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, 1997
-------------------------
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 South 16th Street, Manitowoc, Wisconsin 54220
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(Address of principal executive offices) (Zip Code)
(920) 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 September 30, 1997, the most recent
practicable date, was 17,267,035.
PART I. FINANCIAL INFORMATION
--------------------------------
1. Financial Statements
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<TABLE>
<CAPTION>
THE MANITOWOC COMPANY, INC.
Consolidated Statements of Earnings
For the Quarter and Nine Months Ended Calendar Years 1997 and 1996
(Unaudited)
(In thousands, except per-share and average shares data)
QUARTER ENDED YEAR-TO-DATE
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1997 1996 1997 1996
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $133,935 $132,042 $394,961 $385,360
Costs And Expenses:
Cost of goods sold 96,581 95,264 283,770 282,054
Engineering, selling and
administrative expenses 20,826 20,652 62,641 60,924
------ ------ ------ ------
Total 117,407 115,916 346,411 342,978
Earnings From Operations 16,528 16,126 48,550 42,382
Other Income (Expense):
Interest Expense (1,512) (2,294) (4,244) (7,313)
Interest and dividend income 145 240 226 358
Other income (expense) (49) 152 (202) 317
------- ------ ------- -------
Total (1,416) (1,902) (4,220) (6,638)
------- ------ ------- -------
Earnings Before Taxes
On Income 15,112 14,224 44,330 35,744
Provision For Taxes On Income 5,591 5,690 16,402 14,298
------- ------- ------- --------
Net Earnings $ 9,521 $ 8,534 $ 27,928 $ 21,446
------- ------- ------- --------
Net Earnings Per Share $ .55 $ .49 $1.62 $1.24
Dividends Per Share $ .11 $ .11 $ .33 $ .33
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.
</FN>
</TABLE>
<TABLE>
<CAPTION>
THE MANITOWOC COMPANY, INC.
Consolidated Balance Sheets
As of September 30, 1997 and December 31, 1996
(In thousands, except share data)
- ASSETS -
Unaudited Audited
Sept. 30, Dec. 31,
1997 1996
--------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 13,144 $ 14,364
Marketable securities 1,811 1,657
Accounts receivable 55,294 53,876
Inventories 56,617 43,978
Prepaid expenses and other 1,209 1,281
Future income tax benefits 11,954 12,719
-------- --------
Total current assets 140,029 127,875
Intangible assets - net 89,635 92,200
Other assets 13,641 12,932
Property, plant and equipment:
At cost 198,003 189,383
Less accumulated depreciation (110,503) (104,680)
-------- --------
Property, plant and equipment-net 87,500 84,703
-------- --------
TOTAL $330,805 $317,710
-------- --------
-LIABILITIES AND STOCKHOLDERS' EQUITY-
Current Liabilities:
Accounts payable and accrued expenses $ 89,523 $ 90,967
Current portion of long-term debt 14,016 11,064
Short term borrowings 0 0
Product Warranties 10,427 8,271
-------- --------
Total current liabilities 113,966 110,302
Non-current Liabilities:
Long-term debt less current portion 65,248 76,501
Product warranties 4,287 4,914
Post-retirement health benefits obligations 19,889 19,455
Other 5,223 6,209
------- --------
Total non-current liabilities 94,647 107,079
-------- --------
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 (66) 220
Retained earnings 172,536 150,387
Treasury stock at cost (7,230,620
and 4,820,413 shares) (81,502) (81,502)
-------- --------
Total stockholders' equity 122,192 100,329
-------- --------
TOTAL $330,805 $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 Nine Months Ended September 30, 1997 and 1996
(In thousands)
(Unaudited)
Sept. 30, Sept. 30,
1997 1996
---------- ----------
<S> <C> <C>
Cash Flows From Operations:
Net earnings $ 27,928 $ 21,446
Non-cash adjustments to income:
Depreciation and amortization 8,363 8,431
Deferred financing fees 225 225
Deferred income taxes 63 (3,726)
Gain (loss) on sale of fixed assets 157 (31)
Changes in operating assets
and liabilities:
Accounts receivable (1,418) (4,284)
Inventories (12,639) 8,662
Other current assets 72 2,024
Current liabilities (83) 18,296
Non-current liabilities (986) (599)
Deferred income 434 (528)
Non-current asset (59) (324)
------- -------
Net cash provided by operations 22,057 49,592
Cash Flows From Investing:
Purchase of temporary
investments - net (154) (82)
Proceeds from sale of property,
plant, and equipment 70 1,343
Capital expenditures (9,047) (5,558)
------- -------
Net cash used for investing (9,131) (4,297)
Cash Flows From Financing:
Dividends paid (5,780) (5,756)
Proceeds from long-term borrowings 0 15,000
Payments on long-term borrowings (8,301) (15,049)
Change in short-term borrowings - net 0 (26,807)
------- -------
Net cash used for financing (14,081) (32,612)
Effect of exchange rate changes on cash (65) 52
------- -------
Net increase (decrease) in cash
and cash equivalents (1,220) 12,735
Balance at beginning of year 14,364 15,077
------- -------
Balance at end of period $ 13,144 $ 27,812
------- -------
Supplemental cash flow information:
Interest paid $ 4,969 $ 5,975
Income taxes paid $ 17,029 $ 11,594
<FN>
See accompanying notes which are an integral part of these statements.
