Manitowoc (MTW) Q1 2020 Earnings Call Transcript

Manitowoc (MTW -0.78%)
Q1 2020 Earnings Call
May 08, 2020, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good day, and welcome to the Manitowoc first-quarter 2020 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 of marketing and investor relations. Please go ahead, sir.

Ion Warner -- Vice President, Marketing and Investor Relations

Thank you. Good morning, everyone, and welcome to the Manitowoc conference call to review the company's first-quarter 2020 financial performance, as outlined in last evening's press release. Participating on the call today are Barry Pennypacker, president and chief executive officer; and David Antoniuk, senior 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 2. 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 statements, whether as the result of new information, future events, or other circumstances. And with that, please turn to Slide 3, and I will now turn the call over to you, Barry.

Barry Pennypacker -- President and Chief Executive Officer

Thank you, Ion, and good morning, everyone. I hope everyone is safe and well. To start, I'd like to thank the Manitowoc team globally for their perseverance over the last couple of months. The team has done a superb job of managing the business day to day while balancing challenging personal circumstances.

This morning, I'm going to comment on three topics: how we're managing today's increasingly difficult operating environment, our Q1 results, and our current view and long-term view of short-term market conditions. First, I'd like to discuss how we're managing the current situation due to the global pandemic. The top priority at Manitowoc is ensuring the safety, health and well-being of our employees, their families, our suppliers, and our customers. We recognize the gravity and urgency of the present challenge, and we're resolute in working through these times with a sense of responsibility in the communities in which we operate.

We committed to three key actions in order to deal with the COVID-19 crisis. First and foremost, do what it takes to protect the health and safety of our employees in all Manitowoc facilities. Second, keep our operations running and delivering cranes and providing essential parts and services for our customers. And thirdly, preserve our liquidity and economic well-being without sacrificing our future competitiveness.

Thus far, our actions are succeeding. Manitowoc has not been immune to the coronavirus. We have had a few employees test positive for COVID-19. However, we're pleased to say that those employees have recovered or are recovering in quarantine.

We continue to comply with all government guidelines. In addition, we've implemented safeguards to protect those employees in our facilities, such as providing necessary personal protective equipment where needed, requiring social distancing, staggering breaks and start times, increasing sanitation activities, and when possible, have employees work from home, to name just a few. Our after-market support teams have stepped up during the crisis to provide critical parts and service support to ensure maximum uptime for our customers around the world. Thus far, in the U.S., we've effectively managed the health and safety without completely shutting down.

As we resume our operations globally, we'll leverage these best practices and lessons learned to successfully operate in a post COVID-19 landscape. Our balance sheet is solid and position us well to navigate these difficult times. We have sufficient liquidity and have implemented a prudent capital structure with no significant debt maturities until 2026. We've transformed Manitowoc during the past four years, eliminating significant amounts of fixed cost, positioning us better to weather the storm.

And when markets strengthen, we are poised to continue achieving further margin expansion and profitability. Turning to Slide 4. I'd like to comment on our first-quarter performance. As David will explain, we had a great start to the year from an EBITDA perspective.

Our operations executed well despite the headwinds of COVID-19, which hampered our ability to ship cranes. Our U.S. plants remained operational, while our China factory resumed production after a temporary shutdown in the month of February. Our major facilities in Europe closed mid-March.

Our German factory reopened on April 20. And the remainder of our factories in France, Italy, and Portugal have reopened this week. This is great news. However, we do anticipate it will take some time to become fully operational.

We see additional headwinds in Q2 and Q3 as we transition out of the quarantine and into the new normal. Restarting comes with a variety of challenges, ranging from implementing new social-distancing standards and related safety measures, supply chain disruptions, and construction site delays. We are working closely with our employees, suppliers, and customers to manage through this complex period. Next, I'd like to comment on the crane market conditions.

As explained in prior calls, we saw a decline in order rates in the second half of 2019. As we entered the quarter, we had anticipated a challenged set of comps due to the softening global market demand. Orders for the first quarter were in line with our expectations, including those received at the CONEXPO Trade Show. The global shutdowns related to the pandemic, coupled with the recent drop in the oil and gas end markets, caused a pause in the crane market during the second half of March and all of April.

Fortunately, global quarantines are beginning to relax around the world, and construction sites are going back to work. Our business in China has normalized, and we see the South Korean market quickly returning to normal. In Germany, construction projects continued to work through the quarantine, and we are hopeful for a quick recovery. In our market's hardest-hit, such as France, we are seeing progress every day.

We track open construction sites weekly and are encouraged to see a marked improvement versus the prior week. Finally, in the U.S., economy is beginning to reopen and we are starting to see increases in construction that was deemed nonessential. As we anticipate continued soft order intake, we are taking the necessary steps to adjust our production schedules to match changing levels of demand. In addition, we have cut discretionary spending, eliminated base salary increases, suspended share repurchases, reduced capital expenditures by 50%, although we are continuing to find mission-critical programs for future growth.

