UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities | ||
For the quarterly period ended March 31, 2006 | |||
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o | Transition Report Pursuant to Section 13 or 15(d) of the Securities |
For the transition period from to
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 |
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2400 South 44th Street, |
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(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 ýx No o
Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, (as definedor a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). YesAct.
Large accelerated filer ýx NoAccelerated filer o Non-accelerated filer o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No ýx
The number of shares outstanding of the Registrant’s common stock, $.01 par value, as of September 30, 2005,March 31, 2006, the most recent practicable date, was 30,252,020.61,211,972.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE MANITOWOC COMPANY, INC.
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30,March 31, 2006 and 2005 and 2004
(Unaudited)
(In thousands,millions, except per-share and average shares data)
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
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| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
| 2006 |
| 2005 |
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Net sales |
| $ | 564,913 |
| $ | 460,818 |
| $ | 1,664,792 |
| $ | 1,337,453 |
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| $ | 633.0 |
| $ | 510.3 |
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Costs and expenses: |
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Cost of sales |
| 454,538 |
| 367,834 |
| 1,343,249 |
| 1,056,490 |
|
| 497.8 |
| 413.5 |
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Engineering, selling and administrative expenses |
| 69,168 |
| 62,695 |
| 205,524 |
| 198,106 |
|
| 78.9 |
| 67.8 |
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Amortization expense |
| 732 |
| 777 |
| 2,335 |
| 2,333 |
|
| 0.7 |
| 0.8 |
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Restructuring and plant consolidation costs |
| 3,242 |
| 175 |
| 3,242 |
| 975 |
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Total costs and expenses |
| 527,680 |
| 431,481 |
| 1,554,350 |
| 1,257,904 |
|
| 577.4 |
| 482.1 |
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Earnings from operations |
| 37,233 |
| 29,337 |
| 110,442 |
| 79,549 |
|
| 55.6 |
| 28.2 |
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Other expenses: |
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Other expense: |
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Interest expense |
| (13,547 | ) | (14,071 | ) | (40,440 | ) | (41,103 | ) |
| (11.7 | ) | (12.8 | ) | ||||||
Loss on debt extinguishment |
| — |
| (481 | ) | (9,072 | ) | (1,036 | ) |
| — |
| (8.3 | ) | ||||||
Other income, net |
| 673 |
| 500 |
| 2,952 |
| 1,338 |
| |||||||||||
Other income (expenses), net |
| (1.0 | ) | 1.3 |
| |||||||||||||||
Total other expense |
| (12,874 | ) | (14,052 | ) | (46,560 | ) | (40,801 | ) |
| (12.7 | ) | (19.8 | ) | ||||||
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Earnings from continuing operations before taxes on income |
| 24,359 |
| 15,285 |
| 63,882 |
| 38,748 |
|
| 42.9 |
| 8.4 |
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Provision for taxes on income |
| 3,480 |
| 3,622 |
| 12,641 |
| 10,074 |
|
| 12.9 |
| 2.5 |
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Earnings from continuing operations |
| 20,879 |
| 11,663 |
| 51,241 |
| 28,674 |
|
| 30.0 |
| 5.9 |
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Discontinued operations: |
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Earnings (loss) from discontinued operations, net of income taxes (benefit) of $204, $213, $13, and $1,501 |
| (405 | ) | 1,041 |
| (257 | ) | 4,343 |
| |||||||||||
Gain (loss) on sale or closure of discontinued operations, net of income taxes (benefit) of $(1,816), $0, $(1,816), and $254 |
| (3,373 | ) | — |
| (3,373 | ) | 709 |
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Earnings (loss) from discontinued operations, net of income taxes of $(0.2) and $0.3 |
| (0.3 | ) | 0.6 |
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Net earnings |
| $ | 17,101 |
| $ | 12,704 |
| $ | 47,611 |
| $ | 33,726 |
|
| $ | 29.7 |
| $ | 6.5 |
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Basic earnings per share: |
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Earnings from continuing operations |
| $ | 0.69 |
| $ | 0.44 |
| $ | 1.70 |
| $ | 1.07 |
|
| $ | 0.49 |
| $ | 0.10 |
|
Earnings (loss) from discontinued operations, net of income taxes |
| (0.01 | ) | 0.04 |
| (0.01 | ) | 0.16 |
|
| (0.01 | ) | 0.01 |
| ||||||
Gain (loss) on sale of discontinued operations, net of income taxes |
| (0.11 | ) | — |
| (0.11 | ) | 0.03 |
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Net earnings |
| $ | 0.57 |
| $ | 0.48 |
| $ | 1.58 |
| $ | 1.26 |
|
| $ | 0.49 |
| $ | 0.11 |
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Diluted earnings per share: |
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Earnings from continuing operations |
| $ | 0.67 |
| $ | 0.43 |
| $ | 1.67 |
| $ | 1.06 |
|
| $ | 0.48 |
| $ | 0.10 |
|
Earnings (loss) from discontinued operations, net of income taxes |
| (0.01 | ) | 0.04 |
| (0.01 | ) | 0.16 |
|
| (0.01 | ) | 0.01 |
| ||||||
Gain (loss) on sale of discontinued operations, net of income taxes |
| (0.11 | ) | — |
| (0.11 | ) | 0.03 |
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Net earnings |
| $ | 0.55 |
| $ | 0.47 |
| $ | 1.55 |
| $ | 1.24 |
|
| $ | 0.48 |
| $ | 0.11 |
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Weighted average shares outstanding - basic |
| 30,220,335 |
| 26,774,770 |
| 30,099,135 |
| 26,719,180 |
|
| 60,936,490 |
| 59,988,138 |
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Weighted average shares outstanding - diluted |
| 31,007,522 |
| 27,282,807 |
| 30,762,924 |
| 27,160,903 |
|
| 62,461,920 |
| 61,222,372 |
|
See accompanying notes which are an integral part of these statements.
2
THE MANITOWOC COMPANY, INC.
Consolidated Balance Sheets
As of September 30, 2005March 31, 2006 and December 31, 20042005
(Unaudited)
(In thousands,millions, except share data)
|
| September 30, |
| December 31, |
|
| March 31, |
| December 31, |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
| $ | 120,351 |
| $ | 176,415 |
|
| $ | 204.4 |
| $ | 229.5 |
|
Marketable securities |
| 2,293 |
| 2,248 |
|
| 2.3 |
| 2.3 |
| ||||
Accounts receivable, less allowances of $25,328 and $26,308 |
| 262,223 |
| 244,335 |
| |||||||||
Inventories – net |
| 339,161 |
| 287,036 |
| |||||||||
Accounts receivable, less allowances of $24.8 and $23.8 |
| 293.3 |
| 243.2 |
| |||||||||
Inventories — net |
| 397.2 |
| 331.5 |
| |||||||||
Deferred income taxes |
| 50,789 |
| 60,963 |
|
| 78.6 |
| 74.4 |
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Other current assets |
| 97,632 |
| 74,964 |
|
| 78.9 |
| 72.5 |
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Total current assets |
| 872,449 |
| 845,961 |
|
| 1,054.7 |
| 953.4 |
| ||||
Property, plant and equipment – net |
| 344,741 |
| 357,568 |
| |||||||||
Property, plant and equipment — net |
| 359.5 |
| 353.9 |
| |||||||||
Goodwill |
| 433,980 |
| 451,868 |
|
| 437.9 |
| 429.6 |
| ||||
Other intangible assets – net |
| 141,719 |
| 154,342 |
| |||||||||
Other intangible assets — net |
| 140.4 |
| 139.9 |
| |||||||||
Deferred income taxes |
| 55,887 |
| 48,490 |
|
| 26.8 |
| 26.7 |
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Other non-current assets |
| 62,668 |
| 69,907 |
|
| 55.5 |
| 58.3 |
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Total assets |
| $ | 1,911,444 |
| $ | 1,928,136 |
|
| $ | 2,074.8 |
| $ | 1,961.8 |
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Liabilities and Stockholders’ Equity |
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Current Liabilities: |
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Accounts payable and accrued expenses |
| $ | 561,718 |
| $ | 513,504 |
|
| $ | 673.0 |
| $ | 591.8 |
|
Current portion of long-term debt |
| — |
| 61,250 |
| |||||||||
Short-term borrowings |
| 11,939 |
| 10,355 |
|
| 6.1 |
| 19.4 |
| ||||
Product warranties |
| 39,925 |
| 37,870 |
|
| 48.4 |
| 47.3 |
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Product liabilities |
| 29,619 |
| 29,701 |
|
| 31.5 |
| 31.8 |
| ||||
Total current liabilities |
| 643,201 |
| 652,680 |
|
| 759.0 |
| 690.3 |
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Non-Current Liabilities: |
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Long-term debt, less current portion |
| 482,500 |
| 512,236 |
| |||||||||
Long-term debt |
| 478.0 |
| 474.0 |
| |||||||||
Pension obligations |
| 63,810 |
| 67,798 |
|
| 72.1 |
| 71.6 |
| ||||
Postretirement health and other benefit obligations |
| 53,269 |
| 54,097 |
|
| 53.0 |
| 52.4 |
| ||||
Long-term deferred revenue |
| 83,430 |
| 82,587 |
|
| 76.4 |
| 81.7 |
| ||||
Other non-current liabilities |
| 52,422 |
| 39,809 |
|
| 54.1 |
| 48.5 |
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Total non-current liabilities |
| 735,431 |
| 756,527 |
|
| 733.6 |
| 728.2 |
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Commitments and contingencies (Note 5) |
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Commitments and contingencies (Note 7) |
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Stockholders’ Equity: |
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Common stock (39,793,982 shares issued, 30,252,020 and 29,949,715 shares outstanding, respectively) |
| 397 |
| 397 |
| |||||||||
Common stock (150,000,000 and 75,000,000 shares authorized, respectively, 79,587,964 and 39,793,982 shares issued, respectively, 61,211,972 and 30,362,501 shares outstanding, respectively) |
| 0.7 |
| 0.4 |
| |||||||||
Additional paid-in capital |
| 195,908 |
| 188,746 |
|
| 199.7 |
| 197.3 |
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Accumulated other comprehensive income |
| 24,917 |
| 61,014 |
|
| 22.0 |
| 16.6 |
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Unearned compensation |
| (1,568 | ) | (47 | ) |
| — |
| (1.4) |
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Retained earnings |
| 413,682 |
| 372,398 |
|
| 457.3 |
| 429.8 |
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Treasury stock, at cost (9,541,962 and 9,844,267 shares, respectively) |
| (100,524 | ) | (103,579 | ) | |||||||||
Treasury stock, at cost (18,375,992 and 9,431,481 shares, respectively) |
| (97.5 | ) | (99.4) |
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Total stockholders’ equity |
| 532,812 |
| 518,929 |
|
| 582.2 |
| 543.3 |
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Total liabilities and stockholders’ equity |
| $ | 1,911,444 |
| $ | 1,928,136 |
|
| $ | 2,074.8 |
| $ | 1,961.8 |
|
See accompanying notes which are an integral part of these statements.
3
THE MANITOWOC COMPANY, INC.
Consolidated Statements of Cash Flows
For the NineThree Months Ended September 30,March 31, 2006 and 2005 and 2004
(Unaudited)
(In millions)
(Unaudited)(In thousands)
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| Nine Months Ended |
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| Three Months Ended |
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| 2005 |
| 2004 |
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| 2006 |
| 2005 |
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Cash Flows from Operations: |
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Net earnings |
| $ | 47,611 |
| $ | 33,726 |
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| $ | 29.7 |
| $ | 6.5 |
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Adjustments to reconcile net earnings to cash provided by (used for) operating activities of continuing operations: |
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Adjustments to reconcile net earnings to cash used for operating activities of continuing operations: |
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Discontinued operations, net of income taxes |
| 3,630 |
| (5,052 | ) |
| 0.3 |
| (0.6 | ) | ||||
Depreciation |
| 43,334 |
| 37,842 |
|
| 17.5 |
| 13.9 |
| ||||
Amortization of intangible assets |
| 2,335 |
| 2,333 |
|
| 0.7 |
| 0.8 |
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Amortization of deferred financing fees |
| 1,636 |
| 2,611 |
|
| 0.4 |
| 0.6 |
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Loss on debt extinguishment |
| 2,641 |
| — |
| |||||||||
Restructuring and plant consolidation costs |
| 3,242 |
| 975 |
| |||||||||
Deferred income taxes |
| 5,935 |
| (5,147 | ) |
| 0.2 |
| 1.9 |
| ||||
Loss on early extinguishment of debt |
| — |
| 1.8 |
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Gain on sale of property, plant and equipment |
| (2,695 | ) | (996 | ) |
| (0.8 | ) | (1.5 | ) | ||||
Changes in operating assets and liabilities, excluding effects of business divestitures: Accounts receivable |
| (36,653 | ) | 14,827 |
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Changes in operating assets and liabilities, excluding effects of business acquisition: |
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Accounts receivable |
| (33.6 | ) | (34.9 | ) | |||||||||
Inventories |
| (101,726 | ) | (130,264 | ) |
| (68.3 | ) | (59.9 | ) | ||||
Other current assets |
| (17,473 | ) | (19,264 | ) | |||||||||
Other assets |
| (2.5 | ) | (12.0 | ) | |||||||||
Accounts payable and accrued expenses |
| 48,013 |
| 67,558 |
|
| 64.3 |
| 41.3 |
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Other liabilities |
| 42,223 |
| (2,373 | ) |
| (15.4 | ) | 12.5 |
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Net cash provided by (used for) operating activities of continuing operations |
| 42,053 |
| (3,224 | ) | |||||||||
Net cash provided by (used for) operating activities of discontinued operations |
| (9,187 | ) | 2,312 |
| |||||||||
Net cash provided by (used for) operating activities |
| 32,866 |
| (912 | ) | |||||||||
Net cash used for operating activities of continuing operations |
| (7.5 | ) | (29.6 | ) | |||||||||
Net cash used for operating activities of discontinued operations |
| (0.3 | ) | (11.9 | ) | |||||||||
Net cash used for operating activities |
| (7.8 | ) | (41.5 | ) | |||||||||
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Cash Flows from Investing: |
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Business acquisition, net of cash acquired |
| (12.1 | ) | — |
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Capital expenditures |
| (34,964 | ) | (26,419 | ) |
| (10.4 | ) | (8.2 | ) | ||||
Proceeds from sale of property, plant and equipment |
| 7,464 |
| 6,493 |
|
| 1.7 |
| 3.0 |
| ||||
Purchase of marketable securities |
| (45 | ) | (22 | ) | |||||||||
Net cash used for investing activities of continuing operations |
| (27,545 | ) | (19,948 | ) |
| (20.8 | ) | (5.2 | ) | ||||
Net cash provided by (used for) investing activities of discontinued operations |
| (14 | ) | 7,982 |
| |||||||||
Net cash used for investing activities of discontinued operations |
| — |
| (0.1 | ) | |||||||||
Net cash used for investing activities |
| (27,559 | ) | (11,966 | ) |
| (20.8 | ) | (5.3 | ) | ||||
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Cash Flows from Financing: |
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Payments on revolving credit facility |
| (4.3 | ) | — |
| |||||||||
Payments on long-term debt |
| (71,888 | ) | (17,852 | ) |
| (11.8 | ) | (67.7 | ) | ||||
Proceeds from long-term debt |
| 13,171 |
| 8,259 |
|
| 6.1 |
| 7.6 |
| ||||
Proceeds (payments) from notes financing |
| (12 | ) | 27,116 |
| |||||||||
Proceeds (payments) on note financings |
| 9.8 |
| (0.3 | ) | |||||||||
Dividends paid |
| (6,325 | ) | — |
|
| (2.1 | ) | (2.1 | ) | ||||
Exercises of stock options |
| 9,032 |
| 5,656 |
|
| 4.7 |
| 3.3 |
| ||||
Debt issue costs |
| (1,769 | ) | — |
| |||||||||
Net cash provided by (used for) financing activities |
| (57,791 | ) | 23,179 |
|
| 2.4 |
| (59.2 | ) | ||||
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Effect of exchange rate changes on cash |
| (3,580 | ) | (2,632 | ) |
| 1.1 |
| (1.6 | ) | ||||
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Net increase (decrease) in cash and cash equivalents |
| (56,064 | ) | 7,669 |
| |||||||||
Net decrease in cash and cash equivalents |
| (25.1 | ) | (107.6 | ) | |||||||||
Balance at beginning of period |
| 176,415 |
| 44,968 |
|
| 229.5 |
| 176.4 |
| ||||
Balance at end of period |
| $ | 120,351 |
| $ | 52,637 |
|
| $ | 204.4 |
| $ | 68.8 |
|
See accompanying notes which are an integral part of these statements.
4
THE MANITOWOC COMPANY, INC.
Consolidated Statements of Comprehensive Income (Loss)
For the Three and Nine Months Ended September 30,March 31, 2006 and 2005 and 2004
(Unaudited)
(In thousands)millions)
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
| ||||||||||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
| 2006 |
| 2005 |
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Net earnings |
| $ | 17,101 |
| $ | 12,704 |
| $ | 47,611 |
| $ | 33,726 |
|
| $ | 29.7 |
| $ | 6.5 |
|
Other comprehensive income (loss) |
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Other comprehensive income (loss): |
|
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Derivative instrument fair market value adjustment - net of income taxes |
| 365 |
| 530 |
| (4,073 | ) | (36 | ) |
| 0.2 |
| (3.5 | ) | ||||||
Foreign currency translation adjustments |
| 731 |
| 4,701 |
| (32,024 | ) | (4,317 | ) |
| 5.2 |
| (18.1 | ) | ||||||
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|
| ||||||
Total other comprehensive income (loss) |
| 1,096 |
| 5,231 |
| (36,097 | ) | (4,353 | ) |
| 5.4 |
| (21.6 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Comprehensive income |
| $ | 18,197 |
| $ | 17,935 |
| $ | 11,514 |
| $ | 29,373 |
| |||||||
Comprehensive income (loss) |
| $ | 35.1 |
| $ | (15.1 | ) |
See accompanying notes which are an integral part of these statements.
5
THE MANITOWOC COMPANY, INC.
Notes to Unaudited Consolidated Financial Statements
For the Three and Nine Months Ended September 30,March 31, 2006 and 2005 and 2004
1. Accounting Policies
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly state the results of operations, cash flows and comprehensive income (loss) for the three and nine months ended September 30,March 31, 2006 and 2005 and 2004 and the financial position at September 30, 2005March 31, 2006, and except as otherwise discussed such adjustments consist of only those of a normal recurring nature. 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, 2004.2005. The consolidated balance sheet as of December 31, 20042005 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 share and per share amounts, are in thousandsmillions 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. See Note 2,3, “Discontinued Operations,” and Note 6, “Stock Split,” for further details.
2. Acquisition
On January 3, 2006, the company acquired certain assets, rights and properties of ExacTech, Inc., a supplier of fabrication, machining, welding, and other services to various parties. Located in Port Washington, Wisconsin, ExacTech, Inc. will provide these services to the company’s U.S. based crane manufacturing facilities. The aggregate consideration paid for the acquisition resulted in approximately $6.5 million of goodwill being recognized by the company’s Crane segment.
