Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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
of incorporation or organization)		Identification Number)

11270 West Park Place

Suite 1000

Milwaukee, Wisconsin

53224

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (414) 760-4600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $.01 Par Value

MTW

New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 30, 2019, the registrant had 35,347,546 shares of common stock, $.01 par value per share, outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE MANITOWOC COMPANY, INC.

Condensed Consolidated Statements of Operations

For the three and six months ended June 30, 2019 and 2018

(Unaudited)

($ in millions, except per-share and average shares data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net sales	$	504.7		$	495.3		$	922.7		$	881.4
Cost of sales		409.5			404.8			747.3			722.5
Gross profit		95.2			90.5			175.4			158.9
Operating costs and expenses:
Engineering, selling and administrative expenses		50.5			62.1			109.9			122.5
Asset impairment expense		—			0.4			—			0.4
Amortization of intangible assets		0.1			0.1			0.2			0.2
Restructuring expense		2.7			3.8			7.2			10.0
Total operating costs and expenses		53.3			66.4			117.3			133.1
Operating income		41.9			24.1			58.1			25.8
Other income (expense):
Interest expense		(7.5	)		(9.4	)		(18.4	)		(19.4	)
Amortization of deferred financing fees		(0.4	)		(0.4	)		(0.8	)		(0.9	)
Loss on debt extinguishment		—			—			(25.0	)		—
Other income (expense) - net		15.9			(5.6	)		12.6			(2.9	)
Total other income (expense)		8.0			(15.4	)		(31.6	)		(23.2	)
Income from continuing operations before income taxes		49.9			8.7			26.5			2.6
Provision (benefit) for income taxes		3.9			(1.2	)		7.2			2.7
Income (loss) from continuing operations		46.0			9.9			19.3			(0.1	)
Discontinued operations:
Loss from discontinued operations, net of income taxes of $0.0, $0.0, $0.0 and $0.0, respectively		—			(0.2	)		—			(0.2	)
Net income (loss)	$	46.0		$	9.7		$	19.3		$	(0.3	)

Per Share Data
Basic income (loss) per common share:
Income from continuing operations	$	1.29		$	0.28		$	0.54		$	—
Loss from discontinued operations, net of income taxes		—			(0.01	)		—			(0.01	)
Basic income (loss) per common share	$	1.29		$	0.27		$	0.54		$	(0.01	)

Diluted income (loss) per common share:
Income from continuing operations	$	1.29		$	0.27		$	0.54		$	—
Loss from discontinued operations, net of income taxes		—			—			—			(0.01	)
Diluted income (loss) per common share	$	1.29		$	0.27		$	0.54		$	(0.01	)

Weighted average shares outstanding - basic		35,595,718			35,530,356			35,619,145			35,449,298
Weighted average shares outstanding - diluted		35,725,908			36,064,108			35,799,089			35,449,298

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

THE MANITOWOC COMPANY, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

For the three and six months ended June 30, 2019 and 2018

(Unaudited)

($ in millions)

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019			2018
Net income (loss)	$	46.0	$	9.7		$	19.3		$	(0.3	)
Other comprehensive income (loss), net of income tax
Unrealized income (expense) on derivatives, net of income tax provision of $0.0, $0.0, $0.0 and $0.0, respectively		0.6		(3.3	)		0.7			(3.4	)
Employee pension and postretirement benefits, net of income tax benefit (provision) of $0.0, $(0.1), $0.0 and $0.0, respectively		0.5		0.7			1.0			1.3
Foreign currency translation adjustments		1.2		(26.8	)		(1.3	)		(15.2	)
Total other comprehensive income (loss), net of income tax		2.3		(29.4	)		0.4			(17.3	)
Comprehensive income (loss)	$	48.3	$	(19.7	)	$	19.7		$	(17.6	)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

THE MANITOWOC COMPANY, INC.

