Ion Warner - The Manitowoc Co., Inc. Barry L. Pennypacker - The Manitowoc Co., Inc. David J. Antoniuk - The Manitowoc Co., Inc..

Themis Davris - Credit Suisse Securities (USA) LLC Michael David Shlisky - Seaport Global Securities LLC Steven Michael Fisher - UBS Securities LLC Seth Weber - RBC Capital Markets LLC Charles Brady - SunTrust Robinson Humphrey, Inc. Thomas Simonitsch - JPMorgan Securities LLC Jerry Revich - Goldman Sachs & Co. Mig Dobre - Robert W. Baird & Co., Inc.

Please standby. Good day, everyone, and welcome to The Manitowoc First Quarter 2017 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Ion Warner, Vice President, Marketing and Investor Relations. Please go ahead, sir..

Thank you, Eric and good morning, everyone. And welcome to The Manitowoc's conference call to review the company's first quarter 2017 performance as outlined in last evening's release. Conducting the call will be Barry Pennypacker, President and Chief Executive Officer; and Dave Antoniuk, Senior Vice President and Chief Financial Officer.

Please turn to slide 2. Before we begin, 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 are made on the company's current assessment of its markets and other factors that affect its business.

However, actual results could differ materially from any implied projections due to one or more of the factors explained in our Manitowoc's most recent Annual Report on its Form 10-K filing with the Securities and Exchange Commission.

The Manitowoc Company does not undertake any obligation to publicly update or revise any forward-looking statement, whether the result of new information, future events or other circumstances. Today's webcast includes a slide presentation which can be found in the Investor Relations section of our website.

We will reference these slides throughout the prepared remarks. We will be sure to reserve time for questions-and-answers after our remarks. I would like to request that you limit your questions to one, and a follow-up to return to the queue for further questions to ensure everyone has an opportunity to ask their questions.

And with that, please refer to slide 3 and I will now turn the call over to you, Barry..

Thanks, Ion and good morning, and welcome everyone. March 4, 2017 was the first anniversary of Manitowoc's journey as a standalone crane company after the spinoff of its foodservice business. Last November at our inaugural Investor Day, we've laid out a clear long-term strategy as a stronger and more customer focused crane company.

We know where we want to take this company, and we're making significant progress using the lean principles of The Manitowoc Way. I am pleased with our team's accomplishments and want to take the opportunity to thank them for the dedication and commitment to excellence and making Manitowoc a little bit better each and every day.

Now, let's review our first quarter results. We are pleased to see the first quarter orders of $488 million which increased our backlog 56% since the end of last year. Demand particularly for new products met our expectations with nearly half of our orders from new products introduced in the last 12 months.

This is a remarkable accomplishment and a testament to our focus on the voice of the customer by delivering innovation and velocity utilizing the tools of The Manitowoc Way. We are encouraged by the overall positive sentiment exhibited by hundreds of customers that we met with at the CONEXPO trade show.

However, this positive sentiment has not translated to greater demand in the overall crane industry. Mobile crane demand continues to be muted in the Americas and the Middle East region, given persistently lower used crane values and soft rental rates. In particular, the North American market for crawler cranes continues to be extremely weak.

Tower crane demand remains strong with continued stable commercial and residential construction market activity. Turning to revenue, our revenue was down $120 million year-over-year, or 28.5%. The decrease in net sales was primarily driven by decreases in mobile crane shipments.

At the beginning of 2016, the company had a significant higher backlog and shipped a significant volume of large crawler cranes in the first quarter of 2016, whose orders had been placed in earlier years. These orders did not reoccur in 2016, resulting in minimal shipments of crawler cranes in the first quarter of 2017.

In addition, the North American market remains weak, which resulted in lower sales of other mobile products on a year-over-year basis. Sales in the Middle East also remained weak, mainly due to continuing low oil prices.

Slightly offsetting these declines, tower sales in Europe saw a year-over-year growth, mainly due to continued strength in residential and commercial construction markets, coupled with new product introductions. Considering the difficult revenue situation, we continue to take substantial action to manage our costs and our right size our business.

In the last 12 months, we've reduced our head count by 1,300 employees, or 22% of which 200 were in the first quarter of this year. We continue to make substantial progress on our manufacturing rationalization previously announced.