2.3. Discontinued Operations
During the third quarter of 2005, the company decided to close Toledo Ship Repair Company (Toledo Ship Repair), a division of the company’s wholly-owned subsidiary, Manitowoc Marine Group, LLC. Located in Toledo, Ohio, Toledo Ship Repair performed ship repair and industrial repair services. As a resultDuring the third quarter of the closure,2005, the company recorded a $5.2 million pre-tax ($3.43.8 million after tax) charge for costs related to the closure of the business. This charge included $0.2 million related to severance agreements; $1.0 million for future lease payments; $0.3 million for the write-off of goodwill related to this business; $2.2 million for the write-down of certain assets (primarily property, plant and equipment and inventory) to estimated salvage value; and $1.5 million for closing and other related costs. This charge iswas recorded in lossgain (loss) on sale or closure of discontinued operations, net of income taxes in the Consolidated Statements of Operations.Operations during the third quarter of 2005. The closure of Toledo Ship Repair represents a discontinued operation under Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Results of Toledo Ship Repair in current and prior periods have been classified as discontinued in the Consolidated Financial Statements to exclude the results from continuing operations.
The closure of Toledo was completed during the first quarter of 2006.
The following selected financial data of Toledo Ship Repair for the three and nine months ended September 30,March 31, 2006 and 2005 and 2004 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 was no general corporate expense or interest expense allocated to discontinued operations for this business during the periods presented.
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net sales |
| $ | 2,121 |
| $ | 7,956 |
| $ | 10,757 |
| $ | 22,904 |
|
|
|
|
|
|
|
|
|
|
| ||||
Pretax earnings (loss) from discontinued operations |
| $ | (2,083 | ) | $ | (297 | ) | $ | (5,083 | ) | $ | 77 |
|
Pretax loss on sale or closure of discontinued operation |
| (5,189 | ) | — |
| (5,189 | ) | — |
| ||||
Provision (benefit) for taxes on income (loss) |
| (2,440 | ) | (87 | ) | (3,596 | ) | 23 |
| ||||
Earnings (loss) from discontinued operation, net of income taxes |
| $ | (4,832 | ) | $ | (210 | ) | $ | (6,676 | ) | $ | 54 |
|
| Three Months Ended |
| |||||
|
| 2006 |
| 2005 |
| ||
Net sales |
| $ | — |
| $ | 4.2 |
|
|
|
|
|
|
| ||
Pretax loss from discontinued operations |
| $ | (0.5 | ) | $ | (0.8 | ) |
Benefit for taxes on loss |
| 0.2 |
| 0.3 |
| ||
Net loss from discontinued operations |
| $ | (0.3 | ) | $ | (0.5 | ) |
6
During the third quarter ofOn December 30, 2005, the company decided that it would divest itselfcompleted the sale of itsDiversified Refrigeration, LLC, (f/k/a Diversified Refrigeration, Inc.) (DRI) to Monogram Refrigeration, LLC, a wholly-owned subsidiary Diversified Refrigeration, Inc. (DRI).of the General Electric Company. DRI iswas the company’s private-label Foodservice contract manufacturing operation. ForNet proceeds from the third quartersale of 2005DRI were approximately $28.4 million and resulted in a pre-tax gain of $17.6 million ($9.6 million after tax). This gain was recorded in gain (loss) on sale or closure of discontinued operations, net of income taxes in the company has classifiedConsolidated Statements of Operations for the year ended December 31, 2005. The sale of DRI as available for sale in accordance withrepresents a discontinued operation under SFAS No. 144. Results of DRI in current and prior periods have been classified as discontinued in the Consolidated Financial Statements to exclude the results from continuing operations.
The following selected financial data of DRI for the three and nine months ended September 30, 2005 and 2004 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 operating results from DRI for the quarter ended March 31, 2006. There was no general corporate expense or interest expense allocated to discontinued operations for this business during the periodsperiod presented.
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net sales |
| $ | 24,089 |
| $ | 22,375 |
| $ | 69,337 |
| $ | 68,830 |
|
|
|
|
|
|
|
|
|
|
| ||||
Pretax earnings from discontinued operations |
| $ | 1,882 |
| $ | 2,079 |
| $ | 4,839 |
| $ | 7,924 |
|
Provision for taxes on income |
| 828 |
| 453 |
| 1,793 |
| 2,060 |
| ||||
Earnings from discontinued operation, net of income taxes |
| $ | 1,054 |
| $ | 1,626 |
| $ | 3,046 |
| $ | 5,864 |
|
During the second quarter of 2004, the company completed the sale of its wholly-owned subsidiary, Delta Manlift SAS (Delta), to JLG Industries, Inc. Headquartered in Tonneins, France, Delta manufactures the Toucan brand of vertical mast lifts, a line of aerial work platforms distributed throughout Europe for use principally in industrial and maintenance operations. The company received $9.0 million for Delta and certain other assets of the company’s Aerial Work Platform (AWP) businesses. As a result of the sale and additional reserves for the closures of the other AWP businesses, the company recorded a $1.0 million pre-tax gain ($0.7 million net of taxes). This gain was recorded in gain on sale or closure of discontinued operations, net of income taxes in the Consolidated Statements of Operations in the second quarter of 2004. Delta was acquired in August 2002 as part of the acquisition of Grove Investors, Inc. (Grove). During December 2003, the company completed plans to restructure its AWP businesses. The restructuring included the closure of the Potain GmbH (Liftlux) facility in Dillingen, Germany and discontinuation of U.S. Manlift production at the Shady Grove, Pennsylvania facility. With the sale of Delta and the closure of the Liftlux and U.S. Manlift operations, the company no longer participates in the aerial work platform market, other than providing aftermarket parts and service support. The sale of Delta, the closure of Liftlux and the discontinuation of the U.S. Manlift production represent discontinued operations under SFAS No. 144. Results of these companies have been classified as discontinued to exclude the results from continuing operations.
The following selected financial data of the AWP businesses for the three and nine months ended September 30, 2004 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 was no activity related to the AWP business during the three and nine months ended September 30, 2005. There were no general corporate expenses or interest expense allocated to discontinued operations for this business during the periods presented.
|
| Three Months Ended |
| Nine Months Ended |
| ||
|
|
|
|
|
| ||
Net sales |
| $ | 98 |
| $ | 14,761 |
|
|
|
|
|
|
| ||
Pretax loss from discontinued operations |
| $ | (437 | ) | $ | (1,646 | ) |
Pretax gain on sale or closure of discontinued operation |
| — |
| 817 |
| ||
Benefit for taxes on loss |
| (127 | ) | (223 | ) | ||
Loss from discontinued operation, net of income taxes |
| $ | (310 | ) | $ | (606 | ) |
7
During the fourth quarter of 2003 the company terminated its distributor agreement with North Central Crane & Excavator Sales Corporation (North Central Crane), a wholly-owned crane distributor. The company entered into a new distributor agreement with an independent third party for the area previously covered by North Central Crane. The termination of North Central Crane represents a discontinued operation under SFAS No. 144, as this was the company’s only wholly-owned domestic crane distributor. The results of this company have been classified as discontinued to exclude the results from continuing operations.
The following selected financial data of North Central Crane for the three and nine months ended September 30, 2004 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 was no activity related to North Central Crane during the three and nine months ended September 30, 2005. There were no general corporate expenses or interest expense allocated to discontinued operations for this business during the periods presented.
|
| Three Months Ended |
| Nine Months Ended |
| ||
|
| 2004 |
| 2004 |
| ||
Net sales |
| $ | 507 |
| $ | 3,068 |
|
|
|
|
|
|
| ||
Pretax loss from discontinued operations |
| $ | (91 | ) | $ | (365 | ) |
Benefit for taxes on loss |
| (26 | ) | (105 | ) | ||
Loss from discontinued operation, net of income taxes |
| $ | (65 | ) | $ | (260 | ) |
| Three Months Ended |
| ||
|
| 2005 |
| |
Net sales |
| $ | 22.5 |
|
|
|
|
| |
Pretax earnings from discontinued operations |
| $ | 1.7 |
|
Provision for taxes on earnings |
| (0.6 | ) | |
Net earnings from discontinued operations |
| $ | 1.1 |
|
3.4. Inventories
The components of inventory at September 30, 2005March 31, 2006 and December 31, 20042005 are summarized as follows:
|
| September 30, 2005 |
| December 31, 2004 |
|
| March 31, 2006 |
| December 31, 2005 |
| ||||
Inventories - gross: |
|
|
|
|
|
|
|
|
|
| ||||
Raw materials |
| $ | 132,334 |
| $ | 111,400 |
|
| $ | 141.0 |
| $ | 131.6 |
|
Work-in-process |
| 113,383 |
| 87,825 |
|
| 138.8 |
| 113.9 |
| ||||
Finished goods |
| 150,683 |
| 144,480 |
|
| 178.6 |
| 143.2 |
| ||||
Total inventories - gross |
| 396,400 |
| 343,705 |
|
| 458.4 |
| 388.7 |
| ||||
Excess and obsolete inventory reserve |
| (37,510 | ) | (38,132 | ) |
| (39.2 | ) | (36.3 | ) | ||||
Net inventories at FIFO cost |
| 358,890 |
| 305,573 |
|
| 419.2 |
| 352.4 |
| ||||
Excess of FIFO costs over LIFO value |
| (19,729 | ) | (18,537 | ) |
| (22.0 | ) | (20.9 | ) | ||||
Inventories - net |
| $ | 339,161 |
| $ | 287,036 |
|
| $ | 397.2 |
| $ | 331.5 |
|
Inventory is carried at lower of cost or market using the first-in, first-out (FIFO) method for 86%84% and 90%85% of total inventory at September 30, 2005March 31, 2006 and December 31, 2004,2005, respectively. The remainder of the inventory cost is determined using the last-in, first-out (LIFO) method.
4. Stock-Based5. Stock Based Compensation
TheEffective January 1, 2006, the company accountsadopted SFAS No. 123 (R), “Share-Based Payment: An Amendment of Financial Accounting Standards Board Statements No. 123” (SFAS No. 123(R)), which revised SFAS No. 123, “Accounting for its stock options under the recognitionStock-Based Compensation” and measurement provisions of Accounting Principles Boardsupersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,Employees.” and related Interpretations. No stock-basedSFAS No. 123(R) requires all share-based payments to employees, including grants of employee compensation cost related to stock options, is reflectedto be measured at fair value and expensed in earnings. The following table illustrates the effect on net earnings and earnings per share ifconsolidated statement of operations over the service period (generally the vesting period) of the grant. Upon adoption, the company had appliedtransitioned to SFAS No. 123(R) using the fair value recognition provisionsmodified prospective application, under which compensation expense is only recognized in the consolidated statements of operations beginning with the first period that SFAS 123, “Accounting for Stock-Based Compensation,”No. 123(R) is effective and continuing to be expensed thereafter. Prior periods’ stock-based compensation expense is still presented on a pro-forma basis.
The company maintains the following stock based employee compensationplans:
The Manitowoc Company, Inc. 1995 Stock Plan, provides for the threegranting of stock options, restricted stock and nine months ended September 30, 2005 and 2004.
8
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| ||||
Reported net earnings |
| $ | 17,101 |
| $ | 12,704 |
| $ | 47,611 |
| $ | 33,726 |
|
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes |
| (1,598 | ) | (1,239 | ) | (3,849 | ) | (3,722 | ) | ||||
Pro forma net earnings |
| $ | 15,503 |
| $ | 11,465 |
| $ | 43,762 |
| $ | 30,004 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
| ||||
Basic - as reported |
| $ | 0.57 |
| $ | 0.47 |
| $ | 1.58 |
| $ | 1.26 |
|
Basic - pro forma |
| $ | 0.51 |
| $ | 0.43 |
| $ | 1.45 |
| $ | 1.12 |
|
Diluted - as reported |
| $ | 0.55 |
| $ | 0.47 |
| $ | 1.55 |
| $ | 1.24 |
|
Diluted - pro forma |
| $ | 0.50 |
| $ | 0.42 |
| $ | 1.42 |
| $ | 1.10 |
|
During May 2005, the company issued a total of 45 thousandlimited stock appreciation rights as an incentive to certain employees. Under this plan, stock options to acquire up to 5.0 million shares of restrictedcommon stock, with a fairin the aggregate, may be granted under the time-vesting formula at an exercise price equal to the market valueprice of $40.56the common stock at the close of business or the business day immediately preceding the date of grant. The options become exercisable in 25% increments beginning on the second anniversary of the grant date over a four-year period and expire ten years subsequent to certain employees and non-employee directors. The restricted shares are shares of company stock that cannot be sold or otherwise transferred during a specified vesting period from the date of issuance.grant date. The restrictions on transferany restricted shares granted under the plan lapse in one-third increments on each anniversary of the grant date. Awards are no longer granted under this plan. Awards surrendered under this plan become available for granting under the 2003 Incentive Stock and Awards Plan.
The Manitowoc Company, Inc. 2003 Incentive Stock and Awards Plan (2003 Stock Plan) provides for both short-term and long-term incentive awards for employees. Stock-based awards may take the form of stock options, stock appreciation rights, restricted stock,performance share or performance unit awards. The total number of shares of the company’s common stock originally available for awards under the 2003 Stock Plan is 6.0 million shares subject to adjustments for stock splits, stock dividends and certain other transactions or events. Options under this plan are exercisable at such times and subject to such conditions as the compensation committee should determine. Options granted under the plan to date become exercisable in equal 25% increments beginning on the second anniversary of the grant date over a four-year period and expire ten years subsequent to the grant date. Restrictions on
restricted stock awarded under this plan lapse 100% on the third anniversary of the grant date. WhenThere have been no awards of stock appreciation rights, performance shares or performance units.
The Manitowoc Company, Inc. 1999 Non-Employee Director Stock Option Plan (1995 Stock Plan), provides for the restrictionsgranting of stock options to non-employee members of the board of directors. Under this plan, stock options to acquire up to 0.4 million shares of common stock, in the aggregate, may be granted under a time-vesting formula and at an exercise price equal to the market price of the common stock at the date of grant. For the 1999 Stock Plan, the options become exercisable in 25% increments beginning on the first anniversary of the grant date over a four-year period and expire ten years subsequent to the grant date. During 2004, this plan was frozen and replaced with the 2004 Director Stock Plan.
The 2004 Non-Employee Director Stock and Awards Plan (2004 Stock Plan) was approved by the shareholders of the company during the 2004 annual meeting and it replaces The Manitowoc Company, Inc. 1999 Non-Employee Director Stock Option Plan. Stock-based awards may take the form of stock options, restricted stock, or restricted stock units. The total number of shares of the company’s common stock originally available for awards under the 2004 Stock Plan is 0.5 million, subject to adjustments for stock splits, stock dividends, and certain other transactions and events. Stock options awarded under the plan vest immediately and expire ten years subsequent to the grant date. Restrictions on restricted stock awarded to date under the plan lapse on the employee or directorthird anniversary of the award date.
With the acquisition of Grove, the company inherited the Grove Investors, Inc. 2001 Stock Incentive Plan. Outstanding Grove stock options under the Grove Investors, Inc. 2001 Stock Incentive Plan were converted into options to acquire Manitowoc Stock at the date of acquisition. No future stock options may be granted under this plan. Under this plan, after the conversion of Grove stock options to Manitowoc stock options, stock options to acquire 0.1 million shares of common stock of the company were outstanding. These options are fully vested and expire on September 25, 2011. No additional options may be granted under the Grove Investors, Inc. 2001 Stock Incentive Plan.
As a result of the adoption of SFAS No. 123(R), the company recognized $1.0 million of compensation expense associated with stock options for the three months ended March 31, 2006. The following presents pro-forma net income and per share data as if a fair-value-based method had been used to account for stock-based compensation for the three months ended March 31, 2005 (in millions, except per share amounts):
| Three Months ended |
| ||
|
| March 31, |
| |
|
| 2005 |
| |
|
|
|
| |
Net earnings as reported |
| $ | 6.5 |
|
|
|
|
| |
Stock option based employee compensation expense included in reported |
| — |
| |
|
|
|
| |
Stock option based employee compensation expense determined under |
| (0.9 | ) | |
Pro-forma net earnings |
| $ | 5.6 |
|
|
|
|
| |
Earnings per share: |
|
|
| |
Basic, as reported |
| $ | 0.11 |
|
Basic, pro-forma |
| $ | 0.09 |
|
|
|
|
| |
Diluted, as reported |
| $ | 0.11 |
|
Diluted, pro-forma |
| $ | 0.09 |
|
A summary of the company’s stock option activity is as follows (in millions, except weighted average exercise price and aggregate intrinsic value):
|
|
| Weighted |
|
|
| |||
|
|
|
| Average |
| Aggregate |
| ||
|
| Shares |
| Exercise Price |
| Intrinsic Value |
| ||
|
|
|
|
|
|
|
| ||
Options outstanding as of January 1, 2005 |
| 4.0 |
| $ | 12.76 |
|
|
| |
Granted |
| 0.7 |
| $ | 20.41 |
|
|
| |
Exercised |
| (0.9 | ) | $ | 12.08 |
|
|
| |
Cancelled |
| (0.3 | ) | $ | 15.60 |
|
|
| |
Options outstanding as of December 31, 2005 |
| 3.5 |
| $ | 14.48 |
|
|
| |
|
|
|
|
|
|
|
| ||
Granted |
| 0.3 |
| $ | 37.11 |
|
|
| |
Exercised |
| (0.4 | ) | $ | 12.62 |
|
|
| |
Cancelled |
| — |
| $ | — |
|
|
| |
Options outstanding as of March 31, 2006 |
| 3.4 |
| $ | 16.55 |
| $ | 97.5 |
|
|
|
|
|
|
|
|
| ||
Options exerciseable as of: |
|
|
|
|
|
|
| ||
January 1, 2005 |
| 1.6 |
| $ | 12.30 |
|
|
| |
December 31, 2005 |
| 1.5 |
| $ | 12.64 |
|
|
| |
March 31, 2006 |
| 1.3 |
| $ | 12.96 |
| $ | 44.0 |
|
The outstanding stock options at March 31, 2006 have a range of exercise prices of $8.47 to $38.11 per option. The following table shows the options outstanding and exercisable by range of exercise prices at March 31, 2006 (in millions, except weighted average exercise price).
|
|
|
| Weighted Average |
|
|
|
|
|
|
| ||
|
|
|
| Remaining |
|
|
|
|
|
|
| ||
|
| Outstanding |
| Contractual |
| Weighted Average |
| Exercisable |
| Weighted Average |
| ||
Range of Exercise Price |
| Options |
| Life (Years) |
| Exercise Price |
| Options |
| Exercise Price |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
$8.47 - $11.00 |
| 0.5 |
| 5.3 |
| $ | 9.58 |
| 0.4 |
| $ | 9.61 |
|
$11.01 - $13.50 |
| 1.2 |
| 6.1 |
| 12.63 |
| 0.5 |
| 12.64 |
| ||
$13.51 - $16.00 |
| 0.4 |
| 6.8 |
| 14.98 |
| 0.2 |
| 14.90 |
| ||
$16.01 - $18.50 |
| 0.3 |
| 6.1 |
| 17.29 |
| 0.2 |
| 17.34 |
| ||
$18.51 - $21.00 |
| 0.7 |
| 9.0 |
| 20.29 |
| — |
| — |
| ||
$21.01 - $28.51 |
| 0.1 |
| 9.7 |
| 25.62 |
| — |
| — |
| ||
$36.00 - $38.11 |
| 0.2 |
| 9.9 |
| 37.42 |
| — |
| — |
| ||
|
| 3.4 |
| 7.0 |
| $ | 16.55 |
| 1.3 |
| $ | 12.96 |
|
The company continues to use the Black-Scholes valuation model to value stock options. The company used its historical stock prices as the basis for its volatility assumption. The assumed risk-free rates were based on ten-year U.S. Treasury rates in effect at the time of grant. The expected option life represents the period of time that the options granted are expected to be outstanding and were based on historical experience.
As of March 31, 2006 the company has $8.0 million of unrecognized compensation expense which will ownbe recognized over the shares outright without any payment, exceptnext five years.