Condensed Consolidated Balance Sheets

As of June 30, 2019 and December 31, 2018

(Unaudited)

($ in millions, except share data)

	June 30, 2019			December 31, 2018
Assets
Current Assets:
Cash and cash equivalents	$	35.0		$	140.3
Accounts receivable, less allowances of $10.1 and $10.3, respectively		265.1			171.8
Inventories — net		552.3			453.1
Notes receivable — net		17.9			19.4
Other current assets		37.2			58.3
Total current assets		907.5			842.9

Property, plant and equipment — net		283.5			288.9
Operating lease right-of-use assets		47.6			—
Goodwill		232.7			232.8
Other intangible assets — net		117.5			118.1
Other long-term assets		63.8			59.2
Total assets	$	1,652.6		$	1,541.9
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses	$	421.9		$	425.2
Short-term borrowings and current portion of long-term debt		8.7			6.4
Product warranties		42.4			39.1
Customer advances		10.6			9.6
Other liabilities		25.3			16.3
Total current liabilities		508.9			496.6
Non-Current Liabilities:
Long-term debt		309.6			266.7
Operating lease liabilities		37.0			—
Deferred income taxes		5.3			5.7
Pension obligations		82.9			85.7
Postretirement health and other benefit obligations		18.0			18.3
Long-term deferred revenue		28.5			25.2
Other non-current liabilities		42.7			42.4
Total non-current liabilities		524.0			444.0
Commitments and contingencies (Note 16)
Stockholders' Equity:
Preferred stock (authorized 3,500,000 shares of $.01 par value; none outstanding)		—			—
Common stock (75,000,000 shares authorized, 40,793,983 shares issued, 35,347,546 and 35,588,833 shares outstanding, respectively)		0.4			0.4
Additional paid-in capital		588.8			584.8
Accumulated other comprehensive loss		(116.2	)		(116.6	)
Retained earnings		208.9			189.6
Treasury stock, at cost (5,446,437 and 5,205,150 shares, respectively)		(62.2	)		(56.9	)
Total stockholders' equity		619.7			601.3
Total liabilities and stockholders' equity	$	1,652.6		$	1,541.9

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

THE MANITOWOC COMPANY, INC.

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2019 and 2018

(Unaudited)

($ in millions)

	Six Months Ended June 30,
	2019			2018
Cash Flows from Operating Activities:
Net income (loss)	$	19.3		$	(0.3	)
Adjustments to reconcile net income (loss) to cash used for operating activities:
Asset impairment expense		—			0.4
Depreciation		17.4			18.2
Amortization of intangible assets		0.2			0.2
Amortization of deferred financing fees		0.8			0.9
Loss on debt extinguishment		25.0			—
Gain on sale of property, plant and equipment		—			(2.2	)
Other		6.0			0.7
Changes in operating assets and liabilities:
Accounts receivable		(222.6	)		(273.9	)
Inventories		(106.5	)		(79.5	)
Notes receivable		(2.3	)		8.3
Other assets		26.1			0.3
Accounts payable		22.1			69.2
Accrued expenses and other liabilities		(20.9	)		(10.6	)
Net cash used for operating activities		(235.4	)		(268.3	)

Cash Flows from Investing Activities:
Capital expenditures		(9.7	)		(15.2	)
Proceeds from sale of fixed assets		4.8			8.4
Cash receipts on sold accounts receivable		126.3			238.0
Net cash provided by investing activities		121.4			231.2

Cash Flows from Financing Activities:
Proceeds from revolving credit facility		82.8			—
Payments on revolving credit facility		(82.8	)		—
Payments on long-term debt		(276.6	)		—
Proceeds from long-term debt		300.0			—
Other debt - net		1.9			(3.0	)
Debt issuance costs		(8.2	)		—
Exercises of stock options		0.1			2.0
Common stock repurchases		(7.4	)		—
Net cash provided by (used for) financing activities		9.8			(1.0	)

Effect of exchange rate changes on cash		(1.1	)		(1.2	)

Net decrease in cash and cash equivalents		(105.3	)		(39.3	)
Cash and cash equivalents at beginning of period		140.3			123.0
Cash and cash equivalents at end of period	$	35.0		$	83.7

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

THE MANITOWOC COMPANY, INC.