Despite these very difficult times, our liquidity position remains strong. As of quarter end, we had a total liquidity of approximately $382 million with no outstanding borrowing under our revolving credit facility. In summary, we expect the short-term to be difficult with continuing declines in revenue and profitability, but expect the crane market to rebound. However, we will execute our playbook to weather the storm.

Our operational focus, healthy balance sheet, and market-leading products position us well to capitalize when end markets recover. Due to economic uncertainty, we announced a couple of weeks ago that we're withdrawing our 2020 financial guidance for the remainder of the year. We will reinstate our guidance when we have a clearer line of sight on the business outlook. And with that, I'll turn the call over to David for further color on our financial results.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Thanks, Barry, and good morning, everyone. Let's move to Slide 5. Our first-quarter orders totaled $375 million, a decrease of 15% compared to $441 million of orders last year. On a currency-neutral basis, Q1 orders were down $61 million or 14%, with most of the decline driven by year-over-year demand softening in the Americas, partly offset by improved orders in Europe.

During the quarter, we had approximately $10 million of order cancellations in the Europe and Asia markets. Our Q1 ending backlog of $521 million was down 25% over the prior year, 24% on a currency-neutral basis. The decrease in backlog was mainly due to a decline in the Americas segment, partially offset by an increase in the EURAF segment, driven by stronger year-over-year orders and COVID-19 shipment delays. Net sales in the first quarter of $329 million decreased $89 million or 21% from a year ago, with each of our three segments reporting a year-over-year decline.

Net sales were unfavorably impacted by approximately 1% from changes in foreign currency exchange rates. The largest year-over-year decline in net sales was in the Americas segment, driven by a lower shippable backlog entering the year. Additionally, net sales were negatively impacted by approximately $37 million due to shipping delays and plant closures associated with the COVID-19 pandemic, which resulted in lower shipments of cranes, predominantly in the EURAF segment. Gross profit decreased $17 million year over year driven by decreased volumes.

On a percentage basis, gross margins were flat year over year, mainly due to mix and a higher percentage of aftermarket revenue, which increased to 25% of net sales for the quarter, up from 20% of net sales last year. Our engineering, sales and administrative expenses decreased approximately $4 million to $56 million due to lower headcount and lower short-term incentive compensation costs, partially offset by the costs associated with the CONEXPO Trade Show in March. As a result, first-quarter adjusted EBITDA amounted to $16 million or 5% of net sales, which was in line with our expectations. Our flow-through on the year-over-year sales decline was 15%, reflecting good performance in managing our costs.

During the first quarter, we incurred approximately $2 million of restructuring expenses, predominantly related to European severance costs. Our GAAP diluted earnings per share in the quarter was a loss of $0.22 versus a loss of $0.75 in the prior year. On an adjusted basis, diluted earnings per share was a loss of $0.18 compared to income of $0.08 in the comparable period. The primary driver of the lower adjusted diluted earnings per share was the reduced year-over-year sales volume.

This was partly offset by approximately $4 million or $0.11 per share of lower interest expense resulting from last year's debt refinancing. First-quarter adjusted operating cash flow was a use of $79 million. Our first quarter is always the use of cash as we build inventory in anticipation of the summer construction season in the Northern Hemisphere. Inventory also increased approximately $25 million due to shipment delays caused by the pandemic.

Our quarter end cash balance improved by $55 million year over year to $104 million with no borrowings outstanding on our ABL as compared to $33 million outstanding at March 31, 2019. In the quarter, we repurchased approximately 1.1 million shares for $12 million. Including 2019 buybacks, we have repurchased a total of $19 million under the $30 million approved plan. As Barry mentioned, we have suspended further repurchases at this time.

At the end of the quarter, we had $244 million of revolver borrowing capacity, plus another $38 million of other debt availability. Net of $4 million of outstanding letters of credit, total liquidity was $382 million at March 31, an increase of $112 million from March 31, 2019. Our liquidity remains sufficient to meet our obligations for the foreseeable future, and we do not have any significant debt maturities until 2026. As a reminder, when we refinanced our debt in the prior year, we reduced our cost of borrowing.

In addition, the debt agreement simplified and eased covenant compliance, affording us greater flexibility to access our liquidity. With the significant amount of market uncertainty and disruption due to the pandemic, we withdrew our 2020 financial guidance at the end of March. We expect our second quarter and full-year results will be significantly impacted. As our manufacturing facilities resume operations and our supply chain and demand stabilize, we will be in a better position to update our full-year guidance, and we'll do so as soon as feasible.

With that, I will now turn the call back to Barry.

Barry Pennypacker -- President and Chief Executive Officer

Thank you, David. As many of you are aware, the U.S. Department of Commerce initiated a Section 232 investigation of mobile crane imports. Manitowoc filed this petition to urge the Department of Commerce to investigate a recent and sustained surge of mobile crane imports that threatens domestic manufacturers.

