Manitex International, Inc.
Q3 2013 Earnings Call Transcript

Published: 8 Nov 2013

[Operator:]

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

[David J. Langevin:]

Thank you, Ron. Good afternoon, and thank you for your interest in Manitex International. On the call with me today is our President and COO, Andrew Rooke. Please see our website or our release for replay instructions for this call, which will be available until November 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 risk associated with our company. We've organized our call today, as we have in the past, with my leading off making a brief opening statement, followed by a review of results by Andrew, and a closing statement by me. Andrew and I will then be happy to respond to any questions. So now please refer to Slide #3. Generally, as has been reported by everyone in our industry, global market conditions have been lackluster at best. Or it's evident the that capital equipment buyers are exercising extreme caution and showing deliberation with respect to buying and investing in new equipment. The results we reported today for the third quarter and year-to-date show that even with this challenging backdrop, we've continued to grow our company. And as we stated in our release, we are looking at a sales increase in the range of 20% for the full year. It is important to know why we've been able to grow and grow profitably and the drivers of what we believe will be continued above average performance. These factors, we believe, are our strengths as a niche player, with constant emphasis on prudent expansion of our product portfolio coming from both internally developed products and acquisitions. Diversification of our product portfolio to selectively enter new markets is something we pursued since going public several years ago, and has certainly been a factor in our ability to weather stormy markets. Much of this growth is coming from the sale of higher tonnage cranes at our Manitex division, and a small amount in the fourth quarter will be from our latest acquisition, Sabre. We hope to continue to expand in a larger crane environment by way of our introduction of our 70-ton crane, which we unveiled this summer. In fact, we will be introducing the first 2 initial units of this crane in the fourth quarter with larger crane productions of this model to start in the first quarter of 2014. As we learned from our 50-ton crane, as we populated the market, demand started to grow. Our hopes are we will experience the same with the 70-ton. And as a point of reference, the 50-ton product is now approximately $50 million in sales product for us. Again, our expectations are the 70-ton offering will be similar or greater with time. We also introduced, during the past year, our new 50- and 30-ton cranes and are encouraged by the market acceptance and have high hopes for expanded sales of these products in the near future. Further to this diversification as we announced today in our -- today is our agreement in principle to acquire Valla. Whose products serve primarily the industrial markets and expand our crane offerings to include electric crane models among others. Andrew will discuss Valla more in his prepared remarks. On the production front, we ran our plants for the third quarter on levels, which approximated our order intake, resulting in the leveling, more or less, of our backlog from last quarter at $96 million. However, as we stated in our release and last quarter's prepared remarks, the fourth quarter should result in higher sales than the third. This is a result of several factors, including the addition of Sabre, production of higher tonnage in [indiscernible] cranes, as well as other specialized equipment being produced at our Liftking Canadian facility. However, as I've mentioned on numerous occasions, the fourth quarter is very hard to handicap with the holiday periods and resulting reduction in available production hours. But with the support of our entire organization, we are making -- we are striving to make it a strong finish to the year. And based on the order book in our backlog, it is fair to say that 2013 is going to be our best year yet in terms of both sales and profits for Manitex. With that brief overview, I would like to 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 third 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. 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, benefit from pockets of strength geographically, and continue to grow our revenues, earnings and cash flows. North America remains our strongest geographic market. The level of demand from these commercial and general construction markets continues to edge slowly forward, and this is being reflected in sales and in order intake for low capacity and less specialized boom truck cranes. As we have discussed previously, we incorporated this production into our Badger facility, and we've been able to respond to this demand quickly, which has been received favorably in the market. The softness in the energy sector has continued, evidenced by North American rig counts, which are approximately 2% lower than a year ago. This has contributed to a decrease in order intake compared to the early part of 2012 for a higher capacity equipment that is widely used in the energy sector. 