UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 -------------------- 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) (414) 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 July 31, 1996, the most recent practicable date, was 11,511,357. PART I. FINANCIAL INFORMATION -------------------------------------- Item 1. Financial Statements - ----------------------------- <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Statements of Earnings For the Quarter and Six Months Ended June 30, 1996 and 1995 (Unaudited) (In thousands, except per-share and average shares data) QUARTER ENDED YEAR-TO-DATE June 30, June 30, June 30, June 30, 1996 1995 1996 1995 -------- -------- -------- -------- <S> <C> <C> <C> <C> Net Sales $ 139,219 $ 82,287 $ 253,318 $ 151,388 Costs And Expenses: Cost of goods sold 101,328 61,083 186,790 114,265 Engineering, selling and administrative expenses 20,839 12,099 40,272 24,999 -------- -------- -------- -------- Total 122,167 73,182 227,062 139,264 Earnings From Operations 17,052 9,105 26,256 12,124 Other Income (Expense): Interest expense (2,557) (496) (5,019) (719) Interest & dividend income 67 31 118 47 Other income (expense) 98 (23) 165 (6) -------- -------- --------- -------- Total (2,392) (488) (4,736) (678) -------- -------- --------- -------- Earnings Before Taxes On Income 14,660 8,617 21,520 11,446 Provision For Taxes On Income 5,862 3,231 8,608 4,292 -------- -------- -------- -------- Net Earnings $ 8,798 $ 5,386 $ 12,912 $ 71,54 -------- -------- -------- -------- Net Earnings Per Share $ .76 $ .47 $ 1.12 $ .62 Dividends Per Share $ .16 $ .16 $ .33 $ .33 Average Shares Outstanding 11,511,357 11,511,357 11,511,357 11,511,357 <FN> See accompanying notes which are an integral part of these statements. </TABLE> <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Balance Sheets As of June 30, 1996 and December 31, 1995 (Unaudited) (In thousands, except share data) -ASSETS- June 30, 1996 Dec. 31, 1995 ------------- ------------ <S> <C> <C> Current Assets: Cash and cash equivalents $ 18,546 $ 15,077 Marketable securities 1,607 1,558 Accounts receivable 55,760 51,011 Inventories 48,934 52,928 Prepaid expenses and other 1,681 3,451 Future income tax benefits 11,120 11,120 -------- --------- Total current assets 137,648 135,145 Intangible assets 90,773 92,433 Other assets 10,101 9,663 Property, plant and equipment: At cost 189,843 188,755 Less accumulated depreciation (103,872) (101,081) --------- --------- Property, plant and equipment-net 85,971 87,674 --------- --------- TOTAL $ 324,493 $ 324,915 --------- --------- -LIABILITIES AND STOCKHOLDERS' EQUITY- Current Liabilities: Accounts payable and accrued expenses $ 70,830 $ 66,028 Current portion of long-term debt 12,589 10,089 Short term borrowings 0 26,807 Income taxes payable 3,770 1,503 Product warranties 8,272 6,496 --------- --------- Total current liabilities 95,461 110,923 Non-Current Liabilities: Long-term debt less current portion 108,634 101,180 Product warranties 3,428 4,199 Post-retirement health benefits obligations 19,387 19,190 Other 6,856 7,762 --------- --------- Total non-current liabilities 138,305 132,331 --------- --------- Stockholders' Equity: Common stock (16,331,770 and 10,887,847 shares issued) 163 109 Additional paid-in capital 31,061 31,115 Cumulative foreign currency translation adjustments (488) (479) Retained earnings 141,493 132,418 Treasury stock at cost (4,820,413 and 3,213,379 shares) (81,502) (81,502) --------- --------- Total stockholders' equity 90,727 81,661 --------- --------- TOTAL $ 324,493 $ 324,915 --------- --------- <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 Six Months Ended June 30, 1996 and 1995 (In thousands) (Unaudited) June 30, 1996 June 30, 1995 ------------- ------------ <S> <C> <C> Cash Flows From Operations: Net earnings $ 12,912 $ 7,154 Non-cash adjustments to income: Depreciation and amortization 5,616 3,090 Deferred financing fees 150 -- Deferred income taxes -- (510) (Gain) loss on sale of fixed assets 57 -- Changes in operating assets and liabilities: Accounts receivable (4,749) (12,349) Inventories 3,994 (7,057) Other current assets 1,770 1,559 Current liabilities 8,841 10,350 Non-current liabilities (1,021) 1,537 Deferred income (460) (1,921) Non-current assets (438) 227 --------- --------- Net cash provided by operations 26,672 2,080 Cash Flows From Investing: Purchase of temporary investments (49) 2,165 Proceeds from sale of property, plant, and equipment 1,001 -- Capital expenditures (3,461) (13,005) --------- --------- Net cash used for investing (2,509) (10,840) Cash Flows From Financing: Dividends paid (3,837) (3,837) Proceeds from long-term borrowings 15,000 -- Payments on long-term borrowings (5,046) -- Change in short-term borrowings - net (26,807) 15,401 --------- --------- Net cash provided by (used for) financing (20,690) 11,564 Effect of exchange rate changes on cash (4) 55 --------- --------- Net increase in cash and cash equivalents 3,469 2,859 Balance at beginning of year 15,077 4,118 --------- --------- Balance at end of period $ 18,546 $ 6,977 --------- --------- Supplemental cash flow information: Interest paid $ 2,526 $ 694 Income taxes paid 5,081 2,066 <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 Six Months Ended June 30, 1996 and 1995 (Unaudited) Note 1. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, representing normal recurring accruals, necessary to present fairly the results of operations for the quarter and six months ended June 30, 1996 and 1995, the financial position at June 30, 1996 and the changes in the cash flows for the six months ended June 30, 1996 and 1995. 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, 1995. Note 2. <TABLE> <CAPTION> The components of inventory at June 30, 1996 and December 31, 1995 are summarized as follows (dollars in thousands): June 30, December 31, 1996 1995 ----------- --------- <S> <C> <C> Components: Raw materials $ 27,130 $ 22,809 Work-in-process 15,031 18,868 Finished goods 27,707 31,711 --------- --------- Total inventories at FIFO costs 69,868 73,388 Excess of FIFO costs over LIFO value (20,934) (20,460) --------- --------- Total inventories $ 48,934 $ 52,928 </TABLE> Inventory is carried at lower of cost or market using the first-in, first-out (FIFO) method for 62% and 60% of total inventory for June 30, 1996 and December 31, 1995, respectively. The remainder of the inventory is costed using 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. 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 Wisconsin Department of Natural Resources to settle the potential liability at the Site and fund the cleanup. Approximately 150 PRP's have been identified as having shipped substances to the Site. Recent estimates indicate that the total cost to clean up the Site could be as high as $30 million, however, the ultimate remediation methods and appropriate allocation of costs for the Site are 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. In connection with this matter, the Company expensed $0.2 million, $1.6 million, $0.5 million, and $.9 million for the year ended December 31, 1995, and fiscal years 1994, 1993, and 1992 respectively, for its estimated portion of the cleanup costs. There were no expenses incurred during the six months ended June 30, 1996. As of June 30, 1996, 35 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 and $16.0 million limit on the insurer's contribution. Product liability reserves at June 30, 1996 are $6.4 million; $3.1 million reserved specifically for the 37 cases referenced above, and $3.3 million for incurred but not reported claims. These reserves were estimated using actuarial methods. 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 claims. It is reasonably possible that the estimates for environmental remediation and product liability costs may change in the near future based upon new information which may arise. 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. Note 4. In the transition period ended December 31, 1994, resulting from the Company's change in fiscal years, the Company's decision to consolidate the large-crane manufacturing to a single site resulted in a $14 million charge to earnings in the cranes and related products segment. The charge included a $9.4 million write-down of the facility being abandoned and estimated holding costs of $4.6 million while the plant is being marketed. It is reasonably possible that the estimate for future holding costs of the facility may change in the future. The assets currently held for sale include land and improvements, buildings, and certain machinery and equipment at the "Peninsula facility" located in Manitowoc, Wisconsin. The current carrying value of these assets, determined through independent appraisals, is approximately $3 million and is included in intangibles and other. The future holding costs, included in accounts payable and accrued expenses and in other non-current liabilities, consist primarily of utilities, security, maintenance, property taxes, insurance, and demolition costs for various buildings. Future holding costs also include estimates for various environmental studies on the Peninsula location. To date, $1.5 million has been paid and charged against these reserves, including $.2 million and $.9 million during the second quarter and six months ended June 30, 1996, respectively. Note 5. On December 1, 1995, the Company completed the purchase of the outstanding common stock of The Shannon Group, Inc. ("Shannon"). Shannon is a manufacturer of commercial refrigerators, freezers and