We are grateful that the department saw the clear need to investigate these imports and their impact on national security. Our petition is all about protecting our American workforce and preserving our long-standing commitments to the U.S. military. These imports jeopardize the domestic industry's ability to supply cranes to the U.S.

military and support critical infrastructure, therefore, undermining America's national security. Our motivation for this petition is plain and simple. We wish to compete in the North American market on a level playing field. Let me conclude my remarks by saying that we entered 2020 from a position of strength.

We're managing the business with the flexibility and agility needed while balancing the need to ensure the safety of our employees, customers, and communities. We've adopted quickly by realigning our business to lower demand and are prepared to implement further measures as we monitor the progress through the second quarter. This experienced leadership team has a proven track record in successfully leading businesses through significant disruptions, including Manitowoc, and we have actions in place to manage through this unprecedented pandemic. We are focused on continued prudent cash preservation and balance sheet management while investing in the business.

We are confident that demand will return and Manitowoc will be well-positioned to deliver stronger financial performance for our shareholders based on our four key strategic priorities using the principles of The Manitowoc Way. With that, Abbey, please open up the line for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] And we will take our first question from Jamie Cook with Credit Suisse.

Jamie Cook -- Credit Suisse -- Analyst

Hi. Good morning. I'm glad everyone is healthy and well. I guess my first question, understanding you took some discretionary cost actions.

Is there any way you can sort of quantify how much that theoretically should help, you know, offset volume declines and then some of the longer-term actions you're contemplating and when we'll hear about them? And then I guess just my second question. You know, understanding April and May were probably very weak in terms of orders, etc. But can you just give a little more color there on what you're seeing, how much orders were down, and whether you're seeing any cancellations from customers? Thank you.

Barry Pennypacker -- President and Chief Executive Officer

You're very welcome. We saw some cancellations in the first quarter. Since April 1, I can say, we have not. We have seen a number of customers with some potential liquidity issues come to us and ask for some relief on terms through the delay of payments, for instance.

But other than that, you know, Jamie, the market for us has been pretty stable. April orders were, just like everyone else's, pretty much, you know, nonexistent. What I can say is that the aftermarket percentage of sales rose very high in the month of April, which only to be expected. As far as the cost concerned, we have identified and taken actions in the short-term of the somewhere around the $8 million to $10 million range.

We have longer-term actions that have yet to be implemented. But as this pandemic continues to rear its ugly head, we have multiple scenarios that we've outlined and multiple restructuring programs available to preserve our future and, ultimately, our cash.

Jamie Cook -- Credit Suisse -- Analyst

Thank you. I appreciate your insights. Stay well.

Barry Pennypacker -- President and Chief Executive Officer

You too, Jaime. Thank you for your question.

Operator

And we will take our next question from Ann Duignan with JP Morgan.

Ann Duignan -- J.P. Morgan -- Analyst

Good morning.

Barry Pennypacker -- President and Chief Executive Officer

Good morning, Ann.

Ann Duignan -- J.P. Morgan -- Analyst

Good morning. Can you talk a little bit about Q2, your expectation for free cash flow? And you know, coming into the year expecting to cut inventories by about $80 million, we were flat year-over-year. So, you know, what actions can you take in this environment to reduce inventories? And/or, you know, can you generate positive free cash in Q2?

Barry Pennypacker -- President and Chief Executive Officer

I'll let David talk about the actual cash flow in Q2, but I can tell you that, operationally, we are aligning our plants to deal with the flexibility that we've weaved into them with the implementation of our lean principles through The Manitowoc Way to be perfectly aligned with what our customers' expectations are. This is not the company that will build inventory through finished goods as a result of trying to keep absorption where it needs to be. We will react accordingly. We will take build rates down.

We'll use all the tools that are available to us through the different operating principles of different countries. And we will manage it accordingly. And with that, I'll turn it over to David to give you some more color on the actual cash usage throughout the year.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Yeah. So, Ann, thanks for the question. And generally speaking, the company is a user of cash in Q1 and Q2 with slight increase in cash in Q3 and a larger increase in cash in Q4. So Q2, to be expected, is going to be a use of cash.

The determination of that is going to be, you know, how the sales top line flows through. You know, we've seen order push-outs a little bit, and you know, we anticipate, you know, our top line being impacted. So generally speaking, Yeah, we will be a use of cash. We're trying to mitigate that to the greatest extent possible.

But all in all, we will be a cash user in Q2.

Ann Duignan -- J.P. Morgan -- Analyst

And do you expect to make money in Q2? Or are sales going to be so weak that there's no way to?

David Antoniuk -- Senior Vice President and Chief Financial Officer

I mean, generally speaking, we always strive to make money on an EBITDA basis, and that's really dependent upon factors that are out of our control at this point in time. So, it really is dependent on the top line and what we can get out the door to our customers at the construction sites.

Barry Pennypacker -- President and Chief Executive Officer

Yeah. I mean as these construction sites come back to life, particularly in Europe, what happens in Europe is we build the product to order, and then the customer tells us which job site to ship to. As of now, over the course of the last week, we've seen a little activity in telling us where to ship this product to, but not nearly close to where I would say is a normal amount based on historical data. If that continues through the month of May and the month of June, then David is absolutely correct, we will still strive to be positive in EBITDA, but I think it might be a task that's just too tall.

