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, 1997
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-11978
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The Manitowoc Company, Inc.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0448110
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 So. 16th Street, Manitowoc, Wisconsin 54220
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(Address of principal executive offices) (Zip Code)
(414) 684-4410
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(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 March 31, 1997, the most recent practicable date,
was 11,511,357.
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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<TABLE>
<CAPTION>
THE MANITOWOC COMPANY, INC.
Consolidated Statements of Earnings
For the First Quarter of Calendar Years 1997 and 1996
(Unaudited)
(In thousands, except per-share and average shares data)
March 31, 1997 March 31, 1996
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<S> <C> <C>
Net Sales $ 116,041 $ 114,099
Costs And Expenses:
Cost of goods sold 84,033 85,462
Engineering, selling and
administrative expenses 20,707 19,433
--------- --------
Total 104,740 104,895
Earnings From Operations 11,301 9,204
Other Income (Expense):
Interest expense (1,124) (2,462)
Interest and dividend income 68 51
Other income 37 67
--------- --------
Total (1,019) (2,344)
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Earnings Before Taxes
On Income 10,282 6,860
Provision For Taxes On Income 3,804 2,746
--------- --------
Net Earnings $ 6,478 $ 4,114
--------- --------
Net Earnings Per Share $ .56 $ .36
Dividends Per Share $ .17 $ .17
Average Shares Outstanding 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 March 31, 1997 and December 31, 1996
(Unaudited)
(In thousands, except share data)
-ASSETS-
March 31, December 31,
1997 1996
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 8,492 $ 14,364
Marketable securities 1,668 1,657
Accounts receivable 56,280 53,876
Inventories 53,349 43,978
Prepaid expenses and other 1,096 1,281
Future income tax benefits 12,719 12,719
--------- ---------
Total current assets 133,604 127,875
Intangibles assets-net 91,345 92,200
Other assets 12,942 12,932
Property, plant and equipment:
At cost 192,517 189,383
Less accumulated depreciation (106,663) (104,680)
--------- ---------
Property, plant and equipment-net 85,854 84,703
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TOTAL $323,745 $ 317,710
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-LIABILITIES AND STOCKHOLDERS' EQUITY-
Current Liabilities:
Accounts payable and accrued expenses $ 83,804 $ 90,967
Current portion of long-term debt 12,048 11,064
Short term borrowings 11,500 0
Product warranties 9,171 8,271
--------- ---------
Total current liabilities 116,523 110,302
Non-Current Liabilities:
Long-term debt, less current portion 72,758 76,501
Product warranties 4,837 4,914
Postretirement health benefits obligations 19,552 19,455
Other 5,404 6,209
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Total non-current liabilities 102,551 107,079
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Stockholders' Equity:
Common stock (16,331,770 shares
issued at both dates) 163 163
Additional paid-in capital 31,061 31,061
Cumulative foreign currency
translation adjustments 3 220
Retained earnings 154,946 150,387
Treasury stock at cost (4,820,413 shares
at both dates) (81,502) (81,502)
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Total stockholders' equity 104,671 100,329
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TOTAL $323,745 $317,710
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See accompanying notes which are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
THE MANITOWOC COMPANY, INC.
Consolidated Statement of Cash Flows
For the Three Months Ended March 31, 1997 and 1996
(In thousands)
(Unaudited)
March 31, March 31,
1997 1996
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<S> <C> <C>
Cash Flows From Operations:
Net earnings $ 6,478 $ 4,114
Non-cash adjustments to income:
Depreciation and amortization 2,793 2,765
Deferred financing fees 75 75
Loss on sale of fixed assets 31 --
Changes in operating assets and liabilities:
Accounts receivable (2,404) (6,756)
Inventories (9,371) (4,961)
Other current assets 185 (99)
Current liabilities (6,494) (1,391)
Non-current liabilities (707) (540)
Non-current assets (10) 478
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Net cash used for operations (9,424) (6,315)
Cash Flows From Investing:
Purchase of temporary investments - net (11) (16)
Proceeds from sale of property, plant,
and equipment 0 253
Capital expenditures (3,213) (1,292)
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Net cash used for investing (3,224) (1,055)
Cash Flows From Financing:
Dividends paid (1,919) (1,919)
Proceeds from long-term borrowings-net 0 15,000
Payments on long-term borrowings (2,759) (2,500)
Change in short-term borrowings-net 11,500 (5,607)
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Net cash provided by financing 6,822 4,974
Effect of exchange rate changes on cash (46) (103)
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Net decrease in cash
and cash equivalents (5,872) (2,499)
Balance at beginning of year 14,364 15,077
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Balance at end of period $ 8,492 $ 12,578
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Supplemental cash flow information:
Interest paid $ 1,904 $ 1,291
Income taxes paid $ 663 $ 330
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, 1997 and March 31, 1996
(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 quarters ended March
31, 1997 and 1996, the financial position at March 31, 1997 and
the changes in the cash flows for the quarters ended March 31,
1997 and 1996. 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,
1996.
