-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eap5NWnoBEPG3dkrMB0HTzHU8IzwvFDLDo6qvaQ+k+Ex5alFppToktlgUed6UaHd SrxhO2nTS8eWJs18b1p/YA== 0000061986-00-000002.txt : 20000308 0000061986-00-000002.hdr.sgml : 20000308 ACCESSION NUMBER: 0000061986-00-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANITOWOC CO INC CENTRAL INDEX KEY: 0000061986 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 390448110 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11978 FILM NUMBER: 562855 BUSINESS ADDRESS: STREET 1: 500 S 16TH ST STREET 2: STE B CITY: MANITOWOC STATE: WI ZIP: 54221 BUSINESS PHONE: 4146846621 10-K 1 1999 REPORT ON FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 [_] 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 of (I.R.S. Employer incorporation or organization) Identification Number) 500 South 16th Street, Manitowoc, Wisconsin 54220 - ---------------------------------------------------------------------- (Address of Principal Executive Offices)(Zip Code) Registrant's Telephone Number, Including Area Code: (920) 684-4410 Securities Registered Pursuant to Section 12(b) of the Act: Common Stock, $.01 Par Value New York Stock Exchange (Title of Each Class) (Name of Each Exchange on Which Registered) Common Stock Purchase Rights Securities Registered Pursuant to Section 12(g) of the Act: Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The Aggregate Market Value on January 31, 2000, of the registrant's Common Stock held by non-affiliates of the registrant was $674,556,122 based on the $27.31 per share average of high and low sale prices on that date. The number of shares outstanding of the registrant's Common Stock as of January 31, 2000 the most recent practicable date, was 26,088,369. DOCUMENTS INCORPORATED BY REFERENCE - --------------------------------------------------------------------- Portions of registrant's Annual Report to Shareholders for the year ended December 31, 1999 (the "1999 Annual Report"), are incorporated by reference into Parts I and II of this report. Portions of the registrant's Proxy Statement, to be prepared and filed for the Annual Meeting of Shareholders, dated March 20, 2000 (the "2000 Proxy Statement"), are incorporated by reference in Part III of this report. See Index to Exhibits. PART I ----------- Item 1. Business ------------ GENERAL - -------------- The Manitowoc Company, Inc. (the "Company" or "Manitowoc"), a Wisconsin corporation, is a diversified, capital goods manufacturer headquartered in Manitowoc, Wisconsin. Founded in 1902, the Company is principally engaged in: a) the design and manufacture of commercial ice machines, ice/beverage dispensers and refrigeration products for the foodservice, lodging, convenience store, healthcare and the soft- drink bottling and dispensing industries; (b) the design and manufacture of cranes and related products which are used by the energy, construction, mining and other industries; and (c) ship- repair, conversion, and new construction services for the maritime industry. The Company currently operates a large-crane manufacturing facility and an ice machine and reach-in refrigerator/freezer manufacturing facility in Manitowoc, Wisconsin; six refrigeration products facilities located in Tennessee, Nevada, and Wisconsin; an ice/beverage dispenser manufacturing facility in Indiana; a dispensing valve manufacturing facility in Oregon; a cold plate manufacturing facility in California; a beverage service organization with locations in Ohio, Illinois, Texas, Connecticut, Virginia, Georgia, and California; ship repair yards in Sturgeon Bay, Wisconsin and Toledo and Cleveland, Ohio; a crane re-manufacturing facility in Bauxite, Arkansas; a crane replacement parts manufacturing facility in Punxsutawney, Pennsylvania and Pompano Beach, Florida; and boom truck crane operations in Georgetown, Texas and York, Pennsylvania. For information relating to the Company's lines of business and industry segments, see "Management's Discussion and Analysis of Results of Operations and Financial Condition", "Eleven-Year Financial Summary", Note 1 . "Research and Development" and Note 16 to Consolidated Financial Statements on pages 24-29, 30-31, 37, and 42, respectively, of the 1999 Annual Report, which are incorporated herein by reference. PRODUCTS AND SERVICES - -------------------------------------- Foodservice Equipment - --------------------------- The Foodservice Equipment business segment designs, manufactures and markets commercial ice-cube machines and storage bins; ice/beverage dispensers; walk-in refrigerators and freezers; reach-in refrigerators and freezers; refrigerated undercounters and food prep tables; private label residential refrigerators/freezers; post-mix beverage dispensing valves; cast aluminum cold plates; long