13.8% year over year.

Compared to the fourth quarter of 2015 lifting segment sales decreased 11.2 million or 23%, all crane products were down year over year although knuckle boom’s had increased sales in North America.

The Equipment Distribution segment sales were up 1.2 million or 41.4% from the aggressive sale of used equipment as the company sought to lower working capital and decreased debt. ASV segment revenues were down slightly ASV continued to expand the ASV managed distribution which offset lower sales of under carriages to Caterpillar.

Adjusted gross profit for the quarter was 13.6 million or 20.7% of sales compared to 12.8 million or 16.8% of sales in the fourth quarter of 2015. Adjusted net income for the quarter was 0.3 million or $0.02 a share compared to adjusted net loss of 2.1 million or $0.13 a share in Q4 2015.

Adjusted EBITDA for the fourth quarter was 4.4 million or 6.8% of sales compared to 2.2 million or 2.9% of sales in the fourth quarter of 2015. Slide six is a bridge table showing movement in sales in adjusted net income for the fourth quarter 2016 compared with the fourth quarter of 2015.

The principal items on the reconciliation are lower sales of 10.5 million from volume, we had a net gross margin pick up of 0.8 million a result of negative 1.7 million in margin impact of reduced volume offset by 2.5 million in improvement of margin percentage.

We saw a 1.5 million pick up related to operating expenses related to our previously mentioned cost reduction program. The interest savings of 0.7 million was due to lower borrowings, these savings were offset by an increase in forex and minority interest costs of 0.5 million.

Slide 7 shows that our working capital decreased from 59.2 million at December 31, to 54.5 million at December 31, 2016. Our DSO increased due to an increased percentage of international sales that generally have longer term combined with the timing of sales at the end of the quarter.

Although inventory declined during the year inventory turns reduced to 2.3 times at December 31, 2016 due to the lower sales volumes as previously discussed. Our current ratio is at 1.6 times and is consistent with last year.

Adjusting for the PM working capital facilities that are reported in current liabilities the current ratio would have been 2.0 times at the end of the fourth quarter. Slide 8 provides a breakout of 140.3 million of total debt at December 31, 2016, a reduction of 9.5 million in the fourth quarter.

Of the total debt 92.2 million or 65.7% is non-recourse to Manitex. In total 54.9 million is related to working capital financing that is either transactional or collateral based and a further 21.4 million is in the form of convertible notes.

Since the start of the year we have reduced that by 17.5 million on a restated basis and eliminated 80.1 million in debt associated with divested operations for a year over year debt reduction of 35.6 million.

Slide 9 shows our capitalization net debt and liquidity positions, adjusted EBITDA for the quarter was 4.4 million and 17.4 million on a trailing 12 month basis. And with that I would like to ask Andrew to discuss ASV..

So it’s a pretty busy year and fourth quarter for us today at ASV. Some of the financial perspective quarter four 2016 sales of 25.1 million were down approximately 3% year over year principally from lower under carriage demand from Caterpillar. Fourth quarter operating income was 1.2 million or 4.9% of sales and EBITDA was approximately 10% of sales.

For the full year revenues were 103.8 million with operating income of 6 million or 5.8% of sales and EBITDA of 10.3% of sales. But now I would like to discuss some of the good progress we've made on a number of our stated objectives during 2016.

Firstly our drive to re-establish a comprehensive dealer network in North America showed continued success and we finished the year with 93 dealers and a 133 dealer locations covering 41 U.S. states and three Canadian provinces.

If you recall we started the year with 18 dealers in 22 locations so we have made good progress in the year and really have a good base for the ASV brand from which to progress as we go into 2017. A number of you know that back at its peak in 2008 when ASV was a public company it operated with approximately 300 dealer locations.

With respect to the ASV brand that we launched in the middle of 2015 we have now 12 machines marketed under the brand with the latest launch in the fourth quarter of 2016 and we expect to substantially complete the lineup in the next 12 months.

The return of the ASV brand machines with their focus on operating performance ease and lower cost of maintenance and comfort has being well received as we can see from the following statistics. ASV brand machine revenues grew 292% over 2015 and for the year in 2016 absolute sales of Terex branded machines by 136%.

This resulted in 71% in machine sales for the year going to ASV controlled distribution with that number is 87% for the fourth quarter. Also importantly during the fourth quarter 2016 the ASV sales team assumed responsibility not only for ASV dealers but all the dealers of our equipment.

