Manitowoc (MTW) Q2 2020 Earnings Call Transcript

Manitowoc (MTW -3.60%)
Q2 2020 Earnings Call
Aug 06, 2020, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day everyone, and welcome to the Manitowoc second-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, marketing and investor relations. Please go ahead.

Ion Warner -- Vice President, Marketing and Investor Relations

Good morning everyone, and welcome to the Manitowoc conference call to review the company's second-quarter 2020 financial performance as outlined in last evening's press release. Participating on the call today are Aaron Ravenscroft, our new 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 & 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 a result of new information, future events or other circumstances. And with that, I will now turn the call over to you, Aaron.

Aaron Ravenscroft -- New President and Chief Executive Officer

Thank you very much Ion, and good morning everyone. Before we discuss our second-quarter results, I would like to make a few comments regarding last night's CEO announcement. It is a great honor to be named the president and chief executive officer of Manitowoc Cranes, and I would like to thank Ken Krueger and the board of directors for the opportunity to lead the company into the future. With globally recognized brands and some of the best service in the lifting industry, it is no coincidence that Manitowoc has become a manufacturing leader of cranes and lifting solutions.

While this business has certainly been faced with unprecedented global crisis, I am incredibly proud of what our team has achieved and has continued to deliver parts and services to our customers in a time of essential need. We have a strong foundation and a great team in place, and I see tremendous opportunities ahead for this company. As an introduction, I have served as Manitowoc's executive vice president of Cranes, overseeing mobile and tower cranes globally for the past four years. In this role, my focus has been on improving our product quality, customer service and enhancing operational efficiency and profitability.

While I certainly found my home at Manitowoc earlier in my career, I worked in a variety of operational and sales and marketing roles in the global industrial and engineered equipment product space. I also want to recognize Barry Pennypacker for his years of service to Manitowoc and acknowledge the foundation that he has built. Under his stewardship, the company has expanded the breadth of its product portfolio and significantly enhanced its profitability. Barry was the architect of The Manitowoc Way, and he was a great advocate for the potential of the company.

I look forward to continuing to benefit from Barry's guidance in his advisory role through the end of the year. While I certainly have big shoes to fill, I will be focused on continuing to build and grow the company. There are certainly some things that will not change under my leadership, namely a commitment to and a belief in The Manitowoc Way, a relentless focus on delivering for our customers and a commitment to providing superior returns for our shareholders over the long term. I look forward to continuing to work closely with our experienced leadership team, the Board and all of our team members to advance our strategic priorities and usher in a new phase of growth and development.

With that, please turn to Slide 3. Moving to the second quarter, I'd like to start by thanking my team for their outstanding effort in managing through the significant headwind created by the COVID-19 pandemic. The team did a great job of ensuring both the business continuity and the health and safety of our team while implementing the various local regulations across our global organization. With these efforts and the prior work to rightsize the business, we delivered positive EBITDA during the quarter which exceeded our expectations.

While we executed well in the first half of 2020, we continue to plan cautiously for the second half of the year given the uncertain macro environment. The dynamics for the quarter were largely a continuation of what we outlined in early May. April appeared to be the trough with modest improvements as we move through May and June. However, we are currently in the midst of one of the slowest seasonal periods in the crane business.

In the Americas, although many existing projects are resuming work, there continues to be a fair amount of uncertainty among customers regarding new projects. Demand remained soft, particularly in the energy and commercial construction end markets. Dealer stocking levels remain elevated, fleet utilization rates are down and used crane values have weakened. As a reminder, we've historically experienced slower purchasing decisions during a U.S.

presidential election cycle and expect this one to be no different. In EURAF, construction sites are working aggressively to recover lost time on projects with shortened construction season. We feel good about the short-term utilization rates, but there is less confidence as we look into next year's construction season. And we expect a slower-than-normal order intake for our European tower winter campaign in the second half.

Turning to MEAP. There are lots of puts and takes. In the Middle East, we have seen a nice pickup in multi-crane deals. However, the fundamentals of the construction business remains weak, and we feel this is more of an anomaly than a trend.