</FN>
THE MANITOWOC COMPANY, INC.
Notes to Unaudited Consolidated Financial Statements
For the Nine Months Ended September 30, 1997 and 1996
(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 for
the quarter and nine months ended September 30, 1997 and
1996, the financial position at September 30, 1997 and the
changes in the cash flows for the nine months ended
September 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>
<TABLE>
<CAPTION>
The components of inventory at September 30, 1997 and
December 31, 1996 are summarized as follows (dollars in
thousands):
September 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Components:
Raw materials $ 23,314 $ 20,153
Work-in-process 20,396 19,447
Finished goods 34,924 25,725
-------- --------
Total inventories at FIFO costs 78,634 65,325
Excess of FIFO costs
over LIFO value (22,017) (21,347)
--------- --------
Total inventories $ 56,617 $ 43,978
</TABLE>
Inventory is carried at lower of cost or market using the
first-in, first-out (FIFO) method for 64% and 60% of total
inventory at September 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 $3.4
million in connection with this matter. The Company
expensed $.1 million during the nine months ended September
30, 1997, $.2 million for the year ended December 31, 1996,
and an additional $.2 million in 1995. There were no
expenses incurred for the nine months ended September 30,
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 company's
financial statements.
As of September 30, 1997, 31 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, since which
time the company had 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, 1997 are $7.2
million; $3.4 million reserved specifically for the 31 cases
referenced above, and $3.8 million for incurred but not
reported claims. These reserves were estimated using
actuarial methods. The highest current reserve for a non-
insured claim is $.4 million, and $.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 and self-insured retentions
on 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 third quarter and first nine months
of 1997, $50,000, and $100,000 was charged against the
reserve, respectively.
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, and
the assets mentioned above, determined through independent
appraisals, is approximately $3.8 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 third
quarter and first nine months of 1997, $59,000 and $100,000,
respectively, was charged against the reserve.
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 also split its
common stock on a 3-for-2 basis on July 2, 1996.
Note 6.
On October 1, the company announced the signing of an
agreement to acquire the assets of SerVend International to
further expand the size and scope of it's foodservice
business. SerVend is one of the world's largest
manufacturers of ice/beverage dispensers and dispensing
valves for the soft-drink industry. The purchase is
expected to be completed by October 31 and will dilute
fourth-quarter earnings for the company by three to five
cents per share, after tax. However, SerVend is expected to
add five cents per share to 1998 earnings.
Note 7.
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 Nine Months Ended
September 30, 1997 and 1996.
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<TABLE>
<CAPTION>
Net sales and earnings from operations by business segment for the
quarter and nine months ended September 30, 1997 and 1996 are shown
below (in thousands):
QUARTER ENDED YEAR-TO-DATE
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1997 1996 1997 1996
-------- -------- --------- --------
<S> <C> <C> <C> <C>
NET SALES:
Foodservice products $ 67,099 $ 67,194 $185,549 $187,320
Cranes & related products 60,292 53,997 180,501 156,499
Marine 6,544 10,851 28,911 41,541
-------- ------ -------- --------
Total $133,935 $132,042 $394,961 $385,360
EARNINGS (LOSS) FROM
OPERATIONS:
Foodservice products $ 11,905 $ 10,904 $ 29,518 $ 29,168
Cranes & related products 6,892 6,506 23,322 14,909
Marine 544 1,369 4,451 6,170
General corporate expense (2,033) (1,903) (6,401) (5,615)
Amortization (780) (750) (2,340) (2,250)
------- ------ ------- -------
Total $ 16,528 $ 16,126 $ 48,550 $ 42,382
</TABLE>
Net earnings for the three months ended September 30, 1997, were $9.5
million, or 55 cents per share, compared with earnings of $8.5
million, equal to 49 cents per share in the same three months last
year. It was the eighth consecutive quarter in which the company has
had improved year-over-year quarterly earnings.