But, you know, we're still rest assured that our customers that we talk to are very interested in getting our product and using our product. They want to get back to work as much as we do. So, we're just going to have to watch it. And, you know, as it continues to evolve, we'll certainly try to communicate that.

David Antoniuk -- Senior Vice President and Chief Financial Officer

And Ann, just to add, I mean, we have very, very difficult comps year-over-year in Q2. So, I would imagine we're going to see a significant deterioration in the top line from -- on a year-over-year basis.

Ann Duignan -- J.P. Morgan -- Analyst

Yes. I appreciate that. And just one quick follow-up, Barry. On the filing to the Department of Commerce, can you tell us how many cranes were imported in 2014? And how many were imported in '19? And just [Inaudible] don't you import cranes from Germany?

Barry Pennypacker -- President and Chief Executive Officer

We certainly do import cranes from Germany, but Germany isn't necessarily the major issue that we're facing with regards to this petition. What we're facing in this petition were – you know, when I first came onboard back in 2016, I would never even think about trying to say that based on the feedback that we've gotten from our customers that we were anywhere close to being able, from a quality, delivery, or technology perspective, to compete on a global basis. Over the course of the last three years, we spent tens of millions of dollars to fix that. And I feel like now, our product portfolio is one of the best in the world.

But when I see cranes being imported to the U.S. that are 20% below our cost, when we have very similar types of weights of material, very similar labor costs, when I see that, and I know that some of those cranes are being underwritten by local policies from different countries, it's time for us to stand up for the United States and for our workers. And all I want is what I said earlier, is a level playing field. We're not, you know, in a situation where we believe that we need anything other than just a level playing field because our products and services have evolved, and they are what I would call state-of-the-art now.

But when you see a crane being imported and a sale price equivalent to our manufacturing cost, and this crane is nothing more than a hammer, a little hammer, there's a problem. And when you see financials of some of these companies that are importing these cranes, where they knowingly are making money in their home country and losing money in the United States and North America, it's time for us to act. It'd be irresponsible for us not to. And I'm certainly happy that the Commerce Department have seen the data that we've submitted and, so far, have agreed with us.

Ann Duignan -- J.P. Morgan -- Analyst

OK, Barry. But I wouldn't just throw in the whips that strong dollar doesn't help your case either. So, I'll leave it there. I'll get back in line.

Barry Pennypacker -- President and Chief Executive Officer

You are absolutely correct. The strong dollar does not help our case. However, there are countries that import cranes to the U.S. that are very well-known for currency manipulation.

And that's exactly the type of things that the Department of Commerce of the United States has to be concerned about in order to protect our national security.

Operator

And we'll take our next question from Jerry Revich with Goldman Sachs.

Jerry Revich -- Goldman Sachs -- Analyst

Yes, hi. Good morning, everyone. Nice to hear you all being well. I'm wondering if we could just talk about the aftermarket business in the first quarter.

Pleasantly surprised by the performance. Can you talk about what programs you rolled out that drove the strong growth in a pretty tough environment? And then, in April, can you just talk about the year-over-year performance of the aftermarket business? Thanks.

Barry Pennypacker -- President and Chief Executive Officer

Yeah. The aftermarket business remains strong in April from a year-over-year perspective. So, we're very pleased by that. And we're -- that means that cranes in a number of situations are working and are requiring parts.

The strong performance in aftermarket in the first quarter was driven by a number of factors, but the largest one was that we had a significant increase in the amount of cranes that were being erected in Europe on job sites, which, you know, we get paid to do, which is part of our aftermarket percentage of revenue. So, a significant increase in overall job site construction that required our people to ensure that the cranes were safely erected.

Jerry Revich -- Goldman Sachs -- Analyst

And Barry, just a clarification in terms. You know, in April, there was a sliding scale on what strong means. Your downtime would probably be pretty strong for April. So, can you just say more about what you mean when you say strong in April? Just quantify that a bit if you want to.

Barry Pennypacker -- President and Chief Executive Officer

Yeah, I would. Year over year, our aftermarket dollars in April were not necessarily affected that much.

Jerry Revich -- Goldman Sachs -- Analyst

That's really nice to hear. And when we were at CONEXPO, we had chatted about you folks with the quality improvements and having potentially made up some lost ground from a market share standpoint versus your global competitors. In the U.S., can you just square that up? So, you folks have been able to be competitive is your point, even now that the pricing point for the competitor products is that much lower. Can you just expand on that? Because given that pricing gap that you just mentioned, the market share discussion really stands out in contrast.

Thanks.

