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 | |
| ||
or | ||
[ ] | Transition Report Pursuant to Section 13 or 15(d) of the Securities | |
|
Commission File Number
1-11978
The Manitowoc Company, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin | 39-0448110 |
(State or other jurisdiction | (I.R.S. Employer |
2400 South 44th Street, |
|
(Address of principal executive offices) | (Zip Code) |
(920) 684-4410
(Registrant's telephone number, including area code)
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 ( )
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes (X) No ( )
The number of shares outstanding of the Registrant's common stock, $.01 par value, as of March 31,June 30, 2003, the most recent practicable date, was 26,412,735.26,417,235.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE MANITOWOC COMPANY, INC.
Consolidated Statements of EarningsOperations
For the Three and Six Months Ended March 31,June 30, 2003 and 2002
(Unaudited)
(In thousands, except per-share and average shares data)
Three Months Ended | |||||
2003 | 2002 | ||||
Net sales | $ | 379,251 | $ | 283,025 | |
Costs and expenses: | |||||
Cost of sales | 300,121 | 215,284 | |||
Engineering, selling and administrative expenses | 63,497 | 43,320 | |||
Amortization expense | 704 | 587 | |||
Plant consolidation costs | -- | 3,900 | |||
Total costs and expenses | 364,322 | 263,091 | |||
Earnings from operations | 14,929 | 19,934 | |||
Other income (expense): | |||||
Interest expense | (14,638 | ) | (10,612 | ) | |
Other income, net | 33 | 702 | |||
Total other income (expense) | (14,605 | ) | (9,910 | ) | |
Earnings from continuing operations before taxes on income | 324 | 10,024 | |||
Provision for taxes on income | 110 | 3,910 | |||
Earnings from continuing operations | 214 | 6,114 | |||
Discontinued operations: | |||||
Earnings from discontinued operations, net of income taxes of $16 and $304, |
|
| |||
Gain on sale of discontinued operations, net of income taxes of $149 | 290 | -- | |||
Cumulative effect of accounting change, net of income taxes of $14,200 | -- | (36,800 | ) | ||
Net earnings (loss) | $ | 535 | $ | (30,210 | ) |
Basic earnings (loss) per share: | |||||
Earnings from continuing operations | $ | 0.01 | $ | 0.25 | |
Earnings from discontinued operations, net of income taxes | 0.00 | 0.02 | |||
Gain on sale of discontinued operations, net of income taxes | 0.01 | -- | |||
Cumulative effect of accounting change, net of income taxes | -- | (1.52 | ) | ||
Net earnings (loss) | $ | 0.02 | $ | (1.24 | ) |
Diluted earnings (loss) per share: | |||||
Earnings from continuing operations | $ | 0.01 | $ | 0.25 | |
Earnings from discontinued operations, net of income taxes | 0.00 | 0.02 | |||
Gain on sale of discontinued operations, net of income taxes | 0.01 | -- | |||
Cumulative effect of accounting change, net of income taxes | -- | (1.48 | ) | ||
Net earnings (loss) | $ | 0.02 | $ | (1.22 | ) |
Weighted average shares outstanding - basic | 26,542,127 | 24,283,661 | |||
Weighted average shares outstanding - diluted | 26,582,057 | 24,783,860 |
Three Months Ended | Six Months Ended | ||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||
Net sales | $ | 433,700 | $ | 328,275 | $ | 812,951 | $ | 611,300 | |||
Costs and expenses: | |||||||||||
Cost of sales | 338,338 | 239,917 | 638,459 | 455,201 | |||||||
Engineering, selling and administrative expenses | 67,855 | 44,073 | 131,351 | 87,393 | |||||||
Amortization expense | 733 | 465 | 1,438 | 1,052 | |||||||
Goodwill impairment | 4,900 | -- | 4,900 | -- | |||||||
Restructuring costs | 4,178 | -- | 4,178 | -- | |||||||
Plant consolidation costs | -- | -- | -- | 3,900 | |||||||
Total costs and expenses | 416,004 | 284,455 | 780,326 | 547,546 | |||||||
Earnings from operations | 17,696 | 43,820 | 32,625 | 63,754 | |||||||
Other expense: | |||||||||||
Interest expense | (15,322 | ) | (11,344 | ) | (29,960 | ) | (21,956 | ) | |||
Other income (expense), net | 62 | (265 | ) | 95 | 437 | ||||||
Total other expense | (15,260 | ) | (11,609 | ) | (29,865 | ) | (21,519 | ) | |||
Earnings from continuing operations before taxes on income | 2,436 | 32,211 | 2,760 | 42,235 | |||||||
Provision for taxes on income | 718 | 12,561 | 828 | 16,471 | |||||||
Earnings from continuing operations | 1,718 | 19,650 | 1,932 | 25,764 | |||||||
Discontinued operations: | |||||||||||
Earnings from discontinued operations, net of income taxes of $277, |
|
|
|
| |||||||
Loss on sale of discontinued operations, net of income taxes of $179 |
|
|
|
|
|
| |||||
Cumulative effect of accounting change, net of income taxes of $14,200 | -- | -- | -- | (36,800 | ) | ||||||
Net earnings (loss) | $ | 1,313 | $ | 20,081 | $ | 1,848 | $ | (10,129 | ) | ||
Basic earnings per share: | |||||||||||
Earnings from continuing operations | $ | 0.06 | $ | 0.81 | $ | 0.07 | $ | 1.06 | |||
Earnings from discontinued operations, net of income taxes | -- | 0.02 | 0.00 | 0.04 | |||||||
Loss on sale of discontinued operations, net of income taxes | (0.02 | ) | -- | 0.00 | -- | ||||||
Cumulative effect of accounting change, net of income taxes | -- | -- | -- | (1.51 | ) | ||||||
Net earnings (loss) | $ | 0.05 | $ | 0.83 | $ | 0.07 | $ | (0.42 | ) | ||
Diluted earnings per share: | |||||||||||
Earnings from continuing operations | $ | 0.06 | $ | 0.79 | $ | 0.07 | $ | 1.04 | |||
Earnings from discontinued operations, net of income taxes | -- | 0.02 | 0.00 | 0.04 | |||||||
Loss on sale of discontinued operations, net of income taxes | (0.02 | ) | -- | 0.00 | -- | ||||||
Cumulative effect of accounting change, net of income taxes | -- | -- | -- | (1.48 | ) | ||||||
Net earnings (loss) | $ | 0.05 | $ | 0.81 | $ | 0.07 | $ | (0.41 | ) | ||
Weighted average shares outstanding - basic | 26,544,501 | 24,319,218 | 26,543,320 | 24,301,538 | |||||||
Weighted average shares outstanding - diluted | 26,628,261 | 24,892,423 | 26,603,182 | 24,835,171 |
See accompanying notes which are an integral part of these statements.
THE MANITOWOC COMPANY, INC.
Consolidated Balance Sheets
As of March 31,June 30, 2003 and December 31, 2002
(In thousands, except share data)
| March 31, | December 31, | June 30, (Unaudited) | December 31, | ||||||
Current Assets: | ||||||||||
Cash and cash equivalents | $ | 33,275 | $ | 28,035 | $ | 24,322 | $ | 28,035 | ||
Marketable securities | 2,252 | 2,371 | 2,252 | 2,371 | ||||||
Accounts receivable, less allowances of $29,731 |
|
| ||||||||
Accounts receivable, less allowances of $30,097 |
|
| ||||||||
Inventories - net | 272,391 | 255,218 | 282,419 | 255,218 | ||||||
Deferred income taxes | 98,276 | 96,741 | 101,151 | 96,741 | ||||||
Other current assets | 45,773 | 38,708 | 51,773 | 38,708 | ||||||
Total current assets | 675,855 | 647,164 | 731,244 | 647,164 | ||||||
Property, plant and equipment - net | 316,970 | 319,301 | 314,293 | 319,301 | ||||||
Goodwill - net | 383,378 | 380,338 | 394,910 | 380,338 | ||||||
Other intangible assets - net | 126,595 | 127,299 | 125,861 | 127,299 | ||||||
Deferred income taxes | 19,637 | 19,662 | 19,637 | 19,662 | ||||||
Other non-current assets | 61,049 | 83,359 | 66,037 | 83,359 | ||||||
|
|
|
|
| $ | 1,651,982 | $ | 1,577,123 | ||
Liabilities and Stockholders' Equity | ||||||||||
Current Liabilities: | ||||||||||
Accounts payable and accrued expenses | $ | 392,246 | $ | 350,315 | $ | 427,365 | $ | 350,315 | ||
Current portion of long-term debt | 31,902 | 33,328 | 32,531 | 33,328 | ||||||
Short-term borrowings | 8,053 | 9,304 | 7,485 | 9,304 | ||||||
Product warranties | 30,900 | 31,276 | 32,578 | 31,276 | ||||||
Product liability | 36,520 | 36,175 | ||||||||
Product liabilities | 34,588 | 36,175 | ||||||||
Total current liabilities | 499,621 | 460,398 | 534,547 | 460,398 | ||||||
Non-Current Liabilities: | ||||||||||
Long-term debt, less current portion | 610,988 | 623,547 | 622,896 | 623,547 | ||||||
Pension obligations | 66,389 | 66,051 | 66,741 | 66,051 | ||||||
Postretirement health and other benefit obligations | 65,902 | 65,777 | 68,804 | 65,777 | ||||||
Other non-current liabilities | 50,149 | 66,235 | 53,434 | 66,235 | ||||||
Total non-current liabilities | 793,428 | 821,610 | 811,875 | 821,610 | ||||||
| ||||||||||
Stockholders' Equity: | ||||||||||
Common stock (36,746,482 shares issued, |
|
| ||||||||
Common stock (36,746,482 shares issued, |
|
| ||||||||
Additional paid-in capital | 81,230 | 81,230 | 81,268 | 81,230 | ||||||
Accumulated other comprehensive loss | (28,859 | ) | (23,574 | ) | (15,195 | ) | (23,574 | ) | ||
Unearned compensation | (539 | ) | (609 | ) | (469 | ) | (609 | ) | ||
Retained earnings | 345,224 | 344,689 | 346,538 | 344,689 | ||||||
Treasury stock, at cost | ||||||||||
(10,358,562 shares for both periods) | (106,988 | ) | (106,988 | ) | ||||||
(10,354,062 and 10,358,562 shares, respectively) | (106,949 | ) | (106,988 | ) | ||||||
Total stockholders' equity | 290,435 | 295,115 | 305,560 | 295,115 | ||||||
|
|
|
|
| $ | 1,651,982 | $ | 1,577,123 |
See accompanying notes which are an integral part of these statements.
THE MANITOWOC COMPANY, INC.
Consolidated Statements of Cash Flows
For the ThreeSix Months Ended March 31,June 30, 2003 and 2002
(Unaudited)
(In thousands)
Three Months Ended | Six Months Ended | ||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||
Cash Flows from Operations: | |||||||||||
Net earnings (loss) | $ | 535 | $ | (30,210 | ) | $ | 1,848 | $ | (10,129 | ) | |
Adjustments to reconcile net earnings to | |||||||||||
Adjustments to reconcile net earnings (loss) to | |||||||||||
Discontinued operations, net of income taxes | (321 | ) | (476 | ) | 84 | (907 | ) | ||||
Depreciation | 11,960 | 6,316 | 23,042 | 11,554 | |||||||
Amortization of intangible assets | 704 | 587 | 1,438 | 1,052 | |||||||
Amortization of deferred financing fees | 815 | 960 | 2,204 | 1,920 | |||||||
Goodwill impairment | 4,900 | -- | |||||||||
Deferred income taxes | (1,085 | ) | 697 | (2,544 | ) | 436 | |||||
Cumulative effect of accounting change, net of income taxes | -- | 36,800 | -- | 36,800 | |||||||
Plant consolidation costs | -- | 3,900 | |||||||||
Plant consolidation and restructuring costs | 4,178 | 3,900 | |||||||||
Gain on sale of property, plant and equipment | (170 | ) | (1,943 | ) | (636 | ) | (1,225 | ) | |||
Changes in operating assets and liabilities, excluding | |||||||||||
effects of business acquisitions and divestitures: | |||||||||||
Accounts receivable | (726 | ) | (27,782 | ) | (31,566 | ) | (76,540 | ) | |||
Inventories | (19,398 | ) | (10,046 | ) | (14,517 | ) | (21,414 | ) | |||
Other current assets | 8,112 | (3,695 | ) | ||||||||
Non-current assets | 481 | 5,090 | |||||||||
Current liabilities | 31,579 | 26,311 | |||||||||
Non-current liabilities | (7,404 | ) | (3,846 | ) | |||||||
Other assets | 1,821 | (2,970 | ) | ||||||||
Accounts payable | 25,107 | 47,861 | |||||||||
Other liabilities | 8,174 | 15,519 | |||||||||
Net cash provided by operating activities of |
|
| 23,533 | 5,857 | |||||||
Net cash used for operating activities of |
|
|
|
| |||||||
Net cash provided by (used for ) operating activities | 24,808 | (1,021 | ) | ||||||||
Net cash provided by (used for) operating activities of |
|
|
| ||||||||
Net cash provided by operating activities | 24,036 | 1,767 | |||||||||
Cash Flows from Investing: | |||||||||||
Business acquisitions, net of cash acquired | -- | (4,017 | ) | -- | (7,388 | ) | |||||
Capital expenditures | (4,309 | ) | (6,818 | ) | (11,145 | ) | (12,787 | ) | |||
Proceeds from sale of property, plant and equipment | 967 | 5,771 | 4,974 | 7,015 | |||||||
Sale (purchase) of marketable securities | 119 | (26 | ) | 119 | (47 | ) | |||||
Net cash used for investing activities of continuing operations | (3,223 | ) | (5,090 | ) | (6,052 | ) | (13,207 | ) | |||
Net cash provided by (used for) investing activities of | |||||||||||
discontinued operations | 6,989 | (172 | ) | ||||||||
Net cash provided by (used for) investing activities of | 6,989 | (288 |
| ||||||||
Net cash provided by (used for) investing activities | 3,766 | (5,262 | ) | 937 | (13,495 | ) | |||||
Cash Flows from Financing: | |||||||||||
Payments on long-term debt | (21,992 | ) | (4,065 | ) | (26,274 | ) | (16,719 | ) | |||
(Payments) proceeds from revolver borrowings - net | (1,251 | ) | 14,100 | (2,000 | ) | 26,239 | |||||
Debt issuance costs | (662 | ) | -- | (742 | ) | -- | |||||
Exercises of stock options | -- | 232 | 78 | 1,976 | |||||||
Net cash provided by (used for) financing | (23,905 | ) | 10,267 | (28,938 | ) | 11,496 | |||||
Effect of exchange rate changes on cash | 571 | (147 | ) | 252 | 887 | ||||||
Net increase in cash and cash equivalents | 5,240 | 3,837 | |||||||||
Net increase (decrease) in cash and cash equivalents | (3,713 | ) | 655 | ||||||||
Balance at beginning of period | 28,035 | 23,581 | 28,035 | 23,581 | |||||||
Balance at end of period | $ | 33,275 | $ | 27,418 | $ | 24,322 | $ | 24,236 |
See accompanying notes which are an integral part of these statements.
THE MANITOWOC COMPANY, INC.
Consolidated Statements of Comprehensive Income (Loss)
For the Three and Six Months Ended March 31,June 30, 2003 and 2002
(Unaudited)
(In thousands)
Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||
Net earnings (loss) | $ | 535 | $ | (30,210 | ) | $ | 1,313 | $ | 20,081 | $ | 1,848 | $ | (10,129 | ) | ||
Other comprehensive income (loss): | ||||||||||||||||
Derivative instrument fair market value |
|
|
|
|
|
|
| |||||||||
Foreign currency translation adjustments | (5,446 | ) | (121 | ) | 13,063 | (9,866 | ) | 7,617 | (9,987 | ) | ||||||
Total other comprehensive income (loss) | (5,285 | ) | 475 | 13,664 | (10,092 | ) | 8,379 | (9,617 | ) | |||||||
Comprehensive loss | $ | (4,750 | ) | $ | (29,735 | ) | ||||||||||
Comprehensive income (loss) | $ | 14,977 | $ | 9,989 | $ | 10,227 | $ | (19,746 | ) |
See accompanying notes which are an integral part of these statements.
THE MANITOWOC COMPANY, INC.
Notes to Unaudited Consolidated Financial Statements
For the Three and Six Months Ended March 31,June 30, 2003 and 2002
1. Accounting Policies
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the results of operations, cash flows and comprehensive income (loss) for the three and six months ended March 31,June 30, 2003 and 2002 and the financial position at March 31,June 30, 2003. 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, 2002. The consolidated balance sheet as of December 31, 2002 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. 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, except per share amounts, are in thousands of dollars throughout the tables included in these notes unless otherwise indicated.
Certain prior period amounts have been reclassified to conform to the current period presentation.
2. Acquisitions
2002
On August 8, 2002 the company acquired all of the outstanding common shares of Grove Investors, Inc. (Grove). The results of Grove's operations have been included in the Consolidated Statement of EarningsOperations since that date. Grove is a leading provider of mobile telescopic cranes, truck-mounted cranes, and aerial work platforms for the global market. Grove's products are used in a wide variety of applications by commercial and residential building contractors as well as by industrial, municipal, and military end users. Grove's products are marketed to independent equipment rental companies and directly to end users under the brand names Grove Crane, Grove Manlift, and National Crane.
The company views Grove as a strategic fit with its crane business for a number of reasons. Grove is a global leader in the mobile telescopic crane industry, specifically in all-terrain and rough-terrain mobile telescopic cranes. The company did not offer these types of cranes, so Grove filled this void in the company's product offering. Coupled with the company's recent entrance into the tower crane product line with the acquisition of Potain in 2001, Grove enables the company to offer customers threefour major crane categories, namely crawler cranes, tower cranes, and mobile telescopic cranes.cranes and boom trucks. With the addition of Grove, the company is able to offer customers equipment and lifting solutions for virtually every construction application. The company also believes that the combination of the two companies will provide opportunities to capitalize on their respective strengths in systems, technologies and manufacturing expertise, and that this combination will create natural synergies in its world wide distributionworldwide di stribution and serv iceservice network.
The aggregate purchase price paid for Grove was $277.8 million. This includes the issuance of $70.0 million of the company's common stock, the assumption of $202.4 million of Grove debt outstanding as of August 8, 2002, and direct acquisition costs of $5.4 million. In exchange for the outstanding shares of Grove common stock, the company issued approximately 2.2 million shares of the company's common stock out of treasury with an average market price of $32.34 per share. The number of shares issued at the close of the transaction was calculated based on the average closing price of the company's common stock for the ten consecutive trading days ending on and including the second day prior to the closing of the transaction. In addition, the company assumed all of Grove's outstanding liabilities, contingencies and commitments (approximately $464.2$479.3 million including the outstanding debt). Substantially all of the assumed debt was refinanced.