We typically build inventory in the first half of the year in anticipation of the increased demand for the upcoming construction season. However, this year with our disciplined working capital approach, we actually reduced inventory by close to 15% year-over-year.

Through prudent cash management, I am pleased to report that we ended the quarter with no outstanding borrowings on our ABL credit facility. And with that, I'll turn the call over to David to walk us through the quarter's financial results..

Thanks, Barry and good morning everyone. Let's move to slide 4. Before I run through the numbers in detail, I would like to point out that our financial performance for the quarter was in line with our expectations and consistent with our full year 2017 operating guidance which remains unchanged.

With regard to our liquidity, we ended March with zero borrowings on our asset-based loan revolver. Total availability under this line was approximately $156 million, net of approximately $10 million in outstanding letters of credit.

In the latter part of 2016, we implemented disciplined processes utilizing the principles of The Manitowoc Way for cash management and operating working capital globally. These processes have allowed us to better manage our overall cash position and achieve unprecedented working capital results in the first quarter.

Moving to our financial performance, we reported net sales for the first quarter of $306 million which decreased $122 million, or 28% from a year ago. As Barry had mentioned, the year-over-year revenue decrease was primarily due to the pronounced reduction in crawler crane shipments in the U.S.

and the continued slowdown in the North American and Middle East mobile markets, partly offset by better performance in our European towers market. Orders in the first quarter totaled $488 million, compared to $417 million in the first quarter of 2016, an increase of 17%, which was primarily driven by our new product introductions.

Our book-to-bill ratio in the first quarter 2017 was 1.6 times, which is the first time since Q1 of 2015 that we achieved a book-to-bill ratio greater than 1. Backlog at quarter end was $506 million which represents an increase of $183 million, or 56% from December 2016 and essentially flat from March 2016.

SG&A cost for the first quarter 2017 were $63 million which was $9 million lower than the prior year, primarily due to lower employee related costs and reductions in professional fees, partly offset by the increased cost associated with the CONEXPO trade show.

Restructuring costs for the first quarter were $12 million which were related to the consolidation of manufacturing activities into Shady Grove. These costs are in line with our overall project cost, which are now anticipated to be slightly lower than previously projected.

On an adjusted basis, our operating loss was $11 million compared to operating income of $7 million in the prior year. This decline was primarily attributable to the lower sales volume in 2017, partly offset by lower SG&A spending.

Our non-GAAP adjusted EBITDA for the first quarter was a loss of $800,000 compared to $19 million of EBITDA in the previous year. Our adjusted net loss from continuing operations for the quarter was $24.2 million, or $0.17 per diluted share.

This amount includes $1.5 million of income tax expense related to income generated in foreign jurisdictions which was approximately $0.01 per diluted share higher than our expectations. Cash flow from operating activities was a use of $32 million in 2017, compared to a use of $163 million in the first quarter of 2016.

Total cash used in the quarter was primarily impacted by the restructuring payments, other annual benefit obligations, and the $17 million semi-annual interest payment on our long-term debt.

We're extremely pleased with our working capital performance in the first quarter of 2017, as we generated approximately $10 million of cash through working capital reductions. This contrasts with our historical pattern of consuming cash as we build inventory in the first quarter, in anticipation of the upcoming summer construction season.

As comparative data point, last year we consumed $70 million of cash related to working capital increases. Capital expenditures for the first quarter totaled $4 million, which was in line with our expectations and compared to $11 million in the prior year. Turning to slide 5.

We are reiterating our 2017 full-year operational financial guidance that we shared with you in our fourth quarter 2016 press release, which now includes guidance for income tax expense. I will now turn the call back to Barry for some further remarks.

Barry?.

Thanks, David. Moving to slide 6. Over the last 12 months, we've made significant progress in right sizing our business and implementing the operating principles of The Manitowoc Way. As we outlined in the past, we have four key strategic priorities; margin expansion, growth, innovation and velocity.

The first key element of our strategy is margin expansion. We have a number of major activities under this category, including The Manitowoc relocation and consolidation of tower crane manufacturing in Portugal. First, the relocation of our crawler crane manufacturing in the U.S. is nearly complete.