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. Our backlog at the end of the third quarter remained flat with that of the end of the second quarter at $97 million, although this does represent a 26% reduction from the December 2012 level. We were pleased with our booked orders ratio to sales or book-to-bill ratio with 100% for the quarter, which is 180-basis-point increase above the second quarter of 2013, reflecting a stronger order intake than recently seen. The backlog remains broad-based and includes a majority of broad boom truck product. But a strong order intake from CVS for its container handling equipment was also achieved towards the end of the third quarter. The order book also includes military orders for both quarter 4 of 2013 and the first half of 2014. Finally, we announced today that we had reached agreement in principle to acquire Valla SpA, an Italian-based manufacturer of precision pick and carry cranes, with capacities ranging from 2.5 to 90 ton in electric and diesel versions. As discussed on Slide 5, Valla cranes are sold to specialized agents and distributors for a variety of end markets such as petrochemical, construction, aerospace and automotive. Although not expected to contribute materially to our results in the immediate term, Valla has a unique array of highly desirable Crane products that complement our niche crane offerings, extending our product portfolio and enhancing our overall market position. Valla reported 2012 annual revenues of approximately $7.5 million, and EBITDA of $0.7 million. The Closing, which is subject to the execution of definitive documentation, is expected shortly. Now turning to the financials results. Slide 6 shows the key figures for quarter 3 of 2013, with comparisons for quarter 3 of 2012 and quarter 2 of 2013. Third quarter 2013 revenues are $57.5 million, increased $4.1 million or 7.8% from the third quarter of 2012, resulting primarily from increases in revenues from boom truck cranes and equipment distribution of 19% and 34%, respectively, and the contribution from the newly acquired Sabre of $2.1 million. These increases were partially offset by lower revenues from material handling equipment. Approximately 2/3 of the increase in boom truck revenues was from cranes with capacities greater than 40 tons, reflecting demand for powerline construction and energy usage. Lower capacity, lower margin boom trucks and chassis sales were also stronger and increased approximately $3 million in response to the slowly improving commercial construction sector, which utilizes below capacity, less specialized cranes. On a sequential quarter basis, in line with expectations, revenues decreased 8% from the record sales of the second quarter principally from the timing of orders being processed through production facilities, particularly for material handling equipment. Net income for the third quarter of 2013 were $2.6 million or $0.21 per share in earnings. It was an increase of $0.1 million, 4.7% over the third quarter of 2012. Excluding cost of $0.3 million related to the acquisition of Sabre and the refinancing of credit facilities, net income for the quarter would have been $2.8 million or $0.23 a share. EBITDA for the quarter was another record at $5.6 million or 9.8% of sales, although this was slightly lower as a percentage of sales than we achieved in quarter 3 of 2012. Slide 7 is a bridge for the increase in net income from quarter 3 2012 net income of $2.5 million to a net income of the quarter 3 of 2013 of $2.6 million. Moving to the reconciliation table. A $4.1 million improvement in revenue resulted in a gross profit benefit of $0.8 million, which was reduced by $0.4 million, the effect of a reduction in the gross margin percent from 20.3% in quarter 3 2012 to 19.5% in quarter 3 2013, primarily caused by the mix of sales in the quarter. The combination of the volume and mix provided a net gross profit increase of $0.4 million. The other key movements in net income between the 2 periods were additional costs of $0.3 million associated with the acquisition of Sabre and the refinancing of our credit facilities in the quarter. Operating expenses, less one-off items, were flat. We remain vigilant with regard to cost control, and our total SG&A as a percentage of sales without adjusting for the one-off items this quarter improved in comparison to the third quarter of 2012 by 60 basis points to 10.2%. Finally, our tax cost marginally reduced as our 2013 effective tax rate is favorably impacted by the domestic production activities deduction and federal research and development tax credits. The effective tax rate for quarter 3 2013 was 31.4% compared to 34.4% for the third quarter of 2012. Slide 8 shows our capitalization and liquidity position. Total debt, net of cash at the end of the quarter, was $48.2 million, an increase of $0.9 million from December 31, 2012. During the quarter, we increased our average debt level for working capital purposes together with a term loan to finance the Sabre acquisition. Proceeds from the direct stock offering were used to repay debt at the end of the quarter, which contributed towards the increase in equity of $22.6 million on a year-to-date basis. At the end of quarter 3 2013, 12-month trailing EBITDA was $19.4 million, which provides a strong interest coverage ratio of 6.9x and a debt-to-EBITDA ratio of 2.6x, a firm basis for further growth. And now I'd like to hand back to David for his final summary.