The weighted average fair value of options granted per share during the paymentfirst quarter of applicable, federal, state2006 and local withholding taxes. At2005 is $15.48 and $8.15, respectively. The fair value of each option grant was estimated at the date of grant using the company recorded $1.8 million of unearned compensation in stockholders’ equity. This amount is being recognized as compensation expense overBlack-Scholes option-pricing method with the three year vesting period. During the three and nine months ended September 30, 2005, the company recognized approximately $0.2 million and $0.3 million , respectively, of compensation expense related to the restricted stock awards. following assumptions:
| 2006 |
| 2005 |
| |
|
|
|
|
|
|
Expected life (years) |
| 7.0 |
| 7.3 |
|
Risk-free interest rate |
| 4.5 | % | 3.8 | % |
Expected volatility |
| 34.0 | % | 32.0 | % |
Expected dividend yield |
| 0.6 | % | 0.8 | % |
For the three and nine months ended September 30, 2004,March 31, 2006, the total intrinsic value of stock options exercised was $7.9 million.
The company recognized approximately $0.1 million and $0.2 million, respectively, of compensation expense related to restricted stock which was issued during 2002.2002 for the three months ended March 31, 2005. In addition, during the three months ended March 31, 2006, the company
recognized approximately $0.2 million of compensation expense related to restricted stock which was issued during the second quarter of 2005.
5.6. Stock Split
On February 24, 2006, the board of directors authorized a two-for-one stock split of the company’s outstanding common stock. Record holders of Manitowoc’s common stock at the close of business on March 31, 2006, received on April 10, 2006 one additional share of common stock for every share of Manitowoc common stock they owned as of March 31, 2006. Manitowoc shares outstanding at the close of business on March 31, 2006 totaled 30,605,986. The company’s common stock began trading at its post-split price at the beginning of trading on April 11, 2006. Per share and stock option amounts within this quarterly report on Form 10-Q for both periods presented have been adjusted to reflect the stock split.
7. Contingencies and Significant Estimates
The company has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act (CERLA) 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. Estimates indicate that the total costs to clean up this site are approximately $30 million. However, the ultimate allocations of costs for this site are not yet final. Although liability is joint and several, the company’s share of the liability is estimated to be 11% of the total cost. Prior to December 31, 1996, the company accrued $3.3 million in connection with this matter. 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 liabilities in the Consolidated Balance Sheet at September 30, 2005March 31, 2006 is $0.5$0.4 million. Based on the size of the company’s current allocation of liabilities at this site, the existence of other viable potential responsible parties and current reserve, 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.
During the due diligence process for the sale of DRI certain contaminants in the soil and ground water associated with the facility were identified. As part of the sale agreement, the company agreed to be responsible for costs associated with further investigation and remediation of the issues identified. Estimates indicate that the costs to remediate this site are approximately $2.0 million. During December 2005, the company recorded a $2.0 million reserve for these estimated costs. This charge was recorded in discontinued operations in the Consolidated Statements of Operations for the year ended December 31, 2005. The company’s remaining estimated liability for this matter, included in other current liabilities in the Consolidated Balance Sheet at March 31, 2006 is $1.9 million. Based upon available information, the company does not expect the ultimate costs 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 company does not expect that the ultimate costs will have a material adverse effect on its financial condition, results of operations, or cash flows.
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 September 30, 2005,March 31, 2006, various product-related lawsuits were pending. To the extent permitted under applicable law, all of these are insured with self-insurance retention levels. The company’s self-insurance retention levels vary by business, and have fluctuated over the last five years. The range of the company’s self-insured retention levels is $0.1 million to $3.0 million per occurrence. The high-end of the company’s self-insurance retention level is a legacy product liability insurance
9
program inherited in the Grove Investors, Inc. acquisition in 2002 for cranes manufactured in the United States for occurrences from January 2000 through October 2002. As of September 30, 2005,March 31, 2006, the largest self-insured retention level currently maintained by the company is $2.0 million per occurrence and applies to product liability claims for cranes manufactured in the United States.
Product liability reserves in the Consolidated Balance Sheet at September 30, 2005,March 31, 2006, were $29.6$31.5 million; $7.3$9.5 million reserved specifically for cases and $22.3$22.0 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 case resolutions on aggregate self-insured claims and insured claims. Any recoveries from insurance carriers are dependent upon the legal sufficiency of claims and solvency of insurance carriers.
At September 30, 2005March 31, 2006 and December 31, 2004,2005, the company had reserved $48.0$56.8 million and $46.5$55.4 million, respectively, for warranty claims included in product warranties and other non-current liabilities in the Consolidated Balance Sheets. Certain of these warranty and other related claims involve matters in dispute that ultimately are resolved by negotiations, arbitration, or litigation.
It is reasonably possible that the estimates for environmental remediation, product liability and warranty costs may change in the near future based upon new information that may arise or matters that are beyond the scope of the company’s historical experience. Presently, there are no reliable methods to estimate the amount of any such potential changes.
The company is involved in numerous lawsuits involving asbestos-related claims in which the company is one of numerous defendants. After taking into consideration legal counsel’s evaluation of such actions, the current political environment with respect to asbestos related claims, and the liabilities accrued with respect to such matters, in the opinion of management, ultimate resolution is not expected to have a material adverse effect on the financial condition, results of operations, or cash flows of the company.
The company is also involved in various legal actions arising out of the normal course of business, which, taking into account the liabilities accrued and legal counsel’s evaluation of such actions, in the opinion of management, the ultimate resolution is not expected to have a material adverse effect on the company’s financial condition, results of operations, or cash flows.
The company has been in negotiations with one of its Marine customers to recover certain cost overruns that resulted from change orders related to a particular contract. During the third quarter of 2005, due to the fact that these negotiations were not successful within the timeframe desired by the company, the company filed a lawsuit seeking recovery of these cost overruns from the customer. The amount of recovery included in the company’s estimates of this long-term project’s revenues is $10.2 million as of September 30, 2005. Although the damages portion of the lawsuit has not yet been formalized, the company intends to seek recovery in an amount in excess of the amount currently on the balance sheet. If the company is unsuccessful in its recovery of costs as a result of this lawsuit, the impact on its Consolidated Statements of Operations in a future period could be material. In addition, the company has $7.7 million of progress payment receivables outstanding with this customer as of September 30, 2005. The customer continues to make regular payments on these outstanding receivables in the normal course of business and therefore the company has determined these amounts to be collectible at this time.
During the first quarter of 2004, the company reached a settlement agreement with a third party and recorded a $2.3 million gain, net of legal and settlement costs, in other income (expense) in the Consolidated Statements of Operations.
At September 30, 2005,March 31, 2006, the company is contingently liable under open standby letters of credit issued by the company’s bank in favor of third parties totaling $26.2$26.1 million.
6. Debt and Loss on Debt Extinguishment
In June 2005, the company entered into a five-year, $300 million, secured revolving credit facility, which replaced the company’s $125 million revolving credit facility that was due to expire in May 2006. Borrowings under the secured revolving 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 the company’s consolidated total leverage ratio as defined by the credit agreement. The annual commitment fee in effect at September 30, 2005 on the unused portion of the secured revolving credit facility was 0.25%. As of September 30, 2005, there was no amount outstanding under the secured revolving credit facility. During June 2005, the company recorded a charge of $0.8 million ($0.6 million net of income taxes) for deferred financing costs related to the termination of the previous $125 million revolving credit facility.
10
In December 2004, the company sold, pursuant to an underwritten public offering, approximately 3.0 million shares of its common stock at a price of $36.25 per share. Net cash proceeds from this offering, after deducting underwriting discounts and commissions, were $104.9 million. In addition to underwriting discounts and commissions, the company incurred approximately $0.6 million of accounting, legal and other expenses related to the offering that were charged to additional paid-in capital. The company used a portion of the proceeds to redeem approximately $61.3 million of the 10 ½% senior subordinated notes due 2012 and to pay the prepayment premium to the note holders of $6.4 million. The company used the balance of the proceeds for general corporate purposes.
On January 10, 2005, the company completed the redemption of $61.3 million of the 10 ½% senior subordinated notes due 2012. As a result of this redemption, the company incurred a charge of approximately $8.3 million ($5.4 million net of income taxes) for the early extinguishment of debt related to the prepayment premium paid to the note holders of $6.4 million, and the partial write-off of debt issuance costs of $1.9 million. The charge was recorded in loss on debt extinguishment in the Consolidated Statements of Operations.
During the third quarter of 2004, the company recorded a charge of $0.5 million ($0.4 million net of income taxes) related to the prepayment of the term loan B portion of its senior credit facility. The loss relates to the write-off of unamortized financing fees and unwinding of the company’s floating-to-fixed interest rate swap. In addition, during the first quarter of 2004, the company recorded a charge of $0.6 million ($0.4 million net of income taxes) related to the partial prepayment of the term loan B portion of its senior credit facility. The loss also relates to the write-off of unamortized financing fees and partial unwinding of the company’s floating-to-fixed interest rate swap. The charge was recorded in loss on debt extinguishment in the Consolidated Statements of Operations.
7.8. 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 |
| Nine Months Ended |
|
| Three Months Ended |
| ||||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
| 2006 |
| 2005 |
|
Basic weighted average common shares outstanding |
| 30,220,335 |
| 26,774,770 |
| 30,099,135 |
| 26,719,180 |
|
| 60,936,490 |
| 59,988,138 |
|
Effect of dilutive securities - stock options and restricted stock |
| 787,187 |
| 508,037 |
| 663,789 |
| 441,723 |
|
| 1,525,430 |
| 1,234,234 |
|
Diluted weighted average common shares outstanding |
| 31,007,522 |
| 27,282,807 |
| 30,762,924 |
| 27,160,903 |
|
| 62,461,920 |
| 61,222,372 |
|
For the three and nine months ended September 30,March 31, 2006 and 2005, 0.3 and 2004, no common shares and 0.20.4 million of common shares, respectively, issuable upon the exercise of stock options were anti-dilutive and were excluded from the calculation of diluted earnings per share.
During both the three months ended March 31, 2006 and 2005, the company paid a quarterly dividend of $0.035 per outstanding common share.
8.9. Guarantees
The company periodically enters into transactions with customers that provide for residual value guarantees and buyback commitments. These transactions are recorded as operating leases for all significant residual value guarantees and for all buyback commitments. These initial transactions are recorded as deferred revenue and are 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 September 30, 2005March 31, 2006 and December 31, 20042005 was $119.6$124.0 million and $124.1$128.5 million, respectively. The total amount of residual value guarantees and buyback commitments given by the company and outstanding at September 30, 2005March 31, 2006 was $138.8$146.6 million. This amount is not reduced for amounts the company maywould recover from repossessing and subsequent resale of the units. The residual value guarantees and buyback commitments expire at various times through 2010.
2011.
During the ninethree months ended September 30,March 31, 2006 and 2005, and the year ended December 31, 2004, the company sold $4.4$11.5 million and $25.8$0.9 million, respectively, of its long term notes receivable to third party financing companies. The company fully guarantees some percentage, up to 100%, of collection of the notes to the financing companies. The company has accounted for the sales of the notes as a financing of receivables. The receivables remain on the company’s Consolidated Balance Sheet, net of payments made, in other current and non-current assets and the company has recognized an obligation equal to the net outstanding balance of the notes in other current and non-current liabilities in the Consolidated Balance Sheet. The cash flow benefit of these transactions, net of payments made by the customer, are reflected as financing activities in the Consolidated StatementsStatement of Cash Flows. During the ninethree months ended September 30, 2005March 31, 2006, the customers have paid $4.4$1.7 million of the notes to the third party financing companies. As of September 30, 2005,March 31, 2006, the outstanding balance of the notes receivables guaranteed by the company was $23.2$47.3 million.
11
The company also hashad an accounts receivable factoring arrangement with a bank. Under this arrangement, the company iswas required to repurchase from the bank the first $1.0 million and amounts greater than $1.5 million of the aggregate uncollected receivables during a twelve-month period. During the first quarter of 2006, the company terminated the factoring agreement with the bank. The company’s contingent factoring liability, net of cash collected from customers, was $26.5$0 million and $39.4$23.6 million at September 30, 2005March 31, 2006 and December 31, 2004,2005, respectively.
In the normal course of business, the company provides its customers a warranty covering workmanship, and in some cases 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 units shipped 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 liability and adjusts the amounts as necessary. Below is a
table summarizing the warranty activity for the ninethree months ended September 30, 2005March 31, 2006 and 2004.2005.
|
| 2005 |
| 2004 |
|
| 2006 |
| 2005 |
| ||||
Balance at beginning of period |
| $ | 46,509 |
| $ | 41,770 |
|
| $ | 55.4 |
| $ | 46.5 |
|
Accruals for warranties issued during the period |
| 30,563 |
| 18,193 |
|
| 11.1 |
| 8.8 |
| ||||
Settlements made (in cash or in kind) during the period |
| (26,297 | ) | (18,919 | ) |
| (10.1 | ) | (9.2 | ) | ||||
Currency translation |
| (2,731 | ) | (196 | ) |
| 0.4 |
| (1.2 | ) | ||||
Balance at end of period |
| $ | 48,044 |
| $ | 40,848 |
|
| $ | 56.8 |
| $ | 44.9 |
|
9. Restructuring and Plant Consolidation10. Accounts Receivable Securitization
The company has an accounts receivable securitization program whereby it sells certain of its domestic trade accounts receivable to a wholly owned, bankruptcy-remote special purpose subsidiary which, in turn, sells participating interests in its pool of receivables to a third-party financial institution (Purchaser). The Purchaser receives an ownership and security interest in the pool of receivables. New receivables are purchased by the special purpose subsidiary and participation interests are resold to the Purchaser as collections reduce previously sold participation interests. The company has retained collection and administrative responsibilities on the participation interests sold. The Purchaser has no recourse against the company for uncollectible receivables; however, the company’s retained interest in the receivable pool is subordinate to the Purchaser and is recorded at fair value. Due to a short average collection cycle of less than 60 days for such accounts receivable and the company’s collection history, the fair value of the company’s retained interest approximates book value. The retained interest recorded at March 31, 2006 is $46.5 million, and is included in accounts receivable in the accompanying Consolidated Balance Sheets.
The securitization program’s capacity is $60 million, and includes trade account receivables from its domestic Crane segment businesses. Trade accounts receivable sold to the Purchaser and being serviced by the company totaled $31.1 million at March 31, 2006.
Sales of trade receivables from the special purpose subsidiary to the Purchaser totaled $75.0 million, for the three months ended March 31, 2006. Cash collections of trade accounts receivable balances in the total receivable pool totaled $130.5 million for the three months ended March 31, 2006.
The accounts receivables securitization program is accounted for as a sale in accordance with FASB Statement No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities—a Replacement of FASB Statement No. 125.” Sales of trade receivables to the Purchaser are reflected as a reduction of accounts receivable in the accompanying Consolidated Balance Sheets and the proceeds received are included in cash flows from operating activities in the accompanying Consolidated Statements of Cash Flows.
The table below provides additional information about delinquencies and net credit losses for trade accounts receivable subject to the accounts receivable securitization program.
|
|
|
| Balance Outstanding |
|
|
| |||
|
|
|
| 60 Days or More |
| Net Credit Losses |
| |||
|
| Balance outstanding |
| Past Due |
| Three Months Ended |
| |||
|
| March 31, |
| March 31, |
| March 31, |
| |||
|
| 2006 |
| 2006 |
| 2006 |
| |||
Trade accounts receivable subject to securitization |
| $ | 77.6 |
| $ | 1.5 |
| $ | — |
|
|
|
|
|
|
|
|
| |||
Trade accounts receivable balance sold |
| 31.1 |
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Retained interest |
| $ | 46.5 |
|
|
|
|
| ||
During the three months ended March 31, 2006, the company incurred approximately $0.2 million of costs related to establishing the securitization facility.
11. Plant Consolidations and Restructuring
During the third quarter of 2005, the company recorded a pre-tax restructuring charge of $3.2 million in connection with the consolidation of its Kolpak operation located in Wisconsin with its Kolpak operation located in Tennessee.Tennessee within the Foodservice segment. This action was taken in an effort to streamline the company’s cost structure and utilize available capacity. The charge included $1.5 million to write-down the facility and land, which are held for sale, to estimated fair market value less cost to sell; $0.7 million related to the write-down of certain equipment; $0.1 million to write-off excess inventory which will not be transferred to Tennessee; $0.5 million related to severance and other employee related costs; and $0.5$0.4 million for other related closing costs. This charge has beenwas included in restructuringplant consolidation and plant consolidationrestructuring costs in the Consolidated Statements of Operations for the three and nine monthsthird quarter ended September 30, 2005. The following isAs of March 31, 2006, the rollforwardmajority of thethese restructuring reserve as of September 30, 2005.
|
| Third Quarter |
|
|
| Utilized |
| Reserve |
| ||||
|
| Charge |
| Cash |
| Non-Cash |
| September 30, 2005 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Facility and land |
| $ | 1,469 |
| $ | — |
| $ | (1,469 | ) | $ | — |
|
Equipment |
| 653 |
| — |
| (653 | ) | — |
| ||||
Inventory |
| 100 |
| — |
| (100 | ) | — |
| ||||
Severance and employee costs |
| 470 |
| — |
| — |
| 470 |
| ||||
Other costs |
| 550 |
| — |
| — |
| 550 |
| ||||
|
| $ | 3,242 |
| $ | — |
| $ | (2,222 | ) | $ | 1,020 |
|
During the second and third quarter of 2004, the company incurred approximately $0.2 million and $0.8 million, respectively, of restructuring costs related to the consolidation of certain of its European crane facilities under programs implemented in 2003. These chargesreserves have been included in restructuring and plant consolidation costs in the Consolidated Statements of Operations for the three and nine months ended September 30, 2004. All of this restructuring reserve has been utilized as of September 30, 2005.
utilized.
12
During the second quarter of 2002, the company finalized the purchase accounting for the acquisition of Potain SA (Potain), which included recording an $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 an $8.1 million liability related primarily to employee severance benefits for workforce reductions. Approximately 135 hourly and salaried positions were eliminated. To date the company has utilized approximately $5.3 million of this liability. The remainder of this reserve will be utilized through 2006 based upon the underlying contractual arrangements.
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 were consolidated into other Crane operations. All of this restructuring reserve has been utilized as of September 30, 2005.
10.12. Employee Benefit Plans
The company provides certain pension, health care and death benefits for eligible retirees and their dependents. The pension benefits are funded, while the health care and death benefits are not funded but are paid as incurred. Eligibility for coverage is based on meeting certain years of service and retirement qualifications. These benefits may be subject to deductibles, co-payment provisions, and other limitations. The company has reserved the right to modify these benefits.
