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, 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
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(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, 1999, the most recent
practicable date, was 25,982,848.
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 Nine Months Ended September 30, 1999 and 1998
(Unaudited)
(In thousands, except per-share and average shares data)
QUARTER ENDED YEAR-TO-DATE
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
------- ------- ------ --------
<S> <C> <C> <C> <C>
Net Sales $ 213,898 $ 184,023 $ 624,430 $ 527,061
Costs And Expenses:
Cost of goods sold 151,384 130,743 443,637 377,215
Engineering, selling and
administrative expenses 27,883 26,314 87,092 77,702
------- ------- ------- -------
Total 179,267 157,057 530,729 454,917
Earnings From Operations 34,631 26,966 93,701 72,144
Other Income (Expense):
Interest expense (2,987) (2,091) (8,431) (7,357)
Interest and dividend income 82 22 186 61
Other expense (968) (869) (1,660) (1,698)
-------- ------- -------- --------
Total (3,873) (2,938) (9,905) (8,994)
-------- ------- -------- --------
Earnings Before Taxes
On Income 30,758 24,028 83,796 63,150
Provision For Taxes On Income 11,380 8,825 31,004 23,202
-------- -------- -------- ---------
Net Earnings $ 19,378 $ 15,203 $ 52,792 $ 39,948
-------- -------- -------- ---------
Net Earnings Per Share - Basic $.75 $.59 $2.03 $1.54
Net Earnings Per Share - Diluted $.74 $.58 $2.01 $1.53
Dividends Per Share $.075 $.075 $.225 $ .225
Average Shares Outstanding
Basic 25,982,312 25,939,026 25,970,719 25,926,342
Average Shares Outstanding
Diluted 26,332,622 26,095,275 26,329,068 26,148,023
See accompanying notes which are an integral part of these statements.
</TABLE>
[CAPTION]
<TABLE>
THE MANITOWOC COMPANY, INC.
Consolidated Balance Sheets
As of September 30, 1999 and December 31, 1998
(In thousands, except share data)
- ASSETS -
Unaudited
Sept. 30, Dec. 31,
1999 1998
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 10,387 $ 10,582
Marketable securities 1,915 1,834
Accounts receivable 73,312 69,504
Inventories 80,386 81,978
Prepaid expenses and other 2,344 5,297
Future income tax benefits 20,888 21,682
--------- ---------
Total current assets 189,232 190,877
Intangible Assets - Net 234,326 184,926
Other Assets 15,854 11,628
Property, Plant and Equipment:
At cost 210,161 211,360
Less accumulated depreciation (120,068) (117,777)
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Property, plant and equipment-net 90,093 93,583
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TOTAL $529,505 $481,014
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-LIABILITIES AND STOCKHOLDERS' EQUITY-
Current Liabilities:
Accounts payable and accrued expenses $148,427 $123,534
Current portion of long-term debt 489 10,968
Short-term borrowings 36,300 48,500
Product warranties 15,125 15,110
--------- ---------
Total current liabilities 200,341 198,112
Non-Current Liabilities:
Long-term debt, less current portion 79,805 79,834
Product warranties 4,520 4,723
Post-retirement health benefits obligations 20,077 19,705
Other 5,249 6,088
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Total non-current liabilities 109,651 110,350
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Stockholders' Equity:
Common stock (36,746,482 shares issued
at both dates) 245 245
Additional paid-in capital 31,111 31,029
Accumulated other comprehensive income (260) (212)
Retained earnings 269,634 222,687
Treasury stock at cost (10,763,634 and 10,789,616
shares, respectively) (81,217) (81,197)
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Total stockholders' equity 219,513 172,552
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TOTAL $529,505 $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 Nine Months Ended September 30, 1999 and 1998
(Unaudited)
(In thousands)
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
<S> <C> <C>
Cash Flows From Operations:
Net earnings $ 52,792 $ 39,948
Non-cash adjustments to earnings:
Depreciation and amortization 12,455 10,453
Deferred financing fees 472 298
Deferred income taxes 1,020 -
Loss on sale of fixed assets 591 835
Changes in operating assets and liabilities,