The knowledge transfer and training at Shady Grove has exceeded our expectations. We have successfully assembled and tested two of our larger crawler cranes in our Shady Grove facility, thus preparing us for the eventual rebound of this business.

This past week, we successfully transferred from one information system to another, the last major hurdle in the entire relocation process. Secondly, the Portuguese tower crane consolidation remains on schedule and on budget.

However, we have delayed the consolidation by one quarter to support additional demand in this particular segment of our tower business. As in 2016, our focus on cost controls, reducing head count, increasing productivity and eliminating waste remains unwavering. Our next strategic priority is growth.

During the first quarter, we implemented a key account management program of which our entire executive management team has participated, including myself. This includes reaching out to customers who have not purchased our products in the recent past.

We are communicating our strategy as a standalone crane company, an element of which is our future product plan and I must say that I'm encouraged by the discussions we are having globally. On the military crane order, mentioned in previous calls, the testing has reached its halfway mark. Testing has been progressing extremely well. In fact, the U.S.

Army has commented on how pleased they are with the cranes and their performance during the testing. We expect the initial order to be received early in the second half of 2017. Our aftermarket strategy is beginning to pay dividends.

For instance, we developed a profitable crane reconditioning program called EnCORE where we will remanufacture tower cranes with three levels of options depending on the customer's preference.

This comprehensive program is a key market differentiator that no other OEM offers where we can complete these refurbishments in our state-of-the-art facility in Charlieu, France. We will further differentiate ourselves by supporting this product with a factory warranty.

Another key benefit for this refurbishment program is our ability to increase factory utilization of our plant assets in Charlieu. This is the power of The Manitowoc Way. Please turn to slide 7. Innovation, another key strategic priority of ours continues to play an important role on our overall product portfolio.

For instance, at CONEXPO we showcased 12 cranes, of which 8 of the cranes were new products within the last 12 months. One of the new cranes we displayed was a Grove TMS9000-2 truck-mounted crane, the crane I said on previous calls that we developed from the ground up in six months.

The customers' response to this crane was superb with its leading class-lifting capability and versatility on a variety of roading conditions. Another big surprise at CONEXPO was the second new crane that we developed in six months. We unveiled a new 55-ton rough-terrain crane, the Grove GRT655L.

The new crane impressively demonstrated our ability to leverage common platforms and technologies across our product lines, including the greaseless boom design and CCS controls to add further value to our customers.

These two new products proved we can translate the voice of customer quickly into a salable product using the power of The Manitowoc Way and inspire our team to deliver excellent innovation and value that delight our customers. Please turn to slide 8. Our fourth key strategic priority is velocity.

Let me highlight a few examples of the great progress we are making using the Lean principles of The Manitowoc Way. First, the automation we implemented on the mass production line in Moulins, France is achieving a significant improvement in productivity to help meet the increased demand for tower cranes.

Secondly in our Wilhelmshaven, Germany facility, we are making great progress on the boom assembly area which I previously mentioned. In this area, there are two operations. One involves boom induction or the assembly process of a diverse number of boom configurations; and secondly being the testing area after the boom is assembled.

This is an eye opening experience for me in particular as I participated in this Kaizen personally. On the first two days, we observed the process and calculated the value added to non-value added ratio. I will not disclose the exact number. But let's say, it was south of 25%.

Wasted hours were spent on measuring and grinding sections to align pins to the pinning holes, searching for parts, waiting on prior operations, and performing operations that were unnecessary, et cetera, et cetera, et cetera.

Using The Manitowoc Way tools, we have a plan to eliminate over half of the boom assembly process and almost 80% of the testing requirement that are considered waste. These types of opportunities exist in all of our plants and as we address them with our lean tools, we will continually make progress toward our goal of 10% operating income by 2020.

Here in Shady Grove, we implemented a new flow line for our outrigger boxes. We modified fixtures so they can move from station to station without the need of an overhead crane, thus improving throughput dramatically.

We relocated the raw material kit supermarket area, so that it was adjacent to the work area and assigned a water spider to manage picking and presenting parts to the line.

Furthermore, we created visual working structures to standardize the setup process on the modular fixture tables, we cross-trained all of our employees to be able to produce each product, and develop standard work for each configuration.