The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition.
August 8, 2002 Current assets $ 323,853 Property, plant and equipment 116,734 Goodwill 51,359 Other intangible assets 45,000 Other long-term assets 17,772 Total assets acquired 554,718 Current liabilities, excluding current debt 129,221 Debt 202,420 Other long-term liabilities 147,638 Total liabilities assumed 479,279 Net assets acquired $ 75,439 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| | |||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
Total current assets of $326.5$323.9 million includes cash acquired of $13.8 million. The purchase consideration paid in excess of the fair values of the assets acquired and liabilities assumed was allocated first to the identifiable intangible assets with the remaining excess accounted for as goodwill. The company obtained third party valuations of certain tangible and identifiable intangible assets. Based upon the appraisal report of identifiable intangible assets, the allocation was as follows: $26.0 million to trademarks and tradenames with an indefinite life; $11.9 million to an in-place distributor network with an indefinite life; $7.1 million to patents with a weighted-average 10-year life; and the remaining $32.9$51.4 million to goodwill. The $32.9$51.4 million of goodwill wasis included in the Crane segment. None of that amount is expected to be deductible for tax purposes. The company also obtained third party valuations of the fair value of inventory and property, plant and equipment acquired. Based upon the apprai salappraisal reports of theset hese assets, the company increased the value of inventory and property, plant and equipment by $3.3 million and $1.1 million, respectively. The $3.3 million fair value adjustment to inventory was charged to cost of goods sold during the fourth quarter of 2002 as the related inventory items were sold. The $1.1 million fair value adjustment to property, plant and equipment is being depreciated over the estimated remaining useful lives of the property, plant and equipment.
During the second quarter of 2003 the company recorded $18.4 million of purchase accounting adjustments to the August 8, 2002 Grove opening balance sheet. The purchase accounting adjustments relate to the following: $12.4 million for consolidation of the National Crane facility located in Nebraska to the Grove facility located in Pennsylvania (see further detail in Note 9. "Plant Consolidation and Restructuring"); $2.1 million, $0.5 million and $0.3 million for additional accounts receivable, inventory and warranty reserves, respectively; $0.9 million related to severance and other employee related costs for headcount reductions at the Grove facilities in Europe (see further detail in Note 9. "Plant Consolidation and Restructuring"); and $2.2 million for other purchase accounting related items.
During 2002 the company also completed certain restructuring and integration activities relating to thisthe Grove acquisition. The company recorded a charge totaling $12.1 million related to these restructuring and integration activities during 2002. Of this amount $4.4 million was recorded in the opening balance sheet of Grove and $7.7 million was recorded as a charge to earnings during the fourth quarter of 2002. The $4.4 million recorded in the opening balance sheet related to severance and other employee related costs for headcount reductions at Grove facilities. See further detail in Note 9. "Plant Consolidation and Restructuring." The company has also developed and is finalizing certain other restructuring and integration activities relating to this acquisition, which will result in future adjustments to goodwill during the second quarter of 2003.
The following unaudited pro forma financial information for the three and six months ended March 31,June 30, 2002 assumes the 2002 acquisition of Grove occurred as of January 1, 2002.
|
|
| |
|
|
| |
|
|
| |
|
|
|
|
| |||
|
|
| |
|
|
|
|
| |||
|
|
| |
|
|
|
|
On April 8, 2002 the company purchased the remaining 50% interest in its joint venture Manitowoc Foodservice Europe (f/k/a Fabbrica Apparecchiature per la Produzione del Ghiaccio Srl), a manufacturer of ice machines based in Italy. The aggregate cash consideration paid by the company for the remaining interest was $3.4 million and resulted in $1.9$2.6 million of additional goodwill. The $1.9$2.6 million of goodwill wasis included in the Foodservice segment and is not expected to be deductible for tax purposes. During the second quarter of 2003 the company recorded $0.7 million of purchase accounting adjustments to the April 8, 2002 opening balance sheet.
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
On February 14, 2003, the company finalized the sale of Femco Machine Company, Inc. (Femco), the Crane segment's crane and excavator aftermarket replacement parts and industrial repair business, to a group of private investors led by the current Femco management and its employees. After the Grove acquisition, it was determined that Femco was not a core business to the Crane segment. Cash proceeds from the sale of Femco were approximately $7.0 million, which includes $0.4 million of cash received by the company for post-closing adjustments, and resulted in a gain on sale of approximately $0.4 million ($0.3 million net of tax). The disposition of Femco represents a discontinued operation under SFAS No. 144. Results of Femco have been classified as discontinued, and the results for the three and six months ended March 31,June 30, 2002 have been restated to exclude the results of Femco. The financial results of the company for the three months ended June 30, 2003 does not include any results of Femco. During DecemberDecemb er 2002, the company recorded a $3.4 million ($2.1 million net of tax) charge related to the decision to sell Femco. Of the charg e,charge, $2.2 million related to recording the net assets of Femco at estimated fair value less cost to sell. In addition, the company performed an impairment analysis of the Femco goodwill in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," and determined that the entire $1.2 million of goodwill was impaired. The $3.4 million charge was recorded in discontinued operations in accordance with SFAS No. 144.
The following selected financial data of Femco for the three months ended March 31, 2002 and the period from January 1, 2003 through February 14, 2003 and the three and six months ended June 30, 2002 is presented for informational purposes only and does not necessarily reflect what the results of operations would have been had the business operated as a stand-alone entity. There were no general corporate expenses or interest expense allocated to discontinued operations during any period.
Three Months | Six Months | Six Months | |||||||
Net sales | $ | 5,081 | $ | 2,178 | $ | 9,952 | |||
Pretax earnings from discontinued operations | $ | 345 | $ | 47 | $ | 773 | |||
Pretax gain on disposal | -- | 439 | -- | ||||||
Provision for taxes on income | 135 | 165 | 302 | ||||||
Net earnings from discontinued operations | $ | 210 | $ | 321 | $ | 471 | |||
Three Months Ended | ||||||
2003 | 2002 | |||||
Net sales | $ | 2,178 | $ | 4,871 | ||
Pretax earnings from discontinued operation | 47 | 428 | ||||
Pre-tax gain on disposal | 439 | -- | ||||
Provision for taxes on income | (165 | ) | (167 | ) | ||
Net earnings from discontinued operation | $ | 321 | $ | 261 |
4. Inventories
The components of inventory at March 31,June 30, 2003 and December 31, 2002 are summarized as follows:
March 31, | December 31, | June 30, | December 31, | |||||||||||
Components: | ||||||||||||||
Raw materials | $ | 90,791 | $ | 77,029 | $ | 90,653 | $ | 77,029 | ||||||
Work-in-process | 79,545 | 87,253 | 81,472 | 87,253 | ||||||||||
Finished goods | 120,838 | 109,560 | 129,336 | 109,560 | ||||||||||
Total inventories at FIFO costs | 291,174 | 273,842 | 301,461 | 273,842 | ||||||||||
Excess of FIFO costs over LIFO value | (18,783 | ) | (18,624 | ) | (19,042 | ) | (18,624 | ) | ||||||
Total inventories | $ | 272,391 | $ | 255,218 | $ | 282,419 | $ | 255,218 |
Inventory is carried at lower of cost or market using the first-in, first-out (FIFO) method for 91%93% and 86% of total inventory at March 31,June 30, 2003 and December 31, 2002, respectively. The remainder of the inventory is costed using the last-in, first-out (LIFO) method.
5. Stock-Based CompensationAt March 31, 2003, the company has three stock-based compensation plans.
The company accounts for these plansits stock options under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. No stock-based employee compensation cost related to stock options is reflected in earnings, as all option grants under those plans have an exercise price equal to the market value of the underlying common stock on the date of grant. During the threesix months ended March 31,June 2003, the company recognized approximately $0.1 million of compensation expense related to restricted stock which was issued during 2002. The following table illustrates the effect on net earnings (loss) and earnings (loss) per share if the company had applied the fair value recognition provisions of SFAS 123, "Accounting for Stock-Based Compensation," to stock based employee compensation for the three and six months ended March 31,June 30, 2003 and 2002.
Three Months Ended March 31, | ||||||
2003 | 2002 | |||||
Reported net earnings (loss) | $ | 535 | $ | (30,210 | ) | |
Deduct: Total stock-based employee compensation expense | ||||||
determined under fair value based method for all awards, | ||||||
net of income taxes | (1,439 | ) | (708 | ) | ||
Pro forma net loss | $ | (904 | ) | $ | (30,918 | ) |
Earnings (loss) per share: | ||||||
Basic - as reported | $ | 0.02 | $ | (1.24 | ) | |
Basic - pro forma | $ | (0.03 | ) | $ | (1.27 | ) |
Diluted - as reported | $ | 0.02 | $ | (1.22 | ) | |
Diluted - pro forma | $ | (0.03 | ) | $ | (1.25 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||
Reported net earnings (loss) | $ | 1,313 | $ | 20,081 | $ | 1,848 | $ | (10,129 | ) | |||
Deduct: Total stock-based employee compensation expense | ||||||||||||
determined under fair value based method for all awards, | ||||||||||||
net of income taxes | (1,813 | ) | (823 | ) | (3,252 | ) | (1,531 | ) | ||||
Pro forma net earnings (loss) | $ | (500 | ) | $ | 19,258 | $ | (1,404 | ) | $ | (11,660 | ) | |
Earnings (loss) per share: | ||||||||||||
Basic - as reported | $ | 0.05 | $ | 0.83 | $ | 0.07 | $ | (0.42 | ) | |||
Basic - pro forma | $ | (0.02 | ) | $ | 0.79 | $ | (0.05 | ) | $ | (0.48 | ) | |
Diluted - as reported | $ | 0.05 | $ | 0.81 | $ | 0.07 | $ | (0.41 | ) | |||
Diluted - pro forma | $ | (0.02 | ) | $ | 0.77 | $ | (0.05 | ) | $ | (0.47 | ) |
The fair value of options at date of grant was estimated using the Black-Scholes option pricing model.
In December 2002, SFAS No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure--an amendment of SFAS No. 123" was issued. SFAS No. 148 provides alternative methods of transition for an entity that voluntarily changes to the fair-value-based method of accounting for stock-based employee compensation and is effective for fiscal years ending after December 15, 2002. In addition, SFAS No. 148 requires prominent disclosures in both annual and interim financial statements about the effects on reported net income of an entity's method of accounting for stock-based employee compensation. The company has adopted the disclosure provisions of SFAS No. 148. The company continues to evaluate the effect of a voluntary change in accounting to the fair value method, but has not adopted the change in accounting as of June 30, 2003.
During the annual shareholder meeting held on May 6, 2003, the shareholders of the company's common stock approved the adoption of The Manitowoc Company, Inc. 2003 Incentive Stock and Awards Plan (the "2003 Stock Plan"). The 2003 Stock Plan provides for both short-term and long-term incentive awards. Stock-based awards may take the form of stock options, stock appreciation rights, restricted stock, or performance share awards. The total number of shares of the company's common stock available for awards under the 2003 Stock Plan will be 3.0 million shares subject to adjustments for stock splits, stock dividends and certain other transactions or events. There have been no awards granted under the 2003 Stock Plan as of June 30, 2003.
6. Contingencies and Significant Estimates
The company has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in connection with the Lemberger Landfill Superfund Site near Manitowoc, Wisconsin. Approximately 150 potentially responsible parties have been identified as having shipped hazardous materials to this site. Eleven of those, including the company, have formed the Lemberger Site Remediation Group and have successfully negotiated with the United States Environmental Protection Agency and the Wisconsin Department of Natural Resources to fund the cleanup and settle their potential liability at this site. Recent estimates indicate that the total costs to clean up this site are approximately $30 million. However the ultimate allocations of cost for this site are not yet final. Although liability is joint and several, the company's share of liability is estimated to be 11% of the total cost. Prior to December 31, 1996, the company accrued $3.3 million in connect ion with this matter. The amounts the company has spent each year from 1999 through March 31,June 30, 2003 to comply with its portion of the cleanup costs have not been material. Remediation work at the site has been substantially completed, with only long-term pumping and treating of groundwater and site maintenance remaining. The company's remaining estimated liability for this matter, included in other current and non-current liabilities in the Consolidated Balance Sheet at March 31,June 30, 2003 is $0.8 million. Based on the size of the company's current allocation of liability at this site, the existence of other viable potentially responsible parties and current reserves, the company does not believe that any liability imposed in connection with this site will have a material adverse effect on its financial condition, results of operations, or cash flows.
At certain of the company's other facilities, the company has identified potential contaminants in soil and groundwater. The ultimate cost of any remediation required will depend upon the results of future investigation. Based upon available information, the ultimate costs are not expected to be material to the company.
The company believes that it has obtained and is in substantial compliance with those material environmental permits and approvals necessary to conduct its various businesses. Based on the facts presently known, the company does not expect environmental compliance costs to have a material adverse effect on its financial condition, results of operations or cash flows.
As of March 31,June 30, 2003, various product-related lawsuits were pending. To the extent permitted under applicable law, all of these are insured with self-insurance retention levels. Prior to October 1, 2002, the company's retention levels were $0.1 million per occurrence for Potain crane products; $1.0 million per occurrence for all other crane products (except for Grove); $1.0 million per occurrence for Foodservice products during 1990 to 1996; and $0.1 million per occurrence for Foodservice products during 1997 to present. Prior to the acquisition, a former owner of Grove purchased an insurance policy which effectively indemnified itGrove against claims arising prior to October 1, 1997, up to an aggregate loss limit of $85.0 million. Beginning October 1, 1997, Grove's insurance included self-insurance retention levels of $2.0 million per occurrence with an aggregate loss limit of $15.0 million per year for 1997 through 2000 and self-insurance retention levels of $3.0 million per occurrence with an aggregate loss limit of $15.0 milli onmillion per year for 2000 through October 2002. Effective October 1, 2002, the company adjusted its self-insurance retention limits for all United States crane product liability claims, including Grove, to $2.0 million per occurrence with an aggregate loss limit of $15.0 million per year.year (before excess umbrella coverage). All non-United States crane product liability claims (other than Potain) are fully insured or reserved with a small deductible payable by the company. The Potain and Foodservice self-insurance retention levels remained consistent. Prior to October 1, 2002, the insurer's annual contribution is limited to $25 million for Marine businesses, $25 million (1997-1998) and $50 million (1998-October 1, 2002) for Foodservice and Crane (other than Grove) businesses, and $100 million for Grove. Effective October 1, 2002, the company adjusted the insurer's annual contribution limit to $100 million for all Foodservice and Crane businesses, whereas the insurer's annual contribution limit forfo r Marine cases remained at $25 million.
Product liability reserves in the Consolidated Balance Sheet at March 31,June 30, 2003 were $36.5$34.6 million; $14.6$11.7 million reserved specifically for cases and $21.9$22.9 million for claims incurred but not reported which were estimated using actuarial methods. Based on the company's experience in defending product liability claims, management believes the current reserves are adequate for estimated settlements on aggregate self-insured claims and insured claims. Any recoveries from insurance carriers are dependent upon the legal sufficiency of claims and the solvency of insurance carriers.
At March 31,June 30, 2003 and December 31, 2002, the company had reserved $38.3$40.2 million and $38.5 million, respectively, for warranty claims included in product warranties and other non-current liabilities in the Consolidated Balance Sheets. Certain of these warranties and other related claims involve matters in dispute that ultimately are resolved by negotiation, arbitration or litigation. Infrequently a material warranty issue can arise which is beyond the scope of the company's historical experience.
At March 31,June 30, 2003 the company is contingently liable under open standby letters of credit issued by the company's bank in favor of third parties totaling $30.8 million.
$24.3 million primarily related to business in the Marine segment.
7. Earnings Per Share
The following is a reconciliation of the average shares outstanding used to compute basic and diluted earnings per share.
Three Months Ended | ||||||
2003 | 2002 | |||||
Basic weighted average common shares outstanding | 26,542,127 | 24,283,661 | ||||
Effect of dilutive securities - stock options | 39,930 | 500,199 | ||||
Diluted weighted average common shares outstanding | 26,582,057 | 24,783,860 | ||||
Three Months Ended | Six Months Ended | |||||||||
2003 | 2002 | 2003 | 2002 | |||||||
Basic weighted average common |
|
|
|
| ||||||
Effect of dilutive securities - stock options | 83,760 | 573,205 | 59,862 | 533,633 | ||||||
Diluted weighted average common |
|
|
|
| ||||||
8. Guarantees
As of March 31,June 30, 2003, the company offers certain buyback commitments and guaranteed residual values on cranes and indemnifications under its accounts receivable factoring arrangements. Effective January 1, 2003, the company adopted the initial recognition and measurement provisions of FASB Interpretation (FIN) No.45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." Therefore, for all indemnifications or guarantees meeting the FIN No. 45 requirements of an obligation and issued by the company beginning January 1, 2003, the company is required to recognize a liability for the fair value of such obligations. The adoption of the initial recognition and measurement provisions of FIN No. 45 did not have a material impact on the company's financial statements.
The company periodically enters into transactions with customers that provide for residual value guarantees and buy back commitments. These transactions are recorded as operating leases. Net proceeds received in connection with the initial transactions have been recorded as deferred revenue and are being amortized to income on a straight-line basis over a period equal to that of the customer's third party financing agreement. The deferred revenue included in other current and non-current liabilities at March 31,June 30, 2003 and December 31, 2002 were $41.9$45.8 million and $42.3 million, respectively.
If all buyback commitments outstanding were satisfied at March 31,June 30, 2003, the total cash cost to the company would be $13.2$16.8 million. These buyback commitments are reflected by virtue of recording the transactions as operating leases. These buyback commitments expire at various times through 2007.
2008.
On May 28, 1999, the company entered into an accounts receivable factoring arrangement with a bank. Under this arrangement, the company is required to purchase from the bank the first $0.5 million and amounts greater than $1.0 million of the aggregate uncollected receivables during a twelve-month period. The company's factoring liability, net of cash collected from customers, was $19.6$15.0 million at March 31,June 30, 2003 and $19.5 million at December 31, 2002.
