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, 1999
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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)
(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 June 30, 1999, the most recent practicable date, was 25,970,503.
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 Quarter and Six Months Ended June 30, 1999 and 1998
(Unaudited)
(In thousands, except per-share and average shares data)
QUARTER ENDED YEAR-TO-DATE
--------------------- ----------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 226,342 $ 188,899 $ 410,532 $ 343,038
Costs And Expenses:
Cost of goods sold 160,624 135,805 292,253 246,472
Engineering, selling and
administrative expenses 29,298 25,501 59,209 51,388
------- --------- -------- --------
Total 189,922 161,306 351,462 297,860
Earnings From Operations 36,420 27,593 59,070 45,178
Other Income (Expense):
Interest expense (2,736) (2,858) (5,444) (5,266)
Interest and dividend income 17 48 104 39
Other expense (386) (481) (692) (829)
------- -------- -------- --------
Total (3,105) (3,291) (6,032) (6,056)
-------- -------- -------- --------
Earnings Before Taxes
On Income 33,315 24,302 53,038 39,122
Provision For Taxes On Income 12,329 8,894 19,624 14,377
-------- -------- -------- --------
Net Earnings $ 20,986 $ 15,408 $ 33,414 $ 24,745
-------- -------- -------- --------
Net Earnings Per Share - Basic $ .81 $ .59 $ 1.29 $ .95
Net Earnings Per Share - Diluted $ .80 $ .59 $ 1.27 $ .94
Dividends Per Share $ .075 $ .075 $ .15 $ .15
Average Shares
Outstanding - Basic 25,965,034 25,927,854 25,963,711 25,919,895
Average Shares
Outstanding - Diluted 26,321,060 26,218,127 26,329,040 26,191,445
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, 1999 and December 31, 1998
(In thousands, except share data)
-ASSETS-
June 30, Dec. 31,
1999 1998
-------- ---------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 11,439 $ 10,582
Marketable securities 1,891 1,834
Accounts receivable 81,362 69,504
Inventories 85,533 81,978
Prepaid expenses and other 1,804 5,297
Future income tax benefits 21,682 21,682
-------- ---------
Total current assets 203,711 190,877
Intangible assets - net 235,214 184,926
Other assets 15,890 11,628
Property, plant and equipment:
At cost 217,310 211,360
Less accumulated depreciation (123,218) (117,777)
-------- ---------
Property, plant and equipment-net 94,092 93,583
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TOTAL $548,907 $481,014
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-LIABILITIES AND STOCKHOLDERS' EQUITY-
Current Liabilities:
Accounts payable and accrued expenses $152,070 $123,534
Current portion of long-term debt 489 10,968
Short-term borrowings 42,300 48,500
Product warranties 14,873 15,110
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Total current liabilities 209,732 198,112
Non-Current Liabilities:
Long-term debt less current portion 106,668 79,834
Product warranties 4,555 4,723
Post-retirement health benefits obligations 19,932 19,705
Other 6,160 6,088
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Total non-current liabilities 137,315 110,350
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Stockholders' Equity:
Common stock (36,746,482 shares
issued at both dates) 245 245
Additional paid-in capital 31,135 31,029
Accumulated other comprehensive income (loss) (500) (212)
Retained earnings 252,206 222,687
Treasury stock at cost (10,775,979 and
10,789,616 shares) (81,226) (81,197)
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Total stockholders' equity 201,860 172,552
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TOTAL $548,907 $481,014
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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, 1999 and 1998
(In thousands)
(Unaudited)
June 30, 1999 June 30, 1998
--------------- -------------
<S> <C> <C>
Cash Flows From Operations:
Net earnings $ 33,414 $ 24,745
Non-cash adjustments to income:
Depreciation and amortization 8,239 6,945
Deferred financing fees 307 193
Loss on sale of fixed assets 169 148
Changes in operating assets and liabilities:
Accounts receivable (4,503) (25,695)
Inventories 1,905 (9,602)
Other current assets 3,797 978
Current liabilities 20,271 14,578
Non-current liabilities 297 (188)
Non-current assets (2,414) (1,251)
---------- ----------
Net cash provided by operations 61,482 10,851
Cash Flows From Investing:
Purchase of temporary investments (57) (46)
Business acquisitions - net (62,655) -
Proceeds from sale of property,
plant, and equipment 1,353 237
Capital expenditures (5,590) (8,768)
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Net cash used for investing (66,949) (8,577)
Cash Flows From Financing:
Dividends paid (3,895) (3,889)
Options exercised 77 234
Proceeds from long-term borrowings - 50,000
Payments on long-term borrowings (13,645) (57,834)
Change in revolver borrowings - net 23,800 12,900
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Net cash provided by financing 6,337 1,411
Effect of exchange rate changes on cash (13) 6
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Net change in cash
and cash equivalents 857 3,691
Balance at beginning of period 10,582 11,888
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Balance at end of period $ 11,439 $ 15,579
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Supplemental cash flow information:
Interest paid $ 4,467 $ 4,379
Income taxes paid $ 14,473 $ 16,832
See accompanying notes which are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
THE MANITOWOC COMPANY, INC.