draw beer dispensing systems; compressor racks, and modular refrigeration systems; plus backroom beverage equipment distribution services. Products are sold under the brand names Manitowoc, Kolpak, SerVend, McCall, Flomatic, Compact, Icetronic, and RDI. Several models of commercial ice-cube machines, offering daily production capacities from 65 to 1,880 pounds and featuring a patented self-cleaning capability, are designed, manufactured and marketed by Manitowoc Ice, Inc. The ice machines are complemented by storage bins, with capacities from 150 to 950 pounds, and optional accessories such as water filters and ice baggers. Manitowoc Ice, Inc. also produces reach-in refrigerators and freezers which are available in one-, two-, and three-door models, with capacities up to 72 cubic feet. All units feature patented, top-mount, drop-in refrigeration modules that operate with environmentally friendly HFC refrigerants. During 1999, Manitowoc Ice, Inc. introduced its new patented "QuietQube" ice-cube machines, which feature CVD (cool vapor defrost) technology, operate heat-free and are 75% quieter than non-CVD units. These new machines are ideally suited for new restaurants, which often feature more open designs, and for use with the self-service beverage systems increasingly found in quick service restaurants and convenience stores. Manitowoc Ice also continues to benefit from its 1997 introduction of the new Q-Series ice machines. These models set an industry standard for aesthetic design and incorporate plastic and stainless steel components for added durability and corrosion resistance. On February 10, 2000, the Company purchased Beverage Equipment Supply Company (BESCO), a leading midwest wholesale distributor of beverage dispensing equipment. BESCO was integrated with the Company's Manitowoc Beverage Systems, Inc. (MBS) operation. On April 9, 1999, the Company completed the acquisition of Kyees Aluminum, Inc., a leading supplier of cooling components for the major suppliers of fountain soft-drink beverage dispensers. Kyees is a technology leader in manufacturing aluminum cold plates, a key component used to chill soft-drink beverages in dispensing equipment. On January 11, 1999, the Company completed its acquisition of Purchasing Support Group (PSG), renamed MBS. MBS is a systems integrator, with nationwide distribution of backroom equipment and support system components. It serves the beverage needs of restaurants, convenience stores and other outlets. MBS operates in the Northeast and Atlantic Coast regions, as well as in portions of Arizona, California, Florida, Texas, Georgia and Nevada. This acquisition has improved the distribution of Manitowoc's beverage dispensing equipment and open new markets. For additional information on acquisitions, see Note 11 to Consolidated Financial Statements on page 40 of the 1999 Annual Report, which is incorporated herein by reference. In October 1994, the Company, through its wholly owned subsidiary, Manitowoc Equipment Works PTE, Ltd., entered into an arrangement with Hangzhou Household Electric Appliance Industrial Corporation and formed Hangzhou Wanhua, Ltd., to produce ice machines in China. The joint-venture factory produces the Company's new model QM-20 ice machine. The QM-20 produces 30 pounds of ice per day. It was developed to meet the needs of customers in overseas markets that do not require the 160 to 1,890 pound daily outputs of the standard ice making models. The Foodservice Equipment business segment sales are made from the Company's inventory and sold worldwide through independent wholesale distributors, chain accounts, and government agencies. The distribution network now extends to 80 distributors in 70 countries within Western Europe, the Far East, the Middle East, the Near East, Latin America, North America, the Caribbean, and Africa. A new distribution facility in Rotterdam, Holland has enabled the Company to increase sales of ice and refrigerated foodservice equipment in Europe. Since sales are made from the Company's inventory, orders are generally filled within 24 to 48 hours. The backlog for unfilled orders for Foodservice Equipment at December 31, 1999 and 1998 was not significant. Cranes and Related Products - ----------------------------------- The Company designs and manufactures a diversified line of crawler- and truck-mounted lattice-boom cranes, hydraulically powered telescopic boom trucks, rough-terrain forklifts, and material handling equipment, which are sold under the "Manitowoc", "Manitex", "Spyper", "Pioneer", "USTC", and "Tailgator" names for use by the energy, construction, mining, pulp and paper, and other industries. The Company also specializes in crane rebuilding and remanufacturing services, aftermarket replacement parts for cranes and