In the normal course of business, the company provides its customers a warranty covering workmanship, and in some case materials, on products manufactured by the company. Such warranty generally provides that products will be free from defects for periods ranging from 12 months to 60 months. If a product fails to comply with the company's warranty, the company may be obligated, at its expense, to correct any defect by repairing or replacing such defective products. The company provides for an estimate of costs that may be incurred under its warranty at the time product revenue is recognized. These costs primarily include labor and materials, as necessary, associated with repair or replacement. The primary factors that affect the company's warranty liability include the number of shipped units and historical and anticipated warranty claims. As these factors are impacted by actual experience and future expectations, the company assesses the adequacy of its recorded warranty liabilities and adjusts the am ountsamounts as necessary. Below is a table summarizing the warranty activity for the threesix months ended March 31,June 30, 2003:
Balance at December 31,2002 | $ | 38,514 | |
Accruals for warranties issued during the quarter | 4,931 | ||
Settlements made (in cash or in kind) during the quarter | (5,554 | ) | |
Currency translation | 359 | ||
Balance at March 31, 2003 | $ | 38,250 |
Balance at December 31,2002 | $ | 38,514 | |
Accruals for warranties issued during the six months | 14,518 | ||
Settlements made (in cash or in kind) during the six months | (13,490 | ) | |
Grove purchase accounting adjustment | 332 | ||
Currency translation | 348 | ||
Balance at June 30, 2003 | $ | 40,222 |
9. Plant ConsolidationConsolidations and Restructuring
During the first quarter of 2002, the company recorded a pre-tax restructuring charge of $3.9 million in connection with the consolidation of its Multiplex operations into other of its Foodservice operations. These actions were taken in an effort to streamline the company's cost structure and utilize available capacity. The charge included $2.8 million to write-down the building and land, which are available for sale, to estimated fair market value less cost to sell, $0.7 million related to the write-down of certain equipment, and $0.4 million related to severance and other employee related costs. All of the charge was paid or utilized by December 31, 2002.
During the second quarter of 2002, the company finalized the purchase accounting for the Potain acquisition, which included recording aan $8.1 million liability associated with certain restructuring and integration activities. To achieve reductions in operating costs and to integrate the operations of Potain, the company recorded aan $8.1 million liability related primarily to employee severance benefits for workforce reductions. Approximately 135 hourly and salaried positions will bewere eliminated. To date the company has utilized approximately $2.4$2.9 million of this liability.
During the fourth quarter of 2002, the company completed certain integration activities related to the Grove acquisition and other restructuring activities in the Crane segment. The total amount recognized by the company for these integration and restructuring activities was $12.1 million. Of this amount $4.4 million was recorded in the opening balance sheet of Grove and $7.7 million was recorded as a charge to earnings during the fourth quarter of 2002. These actions were taken in an effort to achieve reductions in operating costs, integrate and consolidate certain operations and functions within the segment and to utilize available capacity.
The $4.4 million recorded in Grove's opening balance sheet related to severance and other employee related costs for headcount reductions at various Grove facilities. The $7.7 million charge included $4.0 million related to severance and other employee related costs for headcount reductions at various Manitowoc and Potain facilities, $2.7 million related to the write-down of certain property, plant and equipment, and $1.0 million related to lease termination costs. In total, approximately 600 hourly and salaried positions were eliminated and four facilities will be consolidated into other Crane operations. To date, the company has utilized approximately $6.9$7.4 million of the total $12.1 million reserve which includes $2.7 million non-cash write-down of property, plant and equipment, and $4.2$4.7 million cash paid to employees for severance. The remaining $5.2$4.7 million reserve is recorded in accounts payable and accrued expenses in the Consolidated Balance Sheet and will be utilized by the company during 2003 .
During the second quarter of 2003 the company completed certain additional integration activities related to the Grove acquisition and other restructuring activities in the Crane segment. The integration and restructuring charges recorded during the second quarter of 2003 include the following: $12.4 million for consolidation of the National Crane facility located in Nebraska to the Grove facility located in Pennsylvania; $4.2 million to write-down certain facilities to estimated book value less cost to sell as a result of consolidation of certain Crane segment operations; $0.9 million related to severance and other employee related costs for headcount reductions at the Grove facilities in Europe; and $0.6 million for other crane segment related restructuring. Both the $12.4 million charge for the consolidation of National Crane and the $0.9 million charge for severance and other employee related costs were recorded in the opening balance sheet of Grove. The $4.2 million charge for the write-down of the facilities and the $0.6 million charge for other Crane segment related restructuring were recorded as a charge to earnings during the second quarter of 2003. All of these actions were taken in an effort to achieve further reductions in operating costs, to integrate and consolidate certain operations and functions within the segment and to utilize available capacity.
The actions to consolidate the National Crane facility with the Grove facility were taken in an effort to streamline the company's cost structure and utilize available capacity at the Grove facility. The charge included $3.7 million related to severance and other employee related costs for workforce reductions. Approximately 290 hourly and salaried positions will be eliminated with the consolidation. The charge also included $6.8 million to write-down the National Crane building and land to estimated fair market value less cost to sell, to prepare the facility for sale and to write-down certain machinery and equipment which will not be relocated to the Grove facility. In addition, the company recorded reserves of $1.2 million to write-off inventory which was acquired in the Grove acquisition and will not be relocated and $0.7 million for other consolidation costs. Of the $12.4 million recorded for the consolidation of the National Crane facility, approximately $6.2 million will be non-cash-related charge s. Of the $6.2 million cash related charges, none has been utilized as of June 30, 2003. The cash payments are expected to be completed by the first quarter of 2004. In addition to the $12.4 million recorded in the opening balance sheet, the company estimates an additional $2.8 million will be recorded as a charge to earnings during the remainder of 2003 for consolidation costs which will be expensed as incurred.
The $4.2 million pre-tax charge was recorded by the company to write-down certain facilities to estimated fair value less costs to sell as a result of the consolidation of certain Crane segment operations. The entire $4.2 million charge is a non-cash charge.
During the second quarter of 2003 the company completed negotiations with the works counsel in Europe and recorded an $0.9 million reserve in the Grove opening balance sheet for costs related to work force reductions in its Grove facilities in Europe. Approximately 10 salaried positions will be eliminated as a result of the work force reduction. None of this reserve has been utilized as of June 30, 2003. The cash payments are expected to be completed during the third and fourth quarter of 2003.
On January 1, 2003, the company adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities. SFAS No. 146 requires that a liability for certain costs associated with an exit or disposal activity be recognized when the liability is incurred. During the second quarter of 2003 the company incurred approximately $0.6 million of restructuring costs related to the consolidation of its European crane facilities. The company estimates an additional $1.7 million will be recorded as a charge to earnings during the remainder of 2003 for Crane segment restructuring. These charges were included in Engineering, Selling and Administration expenses in the Consolidated Statement of Earnings for the three and six months ended June 30, 2003.
10. Goodwill and Other Intangible Assets
Effective January 1, 2002, the company adopted SFAS No. 142, "Goodwill and Other Intangible Assets." This statement changed the accounting for goodwill and indefinite-lived intangible assets from an amortization approach to an impairment-only approach. Previous accounting rules incorporated a comparison of book value to undiscounted cash flows. The new rules require a comparison of book value to fair value.
During the first quarter of 2002, $84.3 million of the excess of the cost over fair value of the net assets acquired in the Potain acquisition was allocated to other intangible assets. Based upon a third-partymanagement's estimates, including consideration of appraisal report,information, the allocation was as follows: $53.0 million to trademarks and tradenames with an indefinite life; $17.5 million to patents with a weighted-average 15-year life; $8.8 million to engineering drawings with a weighted-average 15-year life; and $5.0 million to an in-place distribution network with an indefinite life. During the fourth quarter of 2002 a portion of the excess of the cost over fair value of the net assets acquired in the Grove acquisition was allocated to specific other intangible assets. Based upon a third-partymanagement's estimates, including consideration of appraisal report,information, the allocation was as follows: $26.0 million to trademarks and tradenames with an indefinite life; $11.9 million to an in-place distributor network with an indefiniteindef inite life; and $7.1 million to patents with a weighted-average 10 year life. The gr ossgross carrying amount and accumulated amortization of the company's intangible assets other than goodwill, all as a result of the Potain and Grove acquisitions, were as follows as of March 31,June 30, 2003 and December 31, 2002.
March 31, 2003 | December 31, 2002 | |||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||
Carrying | Accumulated | Book | Carrying | Accumulated | Book | |||||||||||||
Amount | Amortization | Value | Amount | Amortization | Value | |||||||||||||
Trademarks and tradenames | $ | 79,000 | $ | -- | $ | 79,000 | $ | 79,000 | $ | -- | $ | 79,000 | ||||||
Patents | 24,600 | (1,833 | ) | 22,767 | 24,600 | (1,376 | ) | 23,224 | ||||||||||
Engineering drawings | 8,800 | (872 | ) | 7,928 | 8,800 | (625 | ) | 8,175 | ||||||||||
Distribution network | 16,900 | -- | 16,900 | 16,900 | -- | 16,900 | ||||||||||||
$ | 129,300 | $ | (2,705 | ) | $ | 126,595 | $ | 129,300 | $ | (2,001 | ) | $ | 127,299 |
June 30, 2003 | December 31, 2002 | |||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||
Carrying | Accumulated | Book | Carrying | Accumulated | Book | |||||||||||||
Amount | Amortization | Value | Amount | Amortization | Value | |||||||||||||
Trademarks and tradenames | $ | 79,000 | $ | -- | $ | 79,000 | $ | 79,000 | $ | -- | $ | 79,000 | ||||||
Patents | 24,600 | (2,330 | ) | 22,270 | 24,600 | (1,376 | ) | 23,224 | ||||||||||
Engineering drawings | 8,800 | (1,109 | ) | 7,691 | 8,800 | (625 | ) | 8,175 | ||||||||||
Distribution network | 16,900 | -- | 16,900 | 16,900 | -- | 16,900 | ||||||||||||
$ | 129,300 | $ | (3,439 | ) | $ | 125,861 | $ | 129,300 | $ | (2,001 | ) | $ | 127,299 |
11. Recent Accounting Changes and Pronouncements
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Assets." The provisions of SFAS No. 143 establish accounting standards for the recognition and measurement of an asset retirement obligation. This statement was effective for the company as of January 1, 2003, and did not have a material effect on its consolidated financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13 and Technical Corrections as of April 2002," which mainly addresses the accounting and disclosure related to early extinguishment of debt transactions as well as several other technical corrections. SFAS No. 145 was effective for the company beginning January 1, 2003. The adoption of SFAS No. 145 will result in the company reclassifying its 2001 loss on early extinguishment of debt from an extraordinary item to a component of earnings from continuing operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial accounting and reporting for costs associated with exit or disposal activities. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. This Statement also establishes that fair value is the objective for initial measurement of the liability. Severance pay under SFAS No. 146, in many cases, would be recognized over time rather than up front. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," which amends and clarifies financial accounting and reporting for certain derivative instruments. The adoption of SFAS No. 149 is not expected to have a material impact on the company's consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," which requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This statement also addresses the classification of financial instruments that include obligations to issue equity shares as equity. This statement is effective for financial instruments entered into or modified after May 31, 2003. The adoption of SFAS No. 150 did not have an impact on the company's consolidated financial statements.
In November 2002, the EITF reached a consensus regarding EITF Issue 00-21, Accounting for Revenue Arrangements with Multiple Deliverables. The consensus addresses not only when and how an arrangement involving multiple deliverables should be divided into separate units of accounting but also how the arrangement's consideration should be allocated among separate units. The pronouncement is effective for the company commencing with its fiscal year 2004 and is not expected to have a material impact on its consolidated financial statements.
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities." FIN No. 46 clarifies the application of Accounting Research Bulletin No. 52, "Consolidated Financial Statements," to certain entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A variable interest entity is required to be consolidated by the company that has a majority of the exposure to expected losses of the variable interest entity. FIN No. 46 is effective immediately for variable interest entities created after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN No. 46 applies in the first fiscal year or interim period beginning after June 15, 2003. FIN No. 46 did not have an impact on the company's consolidated fin ancial statements.
12. Subsidiary Guarantors of Senior Subordinated Notes due 2011
The following tables present condensed consolidating financial information for (a) the parent company, The Manitowoc Company, Inc. (Parent); (b) on a combined basis, the guarantors of the Senior Subordinated Notes due 2011, which include substantially all of the domestic wholly owned subsidiaries of the company (Subsidiary Guarantors); and (c) on a combined basis, the wholly and partially owned foreign subsidiaries of the company and National Crane Corporation, which do not guarantee the Senior Subordinated Notes due 2011 (Non-Guarantor Subsidiaries). Separate financial statements of the Subsidiary Guarantors are not presented because the guarantors are fully and unconditionally, jointly and severally liable under the guarantees, and the company believes such separate statements or disclosures would not be useful to investors.
The Manitowoc Company, Inc.
Condensed Consolidating Statement of EarningsOperations
For the Three Months Ended March 31,June 30, 2003
(In thousands)
| Non-Guarantor | ||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||
Net sales | $ | -- | $ | 196,395 | $ | 182,856 | $ | -- | $ | 379,251 | |||||
Costs and expenses: | |||||||||||||||
Cost of sales | -- | 150,035 | 150,086 | -- | 300,121 | ||||||||||
Engineering, selling and administrative | 4,134 | 33,294 | 26,069 | -- | 63,497 | ||||||||||
Amortization expense | -- | 172 | 532 | -- | 704 | ||||||||||
Total costs and expenses | 4,134 | 183,501 | 176,687 | -- | 364,322 | ||||||||||
Earnings (loss) from operations | (4,134 | ) | 12,894 | 6,169 | -- | 14,929 | |||||||||
Other income (expense): | |||||||||||||||
Interest expense | (13,204 | ) | (667 | ) | (767 | ) | -- | (14,638 | ) | ||||||
Management fee income (expense) | 4,843 | (2,199 | ) | (2,644 | ) | -- | - | ||||||||
Other income (expense), net | 6,081 | (9,368 | ) | 3,320 | -- | 33 | |||||||||
Total other income (expense) | (2,280 | ) | (12,234 | ) | (91 | ) | -- | (14,605 | ) | ||||||
Earnings (loss) from continuing operations |
|
|
|
|
|
| |||||||||
Provision (benefit) for taxes on income | (911 | ) | 94 | 927 | -- | 110 | |||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| |||||||||
Equity in earnings of subsidiaries | 5,717 | -- | -- | (5,717 | ) | -- | |||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| |||||||||
Discontinued operations: | |||||||||||||||
Earnings from discontinued operations, | |||||||||||||||
net of income tax of $16 | 31 | 31 | -- | (31 | ) | 31 | |||||||||
Gain on sale of discontinued operations, |
|
|
|
|
|
| |||||||||
Net earnings | $ | 535 | $ | 887 | $ | 5,151 | $ | (6,038 | ) | $ | 535 |
|
| ||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||
Net sales | $ | -- | $ | 213,451 | $ | 220,249 | $ | -- | $ | 433,700 | |||||
Costs and expenses: | |||||||||||||||
Cost of sales | -- | 157,486 | 180,852 | -- | 338,338 | ||||||||||
Engineering, selling and administrative | 4,439 | 35,139 | 28,277 | -- | 67,855 | ||||||||||
Amortization expense | -- | 163 | 570 | -- | 733 | ||||||||||
Goodwill impairment | -- | -- | 4,900 | 4,900 | |||||||||||
Restructuring costs | -- | 2,050 | 2,128 | 4,178 | |||||||||||
Plant consolidation costs | -- | -- | -- | -- | -- | ||||||||||
Total costs and expenses | 4,439 | 194,838 | 216,727 | -- | 416,004 | ||||||||||
Earnings (loss) from operations | (4,439 | ) | 18,613 | 3,522 | -- | 17,696 | |||||||||
Other income (expense): | |||||||||||||||
Interest expense | (13,904 | ) | (566 | ) | (852 | ) | -- | (15,322 | ) | ||||||
Management fee income (expense) | 4,807 | (2,095 | ) | (2,712 | ) | -- | -- | ||||||||
Other income (expense), net | 6,318 | (10,005 | ) | 3,749 | -- | 62 | |||||||||
Total other income (expense) | (2,779 | ) | (12,666 | ) | 185 | -- | (15,260 | ) | |||||||
Earnings (loss) from continuing operations |
|
|
|
|
|
| |||||||||
Provision (benefit) for taxes on income | (6,683 | ) | 4,617 | 2,784 | -- | 718 | |||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| |||||||||
Equity in earnings of subsidiaries | 1,848 | -- | -- | (1,848 | ) | -- | |||||||||
Earnings (loss) from continuing operations | 1,313 | 1,330 | 923 | (1,848 | ) | 1,718 | |||||||||
Loss on sale of discontinued operations, | |||||||||||||||
net of income taxes of $179 | -- | (405 | ) | -- | -- | (405 | ) | ||||||||
Net earnings (loss) | $ | 1,313 | $ | 925 | $ | 923 | $ | (1,848 | ) | $ | 1,313 |
The Manitowoc Company, Inc.