Barry Pennypacker -- President and Chief Executive Officer

Yeah. I mean, in the targeted areas in North America where we have decided to gain market share through targeted investments in our product portfolio, we've been very successful in our truck-mounted product where, you know, our portfolio was over 20 years old before it was refreshed. You know, the refreshing of the -- of our TMS products over the course of the last two years has gained substantial amount of market share. The necessity of us to enter the 100-ton, 150-ton crawler market in the U.S., you know, has been very successful for us.

People that have been buying the Manitowoc brand and the Grove brand over the course of the last 30 years, know that there is a premium sometimes to be paid for the name that we have because of the history behind the value of our products five to seven to eight years down the road. That phenomena still exists in the guys that bleed yellow and the guys that bleed red Manitowoc. But there are other customers out there that we'd like to share our products with also. And when, you know, the -- we have a technology that is superior to some of the imports but the cost disadvantage we have is so substantial, it's time for us to react, and that's exactly what we did through this petition.

And as I said, I'm very pleased that the government sees it our way also.

Jerry Revich -- Goldman Sachs -- Analyst

Appreciate the discussion. Thanks.

Operator

And we will take our next question from Stephen Volkmann with Jefferies.

Stephen Volkmann -- Jefferies -- Analyst

Good morning, guys. Just wanted to circle back, Barry, to something you said at the outset where you're seeing a few of your customers who might not be as strong, you know, asking you to help them a little bit on terms, etc. Can you just and on that a little bit and kind of your ability to provide that kind of help in these tough times?

Barry Pennypacker -- President and Chief Executive Officer

Sure. I'll let -- you know, that really falls under our trade finance group that David manages on a day-to-day basis. So, I think I'll let David answer that for you.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Hi, Steve. Good morning. So I think there's two items on this. Well, number one, it's the companies that have financed through Manitowoc cranes whereby a financing in it is in place.

And in the U.S. and Europe, it's a little bit different. But we've seen a lot of instances whereby they're asking for a 90-day extension. And those extensions are typically just locked on to the end of the lease for any cranes that are out there on lease.

With regard to the receivables that we currently finance, there's anywhere from a 30- to 60- to 90-day, depending upon customer in the region, request to extend payments a little bit. But overall, these are not typically new cranes. They've been out there in a while. So, I would say that, overall, you know, the value of the cranes are significantly valued than they receive -- more valuable than the receivables we have on the books at any point in time.

Stephen Volkmann -- Jefferies -- Analyst

OK. All right. Great. That's helpful.

Thanks. And then maybe, Barry, this is a question for you. But I'm wondering -- this may not be something you can do. But obviously, we have two issues, the sort of shorter-term COVID-related issues.

And then we have the oil and gas issues, which are probably longer term. So, I'm curious if you have any commentary around kind of how those two end markets, I mean, kind of recover. I assume the oil and gas will be a longer-term one. And, you know, how important is that to you right now? And how much of a headwind might that be even after COVID kind of passes?

Barry Pennypacker -- President and Chief Executive Officer

I'll answer that in two different ways: First, let me start off by saying that it has been no secret, and we have talked about it ever since I've been here, about our loss of market share in the oil and gas business, specifically in the Middle East. We were very close and had signatures on a page for a very sizable order, our first one in a long time that would have went to Saudi Arabia directly to the oil patch. That has been delayed, but it has not been cancelled. It is not in our backlog.

We feel prudent to keep it out. But that is our first success since I've been here of penetrating the oil and gas market in Saudi Arabia. Secondly, in the U.S., it particularly affects one product line of ours, which is our all-terrain vehicles that come from Germany. So, we saw -- we did not see $23-a-barrel oil, but we did see with the number of all-terrains that were put into the U.S.

market last year, we factored into our plan, fortunately, a significant reduction this year. And that's, you know, going to be what it's going to be this year and shouldn't have a year impact to us. Longer term, I mean, we got to get the economies moving again. We've got to get people driving again.

We've got to get oil, you know, being consumed again. And I think the long-term fundamentals are going to be solid. The crane age in the oil and gas space is relatively high. So, I think any spur in activity, any uptick in activity will spur a demand for cranes that we'll be ready to satisfy.

But when you have sub-30 oil prices, the amount of investment that happens, as you are well aware, is virtually nil. So, we're just going to have to stand by and watch, and get the economies rolling again, get people driving again, and get that oil back up to sustainable levels that we can all enjoy prosperous again.

Stephen Volkmann -- Jefferies -- Analyst

OK. Thank you. I'll pass it on.

Operator

We will take our next question from Seth Weber with RBC.

Brendan Shea -- RBC Capital Markets -- Analyst

Hi, good morning. This is Brendan, on for Seth. You mentioned orders being pushed out, including the one in Saudi Arabia. In your discussions with customers, do you have a sense for how many projects are simply being delayed versus being outright canceled?

Barry Pennypacker -- President and Chief Executive Officer

A large portion, particularly in North America. I've not seen any of the large projects that we have been working with our customers and partners on and canceled, but I've seen them move dramatically to the right.

Brendan Shea -- RBC Capital Markets -- Analyst

OK. Thanks. And one more, if I may. Just any color you can provide, I guess, on the used crane market, particularly in terms of pricing?