Finally in December of 2016 as Mike has already referenced we completed the refinancing of our debt which will provide estimated interest savings year over year of approximately 1 million.

As well as the benefits of the lower interest cost we're using the cash flow benefit to deleverage quicker than under the prior arrangement paying down term that proximately 50%. And with that I would like to hand back to David and the operator for any questions..

Thank you, Mike. Thank you, Andrew. And Katherine if you could we will open it up for any type of questions..

[Operator Instructions]. We will go first to Mike Sulewski with Seaport Global..

This is Jordon in for Mike. It may have closed out the year with some good orders and you gave it back on figured through January 31.

I was wondering if you're seeing similar upsides since the end of January?.

We did that because obviously the first question at December 31 was continuing into 2017 so we thought we would address that sort of way with the increase through January and I don't have the statistics for February but based on what I know I think we were taking orders in excess of production for the month of February as well..

Got it.

And with all those order activity I was wondering if you could give us your view on pricing at the moment?.

So pricing has been on the side of the manufacturers awful for quite a period of time, steadily decreasing getting worse and worse and all that really meant was you just kept increasing the discounts that you were giving off of list price similar to like what you would see in an example would be an automobile and of course what we're trying to do now as we expand production and increase orders we are trying to be a little bit more disciplined on the pricing which relates to less discounts.

.

And what is your broad ASV growth outlook for the year?.

Andrew you want to, I don’t know if you can address that or not Andrew..

I don’t think we can really Dave, we don’t give that projection..

Sorry, Jordon we are fairly restricted on what we can say about ASV right now, so I apologize but I would think that with the -- you can draw conclusion that with the expansion of dealerships you'll see improvement there but again we're fairly restricted..

I have one more here, Con Expo is starting tomorrow, can you give us a bit of preview of what you will be focused on this year?.

Well we're going to very busy at Con Expo, I'm glad that you brought that up Jordon. Some of us are there, some of us are no. We will have a full set of meetings, some press conferences, lot dealer relationship meetings.

So I expect that we will be very busy and also for everyone on this call you know that every three years we say we will have a big first quarter charge because of the Con Expo expenses.

So just as we did three years ago that are probably somewhere in the 600,000 range which is we tried to leave it flat from where we were three years ago and so it'll be running through the first quarter..

[Operator Instructions]. We will go to Mike Mork with Mork Capital Management..

Two questions, one, the energy overhang with the equipment now that the energy cycle in theory anyway has bottomed out.

Is this -- you see it less and less a problem and then secondly your business seems to have bottomed out sometime the last six months or so typically how long do the cycles last for these like three to five year cycles or is it unpredictable?.

It's hard to predict obviously as you well know these cycles.

We were up 10, 11, 12, 13, 14 so five years and during that period we -- and of course that was primarily energy driven as we all know everybody in the industry benefited from that from the largest to smaller companies like us and then as we all know and the backlog for us peaked in the first quarter of '12.

So it's also interesting that you have the backlog peak is usually before the peak of the earnings and sales because obviously we're working off that backlog for quite some time in that case.

So now what we did see was all those units not all those units but a lot of those units that were sold into the energy market as we've said many times, a crane a 40 ton crane, a 50 ton crane doesn’t care if it's working on a housing site or an energy site so it a commodity that can be sold nicely into the marketplace and so we saw a lot of cranes come into the market as long as a lot of other equipment and then serve the growth that you had on a construction side which of course we have experienced growth in the construction side over the last few years.

So now we're hoping as we said in our remarks we're hoping that '17 is just as you say it bottomed sometime in the last six months clearly from a backlog standpoint I would be at the end of the third quarter that started go back up into the fourth and then of course continuing in the first of this year.

So now we're hoping is that you have a good -- we have a good three to five year run here of both energy and material construction.

Of course we have industrial cranes, railroad cranes, distribution cranes, a lot of different type of cranes now so we're hoping that with our concentration in the marketplace we will be able to experience better growth than we experienced during the last upturn..

[Operator Instructions]. We will go to [indiscernible]..

I was going to ask a very similar question of the one you just answered but I guess specifically with every week you read in the news that the domestic U.S. fracking whatever oil rig counts are rising is that the main driver of what's looking better these days or is that just part of the equation..