Condensed Consolidating Statement of EarningsOperations
For the Three Months Ended March 31,June 30, 2002
(In thousands)
| Non-Guarantor |
|
| |||||||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||||
Net sales | $ | -- | $ | 207,469 | $ | 75,556 | $ | -- | $ | 283,025 | $ | -- | $ | 236,790 | $ | 91,485 | $ | -- | $ | 328,275 | ||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||
Cost of sales | -- | 154,904 | 60,380 | -- | 215,284 | -- | 169,906 | 70,011 | -- | 239,917 | ||||||||||||||||||||
Engineering, selling and administrative | 3,545 | 28,331 | 11,444 | -- | 43,320 | 3,660 | 29,640 | 10,773 | -- | 44,073 | ||||||||||||||||||||
Amortization expense | -- | -- | 587 | -- | 587 | -- | -- | 465 | -- | 465 | ||||||||||||||||||||
Plant consolidation costs | -- | 3,900 | -- | -- | 3,900 | -- | -- | -- | - | -- | ||||||||||||||||||||
Total costs and expenses | 3,545 | 187,135 | 72,411 | -- | 263,091 | 3,660 | 199,546 | 81,249 | - | 284,455 | ||||||||||||||||||||
Earnings (loss) from operations | (3,545 | ) | 20,334 | 3,145 | -- | 19,934 | (3,660 | ) | 37,244 | 10,236 | -- | 43,820 | ||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||
Other expense: | ||||||||||||||||||||||||||||||
Interest expense | (9,501 | ) | (405 | ) | (706 | ) | -- | (10,612 | ) | (10,153 | ) | (571 | ) | (620 | ) | -- | (11,344 | ) | ||||||||||||
Management fee income (expense) | 3,853 | (4,528 | ) | 675 | -- | - | 3,804 | (3,804 | ) | -- | -- | -- | ||||||||||||||||||
Other income (expense), net | (314 | ) | (49 | ) | 1,065 | -- | 702 | (225 | ) | (14 | ) | (26 | ) | -- | (265 | ) | ||||||||||||||
Total other income (expense) | (5,962 | ) | (4,982 | ) | 1,034 | -- | (9,910 | ) | ||||||||||||||||||||||
Total other expense | (6,574 | ) | (4,389 | ) | (646 | ) | -- | (11,609 | ) | |||||||||||||||||||||
Earnings (loss) from continuing |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Provision (benefit) for taxes on income | (3,227 | ) | 5,211 | 1,926 | -- | 3,910 | (3,248 | ) | 11,941 | 3,868 | -- | 12,561 | ||||||||||||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| ||||||||||||||||||||||||
Earnings (loss) from continuing operations | ||||||||||||||||||||||||||||||
before equity in earnings of subsidiaries | (6,986 | ) | 20,914 | 5,722 | -- | 19,650 | ||||||||||||||||||||||||
Equity in earnings of subsidiaries | 12,394 | -- | -- | (12,394 | ) | -- | 27,067 | -- | -- | (27,067 | ) | -- | ||||||||||||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| 20,081 | 20,914 | 5,722 | (27,067 | ) | 19,650 | ||||||||||||||||||
Discontinued operations: | -- | -- | -- | -- | -- | |||||||||||||||||||||||||
Earnings from discontinued operations, | ||||||||||||||||||||||||||||||
net of income tax of $304 | 476 | 476 | -- | (476 | ) | 476 | ||||||||||||||||||||||||
Cumulative effect of accounting change, |
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Earnings (loss) from discontinued | ||||||||||||||||||||||||||||||
operations, net of tax of $277 | -- | 431 | -- | -- | 431 | |||||||||||||||||||||||||
Net earnings (loss) | $ | (30,210 | ) | $ | (26,183 | ) | $ | 2,253 | $ | 23,930 | $ | (30,210 | ) | $ | 20,081 | $ | 21,345 | $ | 5,722 | $ | (27,067 | ) | $ | 20,081 |
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2003
(In thousands)
|
| ||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||
Net sales | $ | -- | $ | 409,846 | $ | 403,105 | $ | -- | $ | 812,951 | |||||
Costs and expenses: | |||||||||||||||
Cost of sales | -- | 307,521 | 330,938 | -- | 638,459 | ||||||||||
Engineering, selling and administrative | 8,573 | 68,433 | 54,345 | -- | 131,351 | ||||||||||
Amortization expense | -- | 335 | 1,103 | -- | 1,438 | ||||||||||
Goodwill impairment | -- | 4,900 | -- | 4,900 | |||||||||||
Restructuring costs | -- | 2,050 | 2,128 | -- | 4,178 | ||||||||||
Total costs and expenses | 8,573 | 378,339 | 393,414 | -- | 780,326 | ||||||||||
Earnings (loss) from operations | (8,573 | ) | 31,507 | 9,691 | -- | 32,625 | |||||||||
Other income (expense): | |||||||||||||||
Interest expense | (27,108 | ) | (1,233 | ) | (1,619 | ) | -- | (29,960 | ) | ||||||
Management fee income (expense) | 9,650 | (4,294 | ) | (5,356 | ) | -- | -- | ||||||||
Other income (expense), net | 12,399 | (19,373 | ) | 7,069 | -- | 95 | |||||||||
Total other income (expense) | (5,059 | ) | (24,900 | ) | 94 | -- | (29,865 | ) | |||||||
Earnings (loss) from continuing operations |
|
|
|
|
|
| |||||||||
Provision (benefit) for taxes on income | (7,594 | ) | 4,711 | 3,711 | -- | 828 | |||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| |||||||||
Equity in earnings of subsidiaries | 7,886 | -- | -- | (7,886 | ) | -- | |||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| |||||||||
Discontinued operations: | |||||||||||||||
Earnings from discontinued operations, |
|
|
|
|
| ||||||||||
Loss on sale of discontinued operations, |
|
|
|
|
|
|
| ||||||||
Net earnings (loss) | $ | 1,848 | $ | 1,812 | $ | 6,074 | $ | (7,886 | ) | $ | 1,848 |
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2002
(In thousands)
|
| ||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||
Net sales | $ | -- | $ | 444,259 | $ | 167,041 | $ | -- | $ | 611,300 | |||||
Costs and expenses: | |||||||||||||||
Cost of sales | -- | 324,810 | 130,391 | -- | 455,201 | ||||||||||
Engineering, selling and administrative | 7,205 | 57,971 | 22,217 | -- | 87,393 | ||||||||||
Amortization expense | -- | -- | 1,052 | -- | 1,052 | ||||||||||
Plant consolidation costs | -- | 3,900 | -- | -- | 3,900 | ||||||||||
Total costs and expenses | 7,205 | 386,681 | 153,660 | -- | 547,546 | ||||||||||
Earnings (loss) from operations | (7,205 | ) | 57,578 | 13,381 | -- | 63,754 | |||||||||
Other income (expense): | |||||||||||||||
Interest expense | (19,654 | ) | (976 | ) | (1,326 | ) | -- | (21,956 | ) | ||||||
Management fee income (expense) | 7,657 | (8,332 | ) | 675 | -- | - | |||||||||
Other income (expense), net | (539 | ) | (63 | ) | 1,039 | -- | 437 | ||||||||
Total other income (expense) | (12,536 | ) | (9,371 | ) | 388 | -- | (21,519 | ) | |||||||
Earnings (loss) from continuing operations |
|
|
|
|
|
| |||||||||
Provision (benefit) for taxes on income | (7,419 | ) | 18,096 | 5,794 | -- | 16,471 | |||||||||
Earnings (loss) from continuing operations | |||||||||||||||
before equity in earnings of subsidiaries | (12,322 | ) | 30,111 | 7,975 | -- | 25,764 | |||||||||
Equity in earnings of subsidiaries | 38,993 | -- | -- | (38,993 | ) | -- | |||||||||
Earnings (loss) from continuing operations | 26,671 | 30,111 | 7,975 | (38,993 | ) | 25,764 | |||||||||
Discontinued operations: | |||||||||||||||
Earnings from discontinued operations, | -- | 907 | -- | -- | 907 | ||||||||||
net of income tax of $581 | |||||||||||||||
Cumulative effect of accounting change, | |||||||||||||||
net of income tax of $14,200 | (36,800) | (36,800 | ) | -- | 36,800 | (36,800 | ) | ||||||||
Net earnings (loss) | $ | (10,129) | $ | (5,782 | ) | $ | 7,975 | $ | (2,193 | ) | $ | (10,129 | ) |
The Manitowoc Company, Inc.
Condensed Consolidating Balance Sheet
as of March 31,June 30, 2003
(In thousands)
Non- | Non- | |||||||||||||||||||||
Guarantor | Guarantor | Guarantor | Guarantor | |||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||
Assets | ||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 3,522 | $ | 1,899 | $ | 27,854 | $ | -- | $ | 33,275 | $ | 2,206 | $ | 4,555 | $ | 17,561 | $ | -- | $ | 24,322 | ||
Marketable securities | 2,252 | -- | -- | -- | 2,252 | 2,252 | -- | -- | -- | 2,252 | ||||||||||||
Accounts receivable - net | 4,137 | 76,859 | 142,892 | -- | 223,888 | 4,197 | 97,263 | 167,867 | -- | 269,327 | ||||||||||||
Inventories - net | -- | 102,670 | 169,721 | -- | 272,391 | -- | 101,759 | 180,660 | -- | 282,419 | ||||||||||||
Deferred income taxes | 72,887 | (207 | ) | 25,596 | -- | 98,276 | 72,887 | (206 | ) | 28,470 | -- | 101,151 | ||||||||||
Other current assets | 397 | 20,724 | 24,652 | -- | 45,773 | 398 | 27,928 | 23,447 | -- | 51,773 | ||||||||||||
Total current assets | 83,195 | 201,945 | 390,715 | -- | 675,855 | 81,940 | 231,299 | 418,005 | -- | 731,244 | ||||||||||||
Property, plant and equipment - net | 11,986 | 142,793 | 162,191 | -- | 316,970 | 11,824 | 138,339 | 164,130 | -- | 314,293 | ||||||||||||
Goodwill - net | -- | 231,604 | 151,774 | -- | 383,378 | -- | 241,152 | 153,758 | -- | 394,910 | ||||||||||||
Other intangible assets - net | -- | -- | 126,595 | -- | 126,595 | -- | -- | 125,861 | -- | 125,861 | ||||||||||||
Deferred income taxes | 23,724 | 9,368 | (13,455 | ) | -- | 19,637 | 23,724 | 9,368 | (13,455 | ) | -- | 19,637 | ||||||||||
Other non-current assets | 29,657 | 27,628 | 3,764 | -- | 61,049 | 35,317 | 27,250 | 3,470 | -- | 66,037 | ||||||||||||
Equity in affiliates | 1,048,164 | -- | -- | (1,048,164 | ) | -- | 1,079,476 | -- | -- | (1,079,476 | ) | -- | ||||||||||
Total assets | $ | 1,196,726 | $ | 613,338 | $ | 821,584 | $ | (1,048,164 | ) $ | 1,583,484 | $ | 1,232,281 | $ | 647,408 | $ | 851,769 | $ | (1,079,476 | ) $ | 1,651,982 | ||
Liabilities and Stockholders' Equity | ||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 30,423 | $ | 112,101 | $ | 249,722 | $ | -- | $ | 392,246 | $ | 25,514 | $ | 139,713 | $ | 262,138 | $ | -- | $ | 427,365 | ||
Current portion long-term debt | 28,419 | -- | 3,483 | -- | 31,902 | 28,419 | -- | 4,112 | -- | 32,531 | ||||||||||||
Short-term borrowings | 1,200 | 2,839 | 4,014 | -- | 8,053 | -- | 4,131 | 3,354 | -- | 7,485 | ||||||||||||
Product warranties | -- | 17,503 | 13,397 | -- | 30,900 | -- | 10,058 | 22,520 | -- | 32,578 | ||||||||||||
Product liabilities | -- | 14,781 | 21,739 | -- | 36,520 | -- | 19,124 | 15,464 | -- | 34,588 | ||||||||||||
Total current liabilities | 60,042 | 147,225 | 292,354 | -- | 499,621 | 53,933 | 173,026 | 307,588 | -- | 534,547 | ||||||||||||
Non-Current Liabilities: | ||||||||||||||||||||||
Long-term debt, less current portion | 595,860 | -- | 15,128 | -- | 610,988 | 604,578 | -- | 18,318 | -- | 622,896 | ||||||||||||
Pension obligations | 10,242 | 21,778 | 34,369 | 66,389 | 10,240 | 19,637 | 36,864 | 66,741 | ||||||||||||||
Postretirement health and other |
|
|
|
|
|
|
|
|
|
| ||||||||||||
Intercompany payable/(receivable) - net | 228,139 | (203,756 | ) | (24,383 | ) | -- | -- | 244,519 | (204,335 | ) | (40,184 | ) | -- | -- | ||||||||
Other non-current liabilities | 11,066 | 11,339 | 27,744 | -- | 50,149 | 9,563 | 13,558 | 30,313 | -- | 53,434 | ||||||||||||
Total non-current liabilities | 846,249 | (105,679 | ) | 52,858 | -- | 793,428 | 872,788 | (106,224 | ) | 45,311 | -- | 811,875 | ||||||||||
Stockholders' Equity | 290,435 | 571,792 | 476,372 | (1,048,164 | ) | 290,435 | 305,560 | 580,606 | 498,870 | (1,079,476 | ) | 305,560 | ||||||||||
Total liabilities and | ||||||||||||||||||||||
stockholders' equity | $ | 1,196,726 | $ | 613,338 | $ | 821,584 | $ | (1,048,164 | ) $ | 1,583,484 | $ | 1,232,281 | $ | 647,408 | $ | 851,769 | $ | (1,079,476 | ) $ | 1,651,982 |
The Manitowoc Company, Inc.
Condensed Consolidating Balance Sheet
as of December 31, 2002
(In thousands)
Non- | Non- | |||||||||||||||||||||||
Subsidiary | Guarantor | Subsidiary | Guarantor | |||||||||||||||||||||
Parent | Guarantors | Subsidiaries | Eliminations | Consolidated | Parent | Guarantors | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | ||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 2,650 | $ | (3,982 | ) | $ | 29,367 | $ | -- | $ | 28,035 | $ | 2,650 | $ | (3,982 | ) | $ | 29,367 | $ | -- | $ | 28,035 | ||
Marketable securities | 2,371 | -- | -- | -- | 2,371 | 2,371 | -- | -- | -- | 2,371 | ||||||||||||||
Accounts receivable - net | 3,934 | 87,440 | 134,717 | -- | 226,091 | 3,934 | 87,440 | 134,717 | -- | 226,091 | ||||||||||||||
Inventories - net | -- | 112,425 | 142,793 | -- | 255,218 | -- | 112,425 | 142,793 | -- | 255,218 | ||||||||||||||
Deferred income taxes | 72,887 | 215 | 23,639 | - | 96,741 | 72,887 | 215 | 23,639 | - | 96,741 | ||||||||||||||
Other current assets | 427 | 34,899 | 3,382 | -- | 38,708 | 427 | 34,899 | 3,382 | -- | 38,708 | ||||||||||||||
Total current assets | 82,269 | 230,997 | 333,898 | -- | 647,164 | 82,269 | 230,997 | 333,898 | -- | 647,164 | ||||||||||||||
Property, plant and equipment - net | 12,687 | 148,153 | 158,461 | -- | 319,301 | 12,687 | 148,153 | 158,461 | -- | 319,301 | ||||||||||||||
Goodwill - net | -- | 229,383 | 150,955 | -- | 380,338 | -- | 229,383 | 150,955 | -- | 380,338 | ||||||||||||||
Other intangible assets - net | -- | -- | 127,299 | -- | 127,299 | -- | -- | 127,299 | -- | 127,299 | ||||||||||||||
Deferred income taxes | 9,931 | 9,731 | -- | 19,662 | 9,931 | 9,731 | -- | 19,662 | ||||||||||||||||
Other non-current assets | 34,639 | 8,767 | 39,953 | -- | 83,359 | 34,639 | 8,767 | 39,953 | -- | 83,359 | ||||||||||||||
Equity in affiliates | 1,027,876 | -- | -- | (1,027,876 | ) | -- | 1,027,876 | -- | -- | (1,027,876 | ) | -- | ||||||||||||
Total assets | $ | 1,167,402 | $ | 627,031 | $ | 810,566 | $ | (1,027,876 | ) $ | 1,577,123 | $ | 1,167,402 | $ | 627,031 | $ | 810,566 | $ | (1,027,876 | ) $ | 1,577,123 | ||||
Liabilities and Stockholders' Equity | ||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 20,458 | $ | 166,401 | $ | 163,456 | $ | -- | $ | 350,315 | $ | 20,458 | $ | 166,401 | $ | 163,456 | $ | -- | $ | 350,315 | ||||
Current portion long-term debt | 28,419 | -- | 4,909 | -- | 33,328 | 28,419 | -- | 4,909 | -- | 33,328 | ||||||||||||||
Short-term borrowings | 2,000 | -- | 7,304 | -- | 9,304 | 2,000 | -- | 7,304 | -- | 9,304 | ||||||||||||||
Product warranties | -- | 19,764 | 11,512 | -- | 31,276 | -- | 19,764 | 11,512 | -- | 31,276 | ||||||||||||||
Product liabilities | -- | 15,554 | 20,621 | -- | 36,175 | -- | 15,554 | 20,621 | -- | 36,175 | ||||||||||||||
Total current liabilities | 50,877 | 201,719 | 207,802 | -- | 460,398 | 50,877 | 201,719 | 207,802 | -- | 460,398 | ||||||||||||||
Non-Current Liabilities: | ||||||||||||||||||||||||
Long-term debt, less current portion | 609,836 | 209 | 13,502 | -- | 623,547 | 609,836 | 209 | 13,502 | -- | 623,547 | ||||||||||||||
Pension obligation | 10,357 | 22,223 | 33,471 | 66,051 | 10,357 | 22,223 | 33,471 | 66,051 | ||||||||||||||||
Postretirement health and other | ||||||||||||||||||||||||
benefit obligations | 925 | 64,852 | -- | -- | 65,777 | |||||||||||||||||||
Postretirement health and other benefit obligations | 925 | 64,852 | -- | 65,777 | ||||||||||||||||||||
Intercompany payable/(receivable) - net | 202,370 | (346,609 | ) | 144,239 | -- | -- | 202,370 | (346,609 | ) | 144,239 | -- | -- | ||||||||||||
Other non-current liabilities | (2,078 | ) | 9,069 | 59,244 | -- | 66,235 | (2,078 | ) | 9,069 | 59,244 | -- | 66,235 | ||||||||||||
Total non-current liabilities | 821,410 | (250,256 | ) | 250,456 | -- | 821,610 | 821,410 | (250,256 | ) | 250,456 | -- | 821,610 | ||||||||||||
Stockholders' Equity | 295,115 | 675,568 | 352,308 | (1,027,876 | ) | 295,115 | 295,115 | 675,568 | 352,308 | (1,027,876 | ) | 295,115 | ||||||||||||
Total liabilities and | ||||||||||||||||||||||||
stockholders' equity | $ | 1,167,402 | $ | 627,031 | $ | 810,566 | $ | (1,027,876 | ) $ | 1,577,123 | $ | 1,167,402 | $ | 627,031 | $ | 810,566 | $ | (1,027,876 | ) $ | 1,577,123 |
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Cash Flows
For the ThreeSix Months Ended March 31,June 30, 2003
(In thousands)
Non- | Non- | |||||||||||||||||||||||
Guarantor | Guarantor | Guarantor | Guarantor | |||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Consolidated | Parent | Subsidiaries | Subsidiaries | Consolidated | |||||||||||||||||
Net cash provided by (used in) operations | $ | (6,048 | ) | $ | (1,307 | ) | $ | 32,163 | $ | 24,808 | $ | (23,037 | ) | $ | 1,220 | $ | 45,853 | $ | 24,036 | |||||
Cash Flows from Investing: | ||||||||||||||||||||||||
Business acquisitions - net of cash acquired | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||
Capital expenditures | 463 | (326 | ) | (4,446 | ) | (4,309 | ) | (302 | ) | (1,624 | ) | (9,219 | ) | (11,145 | ) | |||||||||
Proceeds from sale of property, plant, and equipment | -- | (342 | ) | 1,309 | 967 | -- | 34 | 4,940 | 4,974 | |||||||||||||||
Sale of marketable securities | 119 | -- | -- | 119 | 119 | -- | -- | 119 | ||||||||||||||||
Intercompany investments | 30,837 | -- | (30,837 | ) | -- | 52,737 | -- | (52,737 | ) | -- | ||||||||||||||