In Asia, it's a tale of two halves. China and South Korea are experiencing a V-shaped recovery, while the rest of Asia haven't begun to bounce back yet. While the time line for global economic recovery remains unclear given the challenging operating environment, we are confident that the strengths that are the core to Manitowoc's business, that is our people, our products, our brands, our network and our operational excellence, position us for success when demand returns. Despite these difficult market conditions, our liquidity remains strong with $375 million at the end of the second quarter.

As we previously commented, the changes we made to our capital structure last year have better positioned us to manage the cyclical nature of the crane demand. Looking at the second half of 2020, while we are confident we can manage through these turbulent times, we just don't have clear enough picture to reinstate 2020 guidance at this time. And with that, I will turn the call over to Dave to provide further details on our financial results. Dave?

David Antoniuk -- Senior Vice President and Chief Financial Officer

Thanks Aaron, and good morning everyone. Let's move to Slide 4. As Aaron mentioned, the COVID-19 pandemic had a significant impact on our financial results and key metrics in the second quarter. Our second-quarter orders totaled $238 million, a decrease of 36% compared to $372 million of orders last year.

The year-over-year decline was driven by softer demand in the Americas and EURAF segments. Unfavorable changes in foreign currency exchange rates negatively impacted our year-over-year orders by approximately $2 million. During the quarter, we did not have any material order cancellations. Our Q2 ending backlog of $431 million was down 23% over the prior year.

The decrease in backlog was mainly due to the decline in orders in the Americas and EURAF segments. This decrease was partially offset by approximately $50 million of COVID-19-related shipment delays in the EURAF segment. Net sales in the second quarter of $328 million decreased $176 million or 35% from a year ago, with each of our three segments reporting a year-over-year decline. This decrease was primarily attributable to lower shipments of cranes in the Americas region, mainly from entering the quarter with a lower shippable backlog, coupled with the aforementioned pandemic-related shipment delays in EURAF.

Net sales were unfavorably impacted by approximately 1% from changes in foreign currency exchange rates. Our gross profit decreased $47 million year-over-year primarily driven by lower volume of crane shipments across all segments and plant closures during April. Gross profit percentage decreased to 15% from 19% in the same period of 2019. Second-quarter engineering, selling and administrative expenses of $50 million decreased by approximately $1 million year-over-year.

The decrease was primarily due to lower short-term incentive compensation cost and reduced discretionary spending. This was partially offset by a $9 million benefit recorded in 2019 related to the settlement of a legal matter. As a result, second-quarter adjusted EBITDA amounted to $8 million or 2% of net sales which exceeded our expectations. Our flow-through on the year-over-year sales decline was approximately 26% reflecting good performance in managing our costs.

Our GAAP diluted earnings per share in the quarter was a loss of $0.37 versus income of $1.29 in the prior year. On an adjusted basis, diluted earnings per share were a loss of $0.47 compared to income of $0.94 in the comparable period. The primary driver of the lower adjusted diluted earnings per share was the reduced year-over-year sales volume. Second-quarter operating cash flows was a use of $20 million.

Our use of cash in the quarter was primarily driven by second quarter net loss. While we were able to reduce inventory by approximately $15 million during the quarter, inventory levels remain at seasonally elevated levels. We are managing our working capital to current demand levels and expect a significant reduction by year-end. Second-quarter total liquidity was effectively unchanged compared to the prior quarter at $375 million as of June 30 and up $35 million versus a year ago.

As Aaron mentioned, our liquidity remains sufficient to meet our obligations for the foreseeable future. Additionally, we do not have any significant debt maturities until 2026 and as stated in previous calls, our 2019 debt agreement simplified and eased covenant compliance, affording us greater flexibility to access our liquidity. While we did borrow $50 million on our ABL facility in the quarter as a pre-emptive action to preserve liquidity and future cash flows, we anticipate repaying that by the end of the third quarter. With that, I will now turn the call back to Aaron.