related products, ranging from small under-counter units to 300,000 square foot refrigerated warehouses. Among its wide range of products, Shannon is best known for its foamed-in-place walk-in refrigeration units, wood rail walk-in units, refrigerated food-prep tables, reach-in refrigerator/freezers and modular refrigeration systems. The aggregate consideration paid by the Company for Shannon was $127.0 million, which is net of cash acquired of $.7 million, and which includes an amount due to a seller of $19.8 million which was paid in January, 1996, direct acquisition costs of $2.7 million, and other assumed liabilities of $1.3 million. The transaction was financed through credit facilities provided under a Credit Agreement dated December 1, 1995. The acquisition has been recorded using the purchase method of accounting. The cost of the acquisition has been allocated on the basis of the estimated fair value of the assets acquired and the liabilities assumed. The preliminary estimate of the excess of the cost over the fair value of net assets acquired is $88.3 million, and is being amortized over 32 years. The results of operations since the date of acquisition are included in the Consolidated Statements of Earnings. Note 6. On June 14, 1996, the company announced a three-for-two stock split in the form of a 50-percent stock dividend which was effective July 2 to shareholders of record on June 25. Adjusting for the split, the company now has 11.5 million shares outstanding. As a result of the stock split, all earnings and dividend per share amounts and average shares outstanding, appearing herein, have been retroactively adjusted to give effect of the stock split. Note 7. Certain reclassifications have been made to the financial statements of prior years to conform to the presentation for 1996. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for the Quarter and Six Months Ended June 30, 1996 and 1995. - -------------------------------------------------------------------------- <TABLE> <CAPTION> Net sales and earnings from operations by business segment for the quarter and six months ended June 30, 1996 and 1995 are shown below (in thousands): QUARTER ENDED YEAR-TO-DATE June 30, June 30, June 30, June 30, 1996 1995 1996 1995 -------- -------- -------- -------- <S> <C> <C> <C> <C> NET SALES: Foodservice products $ 67,526 $ 30,625 $ 120,126 $ 55,514 Cranes & related products 52,368 37,395 102,502 74,286 Marine 19,325 14,267 30,690 21,588 --------- ------- --------- -------- Total $ 139,219 $ 82,287 $ 253,318 $ 151,388 EARNINGS (LOSS) FROM OPERATIONS: Foodservice products 11,260 7,349 18,264 12,087 Cranes & related products 4,850 (297) 8,403 (1,874) Marine 3,616 3,655 4,801 5,074 General corporate expense (1,924) (1,602) (3,712) (3,163) Amortization (750) 0 (1,500) 0 --------- ------- -------- ------- Total $ 17,052 $ 9,105 $ 26,256 $ 12,124 </TABLE> Net sales for the quarter ended June 30, 1996, were $139.2 million, up 69 percent compared with the second quarter of 1995. Operating earnings nearly doubled to $17.1 million, while net earnings grew to $8.8 million, or 76 cents per share, a 63 percent increase from the $5.4 million, and 47 cents per share, earned in the second quarter of 1995. For the first six months of 1996, net sales totaled $253.3 million, up 67 percent from $151.4 million in the first half of last year. Net earnings rose 80 percent from those of the first six months in 1995. Net earnings for the 1996 period were $12.9 million, equal to $1.12 per share, compared with $7.2 million, and 62 cents per share, for 1995. The improvements continue to be sparked by strong sales and a sharp turnaround in operating earnings by the crane segment. Sales and operating earnings for the foodservice products segment were $67.5 million and $11.3 million, respectively, for the second quarter of 1996, compared to $30.6 million and $7.3 million for 1995. The gain in sales was due largely to the addition of refrigeration equipment sales by the Kolpak, Tonka and McCall units. Comparable ice machine and reach-in sales by Manitowoc Equipment Works (MEW) were 11% higher than those of the second quarter in 1995. Year to date sales and earnings were $120.1 million and $18.3 million, respectively. Cranes and related products sales for the second quarter increased 40% over the same period last year. Operating earnings were $4.9 million and $8.4 million for the second quarter and first six months of 1996, respectively, compared to losses of $.3 million and $1.9 million for the same periods last year. Manitex continues to see improved earnings and West-Manitowoc contributed its first profitable quarter. Orders for cranes and related products continue to be strong from both domestic and international sources. As of June 30, 1996, the backlog of unfilled