Note 2.
<TABLE>
<CAPTION>
The components of inventory at March 31, 1997 and December 31,
1996 are summarized as follows (dollars in thousands):
March 31, December 31,
1997 1996
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<S> <C> <C>
Components:
Raw materials $ 20,641 $ 20,153
Work-in-process 24,582 19,447
Finished goods 29,796 25,725
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Total inventories at
FIFO costs 75,019 65,325
Excess of FIFO costs
over LIFO value (21,670) (21,347)
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Total inventories $ 53,349 $ 43,978
</TABLE>
Inventory is carried at lower of cost or market using the first-
in, first-out (FIFO) method for 56% of total inventory at March
31, 1997 and December 31, 1996. 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.
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
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. There were no
expenses incurred during the transition period ended December
31, 1994 and the first quarter ended March 31, 1997 and 1996.
The company adopted the AICPA Statement of Position (SOP) No.
96-1, "Environmental Remediation Liabilities" in the first
quarter of 1997. This SOP requires the company to accrue for
losses associated with environmental remediation obligations
when such losses are probable and reasonably estimable. Such
accruals are adjusted as information develops or circumstances
change. Costs of future expenditures for environmental
remediation obligations are not discounted to their present
value. The adoption of this SOP did not have a significant
effect on the financial statements.
As of March 31, 1997, 26 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 March 31, 1997 are $6.7 million;
$2.1 million reserved specifically for the 26 cases referenced
above, and $4.6 million for incurred but not reported claims.
These reserves were estimated using actuarial methods. The
highest current reserve for a non-insured claim is $0.3 million,
and $0.6 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 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. 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.
Note 4.
During the fourth quarter of 1996, the company's decision to
consolidate and close walk-in refrigeration plants located in
Iowa and Tennessee resulted in a $1.2 million charge to earnings
in the Foodservice segment. The charge includes a write-down to
the estimated net realizable values of the assets being
abandoned and takes into consideration future holding costs and
costs related to the sale of the properties. During the first
quarter of 1997, nothing was charged against the reserve.
In the transition period ended December 31, 1994, the company's
decision to consolidate its 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 facility 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 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 potential environmental liabilities on the Peninsula
location. During the years ended December 31, 1996 and 1995,
$1.1 million and $.6 million was paid and charged against these
reserves, respectively. For the first quarter of 1997 and 1996,
$.1 million and $.7 million, respectively, was charged against
the reserve.
Note 5.
On June 14, 1996, the company`s board of directors authorized a
three-for-two stock split in the form of a 50-percent stock
dividend payable on July 2, 1996 to shareholders of record on
June 25, 1996. A total of 3,836,889 shares were issued in
connection with the split and fractional shares were paid in
cash. All references in the financial statements to average
number of common shares outstanding and related earnings per
share amounts, market prices per share of common stock, and
stock option plan data have been restated to reflect the split.
Note 6.