excavators and industrial repair and rebuilding services for metal-forming, scrapyard and recycling equipment, which are sold under the "Femco" name. Many of the Company's customers purchase one crane together with several options to permit use of the crane in various lifting applications and other operations. Various crane models combined with available options have lifting capacities ranging from approximately 10 to 1,500 U.S. tons and excavating capacities ranging from 3 to 15 cubic yards. The Company has developed a line of hydraulically-driven, electronically-controlled M-Series crawler cranes. M-Series cranes are easier to transport, operate and maintain, and are more productive in a number of applications. Six models, along with various attachments, have been introduced with lifting capacities ranging from 65 to 1,500 U.S. tons. During 1999, Manitowoc Cranes introduced the Model 21000, a 1,000-ton capacity crawler crane that features the "Octa-trac" crawler system - four sets of dual crawlers minimizing ground bearing pressure and simplifying transportation. In addition to delivering exceptional lifting capacity, the 21000 also provides superior high-reach capability and can be trucked to a job site, assembled and ready to work in just 20 hours. Also during 1999, Manitowoc Cranes introduced the MAX-ER, a capacity enhancing attachment for Models 2250 and 21000. To serve the growing market of the smaller independent contractors and rental-fleet customers who need smaller, less complicated, easily transportable, and more versatile cranes, Manitowoc Cranes developed a new line of value-priced cranes with those characteristics. The first of these, the 100-ton lifting capacity Model-222 crane, has successfully captured a large portion of the rental market for self-erecting cranes. On January 14, 2000, the Company acquired certain assets of Pioneer Holdings LCC, a manufacturer of hydraulic boom trucks. The acquisition complements the Company's Manitex and USTC product lines. USTC introduced the Model 40MTC during 1999, the first 40-ton capacity boom truck in the industry that is a cost-attractive alternative to hydraulic truck cranes. Femco Machine Co., acquired in 1994, is a manufacturer of parts for cranes, draglines, and other heavy equipment. Femco is located in Punxsutawney, Pennsylvania and Pompano Beach, Florida. Femco and Manitowoc Re-Manufacturing, located in Bauxite, Arkansas, together form the Aftermarket Group. These companies rebuild and remanufacture used cranes, both Manitowoc and non- Manitowoc units, for owners who want to add value to their existing cranes. The companies also produce replacement parts for cranes and excavators and perform industrial repair and rebuilding services for metal forming scrapyard and recylcing equipment. Femco's existing South Florida operation is ideally positioned to serve the large Latin American market where used cranes are the order of the day. The Company's cranes and related products are sold throughout North America and foreign countries by independent distributors, and by Company- owned sales subsidiaries located in Mokena, Illinois, and Northampton, England. Distributors generally do not carry inventories of new cranes, except for the smaller truck cranes. Most distributors maintain service facilities and inventories of replacement parts. Company employed service representatives usually assist customers in the initial set-up of new cranes. The Company does not generally provide financing for either its independent distributors or their customers; however, dealers frequently assist customers in arranging financing and may accept used cranes as partial payment on the sale of new cranes. See Note 16 to Consolidated Financial Statements on page 42 of the 1999 Annual Report with respect to export sales, which is incorporated herein by reference. Such sales are usually made to the Company's foreign subsidiaries or independent distributors, in addition to sales made to domestic customers for foreign delivery. Foreign sales are made on Letter of Credit or similar terms. The year-end backlog of crane products includes orders which have been placed on a production schedule, and those orders which the Company has accepted and which are expected to be shipped and billed during the next year. The backlog of unfilled orders for cranes and related products at December 31, 1999 approximated $136.0 million, as compared with $144.1 million a year earlier. The decrease is primarily due to the faster order fill rates achieved during 1999, which meant the backlog was being worked off more quickly than in previous years. Marine - --------- The Company had been a shipbuilder since its inception in 1902. For almost seven decades, all shipbuilding operations were conducted in