Net cash provided by (used for) investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net cash provided by (used for) investing activities |
|
|
|
| ||||||||||||||||||||
Net cash provided by investing activities of |
|
|
|
| ||||||||||||||||||||
Net cash provided by (used for) investing activities | 31,419 | 6,321 | (33,974 | ) | 3,766 | 52,554 | 5,399 | (57,016 | ) | 937 | ||||||||||||||
Cash Flows from Financing: | ||||||||||||||||||||||||
Proceeds from long-term debt | -- | -- | -- | -- | ||||||||||||||||||||
Payments on long-term debt | (23,409 | ) | -- | 1,417 | (21,992 | ) | (27,295 | ) | -- | 1,021 | (26,274 | ) | ||||||||||||
(Payments) proceeds from revolver borrowings - net | (426 | ) | -- | (825 | ) | (1,251 | ) | (2,000 | ) | -- | -- | (2,000 | ) | |||||||||||
Debt issuance costs | (662 | ) | -- | -- | (662 | ) | (742 | ) | -- | -- | (742 | ) | ||||||||||||
Exercises of stock options | -- | -- | -- | -- | 78 | -- | -- | 78 | ||||||||||||||||
Net cash provided by (used for) financing | (24,497 | ) | -- | 592 | (23,905 | ) | (29,959 | ) | -- | 1,021 | (28,938 | ) | ||||||||||||
Effect of exchange rate changes on cash | -- | -- | 571 | 571 | -- | -- | 252 | 252 | ||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 874 | 5,014 | (648 | ) | 5,240 | (442 | ) | 6,619 | (9,890 | ) | (3,713 | ) | ||||||||||||
Balance at beginning of period | 2,648 | (3,115 | ) | 28,502 | 28,035 | 2,648 | (3,115 | ) | 28,502 | 28,035 | ||||||||||||||
Balance at end of period | $ | 3,522 | $ | 1,899 | $ | 27,854 | $ | 33,275 | $ | 2,206 | $ | 3,504 | $ | 18,612 | $ | 24,322 |
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Cash Flows
For the ThreeSix Months Ended March 31,June 30, 2002
(In thousands)
Non- | ||||||||||||
Guarantor | Guarantor | |||||||||||
Parent | Subsidiaries | Subsidiaries | Consolidated | |||||||||
Net cash provided by (used in) operations | $ | (7,614 | ) | $ | 12,453 | $ | (5,860 | ) | $ | (1,021 | ) | |
Cash Flows from Investing: | ||||||||||||
Business acquisitions - net of cash acquired | -- | -- | (4,017 | ) | (4,017 | ) | ||||||
Capital expenditures | (1,182 | ) | (1,746 | ) | (3,890 | ) | (6,818 | ) | ||||
Proceeds from sale of property, plant, and equipment | -- | (3,306 | ) | 9,077 | 5,771 | |||||||
Purchase of marketable securities | (26 | ) | -- | -- | (26 | ) | ||||||
Intercompany investments | (5,403 | ) | -- | 5,403 | -- | |||||||
Net cash provided by (used for) investing activities of |
|
|
|
|
|
|
| |||||
Net cash provided by (used for) investing activities of |
|
|
|
|
|
| ||||||
Net cash provided by (used for) investing activities | (6,611 | ) | (5,224 | ) | 6,573 | (5,262 | ) | |||||
Cash Flows from Financing: | ||||||||||||
Proceeds from long-term debt | -- | -- | -- | -- | ||||||||
Payments on long-term debt | (451 | ) | -- | (3,614 | ) | (4,065 | ) | |||||
(Payments) proceeds from revolver borrowings - net | 14,100 | -- | -- | 14,100 | ||||||||
Debt issuance costs | -- | -- | -- | -- | ||||||||
Exercises of stock options | 232 | -- | -- | 232 | ||||||||
Net cash provided by (used for) financing | 13,881 | -- | (3,614 | ) | 10,267 | |||||||
Effect of exchange rate changes on cash | -- | -- | (147 | ) | (147 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | (344 | ) | 7,229 | (3,048 | ) | 3,837 | ||||||
Balance at beginning of period | 4,456 | 141 | 18,984 | 23,581 | ||||||||
Balance at end of period | $ | 4,112 | $ | 7,370 | $ | 15,936 | $ | 27,418 |
Non- | ||||||||||||
Guarantor | Guarantor | |||||||||||
Parent | Subsidiaries | Subsidiaries | Consolidated | |||||||||
Net cash provided by (used in) operations | $ | (27,523 | ) | $ | 6,769 | $ | 22,521 | $ | 1,767 | |||
Cash Flows from Investing: | ||||||||||||
Business acquisitions - net of cash acquired | -- | -- | (7,388 | ) | (7,388 | ) | ||||||
Capital expenditures | (2,958 | ) | (2,968 | ) | (6,861 | ) | (12,787 | ) | ||||
Proceeds from sale of property, plant, and equipment | -- | 512 | 6,503 | 7,015 | ||||||||
Purchase of marketable securities | (47 | ) | -- | -- | (47 | ) | ||||||
Intercompany investments | 20,136 | -- | (20,136 | ) | -- | |||||||
Net cash provided by (used for) investing activities | ||||||||||||
of continuing operations | 17,131 | (2,456 | ) | (27,882 | ) | (13,207 | ) | |||||
Net cash used for investing activities | ||||||||||||
of discontinued operations | -- | (288 | ) | -- | (288 | ) | ||||||
Net cash provided by (used for) investing activities | 17,131 | (2,744 | ) | (27,882 | ) | (13,495 | ) | |||||
Cash Flows from Financing: | ||||||||||||
Payments on long-term debt | (16,427 | ) | -- | (292 | ) | (16,719 | ) | |||||
Payments proceeds from revolver borrowings - net | 24,400 | -- | 1,839 | 26,239 | ||||||||
Exercise of stock options | 1,976 | -- | -- | 1,976 | ||||||||
Net cash provided by financing | 9,949 | -- | 1,547 | 11,496 | ||||||||
Effect of exchange rate changes on cash | -- | -- | 887 | 887 | ||||||||
Net increase (decrease) in cash and cash equivalents | (443 | ) | 4,025 | (2,927 | ) | 655 | ||||||
Balance at beginning of period | 4,456 | 141 | 18,984 | 23,581 | ||||||||
Balance at end of period | $ | 4,013 | $ | 4,166 | $ | 16,057 | $ | 24,236 |
13. Subsidiary Guarantors of Senior Subordinated Notes due 2012
The following tables present condensed consolidating financial information for (a) the parent company, The Manitowoc Company, Inc. (Parent); (b) on a combined basis, the guarantors of the Senior Subordinated Notes due 2012, which include substantially all of the domestic wholly owned subsidiaries of the company (Subsidiary Guarantors); and (c) on a combined basis, the wholly and partially owned foreign subsidiaries of the company, and the domestic subsidiaries National Crane Corporation and Manitowoc Boom Trucks, Inc., which was sold by the company during the fourth quarter of 2002, all of which do not guarantee the Senior Subordinated Notes due 2012 (Non-Guarantor Subsidiaries). Separate financial statements of the Subsidiary Guarantors are not presented because the guarantors are fully and unconditionally, jointly and severally liable under the guarantees, and the company believes such separate statements or disclosures would not be useful to investors.
The Manitowoc Company, Inc.
Condensed Consolidating Statement of EarningsOperations
For the Three Months Ended March 31,June 30, 2003
(In thousands)
| Non-Guarantor |
| Non-Guarantor | |||||||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||||
Net sales | $ | -- | $ | 196,395 | $ | 182,856 | $ | -- | $ | 379,251 | $ | -- | $ | 213,451 | $ | 220,249 | $ | -- | $ | 433,700 | ||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||
Cost of sales | -- | 150,035 | 150,086 | -- | 300,121 | -- | 157,486 | 180,852 | -- | 338,338 | ||||||||||||||||||||
Engineering, selling and administrative | 4,134 | 33,294 | 26,069 | -- | 63,497 | 4,439 | 35,139 | 28,277 | -- | 67,855 | ||||||||||||||||||||
Amortization expense | -- | 172 | 532 | -- | 704 | -- | 163 | 570 | -- | 733 | ||||||||||||||||||||
Goodwill impairment | -- | -- | 4,900 | 4,900 | ||||||||||||||||||||||||||
Restructuring costs | -- | 2,050 | 2,128 | 4,178 | ||||||||||||||||||||||||||
Plant consolidation costs | -- | -- | -- | - | -- | |||||||||||||||||||||||||
Total costs and expenses | 4,134 | 183,501 | 176,687 | -- | 364,322 | 4,439 | 194,838 | 216,727 | - | 416,004 | ||||||||||||||||||||
Earnings (loss) from operations | (4,134 | ) | 12,894 | 6,169 | -- | 14,929 | (4,439 | ) | 18,613 | 3,522 | -- | 17,696 | ||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||
Interest expense | (13,204 | ) | (667 | ) | (767 | ) | -- | (14,638 | ) | (13,904 | ) | (566 | ) | (852 | ) | -- | (15,322 | ) | ||||||||||||
Management fee income (expense) | 4,843 | (2,199 | ) | (2,644 | ) | -- | - | 4,807 | (2,095 | ) | (2,712 | ) | -- | -- | ||||||||||||||||
Other income (expense), net | 6,081 | (9,368 | ) | 3,320 | -- | 33 | 6,318 | (10,005 | ) | 3,749 | -- | 62 | ||||||||||||||||||
Total other income (expense) | (2,280 | ) | (12,234 | ) | (91 | ) | -- | (14,605 | ) | (2,779 | ) | (12,666 | ) | 185 | -- | (15,260 | ) | |||||||||||||
Earnings (loss) from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Provision (benefit) for taxes on income | (911 | ) | 94 | 927 | -- | 110 | (6,683 | ) | 4,617 | 2,784 | -- | 718 | ||||||||||||||||||
Earnings (loss) from continuing |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Equity in earnings of subsidiaries | 5,717 | -- | -- | (5,717 | ) | - | 1,848 | -- | -- | (1,848 | ) | -- | ||||||||||||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| 1,313 | 1,330 | 923 | (1,848 | ) | 1,718 | ||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||
Earnings from discontinued operations, | ||||||||||||||||||||||||||||||
net of income tax of $16 | 31 | 31 | -- | (31 | ) | 31 | ||||||||||||||||||||||||
Gain on sale of discontinued operations, |
|
|
|
|
|
| ||||||||||||||||||||||||
Net earnings | $ | 535 | $ | 887 | $ | 5,151 | $ | (6,038 | ) | $ | 535 | |||||||||||||||||||
Loss on sale of discontinued operations, | ||||||||||||||||||||||||||||||
net of income taxes of $179 | -- | -- | (405 | ) | -- | (405 | ) | |||||||||||||||||||||||
Net earnings (loss) | $ | 1,313 | $ | 1,330 | $ | 518 | $ | (1,848 | ) | $ | 1,313 |
The Manitowoc Company, Inc.
Condensed Consolidating Statement of EarningsOperations
For the Three Months Ended March 31,June 30, 2002
(In thousands)
| Non-Guarantor |
| Non-Guarantor | |||||||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||||
Net sales | $ | -- | $ | 207,469 | $ | 75,556 | $ | -- | $ | 283,025 | $ | -- | $ | 236,790 | $ | 91,485 | $ | -- | $ | 328,275 | ||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||
Cost of sales | -- | 154,904 | 60,380 | -- | 215,284 | -- | 169,906 | 70,011 | -- | 239,917 | ||||||||||||||||||||
Engineering, selling and administrative | 3,545 | 28,331 | 11,444 | -- | 43,320 | 3,660 | 29,640 | 10,773 | -- | 44,073 | ||||||||||||||||||||
Amortization expense | -- | -- | 587 | -- | 587 | -- | -- | 465 | -- | 465 | ||||||||||||||||||||
Plant consolidation costs | -- | 3,900 | -- | -- | 3,900 | -- | -- | -- | - | -- | ||||||||||||||||||||
Total costs and expenses | 3,545 | 187,135 | 72,411 | -- | 263,091 | 3,660 | 199,546 | 81,249 | - | 284,455 | ||||||||||||||||||||
Earnings (loss) from operations | (3,545 | ) | 20,334 | 3,145 | -- | 19,934 | (3,660 | ) | 37,244 | 10,236 | -- | 43,820 | ||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||
Other expense: | ||||||||||||||||||||||||||||||
Interest expense | (9,501 | ) | (405 | ) | (706 | ) | -- | (10,612 | ) | (10,153 | ) | (571 | ) | (620 | ) | -- | (11,344 | ) | ||||||||||||
Management fee income (expense) | 3,853 | (4,528 | ) | 675 | -- | - | 3,804 | (3,804 | ) | -- | -- | -- | ||||||||||||||||||
Other income (expense), net | (314 | ) | (49 | ) | 1,065 | -- | 702 | (225 | ) | (14 | ) | (26 | ) | -- | (265 | ) | ||||||||||||||
Total other income (expense) | (5,962 | ) | (4,982 | ) | 1,034 | -- | (9,910 | ) | ||||||||||||||||||||||
Total other expense | (6,574 | ) | (4,389 | ) | (646 | ) | -- | (11,609 | ) | |||||||||||||||||||||
Earnings (loss) from continuing |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Provision (benefit) for taxes on income | (3,227 | ) | 5,211 | 1,926 | -- | 3,910 | (3,248 | ) | 11,941 | 3,868 | -- | 12,561 | ||||||||||||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| ||||||||||||||||||||||||
Earnings (loss) from continuing operations | ||||||||||||||||||||||||||||||
before equity in earnings of subsidiaries | (6,986 | ) | 20,914 | 5,722 | -- | 19,650 | ||||||||||||||||||||||||
Equity in earnings of subsidiaries | 12,394 | - | - | (12,394 | ) | - | 27,067 | -- | -- | (27,067 | ) | -- | ||||||||||||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| 20,081 | 20,914 | 5,722 | (27,067 | ) | 19,650 | ||||||||||||||||||
Discontinued operations: | -- | -- | -- | -- | -- | |||||||||||||||||||||||||
Earnings from discontinued operations, | ||||||||||||||||||||||||||||||
net of income tax of $304 | 476 | 261 | 215 | (476 | ) | 476 | ||||||||||||||||||||||||
Cumulative effect of accounting change, |
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Earnings (loss) from discontinued | ||||||||||||||||||||||||||||||
operations, net of tax of $277 | -- | 210 | 221 | -- | 431 | |||||||||||||||||||||||||
Net earnings (loss) | $ | (30,210 | ) | $ | (26,398 | ) | $ | 2,468 | $ | 23,930 | $ | (30,210 | ) | $ | 20,081 | $ | 21,124 | $ | 5,943 | $ | (27,067 | ) | $ | 20,081 |
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2003
(In thousands)
| Non-Guarantor | ||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||
Net sales | $ | -- | $ | 409,846 | $ | 403,105 | $ | -- | $ | 812,951 | |||||
Costs and expenses: | |||||||||||||||
Cost of sales | -- | 307,521 | 330,938 | -- | 638,459 | ||||||||||
Engineering, selling and administrative | 8,573 | 68,433 | 54,345 | -- | 131,351 | ||||||||||
Amortization expense | -- | 335 | 1,103 | -- | 1,438 | ||||||||||
Goodwill impairment | -- | 4,900 | -- | 4,900 | |||||||||||
Restructuring costs | -- | 2,050 | 2,128 | -- | 4,178 | ||||||||||
Total costs and expenses | 8,573 | 378,339 | 393,414 | -- | 780,326 | ||||||||||
Earnings (loss) from operations | (8,573 | ) | 31,507 | 9,691 | -- | 32,625 | |||||||||
Other income (expense): | |||||||||||||||
Interest expense | (27,108 | ) | (1,233 | ) | (1,619 | ) | -- | (29,960 | ) | ||||||
Management fee income (expense) | 9,650 | (4,294 | ) | (5,356 | ) | -- | -- | ||||||||
Other income (expense), net | 12,399 | (19,373 | ) | 7,069 | -- | 95 | |||||||||
Total other income (expense) | (5,059 | ) | (24,900 | ) | 94 | -- | (29,865 | ) | |||||||
Earnings (loss) from continuing operations |
|
|
|
|
|
| |||||||||
Provision (benefit) for taxes on income | (7,594 | ) | 4,711 | 3,711 | -- | 828 | |||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| |||||||||
Equity in earnings of subsidiaries | 7,886 | -- | -- | (7,886 | ) | -- | |||||||||
Earnings (loss) from continuing |
|
|
|
|
|
| |||||||||
Discontinued operations: | |||||||||||||||
Loss from discontinued operations, |
|
|
|
|
| ||||||||||
Loss on sale of discontinued operations, |
|
|
|
|
|
|
| ||||||||
Net earnings (loss) | $ | 1,848 | $ | 2,217 | $ | 5,669 | $ | (7,886 | ) | $ | 1,848 |
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2002
(In thousands)
| Non-Guarantor | ||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||
Net sales | $ | -- | $ | 444,259 | $ | 167,041 | $ | -- | $ | 611,300 | |||||
Costs and expenses: | |||||||||||||||
Cost of sales | -- | 324,810 | 130,391 | -- | 455,201 | ||||||||||
Engineering, selling and administrative | 7,205 | 57,971 | 22,217 | -- | 87,393 | ||||||||||
Amortization expense | -- | -- | 1,052 | -- | 1,052 | ||||||||||
Plant consolidation costs | -- | 3,900 | -- | -- | 3,900 | ||||||||||
Total costs and expenses | 7,205 | 386,681 | 153,660 | -- | 547,546 | ||||||||||
Earnings (loss) from operations | (7,205 | ) | 57,578 | 13,381 | -- | 63,754 | |||||||||
Other income (expense): | |||||||||||||||
Interest expense | (19,654 | ) | (976 | ) | (1,326 | ) | -- | (21,956 | ) | ||||||
Management fee income (expense) | 7,657 | (8,332 | ) | 675 | -- | - | |||||||||
Other income (expense), net | (539 | ) | (63 | ) | 1,039 | -- | 437 | ||||||||
Total other income (expense) | (12,536 | ) | (9,371 | ) | 388 | -- | (21,519 | ) | |||||||
Earnings (loss) from continuing operations |
|
|
|
|
|
| |||||||||
Provision (benefit) for taxes on income | (7,419 | ) | 18,096 | 5,794 | -- | 16,471 | |||||||||
Earnings (loss) from continuing operations | |||||||||||||||
before equity in earnings of subsidiaries | (12,322 | ) | 30,111 | 7,975 | -- | 25,764 | |||||||||
Equity in earnings of subsidiaries | 38,993 | -- | -- | (38,993 | ) | -- | |||||||||
Earnings (loss) from continuing operations | 26,671 | 30,111 | 7,975 | (38,993 | ) | 25,764 | |||||||||
Discontinued operations: | |||||||||||||||
Earnings from discontinued operations, | -- | 471 | 436 | -- | 907 | ||||||||||
net of income tax of $581 | |||||||||||||||
Cumulative effect of accounting change, | |||||||||||||||
net of income tax of $14,200 | (36,800) | (26,100 | ) | (10,700 | ) | 36,800 | (36,800 | ) | |||||||
Net earnings (loss) | $ | (10,129) | $ | 4,482 | $ | (2,289 | ) | $ | (2,193 | ) | $ | (10,129 | ) |
The Manitowoc Company, Inc.