Barry Pennypacker -- President and Chief Executive Officer

I think pretty stable. I think there's been some cranes in the market that have driven the price down because of the fact that there's an exiting happening in that particular brand. But I'd say fairly stable right now, we're seeing.

Brendan Shea -- RBC Capital Markets -- Analyst

OK. Great. Thank you.

Barry Pennypacker -- President and Chief Executive Officer

You're very welcome.

Operator

We will take our next question from Mig Dobre with Baird.

Mig Dobre -- Robert W. Baird -- Analyst

Thank you very much. Good morning, guys.

Barry Pennypacker -- President and Chief Executive Officer

Good morning, Mig. So just trying to clarify your earlier comments. It's obvious that Q2 is going to be pretty tough. But, you know, can you give us a sense here for how you're thinking revenue might trend sequentially or how your production is trending sequentially?

David Antoniuk -- Senior Vice President and Chief Financial Officer

So Mig, I'd say that we're anticipating -- as you know, we sold about $500 million in sales in Q2 '19. So we're -- I anticipate that, that will be significantly down. As Barry indicated, you know, a lot of our European plants, you know, were just reopening. So, we're going to have adverse variances associated with the plant closures, which are going to be challenging, coupled with moveouts.

So, we've run multiple scenarios in that regard. But since we withdrew guidance, you know,we're -- it's a wait and see as to which customers we are going to be able to ship to, and that's going to be a big driver in how we fare in Q2.

Mig Dobre -- Robert W. Baird -- Analyst

Fair enough. But, you know, at this point, it is fair for us to think that revenues are probably going to be down sequentially? We don't know the magnitude [Inaudible]

Barry Pennypacker -- President and Chief Executive Officer

Yes, yes, yes.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Sequentially, if we're down sequentially, it will be -- it won't be as obviously as dramatic as year over year, but yes. Sequentially, it's likely they'll be down.

Mig Dobre -- Robert W. Baird -- Analyst

OK. And as you sort of ran your analysis and stress tests and so on, is there a revenue figure that you can share with us where you would be at breakeven from an EBITDA standpoint?

David Antoniuk -- Senior Vice President and Chief Financial Officer

Well, Mig, great question. We've talked about that in the past. We have run -- I will say, we did -- we have run our modeling as to where we anticipate that we would be from a breakeven standpoint under various scenarios. Each scenario has, what I'll say is, contingencies based upon what we can do, the triggers we can pull to maintain breakeven levels at, what I'll say, abnormally low levels.

At this time, we're not at liberty to say where that is. But I will say that we want to be a company that exits this downturn in a better position to capitalize when the market rebounds.

Barry Pennypacker -- President and Chief Executive Officer

The way I would say that, Mig, is I think David's right. We can't really disclose that. But I will tell you that it's substantially less from some of the actions that we've taken through the SG&A reductions we've done, from the plant closures we've done, from the refinancing of our debt agreement we've done. So, it's substantially lower than what it has been in the past.

Mig Dobre -- Robert W. Baird -- Analyst

That's fair. Last question for me. Barry, I appreciate your comments on 232. I guess I'm just wondering how important this RT business is to you at this point.

You know, maybe you can give us a sense for what percentage of your business or sales, however you want to frame it, that would be helpful.

Barry Pennypacker -- President and Chief Executive Officer

Could you restate your question, Mig? I'm not sure I followed you.

Mig Dobre -- Robert W. Baird -- Analyst

Yeah. So, on the Department of Commerce action that you talked about earlier, as far as the specific products are concerned, I'm trying to understand how relevant, how important they are to your business. What percentage of your business is associated with them? Thank you.

Barry Pennypacker -- President and Chief Executive Officer

Well, I won't tell you the percentage, but I will tell you that it's the lion's share.

Mig Dobre -- Robert W. Baird -- Analyst

OK. Appreciate it.

Barry Pennypacker -- President and Chief Executive Officer

You're welcome.

Operator

And we will take our next question from Stanley Elliott with Stifel.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Hey, good morning, everybody. Thank you for taking the questions. And nice to hear your voices. Barry, could you talk a little bit more about the parts and the services piece? Certainly, our impression is you always have a lot of new products that you guys have been working diligently over the past couple of years, have really kind of put an emphasis on proprietary parts.

Is that really what you're seeing in the business? Or is it kind of more your expanded services offering? Just curious how to think about that.

Barry Pennypacker -- President and Chief Executive Officer

It's a combination of both, Stanley. But I will say that it was no secret that back in '16, '17 and the early part of '18 time frame, when you walked around a crane manufactured in either Shady Grove or in Wilhelmshaven, Germany, you would see, you know, these consumable items that say, call 1(800) supplier to get the aftermarket part. Now if you walked around our cranes, you'll see call 1(800) Manitowoc spare parts for oil filters, for oil, for other types of grease and other disposable items that, typically, we had not participated in because we allowed our supply base to take that. So, we've consciously made a decision internally to change that dynamic, and I think that dynamic is paying off.

