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, 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
------------------------------- ------------------------
(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 June 30, 1997, the most recent practicable date, was
17,267,035.
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, 1997 and 1996
(Unaudited)
(In thousands, except per-share and average shares data)
QUARTER ENDED YEAR-TO-DATE
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $144,985 $139,219 $261,026 $253,318
Costs And Expenses:
Cost of goods sold 103,156 101,328 187,189 186,790
Engineering, selling and
administrative expenses 21,108 20,839 41,815 40,272
-------- ------- ------- --------
Total 124,264 122,167 229,004 227,062
Earnings From Operations 20,721 17,052 32,022 26,256
Other Income (Expense):
Interest expense (1,608) (2,557) (2,732) (5,019)
Interest & dividend income 13 67 81 118
Other income (expense) (190) 98 (153) 165
------- ------- ------- -------
Total (1,785) (2,392) (2,804) (4,736)
------- ------- ------- -------
Earnings Before Taxes
On Income 18,936 14,660 29,218 21,520
Provision For Taxes
On Income 7,007 5,862 10,811 8,608
------- ------- ------ --------
Net Earnings $ 11,929 $ 8,798 $ 18,407 $ 12,912
------- ------- ------- --------
Net Earnings Per Share * $ .69 $ .51 $ 1.07 $ .75
Dividends Per Share * $ .11 $ .11 $ .22 $ .22
Average Shares Outstanding 17,267,035 17,267,035 17,267,035 17,267,035
<FN>
See accompanying notes which are an integral part of these statements.
*1996 amounts have been restated to reflect the retroactive effect of the
June 30, 1997 3-for-2 stock split. See Note 5 for discussion
of the stock split.
</FN>
</TABLE>
<TABLE>
<CAPTION>
THE MANITOWOC COMPANY, INC.
Consolidated Balance Sheets
As of June 30, 1997 and December 31, 1996
(Unaudited)
(In thousands, except share data)
-ASSETS-
June 30, 1997 Dec. 31, 1996
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,627 $ 14,364
Marketable securities 1,686 1,657
Accounts receivable 60,330 53,876
Inventories 53,056 43,978
Prepaid expenses and other 1,167 1,281
Future income tax benefits 12,719 12,719
-------- ---------
Total current assets 136,585 127,875
Intangible assets-net 90,490 92,200
Other assets 12,708 12,932
Property, plant and equipment:
At cost 195,042 189,383
Less accumulated depreciation (108,541) (104,680)
-------- ---------
Property, plant and equipment-net 86,501 84,703
-------- ---------
TOTAL $ 326,284 $ 317,710
-------- ---------
-LIABILITIES AND STOCKHOLDERS' EQUITY-
Current Liabilities:
Accounts payable and accrued expenses $ 83,251 $ 88,131
Current portion of long-term debt 13,032 11,064
Short term borrowings 2,200 0
Other current liabilities 14,328 11,107
-------- --------
Total current liabilities 112,811 110,302
Non-Current Liabilities:
Long-term debt less current portion 69,014 76,501
Product warranties 4,860 4,914
Post-retirement health benefits obligations 19,546 19,455
Other 5,298 6,209
------- --------
Total non-current liabilities 98,718 107,079
------- --------
Stockholders' Equity:
Common stock (24,497,655 and 16,331,770
shares issued) 245 163
Additional paid-in capital 30,979 31,061
Cumulative foreign currency translation
adjustments 75 220
Retained earnings 164,958 150,387
Treasury stock at cost (7,230,620
and 4,820,413 shares) (81,502) (81,502)
------- --------
Total stockholders' equity 114,755 100,329
------- --------
TOTAL $326,284 $ 317,710
------- --------
<FN>
See accompanying notes which are an integral part of these statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
THE MANITOWOC COMPANY, INC.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1997 and 1996
(In thousands)
(Unaudited)
June 30, 1997 June 30, 1996
------------ ------------
<S> <C> <C>
Cash Flows From Operations:
Net earnings $ 18,407 $ 12,912
Non-cash adjustments to income:
Depreciation and amortization 5,493 5,616
Deferred financing fees 150 150
Loss on sale of fixed assets 143 57
Changes in operating assets and liabilities:
Accounts receivable (6,454) (4,749)
Inventories (9,078) 3,994
Other current assets 114 1,770
Current liabilities (1,737) 8,841
Non-current liabilities (874) (1,481)
Non-current assets 185 (438)
------- -------
Net cash provided by operations 6,349 26,672
Cash Flows From Investing:
Purchase of temporary investments (29) (49)
Proceeds from sale of property,
plant, and equipment 12 1,001
Capital expenditures (5,886) (3,461)
------- -------
Net cash used for investing (5,903) (2,509)
Cash Flows From Financing:
Dividends paid (3,837) (3,837)
Proceeds from long-term borrowings 0 15,000
Payments on long-term borrowings (5,519) (5,046)
Change in short-term borrowings - net 2,200 (26,807)
------- -------
Net cash used for financing (7,156) (20,690)
Effect of exchange rate changes on cash (27) (4)
------- -------
Net decrease/ increase in cash
and cash equivalents (6,737) 3,469
Balance at beginning of year 14,364 15,077
------- -------
Balance at end of period $ 7,627 $ 18,546
------- -------
Supplemental cash flow information:
Interest paid $ 3,504 $ 3,817
Income taxes paid 8,966 5,410
<FN>
See accompanying notes which are an integral part of these statements.