Aaron Ravenscroft -- New President and Chief Executive Officer

Thank you very much, Dave. Last quarter, as many of you know, we reported that Manitowoc filed a Trade Expansion Act petition to urge the U.S. Department of Commerce to investigate the trade dynamics of the domestic crane market. This process continues without definitive actions to report on.

The next step is for Manitowoc to submit our final comments on August 10. While we are proud of the results this quarter, the current market conditions remain challenging. For the second half of 2020, our first priority remains the health and safety of our employees throughout the world. Our second priority is to further strengthen our balance sheet and maintain our liquidity.

While we have limited visibility to our demand, we certainly have plenty of opportunity to reduce our inventory to generate cash. We do however want to maintain flexibility to react to the eventual rebound in crane demand without further reducing production capacity. It's about striking the right balance of reducing inventory, keeping our supply chain intact and maintaining our skilled workforce. Our third priority is positioning the company for long-term growth.

New products are the lifeblood of our business, and we continue to invest in innovation. While we are prudently managing our costs in the current environment, we are also ensuring that we have the ability to grow the business when the economy stabilizes and the crane market begins to accelerate. We also want to be prepared for inorganic growth opportunities. In closing, as we manage through COVID environment, I am extremely proud of the dedication and commitment from our team in overcoming these challenges while better positioning the company for the long term.

I believe the future is bright for Manitowoc, and I am excited about the opportunity to drive the company forward. With that, operator, please open the line for questions.

Questions & Answers:

Operator

[Operator instructions] And we'll take our first question from Ann Duignan with J.P. Morgan.

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

Hi. Good morning. I want to just focus on the back half of the year and the comment you made on orders weakening into the back half just seasonally for no other reason. Can you talk about how bad could the backlog get in the back half? And then how much cash do you need to run the business on a quarterly basis? And on top of that, how do you lower inventories if there is no end market demand? So sorry for all those questions, but if you could just help us think through like how you do come out of this downturn if things get weaker before they get better.

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah. So with respect to adjusting our inventory, it's a matter of adjusting our build schedules. So we did have a significant drop, basically, overnight with the pandemic. So it's a matter of adjusting our build schedules for the back half of the year.

And quite frankly, we waited until we've gotten into July and August, particularly in Europe where we have our normal shutdowns, to make it as manageable as possible. In terms of cash, we typically are a user of cash in the first half, and we generate cash throughout the second half. So I think that probably covers your second question. Dave, you want to handle the first question relative to backlog and orders?

David Antoniuk -- Senior Vice President and Chief Financial Officer

Yeah. So Ann, with regard to the backlog and orders, right now, we do forecast what we anticipate as orders, and we do risk-adjust that based upon the current environment and what the downturn may be. As Aaron mentioned in the prepared remarks, this year is a presidential election year, and orders in the Americas are typically down. So we're closely watching that and then we couple that with our build schedule.

We don't typically give guidance as to where our backlog is anticipated. And unfortunately, we can't comment on that. But it's sufficient to say that we are currently watching our current order intake, marrying that up with our production cycle and also looking at generating cash through inventory reductions mainly in the second half of the year.

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

OK. And at this point, given everything that you're seeing out there, are you still comfortable you can generate cash this second half? I mean it's a very unusual year. So how confident are you that you can generate cash in the back half? And I'll leave it there. Thank you.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Yeah. We're fairly confident that we're going to generate cash in the last half of the year.

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

OK, thank you. I'll leave it there. Appreciate it.

Operator

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

Jerry Revich -- Goldman Sachs -- Analyst

Yes. Hi good morning.

Aaron Ravenscroft -- New President and Chief Executive Officer

Good morning Jerry.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Good morning Jerry.

Jerry Revich -- Goldman Sachs -- Analyst

I'm wondering if you folks can just outline your three most significant priorities over the next year, any pivots in the strategy specifically. I know you touched on it in your opening remarks. I'm wondering if you could just expand and talk about the top couple of initiatives or anything else going to look different from here.