Consolidated Statements of Comprehensive Income
For the Quarter and Six Months Ended June 30, 1999 and 1998
(In thousands)
(Unaudited)
Quarter Ended Year-To-Date
-------------------- ---------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Earnings $20,986 $15,408 $33,414 $24,745
Other Comprehensive Income:
Foreign currency
translation adjustments (118) (139) (288) 163
-------- ------- ------- -------
Comprehensive Income $20,868 $15,269 $33,126 $24,908
-------- ------- ------- -------
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, 1999 and 1998
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, cash flows and comprehensive income for the quarters and
six months ended June 30, 1999 and 1998 and the financial position at
June 30, 1999. 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, 1998. The consolidated balance sheet as of
December 31, 1998 was derived from audited financial statements, but
does not include all disclosures required by generally accepted
accounting principles. It is suggested that these financial
statements be read in conjunction with the financial statements and
the notes thereto included in the company's latest annual report.
All dollar amounts are in thousands throughout these footnotes except
where otherwise indicated.
Note 2. The components of inventory at June 30, 1999 and December 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -------------
<S> <C> <C>
Components:
Raw materials $ 43,056 $ 32,564
Work-in-process 24,003 27,882
Finished goods 39,692 42,304
--------- ---------
Total inventories at FIFO costs 106,751 102,750
Excess of FIFO costs
over LIFO value (21,218) (20,772)
--------- ---------
Total inventories $ 85,533 $ 81,978
</TABLE>
Inventory is carried at lower of cost or market using the first-in, first-out
(FIFO) method for 58% and 47% of total inventory at June 30, 1999 and December
31, 1998, 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, including the company, 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. Prior to December 31, 1996, the
company accrued $3.3 million in connection with this matter. The
expenses incurred during the second quarter and first six months of
1999 and 1998 in connection with this matter were not material.
Remediation work at the Site has been completed, with only long-term
pumping and treating of ground water and Site maintenance remaining.
The remaining estimated liability for this matter, included in other
current and noncurrent liabilities at June 30, 1999, is $1.1 million.
As of June 30, 1999, 26 product-related lawsuits were pending. All of
these accidents occurred during years in which 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 $50.0 million
limit on the insurer's contribution.
Product liability reserves at June 30, 1999 are $8.6 million; $3.2
million reserved specifically for the 26 cases referenced above, and
$5.4 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. Any recoveries from
insurance carriers are dependent upon the legal sufficiency of claims
and the solvency of insurance carriers.
It is reasonably possible that the estimates for environmental
remediation and product liability costs may change in the near future
based upon new information that 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.
Assets currently held for sale include land and improvements,
buildings, and certain machinery and equipment at the "Peninsula
facility" located in Manitowoc, Wisconsin, as well as closed walk-in
refrigeration plants located in Iowa and Tennessee. The current
carrying value of these assets, 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, and
insurance. These reserves also include estimates for potential
environmental liabilities at the Peninsula location. For the second
quarter and first six months of 1999 and 1998, the charges against the
reserve were not material.
Note 4. On February 17, 1999, the company's board of directors authorized a 3-
for-2 stock split of the company's shares in the form of a 50-percent
stock dividend payable on April 1, 1999 to shareholders of record on
March 1, 1999. As a result of the stock split, 8,654,900 shares were
issued. All references in the financial statements to average number
of shares outstanding, earnings per share amounts, and market prices
per share of common stock have been restated to reflect the split.
The company also split its common stock on a 3-for-2 basis on June 30,
1997 and July 2, 1996.
Note 5. The following is a reconciliation of the average shares outstanding
used to compute basic and diluted earnings per share. There is no
earnings impact for the assumed conversions of the stock options in
each of the quarters.
<TABLE>
<CAPTION>
Quarter Ended June 30 Six Months Ended June 30
--------------------------------- -----------------------------------
1999 1998 1999 1998
------------------ ----------------- ------------------ -----------------
Per Share Per Share Per Share Per Share
Shares Amount Shares Amount Shares Amount Shares Amount
------- --------- ------- ------- ------ --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS 25,965,034 $.81 25,927,854 $.59 25,963,711 $1.29 25,919,895 $.95
Effect of Dilutive
Securities Stock
Options 356,026 290,273 365,329 271,550
--------- --------- --------- ---------
Diluted EPS 26,321,060 $.80 26,218,127 $.59 26,329,040 $1.27 26,191,445 $.94
</TABLE>
Note 6. On January 11, 1999, the company acquired all of the issued and
outstanding shares of Purchasing Support Group LLC (PSG), a four-
member beverage service organization. The new operation, renamed
Manitowoc Beverage Systems, Inc. (MBS), provides full-service parts,
components, and dispenser systems support to bottlers in the beverage
industry. MBS is made up of companies that have been serving soft-
drink bottling operations throughout the United States since the
1960's with a variety of equipment services for beverage dispensing
systems. MBS operates in the Northeast, Atlantic Coast, Southeast,
Central, and Western United States.