This week I observed the next phase of this process where we were implementing the pool system in the burn shop to support this important Kaizen activity. In closing, as we celebrate our one-year anniversary as a standalone crane company, I'd like to highlight some of our major accomplishments.

First, we have renewed the company's focus on serving our customers. We've made substantial cultural changes in the terms of how we approach listening to our customers' needs and taking ultimate actions. In one of the most challenging economic times in the crane history in the last 40 years, we have developed eight new leading edge cranes in a year.

We have the industry-leading product portfolio in the tower business, which has driven us to be the market leader and we are following suit in our mobile product portfolio. Second, we've proven that we can manage our balance sheet through the cycle.

Despite the headwinds that we faced over the last 12 months, we ended the first quarter without leaning on our ABL. In addition, we've taken numerous actions to improve our working capital and balance sheet positions, which will provide us a stronger platform for future growth.

Third, I'm extremely proud of how our employees have embraced our new customer-focused culture. Being a standalone crane company has required a paradigm shift in how we think and how we operate. In the last six months, the organization pulled together to relocate The Manitowoc manufacturing location.

This was a tough decision but one that was necessary for us to manage through the significant downturn in the demand for mobile cranes and support our long-term goal of 10% by 2020. You heard me talk about the three key stakeholders in our organization, those being our customers, shareholders and employees.

The aforementioned items indicate that our strategy is alive and well at the Manitowoc crane company. While it's only our first anniversary, I want you to know our plan is succeeding and we are here for the very long term. The Manitowoc Way has not only produced operational efficiency.

It has provided the means for us to produce better cranes, forge better relationships with our key stakeholders, and overall, be a better company, yielding a long-term, financially stable standalone crane company. Our future is bright. With that, we'll turn the call back to over to Ion to begin the question-and-answer session.

Ion?.

All right. Thank you, Barry and Dave. Eric, please provide instructions. Operator, please provide instructions for Q&A..

And we'll take our first question from Jamie Cook with Credit Suisse..

Hi. Good morning. This is actually Themis on for Jamie. Thanks for taking my question. First....

Good morning..

Good morning..

First, on the sales outlook for the year, given that sales were a bit light in the quarter, that you were able to reaffirm the sales guidance of down 8% to 10% for the full year. That assumed some improvement in subsequent quarters.

So is it fair to assume that sales will be up on a year-over-year basis in the back half of the year?.

Absolutely. Absolutely. Some of the phasing of the significant orders that we've taken in the first quarter will in fact fall into our revenue streams in the third and some leaking into the fourth quarter. Our bookings are, this month, tracking where we need them to track in order to meet our overall revenue guidance for the year.

So we're very encouraged by what we're seeing from a market perspective and we look forward to continuing to meet the expectations of our shareholders going forward..

Got it. Thank you very much.

And then just a question on used cranes, could you provide some color maybe geographically on used crane inventory and used pricing? I'm just trying to get a better sense of once demand trends, how quickly do you expect new equipment demand to respond?.

Well, as I mentioned in our prior call, there was a substantial auction in February. That auction yielded the results that we thought it would, in that pricing was stable and that inventory was about where we expected. We'll see in this market for a turn when we start having our customers talk about trade-ins.

We've begun to care and discuss some of these particular opportunities for us to trade in equipment and put it into the used market. These are not discussions that we were having last year at this time, so we are encouraged by globally the discussions we're having.

Now that doesn't transfer of course to areas like the Middle East, those discussions aren't happening yet. Those discussions are not happening yet in Latin America, but in the developed markets where we have a tendency to participate at a very high level of share, those discussions are beginning..

Great. Very helpful. Thank you very much..

You're very welcome..

We will go next to Mike Shlisky with Seaport Global..

Good morning, guys..

Good morning, Mike..

So it looks like we're seeing some spending on infrastructure ramping up at the state level with the big one being California, which just passed their increased gasoline taxes. It's been called, let's say, a month now since that happened.

I was kind of wondering if your dealers and customers out there have had any reaction yet to what they're looking to buy over the next few years with infrastructure spending kind of locked in now for it looks like five years or so?.