</FN>
</TABLE>
THE MANITOWOC COMPANY, INC.
Notes to Unaudited Consolidated Financial Statements
For the Six Months Ended June 30, 1997 and 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 quarter and six months
ended June 30, 1997 and 1996, the financial position at June 30,
1997 and the changes in the cash flows for the six months ended
June 30, 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 June 30, 1997 and December 31,
1996 are summarized as follows (dollars in thousands):
June 30, December 31,
1997 1996
--------- -----------
<S> <C> <C>
Components:
Raw materials $ 22,129 $ 20,153
Work-in-process 22,707 19,447
Finished goods 30,173 25,725
-------- --------
Total inventories at
FIFO costs 75,009 65,325
Excess of FIFO costs
over LIFO value (21,953) (21,347)
-------- --------
Total inventories $ 53,056 $ 43,978
</TABLE>
Inventory is carried at lower of cost or market using the first-
in, first-out (FIFO) method for 58% and 56% of total inventory
for June 30, 1997 and December 31, 1996, 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.
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 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. To
date, the company has expensed $3.3 million in connection with
this matter. The Company expensed $.2 million in 1996 and $.2
million in 1995. There were no expenses incurred during the
first six months ended June 30, 1997 and 1996. Remediation work
at the Site has been completed, with only long-term pumping and
treating of ground water and Site maintenance remaining.
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 June 30, 1997, 28 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, 1997 are $6.9 million;
$2.7 million reserved specifically for the 28 cases referenced
above, and $4.2 million for incurred but not reported claims.
These reserves were estimated using actuarial methods. The
highest current reserve for a non-insured claim is $0.2 million,
and $0.4 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 second quarter
and first six months of 1997, $.1 million was charged against the
reserve.
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. These reserves 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 second quarter and first
six months of 1997, $10,000 and $.1 million, respectively, was
charged against the reserve as compared with $.2 million and $.9
million for the second quarter and first six months of 1996.
Note 5.
On May 19, 1997, the company`s board of directors authorized a 3-
for-2 stock split of the company's common stock in the form of a
50-percent stock dividend payable on June 30, 1997 to
shareholders of record on June 2, 1997. As a result of the stock
split, a total of 5,755,678 shares of the company's common stock
were issued. All references in the financial statements to
average number of common shares outstanding and related earnings
per share amounts have been restated to reflect the split. The
company last split its stock, also on a 3-for-2 basis, on July 2,
1996.
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 Quarter and Six Months Ended
June 30, 1997 and 1996
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Net sales and earnings from operations by business segment for the quarter
and six months ended June 30, 1997 and 1996 are shown below (in thousands):
QUARTER ENDED YEAR-TO-DATE
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
NET SALES:
Foodservice products $ 65,941 $ 67,526 $118,450 $120,126
Cranes & related products 63,866 52,368 120,209 102,502
Marine 15,178 19,325 22,367 30,690
-------- ------- -------- --------
Total $144,985 $139,219 $261,026 $253,318
EARNINGS (LOSS) FROM OPERATIONS:
Foodservice products $ 11,437 $ 11,260 $ 17,613 $ 18,264
Cranes & related products 9,493 4,850 16,430 8,403
Marine 2,880 3,616 3,907 4,801
General corporate expense (2,309) (1,924) (4,368) (3,712)
Amortization (780) (750) (1,560) (1,500)
--------- ------- -------- --------
Total $ 20,721 $ 17,052 $ 32,022 $ 26,256
</TABLE>
Net sales for the quarter ended June 30, 1997, were $145.0 million, up 4
percent compared with the second quarter of 1996. Net earnings grew to
$11.9 million, or 69 cents per share, a 36 percent increase from the $8.8
million, and 51 cents per share, earned in the second quarter of 1996.