The components of periodic benefit costs for the three and nine months ended September 30,March 31, 2006 and 2005 and 2004 are as follows:
|
| Three Months Ended September 30, 2005 |
| Nine Months Ended September 30, 2005 |
| ||||||||||||||
|
| U.S. |
| Non-U.S. |
| Postretirement |
| U.S. |
| Non-U.S. |
| Postretirement |
| ||||||
Service cost - benefits earned during the period |
| $ | — |
| $ | 300 |
| $ | 225 |
| $ | — |
| $ | 899 |
| $ | 674 |
|
Interest cost of projected benefit obligations |
| 1,599 |
| 1,031 |
| 833 |
| 4,798 |
| 3,093 |
| 2,500 |
| ||||||
Expected return on plan assets |
| (1,609 | ) | (768 | ) | — |
| (4,828 | ) | (2,305 | ) | — |
| ||||||
Amortization of transition obligation |
| 3 |
| — |
| — |
| 8 |
| — |
| — |
| ||||||
Amortization of prior service costs |
| 1 |
| (9 | ) | — |
| 2 |
| (27 | ) | — |
| ||||||
Amortization of actuarial net (gain) loss |
| 98 |
| (13 | ) | 16 |
| 295 |
| (38 | ) | 49 |
| ||||||
Net periodic benefit costs |
| $ | 92 |
| $ | 541 |
| $ | 1,074 |
| $ | 275 |
| $ | 1,622 |
| $ | 3,223 |
|
Weighted average assumptions: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Discount rate |
| 5.75 | % | 4.75 | % | 5.75 | % | 5.75 | % | 4.75 | % | 5.75 | % | ||||||
Expected return on plan assets |
| 8.25 | % | 5.25 | % | N/A |
| 8.25 | % | 5.25 | % | N/A |
| ||||||
Rate of compensation increase |
| N/A |
| 3.50 | % | N/A |
| N/A |
| 3.50 | % | N/A |
|
13
|
| Three Months Ended September 30, 2004 |
| Nine Months Ended September 30, 2004 |
|
| Three Months Ended March 31, 2006 |
| Three Months Ended March 31, 2005 |
| ||||||||||||||||||||||||||||
|
| U.S. |
| Non-U.S. |
| Postretirement |
| U.S. |
| Non-U.S. |
| Postretirement |
|
| U.S. |
| Non - U.S. |
| Postretirement |
| U.S. |
| Non - U.S. |
| Postretirement |
| ||||||||||||
Service cost - benefits earned during the period |
| $ | — |
| $ | 284 |
| $ | 116 |
| $ | — |
| $ | 853 |
| $ | 558 |
| |||||||||||||||||||
Service cost - benefits earning during the period |
| $ | — |
| $ | 0.4 |
| $ | 0.2 |
| $ | — |
| $ | 0.3 |
| $ | 0.2 |
| |||||||||||||||||||
Interest cost of projected benefit obligations |
| 1,582 |
| 958 |
| 539 |
| 4,747 |
| 2,875 |
| 2,274 |
|
| 1.6 |
| 1.0 |
| 0.8 |
| 1.6 |
| 1.0 |
| 0.9 |
| ||||||||||||
Expected return on plan assets |
| (1,548 | ) | (696 | ) | — |
| (4,643 | ) | (2,087 | ) | — |
|
| (1.6 | ) | (0.8 | ) | — |
| (1.6 | ) | (0.8 | ) | — |
| ||||||||||||
Amortization of transition obligation |
| 3 |
| — |
| — |
| 8 |
| — |
| — |
| |||||||||||||||||||||||||
Amortization of prior service costs |
| 1 |
| — |
| — |
| 2 |
| — |
| — |
| |||||||||||||||||||||||||
Amortization of actuarial net (gain) loss |
| 21 |
| (16 | ) | 11 |
| 64 |
| (49 | ) | 48 |
|
| 0.2 |
| — |
| 0.1 |
| 0.1 |
| — |
| — |
| ||||||||||||
Net periodic benefit costs |
| $ | 59 |
| $ | 530 |
| $ | 666 |
| $ | 178 |
| $ | 1,592 |
| $ | 2,880 |
|
| $ | 0.2 |
| $ | 0.6 |
| $ | 1.1 |
| $ | 0.1 |
| $ | 0.5 |
| $ | 1.1 |
|
Weighted average assumptions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Discount rate |
| 6.25 | % | 5.25 | % | 6.25 | % | 6.25 | % | 5.25 | % | 6.25 | % |
| 5.50 | % | 4.53 | % | 5.50 | % | 5.75 | % | 4.75 | % | 5.75 |
| ||||||||||||
Expected return on plan assets |
| 8.50 | % | 5.25 | % | N/A |
| 8.50 | % | 5.25 | % | N/A |
|
| 8.25 | % | 5.74 | % | N/A |
| 8.25 | % | 5.25 | % | N/A |
| ||||||||||||
Rate of compensation increase |
| N/A |
| 3.50 | % | N/A |
| N/A |
| 3.50 | % | N/A |
|
| N/A |
| 3.53 | % | N/A |
| N/A |
| 3.50 | % | N/A |
|
11.13. Debt
In April 2006, the company announced that it will redeem its 10 3/8% senior subordinated notes due 2011, effective May 15, 2006. As set forth in the notes’ articles of indenture, the company will pay the note holders 105.188 percent of the principal amount plus accrued and unpaid interest up to the redemption date. At March 31, 2006, the notes represented $210.7 million of the company’s outstanding debt. The company estimates that as a result of this redemption, it will incur a charge of $12.2 million related to the call premium and write-off of unamortized debt issuance costs.
In December 2004, the company sold, pursuant to an underwritten public offering, approximately 3.0 million shares of its common stock at a price of $36.25 per share. Net cash proceeds from this offering, after deducting underwriting discounts and commissions, were $104.9 million. On January 10, 2005, the company completed the redemption of $61.3 million of the 10 ½% senior subordinated notes due 2012. As a result of this redemption, the company incurred a charge of approximately $8.3 million ($5.4 million net of income taxes) for the early extinguishment of debt related to the prepayment premium paid to the note holders of $6.4 million, and the partial write-off of debt issuance costs of $1.9 million. The charge was recorded in loss on debt extinguishment in the Consolidated Statement of Operations.
14. Goodwill and Other Intangible Assets
The changes in carrying amount of goodwill by reportable segment for the year ended December 31, 20042005 and ninethree months ended September 30, 2005March 31, 2006 are as follows:
|
| Cranes and |
| Foodservice |
| Marine |
| Total |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Balance January 1, 2004 |
| $ | 205,022 |
| $ | 186,486 |
| $ | 47,417 |
| $ | 438,925 |
|
Tax adjustments related to purchase accounting |
| 950 |
| (360 | ) | — |
| 590 |
| ||||
Foreign currency impact |
| 12,353 |
| — |
| — |
| 12,353 |
| ||||
Balance as of December 31, 2004 |
| 218,325 |
| 186,126 |
| 47,417 |
| 451,868 |
| ||||
Write-off discontinued operation goodwill |
| — |
| — |
| (250 | ) | (250 | ) | ||||
Foreign currency impact |
| (17,638 | ) | — |
| — |
| (17,638 | ) | ||||
Balance as of September 30, 2005 |
| $ | 200,687 |
| $ | 186,126 |
| $ | 47,167 |
| $ | 433,980 |
|
|
| Crane |
| Foodservice |
| Marine |
| Total |
|
| ||||
Balance as of January 1, 2005 |
| $ | 218.3 |
| $ | 186.1 |
| $ | 47.4 |
| $ | 451.8 |
|
|
Write-off of discontinued operations goodwill |
| — |
| (0.4 | ) | (0.2 | ) | (0.6 | ) |
| ||||
Tax adjustment related to purchase accounting |
| (2.4 | ) | — |
| — |
| (2.4 | ) |
| ||||
Foreign currency impact |
| (19.2 | ) | — |
| — |
| (19.2 | ) |
| ||||
Balance as of December 31, 2005 |
| 196.7 |
| 185.7 |
| 47.2 |
| 429.6 |
|
| ||||
Exactech, Inc. acquisition |
| 6.5 |
| — |
| — |
| 6.5 |
|
| ||||
Foreign currency impact |
| 1.8 |
| — |
| — |
| 1.8 |
|
| ||||
Balance as of March 31, 2006 |
| $ | 205.0 |
| $ | 185.7 |
| $ | 47.2 |
| $ | 437.9 |
|
|
As discussed in Note 2, Discontinued Operations,“Acquisition,” during the first quarter ended September 30,of 2006, the company completed the acquisition of ExacTech, Inc. In addition, during 2005 the company decided to closeclosed its Toledo Ship Repair.Repair and divested of DRI. As a result, the company wrote-off the entire goodwill balancebalances related to Toledo Ship Repair.these businesses.
During 2005, the company reversed approximately $2.4 million of a tax reserve related to a German tax issue. This loss is included in gain (loss) on sale or closurereserve was established by the company during purchase accounting for the acquisition of discontinued operations, net of income taxes inGrove Investors, Inc. (Grove) as the Consolidated Statements of Operations.
tax issue related to a period prior to the company acquiring Grove. During 2005, the German tax audit was settled and the excess reserve was reversed through goodwill.
The gross carrying amount and accumulated amortization of the company’s intangible assets other than goodwill were as follows as of September 30, 2005
March 31, 2006 and December 31, 2004:2005.
|
| September 30, 2005 |
| December 31, 2004 |
| ||||||||||||||
|
| Gross |
| Accumulated |
| Net |
| Gross |
| Accumulated |
| Net |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Trademarks and tradenames |
| $ | 92,769 |
| $ | — |
| $ | 92,769 |
| $ | 99,224 |
| $ | — |
| $ | 99,224 |
|
Patents |
| 29,055 |
| (7,470 | ) | 21,585 |
| 30,899 |
| (5,542 | ) | 25,357 |
| ||||||
Engineering drawings |
| 10,886 |
| (2,926 | ) | 7,960 |
| 11,053 |
| (2,519 | ) | 8,534 |
| ||||||
Distribution network |
| 19,405 |
| — |
| 19,405 |
| 21,227 |
| — |
| 21,227 |
| ||||||
|
| $ | 152,115 |
| $ | (10,396 | ) | $ | 141,719 |
| $ | 162,403 |
| $ | (8,061 | ) | $ | 154,342 |
|
14
|
| March 31, 2006 |
| December 31, 2005 |
| ||||||||||||||
|
| Gross |
| Accumulated |
| Net |
| Gross |
| Accumulated |
| Net |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Trademarks and tradenames |
| $ | 92.9 |
| $ | — |
| $ | 92.9 |
| $ | 92.0 |
| $ | — |
| $ | 92.0 |
|
Patents |
| 28.7 |
| (8.2 | ) | 20.5 |
| 28.5 |
| (7.6 | ) | 20.9 |
| ||||||
Engineering drawings |
| 11.3 |
| (3.7 | ) | 7.6 |
| 11.2 |
| (3.5 | ) | 7.7 |
| ||||||
Distribution network |
| 19.4 |
| — |
| 19.4 |
| 19.3 |
| — |
| 19.3 |
| ||||||
|
| $ | 152.3 |
| $ | (11.9 | ) | $ | 140.4 |
| $ | 151.0 |
| $ | (11.1 | ) | $ | 139.9 |
|
12.15. Recent Accounting Changes and Pronouncements
In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, “Inventory Costs — an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 seeks to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) in the determination of inventory carrying costs. The statement requires such costs to be treated as a current period expense. This statement iswas effective for the company on January 1, 2006. The company does not believe the adoption of SFAS No. 151 willdid not have a material impact on itsthe company’s Consolidated Financial Statements.
During December 2004, the FASB revised SFAS No. 123, “Accounting for Stock Based Compensation.” SFAS No. 123-Revised supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, and will require all companies to estimate the fair value of incentive stock options granted and then amortize that estimated fair value to expense over the options’ vesting period. SFAS No. 123-Revised is effective for all annual periods beginning after June 15, 2005. The company currently accounts for its stock option plans under the recognition and measurement principles of APB Opinion No. 25, and related interpretations. No employee or outside director compensation costs related to stock option grants are currently reflected in net earnings. The company is required to adopthas adopted SFAS No. 123-Revised on January 1, 2006. See Note 4, “Stock-Based5, “Stock Based Compensation,” for pro formafurther information if the company had elected to adopt the requirements of the previously issued SFAS No. 123.
In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets — an amendment of APB Opinion No. 29.” This statement addresses the measurement of exchanges of nonmonetary assets and redefines the scope of transactions that should be measured based on the fair value of the assets exchanged. SFAS No. 153 is effective for the company on July 1, 2005. The company does not believeregarding the adoption of SFAS No. 153 will have a material impact on the Consolidated Financial Statements.
123-Revised.
In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement requires retrospective applications to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable. In addition, this statement requires that a change in depreciation, amortization, or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate affected by a change in accounting principle. This new accounting standard iswas effective January 1, 2006. The company does not believe the adoption of SFAS No. 154 willdid not have a materialan impact on theour Consolidated Financial Statements.
In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments an Amendment of FASB Statement No. 133 and 140.” SFAS No 155 amends certain aspects of SFAS No 133, primarily related to hybrid financial instruments and beneficial interest in securitized financial assets, as well as amends SFAS No. 140, related to eliminating a restriction on the passive derivative instruments that a qualifying special-purpose entity (SPE) may hold. SFAS No. 155 is effective for the company on January 1, 2007. The company is currently evaluating the impact of SFAS No. 155 on its Consolidated Financial Statements.
15In March 2006, the FASB Issued SFAS No. 156, “Accounting for Servicing of Financial Assets an amendment of FASB Statement No. 140.” SFAS No. 156, amends certain aspects of SFAS No. 140, by requiring that all separately recognized servicing assets and servicing liabilitiesbe initially measured at fair value, if practicable. SFAS No. 156 is effective for the company on January 1, 2007. The company is currently evaluating the impact of SFAS No. 156 on its Consolidated Financial Statements.
13.16. Subsidiary Guarantors of Senior Subordinated Notes due 2011 and 2012 and Senior Notes due 2013
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 and 2012 and the Senior Notes due 2013, which include substantially all of the domestic wholly-ownedwholly owned subsidiaries of the company (Subsidiary Guarantors); and (c) on a combined basis, the wholly and partially owned foreign subsidiaries of the company, which do not guarantee the Senior Subordinated Notes due 2011 and 2012 and the Senior Notes due 2013 (Non-Guarantor Subsidiaries). Separate financial statements of the Subsidiary Guarantors are not presented because each of the subsidiary guarantors is 100% owned and the guarantors are fully and unconditionally, jointly and severally liable under the guarantees.
guarantees, and 100% owned by the company.
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2005March 31, 2006
(In thousands)
|
| Parent |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
Net sales |
| $ | — |
| $ | 410.6 |
| $ | 294.7 |
| $ | (72.3 | ) | $ | 633.0 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of sales |
| — |
| 332.3 |
| 237.8 |
| (72.3 | ) | 497.8 |
| |||||
Engineering, selling and administrative expense |
| 8.9 |
| 38.6 |
| 31.4 |
| — |
| 78.9 |
| |||||
Amortization expense |
| — |
| 0.3 |
| 0.4 |
| — |
| 0.7 |
| |||||
Total costs and expenses |
| 8.9 |
| 371.2 |
| 269.6 |
| (72.3 | ) | 577.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) from operations |
| (8.9 | ) | 39.4 |
| 25.1 |
| — |
| 55.6 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
| |||||
Interest expense |
| (10.0 | ) | (0.1 | ) | (1.6 | ) | — |
| (11.7 | ) | |||||
Management fee income (expense) |
| 7.2 |
| (6.6 | ) | (0.6 | ) | — |
| — |
| |||||
Other income (expense), net |
| 8.5 |
| (5.1 | ) | (4.4 | ) | — |
| (1.0 | ) | |||||
Total other income (expense) |
| 5.7 |
| (11.8 | ) | (6.6 | ) | — |
| (12.7 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) from continuing operations before taxes on income (loss) and equity in earnings of subsidiaries |
| (3.3 | ) | 27.6 |
| 18.5 |
| — |
| 42.9 |
| |||||
Provision (benefit) for taxes on income |
| (0.8 | ) | 6.5 |
| 7.1 |
| — |
| 12.9 |
| |||||
Earnings (loss) from continuing operations before equity in earnings of subsidiaries |
| (2.5 | ) | 21.1 |
| 11.4 |
| — |
| 30.0 |
| |||||
Equity in earnings of subsidiaries |
| 32.2 |
| — |
| — |
| (32.2 | ) | — |
| |||||
Earnings (loss) from continuing operations |
| 29.7 |
| 21.1 |
| 11.4 |
| (32.2 | ) | 30.0 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings from discontinued operations, net of income taxes |
| — |
| (0.3 | ) | — |
| — |
| (0.3 | ) | |||||
Net earnings |
| $ | 29.7 |
| $ | 20.8 |
| $ | 11.4 |
| $ | (32.2 | ) | $ | 29.7 |
|
|
|
|
| Guarantor |
| Non- |
|
|
|
|
| |||||
|
| Parent |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net sales |
| $ | — |
| $ | 373,170 |
| $ | 244,030 |
| $ | (52,287 | ) | $ | 564,913 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of sales |
| — |
| 305,046 |
| 201,779 |
| (52,287 | ) | 454,538 |
| |||||
Engineering, selling and administrative expense |
| 6,825 |
| 35,383 |
| 26,960 |
| — |
| 69,168 |
| |||||
Amortization expense |
| — |
| 277 |
| 455 |
| — |
| 732 |
| |||||
Restructuring |
| — |
| 3,242 |
| — |
| — |
| 3,242 |
| |||||
Total costs and expenses |
| 6,825 |
| 343,948 |
| 229,194 |
| (52,287 | ) | 527,680 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) from operations |
| (6,825 | ) | 29,222 |
| 14,836 |
| — |
| 37,233 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