excluding effects of business acquisitions:
Accounts receivable 3,547 (21,284)
Inventories 7,052 (15,749)
Other current assets 3,255 1,152
Current liabilities 17,216 22,556
Non-current liabilities (841) (1,063)
Non-current assets (4,103) (3,864)
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Net cash provided by operations 93,456 33,282
Cash Flows From Investing:
Purchase of temporary investments - net (81) (65)
Business acquisitions - net (62,104) --
Proceeds from sale of property, plant, and equipment 5,217 1,291
Capital expenditures (8,192) (9,282)
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Net cash used for investing (65,160) (8,056)
Cash Flows From Financing:
Dividends paid (5,844) (5,834)
Options exercised 61 254
Proceeds from long-term borrowings -- 50,000
Payments on long-term borrowings (10,508) (75,770)
Change in revolver borrowings - net (12,200) 4,000
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Net cash used for financing (28,491) (27,350)
Effect of Exchange Rate Changes on Cash - 23
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Net decrease in cash and cash equivalents (195) (2,101)
Balance at beginning of period 10,582 11,888
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Balance at end of period $ 10,387 $ 9,787
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Supplemental cash flow information:
Interest paid $ 7,507 $ 6,476
Income taxes paid $ 30,316 $ 27,848
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 Nine Months Ended September 30, 1999 and 1998
(Unaudited)
(In thousands)
QUARTER ENDED YEAR-TO-DATE
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Earnings $19,378 $15,203 $52,792 $39,948
Other Comprehensive Income:
Foreign currency
translation adjustments 240 (73) (48) 90
------- ------- ------- -------
Comprehensive Income $19,618 $15,130 $52,744 $40,038
------- -------- ------- -------
See accompanying notes which are an integral part of these statements.
</TABLE>
THE MANITOWOC COMPANY, INC.
Notes to Consolidated Financial Statements
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
Note 1. In the opinion of management, the accompanying unaudited
consolidated 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 nine months ended
September 30, 1999 and 1998, and the financial position at
September 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 September 30, 1999 and
December 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
Sept. 30, 1999 Dec. 31, 1998
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<S> <C> <C>
Components:
Raw materials $37,030 $32,564
Work-in-process 24,949 27,882
Finished goods 39,152 42,304
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Total inventories at FIFO costs 101,131 102,750
Excess of FIFO costs
over LIFO value (20,745) (20,772)
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Total inventories $80,386 $81,978
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</TABLE>
Inventory is carried at lower of cost or market using the first-in,
first-out (FIFO) method for 59% and 47% of total inventory at
September 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
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 quarter and nine months ended September
30, 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 September 30, 1999 is $1.1
million.
As of September 30, 1999, 24 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 September 30, 1999 are $8.6 million;
$3.3 million is reserved specifically for the 24 cases referenced
above, and $5.3 million is reserved 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 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. 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 third quarter and first nine months of
1999 and 1998, the charges against these reserves were not
material.
Note 5. 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 this split. The company also split its common
stock on a 3-for-2 basis on June 30, 1997 and July 2, 1996.
Note 6. The following is a reconciliation of the average
sharesoutstanding used to compute basic and diluted earnings
per share. There is no earnings impact for the assumed
conversions of the stock options in any of the periods.