[David J. Langevin:]

Thank you, Andrew. In summary, it has been a tough economic year to be in our business. And while the year is not yet complete, current market conditions are likely to result in a significant decrease in crane bookings in the sectors in which we compete. That said, we are executing our plan, and we are on pace to deliver a record year for sales and profits. We will continue to execute our strategy of diversifying our product portfolio, as well as patiently and prudently acquiring assets, which will put us in a position to grow in the near term. We also expect this growth to gain momentum with the eventual return of our markets. Our management team's experience with the knowledge and proven track record to integrate businesses, as well as maintaining an appropriate capital structure to allow for opportunistic acquisition growth, which will provide immediate accretion and provide long-term value to our shareholders. With that, Ron, we would like to open up to any questions.

[Operator:]

[Operator Instructions] Your first question comes from Kristine Kubacki with Avondale Partners.

[Kristine Kubacki:]

Just -- you talked a little bit about more, and your overall tone, sounds a little bit more cautious. And you said that customers are a little bit more cautious than earlier this year. I was wondering if you could kind of put that in context. And is that versus the second quarter? And how was confidence kind of through the third quarter? Has confidence eroded, I guess, is the question I'm asking.

[David J. Langevin:]

Well, it's hard to obviously be very precise in this because it's -- you're just trying to get a feel for how the year is going. Obviously, it's not going bad because we've got a good order book going into the fourth quarter. And as we've said because of the way we're producing -- we laid out some production, we'll have a bigger fourth than a third. So I don't want to give you the impression that it's any worse than it is for anybody else because it's not. I think it's probably better for us than it is for a lot of other people because of the markets that we're dealing and we serve, and the fact that we cross over into other markets with our larger -- for us, larger cranes, for the market place. We're still obviously a small crane provider, but for us, it's promoting [ph], as you know, larger cranes. So I think as everybody was saying at the beginning of the year, the second half was going to be better, and I just don't think that, that's materialized. It just seems like the second half is every bit as slow as the first half. So we've just kind of had a slow year and maybe that's good. So maybe we were down this year, which I don't think anybody expected going into the year. But as I said in my prepared remarks, I think we'll be down this year over last year when the year settles out, depending on what you get in orders for the last 6 weeks of the year.

[Kristine Kubacki:]

And on that vein, and I know there's a lot of moving pieces but -- and asking you to move a little bit more into 2014 and how we should probably think about that? I mean, with the addition of Sabre and the other acquisition, should we think about the -- as we move into the first quarter and the second quarter of 2014, could we see sequential growth in those quarters based on what you're hearing and what your order books are telling you?

[David J. Langevin:]

Yes. From speaking to the -- and remember we sell, as you know, through primarily dealer -- not primarily, almost exclusively through dealers. And in talking to dealers, it seems like we should see more of a sequential increase next year rather than a big start and then a slow end. Hopefully, we'll have a steady increase next year and that will be easier for us to predict and easier to produce.

[Kristine Kubacki:]

Okay, that's helpful. And then just one more on the revenue side. You talked about the port crane strength. I was wondering if, just geographically, and if you could tell us where that is coming from. It doesn't sound like it's Europe.

[David J. Langevin:]

No, it's not, but it's really -- I know I said this a number of times on various calls, these quarterly calls, the CVS guys are just doing a great job of getting product around the world. We've got recently had an order for some more units in the U.S. But it's really broad based around the world, as you say, not necessarily Europe, but our hopes are all indications are Europe is coming off the bottom and the indicate -- economic indicators coming out of Europe are positive. So we're really hopeful that while we'll have a very good year this year, we are hopeful that when we do the budgets shortly, the budgets for next year will be even better as it relates to CVS. So I really have to put my hat to the -- our European group they have done a really nice job.

[Kristine Kubacki:]

Sounds good. And then just one last question. I'll get back in queue. But in terms of the acquisition, it sounds like the pipeline sounds like it's pretty full. I guess my question is, is that accurate? And then how do you feel about geographies? And then what kind of pace do you feel kind of comfortable with in terms of execution of the number of acquisitions you could potentially do next year?

[David J. Langevin:]

Well, Kristine, it's, again, a hard and difficult one to respond specifically to. But in general, we've been working diligently for a very long time to continue to add businesses that we think strategically would add value to our company and, therefore, to our shareholders. And we've got ourselves in a position from a capital standpoint where we certainly have the resources and we do have the opportunities, I would think that -- actually, more outside of the U.S. because of the fact that -- especially in Europe, example, of course, would be our most recent acquisition, Valla, the one we announced and we are in the process of wrapping up. It gives you the opportunity to buy, to look at some very good products at very attractive prices. And hopefully, at a time that there is still a lot left on the cycle because certainly Europe, by all means. They haven't even started. I mean, they're just getting off the floor. So we think that's it's a good time to opportunistically grow our businesses and to try to be aggressive. Certainly, again, within the guidelines that we followed for years to be aggressive but reasonable in how we put things together, which means we have to work at them sometimes longer than most because their difficult situations. I would say we're going to try to be aggressive as we go into next year, but it's really hard to see what -- because you can't predict those things.