For the first six months of 1997, net sales grew 3 percent to $261.0
million compared to sales of $253.3 million in the prior-year period.
However, net earnings jumped a dramatic 43 percent to $18.4 million in the
first half of 1997 - equal to $1.07 per share. In the same 1996 period,
net earnings were $12.9 million, equal to 75 cents per share. Per share
earnings are on a post-split basis.
Second quarter sales of foodservice equipment were $65.9 million, down
about 2 percent from a year ago, but operating profit for this segment rose
2 percent to $11.4 million. These results represent the first year-over-
year operating margins improvement since the Shannon Group acquisition was
made in December 1995. The company is continuing to work at refining and
strengthening the Kolpak, McCall, and Tonka operations to capitalize on the
synergy and cost-saving opportunities that exist in combining the ice
machine and commercial refrigeration businesses. Year to date sales and
earnings were $118.4 million and $17.6 million, respectively, compared with
$120.1 million and $18.3 million in 1996.
Cranes and related products sales for the second quarter increased 22
percent over the same period last year. Operating earnings were $9.5
million and $16.4 million for the second quarter and first six months of
1997, respectively, compared with earnings of $4.9 million and $8.4 million
for the same periods last year. A generally strong world market, coupled
with a $152 million backlog of unfilled orders plus the favorable market
reception of recently introduced cranes, suggests the outlook for this
business will remain positive for the next several years.
Sales for the company's marine segment were 22 percent below those of the
second quarter last year. Operating earnings were off 20 percent. Docking
fees are down from those of last year due to fewer dockings in total and
partially from the Coast Guard's recent decision to lengthen the inspection
interval for Great Lakes vessels from every five years to every six years.
In addition, the marine segment benefited from a large cement barge
construction project in 1996. The loss of that business has been offset
somewhat in 1997 by a major ship-conversion project now in progress.
Interest expense continues to decline in line with reduced debt and lower
interest rates than in 1996. As of June 30, 1997, the company's total debt
stood at $84 million and its second quarter tax rate from the first quarter
at 37 percent.
Financial Condition at June 30, 1997
- -------------------------------------
The Company's financial condition remains strong. Cash and marketable
securities of $9.3 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 for long-term debt, costs
associated with the plant consolidation, and 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
--------------------------------
Item 4. Submission of Matters to a Vote of Security Holders
----------------------------------------------------
At the annual meeting of the company's shareholders on May 6, 1997,
pursuant to Proposal 1, management's nominees named below were elected as
directors, of the class whose term expires in 2000, by the indicated votes
cast for and withheld with respect to each nominee. Of the 10,590,337
shares of Common Stock which were represented at the meeting, at least
91.99 percent of the shares voting were voted for the election of each of
management's nominees, as follows:
<TABLE>
<CAPTION>
Name of Nominee For Withheld
- ---------------- --- --------
<S> <C> <C>
Fred M. Butler 9,952,147 638,190
George T. McCoy 9,949,671 640,666
Guido R. Rahr, Jr. 9,957,338 632,999
</TABLE>
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, Dean H. Anderson,
James P. McCann, and Robert S. Throop.
Further information concerning the matters voted upon at the 1997 Annual
Meeting of Shareholders is contained in the company's proxy statement dated
April 1, 1997 with respect to the 1997 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, 1997,
a report on Form 8-K dated as of May 19, 1997 was filed stating that
the Board of Directors of The Manitowoc Company, Inc. declared a 3-
for-2 stock split of the company's common stock in the form of a 50
percent stock dividend payable on June 30, 1997.
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
July 28, 1997
THE MANITOWOC COMPANY, INC.
EXHIBIT INDEX
TO FORM 10-Q
FOR QUARTERLY PERIOD ENDED
June 30, 1997
Exhibit Filed
No Description Herewith
- ------- --------------- ------------
27 Financial Data Schedule X
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7627
<SECURITIES> 1686
<RECEIVABLES> 61394
<ALLOWANCES> 1064
<INVENTORY> 53056
<CURRENT-ASSETS> 136585
<PP&E> 195042
<DEPRECIATION> 108541
<TOTAL-ASSETS> 326284
<CURRENT-LIABILITIES> 112811
<BONDS> 0
0
0
<COMMON> 245
<OTHER-SE> 114510
<TOTAL-LIABILITY-AND-EQUITY> 326284
<SALES> 261026
<TOTAL-REVENUES> 261026
<CGS> 187189
<TOTAL-COSTS> 229004
<OTHER-EXPENSES> (153)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2732
<INCOME-PRETAX> 29218
<INCOME-TAX> 10811
<INCOME-CONTINUING> 18407
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18407
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