I also would be remiss in saying that we did not price effectively our aftermarket in the past. We've used a number of tools to help us with that, and I think it's showing up in our results.

David Antoniuk -- Senior Vice President and Chief Financial Officer

And Stanley, just to add on what Barry says. We've actually made investments in our aftermarket inventory to support the growth in that category.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Great. And then secondly, kind of more broadly, are you hearing anything within all the various markets that you're operating about any sort of stimulus programs, plans, what have you, that would be beneficial to the business?

Barry Pennypacker -- President and Chief Executive Officer

Well, we are here -- we are hearing, you know, stimulus plans in the U.S. I mean we are hearing, you know, a lot more talk about infrastructure that I think will be positive. In Germany, the -- if you're talking about stimulus programs for growth, I'm not too familiar with any country that I know has done that yet. But what I am familiar with is how places like Germany, France, Italy, Korea, have allowed certain things to happen that would offset COVID-19-type expenses.

But as far as the actual stimulus plan, I don't think we've seen those yet.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Perfect, guys. Thank you very much. Stay safe.

Barry Pennypacker -- President and Chief Executive Officer

You're welcome.

Operator

And we will take our next question from Larry De Maria with William Blair.

Larry De Maria -- William Blair -- Analyst

Hi. Good morning, everybody. Can you just remind us the current status on, say, deposits, terms, progress payments, etc.? Has that changed? And have you had to return any of the cash from some of those small cancellations you had?

David Antoniuk -- Senior Vice President and Chief Financial Officer

Larry, no. I mean, the cancellations, we didn't have any deposits on any of those cancellations. So, it was just predominantly 2019, late in the '19 orders that the customer canceled in Q1. So, the answer is no.

Larry De Maria -- William Blair -- Analyst

And are you currently with new orders now in terms of the backlog, etc.? Do they all have deposits with them? Or is there -- I'm just trying to understand some of the risk there.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Yeah. Deposits on orders are not the norm. It -- they're the exception depending on the customer and the circumstances in the customer, but that's not the norm.

Larry De Maria -- William Blair -- Analyst

OK. And then secondly, the inventory obviously picked up a little bit in part because of delays, which obviously you hope to ship. I'm just curious, does all the inventory in your backlog than you're holding -- rather, does that have customer name or is your name attached to it? Or is there anything there that's considered maybe speculative or hope for orders in there? Just again, trying to understand the risk in the inventory and the backlog.

Barry Pennypacker -- President and Chief Executive Officer

Yeah. Don't worry about the risk in the inventory because, quite frankly, we don't make the stock. And over the course of the last three years, David and his team have done a very good job of analyzing and disposing of inventory that would not be considered sellable. So as far as the value of our current inventory and its ability to be sold, I give that a very, very, very high confidence.

Anything to add, David?

David Antoniuk -- Senior Vice President and Chief Financial Officer

Yeah. Larry, I'd say that the key component there is that we continually look at our order intake on a daily basis, and then we marry that up with our build schedule by plant. And then we adjust our build schedule accordingly to, as Barry said it earlier, to not have that build of inventory. You know, there are circumstances where we may strategically do something, but I would say, in general , you know, we build for what we sell.

Larry De Maria -- William Blair -- Analyst

OK. Good to hear. I'll end here. Just last thing is, any issues with financing? I mean obviously, if you're in the energy patch, maybe your cash flows are not good and you're not ordering, period.

But if customers want inventory or for some reason, are there any issues with financing that are out there right now?

Barry Pennypacker -- President and Chief Executive Officer

I would say that, generally, we've been pleased with how we financed. As you know, we have a Manitowoc finance program that continues to operate, and we have a great relationship with the company that underpins that financing. So, at this point in time, while we do look at, you know, a customer's creditworthiness for a sale, you know, we look at satisfying those needs as well and look at servicing it as best we can.

Larry De Maria -- William Blair -- Analyst

OK. Thank you, and good luck.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Thank you.

Barry Pennypacker -- President and Chief Executive Officer

Thank you very much.

Operator

And we'll take our next question from Mike Shlisky with Dougherty & Company.

Mike Shlisky -- Dougherty and Company -- Analyst

Sorry, guys. [Inaudible] there.

Barry Pennypacker -- President and Chief Executive Officer

Hello, Mike.

Mike Shlisky -- Dougherty and Company -- Analyst

Hey, Good morning, guys. Sorry about that. Wanted to follow-up first on the 232 petition you've been talking about. Can you maybe tell us what is the overall remedy there? Is it simply a tariff on the offending parties, and what passed is past, and if you'll get any kind of settlement out of it for your company? And also, is there a time frame that you think that this whole process may play out?

Barry Pennypacker -- President and Chief Executive Officer

The time frame for the process is within 265 days. That's the rule. And, you know, it can go up to 265 days, but it could also be done in 30 days if they've so -- if they see fit to do so. There will probably be, you know, more data gathering.