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah. I'd really go back to what we said in the prepared remarks. Number one is, we're very focused on health and safety. And number two, we're very focused on managing our cash and liquidity as we work through the COVID situation.

In terms of the third bullet point, I'm only on day 2 of the job. So if you don't mind, give me a couple of months to get my feet under me, and we'll provide a little more color. But we definitely want to pivot from, not to say we won't do additional cost cutting, we really want to pivot from cost cutting to moving into more of a growth mode.

Jerry Revich -- Goldman Sachs -- Analyst

OK. And in terms of the outlook for the business from here obviously we got the elections as you alluded to. But on the flip side, we're not going to have a pandemic next quarter that was as bad as what we saw in April essentially. So should we look for the business from a top-line standpoint to go back toward normal seasonality of revenue burn which normally you're down 5% sequentially in the third quarter versus the second quarter? Is that the type of cadence that we're on track for?

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah. So from my point of view, our regular seasonality probably won't apply as it would. I mean, right now of course we lost a lot of production during the second quarter because of the shutdowns and the quarantines. In the third quarter, we're adjusting our build schedules.

And then I think we're too far out yet from the fourth quarter to see really how that plays out. You asked me in terms of confidence by region. I would say that we feel a little more confident about EURAF and MEAP than the Americas. The Americas is our biggest concern.

And I think, to be perfectly honest, it's tough to give you a good view in the back half of the year sitting here in July because July and August are such quiet months for us. I feel good about the July we had, but we are a lumpy business and we have to see how August plays out, but how we come back in line as we get into September is the big question.

Jerry Revich -- Goldman Sachs -- Analyst

OK. And then you touched on used equipment values. I'm wondering if you could talk about utilization rates by region. Should I take that comment a moment ago to mean in Europe utilization rates are pretty solid? Can you just expand and talk about what you're seeing by region?

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah. I mean, in Europe, I'm really speaking specifically about the tower crane business. So once we came out of the quarantines, Germany continued to go, but we had to open up in France which was really heavily shut down. If you look at the big construction companies in France, they've actually pushed shorter holidays in August.

So all of those major players are trying to recover the shortened season. So utilization rates are really strong. The mobile business, I'd say, is OK. The biggest question marks are back in the United States where between the pandemic and what has happened in the oil industry, we've definitely seen utilization come down some.

Jerry Revich -- Goldman Sachs -- Analyst

OK. Perfect. I'll leave it there. Aaron, congratulations.

Thanks everyone.

Aaron Ravenscroft -- New President and Chief Executive Officer

Thank you very much.

Operator

And we'll take our next question from Cliff Ransom with Ransom Research, Inc.

Aaron Ravenscroft -- New President and Chief Executive Officer

Good morning Cliff.

Cliff Ransom -- Ransom Research -- Analyst

Good morning sir. First of all, congratulations. Of course, you're on the hook. This is the longest succession plan I think I've ever seen, 20 years, and it's not 2 days.

Of course, you're on the hook because you've got to continue to do well so that I can continue to take credit. I'm going to assume that you will only enhance The Manitowoc Way. But what will you enhance first? Maybe by way of an answer, you could talk on how well penetrated lean thinking is in areas, nonmanufacturing areas like new product development or HR? And do you have any plans to do anything with the Hoshin Kanri? I have one follow-up.

Aaron Ravenscroft -- New President and Chief Executive Officer

OK. So speaking with respect to Hoshin Kanri, we've been doing priority deployment for the last five years. So I'd say that we've moved beyond the, we're trying to do the science, and we I think have a good control in terms of the hard aspects of that. In terms of lean, I mean, it's a nine-inning game.

We have started to accelerate in the last two years what I would say is a much more mature application of not only the tools, but really how we handle it culturally and doing it on a more daily basis with toolbox talks. And so yes, we will continue. I think now we're really starting to gain some speed in terms of things we can do with some of our capital investments. And you'll have to come over to some of our facilities after the pandemic so we can show off a couple of things that we've got going on.

