Manitowoc Company, Inc. (The)

Good day, everyone, and welcome to the Manitowoc Fourth Quarter 2021 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 Ayan Warner, Vice President, Marketing and Investor Relations. Please go ahead.

Good morning, everyone, and welcome to the Manitowoc conference call to review the company's fourth quarter 2021 financial performance and business update as outlined in last evening's press release. Participating on the call today are Aaron Ravenscroft, President and Chief Executive Officer, and Dave Antonin, Executive Vice President and Chief Financial Officer. Today's webcast includes a slide presentation which can be found in the investor relations section of our website under events and presentations. We will reserve time for questions and answers after our prepared remarks. I would like to request that you limit your questions to one and a follow-up and return to the queue to ensure everyone has an opportunity to ask their questions. Please turn to slide two. Please note our safe harbor statement in the material provided for this call. During today's call, forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 are made based 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 or actual projections due to one or more of the factors, among others, described in the company's latest SEC filings. The Manitowoc company does not undertake any obligation to update or revise any forward-looking statement whether the result of new information, future events, or other circumstances.

And with that, I will now turn over the call to you, Aaron. Thank you, Ion, and good morning, everyone. Please turn to slide three. A year ago on this call, I shared my concerns regarding the unintended consequences of the aggressive fiscal policies being used by governments around the world to accelerate the COVID recovery, which we expected to create inflation and lead to a choppy recovery. Clearly, in retrospect, the economic dislocations created by our return to normal were far greater than anyone anticipated. That being said, 2021 was a year of transition for Manitowoc on multiple fronts. While we bounced back operationally from the COVID shutdowns, we also made significant changes in our strategic orientation. As we laid out a year ago, we continued to build out our tower crane business and the Belt and Road regions, launching two locally designed cranes. We accelerated our all-terrain new product development, which will bear fruit at the upcoming Bama trade show this October. We invested $15 million in our tower crane rental fleet in Europe, which helped us increase our market share in Germany and win some strategic orders with key accounts. And finally, we completed two acquisitions in North America, which lays the groundwork for us to grow our aftermarket presence in the local mobile cranes market. Concurrently, we continued to make progress on our ESG journey. In more traditional safety terms, the team doubled our hazard observations that we call slams, and our recordable injury rate, excluding acquisitions, was 1.39 for the year. While our RIR was up slightly year over year, it is still well below the industry benchmark, and I am very pleased with our performance in the face of a precious year. On the sustainability front, we implemented a CUVIO, a tracking system to help us account for our environmental footprint, and we are utilizing the Manitowoc Way to drive continuous improvement. For example, we assembled a global team to collaborate on paint booth emission reductions and have already begun to realize benefits. As for diversity, we've been leaning in hard on this initiative to help offset our labor shortages. Namely, in Shady Grove, we implemented our first ESL program to help attract Spanish-speaking members of our community, and we have begun to offer relocation incentives in nearby cities, such as Philadelphia, to attract employees to our internal welding and machining schools. With respect to our balance sheet, we continue to position the company for long-term growth. After investing $40 million in CapEx and $186 million on two acquisitions, we closed the year with $75 million of cash on hand and $250 million of liquidity. Considering the difficulties of managing working capital in the current environment, I'm comfortable with where we ended 2021. For sure, the economic dislocations created by the return to normal were far greater than we anticipated a year ago, but I am extremely appreciative of all hard work by our team to minimize inflation as best as we could, implement price increases, and manage part shortages while executing our long-term strategy. A big thank you to the team. Specifically, I would like to recognize Jim Glenwright and Sebastian Millay, who recently won the CEO Award for the Manitowoc Way. In the midst of all the economic chaos of 2021, Manitowoc encountered a cyber attack in June. Jim led our effort to restore our IT system while at the same time continuing to implement a new ERP system for MGX equipment services. Meanwhile, across the pond, Sebastian earned his award for his contributions to the continuous improvement of our manufacturing processes in our tower factories. He led projects to implement an automated tube cutting machine in Moulin, while kicking off another significant machining project in our Char-U factory. I'm very proud of the commitment and passion of our employees at Manitowoc, and these two leaders truly represent the spirit of the Manitowoc way. Finally, I am pleased to announce that our Zhang Zhejiang factory won our annual Manitowoc Way Lessons Learned Competition for 2021. The welding value stream and services support teams developed a homemade robot for welding mass rod bars. Through ingenuity, the team built a robotic welder for less than $10,000. To buy the same machine would have cost 10 times as much, and it would not have been specifically designed for the job at hand. Thank you to everyone that participated in the competition, and I look forward to more innovative solutions in 2022. Turning to the financials, I would like to add a little color on our recent performance. Generally, the story on demand remains consistent with the last couple quarters. Every region and every product category is doing well, except for the China market. Orders for the quarter totaled $615 million, And our backlog ended the year just over $1 billion, our highest level in over 10 years. This was driven by continued solid activity in our end markets, rebounding customer sentiment, and improved dealer stocking levels. Looking at the P&L, I have to admit I was very surprised by how we ended the year. Inflation, part shortages, and logistical problems have been a serious issue for us for over six months. And unfortunately, they are creating a real volatile situation when it comes to predicting short-term results. On the back of a soft third quarter, shipments during October and November periods were $75 million lower than our internal forecasts. And as we entered December, vessels continued to be postponed while at the same time Omicron was spreading around the world. Much to our surprise, we were fortunate in the last couple weeks of the year and received several key part shipments which enabled us to complete several cranes. In fact, we clawed back over $25 million of shipments during December, which was nothing short of a heroic effort by our operations team. This, combined with tighter cost management and favorable mix, helped us deliver a healthy EBITDA of $34 million in the fourth quarter. Finally, as I indicated in our press release last night, we have announced a formal CFO succession plan as Dave prepares to retire. Dave will officially step down as the CFO on May 2nd, at which time Brian Regan will assume the CFO role. Dave will, however, remain with ManusWalks in an advisory role until January 2nd, 2023. Dave has played an integral role in ManusWalks' evolution since 2016. He led us through the difficult times after the food service business spinoff. He renegotiated our debt in 2019. And finally, he shepherded our recent acquisitions. Dave? It's been my pleasure working alongside of you for the last six years. On behalf of the Manitowoc family, thank you for your contributions and dedication to the success of Manitowoc. We wish you the absolute best in the next phase of your life. With that, Dave, the team wanted you to end on a high note. Please provide color on the fourth quarter financial results.