[Operator:]

Your next question comes from Philip Shen with Roth Capital Partners.

[Philip Shen:]

I want to start big picture. You talked about the softening environments, back half being not as strong as you thought early in the year. David, can you talk about where you think we are in this Crane cycle and perhaps how this cycle evolves, perhaps what inning are we in? And where are we in the replacement cycle? So any thoughts on that would be helpful.

[David J. Langevin:]

Sure. Thank you, Phil. I think the cycle, it's probably maybe a little more difficult to predict than what it has been in the past because I don't think they were following a normal recovery. It's been very, very slow, at least in our sectors. So I think we're in the very early stages. We have seen some replacement units in this year, but we believe we have a very long way to go. And as I just mentioned to Kristine, we have obviously a little bit of a blurring of the lines because as we get into larger cranes beyond what has been generally considered a boom truck for many years, as we got into 40- to 45- to 50-ton crane, and now the 70-ton crane. We cross over into truck cranes, all-terrain cranes, bigger markets. And so I think that's probably a big reason why we've continued to grow in a market where, as I said in my prepared remarks, the markets are probably down for the year. And that's probably also good because it extends the cycle that we have, certainly is going to be extended because we're just in the early stages of any type of recovery at all. I don't know what inning it is, but early in the game.

[Philip Shen:]

Okay. That's helpful. Can you talk about the pricing environment? How has it been over the past few months despite the slow economy. It sounds like some of your competitors are saying -- they're not seeing any steep discounting. What are your thoughts on this sentiment and pricing in general?

[David J. Langevin:]

Well, I think generally speaking, we have rational -- we're competing with rational competitors. We're still -- we're in rational markets. As we have announced on numerous occasions, we've had increases. We usually don't -- we don't need those increases. We follow the increases. And this is, again, primarily speaking to the crane market, which is 50% of our business. The rest of the markets, whether it be port or material handling, I would say there we certainly have less ability to lead anything. We're just following what the leaders are doing. But once again, I think we're in markets where, and this is what we usually look for when we're trying to add on companies, is competitors in markets where we think that there's rationality and we have some uniqueness to our products, which allow us to garner some margin and a reason for buying our product. So I would say generally, we're in a pretty good pricing environment, not -- I don't think pricing has been an issue. It's just been the cautiousness of buyers to not get too extended and not -- and certainly no inventory. People are very hesitant to add inventory to their fleets, and the utilization are pretty good. So I mean, for a lot of reasons, we are optimistic going forward. It's just not been a real strong year as we try to wrap up the year here, but we're doing fine in this environment, clearly.

[Philip Shen:]

Good. And one last one and I'll jump back in queue. Can you provide us an update on the 70-ton crane? How is the process of selling going? And any visibility on that you can provide us would be great.

[David J. Langevin:]

Yes, it's not a whole lot, Phil, I do than what I did mention in my remarks. We introduced the products. We took some initial orders. We calibrated, tested, adjusted, modified, got the product ready for mass introduction. And then we will start producing on a small-scale this quarter and to start more in the production mode in the first quarter of next year. So it's -- I would say we're ready now to -- we're getting pretty close to bringing it out, rolling it out, introducing it. And then as I said in my remarks, I'm hopeful that -- we are all hopeful that as we do, the same thing will happen like it happened on the 50-ton. As people started to accept it, see it in production, marvel at its capabilities, we started to get orders. And so clearly, we're hoping the same thing occurs. Equal to or greater than what we did on the 50-ton.

[Operator:]

Your next question comes from the line of Les Sulewski from Sidoti & Company.

[Les Sulewski:]

Could you comment a little more on the -- on how you acquired the acquisition of Valla? How did that come on your plate? And then also for any remaining potential acquisitions in your basket. What is the motivation of these companies to sell their businesses?

[David J. Langevin:]

Well, each one has always unique characteristics about it. Clearly, we've been trying to move into specialized industrial cranes, our 15-ton crane that we've introduced, our 30-ton crane that we've introduced, are more on the petrochemical, industrial areas that Valla participates in. So Valla's a name that we've known for many years. It's a very good high-quality name. It's a family business, and the family decided it was time for them to exit. It's very close to our facility in Italy that we have now with the port business, so it's, from a operations standpoint, very easy for us to assume, has very good people. We expect those people to continue with us. So I think those are the main reasons to answer your question, Les.

[Les Sulewski:]

And then what kind of effect do you think that will play out on the margins?

[David J. Langevin:]

What kind of -- I'm sorry, what was the question? I didn't catch it.