The aggregate consideration paid by the Company for the issued and
outstanding shares of the four member companies of PSG was $42,854
which is net of cash acquired of $732 and includes direct acquisition
costs of $394 and assumed liabilities of $5,192. The acquisition was
financed through the Company's existing credit facility. The purchase
price for PSG is subject to a post-closing adjustment based upon net
worth as set forth in the Purchase and Sale Agreement. The Company
has not recorded any adjustment to the purchase price based upon the
post-closing adjustment as of June 30, 1999.
The acquisition of PSG has been recorded using the purchase method of
accounting. The cost of the acquisition has been allocated on the
basis of the estimated fair values of the assets acquired and the
liabilities assumed. The preliminary estimate of the excess of the
cost over the fair value of the net assets acquired is $32,141 and is
being amortized over 40 years. The results of MBS's operations
subsequent to the date of acquisition are included in the Consolidated
Statements of Earnings for the quarter and six months ended June 30,
1999.
On April 9, 1999, the Company acquired all of the issued and
outstanding shares of Kyees Aluminum, Inc., a leading supplier of
cooling components for the major suppliers of fountain soft drink
beverage dispensers, for $25,750 in cash. Kyees' aluminum "cold
plates" are a key component used to chill soft drink beverages in
dispensing equipment. Located in La Mirada, California, Kyees is a
technology leader in manufacturing cold plate equipment, in both
quality and engineering design. The acquisition of Kyees was financed
through the Company's existing credit facility.
The acquisition of Kyees has been recorded using the purchase method
of accounting. The cost of the acquisition has been allocated on the
basis of the estimated fair values of the assets acquired and the
liabilities assumed. The preliminary estimate of the excess of the
cost over the fair value of the net assets acquired is $22,686 and is
being amortized over 40 years. The results of Kyees' operations
subsequent to the date of acquisition are included in the Consolidated
Statements of Earnings for the quarter and six months ended June 30,
1999.
Note 7. On May 28, 1999, the company entered into an accounts receivable sales
arranement with a bank. Under this arrangement, the company sold
$15.1 million of accounts receivable to the bank through June 30,
1999.
On April 6, 1999, the Company amended and restated its existing Credit
Agreement (Agreement), with a group of banks in order to increase the
amount of funds available and to extend the termination date to April
6, 2004. The amended and restated Agreement provides for maximum
borrowings of $300 million under revolving loans and a letter of
credit subfacility.
The Agreement includes covenants the most restrictive of which require
the maintenance of various debt and net worth ratios. An annual
commitment fee, calculated based upon the company's consolidated
leverage ratio as defined by the Agreement, is due on the unused
portion of the facility quarterly. Borrowings under the Agreement
bear interest at a rate equal to the sum of a base rate, or a
Eurodollar rate, at the option of the company, plus an applicable
percentage, as defined by the Agreement. The base rate is equal to
the greater of the Federal Funds rate in effect on such day plus 0.5%
or the prime rate in effect on such day. Borrowings under the
Agreement are not collateralized.
Note 8. The company determines its segments based upon the internal
organization that is used by management to make operating decisions
and assess performance. Based upon this approach, the company has
three reportable segments: Foodservice Equipment (Foodservice), Cranes
and Related Products (Cranes), and Marine Operations (Marine).
Information about reportable segments and a reconciliation of total
segment sales and profits to the consolidated totals for the quarters
and first six months ending June 30, 1999 and 1998 are summarized in
Item 2, "Management's Discussion and Analysis of Financial Condition
and Results of Operations", to this report on Form 10-Q. As of June
30, 1999 and December 31, 1998, the total assets by segment were as
follows:
<TABLE>
<CAPTION>
June 30, Dec. 31,
1999 1998
-------- --------
<S> <C> <C>
Foodservice $332,209 $254,506
Cranes 164,793 178,470
Marine 8,253 7,023
General corproate 43,652 41,015
------- -------
Total $548,907 $481,014
</TABLE>
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, 1999 and
1998
- --------------------------------------------------------------------------------
Net sales and earnings from operations by business segment for the quarter and
first six months ended June 30, 1999 and 1998 are shown below (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED YEAR-TO-DATE
----------------- --------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES:
Foodservice equipment $110,561 $ 87,230 $194,851 $154,237
Cranes and related products 98,147 86,145 187,577 162,337
Marine 17,634 15,524 28,104 26,464
-------- -------- -------- --------
Total $226,342 $188,899 $410,532 $343,038
EARNINGS (LOSS) FROM OPERATIONS:
Foodservice equipment $ 21,081 $ 15,627 $ 32,853 $ 24,943
Cranes and related products 17,325 12,928 30,602 22,690
Marine 2,880 2,751 5,192 5,056
General corporate expense (2,998) (2,542) (5,989) (5,168)
Amortization (1,868) (1,171) (3,588) (2,343)
-------- -------- -------- --------
Total 36,420 27,593 59,070 45,178
OTHER INCOME (EXPENSE) -NET (3,105) (3,291) (6,032) (6,056)
-------- -------- -------- --------
EARNINGS BEFORE TAXES ON INCOME $ 33,315 $ 24,302 $ 53,038 $ 39,122
</TABLE>
Net earnings for the second quarter of 1999 increased 36% to $21.0 million, or
$.80 per diluted share, from $15.4 million, or $.59 per diluted share, for the
second quarter of 1998. Net sales increased 20% to $226.3 million in the second
quarter of 1999, from $188.9 million for the same period in 1998. Sales and
earnings growth was driven by gains at each of the company's three business
segments.
