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 September 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 South 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 September 30, 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 Third Quarter of Calendar Years 1996 and 1995 (Unaudited) (In thousands, except per-share and average shares data) QUARTER ENDED YEAR-TO-DATE Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1996 1995 1996 1995 --------- --------- --------- --------- <S> <C> <C> <C> <C> Net Sales $132,042 $80,088 $385,360 $231,476 Costs And Expenses: Cost of goods sold 95,264 62,077 282,054 176,343 Engineering, selling and administrative expenses 20,652 12,635 60,924 37,633 -------- -------- -------- -------- Total 115,916 74,712 342,978 213,976 Earnings From Operations 16,126 5,376 42,382 17,500 Other Income (Expense): Interest Expense (2,294) (291) (7,313) (1,010) Interest and dividend income 240 (43) 358 4 Other income 152 653 317 647 -------- -------- -------- -------- Total (1,902) 319 (6,638) (359) -------- -------- -------- -------- Earnings Before Taxes On Income 14,224 5,695 35,744 17,141 Provision For Taxes On Income 5,690 2,105 14,298 6,397 -------- -------- -------- -------- Net Earnings $ 8,534 $ 3,590 $ 21,446 $ 10,744 -------- -------- -------- -------- Net Earnings Per Share $ .74 $ .31 $ 1.86 $ .93 Dividends Per Share $ .17 $ .17 $ .50 $ .50 Average Shares Outstanding 11,511,357 11,511,357 11,511,357 11,511,357 See accompanying notes which are an integral part of these statements. </TABLE> <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Balance Sheets As of September 30, 1996 and December 31, 1995 (In thousands, except share data) - ASSETS - Unaudited Audited Sept. 30, Dec. 31, 1996 1995 ---------- ----------- <S> <C> <C> Current Assets: Cash and cash equivalents $ 27,812 $ 15,077 Marketable securities 1,640 1,558 Accounts receivable 55,295 51,011 Inventories 44,266 52,928 Prepaid expenses and other 1,428 3,451 Future income tax benefits 10,743 11,120 --------- ---------- Total current assets 141,184 135,145 Intangible assets 89,948 92,433 Other assets 14,089 9,663 Property, plant and equipment: At cost 189,043 188,755 Less accumulated depreciation (103,284) (101,081) --------- ---------- Property, plant and equipment-net 85,759 87,674 --------- ---------- TOTAL $ 330,980 $ 324,915 --------- ---------- -LIABILITIES AND STOCKHOLDERS' EQUITY- Current Liabilities: Accounts payable and accrued expenses $ 76,578 $ 66,028 Current portion of long-term debt 31,955 10,089 Short term borrowings 0 26,807 Income taxes payable 6,883 1,503 Product warranties 8,859 6,496 --------- --------- Total current liabilities 124,275 110,923 Non-Current Liabilities: Long-term debt less current portion 79,265 101,180 Product warranties 3,756 4,199 Post-retirement health benefits obligations 19,490 19,190 Other 6,778 7,762 --------- --------- Total non-current liabilities 109,289 132,331 --------- --------- 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 (415) (479) Retained earnings 148,109 132,418 Treasury stock at cost(4,820,413 and 3,213,379 shares) (81,502) (81,502) --------- --------- Total stockholders' equity 97,416 81,661 --------- --------- TOTAL $ 330,980 $ 324,915 --------- --------- 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 Nine Months Ended September 30, 1996 and 1995 (In thousands) (Unaudited) Sept. 30, 1996 Sept. 30, 1995 -------------- ------------- <S> <C> <C> Cash Flows From Operations: Net earnings $ 21,446 $ 10,744 Non-cash adjustments to income: Depreciation and amortization 8,656 4,729 Deferred income taxes (3,726) (1,857) Gain on sale of fixed assets (31) (987) Changes in operating assets and liabilities: Accounts receivable (4,284) (12,712) Inventories 8,662 (1,985) Other current assets 2,024 1,465 Current liabilities 18,296 9,049 Non-current liabilities (599) 1,620 Deferred income (528) (2,199) Non-current asset (324) (234) --------- --------- Net cash provided by operations 49,592 7,633 Cash Flows From Investing: Sale (purchase) of temporary investments - net (82) 8,866 Proceeds from sale of property, plant, and equipment 1,343 3,702 Capital expenditures (5,558) (17,375) --------- --------- Net cash used for investing (4,297) (4,807) Cash Flows From Financing: Dividends paid (5,756) (5,756) Proceeds from long-term borrowings 15,000 0 Payments on long-term borrowings (15,049) 0 Change in short-term borrowings - net (26,807) 9,701 --------- --------- Net cash provided by (used for) financing (32,612) 3,945 Effect of exchange rate changes on cash 52 54 --------- --------- Net increase in cash and cash equivalents 12,735 6,825 Balance at beginning of year 15,077 4,118 --------- --------- Balance at end of period $ 27,812 $ 10,943 --------- --------- Supplemental cash flow information: Interest paid $ 2,526 $ 992 Income taxes paid 11,594 4,823 See accompanying notes which are an integral part of these statements. </TABLE> THE MANITOWOC COMPANY, INC. Notes to Unaudited Consolidated Financial Statements For the Nine Months Ended September 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 nine months ended September 30, 1996 and 1995, the financial position at September 30, 1996 and the changes in the cash flows for the nine months ended September 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 September 30, 1996 and December 31, 1995 are summarized as follows (dollars in thousands): Sept. 30, Dec. 31, 1996 1995 ----------- ----------- <S> <C> <C> Components: Raw materials $ 27,438 $ 22,809 Work-in-process 16,200 18,868 Finished goods 21,755 31,711 --------- --------- Total inventories at FIFO costs 65,393 73,388 Excess of FIFO costs over LIFO value (21,127) (20,460) --------- --------- Total inventories $ 44,266 $ 52,928 </TABLE> Inventory is carried at lower of cost or market using the first-in, first-out (FIFO) method for 59% and 60% of total inventory at September 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 nine months ended September 30, 1996. As of September 30, 1996, 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 and $16.0 million limit on the insurer's contribution. Product liability reserves at September 30, 1996 are $6.7 million; $2.8 million reserved specifically for the 30 cases referenced above, and $3.9 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 always possible that the estimates for environmental remediation and product liability costs may change in the near future based upon new information which could 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 year-end, the Company's decision to consolidate large-crane manufacturing to a single site resulted in a $14 million pre-tax 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 site is being marketed. 