Condensed Consolidating Balance Sheet
as of March 31,June 30, 2003
(In thousands)
Non- | Non- | |||||||||||||||||||||
Guarantor | Guarantor | Guarantor | Guarantor | |||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||
Assets | ||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 3,522 | $ | 1,899 | $ | 27,854 | $ | -- | $ | 33,275 | $ | 2,206 | $ | 4,555 | $ | 17,561 | $ | -- | $ | 24,322 | ||
Marketable securities | 2,252 | -- | -- | -- | 2,252 | 2,252 | -- | -- | -- | 2,252 | ||||||||||||
Accounts receivable - net | 4,137 | 76,859 | 142,892 | -- | 223,888 | 4,197 | 97,263 | 167,867 | -- | 269,327 | ||||||||||||
Inventories - net | -- | 102,670 | 169,721 | -- | 272,391 | -- | 101,759 | 180,660 | -- | 282,419 | ||||||||||||
Deferred income taxes | 72,887 | (207 | ) | 25,596 | -- | 98,276 | 72,887 | (206 | ) | 28,470 | -- | 101,151 | ||||||||||
Other current assets | 397 | 20,724 | 24,652 | -- | 45,773 | 398 | 27,928 | 23,447 | -- | 51,773 | ||||||||||||
Total current assets | 83,195 | 201,945 | 390,715 | -- | 675,855 | 81,940 | 231,299 | 418,005 | -- | 731,244 | ||||||||||||
Property, plant and equipment - net | 11,986 | 142,793 | 162,191 | -- | 316,970 | 11,824 | 138,339 | 164,130 | -- | 314,293 | ||||||||||||
Goodwill - net | -- | 231,604 | 151,774 | -- | 383,378 | -- | 241,152 | 153,758 | -- | 394,910 | ||||||||||||
Other intangible assets - net | -- | -- | 126,595 | -- | 126,595 | -- | -- | 125,861 | -- | 125,861 | ||||||||||||
Deferred income taxes | 23,724 | 9,368 | (13,455 | ) | -- | 19,637 | 23,724 | 9,368 | (13,455 | ) | -- | 19,637 | ||||||||||
Other non-current assets | 29,657 | 27,628 | 3,764 | -- | 61,049 | 35,317 | 27,250 | 3,470 | -- | 66,037 | ||||||||||||
Equity in affiliates | 1,048,164 | -- | -- | (1,048,164 | ) | -- | 1,079,476 | -- | -- | (1,079,476 | ) | -- | ||||||||||
Total assets | $ | 1,196,726 | $ | 613,338 | $ | 821,584 | $ | (1,048,164 | ) $ | 1,583,484 | $ | 1,232,281 | $ | 647,408 | $ | 851,769 | $ | (1,079,476 | ) $ | 1,651,982 | ||
Liabilities and Stockholders' Equity | ||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 30,423 | $ | 112,101 | $ | 249,722 | $ | -- | $ | 392,246 | $ | 25,514 | $ | 139,713 | $ | 262,138 | $ | -- | $ | 427,365 | ||
Current portion long-term debt | 28,419 | -- | 3,483 | -- | 31,902 | 28,419 | -- | 4,112 | -- | 32,531 | ||||||||||||
Short-term borrowings | 1,200 | 2,839 | 4,014 | -- | 8,053 | -- | 4,131 | 3,354 | -- | 7,485 | ||||||||||||
Product warranties | -- | 17,503 | 13,397 | -- | 30,900 | -- | 10,058 | 22,520 | -- | 32,578 | ||||||||||||
Product liabilities | -- | 14,781 | 21,739 | -- | 36,520 | -- | 19,124 | 15,464 | -- | 34,588 | ||||||||||||
Total current liabilities | 60,042 | 147,225 | 292,354 | -- | 499,621 | 53,933 | 173,026 | 307,588 | -- | 534,547 | ||||||||||||
Non-Current Liabilities: | ||||||||||||||||||||||
Long-term debt, less current portion | 595,860 | -- | 15,128 | -- | 610,988 | 604,578 | -- | 18,318 | -- | 622,896 | ||||||||||||
Pension obligations | 10,242 | 21,778 | 34,369 | 66,389 | 10,240 | 19,637 | 36,864 | 66,741 | ||||||||||||||
Postretirement health and other |
|
|
|
|
|
|
|
|
|
| ||||||||||||
Intercompany payable/(receivable) - net | 228,139 | (203,756 | ) | (24,383 | ) | -- | -- | 244,519 | (204,335 | ) | (40,184 | ) | -- | -- | ||||||||
Other non-current liabilities | 11,066 | 11,339 | 27,744 | -- | 50,149 | 9,563 | 13,558 | 30,313 | -- | 53,434 | ||||||||||||
Total non-current liabilities | 846,249 | (105,679 | ) | 52,858 | -- | 793,428 | 872,788 | (106,224 | ) | 45,311 | -- | 811,875 | ||||||||||
Stockholders' Equity | 290,435 | 571,792 | 476,372 | (1,048,164 | ) | 290,435 | 305,560 | 580,606 | 498,870 | (1,079,476 | ) | 305,560 | ||||||||||
Total liabilities and | ||||||||||||||||||||||
stockholders' equity | $ | 1,196,726 | $ | 613,338 | $ | 821,584 | $ | (1,048,164 | ) $ | 1,583,484 | $ | 1,232,281 | $ | 647,408 | $ | 851,769 | $ | (1,079,476 | ) $ | 1,651,982 |
The Manitowoc Company, Inc.
Condensed Consolidating Balance Sheet
as of December 31, 2002
(In thousands)
Non- | ||||||||||||
Subsidiary | Guarantor | |||||||||||
Parent | Guarantors | Subsidiaries | Eliminations | Consolidated | ||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | $ | 2,650 | $ | (3,982 | ) | $ | 29,367 | $ | -- | $ | 28,035 | |
Marketable securities | 2,371 | -- | -- | -- | 2,371 | |||||||
Accounts receivable - net | 3,934 | 87,440 | 134,717 | -- | 226,091 | |||||||
Inventories - net | -- | 112,425 | 142,793 | -- | 255,218 | |||||||
Deferred income taxes | 72,887 | 215 | 23,639 | - | 96,741 | |||||||
Other current assets | 427 | 34,899 | 3,382 | -- | 38,708 | |||||||
Total current assets | 82,269 | 230,997 | 333,898 | -- | 647,164 | |||||||
Property, plant and equipment - net | 12,687 | 148,153 | 158,461 | -- | 319,301 | |||||||
Goodwill - net | -- | 229,383 | 150,955 | -- | 380,338 | |||||||
Other intangible assets - net | -- | -- | 127,299 | -- | 127,299 | |||||||
Deferred income taxes | 9,931 | 9,731 | -- | 19,662 | ||||||||
Other non-current assets | 34,639 | 8,767 | 39,953 | -- | 83,359 | |||||||
Equity in affiliates | 1,027,876 | -- | -- | (1,027,876 | ) | -- | ||||||
Total assets | $ | 1,167,402 | $ | 627,031 | $ | 810,566 | $ | (1,027,876 | ) $ | 1,577,123 | ||
Liabilities and Stockholders' Equity | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable and accrued expenses | $ | 20,458 | $ | 166,401 | $ | 163,456 | $ | -- | $ | 350,315 | ||
Current portion long-term debt | 28,419 | -- | 4,909 | -- | 33,328 | |||||||
Short-term borrowings | 2,000 | -- | 7,304 | -- | 9,304 | |||||||
Product warranties | -- | 19,764 | 11,512 | -- | 31,276 | |||||||
Product liabilities | -- | 15,554 | 20,621 | -- | 36,175 | |||||||
Total current liabilities | 50,877 | 201,719 | 207,802 | -- | 460,398 | |||||||
Non-Current Liabilities: | ||||||||||||
Long-term debt, less current portion | 609,836 | 209 | 13,502 | -- | 623,547 | |||||||
Pension obligation | 10,357 | 22,223 | 33,471 | -- | 66,051 | |||||||
Postretirement health and other | ||||||||||||
benefit obligations | 925 | 64,852 | -- | -- | 65,777 | |||||||
Intercompany payable/(receivable) - net | 202,370 | (346,609 | ) | 144,239 | -- | -- | ||||||
Other non-current liabilities | (2,078 | ) | 9,069 | 59,244 | -- | 66,235 | ||||||
Total non-current liabilities | 821,410 | (250,256 | ) | 250,456 | -- | 821,610 | ||||||
Stockholders' Equity | 295,115 | 675,568 | 352,308 | (1,027,876 | ) | 295,115 | ||||||
Total liabilities and | ||||||||||||
stockholders' equity | $ | 1,167,402 | $ | 627,031 | $ | 810,566 | $ | (1,027,876 | ) $ | 1,577,123 |
Non- | ||||||||||||
Subsidiary | Guarantor | |||||||||||
Parent | Guarantors | Subsidiaries | Eliminations | Consolidated | ||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | $ | 2,650 | $ | (3,982 | ) | $ | 29,367 | $ | -- | $ | 28,035 | |
Marketable securities | 2,371 | -- | -- | -- | 2,371 | |||||||
Accounts receivable - net | 3,934 | 87,440 | 134,717 | -- | 226,091 | |||||||
Inventories - net | -- | 112,425 | 142,793 | -- | 255,218 | |||||||
Deferred income taxes | 72,887 | 215 | 23,639 | - | 96,741 | |||||||
Other current assets | 427 | 34,899 | 3,382 | -- | 38,708 | |||||||
Total current assets | 82,269 | 230,997 | 333,898 | -- | 647,164 | |||||||
Property, plant and equipment - net | 12,687 | 148,153 | 158,461 | -- | 319,301 | |||||||
Goodwill - net | -- | 229,383 | 150,955 | -- | 380,338 | |||||||
Other intangible assets - net | -- | -- | 127,299 | -- | 127,299 | |||||||
Deferred income taxes | 9,931 | 9,731 | -- | 19,662 | ||||||||
Other non-current assets | 34,639 | 8,767 | 39,953 | -- | 83,359 | |||||||
Equity in affiliates | 1,027,876 | -- | -- | (1,027,876 | ) | -- | ||||||
Total assets | $ | 1,167,402 | $ | 627,031 | $ | 810,566 | $ | (1,027,876 | ) $ | 1,577,123 | ||
Liabilities and Stockholders' Equity | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable and accrued expenses | $ | 20,458 | $ | 166,401 | $ | 163,456 | $ | -- | $ | 350,315 | ||
Current portion long-term debt | 28,419 | -- | 4,909 | -- | 33,328 | |||||||
Short-term borrowings | 2,000 | -- | 7,304 | -- | 9,304 | |||||||
Product warranties | -- | 19,764 | 11,512 | -- | 31,276 | |||||||
Product liabilities | -- | 15,554 | 20,621 | -- | 36,175 | |||||||
Total current liabilities | 50,877 | 201,719 | 207,802 | -- | 460,398 | |||||||
Non-Current Liabilities: | ||||||||||||
Long-term debt, less current portion | 609,836 | 209 | 13,502 | -- | 623,547 | |||||||
Pension obligation | 10,357 | 22,223 | 33,471 | 66,051 | ||||||||
Postretirement health and other | 925 | 64,852 | -- | 65,777 | ||||||||
Intercompany payable/(receivable) - net | 202,370 | (346,609 | ) | 144,239 | -- | -- | ||||||
Other non-current liabilities | (2,078 | ) | 9,069 | 59,244 | -- | 66,235 | ||||||
Total non-current liabilities | 821,410 | (250,256 | ) | 250,456 | -- | 821,610 | ||||||
Stockholders' Equity | 295,115 | 675,568 | 352,308 | (1,027,876 | ) | 295,115 | ||||||
Total liabilities and | ||||||||||||
stockholders' equity | $ | 1,167,402 | $ | 627,031 | $ | 810,566 | $ | (1,027,876 | ) $ | 1,577,123 |
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Cash Flows
For the ThreeSix Months Ended March 31,June 30, 2003
(In thousands)
Non- | Non- | |||||||||||||||||||||||
Guarantor | Guarantor | Guarantor | Guarantor | |||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Consolidated | Parent | Subsidiaries | Subsidiaries | Consolidated | |||||||||||||||||
Net cash provided by (used in) operations | $ | (6,048 | ) | $ | (1,307 | ) | $ | 32,163 | $ | 24,808 | $ | (23,037 | ) | $ | 815 | $ | 46,258 | $ | 24,036 | |||||
Cash Flows from Investing: | ||||||||||||||||||||||||
Business acquisitions - net of cash acquired | -- | -- | -- | -- | -- | -- | -- | -- | ||||||||||||||||
Capital expenditures | 463 | (326 | ) | (4,446 | ) | (4,309 | ) | (302 | ) | (1,624 | ) | (9,219 | ) | (11,145 | ) | |||||||||
Proceeds from sale of property, plant, and equipment | -- | (342 | ) | 1,309 | 967 | -- | 34 | 4,940 | 4,974 | |||||||||||||||
Sale of marketable securities | 119 | -- | -- | 119 | 119 | -- | -- | 119 | ||||||||||||||||
Intercompany investments | 30,837 | -- | (30,837 | ) | -- | 52,737 | -- | (52,737 | ) | -- | ||||||||||||||
Net cash provided by (used for) investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net cash provided by (used for) investing activities |
|
|
|
| ||||||||||||||||||||
Net cash provided by investing activities of |
|
|
|
| ||||||||||||||||||||
Net cash provided by (used for) investing activities | 31,419 | 6,321 | (33,974 | ) | 3,766 | 52,554 | 5,399 | (57,016 | ) | 937 | ||||||||||||||
Cash Flows from Financing: | ||||||||||||||||||||||||
Proceeds from long-term debt | -- | -- | -- | -- | ||||||||||||||||||||
Payments on long-term debt | (23,409 | ) | -- | 1,417 | (21,992 | ) | (27,295 | ) | -- | 1,021 | (26,274 | ) | ||||||||||||
(Payments) proceeds from revolver borrowings - net | (426 | ) | -- | (825 | ) | (1,251 | ) | (2,000 | ) | -- | -- | (2,000 | ) | |||||||||||
Debt issuance costs | (662 | ) | -- | -- | (662 | ) | (742 | ) | -- | -- | (742 | ) | ||||||||||||
Exercises of stock options | -- | -- | -- | -- | 78 | -- | -- | 78 | ||||||||||||||||
Net cash provided by (used for) financing | (24,497 | ) | -- | 592 | (23,905 | ) | (29,959 | ) | -- | 1,021 | (28,938 | ) | ||||||||||||
Effect of exchange rate changes on cash | -- | -- | 571 | 571 | -- | -- | 252 | 252 | ||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 874 | 5,014 | (648 | ) | 5,240 | (442 | ) | 6,214 | (9,485 | ) | (3,713 | ) | ||||||||||||
Balance at beginning of period | 2,648 | (3,115 | ) | 28,502 | 28,035 | 2,648 | (3,115 | ) | 28,502 | 28,035 | ||||||||||||||
Balance at end of period | $ | 3,522 | $ | 1,899 | $ | 27,854 | $ | 33,275 | $ | 2,206 | $ | 3,099 | $ | 19,017 | $ | 24,322 |
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Cash Flows
For the ThreeSix Months Ended March 31,June 30, 2002
(In thousands)
Non- | Non- | |||||||||||||||||||||||
Guarantor | Guarantor | Guarantor | Guarantor | |||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Consolidated | Parent | Subsidiaries | Subsidiaries | Consolidated | |||||||||||||||||
Net cash provided by (used in) operations | $ | (7,614 | ) | $ | 16,246 | $ | (9,653 | ) | $ | (1,021 | ) | $ | (27,523 | ) | $ | 17,469 | $ | 11,821 | $ | 1,767 | ||||
Cash Flows from Investing: | ||||||||||||||||||||||||
Business acquisitions - net of cash acquired | -- | -- | (4,017 | ) | (4,017 | ) | -- | -- | (7,388 | ) | (7,388 | ) | ||||||||||||
Capital expenditures | (1,182 | ) | (1,746 | ) | (3,890 | ) | (6,818 | ) | (2,958 | ) | (2,968 | ) | (6,861 | ) | (12,787 | ) | ||||||||
Proceeds from sale of property, plant, and equipment | -- | (3,306 | ) | 9,077 | 5,771 | -- | 512 | 6,503 | 7,015 | |||||||||||||||
Purchase of marketable securities | (26 | ) | -- | -- | (26 | ) | (47 | ) | -- | -- | (47 | ) | ||||||||||||
Intercompany investments | (5,403 | ) | -- | 5,403 | -- | 20,136 | -- | (20,136 | ) | -- | ||||||||||||||
Net cash provided by (used for) investing activities of |
|
|
|
|
|
|
| |||||||||||||||||
Net cash provided by (used for) investing activities of |
|
|
|
|
|
|
| |||||||||||||||||
Net cash provided by (used for) investing activities | ||||||||||||||||||||||||
of continuing operations | 17,131 | (2,456 | ) | (27,882 | ) | (13,207 | ) | |||||||||||||||||
Net cash used for investing activities | ||||||||||||||||||||||||
of discontinued operations | -- | (288 | ) | -- | (288 | ) | ||||||||||||||||||
Net cash provided by (used for) investing activities | (6,611 | ) | (5,107 | ) | 6,456 | (5,262 | ) | 17,131 | (2,744 | ) | (27,882 | ) | (13,495 | ) | ||||||||||
Cash Flows from Financing: | ||||||||||||||||||||||||
Proceeds from long-term debt | -- | -- | -- | -- | ||||||||||||||||||||
Payments on long-term debt | (451 | ) | -- | (3,614 | ) | (4,065 | ) | (16,427 | ) | -- | (292 | ) | (16,719 | ) | ||||||||||
(Payments) proceeds from revolver borrowings - net | 14,100 | -- | -- | 14,100 | ||||||||||||||||||||
Debt issuance costs | -- | -- | -- | -- | ||||||||||||||||||||
Exercises of stock options | 232 | -- | -- | 232 | ||||||||||||||||||||
Net cash provided by (used for) financing | 13,881 | -- | (3,614 | ) | 10,267 | |||||||||||||||||||
Payments proceeds from revolver borrowings - net | 24,400 | -- | 1,839 | 26,239 | ||||||||||||||||||||
Exercise of stock options | 1,976 | -- | -- | 1,976 | ||||||||||||||||||||
Net cash provided by financing | 9,949 | -- | 1,547 | 11,496 | ||||||||||||||||||||
Effect of exchange rate changes on cash | -- | -- | (147 | ) | (147 | ) | -- | -- | 887 | 887 | ||||||||||||||
Net increase (decrease) in cash and cash equivalents | (344 | ) | 11,139 | (6,958 | ) | 3,837 | (443 | ) | 14,725 | (13,627 | ) | 655 | ||||||||||||
Balance at beginning of period | 4,456 | 141 | 18,984 | 23,581 | 4,456 | 141 | 18,984 | 23,581 | ||||||||||||||||
Balance at end of period | $ | 4,112 | $ | 11,280 | $ | 12,026 | $ | 27,418 | $ | 4,013 | $ | 14,866 | $ | 5,357 | $ | 24,236 |
14. Business Segments
The company identifies its segments using the "management approach," which designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the company's reportable segments. The company has three reportable segments: Cranes and Related Products, Foodservice Equipment, and Marine. Net sales and earnings from operations by segment is summarized as follows:
Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Net sales: | ||||||||||||||||||||
Cranes and related products | $ | 238,914 | $ | 129,375 | ||||||||||||||||
Foodservice equipment | 105,037 | 102,777 | ||||||||||||||||||
Cranes and Related Products | $ | 266,801 | $ | 142,132 | $ | 505,716 | $ | 271,509 | ||||||||||||
Foodservice Equipment | 126,968 | 134,077 | 232,004 | 236,853 | ||||||||||||||||
Marine | 35,300 | 50,873 | 39,931 | 52,066 | 75,231 | 102,938 | ||||||||||||||
Total net sales | $ | 379,251 | $ | 283,025 | $ | 433,700 | $ | 328,275 | $ | 812,951 | $ | 611,300 | ||||||||
Earnings (loss) from operations: | ||||||||||||||||||||
Cranes and related products | $ | 6,239 | $ | 12,077 | ||||||||||||||||
Foodservice equipment | 12,227 | 5,475 | ||||||||||||||||||
Cranes and Related Products | $ | (1,143 | ) | $ | 20,382 | $ | 5,095 | $ | 32,459 | |||||||||||
Foodservice Equipment | 21,224 | 21,153 | 33,452 | 26,628 | ||||||||||||||||
Marine | 597 | 5,927 | 2,930 | 5,945 | 3,526 | 11,872 | ||||||||||||||
Total | 23,011 | 47,480 | 42,073 | 70,959 | ||||||||||||||||
Corporate expense | (4,134 | ) | (3,545 | ) | (5,315 | ) | (3,660 | ) | (9,448 | ) | (7,205 | ) | ||||||||
Total | $ | 14,929 | $ | 19,934 | ||||||||||||||||
Interest expense | (15,322 | ) | (11,344 | ) | (29,960 | ) | (21,956 | ) | ||||||||||||
Other income (expense), net | 62 | (265 | ) | 95 | 437 | |||||||||||||||
Earnings from continuing operations | ||||||||||||||||||||
before taxes on income | $ | 2,436 | $ | 32,211 | $ | 2,760 | $ | 42,235 |
EarningsLoss from operations of the Crane segment for the three and six months ended March 31, 2002June 30, 2003 includes charges of $4.9 million for a goodwill impairment charge related to company's Aerial Work Platform reporting Unit (see Note 10. "Goodwill and Other Intangible Assets") and $4.8 million related to restructuring activities (see Note 9. "Plant Consolidation and Restructuring"). In addition, earnings from operations of the Foodservice equipment segment for the three and six months ended June 30, 2002 includes a $3.9 million charge for the consolidation of the company's Multiplex operations into other Foodservice operations. See further detail inEquipment operations (see Note 9. "Plant" Plant Consolidation and Restructuring."