Manitowoc, Wisconsin. Two adjoining shipyards in Sturgeon Bay, Wisconsin, were acquired in 1968 and 1970, and all shipbuilding activities were transferred to those facilities. In January, 1992, the Company acquired substantially all the assets of Merce Industries, Inc. Merce Industries, Inc. operated the ship repair facility owned by the Port Authority of Toledo, Ohio, and similar operations in Cleveland, Ohio. Included with the acquisition was the assumption of a lease agreement with the Port Authority for the ship repair facilities. The Marine Group (made up of Bay Shipbuilding Co. (BSC), Toledo Shiprepair Co., and Cleveland Shiprepair Co.) dry-docks and services commercial vessels of all sizes, including 1,000-foot super carriers, the largest vessels sailing the Great Lakes. The Marine Group's capabilities include planned and emergency maintenance, vessel inspections, five-year surveys, conversions, repowering, and retrofitting plus repair service for hulls, turbines, boilers, propulsion systems and automated cargo/ballasting systems. To reduce seasonality, the Marine Group performs non-marine industrial repair during the summer months. During 1998, BSC was awarded a contract to build a twin-hull, ocean-going tank barge for use by ExxonMobil. The Seneca, a 504-foot, double-hulled tank barge was delivered during the fourth quarter of 1999. The 140,000-barrel barge will haul grade A refined petroleum products, including gasoline, jet fuel, and distillates, to major metropolitan markets along the Eastern Seaboard and Hudson River. In May 1999, the Marine Group delivered the dipper dredge, New York, the largest dredge of its kind in the world. During November 1999, the Marine Group signed a contract with Great Lakes Dredge & Dock to build a 5,000-cubic-meter hopper dredge. This highly automated and self-propelled ship will incorporate bottom dump doors, an innovation allowing rapid unloading of dredged material. Designed to operate at service speeds of 14 knots, the vessel can dredge at depths to 90 feet. The year-end backlog for the marine segment includes repair and maintenance work presently scheduled at the shipyard which will be completed in the next year. At December 31, 1999, the backlog approximated $10.5 million (not including construction projects), compared to $9.1 million one year ago. Raw Materials and Supplies - ---------------------------------- The primary raw material used by the Company is structural and rolled steel, which is purchased from various domestic sources. The Company also purchases engines and electrical equipment and other semi- and fully-processed materials. It is the policy of the Company to maintain, wherever possible, alternate sources of supply for its important materials and parts. The Company maintains inventories of steel and other purchased material. The Company has been successful in its goal to maintain alternative sources of raw materials and supplies, and therefore, is not dependent on a single source for any particular raw material or supply. Patents, Trademarks, Licenses - ------------------------------------- The Company owns a number of United States and foreign patents pertaining to its crane and foodservice products, and has presently pending applications for patents in the United States and foreign countries. In addition, the Company has various registered and unregistered trademarks and licenses which are of material importance to the Company's business. While the Company believes its ownership of this intellectual property is adequately protected in customary fashions under applicable law, no single patent, trademark or license is critical to the Company's overall business. Seasonality - -------------- Typically, the second quarter represents the Company's best quarter in all of the business segments. Since the summer brings warmer weather, there is an increase in the use of ice machines. As a result, distributors build inventories during the second quarter for the increased demand. In the Cranes and Related Products segment, summer also represents the main construction season. Customers require new machines, parts, and service in advance of that season. With respect to the Marine segment, the Great Lakes shipping industry's sailing season is normally May through November. Thus, barring any emergency groundings, the majority of repair and maintenance work is performed during the winter months and the work is typically completed during the first and second quarter of the year. Competition - --------------- All of the Company's products are sold in highly competitive markets. Competition is at all levels, including price, service and product performance. Within the ice beverage group of the Foodservice Equipment segment, there are several manufacturers with whom the Company