| |||||
Interest expense |
| (11,835 | ) | (632 | ) | (1,080 | ) | — |
| (13,547 | ) | |||||
Management fee income (expense) |
| 6,048 |
| (6,048 | ) | — |
| — |
| — |
| |||||
Loss on debt extinguishment |
| — |
| — |
| — |
| — |
| — |
| |||||
Other income (expense), net |
| 9,802 |
| (5,620 | ) | (3,509 | ) | — |
| 673 |
| |||||
Total other income (expense) |
| 4,015 |
| (12,300 | ) | (4,589 | ) | — |
| (12,874 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) from continuing operations before taxes on income (loss) and equity in earnings of subsidiaries and discontinued operations |
| (2,810 | ) | 16,922 |
| 10,247 |
| — |
| 24,359 |
| |||||
Provision (benefit) for taxes on income |
| (66 | ) | 487 |
| 3,059 |
| — |
| 3,480 |
| |||||
Earnings (loss) from continuing operations before equity in earnings of subsidiaries and discontinued operations |
| (2,744 | ) | 16,435 |
| 7,188 |
| — |
| 20,879 |
| |||||
Equity in earnings of subsidiaries |
| 19,845 |
| — |
| — |
| (19,845 | ) | — |
| |||||
Earnings (loss) from continuing operations before discontinued operations |
| 17,101 |
| 16,435 |
| 7,188 |
| (19,845 | ) | 20,879 |
| |||||
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
| |||||
Loss from discontinued operations, net of income taxes |
| — |
| (405 | ) | — |
| — |
| (405 | ) | |||||
Loss on closure of discontinued operations, net of income taxes |
| — |
| (3,373 | ) | — |
| — |
| (3,373 | ) | |||||
Net earnings (loss) |
| $ | 17,101 |
| $ | 12,657 |
| $ | 7,188 |
| $ | (19,845 | ) | $ | 17,101 |
|
16
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2004(In thousands)
|
|
|
| Guarantor |
| Non- |
|
|
|
|
| |||||
|
| Parent |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net sales |
| $ | — |
| $ | 300,380 |
| $ | 206,747 |
| $ | (46,309 | ) | $ | 460,818 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of sales |
| — |
| 237,926 |
| 176,217 |
| (46,309 | ) | 367,834 |
| |||||
Engineering, selling and administrative expense |
| 4,673 |
| 33,212 |
| 24,810 |
| — |
| 62,695 |
| |||||
Amortization expense |
| — |
| 172 |
| 605 |
| — |
| 777 |
| |||||
Restructuring |
| — |
| 1 |
| 174 |
| — |
| 175 |
| |||||
Total costs and expenses |
| 4,673 |
| 271,311 |
| 201,806 |
| (46,309 | ) | 431,481 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) from operations |
| (4,673 | ) | 29,069 |
| 4,941 |
| — |
| 29,337 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
| |||||
Interest expense |
| (12,798 | ) | (262 | ) | (1,011 | ) | — |
| (14,071 | ) | |||||
Management fee income (expense) |
| 4,809 |
| (4,809 | ) | — |
| — |
| — |
| |||||
Loss on debt extinguishment |
| (481 | ) | — |
| — |
| — |
| (481 | ) | |||||
Other income (expense), net |
| 9,799 |
| (5,475 | ) | (3,824 | ) | — |
| 500 |
| |||||
Total other income (expense) |
| 1,329 |
| (10,546 | ) | (4,835 | ) | — |
| (14,052 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) from continuing operations before taxes on income (loss) and equity in earnings of subsidiaries and discontinued operations |
| (3,344 | ) | 18,523 |
| 106 |
| — |
| 15,285 |
| |||||
Provision (benefit) for taxes on income |
| (715 | ) | 3,963 |
| 374 |
| — |
| 3,622 |
| |||||
Earnings (loss) from continuing operations before equity in earnings of subsidiaries and discontinued operations |
| (2,629 | ) | 14,560 |
| (268 | ) | — |
| 11,663 |
| |||||
Equity in earnings of subsidiaries |
| 15,399 |
| — |
| — |
| (15,399 | ) | — |
| |||||
Earnings (loss) from continuing operations before discontinued operations |
| 12,770 |
| 14,560 |
| (268 | ) | (15,399 | ) | 11,663 |
| |||||
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
| |||||
Gain (loss) from discontinued operations, net of income taxes |
| (66 | ) | 1,320 |
| (213 | ) | — |
| 1,041 |
| |||||
Net earnings (loss) |
| $ | 12,704 |
| $ | 15,880 |
| $ | (481 | ) | $ | (15,399 | ) | $ | 12,704 |
|
17
The Manitowoc Company, Inc.Condensed Consolidating Statement of OperationsFor the Nine Months Ended September 30,March 31, 2005
(In thousands)
|
|
|
| Guarantor |
| Non- |
|
|
|
|
| |||||||||||||||||||||
|
| Parent |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated |
|
| Parent |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net sales |
| $ | — |
| $ | 1,045,503 |
| $ | 802,394 |
| $ | (183,105 | ) | $ | 1,664,792 |
|
| $ | — |
| $ | 310.8 |
| $ | 254.7 |
| $ | (55.2 | ) | $ | 510.3 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Cost of sales |
| — |
| 866,552 |
| 659,802 |
| (183,105 | ) | 1,343,249 |
|
| — |
| 257.4 |
| 211.3 |
| (55.2 | ) | 413.5 |
| ||||||||||
Engineering, selling and administrative Expense |
| 17,587 |
| 104,419 |
| 83,518 |
| — |
| 205,524 |
| |||||||||||||||||||||
Engineering, selling and administrative expense |
| 5.3 |
| 34.2 |
| 28.3 |
| — |
| 67.8 |
| |||||||||||||||||||||
Amortization expense |
| — |
| 654 |
| 1,681 |
| — |
| 2,335 |
|
| — |
| 0.2 |
| 0.6 |
| — |
| 0.8 |
| ||||||||||
Restructuring |
| — |
| 3,242 |
| — |
| — |
| 3,242 |
| |||||||||||||||||||||
Total costs and expenses |
| 17,587 |
| 974,867 |
| 745,001 |
| (183,105 | ) | 1,554,350 |
|
| 5.3 |
| 291.8 |
| 240.2 |
| (55.2 | ) | 482.1 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Earnings (loss) from operations |
| (17,587 | ) | 70,636 |
| 57,393 |
| — |
| 110,442 |
|
| (5.3 | ) | 19.0 |
| 14.5 |
| — |
| 28.2 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Interest expense |
| (35,789 | ) | (1,532 | ) | (3,119 | ) | — |
| (40,440 | ) |
| (11.5 | ) | (0.4 | ) | (0.9 | ) | — |
| (12.8 | ) | ||||||||||
Loss on debt extinguishment |
| (8.3 | ) | — |
| — |
| — |
| (8.3 | ) | |||||||||||||||||||||
Management fee income (expense) |
| 18,144 |
| (18,144 | ) | — |
| — |
| — |
|
| 6.0 |
| (6.0 | ) | — |
| — |
| — |
| ||||||||||
Loss on debt extinguishment |
| (9,072 | ) | — |
| — |
| — |
| (9,072 | ) | |||||||||||||||||||||
Other income (expense), net |
| 29,701 |
| (15,992 | ) | (10,757 | ) | — |
| 2,952 |
|
| 9.3 |
| (5.9 | ) | (2.1 | ) | — |
| 1.3 |
| ||||||||||
Total other income (expense) |
| 2,984 |
| (35,668 | ) | (13,876 | ) | — |
| (46,560 | ) | |||||||||||||||||||||
Total other expense |
| (4.5 | ) | (12.3 | ) | (3.0 | ) | — |
| (19.8 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Earnings (loss) from continuing operations before taxes on income (loss) and equity in earnings of subsidiaries and discontinued operations |
| (14,603 | ) | 34,968 |
| 43,517 |
| — |
| 63,882 |
| |||||||||||||||||||||
Earnings (loss) from continuing operations before taxes on income (loss) and equity in earnings of subsidiaries |
| (9.7 | ) | 6.6 |
| 11.5 |
| — |
| 8.4 |
| |||||||||||||||||||||
Provision (benefit) for taxes on income |
| (2,666 | ) | (831 | ) | 16,138 |
| — |
| 12,641 |
|
| (3.3 | ) | 2.3 |
| 3.6 |
| — |
| 2.5 |
| ||||||||||
Earnings (loss) from continuing operations before equity in earnings of subsidiaries and discontinued operations |
| (11,937 | ) | 35,799 |
| 27,379 |
| — |
| 51,241 |
| |||||||||||||||||||||
Earnings (loss) from continuing operations before equity in earnings of subsidiaries |
| (6.4 | ) | 4.3 |
| 8.0 |
| — |
| 5.9 |
| |||||||||||||||||||||
Equity in earnings of subsidiaries |
| 59,548 |
| — |
| — |
| (59,548 | ) | — |
|
| 12.8 |
| — |
| — |
| (12.8 | ) | — |
| ||||||||||
Earnings (loss) from continuing operations before discontinued operations |
| 47,611 |
| 35,799 |
| 27,379 |
| (59,548 | ) | 51,241 |
| |||||||||||||||||||||
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Loss from discontinued operations, net of income taxes |
|
|
| (257 | ) |
|
|
|
| (257 | ) | |||||||||||||||||||||
Loss on closure of discontinued operations, net of income taxes |
| — |
| (3,373 | ) | — |
| — |
| (3,373 | ) | |||||||||||||||||||||
Net earnings (loss) |
| $ | 47,611 |
| $ | 32,169 |
| $ | 27,379 |
| $ | (59,548 | ) | $ | 47,611 |
| ||||||||||||||||
Earnings (loss) from continuing operations |
| 6.4 |
| 4.3 |
| 8.0 |
| (12.8 | ) | 5.9 |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Earnings from discontinued operations, net of income taxes |
| — |
| 0.6 |
| — |
| — |
| 0.6 |
| |||||||||||||||||||||
Net earnings |
| $ | 6.4 |
| $ | 4.9 |
| $ | 8.0 |
| $ | (12.8 | ) | $ | 6.5 |
|
1816
The Manitowoc Company, Inc.Condensed Consolidating Statement of OperationsFor the Nine Months Ended September 30, 2004(In thousands)
|
|
|
| Guarantor |
| Non- |
|
|
|
|
| |||||
|
| Parent |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net sales |
| $ | — |
| $ | 849,065 |
| $ | 621,406 |
| $ | (133,018 | ) | $ | 1,337,453 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of sales |
| — |
| 679,541 |
| 509,967 |
| (133,018 | ) | 1,056,490 |
| |||||
Engineering, selling and administrative expense |
| 15,514 |
| 102,778 |
| 79,814 |
| — |
| 198,106 |
| |||||
Amortization expense |
| — |
| 511 |
| 1,822 |
| — |
| 2,333 |
| |||||
Restructuring |
| — |
| 82 |
| 893 |
| — |
| 975 |
| |||||
Total costs and expenses |
| 15,514 |
| 782,912 |
| 592,496 |
| (133,018 | ) | 1,257,904 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) from operations |
| (15,514 | ) | 66,153 |
| 28,910 |
| — |
| 79,549 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other expense: |
|
|
|
|
|
|
|
|
|
|
| |||||
Interest expense |
| (36,901 | ) | (817 | ) | (3,385 | ) | — |
| (41,103 | ) | |||||
Management fee income (expense) |
| 14,427 |
| (14,427 | ) | — |
| — |
| — |
| |||||
Loss on debt extinguishment |
| (1,036 | ) | — |
| — |
| — |
| (1,036 | ) | |||||
Other income (expense), net |
| 29,285 |
| (15,105 | ) | (12,842 | ) | — |
| 1,338 |
| |||||
Total other income (expense) |
| 5,775 |
| (30,349 | ) | (16,227 | ) | — |
| (40,801 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) from continuing operations before taxes on income (loss) and equity in earnings of subsidiaries and discontinued operations |
| (9,739 | ) | 35,804 |
| 12,683 |
| — |
| 38,748 |
| |||||
Provision (benefit) for taxes on income |
| (1,774 | ) | 6,128 |
| 5,720 |
| — |
| 10,074 |
| |||||
Earnings (loss) from continuing operations before equity in earnings of subsidiaries and discontinued operations |
| (7,965 | ) | 29,676 |
| 6,963 |
| — |
| 28,674 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in earnings of subsidiaries |
| 41,048 |
| — |
| — |
| (41,048 | ) | — |
| |||||
Earnings (loss) from continuing operations before discontinued operations |
| 33,083 |
| 29,676 |
| 6,963 |
| (41,048 | ) | 28,674 |
| |||||
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
| |||||
Gain (loss) from discontinued operations, net of income taxes |
| (66 | ) | 5,071 |
| (662 | ) | — |
| 4,343 |
| |||||
Gain on sale of discontinued operations, net of income taxes |
| — |
| — |
| 709 |
| — |
| 709 |
| |||||
Net earnings (loss) |
| $ | 33,017 |
| $ | 34,747 |
| $ | 7,010 |
| $ | (41,048 | ) | $ | 33,726 |
|
19
The Manitowoc Company, Inc.
Condensed Consolidating Balance Sheet
as of September 30, 2005March 31, 2006
(In thousands)
|
| Parent |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 100.0 |
| $ | 13.4 |
| $ | 91.0 |
| $ | — |
| $ | 204.4 |
|
Marketable securities |
| 2.3 |
| — |
| — |
| — |
| 2.3 |
| |||||
Accounts receivable - net |
| 0.4 |
| 113.4 |
| 179.5 |
| — |
| 293.3 |
| |||||
Inventories - net |
| — |
| 164.1 |
| 233.1 |
| — |
| 397.2 |
| |||||
Deferred income taxes |
| 44.5 |
| — |
| 34.1 |
| — |
| 78.6 |
| |||||
Other current assets |
| 0.5 |
| 59.6 |
| 18.8 |
| — |
| 78.9 |
| |||||
Total current assets |
| 147.7 |
| 350.5 |
| 556.5 |
| — |
| 1,054.7 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property, plant and equipment - net |
| 11.0 |
| 152.8 |
| 195.7 |
| — |
| 359.5 |
| |||||
Goodwill |
| — |
| 298.6 |
| 139.3 |
| — |
| 437.9 |
| |||||
Other intangible assets - net |
| — |
| 52.7 |
| 87.7 |
| — |
| 140.4 |
| |||||
Deferred income taxes |
| 27.7 |
| — |
| (0.9 | ) | — |
| 26.8 |
| |||||
Other non-current assets |
| 28.2 |
| 14.8 |
| 12.5 |
| — |
| 55.5 |
| |||||
Investment in affiliates |
| 459.6 |
| 18.8 |
| 203.1 |
| (681.5 | ) | — |
| |||||
Total assets |
| $ | 674.1 |
| $ | 888.2 |
| $ | 1,194.0 |
| $ | (681.5 | ) | $ | 2,074.8 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable and accrued expenses |
| $ | 40.5 |
| $ | 279.5 |
| $ | 353.0 |
| $ | — |
| $ | 673.0 |
|
Short-term borrowings |
| — |
| — |
| 6.1 |
| — |
| 6.1 |
| |||||
Product warranties |
| — |
| 24.2 |
| 24.2 |
| — |
| 48.4 |
| |||||
Product liabilities |
| — |
| 28.3 |
| 3.2 |
| — |
| 31.5 |
| |||||
Total current liabilities |
| 40.5 |
| 332.0 |
| 386.5 |
| — |
| 759.0 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Non-Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt |
| 469.1 |
| — |
| 8.9 |
|
|
| 478.0 |
| |||||
Pension obligations |
| 29.7 |
| 14.4 |
| 28.0 |
|
|
| 72.1 |
| |||||
Postretirement health and other benefit obligations |
| 53.0 |
| — |
| — |
| — |
| 53.0 |
| |||||
Intercompany |
| (525.0 | ) | (77.6 | ) | 169.8 |
| 432.8 |
| — |
| |||||
Long-term deferred revenue |
| — |
| 19.0 |
| 57.4 |
| — |
| 76.4 |
| |||||
Other non-current liabilities |
| 24.7 |
| 15.8 |
| 13.6 |
| — |
| 54.1 |
| |||||
Total non-current liabilities |
| 51.5 |
| (28.4 | ) | 277.7 |
| 432.8 |
| 733.6 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Stockholders’ equity |
| 582.2 |
| 584.6 |
| 529.8 |
| (1,114.3 | ) | 582.2 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total liabilities and stockholders’ equity |
| $ | 674.1 |
| $ | 888.2 |
| $ | 1,194.0 |
| $ | (681.5 | ) | $ | 2,074.8 |
|
|
|
|
|
|
| Non- |
|
|
|
|
| |||||
|
|
|
| Guarantor |
| Guarantor |
|
|
|
|
| |||||
|
| Parent |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 44,152 |
| $ | 14,104 |
| $ | 62,095 |
| $ | — |
| $ | 120,351 |
|
Marketable securities |
| 2,293 |
| — |
| — |
| — |
| 2,293 |
| |||||
Accounts receivable – net |
| 62 |
| 117,604 |
| 144,557 |
| — |
| 262,223 |
| |||||
Inventories – net |
| — |
| 145,960 |
| 193,201 |
| — |
| 339,161 |
| |||||
Deferred income taxes |
| 42,057 |
| — |
| 8,732 |
| — |
| 50,789 |
| |||||
Other current assets |
| 385 |
| 82,556 |
| 14,691 |
| — |
| 97,632 |
| |||||
Total current assets |
| 88,949 |
| 360,224 |
| 423,276 |
| — |
| 872,449 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property, plant and equipment – net |
| 11,146 |
| 150,770 |
| 182,825 |
| — |
| 344,741 |
| |||||
Goodwill |
| — |
| 291,413 |
| 142,567 |
| — |
| 433,980 |
| |||||
Other intangible assets – net |
| — |
| 54,404 |
| 87,315 |
| — |
| 141,719 |
| |||||
Deferred income taxes |
| 25,791 |
| — |
| 30,096 |
| — |
| 55,887 |
| |||||
Other non-current assets |
| 28,262 |
| 18,241 |
| 16,165 |
| — |
| 62,668 |
| |||||
Investment in affiliates |
| 459,561 |
| 89,804 |
| 187,256 |
| (736,621 | ) | — |
| |||||
Total assets |
| $ | 613,709 |
| 964,856 |
| 1,069,500 |
| (736,621 | ) | 1,911,444 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable and accrued expenses |
| $ | 34,079 |
| 276,661 |
| 250,978 |
| — |
| 561,718 |
| ||||
Short-term borrowings |
| — |
| — |
| 11,939 |
| — |
| 11,939 |
| |||||
Product warranties |
| — |
| 20,861 |
| 19,064 |
| — |
| 39,925 |
| |||||
Product liabilities |
| — |
| 26,919 |
| 2,700 |
| — |
| 29,619 |
| |||||
Total current liabilities |
| 34,079 |
| 324,441 |
| 284,681 |
| — |
| 643,201 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Non-Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt, less current portion |
| 475,342 |
| — |
| 7,158 |
| — |
| 482,500 |
| |||||
Pension obligations |
| 19,799 |
| 14,092 |
| 29,919 |
| — |
| 63,810 |
| |||||
Postretirement health and other benefit obligations |
| 53,269 |
| — |
| — |
| — |
| 53,269 |
| |||||
Intercompany |
| (520,470 | ) | (14,122 | ) | 138,802 |
| 395,790 |
| — |
| |||||
Long-term deferred income |
| — |
| 25,789 |
| 57,641 |
| — |
| 83,430 |
| |||||
Other non-current liabilities |
| 18,878 |
| 16,365 |
| 17,179 |
| — |
| 52,422 |
| |||||
Total non-current liabilities |
| 46,818 |
| 42,124 |
| 250,699 |
| 395,790 |
| 735,431 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Stockholders’ equity |
| 532,812 |
| 598,291 |
| 534,120 |
| (1,132,411 | ) | 532,812 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total liabilities and stockholders’ equity |
| $ | 613,709 |
| $ | 964,856 |
| $ | 1,069,500 |
| $ | (736,621 | ) | $ | 1,911,444 |
|
20
The Manitowoc Company, Inc.