The answer is a little bit more complicated because its get into the psychology, as you know you heard us speak for many quarters where there was just a large hesitancy to buy and our dealers we sell primarily through dealers and our dealers were not anxious to fill voids if they had an inventory because there was not enough demand for them to take that risk to buy a $400,000 crane.

As we all know because of a lot of factors primarily fear that they didn't want to miss orders we saw we've seen across the board and many of our dealers were they weren't ordering any type of quantity at all start to put in orders and again these are not historical levels of orders but from a perspective where we've been much improved and much better so we've seen companies order 5, 10 cranes whereas in the past they would order one, two and then cancel the orders after we got started.

So it was just the worse but that whole climate seems to have improved.

There's always been money available and obviously a very low interest rates and you continue to have large amounts of money available to fund the growth it's just that there was hesitancy on the part of the buyers that being our customers and dealers to pull the trigger but that’s starting to change and I assume we'll have a very positive Con Expo this year as a result, I've heard it's one of the largest if not the largest ever so we'll see what happens right..

Right.

And what about the used equipment that was always such a factor I mean which made perfect sense, if there was a bunch of used equipment lying around that wasn't being utilized then that was a cheap alternative to buying a new crane but what you're saying it would seem like that pool of competitive equipment however you want to put it is no longer a factor?.

Well certainly for us.

As we first started see this phenomena several years ago you had customers who were buying in anticipation of further drilling and further rig counts and further expansion and so again they did not -- they wanted to make sure that they received their -- they had their units in order to meet that expansion because as you know any time you go to any drilling site you're going to see any number of cranes depending on the size and the amount of infrastructure work and other things that are being done around the pads so.

So that one when it first started to come down and as we all know rapidly decrease on a rapid basis and then you had a glut of almost brand new equipment in some cases still with a rapping on it coming into the market and selling for less than what we could sell that we were listing a new crane for even at large discounts.

Therefore you just saw a glut of it and then that glut started to be more of a trickle and again the quality of the cranes started to also deteriorate because as you went out the new cranes the good cranes went first and then you started to see the cranes that maybe had some hours on him and if you have rugged energy hours on them they [indiscernible] rapidly.

So what we're anticipating now is there is still going to be some of that 2017 I don’t think it's over but clearly as you said with the influx of orders that has to materially passed us by now..

Well that’s a major positive I would think..

Well we all hope so right. Thank you, Charles..

Our next question comes from [indiscernible]..

I was wondering if you could talk a little bit more about the recent cost reduction efforts and you mentioned there are more opportunities in 2017 just in terms of if you can quantify any outlook for 2017 what you're focused on lately and any expenses associated with those efforts..

So just to give everybody some history several years ago when we started to see the falloff in sales obviously we all wanted to attack things that we can control which primarily are cost and material cost as we all know especially steel couldn't find a bottom, it was falling so fast.

So we along with everybody else in industry but again we tried to be very aggressive in addressing the cost of goods sold, a material portion of our cost of goods sold which is our biggest component of our cost of goods sold by far.

So we are aggressive in reducing cost and we also did some restructuring by unfortunately having to reduce the plant, reducing making some people redundant and most of those efforts centered in our North American operations.

So now that we've accomplished that and we had lot to do Andrew is very busy over it, transforming ASV so we have had a lot of work over the last two years to get ourselves in this position, but as I said and as you referred to we're not done yet we still have more to do in the U.S.

We indicated in total that we would do 15 million through three years, we've done more than that through two years in cost reductions.

This year I think the emphasis will be more on our worldwide operations because those areas have primarily been untouched during the last couple of years but now with less number of subsidiaries in operations that we have we will be able to focus better on some of those and I expect that there will be some significant savings there as well..

We will continue on to Jeffrey Long with Tuxedo Road Associates..

Two questions if I may, number one can you comment on the progress that PM is making in the United States and number two could you comment on the mix and the backlog increase in terms of crane tonnage types..

Okay. I'll give the best -- I will give both of those a shot Jeff, so the PM integration I think because of what I just mentioned the brand in a few minutes ago we had a lot of issues and lot of areas of concern on our plate over the last couple years and certainly we've made progress on PM.

PM overall has been generally flat but that's because as you know as you look at the worldwide sales of PM Europe is up, South America is down, U.S., North America is up, Middle East is down, Southeast Asia is up so you just kind of -- there's ups and downs all over the place plus when we purchased PM the Euro to Dollar was in the 140s and now of course is 105 so you have had under 110 so you've had significant changes and the value that’s attributed back to us on our U.S.

statements and we've had roughly a 30% decrease in that. But I think we're going to see some good progress because again it's something that has been worked on significantly and we have the people and now focus and the attention on PM.