For the first six month period of 1999, net earnings increased 35% to $33.4
million, or $1.27 per diluted share, from $24.7 million, or $.94 per diluted
share, for the first six months of 1998. Net sales increased 20% to $410.5
million in the first six-month period of 1999 from $343.0 million for the same
period in 1998. The recent acquisitions of USTC, MBS and Kyees accounted for
approximately 60% of the increase in revenue. The remainder was due mainly to
volume increases in the Foodservice and Crane segments. The increase in
operating earnings was the result of improved operating efficiencies, continued
margin expansion and additional cost reductions in each of our business
segments.
Sales for the Foodservice segment were $110.6 million for the quarter, up 27%
from the second quarter of 1998. Operating earnings increased 35% to $21.1
million, from $15.6 million in 1998. Manitowoc Ice continues to benefit from
the strong demand for its new "Q" series ice machines. SerVend's sales
increased significantly from the benefits of the recent acquisition of Manitowoc
Beverage Systems, which is expanding our geographic reach into new sales
territories. McCall achieved record production levels while introducing seven
new products at the National Restaurant Association show. For the first six
months of 1999 sales and operating earnings increased 26% and 32%, respectively.
All of the Foodservice operations contributed to this strong performance on a
year-over-year basis.
Cranes and related products sales for the second quarter increased 14%, to $98.1
million, from $86.1 million for the second quarter of 1998. Operating earnings
were $17.3 million, a 34% gain over the second quarter of 1998. This
performance is being driven by continued customer demand for our innovative new
crane designs. Highlighting this quarter was the shipment of our first Model
21000, a 1,000-ton capacity crawler crane, which was introduced at Conexpo
earlier this year. For the first six months of 1999, Cranes sales were $187.6
million, a 16% increase over the first six months of 1998. Operating earnings
increased 35%, to $30.6 million, from $22.7 million for the same period in 1998.
A significant factor in the performance of the crane segment is the progress
made in reducing the manufacturing time for the high-capacity crawler cranes.
Workflow improvements and aggressive subcontracting have added manufacturing
capacity and reduced the time needed to produce Manitowoc's 175- to 300-ton
capacity cranes by 40 percent.
Marine segment sales and operating earnings for the second quarter were $17.6
million and $2.9 million, respectively, compared with $15.5 million and $2.8
million for the same period in 1998. In May, work was completed on the NEW YORK
dipper dredge. Other projects during the quarter included repair work on
several tugs, a passenger ferry, and a hull repair for a 767' self-unloading
bulk carrier that ran aground. In June, Bay Shipbuilding began recognizing
revenues and earnings from the Mobil tank barge contract, which will keep the
yards busy during the traditionally slower summer months. For the first six
months of 1999, sales and operating earnings for this segment were $28.1 million
and $5.2 million, respectively, compared with $26.5 million and $5.1 million for
1998.
Cash flow from operations was a record $61 million, a more than four-fold
increase over the first six months of last year. Strong earnings, combined with
dramatic reductions in working capital, contributed to this performance. During
the quarter, total debt was also reduced by $27 million, down to $149 million.
The effective tax rate remains unchanged at 37 percent.
Financial Condition at June 30, 1999
- ----------------------------------------
The Company's financial condition remains strong. Cash and marketable
securities of $13.3 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, line of credit, and anticipated
capital expenditures of between $15-$18 million.
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.
Year 2000 Compliance
- ----------------------------
The Year 2000 (or Y2K) issue is the result of computer systems and software
products that are coded to accept two digits rather than four in their date code
fields to define a year. A company's computer equipment and software devices
with embedded technology that are time-sensitive may recognize a date using "00"
as the year 1900 rather than 2000. This could result in a system failure or
miscalculations causing disruptions of operations including, among other things,
a temporary inability to process transactions, send invoices, or engage in other
normal business activities.