There could be congressional hearings. There's a lot of potential things that could come out of this that would increase the time frame. But at the outset is, you know, 100%, zero days to 265 days. And as far as the revenue is concerned, Mike, I would tell you that it is 100% the discretion of the President of the United States.

And that is, at this point, 100% up to him based on the data that he is provided from the Commerce Department.

Mike Shlisky -- Dougherty and Company -- Analyst

OK. OK. Got it. And I also wanted to touch on your margin performance in the quarter, and I'm of looking ahead, very impressive to get the 15% decrementals here.

I think you had commented, during the quarter, I think it was at CONEXPO that in an environment where we're down, you might get 25% decrementals, ex COVID, you may beat that this quarter. I'm just kind of curious if you can give us any kind of framework as to what might happen in Q2 and Q3 for these kinds of market moving forward given the stronger declines that could be taking place here?

Barry Pennypacker -- President and Chief Executive Officer

So, Mike, we've always, always kind of articulated that on the down market, you know,25% to 30% decrementals is typically what we would consider the norm. Understanding that in Q2 of last year, we did have a onetime benefit of just over $9 million associated with the legal settlement. I would say that, overall, we want to stay within our guidelines, and we do everything possible to stay within those guidelines.

Mike Shlisky -- Dougherty and Company -- Analyst

OK. Fair enough. Thanks so much, guys.

Barry Pennypacker -- President and Chief Executive Officer

Thank you, Mike.

Operator

We will take our next question from Steven Fisher with UBS.

Steven Fisher -- UBS -- Analyst

Thanks. Good morning, guys.

Barry Pennypacker -- President and Chief Executive Officer

Good morning.

Steven Fisher -- UBS -- Analyst

I got on the call late, so if you covered this already, I can just catch up with you guys afterwards offline. No need to repeat it. But at CONEXPO you said customers, Barry, were telling you that they had robust plans for 2021, and that any curtailed orders from 2020 would be taken up in 2021 in addition to the robust 2021 orders. So, are they telling you anything different now about how those orders might be parsed out?

Barry Pennypacker -- President and Chief Executive Officer

No. Sticking exactly with what they said, the only thing I would say is that I think 2021, you know, assuming that, you know, some stability happens in the oil and gas market, I think 2021 has the potential to exceed my entire expectations that we had back at CONEXPO. Because we are having discussions with a number of very, very longtime loyal customers that had no choice but to delay and/or cancel orders that are absolutely looking forward to getting those orders back again in 2021. So, my view has not changed on 2021, and I don't think, based on what our customers are telling us, there's anything to substantially change that view.

Steven Fisher -- UBS -- Analyst

Great. That's helpful. And then, I guess, along the same lines, specific maybe to infrastructure, more in the near term. If you addressed this, I apologize.

The states are obviously in a bit of a tricky position right now. Do you have any feedback on orders specifically destined for highway projects that -- you know, I guess, what's the experience you're seeing there? Is it a mix of some going forward and some being deferred? Is nothing being deferred? What are you seeing there on specific to highways and infrastructure?

Barry Pennypacker -- President and Chief Executive Officer

It's a mix. Our dealers are, you know, very anxious to see some of the states reopen their construction and reapply some of their cash flow to infrastructure. You know, we're going to have to wait and see how COVID expenses affect that. You know, we were planning some very nice infrastructure projects in Louisiana.

And as you know, with the COVID expenses that, that state has had to undertake, it could affect, in the short term, some funding for the infrastructure projects. I suspect that California will pull back on some as a result of COVID. Illinois has already told us that some of the projects that they were planning for the third and fourth quarter of this year will leak into next year. So, I would say that the states are, right now, focusing on how they can maintain cash flow through COVID while, at the same time, delaying infrastructure.

Steven Fisher -- UBS -- Analyst

Very helpful. Thanks a lot, guys.

Barry Pennypacker -- President and Chief Executive Officer

Thank you, Steven.

Operator

And at this time, I would like to turn the conference back to Ion Warner for any additional or closing remarks.

Ion Warner -- Vice President, Marketing and Investor Relations

Before we conclude today's call, please note that a replay of our first quarter 2020 conference call will be available later this morning by accessing the Investor Relations section of our website at www.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 next quarter. Please be safe.

Operator

[Operator signoff]

Duration: 57 minutes

Call participants:

Ion Warner -- Vice President, Marketing and Investor Relations

Barry Pennypacker -- President and Chief Executive Officer

David Antoniuk -- Senior Vice President and Chief Financial Officer

Jamie Cook -- Credit Suisse -- Analyst

Ann Duignan -- J.P. Morgan -- Analyst

Jerry Revich -- Goldman Sachs -- Analyst

Stephen Volkmann -- Jefferies -- Analyst

Brendan Shea -- RBC Capital Markets -- Analyst

Mig Dobre -- Robert W. Baird -- Analyst

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Larry De Maria -- William Blair -- Analyst

Mike Shlisky -- Dougherty and Company -- Analyst

Steven Fisher -- UBS -- Analyst

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