Manitex International, Inc.
Q2 2013 Earnings Call Transcript

Published: 8 Aug 2013

[Operator:]

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Manitex International, Inc. Second Quarter 2013 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to David Langevin, Chairman and CEO. Please go ahead.

[David J. Langevin:]

Thank you, Douglas. Good afternoon, ladies and gentlemen, and thank you for your interest in Manitex International. On the call with me today is our President and COO, Andrew Rooke. Please view our website or our release for replay instructions for this call, which will be available until August 14, 2013. We will again be using slides to assist in this presentation, which are available through the webcast or directly from the Investor Relations section of our website. Refer to the first slide regarding the Safe Harbor statement. Please review this statement and refer to our SEC filings for further guidance on the risks associated with our company. We've organized our call today as in the past, with my leading off by making a brief opening statement, followed by a review of our results by Andrew, and a closing statement by me. Andrew and I will then respond to any questions. So now please refer to Slide #3. We believe we continued with good execution and improved results in this quarter, resulting in sales of approximately $63 million, net income of $0.22 per share and EBITDA of $5.5 million. This all coming against the backdrop of economic reports, which have been widely reported as being very soft and cautious for future growth. And while we do not see any change in the slow growth environment, we also do not see any trends on our order book, which would indicate we are going backwards. Assuming no impact from the Sabre acquisition, which we outlined in our release, we should be able to continue to produce results in the second half of the year consistent with those in the first half. Also while we normally expect the third quarter to be stronger than the fourth, due to production hours available in the third versus the fourth, this year, with the way production is setting up at our facilities, we may see a stronger fourth quarter. But overall, the second half should be similar to the first, which would result in a total group being around $250 million in sales -- $250 million in sales for 2013. This compares to approximately $205 million for the year 2012. And again, this excludes any impact from the possible acquisition of Sabre. While mentioning Sabre, we look forward to welcoming Sabre to our Manitex group of companies. As disclosed in our release, we expect Sabre to close in the near future, using a commitment from our bank for a new term loan at an interest rate of 3.75% over 5 years. Trailing sales at Sabre were approximately $40 million and EBITDA was $4.5 million. And our purchase price is $14 million, consisting of $13 million in cash and $1 million of Manitex stock. We believe Sabre will be a good fit with our company, providing further diversification of our product line and end markets, which we believe will show above average upside and for -- and with many opportunities for its growth within our existing sales distribution network. With our forthcoming acquisition, this provides us with an opportunity to review our acquisition strategy, which we have not discussed in some time. We look at opportunities from all over the world, but be mindful that we are still a small company. We are careful and cautious because with our many years of experience at the senior management level, we realize that many parts of the world bring a different mix of operating and country risk that our company may not be ready for in its current state of development. We look for companies that have a better profit margin than we have to improve the profit potential for our company and that also work with the same customers or provide product expansion in order to gain some benefit from our distribution partners. And finally, the purchase price is realistic to the other factors we just outlined, realizing that strategic benefits and cost benefit reductions all sound good and look good in financial models, but are very difficult and sometimes not realistic in achieving. With that brief overview, I will turn it over to Andrew to review in more details our results. Andrew?

[Andrew M. Rooke:]