The company continues to undertake various initiatives intended to ensure its
computer equipment and software will function properly with respect to Y2K and
beyond. For this purpose, the term "computer equipment and software" includes
systems commonly thought of as Information Technology (IT) systems - including
accounting, data processing and telephone systems - as well as those that are
not commonly thought of as IT systems - such as manufacturing equipment, company
products, alarm systems, fax machines or other miscellaneous systems. Both IT
and non-IT systems may contain embedded technology, which complicates Y2K
identification, assessment, remediation, and testing efforts.
Based upon its identification and assessment efforts through the end of the
second quarter of 1999, the company is in the process of converting, modifying,
and upgrading its computer equipment and software to be Y2K compliant, as
necessary. In addition, in the ordinary course of replacing computer equipment
and software, the company attempts to get replacements that are Y2K compliant.
The company continues to anticipate that its Y2K identification, assessment,
remediation, and testing efforts, which began in 1996, will be complete by
October 1999, and contingency plans will be developed, as necessary, to address
unforseen circumstances prior to the end of 1999. The company believes that
these efforts will be completed prior to any currently anticipated impact on its
computer equipment and software. It also does not anticipate any significant
disruption to its normal business operations to achieve this goal. The company
estimates that as of June 30, 1999, it had completed approximately 95% of the
initiatives it believes will be necessary to fully address potential Y2K issues.
The company has made inquiries and gathered information on the Y2K compliance of
its significant vendors, suppliers, dealers and distributors. This was done in
an attempt to determine the extent to which interfaces with these companies are
vulnerable to Y2K issues, and whether the products and services purchased from
or by these companies are Y2K compliant. During the first quarter of 1999, the
company completed a follow-up mailing to significant vendors, suppliers, dealers
and distributors for newly acquired companies and for those that did not
initially respond, or whose responses were deemed unsatisfactory by the company.
Although the company cannot assure Y2K compliance by its key suppliers, dealers,
and distributors, no major part of critical operation of any company segment
relies on a single source for raw materials, supplies, or services, and the
company has multiple distribution channels for most of its products.
Beginning in the second half of 1997, through June 30, 1999, the company has
spent approximately $4.4 million to upgrade its systems, including Y2K issues.
Approximately $0.5 million was spent during the first six months of 1999, with
about $0.3 million was spent in the second quarter. Estimated additional costs
for system upgrades during the last two quarters of 1999, including addressing
Y2K concerns, will approximate $0.5 million. These expenditures were and will
be funded using cash flows from operations.
The costs of the company's Y2K conversion efforts and dates by which it believes
these efforts will be completed are based on management's best estimates. These
were developed using many assumptions regarding future events, including
continued availability of certain resources, third-party remediation plans, and
other factors. There can be no assurance that these estimates will prove to be
accurate, and actual results could differ materially from those currently
anticipated.
The company believes that the Y2K issue will not pose significant operational
problems for it. However, if all Y2K issues are not properly identified, or
assessment, remediation, or testing are not completed for Y2K problems that are
identified, there can be no assurance that the Y2K issue will not have a
material adverse affect on the company's relationships with customers, vendors,
distributors, and others. In addition, there can be no assurance that the Y2K
issues of other entities will not have a material adverse impact on the
company's systems or results of operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
-------------------------------------------------------
See Item 7A of the company's Annual Report on Form 10-K for the year ended
December 31, 1998.
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 4, 1999, management's
nominees named below were elected as directors by the indicated votes cast for
each nominee. Of the 15,819,390 shares of Common Stock which were represented
at the meeting, at least 99.1 percent of the shares voting were voted for the
election of each of management's nominees.
Three directors were elected to serve until the Annual Meeting of Shareholders
to be held in the year 2002:
Name of Nominee For Withheld
- --------------- ---------- --------
Dean H. Anderson 15,697,897 121,493
James P. McCann 15,683,500 135,890
Robert S. Throop 15,704,047 115,343
One director was elected to serve until the Annual Meeting of Shareholders to be
held in the year 2001:
Name of Nominee For Withheld
- --------------- ---------- --------
Robert C. Stift 15,683,179 136,211
One director was elected to serve until the Annual Meeting of Shareholders to be
held in the year 2000:
Name of Nominee For Withheld
- --------------- --------- --------
Terry D. Growcock 15,703,192 116,198
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 George T. McCoy, Guido R. Rahr, Jr., and Gilbert F.
Rankin, Jr.
Proposal 2, the 1999 Non-Employee Director Stock Option Plan, was approved as
follows:
Shares Voted For 14,421,504
Shares Voted Against 1,217,119
Shares Abstaining 180,767
Further information concerning the matters voted upon at the 1999 Annual Meeting
of Shareholders is contained in the company's proxy statement dated March 15,
1999 with respect to the 1999 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: None.
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/ Terry D. Growcock
-------------------------------
Terry D. Growcock
President and Chief Executive Officer
/s/ Robert R. Friedl
-------------------------------
Robert R. Friedl
Senior V.P. and Chief Financial Officer
/s/ E. Dean Flynn
-------------------------------
E. Dean Flynn
Secretary
August 9, 1999
THE MANITOWOC COMPANY, INC.
