UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 -------------- OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- --------------- Commission File Number 1-11978 ----------- The Manitowoc Company, Inc. -------------------------------------------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-0448110 ---------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 500 So. 16th Street, Manitowoc, Wisconsin 54220 ----------------------------------------------------------- (Address of principal executive offices) (Zip Code) (920) 684-4410 ------------------------ (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( ) The number of shares outstanding of the Registrant's common stock, $.01 par value, as of April 30, 2000, the most recent practicable date, was 24,705,480. PART I. FINANCIAL INFORMATION ------------------------------- Item 1. Financial Statements - ---------------------------- <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Statements of Earnings For the Three Months Ended March 31, 2000 and 1999 (Unaudited) (In thousands, except per-share and average shares data) March 31, 2000 March 31, 1999 ---------------- -------------- <S> <C> <C> Net Sales $ 201,990 $ 184,189 Costs And Expenses: Cost of goods sold 146,273 131,629 Engineering, selling and administrative expenses 28,974 29,910 ----------- --------- Total 175,247 161,539 Earnings From Operations 26,743 22,650 Other Income (Expense): Interest expense (2,511) (2,708) Interest and dividend income 67 72 Other expense (438) (290) ------------ --------- Total (2,882) (2,926) ------------ --------- Earnings Before Taxes On Income 23,861 19,724 Provision For Taxes On Income 8,948 7,296 ------------ --------- Net Earnings $ 14,913 $ 12,428 ------------ --------- Net Earnings Per Share - Basic $ .58 $ .48 Net Earnings Per Share - Diluted $ .57 $ .47 Dividends Per Share $ .075 $ .075 Average Shares Outstanding - Basic 25,850,072 25,962,372 Average Shares Outstanding - Diluted 25,997,317 26,166,099 <FN> See accompanying notes which are an integral part of these statements. </TABLE> <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Balance Sheets As of March 31, 2000 and December 31, 1999 (Unaudited) (In thousands, except share data) -ASSETS- March 31, 2000 Dec. 31, 1999 Current Assets: ----------------- ------------- <S> <C> <C> Cash and cash equivalents $ 18,239 $ 10,097 Marketable securities 1,953 1,923 Accounts receivable 86,688 62,802 Inventories 99,623 91,437 Prepaid expenses and other 3,780 2,211 Future income tax benefits 22,528 22,528 --------- -------- Total current assets 232,811 190,998 Intangibles assets-net 252,900 232,729 Other assets 14,110 14,490 Property, plant and equipment: At cost 220,610 214,352 Less accumulated depreciation (124,819) (122,329) --------- --------- Property, plant and equipment-net 95,791 92,023 --------- --------- TOTAL $ 595,612 $ 530,240 --------- --------- -LIABILITIES AND STOCKHOLDERS' EQUITY- Current Liabilities: Accounts payable and accrued expenses $ 147,723 $ 141,909 Current portion of long-term debt 750 489 Short term borrowings 99,501 32,300 Product warranties 14,893 14,610 --------- --------- Total current liabilities 262,867 189,308 Non-Current Liabilities: Long-term debt, less current portion 78,951 79,223 Product warranties 4,344 4,366 Postretirement health benefits obligations 20,023 19,912 Other 7,117 5,255 --------- --------- Total non-current liabilities 110,435 108,756 --------- --------- Stockholders' Equity: Common stock (36,746,482 shares issued at both dates) 367 367 Additional paid-in capital 31,497 31,476 Accumulated other comprehensive income (998) (814) Retained earnings 294,628 281,672 Treasury stock at cost (11,508,802 and 10,658,113 shares) (103,184) (80,525) --------- --------- Total stockholders' equity 222,310 232,176 --------- --------- TOTAL $ 595,612 $ 530,240 --------- --------- <FN> See accompanying notes which are an integral part of these statements. </TABLE> <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2000 and 1999 (In thousands) (Unaudited) March 31, 2000 March 31, 1999 ----------------- -------------- <S> <C> <C> Cash Flows From Operations: Net earnings $ 14,913 $ 12,428 Non-cash adjustments to income: Depreciation and amortization 4,425 4,009 Deferred financing fees 169 141 Loss on sale of fixed assets 79 190 Changes in operating assets and liabilities excluding effects of business acquisitions: Accounts receivable (14,807) (11,501) Inventories (3,170) 1,681 Other current assets (677) 3,859 Non-current assets 807 (4,419) Current liabilities (768) 2,723 Non-current liabilities 141 80 ---------- ---------- Net cash provided by operations 1,112 9,191 Cash Flows From Investing: Purchase of temporary investments - net (30) (24) Business acquisitions - net (30,694) (37,662) Proceeds from sale of property, plant, and equipment 22 538 Capital expenditures (4,853) (3,206) ---------- ---------- Net cash used for investing (35,555) (40,354) Cash Flows From Financing: Dividends paid (1,957) (1,947) Treasury stock purchased (22,638) -- Proceeds (payments) on long-term borrowings (11) 25,278 Proceeds from short-term borrowings-net 67,201 11,500 ---------- ---------- Net cash provided by financing 42,595 34,831 Effect of exchange rate changes on cash (10) -- ---------- ---------- Net increase in cash and cash equivalents 8,142 3,668 Balance at beginning of period 10,097 10,582 ---------- ---------- Balance at end of period $ 18,239 $ 14,250 ---------- ---------- Supplemental cash flow information: Interest paid $ 1,920 $ 2,207 Income taxes paid $ 4,022 $ 2,252 <FN> See accompanying notes which are an integral part of these statements. </TABLE> <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Statements of Comprehensive Income For the Three Months Ended March 31, 2000 and 1999 (In thousands) (Unaudited) March 31, 2000 March 31, 1999 -------------------- ------------------- <S> <C> <C> Net earnings $ 14,913 $ 12,428 Other comprehensive income: Foreign currency translation adjustments (184) (170) ------------ ----------- Comprehensive income $ 14,729 $ 12,258 ------------ ----------- <FN> See accompanying notes which are an integral part of these statements. </TABLE> THE MANITOWOC COMPANY, INC. Notes to Unaudited Consolidated Financial Statements For the Three Months Ended March 31, 2000 and March 31, 1999 (Unaudited) Note 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, representing normal recurring accruals, necessary to present fairly the results of operations, cash flows and comprehensive income for the three months ended March 31, 2000 and 1999 and the financial position at March 31, 2000. The interim results are not necessarily indicative of results for a full year and do not contain information included in the Company's annual consolidated financial statements and notes for the year ended December 31, 1999. The consolidated balance sheet as of December 31, 1999 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. It is suggested that these financial statements be read in conjunction with financial statements and the notes thereto included in the Company's latest annual report. Note 2. The components of inventory at March 31, 2000 and December 31, 1999 are summarized as follows (in thousands): <TABLE> <CAPTION> March 31, 2000 Dec. 31, 1999 ----------------- ------------- <S> <C> <C> Components: Raw materials $ 47,900 $ 39,134 Work-in-process 30,021 30,218 Finished goods 42,329 42,352 --------- -------- Total inventories at FIFO costs 120,250 111,704 Excess of FIFO costs over LIFO value (20,627) (20,267) --------- -------- Total inventories $ 99,623 $ 91,437 ========= ========= </TABLE> Inventory is carried at lower of cost or market using the first-in, first-out (FIFO) method for 58% and 57% of total inventory at March 31, 2000 and December 31, 1999, respectively. The remainder of the inventory is costed using the lower of the last-in, first-out (LIFO) method. Note 3. The United States Environmental Protection Agency ("EPA") has identified the company as a potentially responsible party ("PRP") under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), liable for the costs associated with investigating and cleaning up contamination at the Lemberger Landfill Superfund Site (the "Site") near Manitowoc, Wisconsin. Approximately 150 PRP's have been identified as having shipped substances to the Site. Eleven of the potentially responsible parties have formed a group (the Lemberger Site Remediation Group, or LSRG) and have successfully negotiated with the EPA and the Wisconsin Department of Natural Resources to settle the potential liability at the Site and fund the cleanup. Recent estimates indicate that the total cost to clean up the Site could be as high as $30 million, however, the ultimate allocation of costs for the Site is not yet final. Although liability is joint and several, the Company's percentage share of liability is estimated to be 11% of the total cleanup costs. Prior to December 31, 1996, the Company accrued $3.3 million in connection with this matter. There were no expenses incurred for the quarters ended March 31, 2000 and 1999. Remediation work at the Site has been completed, with only long-term pumping and treating of ground water and Site maintenance remaining. The remaining estimated liability for this matter, included in other current and noncurrent liabilities at March 31, 2000, is $1.1 million. As of March 31, 2000, 30 product-related lawsuits were pending. Of these, two occurred between 1985 and 1990 when the Company was completely self-insured. The remaining lawsuits occurred subsequent to June 1, 1990, at which time the Company has insurance coverages ranging from a $5.5 million self-insured retention with a $10.0 million limit on the insurer's contribution in 1990, to the current $1.0 million self-insured retention for Cranes and Marine cases ($100,000 for Foodservice cases) and a $50.0 million limit on the insurer's contribution. Product liability reserves included in accounts payable