Thanks, David, and good afternoon, and welcome, everyone. Following our usual format, I'd like to start out by providing a general business update, which is summarized on Slide 4. During the second quarter and currently, our markets have been in a more cautious condition. And we've seen a great deal of uncertainty having an influence on our customers in their purchasing decisions every day. And specifically in Europe, we continue to see pronounced weakness. So far this year, however, as a niche provider serving a wide variety of end markets, our diversity is enabling us to meet some of the challenges that we've seen in the market and continue to grow our revenues, earnings and cash flows for the benefit of our shareholders. The level of demand from the North American commercial and general construction markets has remained fairly constant, and that has been reflected in sales and in order intake for lower capacity and less specialized boom truck cranes. With the production initiatives we implemented during 2012, in anticipation of this demand, such as moving our production of lower-capacity boom trucks to our Badger Equipment facility, we have been able to respond to this demand quickly, and in addition, increase our market share in this sector. The recent softness in the energy sector has continued, evidenced by a reduction in the North American rig counts, which are currently approximately 9% lower than a year ago. This has contributed to a decrease in order intake for our higher-capacity equipment. We believe this softening has bottomed out and also that this sector remains a source of significant growth potential for our products in both the short and long term. As I've already referenced with regard to increased production and some changes in the demand profile, our backlog at the end of the second quarter did show a 26% reduction from the December 31, 2012, level. And our book-to-orders ratio to sales or book-to-bill ratio was 82% for the quarter, which was, however, a 32% increase above the first quarter of 2013. Our backlog at the end of the quarter is $97 million and is broadly based, but does of course have a majority representation in Manitex boom trucks and also reflects the anticipated mix of energy to commercial product. We announced in May the largest contract award we have received, a $37 million contract to supply the U.S. Navy with material handling equipment from our Liftking operation, and for which deliveries are expected in the second half of 2014. Finally, before moving on to the financial results, please turn to Slide 5, which covers the announcement we made today regarding our agreement to acquire Sabre Manufacturing. Sabre is located in Knox, Indiana and manufactures specialized trailer tanks for liquid storage and containment solutions for a variety of end markets, such as petrochemical, waste management and oil and gas drilling. These trailer tanks are above ground storage tanks for solid and liquid containment, with capacities from 8,000 to 21,000 gallons. And Sabre has a large installed base of this units in North America, which are sold to specialist independent tank rental companies. The negotiated purchase price of $14 million consists of $13 million cash and $1 million in Manitex International stock. The cash portion will be financed by a new term loan to be provided by our current bank, Comerica. Closing, subject to execution of definitive agreement, is expected shortly. We're very excited at the prospect of adding another specialized product with a strong reputation and a dedicated, experienced workforce to the company. Pro forma trailing 12-month revenues to March 31, 2013, were $39 million, with adjusted EBITDA of $4.5 million. On a pro forma basis after the acquisition, our debt-to-EBITDA ratio will be 2.9x. Now turning to the financial results. Slide 6 shows the key figures for quarter 2, 2013 with comparatives with quarter 2, 2012 and quarter 1, 2013. Second quarter 2013 revenues of $62.6 million increased $10.1 million or 19.2% from the second quarter of 2012, resulting primarily from production increases at the Manitex crane facility and increased sales for port-related equipment from CVS, partially offset by lower revenues from other material handling operations and equipment distribution. Cranes with capacities greater than 45 ton increased as a proportion of total revenues, contributing approximately $5 million of the total increase. The lower margin, lower capacity boom trucks and chassis sales also increased approximately $3 million, in response to improved commercial construction activity, which utilizes the lower-capacity, less-specialized cranes. Part sales as a percentage of revenue for the quarter were approximately 18% lower than the prior year quarter, due to the increase in new product revenues, but were also marginally reduced on a dollar basis. On a sequential quarter basis, revenues increased 5%, with a 12% increase in sales of cranes on the number of units basis, although this is partially offset by reduced material handling and equipment distribution sales. Gross profit of $12.3 million was equal to 19.6% of sales, compared to $10.8 million or 20.5% for the second quarter of 2012, and $10.2 million or 17.2% in the first quarter of 2013. The year-over-year reduction in gross margin percent was generated by an increase in the mix of lower-capacity cranes and chassis and a lower percentage of higher margin part sales. Part sales are anticipated to return in line with their historical levels over time, as the recent rapid increase in new equipment sales become increasingly deployed and utilized. The 240 basis point sequential improvement to more normalized levels was generated by improved manufacturing efficiencies over the prior quarter, as newer products became better assimilated into manufacturing, as well as a benefit from improved volume and product mix. Net income for the second quarter of 2013 of $2.7 million or $0.22 in earnings per share was a $0.3 million 15% increase or $0.02 share improvement over the second quarter of 2012. EBITDA for the quarter was another record at $5.5 million or 8.8% of sales, although this was slightly lower as a percentage of sales than we achieved in quarter 2, 2012. Slide 7 is a bridge for the 15% increase in net income from quarter 2, 2012 net income of $2.3 million to the net income for quarter 2, 2013 of $2.7 million. Moving to the reconciliation table. The $10.1 million improvement in revenue resulted in a gross profit benefit of $2.1 million, which was reduced by $0.6 million, the effect of a reduction in the gross margin percent. As previously discussed, this reduction was the impact of a lower percentage of higher margin part sales in total revenues and an increase in the mix of lower capacity cranes and chassis, together with the inefficiency of lower product volumes in material handling operations. The combination of volume and mix provided a net gross profit increase of $1.5 million. The other key movements in net income between the 2 periods were an increase in selling expense of $0.6 million together with an increase in G&A cost, principally employee-related costs from additional staff and incentive compensation. Our commitment to cost control and higher efficiency remains a key objective, and our total SG&A as a percentage of sales remains steady with the second quarter of 2012 at 11.3%. However, this ratio has been reduced by 100 basis points to 10.8% for the 6 months ended June 30, 2013, compared to 11.8% for the corresponding period in 2012. Finally, although taxable income increased quarter-over-quarter, our tax cost actually marginally reduced, as our 2013 effective tax rate is favorably impacted by the domestic product -- production activities reduction and federal research and development tax credits. Slide 8 shows our key working capital ratios, which remain relatively consistent and in a good position. Working capital has increased $8.8 million, principally in inventory, from December 31, 2012, to support the revenue growth, which has been almost $27 million year-to-date compared to the 6 months to June 30, 2012. Slide 9 shows our capitalization and liquidity position. Total debt at the end of the quarter was $52.8 million, of which approximately 12% relates to prior acquisitions and facility leases. The net of cash increase in debt was $2.4 million, which was for working capital purposes. At the end of quarter 2, 2013, 12-month trailing EBITDA was $19.1 million, which provides a strong interest coverage ratio of 7.5x and a debt-to-EBITDA ratio of 2.8x, both of which are relatively consistent with December 31, 2012. And now I'd like to hand back to David for his final summary.