EXHIBIT INDEX
TO FORM 10-Q
FOR QUARTERLY PERIOD ENDED
June 30, 1999
Exhibit Filed
No Description Herewith
- ------- --------------- ------------
10 1999 Non-Employee Director X
Stock Option Plan
27 Financial Data Schedule X
THE MANITOWOC COMPANY, INC.
1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
SECTION 1. Purpose
The purpose of The Manitowoc Company, Inc. 1999 Non-employee Director
Stock Option Plan is to promote the long-term growth and financial success of
The Manitowoc Company, Inc. The Plan is intended to secure for the Company and
its shareholders the benefits of the long-term incentives inherent in increased
common stock ownership by members of the Board of Directors of the Company who
are not employees of the Company or its Affiliates. It is intended that the
Plan will induce and encourage highly experienced and qualified individuals to
serve on the Board and assist the Company in promoting a greater identity of
interest between the Company's non-employee directors and the shareholders of
the Company.
SECTION 2. Definitions
The following terms shall have the respective meanings set forth
below, unless the context otherwise requires:
a. "Affiliate" shall mean any corporation, partnership, joint
venture, or other entity in which the Company holds an equity, profit, or
voting interest of more than fifty percent (50%).
b. "Annual Meeting of the Shareholders" shall mean the annual
meeting of shareholders of the Company held each calendar year.
c. "Board" shall mean the Board of Directors of the Company.
d. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
e. "Company" shall mean The Manitowoc Company, Inc., a Wisconsin
corporation, together with any successor thereto.
f. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
g. "Fair Market Value per Share" shall mean for any day the last
sale price at which a Share traded as reported on the composite tape by the New
York Stock Exchange on the business day immediately preceding such day, or, if
there were no trades of Shares on the composite tape on such business day, on
the most recent preceding business day on which there were trades. Or, if
Shares are not listed or admitted to trading on the New York Stock Exchange when
the determination of fair market value is to be made, Fair Market Value per
Share shall be the mean between the highest and lowest reported sales prices of
Shares on that date on the principal exchange on which the Shares are then
listed. If the Shares are not listed on any national exchange Fair Market Value
per Share shall be the amount determined in good faith by the Board to be the
fair market value of a Share at the relevant time.
h. "Non-employee Director" shall mean a member of the Board who
is not an employee of the Company or any Affiliate.
i. "Option" shall mean a stock option granted hereunder to a Non-
employee Director. An Option shall either be a "First Option," granted when a
Non-employee Director is initially elected to the Board, or an "Annual Option,"
granted annually, thereafter, to each continuing Non-employee Director.
j. "Option Agreement" shall mean any written agreement, contract,
or other instrument or document evidencing any Option granted under the Plan.
k. "Plan" shall mean The Manitowoc Company, Inc. 1999 Non-
employee Director Stock Option Plan.
l. "Shares" shall mean shares of common stock of the Company,
$.01 par value, and such other securities or property as may become subject to
Options pursuant to an adjustment made under Section 4(b) of the Plan.
SECTION 3. Plan Operation
a. The Plan is intended to meet the "formula" plan requirements
of Rule 16b-3 (or any successor provision thereto), as interpreted, adopted
under the Exchange Act and accordingly is intended to be self-governing.
b. The Board shall have no discretion to select the Non-employee
Directors to receive Option grants under the Plan, to determine the number of
Shares subject to the Plan or to each grant, nor the exercise price of the
Options granted pursuant to the Plan.
c. The Plan shall be administered by the Board. The Board may,
by resolution, delegate part or all of its administrative powers with respect to
the Plan.
d. The Board shall have all of the powers vested in it by the
terms of the Plan, such powers to include the authority, within the limits
prescribed herein, to establish the form of the agreement embodying grants of
Options made under the Plan.
e. The Board shall, subject to the provisions of the Plan, have
the power to construe the Plan, to determine all questions arising thereunder
and to adopt and amend such rules and regulations for the administration of the
Plan as it may deem desirable, such administrative decisions of the Board to be
final and conclusive.
f. Except to the extent prohibited by applicable law, the Board
may authorize any one or more of their number or the Secretary or any other
officer of the Company to execute and deliver documents on behalf of the Board.
The Board hereby authorizes the Secretary to execute and deliver all documents
to be delivered by the Board pursuant to the Plan.