Condensed Consolidating Balance Sheet
as of December 31, 20042005
(In thousands)millions)
|
| Parent |
| Guarantor |
| Non- |
| Eliminations |
| Total |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 146.4 |
| $ | 9.7 |
| $ | 73.4 |
| $ | — |
| $ | 229.5 |
|
Marketable securities |
| 2.3 |
| — |
| — |
| — |
| 2.3 |
| |||||
Account receivable-net |
| 0.2 |
| 85.0 |
| 158.0 |
| — |
| 243.2 |
| |||||
Inventories-net |
| — |
| 141.8 |
| 189.7 |
| — |
| 331.5 |
| |||||
Deferred income taxes |
| 36.8 |
| — |
| 37.6 |
| — |
| 74.4 |
| |||||
Other current assets |
| 0.5 |
| 52.2 |
| 19.8 |
| — |
| 72.5 |
| |||||
Total current assets |
| 186.2 |
| 288.7 |
| 478.5 |
| — |
| 953.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property, plant and equipment - net |
| 11.1 |
| 146.4 |
| 196.4 |
| — |
| 353.9 |
| |||||
Goodwill-net |
| 1.0 |
| 291.0 |
| 137.6 |
| — |
| 429.6 |
| |||||
Other intangible assets |
| — |
| 54.1 |
| 85.8 |
| — |
| 139.9 |
| |||||
Deferred income taxes |
| 26.7 |
| — |
| — |
| — |
| 26.7 |
| |||||
Other non-current assets |
| 27.6 |
| 17.4 |
| 13.3 |
| — |
| 58.3 |
| |||||
Investments in affiliates |
| 459.6 |
| 18.8 |
| 203.1 |
| (681.5 | ) | — |
| |||||
Total assets |
| $ | 712.2 |
| $ | 816.4 |
| $ | 1,114.7 |
| $ | (681.5 | ) | $ | 1,961.8 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable and accrued expenses |
| $ | 47.5 |
| $ | 257.8 |
| $ | 286.5 |
| $ | — |
| $ | 591.8 |
|
Short-term borrowings |
| 4.3 |
| — |
| 15.1 |
| — |
| 19.4 |
| |||||
Product warranties |
| — |
| 24.0 |
| 23.3 |
| — |
| 47.3 |
| |||||
Product liabilities |
| — |
| 28.8 |
| 3.0 |
| — |
| 31.8 |
| |||||
Total current liabilities |
| 51.8 |
| 310.6 |
| 327.9 |
| — |
| 690.3 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt |
| 468.6 |
| — |
| 5.4 |
| — |
| 474.0 |
| |||||
Pension obligations |
| 29.7 |
| 14.3 |
| 27.6 |
| — |
| 71.6 |
| |||||
Postretirement health and other benefit obligations |
| 52.4 |
| — |
| — |
| — |
| 52.4 |
| |||||
Long-term deferred revenue |
| — |
| 23.6 |
| 58.1 |
| — |
| 81.7 |
| |||||
Intercompany |
| (443.8 | ) | (108.0 | ) | 167.4 |
| 384.4 |
| — |
| |||||
Other non-current liabilities |
| 10.1 |
| 16.8 |
| 21.6 |
| — |
| 48.5 |
| |||||
Total non-current liabilities |
| 117.0 |
| (53.3 | ) | 280.1 |
| 384.4 |
| 728.2 |
| |||||
Stockholders’ equity |
| 543.2 |
| 559.1 |
| 506.9 |
| (1,065.9 | ) | 543.3 |
| |||||
Total liabilities and stockholders’ equity |
| $ | 712.2 |
| $ | 816.4 |
| $ | 1,114.7 |
| $ | (681.5 | ) | $ | 1,961.8 |
|
|
|
|
|
|
| Non- |
|
|
|
|
| |||||
|
|
|
| Guarantor |
| Guarantor |
|
|
|
|
| |||||
|
| Parent |
| Subsidiaries |
| Subsidiaries |
| Eliminations |
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 135,827 |
| $ | (4,523 | ) | $ | 45,111 |
| $ | — |
| $ | 176,415 |
|
Marketable securities |
| 2,248 |
| — |
| — |
| — |
| 2,248 |
| |||||
Accounts receivable - net |
| 114 |
| 89,890 |
| 154,331 |
| — |
| 244,335 |
| |||||
Inventories - net |
| — |
| 103,687 |
| 183,349 |
| — |
| 287,036 |
| |||||
Deferred income taxes |
| 41,271 |
| — |
| 19,692 |
| — |
| 60,963 |
| |||||
Other current assets |
| 613 |
| 49,045 |
| 25,306 |
| — |
| 74,964 |
| |||||
Total current assets |
| 180,073 |
| 238,099 |
| 427,789 |
| — |
| 845,961 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property, plant and equipment - net |
| 11,817 |
| 161,722 |
| 184,029 |
| — |
| 357,568 |
| |||||
Goodwill |
| 5,434 |
| 246,538 |
| 199,896 |
| — |
| 451,868 |
| |||||
Other intangible assets - net |
| — |
| 41,614 |
| 112,728 |
| — |
| 154,342 |
| |||||
Deferred income taxes |
| 18,373 |
| 2 |
| 30,115 |
|
|
| 48,490 |
| |||||
Other non-current assets |
| 35,270 |
| 17,314 |
| 17,323 |
| — |
| 69,907 |
| |||||
Investment in affiliates |
| 459,560 |
| 91,191 |
| 189,313 |
| (740,064 | ) | — |
| |||||
Total assets |
| $ | 710,527 |
| $ | 796,480 |
| $ | 1,161,193 |
| $ | (740,064 | ) | $ | 1,928,136 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable and accrued expenses |
| $ | 34,013 |
| $ | 223,746 |
| $ | 255,745 |
| $ | — |
| $ | 513,504 |
|
Current portion of long-term debt |
| 61,250 |
| — |
| — |
| — |
| 61,250 |
| |||||
Short-term borrowings |
| — |
| — |
| 10,355 |
| — |
| 10,355 |
| |||||
Product warranties |
| — |
| 19,306 |
| 18,564 |
| — |
| 37,870 |
| |||||
Product liabilities |
| — |
| 27,391 |
| 2,310 |
| — |
| 29,701 |
| |||||
Total current liabilities |
| 95,263 |
| 270,443 |
| 286,974 |
| — |
| 652,680 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Non-Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt, less current portion |
| 504,880 |
| — |
| 7,356 |
| — |
| 512,236 |
| |||||
Pension obligations |
| 19,419 |
| 15,065 |
| 33,314 |
| — |
| 67,798 |
| |||||
Postretirement health and other benefit obligations |
| 54,097 |
| — |
| — |
| — |
| 54,097 |
| |||||
Long-term deferred revenue |
| — |
| 31,605 |
| 50,982 |
| — |
| 82,587 |
| |||||
Intercompany |
| (497,236 | ) | (108,824 | ) | 236,571 |
| 369,489 |
| — |
| |||||
Other non-current liabilities |
| 15,175 |
| 18,463 |
| 6,171 |
| — |
| 39,809 |
| |||||
Total non-current liabilities |
| 96,335 |
| (43,691 | ) | 334,394 |
| 369,489 |
| 756,527 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Stockholders’ equity |
| 518,929 |
| 569,728 |
| 539,825 |
| (1,109,553 | ) | 518,929 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total liabilities and stockholders’ equity |
| $ | 710,527 |
| $ | 796,480 |
| $ | 1,161,193 |
| $ | (740,064 | ) | $ | 1,928,136 |
|
21
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Cash Flows
For the NineThree Months Ended September 30, 2005March 31, 2006
(In thousands)
|
| Parent |
| Subsidiary |
| Non- |
| Eliminations |
| Consolidated |
| |||||
Net cash provided by (used in) operations |
| $ | 38.9 |
| $ | (19.1 | ) | $ | 4.6 |
| $ | (32.2 | ) | $ | (7.8 | ) |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash Flows from Investing: |
|
|
|
|
|
|
|
|
|
|
| |||||
Business acquisition |
| — |
| (12.1 | ) | — |
| — |
| (12.1 | ) | |||||
Capital expenditures |
| (0.4 | ) | (4.5 | ) | (5.5 | ) | — |
| (10.4 | ) | |||||
Proceeds from sale of property, plant and equipment |
| — |
| — |
| 1.7 |
| — |
| 1.7 |
| |||||
Purchase of marketable securities |
| — |
| — |
| — |
| — |
| — |
| |||||
Intercompany investments |
| (83.2 | ) | 33.6 |
| 17.4 |
| 32.2 |
| — |
| |||||
Net cash provided by (used for) investing activities of continuing operations |
| (83.7 | ) | 17.1 |
| 13.6 |
| 32.2 |
| (20.8 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash Flows from Financing: |
|
|
|
|
|
|
|
|
|
|
| |||||
Payments on revolving credit facility |
| (4.3 | ) | — |
| — |
| — |
| (4.3 | ) | |||||
Payments on long-term debt |
| — |
| — |
| (11.8 | ) | — |
| (11.8 | ) | |||||
Proceeds from long-term debt |
| — |
| — |
| 6.1 |
| — |
| 6.1 |
| |||||
Proceeds on note financings |
| — |
| 5.7 |
| 4.1 |
| — |
| 9.8 |
| |||||
Dividends paid |
| (2.1 | ) | — |
| — |
| — |
| (2.1 | ) | |||||
Exercises of stock options |
| 4.7 |
| — |
| — |
| — |
| 4.7 |
| |||||
Net cash provided by (used for) financing activities |
| (1.7 | ) | 5.7 |
| (1.6 | ) | — |
| 2.4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Effect of exchange rate changes on cash |
| — |
| — |
| 1.1 |
| — |
| 1.1 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net increase (decrease) in cash and cash equivalents |
| (46.5 | ) | 3.7 |
| 17.7 |
| — |
| (25.1 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance at beginning of period |
| 146.5 |
| 9.7 |
| 73.3 |
| — |
| 229.5 |
| |||||
Balance at end of period |
| $ | 100.0 |
| $ | 13.4 |
| $ | 91.0 |
| $ | — |
| $ | 204.4 |
|
|
|
|
|
|
| Non- |
|
|
|
|
| |
|
|
|
| Subsidiary |
| Guarantor |
|
|
|
|
| |
|
| Parent |
| Guarantors |
| Subsidiaries |
| Eliminations |
| Consolidated |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Net cash provided by (used for) operations |
| $ | 50,966 |
| 2,881 |
| 47,754 |
| (59,548 | ) | 42,053 |
|
Cash used by discontinued operations |
| — |
| (9,187 | ) | — |
| — |
| (9,187 | ) | |
Net cash provided by (used for) operating activities |
| 50,966 |
| (6,306 | ) | 47,754 |
| (59,548 | ) | 32,866 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Cash Flows from Investing: |
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures |
| (641 | ) | (11,506 | ) | (22,817 | ) | — |
| (34,964 | ) | |
Proceeds from sale of property, plant and equipment |
| — |
| 1,167 |
| 6,297 |
| — |
| 7,464 |
| |
Purchase of marketable securities |
| (45 | ) | — |
| — |
| — |
| (45 | ) | |
Intercompany investments |
| (81,643 | ) | 36,739 |
| (14,644 | ) | 59,548 |
| — |
| |
Net cash provided by (used for) investing activities of continuing operations |
| (82,329 | ) | 26,400 |
| (31,164 | ) | 59,548 |
| (27,545 | ) | |
Net cash provided by (used for) investing activities of discontinued operations |
| — |
| (14 | ) | — |
| — |
| (14 | ) | |
Net cash provided by (used for) investing activities |
| (82,329 | ) | 26,386 |
| (31,164 | ) | 59,548 |
| (27,559 | ) | |
|
|
|
|
|
|
|
|
|
|
|
| |
Cash Flows from Financing: |
|
|
|
|
|
|
|
|
|
|
| |
Retirement of long term debt |
| (61,250 | ) | — |
| (10,638 | ) | — |
| (71,888 | ) | |
Proceeds from (retirements of) notes payable |
| — |
| — |
| 13,171 |
| — |
| 13,171 |
| |
Proceeds from receivable financing |
| — |
| (1,453 | ) | 1,441 |
| — |
| (12 | ) | |
Debt issue costs |
| (1,769 | ) | — |
| — |
| — |
| (1,769 | ) | |
Dividends paid |
| (6,325 | ) | — |
| — |
| — |
| (6,325 | ) | |
Exercises of stock options |
| 9,032 |
| — |
| — |
| — |
| 9,032 |
| |
Net cash provided by (used for) financing activities |
| (60,312 | ) | (1,453 | ) | 3,974 |
| — |
| (57,791 | ) | |
|
|
|
|
|
|
|
|
|
|
|
| |
Effect of exchange rate changes on cash |
| — |
| — |
| (3,580 | ) | — |
| (3,580 | ) | |
|
|
|
|
|
|
|
|
|
|
|
| |
Net increase (decrease) in cash and cash equivalents |
| (91,675 | ) | 18,627 |
| 16,984 |
| — |
| (56,064 | ) | |
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at beginning of period |
| 135,827 |
| (4,523 | ) | 45,111 |
| — |
| 176,415 |
| |
Balance at end of period |
| $ | 44,152 |
| 14,104 |
| 62,095 |
| — |
| 120,351 |
|
22
The Manitowoc Company, Inc.
Condensed Consolidating Statement of Cash Flows
For the NineThree Months Ended September 30, 2004March 31, 2005
(In thousands)
|
| Parent |
| Subsidiary |
| Non- |
| Eliminations |
| Consolidated |
| |||||
Net cash provided by (used in) operations |
| $ | 9.5 |
| $ | (85.8 | ) | $ | 47.6 |
| $ | (12.8 | ) | $ | (41.5 | ) |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash Flows from Investing: |
|
|
|
|
|
|
|
|
|
|
| |||||
Capital expenditures |
| (0.1 | ) | (3.4 | ) | (4.7 | ) | — |
| (8.2 | ) | |||||
Proceeds from sale of property, plant and equipment |
| — |
| — |
| 3.0 |
| — |
| 3.0 |
| |||||
Purchase of marketable securities |
| — |
| — |
| — |
| — |
| — |
| |||||
Intercompany investments |
| (62.4 | ) | 96.2 |
| (46.6 | ) | 12.8 |
| — |
| |||||
Net cash provided by (used for) investing activities of continuing operations |
| (62.5 | ) | 92.8 |
| (48.3 | ) | 12.8 |
| (5.2 | ) | |||||
Net cash provided by investing activities of discontinued operations |
| — |
| (0.1 | ) | — |
| — |
| (0.1 | ) | |||||
Net cash provided by (used for) investing activities |
| (62.5 | ) | 92.7 |
| (48.3 | ) | 12.8 |
| (5.3 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash Flows from Financing: |
|
|
|
|
|
|
|
|
|
|
| |||||
Payments on long-term debt |
| (61.2 | ) | — |
| (6.5 | ) | — |
| (67.7 | ) | |||||
Proceeds from long-term debt |
| — |
| — |
| 7.6 |
| — |
| 7.6 |
| |||||
Payments on notes financings |
| — |
| 0.2 |
| (0.5 | ) | — |
| (0.3 | ) | |||||
Dividends paid |
| (2.1 | ) | — |
| — |
| — |
| (2.1 | ) | |||||
Exercises of stock options |
| 3.3 |
| — |
| — |
| — |
| 3.3 |
| |||||
Net cash provided by (used for) financing activities |
| (60.0 | ) | 0.2 |
| 0.6 |
| — |
| (59.2 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Effect of exchange rate changes on cash |
| — |
| — |
| (1.6 | ) | — |
| (1.6 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net increase (decrease) in cash and cash equivalents |
| (113.1 | ) | 7.1 |
| (1.6 | ) | — |
| (107.6 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance at beginning of period |
| 135.8 |
| (4.5 | ) | 45.1 |
| — |
| 176.4 |
| |||||
Balance at end of period |
| $ | 22.7 |
| $ | 2.6 |
| $ | 43.5 |
| $ | — |
| $ | 68.8 |
|
|
|
|
|
|
| Non- |
|
|
|
|
| |
|
|
|
| Subsidiary |
| Guarantor |
|
|
|
|
| |
|
| Parent |
| Guarantors |
| Subsidiaries |
| Eliminations |
| Consolidated |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Net cash provided by (used for) operations |
| $ | 69,679 |
| (5,251 | ) | (26,604 | ) | (41,048 | ) | (3,224 | ) |
Cash provided by (used for) discontinued Operations |
| (66 | ) | 3,064 |
| (686 | ) | — |
| 2,312 |
| |
Net cash provided by (used for) operating activities |
| 69,613 |
| (2,187 | ) | (27,290 | ) | (41,048 | ) | (912 | ) | |
|
|
|
|
|
|
|
|
|
|
|
| |
Cash Flows from Investing: |
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures |
| (2,687 | ) | (13,899 | ) | (9,833 | ) | — |
| (26,419 | ) | |
Proceeds from sale of property, plant and equipment |
| 40 |
| 2 |
| 6,451 |
| — |
| 6,493 |
| |
Purchase of marketable securities |
| (22 | ) | — |
| — |
| — |
| (22 | ) | |
Intercompany investments |
| (46,559 | ) | (8,397 | ) | 13,908 |
| 41,048 |
| — |
| |
Net cash provided by (used for) investing activities of continuing operations |
| (49,228 | ) | (22,294 | ) | 10,526 |
| 41,048 |
| (19,948 | ) | |
Net cash provided by (used for) investing activities of discontinued operations |
| — |
| (1,018 | ) | 9,000 |
| — |
| 7,982 |
| |
Net cash provided by (used for) investing activities |
| (49,228 | ) | (23,312 | ) | 19,526 |
| 41,048 |
| (11,966 | ) | |
|
|
|
|
|
|
|
|
|
|
|
| |
Cash Flows from Financing: |
|
|
|
|
|
|
|
|
|
|
| |
Retirement of long-term debt |
| (17,709 | ) | — |
| (143 | ) | — |
| (17,852 | ) | |
Proceeds from (payments on) long-term debt |
|
|
|
|
|
|
|
|
|
|
| |
Proceeds from notes financing |
| — |
| — |
| 8,259 |
| — |
| 8,259 |
| |
Proceeds from receivable financing |
| — |
| 27,116 |
| — |
| — |
| 27,116 |
| |
Exercises of stock options |
| 5,656 |
| — |
| — |
| — |
| 5,656 |
| |
Net cash provided by (used for) financing activities |
| (12,053 | ) | 27,116 |
| 8,116 |
| — |
| 23,179 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Effect of exchange rate changes on cash |
| — |
| — |
| (2,632 | ) | — |
| (2,632 | ) | |
|
|
|
|
|
|
|
|
|
|
|
| |
Net increase (decrease) in cash and cash equivalents |
| 8,332 |
| 1,617 |
| (2,280 | ) | — |
| 7,669 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at beginning of period |
| 11,816 |
| (100 | ) | 33,252 |
| — |
| 44,968 |
| |
Balance at end of period |
| $ | 20,148 |
| 1,517 |
| 30,972 |
| — |
| 52,637 |
|
23
15.17. 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 (Crane), Foodservice Equipment (Foodservice), and Marine. Net sales and earnings from operations by segment areis summarized as follows:
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
| ||||||||||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
| 2006 |
| 2005 |
| ||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Crane |
| $ | 404,854 |
| $ | 305,717 |
| $ | 1,189,849 |
| $ | 890,108 |
|
| $ | 477.5 |
| $ | 358.0 |
|
Foodservice |
| 108,902 |
| 100,216 |
| 308,799 |
| 292,733 |
|
| 93.6 |
| 96.2 |
| ||||||
Marine |
| 51,157 |
| 54,885 |
| 166,144 |
| 154,612 |
|
| 61.9 |
| 56.1 |
| ||||||
Total net sales |
| $ | 564,913 |
| $ | 460,818 |
| $ | 1,664,792 |
| $ | 1,337,453 |
|
| $ | 633.0 |
| $ | 510.3 |
|
Earnings (loss) from operations: |
|
|
|
|
|
|
|
|
| |||||||||||
Earning from operations: |
|
|
|
|
| |||||||||||||||
Crane |
| $ | 28,853 |
| $ | 12,560 |
| $ | 83,117 |
| $ | 38,612 |
|
| $ | 50.5 |
| $ | 19.6 |
|
Foodservice |
| 15,297 |
| 17,997 |
| 43,963 |
| 46,530 |
|
| 10.6 |
| 12.3 |
| ||||||
Marine |
| (92 | ) | 3,453 |
| 949 |
| 9,921 |
|
| 3.7 |
| 1.6 |
| ||||||
Corporate expense |
| (6,825 | ) | (4,673 | ) | (17,587 | ) | (15,514 | ) |
| (9.2 | ) | (5.3 | ) | ||||||
Operating earnings |
| 37,233 |
| 29,337 |
| 110,442 |
| 79,549 |
| |||||||||||
Total |
| 55.6 |
| 28.2 |
| |||||||||||||||
Interest expense |
| (13,547 | ) | (14,071 | ) | (40,440 | ) | (41,103 | ) |
| (11.7 | ) | (12.8 | ) | ||||||
Loss on debt extinguishment |
| — |
| (481 | ) | (9,072 | ) | (1,036 | ) |
| — |
| (8.3 | ) | ||||||
Other income (expense), net |
| 673 |
| 500 |
| 2,952 |
| 1,338 |
|
| (1.0 | ) | 1.3 |
| ||||||
Earnings from continuing operations before taxes on income |
| $ | 24,359 |
| $ | 15,285 |
| $ | 63,882 |
| $ | 38,748 |
|
| $ | 42.9 |
| $ | 8.4 |
|
Crane segment operating earnings for the three months ended September 30,March 31, 2006 and 2005 and 2004 includes amortization expense of $0.7 million and $0.8 million, respectively. Crane segment operating earnings for both the nine months ended September 30, 2005 and 2004 includes amortization expense of $2.3 million. Crane segment operating earnings for the three and nine months ended September 30, 2004 includes a charge of $0.2 million and $1.0 million, respectively, related to restructuring activities (see Note 9, Restructuring and Plant Consolidation). Foodservice segment operating earnings for both the three and nine months ended September 30, 2005 includes a charge of $3.2 million related to restructuring activities (see Note 9, Restructuring and Plant Consolidation).