competes. The primary competitors include Scotsman Industries (tradename Scotsman and Crystal Tips), Prospect Heights, Illinois; Welbilt Company (tradename Ice-O-Matic), New Hyde Park, New York; and Hoshizaki American, Inc. (tradename Hoshizaki), Peachtree City, Georgia. The Company believes that it is the leading, low-cost, producer of ice machines in North America. Competitors within the beverage dispenser/dispensing valves market include IMI Cornelius, Anoka, Minnesota, and Lancer Corporation, San Antonio, Texas. The Company is one of the leading suppliers of fountain equipment and dispensing valves used by soft-drink bottlers. The list of competitors for the refrigeration group of the Foodservice Equipment segment line include Beverage Air, Spartanburg, South Carolina; The Delfield Company, Mt. Pleasant, Michigan; Traulsen & Company, Inc., College Point, New York; True Food Service Company, O'Fallon, Missouri; Masterbilt, New Albany, Mississippi; Nor-Lake Incorporated, Hudson, Wisconsin; and American Panel, Ocala, Florida. The Company is one of the leading producers of small undercounter refrigeration units and large refrigerated warehouses as well as a supplier of walk-in refrigerator/freezers to many of the leading restaurant and grocery chains in the United States. With respect to crawler cranes, there are numerous domestic and foreign manufacturers of cranes with whom the Company competes, including Link Belt Construction Equipment Co., a subsidiary of Sumitomo Corporation, Tokyo, Japan; Kobelco, Kobe Steel, Ltd., Tokyo, Japan; Mannesmann Demag Baumaschinen, Zweibrucken, West Germany; Liebherr-Werk Ehingen GMBH, Ehingen, West Germany; Hitachi Construction Machinery Co., Ltd., Tokyo, Japan; and Terex Corporation, Westport, Connecticut. Within the market the Company serves, lattice boom crawler cranes with lifting capacities greater than 150 tons, Manitowoc is a world leader of this equipment. The competitors within the boom truck crane market include Terex Corporation, Westport Connecticut, and Grove Crane, Shady Grove, Pennsylvania. The Company believes that its current output of boom truck cranes ranks second among its competitors. In the ship repair operation, the Company is one of two operational shipyards on the Great Lakes capable of drydocking and servicing 1000 foot Great Lakes bulk carriers; the other is Erie Marine Enterprises, Erie, Pennsylvania. There are two other shipyards on the Great Lakes, Fraser Shipyards, Inc., Superior, Wisconsin, and H. Hansen Industries, Toledo, Ohio, with whom the Company competes for drydocking and servicing smaller Great Lakes vessels. The Company also competes with many smaller firms which perform top side repair work during the winter lay-up period. In addition, there are shipyards on the East, West and Gulf Coasts capable of converting and reconstructing vessels of sizes that can enter the Great Lakes through the St. Lawrence Seaway and the Wellen Canal. There are also shipyards on the inland rivers capable of servicing smaller, specialized vessels which the Company is capable of servicing. For additional information regarding the company's competition, see "Manitowoc Business and Product Overview" on pages 6-7 of the 1999 Annual Report, which is incorporated herein by reference. Employee Relations - ------------------------ The Company employs approximately 3,200 persons, of whom about 660 are salaried. The number of employees is consistent with the prior year. The Company has labor agreements with 17 union locals. There have been no work stoppages during the three years ended December 31, 1999. Item 2. PROPERTIES -------------------- Owned - --------- The Company owns Foodservice Equipment manufacturing facilities located in Manitowoc, Wisconsin; River Falls, Wisconsin; Parsons, Tennessee; Sellersburg, Indiana; Scotts Hill, Tennessee; and LaMirada, California. Manitowoc Ice, Inc.'s production of ice machines and reach-in coolers are housed in a recently expanded 368,000 square foot facility in Manitowoc, Wisconsin. The 128,000 square foot addition was completed during 1995 and permitted both ice machines and reach-ins to be manufactured in the same facility. The Company owns and operates manufacturing facilities located in Parsons, Tennessee and River Falls, Wisconsin. The Parsons and River Falls facilities have approximately 212,000 and 133,000 square feet of manufacturing and office space, respectively. In 1998, the Company closed a 40-000 square foot manufacturing facility in Scott Hills, Tennessee and consolidated the warehousing into its Parsons, Tennessee facility. The Scotts Hill plant is currently held for sale. SerVend International, Inc. has approximately 140,000 square feet of manufacturing and office space located in Sellersburg, Indiana. Kyees Aluminum