[David J. Langevin:]

Thank you, Andrew. In summary, in the short term, we are working in a challenging microeconomic -- macroeconomic environment. Fortunately, our organization has new products, which are being well received. And while the global economy is slow, it continues to grow at some level. As we stated, we believe that the second half sales will be similar to the first half. And along with potential sales from Sabre, we will be reporting a very positive year-over-year improvement. Also as we've stated in previous quarterly calls, we like where we are positioned with our product profile in the marketplace. We believe that with the products we have to offer, combined with solid execution, along with an opportunistic acquisition strategy, we can continue to deliver superior returns to our shareholders. With that, Douglas, we would like to open it up for questions.

[Operator:]

[Operator Instructions] Our first question is from the line of Amit Dayal with Benchmark Company.

[Amit Dayal:]

Could you talk a little bit about this acquisition in terms of how you're going to fit it into your existing portfolio and what your plans are for generating profit in this business?

[David J. Langevin:]

Well, we're trying not to talk a lot about the acquisition at this point because we still have work to do in order to close it. Of course, as we all know, nothing is done till it's done. But we were far enough along and in a position where, from a legal standpoint, you know all the words, if you get to a certain level, you have to disclose what we're working on so that the information is public. But generally speaking, if you think about it, when we're working and we have mentioned one of the biggest area is in the oil and gas area, when you're working on platforms that are -- you've heard us talk in past about the size of the rigs that are now underway. There's an awful lot of cross-selling between what we're delivering. If you look at a large pad, there is hopefully a lot of cranes and always a lot of tanks. And so Sabre has typically sold through a very strong relationship with a particular rental company, and we hope to continue that relationship and expand on it. So -- but I don't want to, again, talk a lot about the acquisition at this point. But thanks, Amit, for your question. I appreciate it.