As of September 30, 2005March 31, 2006 and December 31, 2004,2005, the total assets by segment were as follows:
|
| September 30, 2005 |
| December 31, 2004 |
|
| March 31, 2006 |
| December 31, 2005 |
| ||||
Crane |
| $ | 1,292,346 |
| $ | 1,279,665 |
|
| $ | 1,353.4 |
| $ | 1,224.7 |
|
Foodservice |
| 342,139 |
| 302,865 |
|
| 339.7 |
| 313.2 |
| ||||
Marine |
| 136,479 |
| 110,336 |
|
| 127.1 |
| 123.3 |
| ||||
Corporate |
| 140,480 |
| 235,270 |
|
| 254.6 |
| 300.6 |
| ||||
Total |
| $ | 1,911,444 |
| $ | 1,928,136 |
|
| $ | 2,074.8 |
| $ | 1,961.8 |
|
2421
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations for the Three and Nine Months Ended September 30,March 31, 2006 and 2005 and 2004
Analysis of Net Sales
The following table presents net sales by business segment (in thousands)millions):
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| ||||
Net sales: |
|
|
|
|
|
|
|
|
| ||||
Cranes and Related Products |
| $ | 404,854 |
| $ | 305,717 |
| $ | 1,189,849 |
| $ | 890,108 |
|
Foodservice Equipment |
| 108,902 |
| 100,216 |
| 308,799 |
| 292,733 |
| ||||
Marine |
| 51,157 |
| 54,885 |
| 166,144 |
| 154,612 |
| ||||
Total net sales |
| $ | 564,913 |
| $ | 460,818 |
| $ | 1,664,792 |
| $ | 1,337,453 |
|
During the third quarter of 2005 we completed plans to close our ship repair business in Ohio known as Toledo Ship Repair Company and decided to divest ourselves of Diversified Refrigeration, Inc., our private-label contract manufacturing Foodservice operation in Tennessee. 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.
| Three Months Ended |
| |||||
|
| 2006 |
| 2005 |
| ||
Net sales: |
|
|
|
|
| ||
Crane |
| $ | 477.5 |
| $ | 358.0 |
|
Foodservice |
| 93.6 |
| 96.2 |
| ||
Marine |
| 61.9 |
| 56.1 |
| ||
Total |
| $ | 633.0 |
| $ | 510.3 |
|
Consolidated net sales for the three months ended September 30, 2005March 31, 2006 increased 22.6%24.1% to $564.9$633.0 million, from $460.8$510.3 million for the same period in 2004.2005. The increase in sales was driven by the Crane and Foodservice segments and was partially offset by lower sales in the Marine segment. Consolidated net sales for the nine months ended September 30, 2005 increased 24.5% to $1.7 billion, from $1.3 billion for the same period in 2004. All three of our segments had increased sales during the first nine months of 2005 compared to the first nine months of 2004.
segments.
Net sales from the Crane segment for the three months ended September 30, 2005March 31, 2006 increased 32.4%33.5% to $404.9$477.5 million versus $305.7$358.0 million for the three months ended September 30, 2004. For the nine months ended September 30, 2005, net sales increased 33.7% to $1.2 billion compared to $890.1 million for the first nine months of 2004.March 31, 2005. Net sales for the quarter and nine months ended September 30, 2005March 31, 2006 increased over the prior year in all major geographic regions, as well as our aftermarket sales and service business.regions. From a product line standpoint this sales increase was driven by increased volumesvolume of crawler, tower and mobile hydraulic cranes worldwide, increased salesincreases in our aftermarket sales and service business, increased crawler crane sales in Europe and Asia, and increased boom truck sales in North America. For the nine months ended September 30, 2005 versus the same period in 2004, the stronger Euro currency compared to the U.S. Dollar had an approximate 1.3% favorable impact on sales. Foreign exchange rates did not have a measurable impact on the comparison of net sales for the third quarter in 2005 versus the same period in 2004. As of September 30, 2005,March 31, 2006, total Crane segment backlog was $632.6$986.8 million, an 86.0%a 13.9% increase over the December 31, 20042005 backlog, which was $340.0$866.1 million.
Net sales from the Foodservice segment increased 8.7%decreased 2.7% to $108.9$93.6 million forin the three months ended September 30, 2005March 31, 2006 versus the three months ended September 30, 2004. March 31, 2005. The reduction in sales of the Foodservice segment occurred primarily in the segment’s beverage division which had two major customer rollouts occur in 2005 that did not reoccur during 2006.
Net sales from the Foodserviceour Marine segment for the nine months ended September 30, 2005 increased 5.5%10.4% to $308.8$61.9 million compared to $292.7 million. The increased sales in the Foodservice segment in both periods were driven by higher sales infirst quarter of 2006 versus the ice and beverage divisions offset by lower sales in the refrigeration division. The majority of the increase in sales was the result of larger sales volumes and increased pricing due to higher commodity costs. The higher volumes in the ice and beverage divisions were driven by the hotter-than-normal weather throughout much of the United States during the thirdfirst quarter of 2005. The decrease in sales of the refrigeration division reflects a slowing in the rate of new restaurant construction in the United States as well as the timing of larger new construction projects.
25
Net salesincrease resulted from the Marine segment of $51.2 million in the third quarter of 2005 were down 6.8% compared to the third quarter of 2004. For the nine months ended September 30, 2005, sales of $166.1 million were 7.5% above sales for the first nine months of 2004. The reduction in sales for the three months ended September 30, 2005 compared to the same period in 2004 was a result of three long-term new-construction contracts being substantially completed during the second quarter of 2005. These three contracts generated sales throughout 2004 and through the first six months of 2005. The increase in net sales for the nine months ended September 30, 2005 was a result of higher commercial contract revenue during the first six months of 2005from construction contracts and a strong 2005 winter repair season.
Analysis of Operating Earnings
The following table presents operating earnings (loss) by business segment (in thousands)millions):
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| ||||
Earnings (loss) from operations: |
|
|
|
|
|
|
|
|
| ||||
Cranes and Related Products |
| $ | 28,853 |
| $ | 12,560 |
| $ | 83,117 |
| $ | 38,612 |
|
Foodservice Equipment |
| 15,297 |
| 17,997 |
| 43,963 |
| 46,530 |
| ||||
Marine |
| (92 | ) | 3,453 |
| 949 |
| 9,921 |
| ||||
Corporate expense |
| (6,825 | ) | (4,673 | ) | (17,587 | ) | (15,514 | ) | ||||
Total |
| $ | 37,233 |
| $ | 29,337 |
| $ | 110,442 |
| $ | 79,549 |
|
| Three Months Ended |
| |||||
|
| 2006 |
| 2005 |
| ||
Earnings from operations: |
|
|
|
|
| ||
Crane |
| $ | 50.5 |
| $ | 19.6 |
|
Foodservice |
| 10.6 |
| 12.3 |
| ||
Marine |
| 3.7 |
| 1.6 |
| ||
General corporate expense |
| (9.2 | ) | (5.3 | ) | ||
Total |
| $ | 55.6 |
| $ | 28.2 |
|
Consolidated gross profit for the three months ended September 30, 2005March 31, 2006 was $110.4$135.2 million, an increase of 18.7%$38.4 million over the consolidated gross profit of $93.0 million for the same period in 2004. Consolidated gross profit for the nine months ended September 30, 2005 was $321.5 million, an increase of 14.4% over the consolidated gross profit of $281.0 million for the same period in 2004.$96.8 million. The increase in consolidated gross profit was primarily driven by significantly higher gross profit in the Crane segment on increased volume and productivity gains. GrossFirst quarter 2006 gross profit margin inof the CraneFoodservice segment improved by 0.9 percentage points inwas down 4.9% compared to the thirdfirst quarter of 2005 compareddue primarily to the same period in 2004. Third quarter 2005 gross profit for the Foodservice segmentreduced sales and increased by 0.2 percentage points compared to the third quarter of 2004. The Foodservice segment’s gross profit for the third quarter of 2005 was positively impacted by higher sales volume as explained above and by a favorable product sales mix during the quarter.commodity costs. The Marine segment’s gross profit for both the three and nine months ended September 30, 2005first quarter of 2006 was down significantly from the three and nine months ended September 30, 2004. For the three months ended September 30, 2005 comparedup $3.5 million due in part to 2004, the Marine segment gross margin was negatively affected by production inefficiencies experienced during the completion of threestrong winter repair work. Also, an unfavorable new construction contracts during 2005. In addition, the majority of the net sales and margin in the third quarter ofMarine contract adversely affected 2005 was from a first-run prototype military vessel that is structured as a cost plus contract. This prototype vessel has a relatively low margin. For the nine months ended September 30, 2005, the margin was negatively affected by labor inefficiencies and cost overruns experienced on specific construction contracts.
results.
Engineering, selling and administrative (ES&A) expenses for the thirdfirst quarter of 20052006 increased approximately $6.5$11.1 million or 10% compared to $78.9 million versus $67.8 million for the thirdfirst quarter of 2004.2005. This increase was primarily driven by increased engineeringthe Crane segment and corporate expenses. Crane segment increases were due to higher selling expense, related to new product development, costs associated with the ongoing Foodservice ERP system implementation, and increased employee costs related to commissions and employee incentives. For the nine months ended September 30, 2005, engineering, selling and administrative expenses increased $7.4 million versus the same period in 2004. The reasons for this nine month increase were the same as those for the third quarter described above.
During the third quarter of 2005, we recorded a pre-tax restructuring charge of $3.2 million in connection with the consolidation of our Kolpak operation located in Wisconsin with our Kolpak operation located in Tennessee. This action was taken in an effort to streamline the company’s cost structure and utilize available capacity. The charge included $1.5 million to write-down the facility and land, which are held for sale, to estimated fair market value less cost to sell, $0.7 million related to the write-down of certain equipment, $0.1 million to write-off excess inventory which will not be transferred to Tennessee, $0.5 million related to severance and other employee related costs, and $0.5 million for otherincreased research and development expenses. Corporate expenses increased primarily due to expensing of stock options and employee related closing costs. This charge has been included in restructuring and plant consolidation costs in the Consolidated Statements of Operations for the three and nine months ended September 30, 2005.
26
For the three months ended September 30, 2005,March 31, 2006, the Crane segment reported net operating earnings of $28.9$50.5 million compared to $12.6$19.6 million for the three months ended September 30, 2004. For the nine months ended September 30, 2005, the Crane segment reported net operating earnings of $83.1 million compared to $38.6 million for the nine months ended September 30, 2004. Crane segment operating earnings for the three months ended September 30, 2005 and 2004 includes amortization expense of $0.7 million and $0.8 million, respectively. Crane segment operating earnings for both the nine months ended September 30, 2005 and 2004 includes amortization expense of $2.3 million. Crane segment operating earnings for the three and nine months ended September 30, 2004 includes a charge of $0.2 million and $1.0 million, respectively, related to restructuring activities. The prior year restructuring charge relates to costs incurred during the second and third quarter of 2004 for the consolidation of certain of our European crane facilities. These charges have been included in restructuring and plant consolidation costs in the Consolidated Statements of Operations for the three and nine months ended September 30, 2004. March 31, 2005. Operating earnings of the Crane segment for both the three and nine months ended September 30, 2005,March 31,
2006 were positivelyfavorably affected by increased volume across all regions and products, other than North America crawler cranes, productivity gains as a result of consolidation efforts duringover the past several years, and more effective leveraging of engineering, selling and administrative expenses on higher sales volumes.volume. Operating margin for the three months ended March 31, 2006 was 10.7% versus 5.7% for the three months ended March 31, 2005. Favorable pricing levels, strong factory performance and controlled spending in all our regions contributed to the gains in margin. For the ninethree months ended September 30, 2005,March 31, 2006 operating earnings were positivelyadversely affected by $1.5approximately $2.0 million due to changes in foreign currency exchange rates.
First quarter 2006 Foodservice segment operating earnings were $10.6 million, a decrease of $1.7 million, versus the consolidation impactfirst quarter of 2005. Operating earnings for the first quarter of 2005 were favorably impacted by three specific items. In our Ice division during 2005 our U.S. manufacturing facility was scheduled to go-live with its new ERP system, and union contracts were set to expire at the same facility. Both of these items were scheduled to occur in the beginning of the stronger Euro versussecond quarter of 2005. In response to these items, our customers sought to protect themselves from any disruptions and placed their orders earlier in 2005 than they historically have. There was no interruption during 2005 from either of these items, however first quarter 2005 sales were significantly higher than historical levels. Also, during the U.S. Dollarfirst quarter of 2005, our beverage division was favorably impacted by two major customer rollouts which did not repeat in the current year period.
Operatingfirst quarter of 2006. First quarter 2006 operating earnings inreturned to a more normal level. For the first quarter of 2006 operating margin of the Foodservice segment decreased 15.0% to $15.3 million forwas 11.4% versus 12.7% in the thirdfirst quarter of 2005 compared to $18.0 million for the third2005. First quarter of 2004. Operating earnings in the Foodservice segment decreased 5.5% to $44.0 million for the nine months ended September 30, 2005 compared to $46.5 million for the same period in 2004. Operating earnings in the Foodservice segment for both the three2006 margin was negatively impacted by sales mix, and nine months ended September 30, 2005 includes a restructuring charge of $3.2 million related to the consolidation of the Kolpak operations. The restructuring charge is the reason for the decrease in the operating earnings from period to period. Excluding the restructuring charges, the Foodservice operating earnings increased from the prior year for both the threecopper and nine months ended September 30, 2005. This increase is the result of growth in ice and beverage division sales volumes.
aluminum costs.
Marine segment operating earnings decreased $3.5increased $2.1 million to a loss of $0.1$3.7 million for the thirdfirst quarter of 2005 compared to2006. First quarter 2006 operating earnings of the Marine segment were favorably affected by a gain of $3.4strong winter repair season. First quarter 2006 winter repair operating earnings increased approximately $0.9 million forversus the thirdfirst quarter of 2004. Operating earnings for the nine months ended September 30,2005. First quarter 2005 were $1.0 million compared to $9.9 million for the same period in 2004. Marine segment operating earnings for the nine months ended September 30, 2005 were negatively affectedimpacted by material cost increases and production inefficiencies experienced on certain construction contracts. Several of these contracts werea fixed price contractscontract which werewas bid and awarded prior to the unprecedented rise in steel and other commodities costs during the past year.2004. Labor inefficiencies were incurred due to delays and disruption causedalso impacted this project. This project reduced first quarter 2005 operating earnings by customer change orders and a larger mix of first-time or limited vessel construction projects. In addition, the large number of projects in process at the same time in our shipyards, a shortage of available specific skilled labor, and project rework requirements all resulted in greater than normal utilization of costlier subcontract labor on certain contracts.approximately $2.3 million. For the three months ended September 30, 2005, the majorityfirst quarter of 2006, a significant percentage of the operating earnings wereMarine segment results are from a relatively low margin, first-run military prototype vessel that is structured as a cost plus contract. This prototype vessel has a relatively low margin.
Corporate expenses increased $3.9 million during the first quarter of 2006 versus the first quarter of 2005. Approximately $1.0 million of this increase is the result of beginning to expense stock options during the first quarter of 2006. Also contributing to the increase are higher employee related costs, securitization fees and expenses, and other consulting related expenses.
Analysis of Non-Operating Income Statement Items
Interest expense for the three and nine monthsfirst quarter of 2006 was $11.7 million versus $12.8 million for the quarter ended September 30, 2005 decreased slightly compared to the three and nine months ended September 30, 2004. ThisMarch 31, 2005. The decrease is the result ofresulted from lower average debt levels, favorable changes in foreign currency exchange rates, and a lower Euro versus U.S. Dollar exchange rate in 2005,interest income earned on invested money. These items were partially offset by an increase in the variable interest rate portion of outstanding debt balances. The weighted average interest rate on outstanding borrowings at March 31, 2006 was 9.5% compared to 8.6% at March 31, 2005.
During June 2005,In December 2004, we recordedsold, pursuant to an underwritten public offering, approximately 3.0 million shares of our common stock at a chargeprice of $0.8$36.25 per share. Net cash proceeds from this offering, after deducting underwriting discounts and commissions, were $104.9 million. We used a portion of the proceeds to redeem approximately $61.3 million ($0.6 million net of income taxes)the 10 ½% senior subordinated notes due 2012 and to write-off deferred financing costs relatedpay the prepayment premium to the terminationnote holders of our previous $125 million revolving credit facility. In addition, on$6.4 million. We used the balance of the proceeds for general corporate purposes. On January 10, 2005, we redeemedcompleted the redemption of $61.3 million of ourthe 10 ½% senior subordinated notes due 2012. As a result of this redemption, we incurred a charge of approximately $8.3 million ($5.4 million net of income taxes) fordue to the early extinguishment of debt related to the prepayment premium of $6.4 million paid to the note holders of $6.4 million, and due to the partial write-off of debt issuance costs of $1.9 million. Both of these charges wereThe charge was recorded in loss on debt extinguishment in the Consolidated StatementsStatement of Operations.
During the third quarter of 2004, we recorded a charge of $0.5 million ($0.4 million net of income taxes) related to the prepayment of the term loan B portion of our previous senior credit facility. This charge relates to the write-off of unamortized financing fees and the unwinding of a floating-to-fixed interest rate swap. In addition, during the first quarter of 2004, we recorded a charge of $0.6 million ($0.4 million net of income taxes) related to the partial prepayment of the term loan B portion of our previous senior credit facility. This charge also relates to the write-off of unamortized financing fees and partial unwinding of a floating-to-fixed interest rate swap. This charge was also recorded in loss on debt extinguishment in the Consolidated Statements of Operations.
27
The effective tax rate for both the nine monthsquarter ended September 30,March 31, 2006 and 2005 was 19.8%30.0%. The first quarters of 2006 and 2005 were favorably affected as compared to 26.0% for the nine months ended September 30, 2004. The lower effectivestatutory rate by certain global tax rate in 2005 compared to 2004 was the result of the realization of certain tax benefits during the second quarter of 2005 that were previously reserved due to their previous uncertainty regarding realizationplanning initiatives and the recognition of a partial tax credit during the third quarter of 2005 related to research and development projects.fixed permanent book-tax differences.
As a result of the above, earningsEarnings from continuing operations were $20.9 million and $51.2$30.0 million for the three and nine months ended September 30, 2005, respectively,March 31, 2006 compared to $11.7 million and $28.7$5.9 million for the three and nine months ended September 30, 2004, respectively.March 31, 2005.
The loss from discontinued operations, net of income taxes, for the three and nine months ended September 30, 2005 and 2004March 31, 2006 reflects the operating results of the followingour discontinued businesses: Toledo Ship Repair Company (Toledo Ship Repair), Diversified Refrigeration, Inc (DRI),operation. The closure of Toledo was completed during the Aerial Work Platform (AWP) businesses, and North Central Crane & Excavator Sales Corporation (North Central Crane).
During the thirdfirst quarter of 2005, we decided to close Toledo Ship Repair Company (Toledo Ship Repair), a division of the company’s wholly-owned subsidiary, Manitowoc Marine Group, LLC. Located in Toledo, Ohio, Toledo Ship Repair performed ship repair2006 and industrial building services. As a result ofno further results are expected from this closure, we recorded a $5.2 million pre-tax ($3.4 million after tax) charge for costs related to the closure of the business. This charge included $0.2 million related to severance agreements; $1.0 for future lease payments; $0.3 for the write-off of goodwill related to this business; $2.2 million for the write-down of certain assets (primarily property, plant and equipment and inventory) to estimated salvage value; and $1.5 million for closing and other related costs. This charge is recorded inoperation. The gain (loss) on sale or closure offrom discontinued operations, net of income taxes, infor the Consolidated Statements of Operations.