But I feel very good about where we are in terms of The Manitowoc Way. Barry has implemented this in a few different places and I've been by his side to do it. And I'd say, this time, we've gone faster than the last couple of times as you do with any of these types of things. And the team on the whole is really engaged on lean.

It will remain the cornerstone of the business, and we'll continue to push forward with it.

Cliff Ransom -- Ransom Research -- Analyst

The follow-up is, uncertainties for the second half with cash, notwithstanding, you seem to have set yourself up pretty well for it. This environment is likely to produce acquisition opportunities. When do you think you'll be ready managerially to look at something meaningful?

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah. So I mean, from my perspective, if you ask us about acquisitions, technically speaking, with the amount of liquidity we have, we could do one. And I feel comfortable that the managerial, we could handle one. We were ramping up to be more aggressive on that front, now it's just a question of getting more certainty around our order book.

Cliff Ransom -- Ransom Research -- Analyst

OK, thank you very much. Congrats.

Aaron Ravenscroft -- New President and Chief Executive Officer

Thank you very much Cliff.

Operator

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

Aaron Ravenscroft -- New President and Chief Executive Officer

Hi Jamie.

Colton Zimmer -- Credit Suisse -- Analyst

Hi. Good morning. This is Colton Zimmer on for Jamie. First off, congratulations, and welcome, Aaron.

Our question is just continuing the discussion on growth. Are there any particular end markets and geographies that you're maybe focused on growing products or looking out for M&A? And then my second question is just on decremental margins. Performance in the quarter was pretty good considering the sales decline. So I was just wondering if maybe that changes expectations for the back half of the year.

Thank you.

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah. So in terms of the inorganic growth, I think it's a little bit too early to comment on in any significant way. We definitely want to find things that have higher EBITDA percentage margins and have more closeness to our customers and those sorts of things. So I'll leave it at that and we can follow up on that in the next call or two.

With respect to decremental margins, I mean, we normally say that our decremental is around 25% to 30%. I would say though in the second half, we are going to have various plant shutdowns as well as a little bit less favorable mix

Colton Zimmer -- Credit Suisse -- Analyst

OK, great. Thank you.

Operator

And our next question comes from Mig Dobre with Baird.

Aaron Ravenscroft -- New President and Chief Executive Officer

Good morning, Mig.

Mig Dobre -- Robert W. Baird -- Analyst

Good morning, everyone. Hello, Aaron. Welcome. I guess I want to go back to the margin discussion, maybe put a finer point on it.

I appreciate your comment on the decrementals, but I'm trying to understand if production here is expected to decline sequentially versus where you were in the second quarter in order to obtain that inventory destock that you talked about earlier. So is it going to be lower sequentially? I mean, obviously, it's going to be lower year-over-year.

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah. So it's a bit complicated because of the shutdowns we always have in Europe. I mean, third quarter is always our most challenging. And I think we're in good shape relative to those to optimize them relative to what we're going to do on build schedules.

The bigger challenge when I compare the second quarter to the third quarter is really in the Americas, where we didn't have so many shutdowns in the second quarter. Our supply chain was intact through the entire quarantine. So we continued to move along there. And now we're I would say trying to optimize how we roll those shutdowns.

You've been to Shady Grove. You know how big the facility is. So we're trying to do that in a very managed way given the size of the facility.

Mig Dobre -- Robert W. Baird -- Analyst

Right. Because even though you're not providing guidance, just the way I'm interpreting your comments here, if we're seeing pressure sequentially in the back half and we're kind of maybe even breaking with seasonality, who knows, in the fourth quarter. Then I guess the question is, are you going to be able to be EBITDA margin positive in Q3 and Q4 given what's happening with production as far as you know today?

Aaron Ravenscroft -- New President and Chief Executive Officer

Yes. I think we will be EBITDA positive in the third and the fourth quarter.