[Amit Dayal:]

Do you expect to close this in the third quarter?

[David J. Langevin:]

We would expect we would close it in the third quarter, yes.

[Amit Dayal:]

Okay. And in terms of the margins, David, just really quickly, you had indicated that we should expect a margin bounce back that happened. What are the opportunities for improvements from this point, in the second half of the year on the margin front?

[David J. Langevin:]

Okay. The margins, we explained in the first quarterly call that our margins were hurt by some of the mix that we had, plus what Andrew referred to in his prepared remarks, where we were producing some of our products at different locations, specifically the Badger location. That has improved, of course, which we see in the expansion in our margins in the second quarter over the first. But by no means is it at a level where we're satisfied. It's, I guess, a continuous learning process that we all discover as we move products around. It takes time for -- because we are working not in -- we're working with manpower and people and not with machines. It does take time to adapt and to learn the products, so we expect further improvement as we go forward through the year.

[Amit Dayal:]

In terms of the backlog, you came in at around $96 million at the end of the quarter, does this include the $37 million you got from the Navy order?

[David J. Langevin:]

No, it only includes -- Andrew, correct me if I'm wrong, but I believe it only includes a small piece of it, is that right?

[Andrew M. Rooke:]

That's correct, yes. We announced that there was approximately $5 million that we got initially for that contract, and that's in our backlog.

[David J. Langevin:]

But the rest, you have to -- it's not -- it's only been 12 months, right? So we have long lead times on those products because they're being developed. And so as Andrew reported, they'd be in the second half of next year. So those numbers will come in, in future backlogs.

[Amit Dayal:]

Okay, perfect. And just one last question from my side. On the energy side of things, are you expecting some pickup to happen, especially in the context of your 70-ton crane? If you could give us an update on where potential sales for that product stand at this point?

[David J. Langevin:]

Thank you again. The 70-ton has been coming along and developing very satisfactorily. We're very positive about it. We think it's going to be a great product and have, as we've said in the past, significant potential for us as we go forward. And then that will take time. But specifically on the energy side, the drilling rig counts, as Andrew mentioned, have fallen off year-over-year. Many people are saying that, that will start to reverse again in 2014. We're also expecting equipment that's been sold and delivered to end users in North America will be shifted to some international operations, so we're expecting further advances and further increases in our equipment going into next year.

[Operator:]

The next question comes from the line of Kristine Kubacki with Avondale Partners.

[Kristine Kubacki:]

Just a question for you on there's a -- in your press release, it caught my eye, obviously, you made a little commentary about Europe still being pretty challenging, but you talked about a little bit of increased sales from port-related equipment from CVS. Is that within Europe? Or are you seeing -- I know your strategy has been to grow that brand. Can you give us a little color about the commentary there on some increased sales of CVS?

[David J. Langevin:]

Yes. I don't -- I wouldn't really describe it as being within Europe. It's primarily around the world. And as you noticed from -- I'm sure from reading our 10-K, most of our international business generates from CVS, and they sell on a very diverse market. It's all over the place. In the past, we've announced orders to São Paulo, to South Africa. But again, we list a whole slew of countries that they sell to. And it's really the -- if you remember, when we originally did that acquisition, it was -- at that time, from a trailing standpoint, 50% Europe and 50% non-Europe. Unfortunately, they've been growing and expanding in the 50% non-Europe side of their business. And we all hope and pray this -- they'll be back into a European market, where there's the other 50% of their growth because that would significantly expand what they've already accomplished, so it's now outside of Europe mostly. I don't know, Andrew, if you have anything else to say?