Certain reclassifications have been made to the financial
statements of prior years to conform to the presentation for
1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations for the Quarters Ended March 31, 1997
and March 31, 1996
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<TABLE>
<CAPTION>
Net sales and earnings from operations by business segment for the quarter
ended March 31, 1997 and 1996 are shown below (in thousands):
March 31, 1997 March 31, 1996
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<S> <C> <C>
NET SALES:
Foodservice products $ 52,509 $ 52,600
Cranes and related products 56,343 50,134
Marine 7,189 11,365
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Total $ 116,041 $114,099
EARNINGS (LOSS) FROM OPERATIONS:
Foodservice products 6,176 7,004
Cranes and related products 6,937 3,553
Marine 1,027 1,185
General corporate expense (2,059) (1,788)
Amortization (780) (750)
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Total $ 11,301 $ 9,204
</TABLE>
First quarter net earnings were $6.5 million, or 56 cents per share, up
57% from the prior-year quarter when the company earned $4.1 million, or
36 cents per share. Sales for the quarter were $116.0 million, compared
with $114.1 million in the same period last year. The strong earnings
improvement was driven by higher sales and higher operating margins in
the crane business in addition to lower interest expense and a lower
tax rate.
Foodservice Equipment sales were $52.5 million for the quarter, showing
little change over the first quarter of 1996. Operating earnings dropped
12% to $6.2 million, from $7.0 million in 1996. A significant reason for
the lower margins is the costs associated with the new Nevada plant and
the consolidation of the Iowa and Tennessee facilities.
First quarter sales for the Crane segment were $56.3 million, compared to
$50.1 million for 1996. Crane segment operating earnings were $6.9
million, nearly double those of the first quarter last year. Most of the
improvement came from continuing productivity gains and higher margins on
the new products at the large-crane unit, which produces heavy-lift
lattice-boom models used primarily in crane rental and heavy construction
applications.
The crane backlog of unfinished orders climbed to approximately $145
million at the end of the quarter, as compared to $136 million at December
31, 1996. A majority of sales are being generated from products
introduced during the last three to four years. The backlog of boom
trucks at Manitex and of new West-Manitowoc cranes are both showing strong
gains.
Marine segment sales were $7.2 million, off 37% from the first quarter
last year when the company was in the midst of a major barge construction
project. Operating profits were $1.0 million, a decline of only 13%,
however, because of a change in product mix to a greater percentage of
higher margin services.
Interest expense was significantly lower than in the first quarter last
year because of an aggressive early repayment of debt during the last half
of 1996.
Bottom-line results also benefited from a tax rate of 37%, compared with a
40% rate for the same three months of last year. Management anticipates
the company will continue to benefit from lower state income taxes
throughout 1997.
Financial Condition at March 31, 1997
- --------------------------------------
The Company's financial condition remains strong. Cash and marketable
securities of $10.2 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, line of credit, costs
associated with the plant opening and consolidations, and anticipated
capital expenditures.
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: 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; demand for used
equipment in developing countries. Marine - shipping volume
fluctuations based on performance of the steel industry; five-year
drydocking schedule; reducing seasonality through non-marine repair work.
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
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a) Exhibits: See exhibit index following the signatures on this
Report, which is incorporated herein by reference.
b) Reports on form 8-K: A report on Form 8-K, dated as of February
19, 1997, was filed on March 4, 1997, stating that the Board of
Directors of The Manitowoc Company, Inc. decided to discontinue its
common stock repurchase program, effective immediately.
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
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E. Dean Flynn
Secretary
April 28, 1997
THE MANITOWOC COMPANY, INC.
EXHIBIT INDEX
TO FORM 10-Q
FOR QUARTERLY PERIOD ENDED
MARCH 31, 1997
Exhibit Filed
No Description Herewith
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27 Financial Data Schedule X
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 8492
<SECURITIES> 1668
<RECEIVABLES> 57261
<ALLOWANCES> 981
<INVENTORY> 53349
<CURRENT-ASSETS> 133604
<PP&E> 192517
<DEPRECIATION> 106663
<TOTAL-ASSETS> 323745
<CURRENT-LIABILITIES> 116523
<BONDS> 0
0
0
<COMMON> 163
<OTHER-SE> 104508
<TOTAL-LIABILITY-AND-EQUITY> 323745
<SALES> 116041
<TOTAL-REVENUES> 116041
<CGS> 84033
<TOTAL-COSTS> 104740
<OTHER-EXPENSES> (105)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1124
<INCOME-PRETAX> 10282
<INCOME-TAX> 3804
<INCOME-CONTINUING> 6478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6478
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