Mig Dobre -- Robert W. Baird -- Analyst

Got it. And then perhaps my last question. Are you able to give us a sense for what you're doing with the cost structure in 2020 to be able to stay positive from an EBITDA standpoint, whether it's temporary cost actions, so put maybe a framework around that. And then, Aaron, I know your predecessor and the team have done a lot to take structural cost out of the business.

So I guess I'm wondering how you're thinking about any other opportunity down the line or if we're finally to the point where we simply need volume in order to be able to kind of get incremental margin lift. That's it for me.

Aaron Ravenscroft -- New President and Chief Executive Officer

That's a great question, great question. So over the last five years, we've taken out well over $100 million in costs so we're reaching that law of diminishing returns in terms of taking out big chunks. I do think that we'll have to look surgically speaking in terms of removing more costs. And there are some more levers we have to pull if we need to in terms of managing temporary shutdowns and get a little more cost out.

But I think in terms of the big chunks, we've done all the heavy lifting and I think it's time to move to the next phase as we get through this COVID situation.

Mig Dobre -- Robert W. Baird -- Analyst

And the temporary stuff for this year, can you size that at all?

Aaron Ravenscroft -- New President and Chief Executive Officer

No. I would prefer not to get into it. Again, it gets really complicated when we start to compare what the labor rules are in the United States versus what we do in Europe. We've been doing a variety of things and we'll continue to do it.

It's not that they're not happening. It's just that's a really big question.

Mig Dobre -- Robert W. Baird -- Analyst

Thank you.

Aaron Ravenscroft -- New President and Chief Executive Officer

Thanks.

Operator

And our next question will come from Stanley Elliott with Stifel.

Aaron Ravenscroft -- New President and Chief Executive Officer

Good morning Stanley.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Aaron, welcome. Dave, nice to hear your voice.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Thanks Stanley.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Can you talk about a little more on the tariff situation. I mean if August 10 is the final date, how long typically before you would hear something from the government back, either in favor or the other side?

Aaron Ravenscroft -- New President and Chief Executive Officer

OK. So I am on day 2 of the job, and we have a couple of days left before we have to submit our final comments. But I would say after my initial reviews, I believe that tariffs may not be the best solution. And while we believe strongly in fair trade, we surely don't want to burden our customers with additional costs, particularly in this environment.

So we've got some more work to do between now and August 10. And in terms of responses, I think that really varies relative to what the U.S. Department of Commerce wants to do because at the end of the day it's driven by the president of the United States and his team. So it can move very quickly or it can follow the more regimented process of the 270 days since we filed the petition.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

OK. And then I guess, secondly, in the past, you all have done well with some large sizable orders from the U.S. government, military, etc. Do you have or in any discussions for opportunities like that or it's kind of those sorts of discussions are tracking with what's happening with the general economy?

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah. So I mean, every year, it is a process because of the way that they allocate the resources. And we are in currently, we're in some conversations with the government. But it's always the same game in terms of them getting the appropriations down to the actual places where they can spend the money and how they want to spend the money.

But I feel pretty good with where our team is on that subject. And I'm hopeful that we can land a few next year.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

And do you think that would be more of a 2021 event as opposed to back half of 2020?

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

OK. Great. Thanks guys. Best of luck.

Aaron Ravenscroft -- New President and Chief Executive Officer

Thank you.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Thank you.

Operator

And we'll take our next question from Seth Weber with RBC Capital Markets.

Seth Weber -- RBC Capital Markets -- Analyst

Hey guys. Good morning.

Aaron Ravenscroft -- New President and Chief Executive Officer

Good morning Seth.

Seth Weber -- RBC Capital Markets -- Analyst

I hope everyone is doing well. Dave, just on the inventory question, how much of the reduction is expected to come from selling? I guess are you sitting on used cranes? I'm just trying to tie together the comment of used crane pricing being soft. And is that part of your inventory reduction that's coming in the second half? Thanks.

David Antoniuk -- Senior Vice President and Chief Financial Officer

Yes. Seth, so we always have some used cranes in inventory. I'd say it's not a material part of our overall inventory. So that's not the big chunk of the inventory reduction at this point in time.