SECTION 4. Shares Available for Options
a. Subject to adjustment as provided in Section 4(b):
i. The number of Shares with respect to which Options may
be granted under the Plan shall be *187,500. If, after the effective date
of the Plan, an Option terminates, expires or is canceled prior to the
delivery of all of the Shares issuable thereunder, then the number of
Shares counted against the number of Shares available under the Plan in
connection with the grant of such Option, to the extent of any such
termination, expiration or cancellation, shall again be available for
granting of additional Options under the Plan. If the Exercise Price of
any Option granted under the Plan is satisfied by tendering Shares (by
either actual delivery or by attestation), only the number of Shares issued
net of the Shares tendered shall be deemed delivered for purposes of
determining the maximum number of Shares available for delivery under the
Plan.
ii. The number of Shares covered by an Option under the Plan
shall be counted on the date of grant of such Option against the number of
Shares available for granting Options under the Plan.
iii. Any Shares delivered pursuant to the exercise of an
Option may consist, in whole or in part, of authorized and unissued Shares
or of treasury shares.
b. In the event that the Board shall determine that any dividend
or other distribution (whether in the form of cash, Shares, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company,
or other similar corporate transaction or event (collectively referred to as
"Events") affects the Shares such that an adjustment is determined by the Board
to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the Board
may, in such manner as it may deem equitable, adjust any or all of (i) the
number and type of Shares subject to the Plan and which thereafter may be made
the subject of Options under the Plan; (ii) the number and type of Shares
subject to outstanding Options; and (iii) the exercise price with respect to any
Option (collectively referred to as "Adjustments"); provided, however, that
Options subject to grant or previously granted to Non-employee Directors under
the Plan at the time of any such Event shall be subject to only such Adjustments
as shall be necessary to maintain the proportionate interest of the Non-employee
Directors and preserve, without exceeding, the value of such Options; and
provided further that the number of Shares subject to any Option shall always be
a whole number.
*Reflects the Company's 3 for 2 stock split of 4/1/99 (125,000 shares
adjusted to 187,500 shares).
SECTION 5. Nonqualified Stock Option Awards to Non-employee Directors
a. Non-employee Directors shall automatically be granted Options
under the Plan in the manner set forth in this Section 5 for no cash
consideration. A Non-employee Director may hold more than one Option under the
Plan in his or her capacity as a Non-employee Director of the Company, but only
on the terms and subject to the conditions set forth herein. All options
granted to Non-employee Directors pursuant to the Plan shall be nonqualified
stock options which do not qualify for special tax treatment under Code Sections
421 or 422.
b. By and simultaneously with the adoption of the Plan by the
Board, subject to approval of the Plan by the shareholders of the Company, each
Non-employee Director at such time shall be granted an Option to purchase two
thousand (2,000) Shares under the Plan (the "First Option"). Thereafter, on the
date on which a Non-employee Director, other than a Non-employee Director who
was serving as a director of the Company on the date of shareholder approval, is
first elected or appointed as a director of the Company during the existence of
the Plan, such Non-employee Director shall automatically be granted an Option to
purchase two thousand (2,000) Shares under the Plan.
c. Following the date of grant of the First Option, on the date
of the first Board meeting occurring in each calendar year, each continuing Non-
employee Director of the Board shall be granted an additional Option to purchase
one thousand (1,000) Shares under the Plan (the "Annual Option"). Annual
Options are not made concurrently with First Options and a Non-employee Director
must be continuing in office in order to be eligible to receive an Annual
Option.
d. The automatic grants to Non-employee Directors shall not be
subject to the discretion of any person.
e. Each Option granted under the Plan shall be evidenced by a
written Agreement. Each Agreement shall be subject to, and incorporate, by
reference or otherwise, the applicable terms of this Plan.
f. No Option shall be granted under the Plan after the tenth
anniversary of the effective date of the Plan. However, the term of any Option
theretofore granted may extend beyond such date.
g. Notwithstanding the provisions of Section 5(b), Options shall
automatically be granted to Non-employee Directors under the Plan only for so
long as the Plan remains in effect and a sufficient number of Shares are
available hereunder for the granting of such Options.
h. No Option, and no right under such Option, shall be
assignable, alienable, saleable or transferable by a Non-employee Director
otherwise than by will or by the laws of descent and distribution other than
with the prior approval of the Board. Each Option shall be exercisable, during
the lifetime of the Non-employee Director, only by such individual or, if
permissible under applicable law, by such individual's guardian or legal
representative. No Options may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or encumbrance
thereof shall be void and unenforceable against the Company or any Affiliate.
SECTION 6. Exercise Price.
a. The price per Share of the Company's common stock which may be
purchased upon exercise of an Option ("Exercise Price") shall be one hundred
percent (100%) of the Fair Market Value per Share on the date the Option is
granted and shall be payable in full at the time the Option is exercised as
follows (except that, in the case of an exercise under paragraph (iii), payment
may be made as soon as practicable after the exercise):
i. in cash or by certified check,
ii. by delivery to the Company of Shares which shall have
been owned for at least six (6) months and have a Fair Market Value per
Share on the date of surrender equal to the Exercise Price, or
iii. by delivery to the Company of a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company from sale or loan proceeds the amount
required to pay the exercise price.
b. Such Exercise Price shall be subject to adjustment as provided
in Section 4(b) hereof.