Condensed Consolidated Statements of Equity

As of June 30, 2019 and December 31, 2018

(Unaudited)

($ in millions, except share data)

	June 30, 2019			December 31, 2018
Common Stock - Shares Outstanding
Balance at beginning of period		35,588,833			35,273,864
Stock options exercised		34,979			95,019
Restricted stock, net		141,916			165,404
Performance shares issued		54,860			54,546
Common stock repurchases		(473,042	)		—
Balance at end of period		35,347,546			35,588,833
Common Stock - Par Value
Balance at beginning of period	$	0.4		$	0.4
Balance at end of period	$	0.4		$	0.4
Additional Paid-in Capital
Balance at beginning of period	$	584.8		$	577.6
Stock options exercised and issuance of other stock awards		(2.1	)		(1.0	)
Stock-based compensation		6.1			8.2
Balance at end of period	$	588.8		$	584.8
Accumulated Other Comprehensive Loss
Balance at beginning of period	$	(116.6	)	$	(97.4	)
Other comprehensive income (loss)		0.4			(19.2	)
Balance at end of period	$	(116.2	)	$	(116.6	)
Retained Earnings
Balance at beginning of period - As reported	$	189.6		$	256.7
Net income (loss)		19.3			(67.1	)
Balance at end of period	$	208.9		$	189.6
Treasury Stock
Balance at beginning of period	$	(56.9	)	$	(59.8	)
Stock options exercised and issuance of other stock awards		2.1			2.9
Common stock repurchases		(7.4	)		—
Balance at end of period	$	(62.2	)	$	(56.9	)
Total equity	$	619.7		$	601.3

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

THE MANITOWOC COMPANY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2019 and 2018

1. Accounting Policies and Basis of Presentation

The Manitowoc Company, Inc. (“Manitowoc,” “MTW” or the “Company”) was founded in 1902 and has over a 116-year tradition of providing high-quality, customer-focused products and support services to its markets. Manitowoc is one of the world's leading providers of engineered lifting solutions. Manitowoc, through its wholly-owned subsidiaries, designs, manufactures, markets, and supports comprehensive product lines of mobile telescopic cranes, tower cranes, lattice-boom crawler cranes, and boom trucks under the Grove, Manitowoc, National Crane, Potain, Shuttlelift and Manitowoc Crane Care brand names.

The Company has three reportable segments, the Americas segment, Europe and Africa (“EURAF”) segment and Middle East and Asia Pacific (“MEAP”) segment. The segments were identified using the “management approach,” which designates the internal organization that is used by management for making operating decisions and assessing performance. Refer to Note 14, “Segments” for additional information.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments necessary for a fair statement of the results of operations and comprehensive income for the three and six months ended June 30, 2019 and 2018, the cash flows for the same six-month periods and the financial position and equity at June 30, 2019 and December 31, 2018, 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, 2018. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations dealing with interim financial statements. However, the Company believes that the disclosures made in the Condensed Consolidated Financial Statements included herein are adequate to make the information presented not misleading. 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 on Form 10-K.

During the fourth quarter of 2018, the Company identified an adjustment to the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2018. The adjustment related to the treatment of cash receipts on sold accounts receivable, whereby the Company had overstated cash flows provided by investing activities and understated cash flows used for operating activities by approximately $12.7 million. In evaluating whether the Company’s previously issued consolidated financial statements were materially misstated, the Company considered the guidance in Accounting Standards Codification (“ASC”) Topic 250, “Accounting Changes and Error Corrections” and ASC Topic 250-10-S99-1, “Assessing Materiality.” The Company determined that this error was not material to the Company’s prior period consolidated financial statements and therefore, amending the previously filed report was not required, however this adjustment has been reflected in this filing.

Certain prior period amounts have been reclassified to conform to the current period presentation. All dollar amounts, except share amounts, are in millions of dollars throughout the tables in these notes unless otherwise indicated.

2. Revenues

The Company records deferred revenues when cash payments are received or due in advance of performance, including amounts which are refundable. The table below shows the change in the customer advances balance for the three and six months ended June 30, 2019 and 2018.