Well, particularly in California, it's a little early yet, since it's only been a month, but I can tell you that our dealer on the West Coast is having discussions. The communications have suddenly picked up in that region, and I think we're at a very positive position to substantiate the increased demand on the West Coast..

Okay. Great. And I also wanted to ask secondly about Crane Care. Just give us some thoughts as to how that did in the quarter and anything you might be expecting for the rest of the year in that business? Thanks..

We're very, very, very pleased with our effort in Crane Care. We continue to make progress. The organization is starting to feel its way and getting some early successes. In my prepared remarks I mentioned the EnCORE program. The EnCORE program is a complete paradigm shift and that's all aftermarket.

And I think you'll see as time goes on, that will, in fact, change the overall results of our percentage of sales in the aftermarket, but more importantly, I think it's a margin-changing opportunity for us..

Got it. Thanks, Barry, I appreciate it..

You're welcome, Mike..

And we'll go next to Steven Fisher with UBS..

Thanks. Good morning..

Good morning, Steven..

I know, Barry, you commented that orders were helped by new product introductions. But how do you reconcile the positive order growth at CONEXPO and in the quarter with the still weak demand for cranes in the field? And I think you mentioned you got some visibility in the month of April.

But what's the visibility on orders for the rest of the year here? Thanks..

Well, I think it continues to evolve. I think fundamentally the market conditions haven't changed very much.

But I believe that our products and the productivity that we're able to give our customers, the discussions that we had with our customers at CONEXPO and how the TMS9000-2 is such a productive asset that they're willing to take a flyer on the market conditions coming back.

A lot of our dealers are seeing confidence in their end customers, and therefore they're getting their inventories in line to take care of the eventual uptick in what we believe will result from an underlying market condition. We're seeing some strength in some of the oil patches, particularly in the Permian Basin.

I think that's very well explained, as you know, that along the Gulf Coast, there's a substantial amount of infrastructure being put in place to support that output of the Permian Basin. And so we see pockets of strength. A substantial portion of our order growth in the year-over-year number was, in fact, in North America.

And I think the overall sentiment is that the market is going to improve. Therefore we need to start getting some inventory into the channel..

Got it. That's helpful. And it sounds like your inventory build was consistent with your expectation in Q1.

How are you thinking about what the right company levels for inventory will be for the full year, I think kind of at 31% of trailing sales? Where do you think that should be by the end of the year?.

I think I targeted $30 million of overall inventory reduction from the last call and we're on track for that..

Okay. Thanks a lot..

You're very welcome..

And we will go next to Seth Weber with RBC Capital Markets..

Hey. Good morning. Good morning, everybody..

Good morning, Seth..

First just a clarification, is the backlog that you're reporting, is that a 12-month backlog or does some of that bleed further out?.

Yeah, that's majority in the current year, Seth..

Okay. Thanks. So first question, we're starting to hear some comments about some not necessarily on the crane market, but just customer credit issues and bankruptcies.

Have you seen any deterioration in customer financial health and are you seeing any kind of – are you taking any additional measures as far as deposits or changing your credit policies or anything like that?.

Yeah, I'll let David give you a little bit more color. But the answer to your question unfortunately is yes.

So, David, why don't you provide a little more color?.

Yeah. So, Seth, we've seen pockets of difficulty from end customer point-of-view because they can't utilize the crane as much as they would like to have done so.

A lot of times, we work with our financing partner, Manitowoc Finance, which is underpinned by DLL and work with them to come out with a solution that enables us to either take back the cranes and work with the customers or refinance the cranes in the marketplace. So, we do have a number of options that are available to us. We explore all options.

We like to see our customers succeed and do everything in our power to make sure that they can succeed. So, I would say that there's not one way that we approach each customer. It just depends on the specific dynamics, and then sometimes, if there is a bankruptcy, we would work in repossessing the cranes and then reselling them on the market..

You may want to mention, David, about what our position has been thus far in the cranes that we are in the process of repossessing or have in that. Thus far we have not seen these repossessions have a negative impact on our overall financial results..

Yeah. I would say that we work closely with our partners in order to mitigate any potential losses. We try and make sure that the value we hold in the cranes from a leasing standpoint is equivalent to market values at those times..