[Les Sulewski:]

What affect will Valla, yes, play out on the margins?

[David J. Langevin:]

What effect? Yes, I don't think -- it's not going to be material for us coming out of the blocks. We would hope that what we have announced is the sales and the EBITDA numbers, which are very similar to ours, so I wouldn't expect any material change to our margins as a result of Valla.

[Operator:]

Your next question comes from the line of Jeffrey Lowen [ph] from Tuxedo RD Associates [ph].

[Unknown Analyst:]

A couple of questions, if I may. Number one, what's the headcount now? And the number of shifts you might be running at Georgetown?

[David J. Langevin:]

We're-- we have -- at the end of September, we had 488 including about slightly over 100 relating to Sabre. And at the end of the year, we had 386. So I think it's a credit to our people. We've added significant more sales with roughly the same amount of headcount than any additional companies at the end of the year. And we're not running -- we ran more level in the third quarter and we will in the fourth quarter at Georgetown, so we're just running one shift. The last time I was there, they were running 4 10s and 2 8s, but 1 shift.

[Unknown Analyst:]

Okay, great. Second question. The increase in notes payable is a function of?

[David J. Langevin:]

The notes payable change at the September 30 date was a little a bit of a aberration. I don't know if you specifically mentioned, I can't remember, Andrew, if you specifically mentioned it. But what happened was we took on the term note when we acquired Sabre, and then we paid that off in October. Did you mention that Andrew?

[Andrew M. Rooke:]

Not specifically.

[David J. Langevin:]

Okay, but it's in our queue?

[Andrew M. Rooke:]

It's on the slides that we...

[David J. Langevin:]

Okay. It's on the slides, okay. So, Jeff, it was there September 30 and then it was eliminated afterwards with our revolver.

[Unknown Analyst:]

Okay. And the last question is at whose expense does the 70-ton crane replace? In other words, without going into specific companies, who are you competing against or what types of products are you competing against in that 70-ton market? Is that a fixed crane kind of competitor? Or is that just totally new Greenfields?

[David J. Langevin:]

No, no. It's -- and as I said earlier -- I mean, it's still a relatively small crane in the crane world. So I mean this is not -- because again, we're mounting it on a regular truck chassis, a Peterbilt or Kenworth. It's going over the road. So in the crane world, we're still a small player. But for us, obviously, this was as we crack the 40-ton market, these were new areas for cranes being mounted on trucks in the U.S. Although they've been in existence in the past. But from a mass-marketing standpoint, it's a breakthrough. And we'll be competing against the normal crane people, truck crane, all-terrain cranes. And they really -- what's happening is, especially in the energy fields as you get the rigs, the pipe being -- everything as it gets larger, they want larger cranes. And of course, these are more mobile cranes, so they're easier to -- as they move from side to side in convoys, these are easier to transfer. So it's really not anybody else other than the normal crane manufacturers, but we're trying to break into bigger markets that are truck cranes and all-terrain cranes.

[Operator:]

And your next question comes from the line of Michael Holmok [ph] from Wolverine Asset Management.

[Unknown Analyst:]

I had come late, so forgive me if you already spoke of this. But can you update us on Sabre and anything you've seen so far that causes you to be more or less excited? And then I have some follow-ups on Sabre's exposure to the energy industry.

[David J. Langevin:]

Sure, of course. Sabre's -- as we knew when we were getting in because we knew the company pretty well, just excellent management, really good people. We've had to, of course, bring it into the public company arena, so they've -- I'm sure they're overjoyed with stocks implementation and the accounting implementation that we've had to do. But that's all -- that's just probably company stuff. But operationally, we've been very pleased. We've taken -- brought on a salesman as we reported when we announced the acquisition at the end of the last quarter. We did not have a significant sales team. They still don't, but they have a salesman, and we've introduced him. We've had some sessions to introduce him to our distribution. So, Andrew, you spent more time there than me, but I can't think of anything that has gotten us less excited. If anything, I'm probably more excited as we got into Sabre.

[Andrew M. Rooke:]

I would agree. I think performing along lines of expectations at the moment.

[Unknown Analyst:]

And what is -- can you tell us what their exposure to the energy markets is right now? And I'm guessing that might be their highest growth area, but I could be wrong. And if you could speak to that.

[David J. Langevin:]

I think right now, it's probably less exposed there than they have in the past. But they still have reasonably good exposure there. I don't know if you want to try to quantify it, Andrew. I don't feel like [indiscernible].