Net sales for the period totaled $134 million, up from $132 million in
the same quarter of 1996.
For the nine months, net earnings totaled $27.9 million, or $1.62 per
share, on sales of $395 million. In the same period of 1996, the
company earned $21.4 million, or $1.24 per share, on sales of $385
million.
Sales and operating earnings for the foodservice products segment were
$67.1 million and $11.9 million, respectively, for the third quarter
of 1997, compared to $67.2 million and $10.9 million for 1996. The
higher margin resulted primarily from lower material costs and steps
taken to enhance the profitability of the Shannon companies that were
acquired in late 1995. Year to date sales and earnings were $185.5
million and $29.5 million, respectively.
Manitowoc Ice recently introduced its new "Q-Model" line of ice
machines at a trade show in early September. The full line will be
available to dealers beginning in the spring of 1998. The new models
set an industry standard for aesthetic design and incorporate plastic
and stainless steel components for added durability and corrosion
resistance. In addition, all "Q" Models use environmentally
friendly refrigerants.
Cranes and related products sales for the third quarter increased 12%
over the same period last year, while year to date sales rose 15%.
Operating earnings were $6.9 million and $23.3 million for the third
quarter and first nine months of 1997, respectively, compared to $.6.5
million and $14.9 million for the same periods last year. The backlog
of unfilled crane orders remains strong at $148 million, up from $145
million at this time last year, in spite of an increase in shipments.
Earnings for the marine segment fell sharply from an exceptionally
strong quarter last year when Manitowoc Marine Group completed a major
contract for construction of a self-unloading cement barge that was
shipped during the third quarter. The ship conversion project that is
now underway at the Sturgeon Bay yard is not only smaller in size, but
will be completed later in the year so that most of it's contribution
will be realized in the fourth quarter of 1997.
Interest expense for the quarter and year-to-date continue to decline
in line with lower debt. At the end of the quarter, the company had
no outstanding revolving debt. Total debt stood at $79 million,
including the current portion, compared with $111 million a year
earlier.
The year-to-date tax rate for 1997 is 37%, compared with 40% in 1996.
Financial Condition at September 30, 1997
- --------------------------------------------
The Company's financial condition remains strong. Cash and marketable
securities of $14.9 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 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 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: Subsequent to the third quarter
ended September 30, a report on Form 8-K dated as of
October 1, 1997 was filed stating that the Company
issued a press release announcing that it entered into
an agreement to acquire the operations and assets of
SerVend International, a privately held manufacturer of
ice/beverage dispensers and dispensing valves.
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 22, 1996
THE MANITOWOC COMPANY, INC.
EXHIBIT INDEX
TO FORM 10-Q
FOR QUARTERLY PERIOD ENDED
September 30, 1997
Exhibit Filed
No Description Herewith
- ---------- --------------- --------
27 Financial Data Schedule X
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 13144
<SECURITIES> 1811
<RECEIVABLES> 56434
<ALLOWANCES> 1140
<INVENTORY> 56617
<CURRENT-ASSETS> 140029
<PP&E> 198003
<DEPRECIATION> 110503
<TOTAL-ASSETS> 330805
<CURRENT-LIABILITIES> 113966
<BONDS> 0
0
0
<COMMON> 245
<OTHER-SE> 121947
<TOTAL-LIABILITY-AND-EQUITY> 330805
<SALES> 394961
<TOTAL-REVENUES> 394961
<CGS> 283770
<TOTAL-COSTS> 346411
<OTHER-EXPENSES> 202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4244
<INCOME-PRETAX> 44330
<INCOME-TAX> 16402
<INCOME-CONTINUING> 27928
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27928
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.62
</TABLE>