and accrued expenses at March 31, 2000 are $8.3 million; $2.8 million reserved specifically for the 30 cases referenced above, and $5.5 million for incurred but not reported claims. These reserves were estimated using actuarial methods. The highest current reserve for a non-insured claim is insignificant, and $0.9 million for an insured claim. Based on the Company's experience in defending itself against product liability claims, management believes the current reserves are adequate for estimated settlements on aggregate self-insured and insured claims. Any recoveries from insurance carriers are dependent upon the legal sufficiency of claims and the solvency of insurance carriers. It is reasonably possible that the estimates for environmental remediation and product liability costs may change in the near future based upon new information that may arise. Presently, there is no reliable means to estimate the amount of any such potential changes. The Company is also involved in various other legal actions arising in the normal course of business. After taking into consideration legal counsel's evaluation of such actions, in the opinion of management, ultimate resolution is not expected to have a material adverse effect on the consolidated financial statements of the Company. Note 4. The Company holds assets for sale which include land and improvements, buildings, and certain machinery and equipment at the "Peninsula facility" located in Manitowoc, Wisconsin, and land and building located in Scotts Hill, Tennessee. The current carrying value of these assets determined through independent appraisals is $3.3 million and is included in other assets on the Consolidated Balance Sheet at March 31, 2000. The Company has reserved for the future holding costs, which are included in accounts payable and accrued expenses, consisting primarily of utilities, security, maintenance, property taxes, and insurance. The Company has also recorded reserves for potential environmental liabilities on the Peninsula location. During the quarter ended March 31, 2000, $0.2 million was charged against these reserves. Note 5. On February 17, 1999, the Company's board of directors authorized a 3-for-2 stock split of the Company's shares in the form of a 50% stock dividend payable April 1, 1999 to shareholders of record on March 1, 1999. As a result of the stock split 8,652,289 shares were issued. Note 6. The following is a reconciliation of the average shares outstanding used to compute basic and diluted earnings per share. There is no earnings impact for the assumed conversions of the stock options in each of the quarters. <TABLE> <CAPTION> Quarter Ended March 31 --------------------------------------------------------------------------- 2000 1999 -------------------------------------------------------------------------- Per Share Per Share Shares Amount Shares Amount ======== ======== ====== ======== <S> <C> <C> <C> <C> Basic earnings per share 25,850,072 $ .58 25,962,372 $ .48 Effect of dilutive securities - stock options 147,245 203,727 Diluted earnings per share 25,997,317 $ .57 26,166,099 $ .47 </TABLE> Note 7. On January 14, 2000, the Company, through a wholly-owned subsidiary, acquired certain assets of Pioneer Holding LLC (Pioneer), a manufacturer of hydraulic boom trucks, from its parent company Mega Manufacturing. Pioneer produces five models of boom trucks with varying lifting capacities sold under the Pioneer Crane brand name. Pioneer Cranes feature an innovative X-type outrigger system that provides 360-degree stability and 500-degree rotation capability without any reduction in lifting capacity. On February 17, 2000 the Company, through a wholly-owned subsidiary, acquired all of the issued and outstanding shares of Beverage Equipment Supply Company (BESCO), a leading wholesale distributor of beverage dispensing equipment. BESCO has been integrated into the Company's Manitowoc Beverage Systems (MBS) operation. BESCO serves 14 states primarily in the Midwest, is located in Holland, Ohio, and has a warehouse facility in Lombard, Illionois. BESCO represents more than 50 different equipment manufacturers with products ranging from beverage dispensing equipment and systems to draft beer-dispensing systems. On March 31, 2000 the Company acquired all of the issued and outstanding shares of Multiplex Company, Inc. (Multiplex). Multiplex is headquartered in St. Louis, Missouri where its production facility is located and has operations in Franfurt, Germany and Surrey, England. Multiplex manufactures soft drink and beer dispensing equipment as well as water purification systems and supplies leading quick-service restaurants, convenience stores, and movie theatres. In addition, Multiplex designs and builds custom applications to meet the needs of customers with requirements that cannot be met by conventional dispensing equipment. Multiplex was integrated into the Company's Ice/Beverage Group. On April 7, 2000 the Company, through a wholly-owned subsidiary, acquired