orders stood at $91.3 million, despite an increased level of shipments. Second quarter sales in the Marine segment rose to $19.3 million, a 35% increase over the $14.3 million recorded during the second quarter last year. The increase was due to a busy winter repair season and the ongoing construction of a new self-unloading cement barge. Earnings for the quarter stood at $3.6 million compared earnings of $3.7 million during the same period last year. Marine operating margin was down slightly, due to a shift in repair and service mix. Management expects continued gains in the second half of 1996. However, the level of improvement will probably not equal that of the first half, due to the lower level of profitability expected in the fourth quarter. Last year's fourth quarter included shipment of an M-1200 RINGER that added significantly to the crane segment's sales and operating margin. The company continues to generate strong positive cash flow. At the end of the quarter, the company had no borrowings under its revolving credit lines. Indebtedness under the six-year term loan facility stood at $121 million, including the current portion. During the quarter, the total indebtedness decreased by $24 million. Financial Condition at June 30, 1996 - -------------------------------------- The Company's financial condition remains strong. Cash and marketable securities of $20 million and future cash flows from operations are adequate to meet the Company's liquidity requirements for the foreseeable future, including payments for long-term debt, costs associated with the plant consolidation, and capital expenditures. This Management's Discussion and Analysis, as well as certain other parts of this Report on Form 10-Q, contain forward looking statements that involve a number of risks and uncertainties. Such statements are based on management's current expectations. The company cautions that such statements are further qualified by important factors that could cause actual results to differ materially from those in the forward looking statements. PART II. OTHER INFORMATION ---------------------------------------- Item 4. Submission of Matters to a Vote of Security Holders ----------------------------------------------------- At the annual meeting of the Company's shareholders on May 7, 1996, pursuant to Proposal 1, management's nominees named below were elected as directors, of the class whose term expires in 1999, by the indicated votes cast for and withheld with respect to each nominee. Of the 6,930,690 shares of Common Stock which were represented at the meeting, at least 90.3% of the shares voting were voted for the election of each of management's nominees, as follows: Name of Nominee For Withheld - --------------- ---- --------- Dean H. Anderson 6,860,128 70,562 James P. McCann 6,875,166 55,524 Robert S. Throop 6,875,791 54,899 There were no abstentions or broker non-votes with respect to the election of directors. In addition to the directors elected at the meeting, the Company's continuing directors are Gilbert F. Rankin, Fred M. Butler, George T. McCoy, and Guido R. Rahr, Jr. In addition, shareholders voted to approve two other proposals. Under Proposal 2, shareholders approved the Company's 1995 Stock Plan. Under Proposal 3, shareholders approved an amendment to increase by 100,000 the number of shares that may be issued under the Company's Deferred Compensation Plan. The votes on those two proposals were as follows: Broker Proposal For Against Abstain Non-Votes - -------- ---- ------- -------- --------- #2 (1995 Stock Plan) 4,442,234 1,826,753 172,431 489,272 #3 (Number of Shares) 6,106,593 208,740 126,085 489,272 Further information concerning the matters voted upon at the 1996 Annual Meeting of Shareholders is contained in the Company's proxy statement dated April 27, 1996 with respect to the 1996 annual meeting. 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: During the second quarter ended June 30, 1996, a report on Form 8-K dated as of June 14, 1996 was filed stating that the Board of Directors of The Manitowoc Company, Inc. declared a three-for-two stock split of the company's common shares in the form of a 50 percent stock dividend. 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/ Fred M. Butler ------------------------ Fred M. Butler Chief Executive Officer /s/ Robert R. Friedl ------------------------- Robert R. Friedl Chief Financial Officer /s/ E. Dean Flynn ------------------------ E. Dean Flynn Secretary August 13, 1996 THE MANITOWOC COMPANY, INC. EXHIBIT INDEX TO FORM 10-Q FOR QUARTERLY PERIOD ENDED June 30, 1996 Exhibit Filed No Description Herewith - ------- ----------- -------- 10 The Manitowoc Company, Inc. Management Incentive Compensation Plan, as amended May 7, 1996 X 27 Financial Data Schedule X