[Andrew M. Rooke:]

No, absolutely right. I think the international will be -- the European market is particular challenging. Italy, Southern Europe is very, very tough at the moment.

[David J. Langevin:]

So Kristine, it's pretty much outside the rest of the world other than Europe.

[Kristine Kubacki:]

Okay, that's helpful. And then you just talked about kind of in a pro forma basis that debt to EBITDA at about 2.9x, are you comfortable at that level? Or would you have more firepower here to take on further acquisitions if you found the perfect thing out there?

[David J. Langevin:]

Well, we have always said that we want to stay under 3x or in that range. We've gone over that at a certain points in our development because there's a -- it's always a challenge, isn't it, where you try to, as you say, find the right opportunity and take advantage of it and get it done. So we've been up to 4.5x to 5x, but we're much more comfortable down here in the 3x because it also allows -- I mean, primarily we believe we have to continue to grow from our internal growth of our companies, and acquisitions are secondary. And I think we've proven that over the years we've been public. And then we've also proven we're very prudent with our equity. So we really want to keep our ratios in good shape, continue to pay off our debt, and continue to grow our company.

[Kristine Kubacki:]

Okay. And then just -- to go back to the margin piece just one more time, and I'm sorry if I missed this. But obviously, you had a big, nice step-up from quarter-over-quarter. And I know you've moved the production around a little bit and part sales is part of that. From a mix standpoint, from an efficiency standpoint, could we see margins go back up over 20% in the second half of this year? Or would that be a [indiscernible] within the mix?

[David J. Langevin:]

Well, we certainly are striving for that. As I mentioned to the previous caller, we're -- we did better in the second quarter, which is what we expected, from introducing Manitex cranes to the Badger production facility. But we are by no means where we want to be at Badger, from producing -- from a margin standpoint. So we have to continue to improve and we have continuous improvements at many of our facilities. So we would certainly hope, but I would not -- I always hesitate to get people to -- because 1% or 2% on the margin line can have a significant impact on the earnings per share, so I try to keep it very cautious there.

[Operator:]

Our next question is from the line of Philip Shen with Roth Capital Partners.

[Philip Shen:]

So you guys talked about the energy markets and the slowdown there and the potential outlook as well. Can you talk about the demand for your cranes by the power industry? Is that -- is there a growth there at all?

[David J. Langevin:]

It's been a good area for us. I would say that, that's been a very steady area, as we -- as the growth system has continued improvement around North America, specifically in the U.S, that's been a very steady market for us all along, and it continues to be. So I'm glad you brought that up, Philip. That's an area that has been rock solid.

[Philip Shen:]

Great. And does that trend more with the transmission side of the business or distribution or even something else?

[David J. Langevin:]

You're getting beyond me a little bit. I know -- from what I've known and seen of the use of the cranes is the expansion and the extension of the grid system in the U.S. where they're going higher and they're using larger cranes to do the work. That's what I've seen. I don't know, Andrew, if you -- those are the sites that I've been on. You may have been on some other ones or have some other background, but that what I'm familiar with.

[Andrew M. Rooke:]

No. Again, you're right. The work is both expansion of the grid, a new grid getting into place, connecting some of the more remote parts of energy to the grid and then, as you say, just increasing in the capacity, which essentially involves going higher.

[Philip Shen:]

Okay, that's helpful. Can you talk about the construction marketing, give us some color there? What are the trends you're seeing and what the potential impact could be on your product lines, perhaps, even outside of boom trucks and cranes?