substantially all of the net business assets of Harford Duracool, LLC (Harford), a leading manufacturer of walk-in refrigerators and freezers. Harford maintains a 67,000-square- foot manufacturing facility in Aberdeen, Maryland. The company's primary distribution channels are foodservice equipment dealers and commercial refrigeration distributors. Harford's products range in size from 200 to 60,000 cubic feet. Harford also manufactures a line of modular, temperature-controlled structures for additional niche markets. All of the aforementioned acquisitions have been accounted for using the purchase method of accounting and were financed using funds from the company's existing credit facility. The total aggregate consideration paid for these acquistions was $59.4 million, which is net of cash acquired of $1.1 million and includes direct acquistion costs of $0.3 million and assumed liabilities of $8.5 million. The preliminary estimate of the aggregate excess of cost over the fair values of the net assets acquired for these acquisitions of $34.2 million is being amortized over a weighted average life of 36 years. The results of these acquisitions' operations, except for Harford, subsequent to their date of acquisition are included in the Consolidated Statement of Earnings for the quarter ending March 31, 2000. Note 8. The Company determines its segments based upon the internal organization that is used by management to make operating decisions and assess performance. Based upon this approach, the Company has three reportable segments: Foodservice Equipment (Foodservice), Cranes and Related Products (Cranes), and Marine Operations (Marine). Information about reportable segments and a reconciliation of total segment sales and profits to the consolidated totals for the quarters ending March 31, 2000 and 1999 are summarized in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations", to this report on Form 10-Q. As of March 31, 2000 and December 31, 1999, the total assets by segment were as follows (in thousands): <TABLE> <CAPTION> March 31, 2000 Dec. 31, 1999 --------------- -------------- <S> <C> <C> Foodservice $355,610 $314,982 Cranes 182,562 165,974 Marine 16,582 10,162 General corporate 40,858 39,122 -------------- ------------- Total $595,612 $530,240 ============== ============= </TABLE> Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for the Quarters Ended March 31, 2000 and March 31, 1999 - -------------------------------------------------------------- Net sales and earnings from operations by business segment for the quarter ended March 31, 2000 and 1999 are shown below (in thousands): <TABLE> <CAPTION> March 31, 2000 March 31, 1999 ----------------- ---------------- <S> <C> <C> NET SALES: Foodservice equipment $ 92,929 $ 84,289 Cranes and related products 96,907 89,430 Marine 12,154 10,470 -------------- -------------- Total $201,990 $ 184,189 ============= ============== EARNINGS (LOSS) FROM OPERATIONS: Foodservice equipment $ 12,180 $ 11,773 Cranes and related products 17,333 13,277 Marine 2,377 2,312 General corporate expense (3,245) (2,997) Amortization (1,902) (1,715) ------------- -------------- Total 26,743 22,650 OTHER INCOME (EXPENSE) - NET (2,882) (2,926) ------------- --------------- EARNINGS BEFORE TAXES ON INCOME $ 23,861 19,724 ============== =============== </TABLE> Net earnings for the first quarter increased 20% to $14.9 million, or $.57 per diluted share, from $12.4 million, or $.47 per diluted share, in 1999. Net sales increased nearly 10% to $202.0 million in the first quarter of 2000, from $184.2 million for the same period in 1999. Sales and earnings growth were driven by gains in each of the Company's three operating segments. Foodservice equipment sales were $92.9 million for the quarter, up 10% from the first quarter of 1999, despite an ongoing slowdown in the soft-drink beverage equipment marketplace. Operating earnings increased only 3.5% even with an additional $1.0 million in manufacturing costs, most of which are non-recurring, relating to conversions to a mixed-model/demand flow method of manufacturing at Manitowoc Ice and Diversified Refrigeration and the installation of a new state-of-the-art evaporator assembly and plating operationg at Manitowoc Ice. Excluding these improvement costs, Foodservice Equipment operating earnings grew nearly 12%. First quarter sales for the Crane segment were $96.9 million, compared to $89.4 million for 1999, an increase of 8%. Crane segment operating earnings continued to outpace sales. Operating earnings increased more than 30% over the first quarter of 1999. Bookings are up over 20% from the fourth quarter of 1999, and the backlog at the end of the first quarter stood at a solid $142.0 million, up from $136 million at December 31, 1999. Marine segment sales and operating earnings for the first quarter were $12.2 million and $2.4 million, respectively, compared with $10.5 million and $2.3 million for the same period in 1999. This represented a sales increase of 16% and an operating earnings increase of 3%. The Marine operations are in the final stages of completing another successful winter repair season. Sixteen vessels wintered at Sturgeon Bay and 25 vessels were serviced by the operations in Toledo and Cleveland, a total representing nearly two-thirds of the U.S.