[Andrew M. Rooke:]

Yes. I would say that this sort of very high volumes, as everybody experienced with the energy sector, those very high volumes of 12, 15 months ago that we saw, sort of everybody saw, that was obviously reduced. And that's been part of that picture. Nonetheless, they continue to receive steady order intake from the energy sector. And from the other industrial sectors that they operate in as well. So I think they have a good balance there, and one that we'll continue to try and develop.

[Unknown Analyst:]

And lastly, any particular innovations or IP that they have in any particular industries that [indiscernible] cost?

[Andrew M. Rooke:]

They do operate and pride themselves, they do have a couple of patents for example. So they are focused more on some of the specialized tanks and some of the attributes, particularly relating to that. And that helps them build stronger and deeper relationships, as I'm sure you know, with the customer base. So I think they would pride themselves on being more engineered, more technologically advanced than some of the competitors in that market.

[David J. Langevin:]

Michael, if...

[Andrew M. Rooke:]

Not to say that it's unique, but they have some good product.

[David J. Langevin:]

Michael, if I may, they would -- we're not able to adequately give you the energy that they have for their product and the amount of involvement and enthusiasm they have to make sure that their products are the highest quality and are the most innovative because neither one of us are engineers or have spent the amount of time that these guys do in their businesses. But they -- when I go there, I'm very impressed how -- between the valves and the pumps, and all the things that they are involved with, they're really excited about it. So it's -- I know I'm not giving them enough credit for all of the hard work they do, but they're really excited about their products.

[Operator:]

Your next question comes from Alex Blanton from Clear Harbor Asset Management.

[Alexander M. Blanton:]

I have a question on the $2.1 million you announced from Sabre for the quarter. That's for -- I think you closed that August 19?

[David J. Langevin:]

That's correct.

[Alexander M. Blanton:]

So that would be 42 days.

[David J. Langevin:]

Well, I guess.

[Alexander M. Blanton:]

That's an annual rate.

[David J. Langevin:]

Precise, yes, 42 days.

[Alexander M. Blanton:]

No, well, I mean, 365 divided by 42 x 0.1 is $18 million. So that's an $18 million annual rate, which is well below what they did 12 months ending last March, so which was -- what is it, a seasonal thing or what is it?

[David J. Langevin:]

No. I think they're probably somewhere around $2 million a month, give or take, is kind of the run rate that they're at right now.

[Alexander M. Blanton:]

So that's way down from...

[David J. Langevin:]

And I think that as we took over the company, I'm sure there was some, as I said earlier, some of the things that we all of a sudden started. And remember, this was a small company. So some of things we all of a sudden we started to implement and put into the company probably slowed them down some more so their productivity was probably not great. But I think it's either $20 million range, Andrew, I don't know.

[Andrew M. Rooke:]

You're right about the $2 million Dave. [indiscernible]

[David J. Langevin:]

$2 million a month, so $24 million range. And they were $39 million, 12 months the last reported. Is that right? $30 million?

[Andrew M. Rooke:]

Yes, it was $30 million. Yes.

[Alexander M. Blanton:]

Why is it only $24 million?

[David J. Langevin:]

Well, I think it's just a reflection of the slowness in the economy, the slowness in new equipment. But it's not anything unusual, no.

[Alexander M. Blanton:]

Well, it's a very large percentage drop compared with most companies. That's what I'm saying. I mean, did you lose large customers?

[David J. Langevin:]

No, no, no. We haven't. No, I mean, the rental customers that they provide product to have ordered new equipment since then, so they've continued to order. I don't think we've lost anything. I'm sure we probably added some initial contacts. Now whether or not those initial contacts have come on as orders is still yet to be seen. But we've been trying to get it into our distribution. And as I said earlier, we added a salesman. But I think it's going to take some time to get it into our network. But no, there's been no loss of customers other than -- I think some of those customers were ordering -- remember, you had -- 12, 18 months ago, as Andrew said, we had a large addition of products and equipment into the, especially, energy industry. And you have to let that equipment now be absorbed by the industry at a slower pace. So I think it's just a timing issue.

[Alexander M. Blanton:]

Well, when you announced it, you said that you had bought it at about 3x EBIT, I think it was.

[David J. Langevin:]

For trailing, yes, for trailing.

[Alexander M. Blanton:]

Yes, for trailing. But that's not 3x the EBIT. It just seemed that it was a lot less than it was.

[Andrew M. Rooke:]

Yes. That was trailing.

[Alexander M. Blanton:]

So you really didn't buy as much of a bargain? You bought the thing when it was -- sales had dropped off.