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30 September 30
------------------------------------ ---------------------------------------
1999 1998 1999 1998
----------------- ---------------- ----------------- ---------------
Per Per Per Per
Share Share Share Share
Shares Amount Shares Amount Shares Amount Shares Amount
----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS 25,982,312 $.75 25,939,026 $.59 25,970,719 $2.03 25,926,342 $1.54
Effect of Dilutive
Securities-
Stock Options 350,310 156,249 358,349 221,681
---------- ------------- ---------- ----------
Diluted EPS 26,332,622 $.74 26,095,275 $.58 26,329,068 $2.01 26,148,023 $1.53
---------- ---------- ---------- ----------
</TABLE>
Note 7. 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 $43.7 million which is net of cash acquired of
$0.7 million and includes direct acquisition costs of $0.5
million and assumed liabilities of $5.9 million. 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 September 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 $33.7 million 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 nine months ended September 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. The aggregate
consideration paid by the company was $28.3 million which is
net of cash acquired of $1.0 million and includes direct
acquisition costs of $0.2 million, assumed liabilities of
$2.0 million, and the payment of a post-closing net worth
adjustment during the third quarter of $1.4 million to the
former owners of the company. 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 $24.0 million 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 nine months ended September 30, 1999.
Note 8. 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
sub-facility.
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.
On May 28, 1999, the company entered into an accounts
receivable sales arrangement with a bank. Under this
arrangement, the company has sold $48.2 million of accounts
receivable to the bank through September 30, 1999. At
September 30, 1999, the company has outstanding $13.1
million of accounts receivable which have been sold to the
bank but for which the customers' cash has not yet been
collected. The cash flow impact of this arrangement is
reported as cash flows from operations for the nine-month
period ended September 30, 1999.
Note 9. 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 nine months ending September 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 September 30, 1999 and December 31, 1998,
the total assets by segment were as follows:
<TABLE>
<CAPTION>
Sept. 30, 1999 Dec. 31, 1998
---------------- ---------------
<S> <C> <C>
Foodservice $326,308 $254,506
Cranes 155,758 178,470
Marine 8,867 7,023
General corporate 38,572 41,015
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Total $529,505 $481,014
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</TABLE>
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, 1999 and 1998.
- --------------------------------------------------------------
Net sales and earnings from operations by business segment for the
quarter and nine months ended September 30, 1999 and 1998 are shown
below (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED YEAR-TO-DATE
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
NET SALES:
Foodservice products $104,677 $ 90,564 $299,528 $244,801
Cranes and related products 95,485 84,858 283,062 247,195
Marine 13,736 8,601 41,840 35,065
-------- ------- ------- -------
Total $213,898 $184,023 $624,430 $527,061
-------- ------- -------- --------
EARNINGS (LOSS) FROM OPERATIONS:
Foodservice products $ 20,088 $ 16,804 $ 52,941 $ 41,747
Cranes and related products 17,967 12,762 48,569 35,452
Marine 1,134 858 6,326 5,914
General corporate expense (2,664) (2,286) (8,653) (7,454)
Amortization (1,894) (1,172) (5,482) (3,515)
-------- ------- ------- --------
Total 34,631 26,966 93,701 72,144
-------- ------- -------- --------
OTHER INCOME (EXPENSE) - NET (3,873) (2,938) (9,905) (8,994)
-------- ------ -------- --------
EARNINGS BEFORE TAXES ON INCOME $30,758 $24,028 $83,796 $63,150
-------- ------ -------- --------
</TABLE>
Net earnings for the third quarter of 1999 increased 27.5 percent to
$19.4 million, or $0.74 per diluted share, from $15.2 million, or
$0.58 per diluted share, for the third quarter of 1998. Net sales
increased 16.2 percent to $213.9 million in the third quarter of 1999
from $184.0 million for the same period in 1998.
For the first nine months of 1999, net earnings increased 32.2 percent
to $52.8 million, or $2.01 per diluted share, from $39.9 million, or
$1.53 per diluted share, for the first nine months of 1998. Net sales
increased 18.5 percent to $624.4 million in the nine-month period of
1999 from $527.1 million for the same period in 1998. Sales and
earnings growth continue to be driven by gains at each of the
company's three main businesses.