Okay. Are you doing anything differently on the order side, taking bigger deposits or....

Yeah. I would say from the order side, I'd say we're a little bit more thorough in our evaluations of what's going on with the customer. We're looking at the customers a little bit more in detail from the credit side of that, and whereas we would actually look at creditors do a detailed review with the company at a certain credit level.

We've kind of upped that a little bit and said, okay, here's what it is. But quite honestly, historically, what we found is that it's not so much that the folks that are in a lower credit position that ultimately fail. It's some of the other ones just because they have too much on their books at any particular point in time.

So, in a long way, short answer to your question is, yes, we are paying particularly more attention to the customers from a credit profile to make sure that what we can do is we can stay above water in the value of the cranes as they utilize them..

Okay. And just so I'm understanding, is this the source of used equipment pressure that you've been talking about or, I mean, I guess I'm trying understand how much of this is contributing to the excess used supply that's in the market..

No, no. This is not. I wouldn't call it any significant to the used supply market. These are one-offs that occur sporadically..

Okay. And I guess, just a quick follow up. Is there any update to how we should be thinking about the cost savings cadence? It sounds like maybe some of your programs are running a little bit ahead of schedule.

So is there anything that we can infer from that from the cadence on cost savings that you had previously outlined?.

Yeah. I think our cost savings are on track relative to the consolidation into Shady Grove where we see some benefits to the overall cost that we will incur, and that savings will be about somewhere around $4 million in total..

Okay. All right. Great. Thank you very much, guys. I appreciate it..

Okay..

And we'll go next to Charley Brady with SunTrust Robinson Humphrey..

Hey. Thanks. Good morning, guys..

Good morning, Charley..

Good morning, Charley..

Hey. Just, I guess, on the margins, I know adjusted EBITDA guidance unchanged. Can I infer from that then that the previous guidance for operating margin of flat to up one is also unchanged. There was no mention of that in the release this time around..

That's correct..

Okay. And then just on the engineering expense in the quarter, a little bit elevated from a percentage of sales.

Is that a function of obviously CONEXPO is not a cheap event? Maybe give us some idea of kind of what your run rate expectation is to that as we go through the year?.

No. I think that engineering expense increase was all prototypes that we manufacture for testing, and it's not something that you should see continue..

Okay. Great. Thanks..

You're welcome..

And we'll go next to Ann Duignan with JPMorgan..

Good morning. This is Tom Simonitsch on behalf of Ann.

First of all, could you give us some more color on price cost in the first quarter? And what material cost headwinds are you assuming for the rest of 2017?.

Clearly at the beginning of the quarter, there were some headwinds from steel. However, what I'd say is that we were in a position to offset that either through productivity, combination of productivity and a combination of price.

We have reflected in our guidance what we believe to be slight increases for some of the steel that we utilized in our manufacturing operations for the balance of the year. However, I also believe that if you look at the indexes in the last couple of weeks that may be an upside for us..

Okay.

Thank you very much, and can you provide some guidance from the cadence of expected EBITDA through 2017?.

Yeah. We typically don't report that on a quarterly basis, which is why we only gave our annual results in that regard.

But I would tend to say that, when you look at it on a quarter-by-quarter basis, our adjusted EBITDA is going to be in line with our sales split, and typically this year, we're going to look for a improvement in the second half of the year..

Okay. I'll pass it along. Thanks very much..

You're welcome..

And the next question is from Jerry Revich with Goldman Sachs..

Hi. Good morning, everyone. I'm wondering if you folks can talk about on the new products that you're taking orders for now.

How does the gross margin profile compare to the products that they're replacing? I'm assuming that they're made for manufacturability to a greater extent before, is that right? And can you just step us through the order of magnitude of improvement if that's correct?.

Yeah. The order of magnitude of improvement, I won't give you that. But I will say it's large because every step of the process through our eight toll gate of development, we have to have cost as one of the elements that has to be met at each stage in order to be moved on to the next stage. And I will tell you that I am extremely pleased.

I gave some pretty difficult targets on the TMS9000-2 and the 655, and I think these guys are going to show me how they exceeded those targets. So I think you're going to see as time goes on, our margin profile is going to change dramatically as a result of these new products that we're developing and implementing into the market..