[David J. Langevin:]

Yes. The company was based and built originally -- basically around the real estate market. I mean, that's where -- as we all know, the growth in the 2003 to 2008 period was all built around that. Now fortunately for us, we've been well received and accepted in the energy markets by developing new products specifically for that market. So we kind of developed another leg, which is a significant growth in North America now. But what we've seen -- as we all know, we've seen a rebound in the commercial side, and Andrew mentioned it and referred to some of the numbers that we've seen in expansion on the construction and the residential side, nonenergy side, the commercial side. And we expect that to continue, but it seems to be continuing at a relatively slow pace. I think people are just very cautious. And as we continue to rebound, it's at a very slow, cautious basis and so that's our basic message is that we're growing, but there's nothing there that's going to skyrocket, unfortunately. We keep introducing new products and introducing products, which are going into areas where we've never gone before, and that's continued to allow us to grow at rates far greater than anyone else in the marketplace, realizing that, of course, we're a small competitor, a small player.

[Philip Shen:]

Okay. Again, that's helpful. Another question here on just in terms of end markets in general. I'm not sure if you guys have talked about this in the past, but when you look at your overall revenue mix, take 2012 for example, independent of product line, could you actually give us a sense for what your end market mix might be? So for instance, in what percentage of your 2012 revenues was exposed to oil and gas, and what percentage was exposed to power, and then in turn construction?

[David J. Langevin:]

We didn't -- we haven't broken it out that fine. But generally in 2012, we had more of -- especially with the first half of the year, we had more of an energy bias, oil and natural gas. Because as we all know, the rig counts and the production expanded significantly during that period. Since then, I would say we've generally have said we are more on a 50% energy distribution, noncommercial side. And of course, as you -- as we all know, power distribution kind of gets into both lines, commercial and noncommercial or energy. And so what we've said generally, we're kind of running at a 50% commercial side and 50% energy side.

[Philip Shen:]

Great. That's definitely helpful. And one last one, then I'll jump back in queue. In terms of new trends in the rental market, can you talk about what you're seeing there? To what degree do you guys sell to the rental companies? And is that a segment that can be important for you guys going forward?

[David J. Langevin:]

We haven't typically, in the past. Because, again, when you think about some of the big names, of course, in the rental market, they're more into the backhoes, the skid stairs, things that we do not provide. So typically, our market has been independent dealers and -- or the Caterpillar dealership, we obviously have a strong relationship there as a preferred provider, but most of -- other than rush equipment down in Texas or H&E equipment, most of our products end up going into dealerships and the end users. So while we have not focused a lot on the rental side, that might be an area that we might start entertaining a little more interest in, especially with some of the new products that we're bringing on board.

[Operator:]

Our next question is from the line of Les Sulewski with Sidoti & Company.

[Les Sulewski:]

Could you comment a little bit more on the -- on your backlog? Is it possible to kind of give a breakdown some of the orders you're seeing more from -- is it more from the energy or the construction space?

[David J. Langevin:]

I would say it's more -- right now, as Andrew mentioned in his prepared remarks, slightly more on the commercial side. But we still see steady, solid orders from the energy side. So I think we're kind of in that 50-50 category at this point.

[Les Sulewski:]

Okay. And then how about your capacity levels looking out in the out year?

[David J. Langevin:]

We don't have any issues there. We've -- we're running generally one shift at all of our facilities. We may have some -- a little bit of welding or a little bit of painting, some of those type of specialty work that could be done in a second shift. But generally speaking, we're on one shift. And remember, our process is we typically assemble and we -- and so we typically have most of our components -- not most, almost all of our components done from outside vendors. So we're very flexible from a capacity standpoint.

[Les Sulewski:]

Right, that's helpful. And then so just looking out on the CapEx levels, any guidance on that?

[David J. Langevin:]

Because of the process that I just mentioned, we don't have a large amount of CapEx. I think, Andrew, overall, we've been running around $1 million a year, something like that, possibly?

[Andrew M. Rooke:]

Yes, it's something...

[David J. Langevin:]

$0.5 million? I mean, it's...

[Andrew M. Rooke:]

And we've had a couple of investments this year. I mean, so far, we're about $800,000 gross CapEx for the first half of the year, which is maybe a little bit higher than we've had in prior years. But -- doubling that for this year would probably be a reasonable estimate.