But from where we ended the quarter in June here, we would expect in excess of $80 million in inventory reductions through the rest of the year.

Seth Weber -- RBC Capital Markets -- Analyst

$80 million total from June to year-end, thank you. OK. And then, Aaron, maybe if you could just give us, you've been in the crane space for a while. Can you just give us your view what you think a normalized crane market looks like from a revenue perspective for Manitowoc? Obviously, we're not there anytime soon, but can you just, do you have a number in mind for what you think kind of a mid-cycle revenue run rate would be for the company?

Aaron Ravenscroft -- New President and Chief Executive Officer

Boy, that's a tough one. Let's just say, I hope that the high is a lot higher than what I saw in the last five years. But if you look at the cycles, you would think that we should be about $2 billion at some point. Now how high it goes, I think it always depends on how low the trough was before that which is what we saw back in the early 2000s.

But we're eager to get back to that $1.8 billion range, let's say that midpoint.

Seth Weber -- RBC Capital Markets -- Analyst

OK. And then just lastly, can you comment on what you're -- are you seeing anything? You guys are obviously doing the right things with pulling in production here. Any comments as to what your competitors are doing? Do you see discipline across the space or are your competitors following suit with that or are they continuing to produce and build inventory? Thanks.

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah, I think everyone is doing pretty much the same thing.

Seth Weber -- RBC Capital Markets -- Analyst

OK. I appreciate it guys. Thank you.

Aaron Ravenscroft -- New President and Chief Executive Officer

Thank you.

Operator

And we'll take our next question from Steven Fisher with UBS.

Aaron Ravenscroft -- New President and Chief Executive Officer

Good morning Steven.

Steven Fisher -- UBS -- Analyst

Good morning. Congratulations on the new role, Aaron. I know it's only day 1 here and you want more time to sort out your plans, but new leaders often have new metrics so I'm just curious if you have any new metrics you think you'll be focused on. I know for the company, EBITDA margins and velocity have been important metrics over the last few years, but curious if you have any preliminary thoughts on what the right metrics should be to look at going forward.

Aaron Ravenscroft -- New President and Chief Executive Officer

Yeah. So obviously, I've worked under Barry's tutelage for almost 20 years. So I think many of the metrics will be the same. I will say one of the things that's really cropped up in the last two or three years for us, it's really important internally is the number of SLAMs we do which is our safety risk assessments.

So we are strongly tracking that and picking up good steam in our record because it has gotten a lot better. In terms of the financial performance, it's many of the same ones. Yes, I know we've been very focused on EBITDA margin as a percentage. But let's face it, I think EBITDA dollars is equally important in terms of how we drive our shareholder value.

Steven Fisher -- UBS -- Analyst

OK. Fair enough. And it sounds like you want to be in growth mode because I'm curious how you see the industry structure shaping up and the competitive dynamics over the next several years and whether the structure of the industry enables that, is friendly to growth over time or is it really just going to be whatever the cycle is going to be?

Aaron Ravenscroft -- New President and Chief Executive Officer

So we don't want to ride the cycle. That's for sure. So when we look at acquisitions, we're looking at things that will help us dampen the ups and the downs of the business. In terms of structural changes, from my point of view, the market hasn't changed a whole lot.

Obviously, there's that one large merger between two big players in the industry, and I don't think there will be significantly more. But I think the crane business is a competitive business, and we've got to be very, very focused on how we continuously get more competitive and closer with our customers and continue to launch those new products and service those customers.

Steven Fisher -- UBS -- Analyst

Fair enough. Thanks a lot.

Aaron Ravenscroft -- New President and Chief Executive Officer

Thank you.

Operator

[Operator instructions] And our next question will come from Cliff Ransom with Ransom Research, Inc.