Okay. And then you mentioned half of the orders were from new products.

What's the timeline from a development standpoint on the rest of the portfolio? And then in terms of when do the new products go into production? Just coming back to your earlier comments, it sounds like it's 3Q, 4Q that or could it start this quarter?.

Well, on the crane that we developed in six months, TMS9000-2, that's this quarter. The 5150 that was a new product from GMK product line that's already started shipping in the second quarter. All of our tower cranes that we introduced at CONEXPO are, in fact, shipping. Some of the 655 will be a third quarter event.

And just so you know that we've already are planning a May event of next year here at Shady Grove where we plan to introduce upwards of five new cranes to continue to evolve our product portfolio, and all of those will be new and improved and meeting customer expectations, as we have planned going forward..

Thank you..

You're very welcome..

And we'll go next to Mig Dobre with Baird..

Good morning, guys. I'm just looking for maybe a little more clarity. Barry, you commented earlier that demand is relatively weak, but obviously the quarter, you had good order intake at CONEXPO. You also mentioned something about dealer inventories restocking.

I'm trying to basically parse out what is new product and trade show versus dealer stocking for whatever reason versus how demand actually is?.

Yeah. I mean, as I said, I think 50% of our orders in the quarter were for new product. The difficult task of trying to take that 50% and slicing it into what is for dealer stock and what is for service in the field immediately is difficult to do. We're taking a stab at that, but it is extremely difficult to do.

I can tell you that we've started with our GMK product line and the orders that we have taken for all of the GMKs, the new 5150, those as they ship are going directly into revenue service. So those are not for stocking in the dealer channel.

We're still analyzing the TMS9000-2, but I know for a fact that at least half of those are going directly to job sites once they ship.

So it's an ongoing process, it's difficult, but I will tell you that in my opinion and based on some of the fact that we've done so far, a good portion of that 50% is going right into revenue service instead of dealer stock..

I appreciate that.

But I guess on the dealer stock I'm just wondering sort of what's driving that phenomena because if demand is the way you describe it and then obviously we're also looking at oil prices being perhaps weaker than they have been in some time, I'm wondering if the dealers to some extent are not getting a little bit ahead of themselves.

What is your perspective on that?.

My perspective is that they are not. Because I know what their inventory levels have been, and their inventory levels have, in fact, been below what our expectations are in order for us to continue to grow our market share in regions where we haven't done that in the past.

And in order to do that, as a dealer, you have to make a certain level of commitment to inventory on the ground in order to gain that share. And that is exactly what we're doing with our channel. That's exactly what we're doing with our new sales management process is that we are ensuring that our dealers are in a position to take advantage of share.

Remember, our share has dropped dramatically. That doesn't mean that there isn't a market out there still for our product that we need to capture, and that's exactly what we're positioning the company to do..

Fair enough. Then I guess my follow up then, maybe for you, Dave.

Is there any way to help us understand the impact of this inventory accounting change to FIFO in the quarter and also, how raw material increases play out going forward given this change?.

Yeah. Mig, so that change was done in the fourth quarter of 2016 and we've published all of the restated amounts to the current accounting under FIFO method. So, if you need those, I can give those to you offline. I can point you in the right direction on that.

With regard to raw materials, I think the number one item that's on everybody's mind is steel. We're acutely aware of steel. We have meetings on steel relative to our hedging program associated with steel. I would say that our forecast include the fact that steel is going to be up on a year-over-year basis and we accounted for that.

So I don't think it's anything dramatic that's going to affect the inventory levels to be quite honest, but it is something that we are acutely aware of and we follow very closely..

Appreciate it. Good luck, guys..

Thanks..

Thanks, Mig..

With no questions remaining in queue, I'll turn the call back to Mr. Warner for any additional or closing remarks..

Thank you, Eric. Before we conclude today's call, please note that a replay of our first quarter conference call will be available later this morning by accessing the Investor Relations section of our website at manitowoc.com. Thank you, everyone, for joining us today and for your continuing interest in The Manitowoc Company.

We look forward to speaking with you again during our second quarter 2017 conference call, and please have a good day..

This concludes today's call. Thank you for your participation. You may now disconnect..