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Balance at beginning of period	$	13.3		$	14.4		$	9.6		$	12.7
Cash received or due in advance of satisfying performance obligation		18.3			30.5			50.2			56.8
Revenue recognized		(21.1	)		(28.8	)		(49.4	)		(53.6	)
Currency translation		0.1			(0.8	)		0.2			(0.6	)
Balance at end of period	$	10.6		$	15.3		$	10.6		$	15.3

Disaggregation of the Company’s revenue sources are disclosed in Note 14, “Segments.”

3. Inventories

The components of inventories as of June 30, 2019 and December 31, 2018 are summarized as follows:

	June 30, 2019			December 31, 2018
Raw materials	$	180.3		$	159.2
Work-in-process		150.1			112.0
Finished goods		280.3			238.0
Total inventories		610.7			509.2
Excess and obsolete inventory reserve		(58.4	)		(56.1	)
Inventories — net	$	552.3		$	453.1

4. Notes Receivable

The Company has notes receivable balances that are classified as current or long-term based on the timing of amounts due. Long-term notes receivable are included within other long-term assets on the Condensed Consolidated Balance Sheets. Current and long-term notes receivable balances primarily relate to the Company’s captive finance entity in China. The Company also has a long-term note receivable balance related to the 2014 sale of Manitowoc Dong Yue. As of June 30, 2019, the Company had current and long-term notes receivable in the amount of $17.9 million and $20.8 million, respectively. As of December 31, 2018, the Company had current and long-term notes receivable in the amount of $19.4 million and $17.0 million, respectively.

5. Property, Plant and Equipment

The components of property, plant and equipment at June 30, 2019 and December 31, 2018 are summarized as follows:

	June 30, 2019			December 31, 2018
Land	$	24.1		$	24.1
Building and improvements		197.4			195.3
Machinery, equipment and tooling		269.0			269.4
Furniture and fixtures		16.9			16.4
Computer hardware and software		117.7			117.1
Rental cranes		81.7			84.0
Construction in progress		7.8			9.6
Total cost		714.6			715.9
Less accumulated depreciation		(431.1	)		(427.0	)
Property, plant and equipment — net	$	283.5		$	288.9

Assets Held for Sale

The Company has classified the Manitowoc, Wisconsin manufacturing buildings and land as held for sale on the Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018. The net book value of assets held for sale were $8.8 million and $12.9 million as of June 30, 2019 and December 31, 2018, respectively, and are included in other current assets on the Condensed Consolidated Balance Sheets. During the first quarter of 2019, a portion of the manufacturing site was sold which resulted in a decrease in assets held for sale.

6 . Goodwill and Other Intangible Assets

The Company performs an annual impairment review during the fourth quarter of every year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. There have been no impairment indicators since the fourth quarter of 2018; therefore, no impairment review has occurred during the six months ended June 30, 2019.

The changes in the carrying amount of goodwill for the year ended December 31, 2018 and the six months ended June 30, 2019 are summarized as follows:

	Americas		EURAF			MEAP			Consolidated
Balance as of January 1, 2018	$	166.5	$	85.9		$	68.9		$	321.3
Foreign currency impact		—		(3.7	)		(2.6	)		(6.3	)
Goodwill impairment - October 31, 2018		—		(82.2	)		—			(82.2	)
Balance as of December 31, 2018		166.5		—			66.3			232.8
Foreign currency impact		—		—			(0.1	)		(0.1	)
Balance as of June 30, 2019	$	166.5	$	—		$	66.2		$	232.7

Other intangible assets with definite lives are amortized over their estimated useful lives. Definite lived intangible assets are also subject to impairment testing whenever events or circumstances indicate that the carrying value of the assets may not be recoverable.

The gross carrying amount, accumulated amortization and net book value of the Company’s intangible assets other than goodwill at June 30, 2019 and December 31, 2018 are summarized as follows:

	June 30, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
Trademarks and tradenames	$	96.2	$	—		$	96.2	$	96.7	$	—		$	96.7
Customer relationships		10.2		(8.5	)		1.7		10.1		(8.4	)