So I think you'll see some good progress because we continue to see growth of knuckle cranes although its not as easy to quantify because there's more of them and the history of tracking cranes is very strong on a stick crane side which is where Manitex are because it has been a U.S.

product for many, many years and it's less so on our knuckle side because it's -- for crane and a crane periods it's relatively new although as we all know it's been around for a while but it's still relatively new on the knuckle side.

But I think you'll see while we have gone up in sales I think you'll see further progress as we go forward and on Manitex on the backlog in Manitex it principal is our stick crane side which is great because its obviously where our greatest amount of margin and product and profit that we have in our companies of the stick cranes and most importantly of course it's the higher tonnage cranes that generate the most versus lower tonnage and while first in the past couple of years we've seen a very broad representation of tonnage that has began to shift again back towards a higher tonnage.

So that’s another reason why we feel that we have some good news on the horizon as we continue to expand our higher tonnage cranes.

Our backlog is dominated by Manitex because ASV and PM are not necessarily large backlog companies, their cycles are much quicker and PM for example does not do the amount of mounting on a truck at the plant that we do much, much smaller percentage of that.

So they get the crane order and get the crane out in a much faster working capital cycle which is good from a cash flow standpoint..

We will go to Dale Heckner with Metropolitan Services [ph]..

The question I had for you this time is ASV is actually a fairly new holding for Manitex and I know to what extent that you're able to discuss that situation now. I just wonder if there's any more color available on why its up for strategic review you know such a relatively short time after it was acquired..

Sure, of course.

The ASV joint venture was at the time that we went into it at the end of 2014 our partner Terex was much stronger in the construction products area and as a result of decisions that they made either through external sources or internal purposes they deemphasized significantly the construction products side to the point that they are just liquidating and getting out of their businesses.

So we had to devote -- and Andrew and his team really did a great job of transforming ASV back to its former self and back to its ASV brand and its ASV identity.

And then on the other side we at Manitex had because of the acquisitions that we did and the growth and sales that we saw through acquisitions we had a significant amount of debt and that debt while as we service it all and we paid everything it was straining us because our EBITDA had evaporated with the concentration that we had at one point in time which we don't anymore but at one point in time in the energy area and so it just as it became apparent that we were going to start to see further expansion in our crane business and we wanted to concentrate and we strategically made a decision several years ago because for a lot of reasons one of which we had to but also because it’s the best playing for us as shareholders of which I'm one of the largest.

We wanted to expand and become much more of a pure play and a crane oriented and certain type of crane, certain niche cranes not crawler cranes, not large cranes because that market is already well taken care of by a number of different parties.

So where we can be a dominant player and ASV of course is not in any of those areas so it just was foreign to us and with our joint venture partner not being very much involved and us needing the liquidity to grow the crane side we thought it was our best interest to pursue other options for ASV..

Okay. Although I think it's the most recent thing that you bought if I'm not mistaken but I think what you are saying about --.

It was purchased in '14 and we've bought PM in '15 so its one of them--.

Yes they were very close together, right. Okay.

The second question I had was you announced that you had you did a while back that you're going to start having a Manitex branded knuckle boom crane? I was wondering is that basically -- is that its owned crane or is that basically using the PM crane format or whatever you want to call it -- its kind of like a rebranding of your PM technology?.

So what we're doing is Manitex has certain strengths in the North American market because it is a dominant player, the leader in the stick crane market and as a result we have a good reputation, good brand name and PM did never had that exposure and recognition in the U.S.

So all we're doing is stating the PM intellectual property and making it in the U.S. at our Georgetown, Texas facility. So exactly what you said is they're just taking the PM, branding it a better known product name and putting it into the U.S. and conversely Manitex does not have a lot of brand recognition outside of the U.S.

and PM does and certainly in Europe people know the PM name but we hardly sold anything into the European market. So the idea as we now are concentrated in just our crane group to really do a lot more of the cross branding..

Thank you. And with no additional questions in the queue I'd like to turn the floor back over to Dave Langevin for any addition or closing remarks..

Thank you, Katherine. Thank you everyone for your participation in today's call. We look forward to our future calls. Thank you again..

Thank you. Ladies and gentlemen once again that does conclude today's conference. Thank you all again for your participation..