Duringthree months ended March 31, 2005 reflects the third quarter of 2005, we decided to divest ourselvesoperating results of our wholly-owned subsidiary, Diversified Refrigeration, Inc. (DRI).discontinued Toledo Ship Repair and DRI is our private-label Foodservice contract manufacturingoperations. The DRI operation located in Tennessee.
During the second quarter of 2004, we completed the sale of our wholly-owned subsidiary, Delta Manlift SAS (Delta) and certain other assets of our Aerial Work Platform (AWP) businesses, to JLG Industries, Inc. Headquartered in Tonneins, France, Delta manufactures the Toucan brand of vertical mast lifts, a line of aerial work platforms distributed throughout Europe for use principally in industrial and maintenance operations. We received $9.0 million for the sale of Delta and certain other assets of our AWP businesses. As a result of the sale and additional reserves for the closures of the other AWP businesses, we recorded a $1.0 million pre-tax gain ($0.7 million net of taxes). This gain was recorded in gain on sale or closure of discontinued operations, net of income taxes in the Consolidated Statements of Operations in the second quarter of 2004. Delta was acquired in August 2002 as part of the acquisition of Grove Investors Inc. (Grove). During December 2003, we completed plans to restructure our AWP businesses. The restructuring included the closure of the Potain GmbH (Liftlux) facility in Dillingen, Germany and the discontinuation of U.S. Manlift production at the Shady Grove, Pennsylvania facility. With the sale of Delta and the closure of the Liftlux and U.S. Manlift operations, we no longer participate in the aerial work platform market, other than providing aftermarket parts and service support.
Duringsold during the fourth quarter of 2003 we terminated our distributor agreement with North Central Crane, a wholly-owned crane distributor. We entered into a new distributor agreement with an independent third party for the area previously covered by North Central Crane.
282005.
Financial Condition
First Nine MonthsQuarter of 2006
Cash and cash equivalents balance as of March 31, 2006 was $204.4 million, which represented a $25.1 million reduction of cash during the quarter. Cash flow from operations was a use of cash of $7.8 million compared to a use of $41.5 million during the first quarter of 2005. Cash flow during the first quarter of 2006 was driven by $29.7 million of net earnings, an increase of $23.2 million over net earnings for the first quarter of 2005. Accounts payable and accrued expense positively impacted cash flow from operations with a $64.3 million increase. This was driven primarily by the increase in inventory in the Crane segment required to support the increase in production, as well as the increase in the Foodservice segment, which traditionally increases inventory during the first quarter to support the peek season which occurs in the second and third quarters. A $68.3 million increase in inventory negatively impacted cash flow from operations. Accounts receivable also negatively impacted cash flow with an increase of $33.6 million during the first quarter of 2006. This increase was driven by higher sales in the Crane segment. During the quarter, the company terminated its accounts receivable factoring arrangement with a bank. Factored receivables totaled $23.6 million at December 31, 2005 and $0 at March 31, 2006.
On January 3, 2006, we acquired certain assets, rights and properties of ExacTech, Inc., a supplier of fabrication, machining, welding and other services to various parties. Located in Port Washington, Wisconsin, the operation will provide these services to the U.S. based crane manufacturing facilities. The cash flow impact of this acquisition is included in business acquisition, net of cash acquired within the cash flow from investing section of the Consolidated Statement of Cash Flows.
Capital expenditures for the quarter were $10.4 million. The company continues to invest capital in the Foodservice ERP system, the new China manufacturing facilities in the Crane segment, new manufacturing equipment, and new product tooling costs.
First Quarter of 2005
During the first nine months ofAt March 31, 2005, cash and cash equivalents of $68.8 million decreased by $57.8 million.$107.6 million compared to the December 31, 2004 balance. On January 10, 2005 we completed the redemption of $61.3 million of our 10 ½% senior subordinated notes due 2012, which requiredalso resulted in us to paypaying a premium to the note holders of $6.4 million. During the first nine months of 2005,quarter, accounts receivable and inventory increased $36.7$34.9 million and $101.7$59.9 million, respectively. These increases are primarily the result of higher sales in the Crane segment,and Foodservice segments and increased backlog in the Crane segment and traditional seasonal inventory build-up in the Foodservice segment. Offsetting these increases in operating assets was a $48.0$41.3 million increase in accounts payable and accrued expenses, which resulted primarily associated withfrom the increased inventory.
Capital expenditures for the first nine months of 2005quarter were $35.0$8.2 million. The company continues to invest capital in the Foodservice segment’s ERP system, the new China manufacturing facilities in the Crane and Foodservice segments, production machinery and equipment, and new product tooling.
During the first nine monthsquarter of 2005, the company paid threea quarterly dividends totaling $6.3 million.dividend of $2.1 million dollars. At its February 2005 meeting, the board of directors approved changing to a quarterly dividend from an annual dividend beginning in the first quarter of 2005.
As discussed in the liquidity and capital resources section below, during June 2005, we entered into a new five year, $300.0 million secured revolving credit facility. As a result, we incurred approximately $1.8 million of debt issuance costs.
First Nine Months of 2004
During the first nine months of 2004, cash and cash equivalents increased approximately $7.7 million. During the first nine months of 2004 we built inventory to accommodate the large increase in backlog in the Crane segment and have increased our crane shipments to Asia which results in cranes remaining in inventory for a longer period of time due to shipment times. In addition, inventory values were impacted by higher commodity costs. Offsetting the increase in inventory were net earnings of $33.7 million, a reduction in accounts receivable of $14.8 million, and an increase in payables and other liabilities of approximately $67.6 million due to purchases of inventory and timing of payments.
Capital expenditures for the first nine months of 2004 were $26.4 million. The primary expenditures were for an ERP system in the Foodservice segment, new equipment purchases in the Marine segment, and new product tooling costs. In addition, the company received $9.0 million of cash from the sale of Delta during the second quarter of 2004. These cash proceeds are reported in the discontinued operations section of the cash flow from investing activities.
During the first nine months of 2004, we prepaid the entire term loan B portion of our previous senior credit facility, which resulted in a cash outflow of $17.9 million.
During the first nine months of 2004, we sold $28.6 million of our long term notes receivable to third party financing companies. We have agreed to provide recourse on the notes to the financing company. We have accounted for the sale of the notes as a financing of receivables. Through the first nine months of 2004, $1.5 million of these notes have been collected by the third party financing companies.
Liquidity and Capital Resources
Our primary cash requirements include working capital, debt payments (see Note 13, “Debt”), interest on indebtedness, capital expenditures, and dividends. The primary sources of cash for each of these are cash flows from continuing operations and borrowings under our seniorfive-year, $300 million secured revolving credit facility. Wefacility (Revolving Credit Facility). At March 31, 2006, we had $122.6$206.7 million in cash and short term investments along with $281.1$273.9 million of unused availability under the terms of the secured revolving credit facility at September 30, 2005. The secured revolving credit facility provides us with the option to increase the line to $550 millionRevolving Credit Facility. This availability under the same terms at a later date.
OurRevolving Credit Facility is reduced for outstanding debt at September 30, 2005 consisted primarilyletters of our senior notes due 2013, and our senior subordinated notes due 2011 and 2012.
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credit of $26.1 million as of March 31, 2006.
In June 2005, we entered into a five year,our Revolving Credit Facility, which in addition to $300 million secured revolving creditof borrowing capacity, provides for us to access an additional $250 million of borrowing capacity during the life of the facility which replaced our previous $125 million revolving credit facility that was due to expire in May 2006.under the same terms. Borrowings under the new secured revolving credit facilityRevolving 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 the company’sour consolidated total leverage ratio as defined by the credit agreement. The annual commitment fee in effect at September 30, 2005March 31, 2006 on the unused portion of the secured revolving credit facility was 0.25%0.15%. As of September 30, 2005,March 31, 2006, there was no amountoutstanding balance under the Revolving Credit Facility, but we had $26.1 million of letter of credit commitments outstanding under the secured revolving credit facility.Revolving Credit Facility.
We hadOur outstanding debt at September 30, 2005,March 31, 2006 consists of our $150.0 million of 7 1/8% Senior Notessenior notes due 2013 (Senior Notes due 2013). , 175 million EURO ($210.7 million based on March 31, 2006 exchange rates) of 10 3/8% senior subordinated notes due 2011 (Senior Subordinated Notes due 2011), $113.8 million of 10 1/2% senior subordinated notes due 2012 (Senior Subordinated Notes due 2012) , as well as outstanding amounts under foreign overdraft facilities and capital leases.
The Senior Notes due 2013 are unsecured senior obligations ranking prior to our 175 million Euro of 10 3/8% Senior Subordinated Notes due 2011 (Senior Subordinated Notes due 2011) ($210.3 million based on September 30, 2005 exchange rates) and our $113.8 million of 10 ½% Senior Subordinated Notes due 2012 (Senior Subordinated Notes due 2012).2012. Our secured revolving credit facilitysenior indebtedness, including indebtedness under our Revolving Credit Facility, ranks equally with the Senior Notes due 2013, except that it is secured by substantially all domestic tangible and intangible assets of the company and its subsidiaries. Interest on the Senior Notes due 2013 is payable semiannually in May and November each year, commencing May 1, 2004. The Senior Notes due 2013 can be redeemed by us in whole or in part for a premium on or after November 1, 2008. In addition, we may redeem for a premium at any time prior to November 1, 2006, up to 35% of the face amount of the Senior Notes due 2013 with the proceeds of one or more equity offerings.
We had outstanding at September 30, 2005, 175 million Euro ($210.3million based on September 30, 2005 exchange rates) of the Senior Subordinated Notes due 2011. The Senior Subordinated Notes due 2011 are unsecured obligations ranking subordinate in right of payment to all of our Seniorsenior debt, are equal in rank to our Senior Subordinated Notes due 2012, and are fully and unconditionally, jointly and severally guaranteed by substantially all of our domestic subsidiaries. Interest on the Senior Subordinated Notes due 2011 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.
We also had outstanding at September 30, 2005, $113.8 million In April 2006, we announced our intention to redeem all of the Senior Subordinated Notes due 2012. 2011 immediately on May 15, 2006. We will utilize a combination of available cash on hand as well as availability under our Revolving Credit Facility to complete the redemption.
The Senior Subordinated Notes due 2012 are unsecured obligations of the company ranking subordinate in right of payment to all of our Seniorsenior debt, are equal in rank to our 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. These notes can be redeemed by us in whole or in part for a premium on or after August 1, 2007.
As of March 31, 2006, we also had outstanding $15.0 million of other indebtedness with a weighted-average interest rate of 6.2%. This debt includes outstanding bank overdrafts in Asia and Europe, and various capital leases.
During the fourth quarterAs of 2004, the company issued approximately 3.0March 31, 2006, we had five fixed-to-floating rate swap contracts which effectively converted $206.1 million shares of its common stock at an offering price of $36.25. A portion of the net proceeds received from this offering was used to redeem 35% of theour fixed rate Senior Notes due 2013 and Senior Subordinated Notes due 2012.2011 and 2012 to variable rate debt. These contracts are considered to be a hedge against changes in the fair value of the fixed rate debt obligation. Accordingly, the interest rate swap contracts are reflected at fair value in our Consolidated Balance Sheet as a liability of $7.1 million and an asset of $1.8 million as of March 31, 2006. Debt is reflected at an amount equal to the sum of its carrying value plus an adjustment representing the change in fair value of the debt obligation attributable to the interest rate risk being hedged. Changes during any accounting period in the fair value of the interest rate swap contract, as well as offsetting changes in the adjusted carrying value of the related portion of fixed-rate debt being hedged, are recognized as an adjustment to interest expense in the Consolidated Statement of Operations. The redemptionchange in fair value of the swaps exactly offsets the change in fair value of the hedged fixed-rate debt; therefore, there was completedno net impact on January 10, 2005.
earnings for the three months ended March 31, 2006. The fair value of these contracts, which represents the cost to settle these contracts, approximated a loss of $5.3 million at March 31, 2006.
Our secured revolving credit facility,Revolving Credit Facility, Senior Notes due 2013, and Senior Subordinated Notes due 2011 and 2012 contain customary affirmative and negative covenants. In general, the covenants contained in the secured revolving credit facilityRevolving Credit Facility are more restrictive than those of the Senior Notes due 2013 and the Senior Subordinated Notes due 2011 and 2012. Among other restrictions, these covenants require us to meet specified financial tests, which include the following: consolidated interest coverage ratio; consolidated total leverage ratio; and consolidated senior leverage ratio. These covenants also limit, among other things, our ability to redeem or repurchase our debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, repurchase capital stock, and create or become subject to liens. The secured revolving credit facilityRevolving Credit Facility also contains cross-default provisions whereby certain defaults under any other debt agreements would result in default under the secured revolving credit facility. We were in compliance with all covenants as of September 30, 2005,March 31, 2006, and based upon our current plans and outlook, we believe we will be able to comply with these covenants during the subsequent 12 months.
Recent Accounting Changes and Pronouncements
In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, “Inventory Costs — an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 seeks to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) in the determination of inventory carrying costs. The statement requires such costs to be treated as a current period expense. This statement iswas effective for the companyus on January 1, 2006. We do not believe theThe adoption of SFAS No. 151 willdid not have a material impact on our Consolidated Financial Statements.
During December 2004, the FASB revised SFAS No. 123, “Accounting for Stock Based Compensation.” SFAS No. 123-Revised supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, and will
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require all companies to estimate the fair value of incentive stock options granted and then amortize that estimated fair value to expense over the options’ vesting period. SFAS No. 123-Revised is effective for all annual periods beginning after June 15, 2005. The company currently accounts for its stock option plans under the recognition and measurement principles of APB Opinion No. 25, and related interpretations. No employee or outside director compensation costs related to stock option grants are currently reflected in net earnings. The company is required to adoptWe have adopted SFAS No. 123-Revised on January 1, 2006. See Note 4, “Stock-Based5, “Stock Based Compensation,” for pro formafurther information if the company had elected to adopt the requirements of the previously issued SFAS No. 123.
In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets — an amendment of APB Opinion No. 29.” This statement addresses the measurement of exchanges of nonmonetary assets and redefines the scope of transactions that should be measured based on the fair value of the assets exchanged. SFAS No. 153 is effective for the company on July 1, 2005. We do not believeregarding the adoption of SFAS No. 153 will have a material impact on our Consolidated Financial Statements.
123-Revised.
In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement requires retrospective applications to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable. In addition, this statement requires that a change in depreciation, amortization, or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate affected by a change in accounting principle. This new accounting standard iswas effective January 1, 2006. We do2006 and did not believe the adoption of SFAS No. 154 will have a materialan impact on our Consolidated Financial Statements.
In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments an Amendment of FASB Statement No. 133 and 140.” SFAS No 155 amends certain aspects of SFAS No 133, primarily related to hybrid financial instruments and beneficial interest in securitized financial assets, as well as amends SFAS No. 140, related to eliminating a restriction on the passive derivative instruments that a qualifying special-purpose entity (SPE) may hold. SFAS No. 155 is effective for us on January 1, 2007. We are currently evaluating the impact of SFAS No. 155 on our Consolidated Financial Statements.
In March 2006, the FASB Issued SFAS No. 156, “Accounting for Servicing of Financial Assets an amendment of FASB Statement No. 140.” SFAS No. 156, amends certain aspects of SFAS No. 140, by requiring that all separately recognized servicing assets and servicing liabilitiesbe initially measured at fair value, if practicable. SFAS No. 156 is effective for us on January 1, 2007. We are currently evaluating the impact of SFAS No. 156 on our Consolidated Financial Statements.
Critical Accounting Policies
Our critical accounting policies have not significantlymaterially changed since the 20042005 Form 10-K was filed.
Cautionary Statements About Forward-Looking Information
Statements in this report and in other company communications that are not historical facts are forward-looking statements, which are based upon our current expectations. These statements involve risks and uncertainties that could cause actual results to differ materially from what appears within this Form 10-Q.
annual report.
Forward-looking statements include descriptions of plans and objectives for future operations, and the assumptions behind those plans. The words “anticipates,” “believes,” “intends,” “estimates,” and “expects,” or similar expressions, usually identifiesidentify forward-looking statements. Any and all projections of future performance are forward-looking statements.
In addition to the assumptions, uncertainties, and other information referred to specifically in the forward-looking statements, a number of factors relating to each business segment could cause actual results to be significantly different from what is presented in this Form 10-Q.annual report. Those factors include, without limitation, the following:
Crane—market acceptance of new and innovative products; cyclicality of the construction industry; the effects of government spending on construction-related projects throughout the world; changes in world demand for our crane product offering; the replacement cycle of technologically obsolete cranes; demand for used equipment; actions of competitors; and foreign exchange rate risk.
Foodservice—market acceptance of new and innovative products; weather; consolidations within the 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; and the demand for quickservice restaurant 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.
maintenance, and ability of our customers to obtain financing.
Corporate (including factors that may affect all three segments)—changes in laws and regulations throughout the world; the ability to finance, complete and/or successfully integrate, restructure and consolidate acquisitions, divestitures, strategic alliances and joint ventures; successful and timely completion of new facilities and facility expansions; competitive pricing; availability of certain raw materials; changes in raw materials and commodity prices; changes in domestic and international
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economic and industry conditions, including steel industry conditions; changes in the interest rate environment; risks associated with growth; foreign currency fluctuations; world-wide political risk; health epidemics; pressure of additional financing leverage resulting from acquisitions; success in increasing manufacturing efficiencies; 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 20042005 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, 2004.2005.
Item 4. Controls and Procedures
Disclosure Controls and Procedures: The company maintains disclosure controls and procedures designed to ensure that the information the company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. The company’s management, with the participation of the company’s Chief Executive Officer and Chief Financial Officer, has reviewed andhave evaluated the effectiveness of the company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”).report. Based on such evaluation, the Company’scompany’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date,end of such period, the company’s disclosure controls and procedures are effective.
effective 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, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.
Changes in Internal Controls Over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). During the period covered by this report, we made no changes which have materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1A. Risk Factors
The company’s risk factors disclosures have not materially changed since the 2005 Form 10-K was filed. The company’s risk factors are incorporated by reference from Item 1A of the company’s Annual Report on Form 10-K for the year ended December 31, 2005.
Item 6. Exhibits
(a) Exhibits: See exhibit index following the signature page of this Report, which is incorporated herein by reference.
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. | ||
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| /s/ Terry D. Growcock | ||
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| Terry D. Growcock | ||
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| Chairman and Chief Executive Officer | ||
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| | /s/ Carl J. Laurino | |
Carl J. Laurino | |||
Senior Vice President and Chief Financial | |||
Officer | |||
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| /s/ Maurice D. Jones | ||
Maurice D. Jones | |||
Senior Vice President, General | |||
Counsel and Secretary |
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THE MANITOWOC COMPANY, INC.
EXHIBIT INDEX
TO FORM 10-Q
FOR QUARTERLY PERIOD ENDEDSeptember 30, 2005March 31, 2006
Exhibit No.* |
| Description |
| Filed/Furnished |
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| Rule 13a - 14(a)/15d - 14(a) Certifications |
| X (1) |
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32.1 |
| Certification of CEO pursuant to 18 U.S.C. Section 1350 |
| X (2) |
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32.2 |
| Certification of CFO pursuant to 18 U.S.C. Section 1350 |
| X (2) |
(1) Filed Herewith
(2) Furnished Herewith
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.
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