manufacturing and office space consists of approximately 15,000 square feet located in LaMirada, California. Cranes and related products are manufactured at plant locations in Manitowoc, Wisconsin; Georgetown, Texas; York, Pennsylvania; Bauxite, Arkansas; and Punxsutawney, Pennsylvania. During 1995, the crane operations in Manitowoc completed a move from the original plant located in the central city to consolidate all its activities at the existing South Works facility. South Works' construction was completed in 1978 and is comprised of approximately 265,000 square feet of manufacturing and office space located on 76 acres. The original plant, which includes approximately 600,000 square feet of manufacturing and office space, is currently being held for sale. The Punxsutawney operations consist of two manufacturing and office facilities operated as Femco Machine Co. These facilities have approximately 71,000 square feet and are located on approximately 34 acres. In 1993, the Manitex boom truck crane operations were moved to Georgetown, Texas. The Company purchased an existing manufacturing and office facility totaling approximately 175,000 square feet. The USTC manufacturing and office facility, acquired in November 1998, has approximately 110,000 square feet and is located on approximately 17 acres in York, Pennsylvania. In June, 1987, the Company purchased an existing 20,000 square foot facility in Bauxite, Arkansas, for the remanufacturing of used cranes. This facility began operations in fiscal 1988. The Company's shipyard in Sturgeon Bay, Wisconsin, consists of approximately 55 acres of waterfront property. Four of those acres, which connect two operating areas of the shipyard, are leased under a long term ground lease. There is approximately 295,000 square feet of enclosed manufacturing and office space. Facilities at the shipyard include a 140 foot by 1,158 foot graving dock, the largest on the Great Lakes. In addition, there is a 250 foot graving dock, and a 600 foot floating drydock. Additional properties consist primarily of a crane sales office and warehouse facility located in Northampton, England. Geographic Areas - -------------------- The information required by this item is incorporated by reference from Note 16 to Consolidated Financial Statements on page 42 of the 1999 Annual Report. Leased - --------- The Company leases three manufacturing facilities for the Foodservice Equipment segment including approximately 90,000 square feet in Selmer, Tennessee; 150,000 square feet in Sparks, Nevada; 5,000 square feet in Portland, Oregon; and approximately 17,000 square feet in LaMirada, California. The Company also leases office and/or warehouse space in Franklin, Tennessee; Danbury, Connecticut; Roanoke Virginia; Granby, Connecticut; Lithonia, Georgia; Orlando, Florida; Irwindale, California; Dallas, Texas; Buena Park, California; Holland, Ohio; and Lombard, Illinois. In addition, the Company leases sales offices and warehouse facilities for cranes and related products in Mokena, Illinois. Facilities are also leased in Pompano Beach, Florida for parts manufacturing and crane re-manufacturing. Furthermore, the Company leases the shipyard facilities at Toledo and Cleveland, Ohio for the marine segment. These facilities include waterfront land, buildings, and 800-foot and 550-foot graving docks. Item 3. LEGAL PROCEEDINGS --------------------------------- The information required by this item is incorporated by reference from Note 13 to Consolidated Financial Statements on page 41 of the 1999 Annual Report. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------------------------------------------------------------ No matters were submitted to security holders for a vote during the fourth quarter of the Company's fiscal year ended December 31, 1999. Executive Officers of the Registrant - -------------------------------------------- Each of the following officers of the Company has been elected to a one-year term by the Board of Directors. The information presented is as of January 31, 2000. Position With Principal Position Name Age The Registrant Held Since ----------- ------ -------------------- ------------------ Terry D. Growcock 54 President & CEO 1998 Glen E. Tellock 38 Vice President & CFO 1999 Thomas G. Musial 48 Vice President - Human Resources 1995 and Administration Maurice D. Jones 40 Secretary and General Counsel 1999 Terry D. Growcock, 54, president and chief executive officer since 1998. Previously, president and general manager of Manitowoc Ice, Inc. (1996); also executive vice president of Manitowoc Equipment Works (1994). Prior to joining Manitowoc, Mr. Growcock served in numerous management and executive positions with Siebe plc and United Technologies. Glen E. Tellock, 38, vice president