For the third quarter of 1999, the foodservice segment reported a 19.5
percent increase in operating earnings on a 15.6 percent increase in
sales; this despite a continuing softness in demand from the major
soft-drink manufacturers. Year-to-date sales for the foodservice
products segment increased 22.4 percent to $299.5 million from $244.8
million in 1998. Foodservice operating earnings increased 26.8
percent on a year-to-date basis to $52.9 million from $41.7 million
for 1998.
Cranes and related products sales for the third quarter of 1999 were
$95.5 million, a 12.5 percent increase over the prior year's third
quarter. Operating margin for the third quarter was 18.8 percent,
compared to 15.0 percent for 1998. Highlighting the quarter was the
delivery of Manitowoc Cranes' second high capacity Model 21000 crawler
crane, which made its first major lift as part of a refinery
modernization project for a major chemical manufacturer. In addition,
Manitex and USTC continue to leverage the design, manufacturing and
marketing expertise of each organization. Net sales for the cranes
segment increased 14.5 percent in the first nine months of 1999 to
$283.1 million, compared to $247.2 million for the same period in
1998. Cranes' operating earnings increased 37.0 percent to $48.6
million, or 17.2 percent of net sales in the first nine months of
1999, compared to $35.5 million, or 14.3 percent of net sales for the
same period in 1998.
Sales and operating earnings for the Marine segment were $13.7 million
and $1.1 million, respectively, for the third quarter of 1999,
compared with $8.6 million and $0.9 million for same period last year.
The nearly 60 percent increase in revenues was due to the project
revenue from the Mobil tank barge contract. Progress on the 140,000-
barrel, double-hull tank barge, which Mobil has named Seneca, is well
ahead of schedule and is expected to be completed during the fourth
quarter. Year-to-date sales for this segment were $41.8 million,
compared with $35.1 million in 1998. Operating earnings were $6.3
million compared with $5.9 million last year.
Cash flow from operations was a record $93.5 million, a nearly three-
fold increase over the same period of last year. Contributing to this
impressive performance were reductions in accounts receivable and
inventories combined with strong earnings growth. During the quarter,
total debt was reduced by $33 million, down to $116.6 million.
The effective tax rate remains unchanged at 37 percent.
Financial Condition at September 30, 1999
- --------------------------------------------
The company's financial condition remains strong. Cash and marketable
securities of $12.3 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 planned 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 dry-docking 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 third quarter of 1999, the company believes that substantially
all of its business units have completed their Year 2000 remediation
efforts. Only one business unit representing less than one percent of
the company's net sales is not yet Y2K compliant, but it will be
completing its remediation in November of 1999. Contingency plans will
be developed, as necessary, to address unforeseen 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 September 30, 1999, it had completed
approximately 99% 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. The company has developed contingency
plans to mitigate inventory procurement interruptions which may be
caused by vendor Y2K issues. 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 September 30, 1999, the
company has spent approximately $4.9 million to upgrade its systems,
including Y2K issues. Approximately $1.0 million was spent during the
first nine months of 1999, with about $0.5 million spent in the third
quarter. No additional significant costs are expected during the
fourth quarter of 1999. These expenditures were 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 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 third quarter ended September
30, 1999, a report on Form 8-K dated as of September 10, 1999 was
filed stating that the company's board of directors had
unanimously approved the appointment of vice president and
treasurer, Glen E. Tellock, to the position of vice president and
chief financial officer.
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/ Glen E. Tellock
-------------------------
Glen E. Tellock
Vice President and
Chief Financial Officer
/s/ Maurice D. Jones
-------------------------
Maurice D. Jones
Secretary
October 28, 1999
THE MANITOWOC COMPANY, INC.
EXHIBIT INDEX
TO FORM 10-Q
FOR QUARTERLY PERIOD ENDED
September 30, 1999
Exhibit Filed
No Description Herewith
- ------ -------------------------- ----------
27 Financial Data Schedule X
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0
0
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