[David J. Langevin:]

I guess what you have to try to look at is what's the timing and what's your horizons and what you -- if you have a longer-term view, as we do, obviously, then I think it'll be an excellent addition for us.

[Alexander M. Blanton:]

Okay. Now do you know if the analyst estimates, which were a consensus of $0.21?

[David J. Langevin:]

Was it $0.21 or $0.20?

[Alexander M. Blanton:]

20. -- I think it was 20.8. I don't have it. $0.21 rounded.

[David J. Langevin:]

Last I saw, it was $0.20. But it depends on...

[Alexander M. Blanton:]

It depends on who's...

[David J. Langevin:]

Who's in it, that's right. Who's in it?

[Alexander M. Blanton:]

Well, yes. There were several different people that collect the consensus, and they sometimes vary but...

[David J. Langevin:]

They do, that's right. And some fall off and some don't. So for a small company like us, it's hard to sometimes follow that.

[Alexander M. Blanton:]

If you only have a few estimates, 1 or 2 difference can make a big break in the average.

[David J. Langevin:]

That's correct. You're exactly tight.

[Alexander M. Blanton:]

But here's the question. Did those consensus include or not include the acquisition cost?

[David J. Langevin:]

They did -- I'm sure they did not include the acquisition cost.

[Alexander M. Blanton:]

Okay. So then if we take that out, we're looking at a beat of $0.02? $0.23 versus $0.21.

[David J. Langevin:]

That's correct. That's right. Yes, we never discussed acquisition cost with anybody because at the time it -- we didn't know if those are, yes.

[Andrew M. Rooke:]

Well they could assume.

[David J. Langevin:]

You could assume, that's right, but nobody did.

[Alexander M. Blanton:]

They didn't change it after you -- okay.

[David J. Langevin:]

No.

[Alexander M. Blanton:]

All right. I was going to ask what -- did someone ask what you thought Sabre would be next year and what it would add?

[David J. Langevin:]

No, nobody has asked that, no. We don't give guidance for the entire group, so we're not going to give guidance for individual companies.

[Operator:]

[Operator Instructions] Your next question comes from John Curti from Singular Research.

[John H. Curti:]

A couple of questions. With respect to the fourth quarter, the introduction of the larger crane and then you'll also be -- will you be getting deliveries under that military contract?

[David J. Langevin:]

No, not the one specifically that we mentioned, but some other ones. We did mention last quarter that we had some government units going through our Liftking facility in the fourth quarter so -- but it doesn't relate to -- if I understand your question right, it does not relate to the Navy one that we announced earlier this year. Is that right, Andrew?

[Andrew M. Rooke:]

Correct.

[John H. Curti:]

And that contract, I believe, in the first year, you expect to do about $5 million?

[David J. Langevin:]

It's spread out over a number of years.

[Andrew M. Rooke:]

Yes, that's about right.

[David J. Langevin:]

Is that right?

[Andrew M. Rooke:]

That's what we talked about last time.

[David J. Langevin:]

Okay.

[John H. Curti:]

And to the timing of when those deliveries start? Is that more like a midyear?

[David J. Langevin:]

I don't know the specific. I don't know, Andrew, if you have a better idea?

[Andrew M. Rooke:]

I think there'll be some, too, in the first half, but I think it'll probably be spread towards the second half, I think. But I haven't got the full details.

[John H. Curti:]

And then what were part sales in the quarter?

[David J. Langevin:]

I don't have a breakdown. Andrew, do you have a breakdown at all? Some kind of percentage of anything.

[Andrew M. Rooke:]

They were pretty consistent with second quarter, yes. So I think we were around about the 12% of sales again, 11%, 12% of sales again.

[David J. Langevin:]

Yes, the same as the second. Yes.

[Andrew M. Rooke:]

Same as the second quarter, correct.

[David J. Langevin:]

Yes.

[John H. Curti:]

And then I just want to kind of get a clarification of where the balance sheet sits post the offering in terms of availability on the revolver. Because I know you sold the shares, you used those proceeds to pay down the term debt. Is that correct?

[David J. Langevin:]

That's correct. That's right. Eventually, it went to the revolver. If you look at the notes on Slide 8, when you get a chance, it said that there was $17 million available under the revolver at the end of the quarter, and $11.5 million of that was used in October to retire the balance of the term, the note in the month of October.

[John H. Curti:]

And the proceeds from the stock offering were used to pay down the revolver?