Restructuring").
As of March 31,June 30, 2003 and December 31, 2002, the total assets by segment were as follows:
March 31, 2003 | December 31, 2002 | June 30, 2003 | December 31, 2002 | |||||
Cranes and related products | $ | 1,018,505 | $ | 1,022,771 | ||||
Foodservice equipment | 328,881 | 320,840 | ||||||
Cranes and Related Products | $ | 1,064,610 | $ | 1,022,771 | ||||
Foodservice Equipment | 344,198 | 320,840 | ||||||
Marine | 91,673 | 93,983 | 94,790 | 93,983 | ||||
Corporate | 144,425 | 139,529 | 148,384 | 139,529 | ||||
Total | $ | 1,583,484 | $ | 1,577,123 | $ | 1,651,982 | $ | 1,577,123 |
15. Debt
The company's Senior Credit Facility and Senior Subordinated Notes due 2011 and 2012 contain customary affirmative and negative covenants. In general, the covenants contained in the Senior Credit Facility are more restrictive than those of the Senior Subordinated Notes due 2011 and 2012. Among other restrictions, these covenants had required the company to meet specified financial tests, which included minimum levels of earnings before interest, taxes, depreciation, and amortization (EBITDA), and various debt to EBITDA ratios which became more restrictive over time. These covenants also limited the company's ability to redeem or repurchase the Senior Subordinated Notes due 2011 and 2012, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, repurchase capital stock, lend money or make advances, create or become subject to liens, and make capital expenditures. The Senior Credit Facility also contains cross-default provisions whereby certain defaults under any other debt agreements would result in default under the Senior Credit Facility. At June 30, 2003, the company was not in compliance with certain of these financial covenants. On July 23, 2003, the company received an amendment and waiver to its Senior Credit Agreement dated May 9, 2001, which cured these violations. In addition, the amendment eliminates the minimum EBITDA covenant and provides future relief under certain financial covenants that became more restrictive over time. The non-financial covenants discussed above are still in-place under the amended Senior Credit Agreement.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations for the QuartersThree and Six Months Ended March 31,June 30, 2003 and 2002
There were twoseveral items that affect the comparability of performance information of the company between the periods discussed in this report. In order to make our discussion of period-to-period comparisons more meaningful, in this Management's Discussion and Analysis we from time to time discuss performance information for a period excluding the effects of these transactions. The twoThese items wereinclude the following:
Analysis of Net Sales
The following table presents net sales by business segment:segment (in thousands):
Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||
Net sales: | ||||||||||||||
Cranes and Related Products | $ | 238,914 | $ | 129,375 | $ | 266,801 | $ | 142,132 | $ | 505,716 | $ | 271,509 | ||
Foodservice Equipment | 105,037 | 102,777 | 126,968 | 134,077 | 232,004 | 236,853 | ||||||||
Marine | 35,300 | 50,873 | 39,931 | 52,066 | 75,231 | 102,938 | ||||||||
Total | $ | 379,251 | $ | 283,025 | $ | 433,700 | $ | 328,275 | $ | 812,951 | $ | 611,300 |
In the fourth quarter of 2002 we divested of Manitowoc Boom Trucks, Inc. and in the first quarter of 2003 we divested of Femco Machine Company, Inc. We have reported the results of these operations as discontinued and have restated prior period amounts in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Prior period amounts throughout this Management Discussion and Analysis have been restated to reflect the reporting of these operations as discontinued.
Consolidated net sales for the first quarter ofthree months ended June 30, 2003 increased approximately 34.0%32.1% to $379.3$433.7 million, from $283.0$328.3 million for the same period in 2002. A significant amountAll of this increase was the result of the Grove acquisition, which was completed by the companyus on August 8, 2002.2002, and the impact of foreign exchange rates. Grove's net sales were $150.4$151.2 million for the first quarter ofthree months ended June 30, 2003. Excluding Grove'sConsolidated net sales for the first quartersix months ended June 30, 2003 increased approximately 33.0% to $813.0 million, from $611.3 million for the same period in 2002. Again, all of 2003, consolidatedthis increase was the result of the Grove acquisition. Grove's net sales decreased 19.2% compared to the first quarter of 2002. Net saleswere $283.4 million for the first quarter of 2003 continued to be affected by the continued depressed demand for crawler cranes in the U.S. market and the 44-day strike at Marinette Marine. The work stoppage was resolved on March 7, 2003, with a new four-year labor agreement.
six months ended June 30, 2003.
Net sales from the Crane segment for the first quarter ofthree months ended June 30, 2003 increased 84.7%87.7% to $238.9$266.8 million versus the first quarter of last year.three months ended June 30, 2002. The increased sales were driven by the $150.4$151.2 million of sales during the first quarter ofthree months ended June 30, 2003 from Grove. Excluding Grove's netNet sales from the Crane segment for the first quarter ofsix months ended June 30, 2003 Crane segment net sales decreased 31.6% comparedincreased 86.3% to $505.7 million versus the first quarter ofsix months ended June 30, 2002. CraneThe increased sales were impacteddriven by very slow demandthe $283.4 million of sales during the six months ended June 30, 2003 from Grove. Although sales were down for U.S. crawler cranes. In addition, global demand for cranes remains weak due to low non-residential construction activity and deferrals in spending for power plant renovation. Following two years of double digit declines in sales, the worldwide crawler crane market is expected to decline further this year, possibly more than 25%. Both the mobile telescopic and tower crane categories are expectedcranes, the largest decline was in crawler cranes. This reflects the slow down in commercial construction, particularly in the United States, together with global pricing pressures as competitors attempt to decline between 5retain or improve market share. The company is pursuing opportunities in Asia and 10 % worldwide.the Middle East to offset the declines in these markets. Crane segment backlog was $202.1$164.8 million at March 31,June 30, 2003 compared to $133.8$1 33.8 million at December 31, 2002.
Net sales from the Foodservice segment increased 2.2%decreased 5.3% to $105.0$127.0 million in the first quarter ofthree months ended June 30, 2003 versus the first quarterthree months ended June 30, 2002. For the six months ended June 30, 2003 net sales of the Foodservice segment were $232.0 million, a decrease of approximately 2.0% from the six months ended June 30, 2002. The decrease in sales of the Foodservice segment is primarily the result of reduced sales at Diversified Refrigeration, Inc. (DRI), our private-label residential refrigerator business unit. DRI's customer introduced a new line of refrigerator in 2002 despite continuing difficultiesand there was an increase in manufacturing and sales at DRI to fill the pipeline for the new line. In addition, factors affecting the decline in the quick-service and hospitality markets, as product innovations helped to improve penetrationsales include cooler weather across much of the country, continuing weakness in the replacement markets. During the first quarterhotel and quick-service restaurant business, and SARS, which affected sales of 2003 our ice business shipments increased while industry shipments decreased.
Net sales from our Marine segment decreased 30.6%23.3% in the firstsecond quarter of 2003 versus the firstsecond quarter of 2002,2002. For the six months ended June 30, 2003 net sales of the Marine segment were $75.2 million, a decrease of approximately 26.9% from the six months ended June 30, 2002. The decrease in sales of the Marine segment are the result of the lingering effects from the first quarter strike at Marinette Marine. The strike ended on March 7, 2003 after reaching an agreement with the union. Two weeks later, Marinette Marine's productivity was back to normal levels. In addition, we expected a full slateMarine, as well as customer deferrals of repairnew construction projects. New construction work remained slow during the firstsecond quarter of 2003. The majority of the ships that had planned to dock with us did so, with the exception of three ships owned by one of our customers. That customer postponed the scheduled repair work2003, primarily due to economic conditions. Despite this,uncertainty and our repair season was slightly up compared to 2002. The Marine segment backlog extends into 2005, and the segment is actively pursuing new business that includes homeland defense and security initiatives, compliance initiatives under the Oil Pollution Act of 1990, and an active dredging market.
customers' difficulty in obtaining financing.
Analysis of Operating Earnings
The following table presents operating incomeearnings by business segment:segment (in thousands):
Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||
Earnings (loss) from operations: | ||||||||||||||||||
Cranes and related products | $ | 6,239 | $ | 12,077 | ||||||||||||||
Foodservice equipment | 12,227 | 5,475 | ||||||||||||||||
Cranes and Related Products | $ | (1,143 | ) | $ | 20,382 | $ | 5,095 | $ | 32,459 | |||||||||
Foodservice Equipment | 21,224 | 21,153 | 33,452 | 26,628 | ||||||||||||||
Marine | 597 | 5,927 | 2,930 | 5,945 | 3,526 | 11,872 | ||||||||||||
Corporate expense | (4,134 | ) | (3,545 | ) | ||||||||||||||
General corporate expense | (5,315 | ) | (3,660 | ) | (9,448 | ) | (7,205 | ) | ||||||||||
Total | $ | 14,929 | $ | 19,934 | $ | 17,696 | $ | 43,820 | $ | 32,625 | $ | 63,754 |
Consolidated operating earnings for the first quarter ofthree months ended June 30, 2003 were $14.9$17.7 million, a decrease of 25.1%59.6% versus the first quarterthree months ended June 30, 2002. For the six months ended June 30, 2003 consolidated operating earnings were $32.6 million compared to $63.8 million for the six months ended June 30, 2002, a decrease of 2002.48.8%. Included in operating earnings are the following items:
This decrease in operating earnings is primarily the result of reduced operating earnings at otherin the Crane and Marine business units and the Marine segmentsegments and higher corporate expenses, offset by improved operating earnings in the Foodservice segment.
Consolidated gross margin infor the three and six months ended June 30, 2003 was impacted by the following items: (i) the loss of our ability to spread fixed costs over a broader base of gross revenue inof crawler cranes due to the decline in sales (referred to as lost absorption); (ii) a shift in product mix towards smaller mobile hydraulic cranes; (iii) price competition in the crane segment, particularly in Europe;segment; (iv) historically lower gross margins from the Grove product line; (v) reduction of contract revenue of our Marine segment due to completed projects and (v)deferral of new projects; and (vi) the strike at Marinette Marine.Marine during the first quarter of 2003.
Engineering, selling and administrative expenses increased $20.2$23.8 million for the three months ended March 31,June 30, 2003 compared to the same period in 2002 and increased $44.0 million for the six months ended June 30, 2003 compared to the six months ended June 30, 2002. This increase is primarily the result of the acquisition of Grove, the effect of the exchange rate between the US Dollar and the Euro during 2003 compared to 2002, and higher corporate expenses. The increase in corporate expenses is the result of growth from acquisition, a warranty charge recorded at corporate and corporate assumption of certain staff responsibilities previously handled by acquired companies.
For the three months ended June 30, 2003 the Crane segment reported a net operating loss of $1.1 million versus net earnings from operations of $20.4 million for the three months ended June 30, 2002. Operating earnings in the Crane segment decreased 48.3%84.3% to $6.2$5.1 million during the first quarter ofsix months ended June 30, 2003 compared to the first quartersix months ended June 30, 2002. As discussed above, there are several items in the three and six months ended June 30, 2003 which affect the comparability of 2002. performance between the periods.
The decrease in operating earnings of the Crane segment was primarily due to lost absorption in crawler cranes and a shift in product mix towards smaller mobile hydraulic cranes. In addition, the price competition in certain areas and historical Grove margins discussed above reduced operating earnings in the first quarter ofthree and six months ended June 30, 2003 compared to the first quarter ofthree and six months ended June 30, 2002. Our worldwide integration and reorganization efforts are proceeding as planned. We have identified an additional $10 million in savings that we expect to achieve by year-end in addition to the $20 million target announced during the assimilation process.
Operating earnings in the Foodservice segment increased 123.3% to $12.2remained flat at $21.2 million during the firstsecond quarter of 2003 compared to $21.2 for the firstsecond quarter of 2002. For the six months ended June 30, 2003 operating earnings were $33.5 million versus $26.6 million for the six months ended June 30, 2002, a 25.6% increase. During the first quarter of 2002, we recorded a pre-tax restructuring charge of $3.9 million in connection with the consolidation of our Multiplex operations into other of our Foodservice operations. These actions were taken in an effort to streamline our cost structure and utilize available capacity. We estimate annual cost savings of approximately $2.7 million as a result of this consolidation. The charge included $2.8 million to write-down the building and land, which are available for sale, to estimated fair market value less cost to sell, $0.7 million related to the write-down of certain equipment, and $0.4 million related to severance and other employee related costs. All of the charge was paid or utilized by December 31, 2002. Excluding the $3.9 million charge, Foodservice segmentThe improvement in operating earnings increased 30.4% compared to the first quarteris a result of 2002. In addition, the increase is due to modest revenue growth, ongoing cost improvements, new product development, and improved performance by Diversified Refrigeration, Inc. (DRI), our private-labelDRI due to a new contract manufacturing operation.
The strike at Marinette Marine wasand deferral of new construction contracts were the principle factorprincipal factors that caused the Marine segment operating earnings to drop 89.9% to $0.6 million in50.7% for the first quarter ofthree months ended June 30, 2003 compared to $5.9 million in the first quarterthree months ended June 30, 2002 and 70.3% for the six months ended June 30, 2003 compared to the same period of 2002.
Analysis of Non-Operating Income Statement Items
Interest expense increased $4.0 million for the quarter ended March 31,June 30, 2003 compared to the quarter ended March 31,June 30, 2002 and $8.0 million for the six months ended June 30, 2003 compared to the six months ended June 30, 2002. This increase is due to additional interest expense related to the 10 1/2% Senior Subordinated Notes due 2012, which were issued in August 2002 to complete the Grove acquisition, and additional amortization of debt issue costs related to these Notes.Notes and an increase in the Euro rate related to interest on our Euro denominated Senior Subordinated Notes due 2011. The weighted-average interest rate paid on all outstanding debt as of March 31,June 30, 2003 was 7.02%6.95%.
The effective tax rate for the first quarter ofthree and six months ended June 30, 2003 was 34.0%30.0% compared to 39.0% infor the first quarter ofthree and six months ended June 30, 2002. The effective rate for first quarter of 2003 approximated the combined domestic federal and state statutory rate reduced by lower foreign effective rates. The lower effective rate in the first quarter of 2003 compared to the first quarter of 2002 reflects the benefits of our global tax planning initiatives in the fourth quarter of 2002 and first quartersix months of 2003.
As a result of the above, earnings from continuing operations were $0.2$1.7 million for the first quarter ofthree months ended June 30, 2003 compared to $6.1$19.7 million for the first quarter ofthree months ended June 30, 2002. Earnings from continuing operations for the six months ended June 30, 2003 were $1.9 million compared to $25.8 million for the six months ended June 30, 2002.
Discontinued operations for the first quarterthree months ended June 30, 2003 includes a charge for the final post-closing adjustment for the sale of Manitowoc Boom Trucks, Inc. (Manitowoc Boom Trucks). Discontinued operations for the six months ended June 30, 2003 includeincludes: the post-closing adjustment for the sale of Manitowoc Boom Trucks; the results of operations of Femco Machine Company, Inc. (Femco) through the date of sale.sale; and the gain on the sale of Femco. Discontinued operations for the first quarter ofthree and six months ended June 30, 2002 include the results of operations of Femco and Manitowoc Boom Trucks, Inc. (Manitowoc Boom Trucks).Trucks.