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 other assets. 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 $0.9 million during the nine months ended September 30, 1996. There were no payments charged against the reserve during the third quarter of 1996. 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 $0.7 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 approximately 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 Nine Months Ended September 30, 1996 and 1995. - ---------------------------------------------------------------------- <TABLE> <CAPTION> Net sales and earnings from operations by business segment for the quarter and nine months ended September 30, 1996 and 1995 are shown below (in thousands): QUARTER ENDED YEAR-TO-DATE Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1996 1995 1996 1995 -------- --------- -------- ----------- <S> <C> <C> <C> <C> NET SALES: Foodservice products $ 67,194 $ 29,781 $187,320 $ 85,295 Cranes & related products 53,997 45,787 156,499 120,073 Marine 10,851 4,520 41,541 26,108 -------- -------- -------- -------- Total $132,042 $ 80,088 $385,360 $231,476 EARNINGS (LOSS) FROM OPERATIONS: Foodservice products $ 10,904 $ 6,771 $ 29,168 $ 18,858 Cranes and related products 6,506 829 14,909 (1,045) Marine 1,369 (347) 6,170 4,727 General corporate expense (1,903) (1,877) (5,615) (5,040) Amortization (750) 0 (2,250) 0 -------- -------- -------- -------- Total $ 16,126 $ 5,376 $ 42,382 $ 17,500 </TABLE> Net sales for the quarter ended September 30, 1996, were $132.0 million, up 65% from $80.1 million for the third quarter of 1995. Net earnings were $8.5 million, or 74 cents per share, compared with $3.6 million, equal to 31 cents per share, earned in the third quarter of 1995, an increase of 137%. This represents the fourth consecutive quarter in which the company has shown an improvement in year-over- year quarterly earnings. For the first nine months, net sales increased 66% to $385.4 million in 1996 from $231.5 million in 1995. Earnings for the same period in 1996 were double those of 1995 - $21.4 million and $1.86 per share, compared with $10.7 million and 93 cents per share. Cranes and related products sales for the third quarter increased 18% over the same period last year. Operating earnings were $6.5 million and $14.9 million for the third quarter and first nine months of 1996, respectively, compared to quarterly earnings of $0.8 million and a year-to-date loss of $1.0 million for 1995. Every unit within the crane segment has contributed to the gain. In addition to continued productivity improvements during the quarter, the crane segment continues to benefit from the introduction of new crane models and a good boom-truck market. As of September 30, 1996, the backlog of unfilled crane segment orders stood at a record $145 million. Sales and operating earnings for the foodservice products segment were $67.2 million and $10.9 million, respectively, for the third quarter of 1996, compared to $29.8 million and $6.8 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 5% higher than those of the third quarter in 1995. The on-going introduction of the first CFC-free ice cube machines bodes well for continuing the recent gains in market share. 1996 year-to-date sales and earnings were $187.3 million and $29.2 million, respectively, versus $85.3 million and $18.9 million, respectively, for the nine months ended September 30, 1996. Third quarter sales in the Marine segment were $10.9 million, compared with $4.5 million recorded during the third quarter last year. Keying this quarter's earnings was a self-unloading cement barge which was delivered at a better margin than originally forecast. Earnings for the quarter stood at $1.4 million compared to an operating loss of $0.3 million during the same period last year. In addition, shipping activity on the Great Lakes continues at a high level, which is a positive indicator for this part of the business. The company continues to generate strong positive cash flow. At the end of the quarter, the company had no revolving debt against its credit lines. Indebtedness under the six-year term facility stood at $111 million, including the current portion. During the quarter, the total indebtedness decreased by $10 million. Financial Condition at September 30, 1996 - ------------------------------------------ The Company's financial condition remains strong. Cash and marketable securities of $29.4 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 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: On August 7, 1996, the Company filed a Current Report on Form 8-K reporting, pursuant to Item 5 of such Form, the August 5, 1996 declaration by the Company's Board of Directors of a dividend distribution of one Right for each outstanding share of Common Stock, par value $0.01 per share, of the Company to shareholders of record at the close of business on September 19, 1996. 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 President and Chief Executive Officer /s/ Robert R. Friedl ---------------------------- Robert R. Friedl Senior Vice President and Chief Financial Officer /s/ E. Dean Flynn ---------------------------- E. Dean Flynn Secretary October 31, 1996 THE MANITOWOC COMPANY, INC. EXHIBIT INDEX TO FORM 10-Q FOR QUARTERLY PERIOD ENDED September 30, 1996 Exhibit Filed No Description Herewith - ------ --------------------------- ------------ 4 First Amendment to Credit Agreement, dated as of September 30, 1996 X 27 Financial Data Schedule X