-flagged Great Lakes fleet. Compared to previous years, the change in Marine margins is due to the shift in scope and mix of this work. Traditionally, the first quarter requires the greatest use of the Company's working capital. However, as a result of the Company's focus on capital management, cash flow from operations for the second consecutive year was positive in the first quarter, this year reaching $1.1 million. With the purchase of 854,000 shares of treasury stock, coupled with the acquisitions discussed aboave, the total funded debt increased to $179.2 million during the quarter. This represents a debt-to-capital ratio of 45% at March 31, 2000. Financial Condition at March 31, 2000 - ----------------------------------------------- The Company's financial condition remains strong. Cash and marketable securities of $20.2 million and future cash flows from operations are expected to be adequate to meet the Company's liquidity requirements for the foreseeable future, including payments on long and short-term debt, and anticipated capital expenditures of between $15-$18 million. This report on Form 10-Q includes forward-looking statements based on management's current expectations. Reference is made in particular to the description of the Company's plans and objectives for future operations, assumptions underlying such plans and objectives and other forward-looking statements in this report. Such forward-looking statements generally are identifiable by words such as "believes," "intends," "estimates," "expects" and similar expressions. These statements involve a number of risks and uncertainties and must be qualified by factors that could cause results to be materially different from what is presented here. This includes the following factors for each business segment: Foodservice Equipment - demographic changes affecting the number of women in the workforce, general population growth, and household income; serving large restaurant chains as they expand their global operations; specialty foodservice market growth; and the demand for equipment for small kiosk-type locations. Cranes and Related Products - market acceptance of innovative products; cyclicality in the construction industry; growth in the world market for heavy cranes; and demand for used equipment in developing countries. Marine - shipping volume fluctuations based on performance of the steel industry; five-year drydocking schedule; and reducing seasonality through non-marine repair work. Year 2000 Compliance - ----------------------------- In prior years, the Company executed various initiatives to ensure that its computer systems are capable of processing periods of the Year 2000 and beyond. These initiatives were completed prior to the end of 1999. In addition, the Company had developed various contingency plans to address any unforeseen circumstances that may have arisen. As a resulst of those planning and implementation efforts, the Company has not experienced any signifiicant system failures or miscalculations as a result of the Year 2000 computer issue and believes it systems successfully responded to the Year 2000 date change. While no such disruption has developed as of the date of this filing, Year 2000 problems may still surface throughout calendar year 2000. The Company will continue to monitor its critical computer applications and those of its suppliers and vendors throughout the calendar year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. Item 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------------- See Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. PART II. OTHER INFORMATION ----------------------------------------------------- Item 6. Exhibits and Reports on Form 8-K ------------------------------------------ a) Exhibits: See exhibit index following the signatures on this Report, which is incorporated herein by reference. b) Reports on form 8-K: None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE MANITOWOC COMPANY, INC. (Registrant) /s/ Terry D. Growcock ---------------------- Terry D. Growcock President and Chief Executive Officer /s/ Glen E. Tellock --------------------- Glen E. Tellock Vice President and Chief Financial Officer /s/ Maurice D. Jones ----------------------- Maurice D. Jones General Counsel and Secretary May 11, 2000 THE MANITOWOC COMPANY, INC. EXHIBIT INDEX TO FORM 10-Q FOR QUARTERLY PERIOD ENDED MARCH 31, 2000 Exhibit Filed No Description Herewith - ------- ----------- -------- 27 Financial Data Schedules X * Pursuant to Item 601(b) (2) of Regulation S-K, the Registrant agrees to furnish to the Securities and Exchange Commission upon request, a copy of any unfiled exhibits or schedules to such document. 10Q-1st-2000