On December 17, 2002, we entered into an agreement with Quantum Heavy Equipment, LLC (Quantum) to sell all of the outstanding stock of Manitowoc Boom Trucks. The Department of Justice approved the sale on December 30, 2002, and it was completed on December 31, 2002. Cash proceeds from the sale of Manitowoc Boom Trucks, a business in the Crane segment, were approximately $13.2 million, which iswas subject to post-closing adjustments. The disposition represents a discontinued operation under SFAS No. 144. Accordingly, results of Manitowoc Boom Trucks have been classified as discontinued, and prior periods have been restated. The financial results
During the second quarter of 2003, we agreed in principle with Quantum to the companyfinal post-closing adjustment for the three months ended March 31, 2003 does not include any resultssale of Manitowoc Boom Trucks. The agreement, once final, will result in us paying $4.7 million to Quantum. Payment of the final post-closing adjustment is expected in the third quarter of 2003. This payment is largely the result of reduction in working capital of Manitowoc Boom Trucks from September 30, 2002 to December 31, 2002 for which the company already received the cash. The agreement resulted in us recording an additional charge for the sale of Manitowoc Boom Trucks of approximately $0.6 million ($0.4 million net of tax) during the second quarter of 2003. This charge is recorded in loss on sale of discontinued operations, net of income taxes, in the Consolidated Statement of Operations.
On February 14, 2003, we finalized the sale of Femco, a business in our Crane segment engaged in aftermarket sales of replacement parts and industrial repair, to a group of private investors led by the current Femco management and its employees. After the Grove acquisition, it was determined that Femco was not a core business to the Crane segment. Cash proceeds from the sale of Femco were approximately $7.0 million, which includes $0.4 million of cash received by the company for post-closing adjustments, and resulted in a gain on sale of approximately $0.5$0.4 million ($0.3 million net of tax). in the first quarter of 2003. The disposition of Femco represents a discontinued operation under SFAS No. 144. Results of Femco have been classified as discontinued and prior periods have been restated. The financial results of the resultscompany for the three months ended March 31,June 30, 2003 have been restated accordingly.does not include any results of Femco.
Financial Condition
First QuarterSix Months of 2003
During the quarter,first six months of 2003, cash and cash equivalents increased $5.2decreased $3.7 million to $33.3$24.3 million at March 31,June 30, 2003. Cash flows from continuing operations for the quartersix months ended March 31,June 30, 2003 were $25.1$23.5 million. Historically, the first quartersix months of our year has not been a strong generating cash flow quarterperiod due to the seasonality of our businesses. During the quarterfirst six months of 2003 the most significant providers of cash were an increase in accounts payable and other accrued expensesliabilities totaling $33.3 million and a $9.0 million tax refund, while receivables remained relatively flat compared to a $27.8and inventories increased $31.6 million use of cash in the first quarter of 2002. Inventories were a $19.4and $14.5 million, use of cash for the first quarter of 2003.respectively. This is primarily due to increased production within the Crane and Foodservice segments in the first quarterhalf of each year. These businesses typically increase activity compared to lower volumes in the fourth quarter in preparation for the higher volume second and third quarters.
In addition, the company received approximately $7.0 million of cash from the sale of Femco during the first quarter of 2003. These cash proceeds are reported in the discontinued operations section of the cash flow from investing activities.
Our primary cash requirements include working capital, interest and principal payments on indebtedness, capital expenditures, and dividends. The primary sources of cash for each of these are cash flowflows from continuing operations and borrowings under our Senior Credit Facility. We had $93.0$100.7 million of unused availability under the terms of the Revolving Credit portion of our Senior Credit Facility at March 31,June 30, 2003.
Our debt at March 31,June 30, 2003 consisted primarily of our Senior Credit Facility, our Senior Subordinated Notes due 2011 and our Senior Subordinated Notes due 2012.
At March 31,June 30, 2003, the Senior Credit Facility consisted of Term Loan A and Term Loan B facilities totaling $255.0 million and $1.2 million$246.8 million. There was no amount outstanding under the Revolving Credit portion.portion of our Senior Credit Facility at June 30, 2003. As a result of prepayments made, Term Loan A requires no additional principal payments during 2003. Term Loan B requires quarterly principal payments of $0.4 million through March 2006 and $33.3 million from June 2006 through May 2007. Substantially all of our domestic tangible and intangible assets are pledged as collateral under the Senior Credit Facility.
Borrowings under the Senior Credit Facility bear interest at a rate equal to the sum of a base rate or a Eurodollar rate plus an applicable margin, which is based on our consolidated total leverage ratio, as defined in the Senior Credit Facility. The weighted-average interest rates for Term Loan A and Term Loan B were 3.77% and the Revolving Credit Facility were 3.96%, 4.27%, and 5.88%4.01%, respectively, at March 31,June 30, 2003. The annual commitment fee in effect on the unused portion of our Revolving Credit Facility at March 31,June 30, 2003 was 0.5%.
We had outstanding at March 31,June 30, 2003, 175 million Euro ($189.0200.2 million) of 10 3/8% Senior Subordinated Notes due 2011. The Senior Subordinated Notes due 2011 are unsecured obligations ranking subordinate in right of payment to all of our senior debt, are equal in rank to our 10 1/2 % Senior Subordinated Notes due 2012, and are fully and unconditionally, jointly and severally guaranteed by substantially all of our domestic subsidiaries. Interest on these Senior Subordinated Notes is payable semiannually in May and November each year. These notes can be redeemed by us in whole or in part for a premium after May 15, 2006. In addition, we may redeem for a premium, at any time prior to May 15, 2004, up to 35% of the face amount of these Senior Subordinated Notes with the proceeds of one or more equity offerings.
We also had outstanding at March 31,June 30, 2003, $175 million of 10 1/2% Senior Subordinated Notes due 2012. The Senior Subordinated Notes due 2012 are unsecured obligations of the company ranking subordinate in right of payment to all of our senior debt, are equal in rank to our 10 3/8% Senior Subordinated Notes due 2011 and are fully and unconditionally, jointly and severally guaranteed by substantially all of the company's domestic subsidiaries. Interest on the Senior Subordinated Notes due 2012 is payable semiannually in February and August each year, commencing February 1, 2003. These notes can be redeemed by us in whole or in part for a premium on or after August 1, 2007. In addition, we may redeem for a premium, at any time prior to August 1, 2005, up to 35% of the face amount of these Senior Subordinated Notes with the proceeds of one or more equity offerings.The
Our Senior Credit Facility and the Senior Subordinated Notes due 2011 and 2012 contain customary affirmative and negative covenants. In general, the covenants contained in the Senior Credit Facility are more restrictive than those of the Senior Subordinated Notes due 2011 and 2012. Among other restrictions, these covenants requirehad required us to meet specified financial tests, includingwhich included minimum levels of earnings before interest, taxes, depreciation, and amortization (EBITDA), and various debt to EBITDA ratios which becomebecame more restrictive over time. These covenants also limitlimited our ability to redeem or repurchase the Senior Subordinated Notes due 2011 and 2012, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, repurchase capital stock, lend money or make advances, create or become subject to liens, and make capital expenditures. The Senior Credit Facility also contains cross-default provisions whereby certain defaults under any other debt agreements wouldwou ld result in a default under the Senior Credit Facility. At March 31,June 30, 2003, we were not in compliance with certain of these financial covenants. On July 23, 2003, we received an amendment and waiver to our Senior Credit Agreement dated May 9, 2001, which cured these violations. In addition, the amendment eliminates the minimum EBITDA covenant and provides future relief under certain financial covenants that became more restrictive over time. The non-financial test covenants discussed above are still in-place under the amended Senior Credit Agreement. Based upon our current plans and outlook, we believe we will be able to comply with the amended covenants during the subsequent 12-month period.
In April 2001, Standard & Poor's assigned a double "B" corporate credit rating to our company, a double "B" rating to our Senior Credit Facility, and a single "B" plus rating to our Senior Subordinated Notes, all ofwith a stable outlook. Also in April 2001, Moody's Investors Service assigned a Ba2 rating to our covenants.
Acquisitions
On August 8, 2002 the companywe acquired all of the outstanding common shares of Grove Investors, Inc. (Grove). The results of Grove's operations have been included in the Consolidated Statement of EarningsOperations since that date. Grove is a leading provider of mobile telescopic cranes, truck-mounted cranes, and aerial work platforms for the global market. Grove's products are used in a wide variety of applications by commercial and residential building contractors as well as by industrial, municipal, and military end users. Grove's products are marketed to independent equipment rental companies and directly to end users under the brand names Grove Crane, Grove Manlift, and National Crane.The Company viewsWe view Grove as a strategic fit with itsour crane business for a number of reasons. Grove is a global leader in the mobile telescopic crane industry, specifically in all-terrain and rough-terrain mobile telescopic cranes. The companyWe did not offer these types of cranes, so Grove filled this void in the company'sour product offering. Coupled with the company'sour recent entrance into the tower crane product line with the acquisition of Potain in 2001, Grove enables the companyus to offer customers threefour major crane categories, namely crawler cranes, tower cranes, and mobile telescopic cranes.cranes and boom trucks. With the addition of Grove, the company iswe are able to offer customers equipment and lifting solutions for virtually every construction application. The companyWe also believesbelieve that the combination of the two companies will provide opportunities to capitalize on their respective strengths in systems, technologies and manufacturing expertise, and that this combination will create natural synergies in its world wideworldwide distribution and serv iceservice network.
The aggregate purchase price paid for Grove was $277.8 million. This includes the issuance of $70.0 million of the company's common stock, the assumption of $202.4 million of Grove debt outstanding as of August 8, 2002, and direct acquisition costs of $5.4 million. In exchange for the outstanding shares of Grove common stock, the companywe issued approximately 2.2 million shares of theour company's common stock out of treasury with an average market price of $32.34 per share. The number of shares issued at the close of the transaction was calculated based on the average closing price of the company'sour common stock for the ten consecutive trading days ending on and including the second day prior to the closing of the transaction. In addition, the companywe assumed all of Grove's outstanding liabilities, contingencies and commitments (approximately $464.2$479.3 million including the outstanding debt). Substantially all of the assumed debt was refinanced.
On April 8, 2002 the companywe purchased the remaining 50% interest in itsour joint venture Manitowoc Foodservice Europe (f/k/a Fabbrica Apparecchiature per la Produzione del Ghiaccio Srl), a manufacturer of ice machines based in Italy. The aggregate cash consideration paid by the company for the remaining interest was $3.4 million and resulted in $1.9$2.6 million of additional goodwill. The $1.9 million of goodwill was included in the Foodservice segment and is not expected to be deductible for tax purposes.
Recent Accounting Changes and Pronouncements
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Assets." The provisions of SFAS No. 143 establish accounting standards for the recognition and measurement of an asset retirement obligation. This statement was effective for us beginningas of January 1, 2003, and did not have a material effect on our consolidated financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13 and Technical Corrections as of April 2002," which mainly addresses the accounting and disclosure related to early extinguishment of debt transactions as well as several other technical corrections. SFAS No. 145 was effective for us beginning January 1, 2003. The adoption of SFAS No. 145 will result in us reclassifying our 2001 loss on early extinguishment of debt from an extraordinary item to a component of earnings from continuing operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial accounting and reporting forcosts associated with exit or disposal activities. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. This Statement also establishes that fair value is the objective for initial measurement of the liability. Severance pay under SFAS No. 146, in many cases, would be recognized over time rather than up front. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002.Effective January 1,In April 2003, we adopted the initial recognitionFASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and measurement provisions of FASB Interpretation (FIN) No. 45, "Guarantor's AccountingHedging Activities," which amends and Disclosure Requirementsclarifies financial accounting and reporting for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires a guarantor to recognize, at the inception of a qualified guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.certain derivative instruments. The adoption of FINSFAS No. 45 did149 is not expected to have a material impact on the company's consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," which requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This statement also addresses the classification of financial instruments that include obligations to issue equity shares as equity. This statement is effective for financial instruments entered into or modified after May 31, 2003. The adoption of SFAS No. 150 did not have an impact on our consolidated financial statements.
In November 2002, the EITF reached a consensus regarding EITF Issue 00-21, Accounting for Revenue Arrangements with Multiple Deliverables. The consensus addresses not only when and how an arrangement involving multiple deliverables should be divided into separate units of accounting but also how the arrangement's consideration should be allocated among separate units. The pronouncement is effective for us commencing with our fiscal year 2004 and is not expected to have a material impact on our consolidated financial statements.
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities." FIN No. 46 clarifies the application of Accounting Research Bulletin No. 52, "Consolidated Financial Statements," to certain entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A variable interest entity is required to be consolidated by the company that has a majority of the exposure to expected losses of the variable interest entity. FIN No. 46 is effective immediately for variable interest entities created after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN No. 46 applies in the first fiscal year or interim period beginning after June 15, 2003. FIN No. 46 did not have an impact on our consolidated financial sta tements.
Critical Accounting Policies
The company'sOur critical accounting policies have not materially changed since the 2002 Form 10-K was filed.
Cautionary Statements About Forward-Looking Information
This Quarterly Report on Form 10-Q may include 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 "anticipates," "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, without limitation, the following factors for each business segment:
Cranes and Related Products- market acceptance of new and innovative products; cyclicality of the construction industry; the effects of government spending on construction-related projects throughout the world; growthchanges in world demand for our crane product offering; the replacement cycle of technologically obsolete cranes; demand for used equipment in developing countries;equipment; action of competitors; and foreign exchange rate risk.
Foodservice Equipment- market acceptance of new and innovative products; demographic information affecting two-income families and general population growth; household income; weather; consolidations within restaurant and foodservice equipment industries; global expansion of customers; actions of competitors; the commercial ice-cube machine replacement cycle in the United States; specialty foodservice market growth; future strength of the beverage industry; new product introductions; and the demand for quickservice restaurants and kiosks.
Marine- shipping volume fluctuations based on performance of the steel industry; weather and water levels on the great lakes; trends in government spending on new vessels; five-year survey schedule; the replacement cycle of older marine vessels; growth of existing marine fleets; consolidation of the Great Lakes marine industry; frequency of casualties on the Great Lakes; and the level of construction and industrial maintenance.
Corporate (including factors that may affect all three segments) - changes in laws and regulations throughout the world; the ability to finance, complete andand/or successfully integrate, restructure and consolidate acquisitions, divestitures, strategic alliances and joint ventures; competitive pricing; changes in domestic and international economic and industry conditions; changes in the interest rate environment; risks associated with growth; foreign currency fluctuations; worldwide political risk; health epidemics; pressure of additional financing leverage resulting from acquisitions; and success in increasing manufacturing efficiencies.
efficiencies; anticipate changes in revenue, margins and costs; work stoppages and labor negotiations; and the ability of our customers to obtain financing.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The company's market risk disclosures have not materially changed since the 2002 Form 10-K was filed. The company's quantitative and qualitative disclosures about market risk are incorporated by reference from Item 7A of the company's Annual Report on Form 10-K for the year ended December 31, 2002.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain a systemProcedures:The company's management, with the participation of the company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the company's disclosure controls and procedures (as such term is defined in Rules 13d-14(c)13a-15(e) and 15d - 14(c)15d-15(e) under the Securities Exchange Act of 1934) designed to provide reasonable assurance that material information about1934, as amended (the "Exchange Act")) as of the company is made known toend of the officers certifying this report, and accordingly is reflected in our SEC reports, includingperiod covered by this report. Based on theirthat evaluation, as of a date within 90 days of the filing of this Form 10-Q, ourcompany's Chief Executive Officer and Chief Financial Officer have concluded that, ouras of the end of such period, the company's disclosure controls and procedures are effective.
Changeeffective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the company in the reports that it files or submits under the Exchange Act.
Internal Controls
Control Over Financial Reporting: There have not been no significantany changes in ourthe company's internal controls (whichcontrol over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are designedreasonably likely to provide reasonable assurance as tomaterially affect, the reliability of our publishedcompany's internal control over financial statements) or in other factors that could significantly affect these controls subsequent to the date of their evaluation.reporting.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 7,At the annual meeting of the company's shareholders on May 6, 2003, management's nominees named below were elected as directors by the company filed its annual Proxy Statementindicated votes cast for itseach nominee. Of the 20,298,444 shares of Common Stock which were represented at the meeting, at least 93.7% 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 which willto be held in the year 2006:
Name of Nominee | For | Withheld |
Daniel W. Duval | 19,673,648 | 624,796 |
James L. Packard | 19,028,817 | 1,269,627 |
Terry D. Growcock | 19,620,518 | 677,926 |
One director was elected to serve until the Annual Meeting of Shareholders to be held in the year 2005:
Name of Nominee | For | Withheld |
Keith D. Nosbusch | 19,045,279 | 1,253,165 |
There were no abstentions or broker non-votes with respect to the election of directors. In addition to the directors elected at the meeting, the company's continuing directors are Gilbert F. Rankin, Robert C. Stift, Virgis W. Colbert, Dean H. Anderson, and Robert S. Throop.
In addition at the annual meeting on May 6, 2003. As discussed in2003 the Proxy Statement, two mattersshareholders approved the adoptions of business are scheduled to be voted upon by stockholders at the meeting:
Votes | % o f votes cast | |||
For | 12,986,020 | 75.3% | ||
Against | 4,006,805 | 23.2% | ||
Abstain | 248,887 | 1.4% | ||
Total | 17,241,712 | 100.0% | ||
Further information concerning the matters voted upon at the 2003 Annual Meeting of Shareholders is contained in the company's proxy statement dated April 8, 2003 with respect to the 2003 Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a)
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.
Date: | The Manitowoc Company, Inc. |
(Registrant) | |
/s/ Terry D. Growcock | |
Terry D. Growcock | |
Chairman and Chief Executive Officer | |
/s/ Timothy M. Wood | |
Timothy M. Wood | |
Vice President and Chief Financial Officer | |
/s/ Maurice D. Jones | |
Maurice D. Jones | |
Vice President, General Counsel |
CERTIFICATIONS
Certification of Principal Executive Officer
I, Terry D. Growcock, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Manitowoc Company, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15b-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date:
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: May 12, 2003
|
|
|
Certification of Principal Financial Officer
I, Timothy M. Wood, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Manitowoc Company, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15b-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date:
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: May 12, 2003
|
|
|
THE MANITOWOC COMPANY, INC.
EXHIBIT INDEX
TO FORM 10-Q
FOR QUARTERLY PERIOD ENDEDMarch 31,June 30, 2003
|
| Filed |
| ||
31 | Rule 13a - 14(a)/15d - 14(a) Certifications | X |
32.1 | Certification of CEO pursuant to 18 U.S.C. Section 1350 | X |
| Certification of CFO pursuant to 18 U.S.C. Section 1350 | X |
* Pursuant to Item 601(b)(2) of Regulation S-K, the Registrant agrees to furnish to the Securities and Exchange Commission upon request a copy of any unfiled exhibits or schedules to such document.