Cliff Ransom -- Ransom Research -- Analyst

Thank you very much. I'm coming up -- this is I think my 48th year looking at the lifting business, and the great dilemma for every company has been how not to overspend at the top and not to overcut at the bottom. Can you talk about how you're trying to manage that process? And were there any particular learnings from, say, what would that be, the 2016 experience that you can apply today? And I have a follow-up.

Aaron Ravenscroft -- New President and Chief Executive Officer

And that is a great, that's a great question, Cliff. I mean, I think that really hits the nail on the head in terms of what we're trying to do. I mean, if I look at our inventory, I think we could take it down further than what we've put out there. Frankly, we've built some plans to take it down further, but we've internally been having that same conversation.

We've got to manage our orders and our backlog and see where those sit. But we don't want to do -- I think in 2017 there were some opportunities we missed because we went really deep at the end of 2016 for very good reasons, quite frankly. But right now we're trying to do more level-loading across the second, the third, the fourth and the first quarter. So we're trying to look at it as a continuous game rather than some of the normal seasonality you have that creates a bit of inflexibility I would say when we get into the first quarter.

Cliff Ransom -- Ransom Research -- Analyst

That might be the best thing I've heard all day. And I just wanted to comment, just because it's a pet peeve of mine, I would like to compliment you or commend you on your increasing focus in the last two or three years on safety. How do you handle the metric of employee engagement?

Aaron Ravenscroft -- New President and Chief Executive Officer

So we measure the number. We call it SLAMs, stop, look, assess and manage. And those are basically risk assessments. So a couple of years back, we engaged the DuPont safety folks as a consulting entity.

They came in. They audited all of our facilities. They gave us good feedback. There were probably eight or nine takeaways.

In my opinion, they are world-class. And they told us to really focus on our SLAMs. And I think our goal, we've got to be something like 30,000 per year. That's our end goal.

We haven't gotten there. So in order to get that many risk assessments, every single day, we have to be doing the risk assessment. So it's literally like 5S for us, Cliff. Our team managers and our value stream managers are reviewing the SLAMs that are done by the employees every day, and that gets up to their businesses.

And when I visit the factories, we're reviewing all the SLAMs that they do. So this is a metric that I see on a regular basis and have regular conversations with and it's in our priority deployment discussions.

Cliff Ransom -- Ransom Research -- Analyst

Anything to do -- well, I accept that, and I know that's a good idea. I was really asking about, how do you measure employee engagement at Manitowoc today and do you think that will change over time?

Aaron Ravenscroft -- New President and Chief Executive Officer

You're asking employee engagement relative to safety or just overall?

Cliff Ransom -- Ransom Research -- Analyst

No, overall. Sorry, I didn't make that very clear.

Aaron Ravenscroft -- New President and Chief Executive Officer

OK. I'm sorry. Yeah, I mean, obviously, with the number of direct employees we have and shop floor-related folks, the safety I think is a good sign. I would just say it's under priority deployment.

It's pretty hard for anyone to hide anywhere. I would say that I don't have a good way of measuring it and giving you a hard and fast answer to the question. I would say, come to the facilities and ask the folks throughout the business. I feel very confident and very good about the level of employee engagement we have.

Frankly, that's why you see what we're able to do in the second quarter because of the level of engagement we have.

Cliff Ransom -- Ransom Research -- Analyst

Thank you Aaron.

Aaron Ravenscroft -- New President and Chief Executive Officer

Thank you Cliff.

Operator

And there are currently no questions in the queue at this time. I would now like to turn the conference back over to Ion Warner for 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 second-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: 39 minutes

Call participants:

Ion Warner -- Vice President, Marketing and Investor Relations

Aaron Ravenscroft -- New President and Chief Executive Officer

David Antoniuk -- Senior Vice President and Chief Financial Officer

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

Jerry Revich -- Goldman Sachs -- Analyst

Cliff Ransom -- Ransom Research -- Analyst

Colton Zimmer -- Credit Suisse -- Analyst

Mig Dobre -- Robert W. Baird -- Analyst

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Seth Weber -- RBC Capital Markets -- Analyst

Steven Fisher -- UBS -- Analyst

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