SECTION 7. Duration and Vesting of Options.
a. The term of each Option granted to a Non-employee Director
shall be for ten (10) years from the date of grant, unless terminated earlier
pursuant to the provisions of Section 8 hereof.
b. Except as otherwise provided in Section 8 hereof, each Option
shall vest and become exercisable according to the following schedule:
i. twenty-five percent (25%) of the total number of Shares
covered by the Option shall become exercisable beginning with the first
anniversary date of the grant of the Option;
ii. thereafter twenty-five percent (25%) of the total number
of Shares covered by the Option shall become exercisable on each subsequent
anniversary date of the grant of the Option until the fourth anniversary
date of the grant of the Option upon which the total number of Shares
covered by Option shall become exercisable.
SECTION 8. Effect of Termination of Membership on the Board.
a. The right to exercise an Option granted to a Non-employee
Director shall be limited as follows, provided the actual date of exercise is in
no event after the expiration of the term of the Option:
i. If a Non-employee Director ceases being a director of
the Company for any reason other than the reasons identified in
subparagraph (b) of this Section 8, the Non-employee Director shall have
the right to exercise the Options as follows, subject to the condition that
no Option shall be exercisable after the expiration of the term of the
Option:
(A) If the Non-employee Director was a member of the Board
of Directors of the Company for five (5) or more years, all
outstanding Options become immediately exercisable upon the date the
Non-employee Director ceases being a director for any reason. The
Non-employee Director may exercise the Options for a period of thirty-
six (36) months from the date the Non-employee Director ceases to be a
director, provided that if the Non-employee Director dies while
serving as a director or before such thirty-six (36) month period has
expired, the Options may be exercised by the Non-employee Director's
legal representative or any person who acquires the right to exercise
an Option by reason of the Non-employee Director's death for a period
of twelve (12) months from the date of the Non-employee Director's
death.
(B) If the Non-employee Director was a member of the Board
of Directors of the Company for fewer than five (5) years, the Non-
employee Director may exercise the Options, to the extent they were
exercisable at the date the Non-employee Director ceases to be a
member of the Board for any reason, for a period of thirty (30) days
following the date the Non-employee Director ceased being a director,
provided that if the Non-employee Director dies while serving as a
director or before such thirty (30) day period has expired, the
Options may be exercised by the Non-employee Director's legal
representative, or any person who acquires the right to exercise an
Option by reason of the Non-employee Director's death, for a period of
twelve (12) months from the date of the Non-employee Director's death.
(C) In the event any Option is exercised by the executors,
administrators, legatees, or distributees of the estate of a deceased
optionee, the Company shall be under no obligation to issue stock
thereunder unless and until the Company is satisfied that the person
or persons exercising the Option are the duly appointed legal
representatives of the deceased optionee's estate or the proper
legatees or distributees thereof.
b. If a Non-employee Director ceases being a director of the
Company due to an act of
i. fraud or intentional misrepresentation or
ii. embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any Affiliate of the Company or
iii. any other gross or willful misconduct as determined by the
Board, in its sole and conclusive discretion,
all Options granted to such Non-employee Director shall immediately be forfeited
as of the date of the misconduct.
SECTION 9. Amendment and Termination of the Plan
a. The Board may at any time amend, alter, suspend, discontinue
or terminate the Plan.
b. Termination of the Plan shall not affect the rights of Non-
employee Directors with respect to Options previously granted to them, and all
unexpired Options shall continue in force and effect after termination of the
Plan, except as they may lapse or be terminated by their own terms and
conditions. Any amendment to the Plan shall become effective when adopted by
the Board, unless specified otherwise.
c. Rights and obligations under any Option granted before any
amendment of this Plan shall not be materially and adversely affected by
amendment of the Plan, except with the consent of the person who holds the
Option, which consent may be obtained in any manner that the Board deems
appropriate.
SECTION 10. General Provisions
a. Nothing contained in the Plan shall prevent the Company or any
Affiliate from adopting or continuing in effect other or additional compensation
arrangements for Non-employee Directors, and such arrangements may be either
generally applicable or applicable only in specific cases.
b. The grant of an Option to a Non-employee Director pursuant to
the Plan shall confer no right on such Non-employee Director to continue as a
director of the Company. Except for rights accorded under the Plan, Non-
employee Directors shall have no rights as holders of Shares as a result of the
granting of Options hereunder.
c. Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any Shares under the Plan or make any other
distribution of benefits under the Plan unless such delivery or distribution
would comply with all applicable laws (including, without limitation, the
requirements of the Securities Act of 1933), and the applicable requirements of
any securities exchange or similar entity.
d. To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of Shares, the issuance may be effected on
a non-certificated basis, to the extent no prohibited by applicable law or the
applicable rules of any stock exchange.
e. The validity, construction and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in accordance
with the internal laws of the State of Wisconsin and applicable federal law.
f. Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision hereof.
g. The Plan shall be effective as of the date of adoption of the
Plan by the Board, February 16, 1999, subject to approval of the Plan by the
shareholders of the Company.
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