[David J. Langevin:]

Yes. Firstly, it kind of crossed over at the end of the quarter because we closed it right at the end of the quarter. And so the first thing was we just took the money, reduced the revolver. And then after we got that done, then we reduced the term. So it was just kind of a quirky period between September 1 and the 1st of October. But net debt was down, obviously, as a result of that.

[John H. Curti:]

I'm assuming you will not have to file an 8-K with -- financials or anything for Valla?

[David J. Langevin:]

No, we will not. No. We assume that we will not as well.

[John H. Curti:]

With respect to Sabre, I know in reading the 8-K, it seemed like they were fairly dependent on a limited number of customers.

[David J. Langevin:]

That's correct.

[John H. Curti:]

How are your efforts going at broadening that customer base, either within the same segments or in to different segments?

[David J. Langevin:]

That's starting. It was part of our -- part of our strategy was to broaden that base, that's as I mentioned, underway.

[John H. Curti:]

How much additional cost are going to get layered in on to Sabre above and beyond the cost that were shown in the 8-K financial statements?

[David J. Langevin:]

I don't think it's going to be material. Andrew, an accountant, some compliance. Well, obviously, we've added a salesman.

[Andrew M. Rooke:]

The key one is the intangible amortization, that's really the...

[David J. Langevin:]

Right. That's in the K.

[Andrew M. Rooke:]

Yes, and that's disclosed.

[David J. Langevin:]

Yes, that's right. But nothing material after that.

[John H. Curti:]

And then the statement that you're expecting 20% revenue growth for the year, that includes the benefits of Sabre for the last quarter of the year?

[David J. Langevin:]

For the last quarter, that's correct. That's right. Yes.

[Operator:]

Your next question comes from the line of Brandon Hemmelgarn from Shaker Investments.

[Brandon Hemmelgarn:]

Just one question with regards to the backlog. The $96.7 million, does that include much of an impact from Sabre? And if so, do you have the backlog trended on an organic basis from last quarter?

[David J. Langevin:]

It was about -- around $5 million, as I recall.

[Operator:]

Your next question comes from Alex Blanton from Clear Harbor.

[Alexander M. Blanton:]

Just a clarification on some things earlier. You said the environment will result in significant decline in crane bookings?

[David J. Langevin:]

Yes, we think that this year -- when the year is done, it's not done yet, so I could be totally wrong on this, but we'll see what happens. But our guess is that year-over-year, in the markets that we're in, in the markets that we serve, crane bookings will be down.

[Alexander M. Blanton:]

Okay. How about the largest sizes? Any idea?

[David J. Langevin:]

No. That's not something we participate in, no.

[Alexander M. Blanton:]

Yes, Okay. But you will have up bookings in cranes?

[David J. Langevin:]

We will have obviously an increase in sales from year-over-year, but not obviously in bookings, no.

[Alexander M. Blanton:]

Okay. How about your share of...

[David J. Langevin:]

Our share, we think, will be -- again, it's a little difficult for us because we cross over into some other areas. But in the markets that we can try to identify, I think we'll be up a little bit. Is that a fair statement, Andrew?

[Andrew M. Rooke:]

Yes, it is.

[Operator:]

Your next question comes from Michael Holmok [ph] from Wolverine Asset Management.

[Unknown Analyst:]

One last follow-up. I was just curious about the -- whether Sabre Manufacturing in Indiana -- or how geographically constrained they are with respect to how economical it is to make product in Indiana and ship afar? And whether -- like, they can be a vendor for, say, some of the fields in North Dakota or further west?

[David J. Langevin:]

Yes. Because of the type of products that they have been manufacturing, they've been able to be fairly broadly based from a geographic standpoint. But as we get into it more and more, and I think we will probably try to look at ways to help distribute that distribution or handle that distribution with our much broader-based manufacturing group and distribution group to expand that further beyond what they can do out of a good facility in Knox, Indiana. So I think that's something that we would anticipate working on as we go.

[Unknown Analyst:]

And right now, Indiana is their only facility?

[David J. Langevin:]

That's correct. That's right, Michael.

[Unknown Analyst:]

So conceivably, you might manufacture in Minnesota to ship to North Dakota or...

[David J. Langevin:]

Or Texas or other locations that we have.

[Operator:]

And there are no further questions at this time. Please continue.

[David J. Langevin:]

Thank you, everyone. I appreciate your interest in Manitex. We look forward to future calls. Thank you, Ron.

[Operator:]

Ladies and gentlemen, this concludes the conference call for today. Thanks for participating. You may now disconnect your lines.