[Operator:]

Our next question is from the line of Alex Silverman with Special Situations Fund.

[Alex Silverman:]

Most of my questions have been answered. Just one clarification on your guidance. Given the weak first quarter, you're seeing the second half look something like the first half. That would sort of suggest the second half isn't great, but you then went on to say $250 million of sales for the year. So are you suggesting the second half looks something like the second quarter run rate or better?

[David J. Langevin:]

I think -- I tried to -- Alex, thanks for the question. I tried to clarify that a little bit in my remarks by saying, it looks to me -- it looks to us that the third quarter will be lighter than the fourth quarter. And that's because we have -- for example, at one of our facilities, we have some very large units that will be going through in the fourth quarter that we know of, just the way the components are coming in. And that those will be fourth quarter sales. And the 70 ton, if we end up producing any of those, those will be in the fourth quarter. So I think that we will have better earnings potentially than we had in the first half. But the sales -- the total overall sales, will be close to -- with some lower number in the third quarter and a higher number in the fourth quarter, coming out to around the $250 million number for the year. And I just want to add that also excludes anything from potential Sabre, of course.

[Operator:]

[Operator Instructions] Our next question is from the line of Arthur Wilson -- I'm sorry, Arthur Winston with Pilot Advisors.

[Arthur Michael Winston:]

Given that the new orders are not that robust, can you pinpoint -- you would think that there would be better utilization at some of your equipment and the part sales would be better, could you pinpoint any reason in your mind as to why the part sales are so lethargic?

[David J. Langevin:]

Well I think the part sales for us are dominated by Manitex, the Manitex Group. And that's the area where we've had so many new units go in because their increase in sales have been very rapid over the last few years. And you generally have, just like when you think of any equipment going in, cars or anything like that, you generally have less if you -- even if you have utilization, you have less part sales because you're on a warranty period for a year. And it's usually second, third, fourth years that you start seeing the part sales.

[Arthur Michael Winston:]

I see. And what is the gross margin of the part sales...

[David J. Langevin:]

When I think -- Arthur, I think it's a good point. And I think it's an area where we need to concentrate and improve, so I agree with you.

[Arthur Michael Winston:]

But what's the gross margin in the part sales?

[David J. Langevin:]

What we have said publicly is that the gross margins tend to be in the 40% range overall with some, far less; and some, more.

[Arthur Michael Winston:]

I see. And just one other question. Are you paying less or more for the components that you buy when you assemble your equipment?

[David J. Langevin:]

Well, we try to pay as little as possible, with similar quality for our specification components.

[Arthur Michael Winston:]

I mean, compared to a year ago, apples-to-apples?

[David J. Langevin:]

Oh, I'm sorry. I didn't understand the question. I apologize. No, it's about the same. There hasn't been a lot of -- as we know, the commodity prices have been fairly positive for us from a purchasing standpoint.

[Arthur Michael Winston:]

And would you say the same is true of your -- the pricing into your backlog, the same unit -- it would be more or less the same price, approximately?

[David J. Langevin:]

Yes.

[Arthur Michael Winston:]

Good, okay. One other question. Your SG&A overhead has been going up to some extent. Do you think that -- forgetting the acquisition, do you think now it's going to plateau out and stop going up?

[David J. Langevin:]

Well, we continue to try to expand our overall sales network. And obviously, if we continue to grow our sales, we'll have selling commission on our sales. But excluding that, we should have -- we should not be adding a lot of SG&A.

[Operator:]

[Operator Instructions] And at this time, I'm showing no further questions in queue. I'd like to turn the call back over to Mr. Langevin for closing remarks.

[David J. Langevin:]

Thank you, Douglas. Thank you, everyone, for your interest in Manitex International. We look forward to future discussions. Thanks again.

[Operator:]

Thank you. Ladies and gentlemen, that does conclude our conference for today. We'd like to thank you for your participation, and you may now disconnect.