and chief financial officer since 1999. Previously, Mr. Tellock served as vice president of finance and treasurer (1998), corporate controller (1992) and director of accounting (1991). Prior to joining Manitowoc, Mr. Tellock served as financial planning manager with the Denver Post Corporation, and as an audit manager for Ernst & Whinney. Thomas G. Musial, 48, vice president human resources since 1995. Previously, manager of human resources (1987) and personnel/industrial relations specialist (1976). Maurice D. Jones, 40, secretary and general counsel (1999). Prior to joining Manitowoc, Mr. Jones was a partner in the law firm of David Kuelthau, S.C., and served as legal counsel for Banta Corporation. PART II ----------- Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ------------------------------------------------------------ The information required by this item is incorporated by reference from "Eleven-Year Financial Summary" "Quarterly Common Stock Price Range," "Supplemental Quarterly Financial Information (Unaudited)," and "Investor Information," on pages 30-31, 44 and back cover, respectively, of the 1999 Annual Report. Item 6. SELECTED FINANCIAL DATA - ------------------------------------------ The information required by this item is incorporated by reference from "Eleven-Year Financial Summary" on pages 30-31 of the 1999 Annual Report. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------ The information required by this item is incorporated by reference from "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 24-29 of the 1999 Annual Report. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------- The information required by this item is incorporated by reference from "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 24-29 of the 1999 Annual Report. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------------------------------------------------------------ The financial statements required by this item are incorporated by reference from pages 32-43 of the 1999 Annual Report. Supplementary financial information is incorporated by reference from "Supplemental Quarterly Financial Information (Unaudited)" on page 44 of the 1999 Annual Report. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - --------------------------------------------------------------- None. PART III ------------ Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------ The information required by this item is incorporated by reference from the sections of the 2000 Proxy statement captioned "Section 16(a) Beneficial Ownership Reporting Compliance" and "Election of Directors". See also "Executive Officers of the Registrant" in Part I hereof, which is incorporated herein by reference. Item 11. EXECUTIVE COMPENSATION - ---------------------------------------- The information required by this item is incorporated by reference from the sections of the 2000 Proxy statement captioned "Compensation of Directors", "Executive Compensation", and "Contingent Employment Agreements". Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------ The information required by this item is incorporated by reference from the section of the 2000 Proxy statement captioned "Ownership of Securities". Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - ------------------------------------------------------------ None. PART IV ------------ Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - ------------------------------------------------------------ (a) Documents filed as part of this Report. (1) Financial Statements: The following Consolidated Financial Statements are filed as part of this report under Item 8, "Financial Statements and Supplementary Data": Report of Independent Public Accountants on years ended December 31, 1999, 1998, and 1997 Financial Statements. Consolidated Statements of Earnings for the years ended December 31, 1999, 1998, and 1997. Consolidated Balance Sheets as of December 31, 1999 and 1998. Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998, and 1997. Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended December 31, 1999, 1998 and 1997. Notes to Consolidated Financial Statements. (2) Financial Statement Schedules: Financial Statement Schedules for the years ended December 31, 1999, 1998, and 1997. Schedule Description Filed Herewith --------- -------------- ----------------- II Valuation and Qualifying Accounts X Report of Independent Accountants on years ended December 31, 1999, 1998, and 1997 Financial Statement Schedule X All other financial statement schedules not listed have been omitted since the required information is included in the consolidated financial statements or the notes thereto, or is not applicable or required under rules of Regulation S-X. (b) Reports on Form 8-K: None (c) Exhibits: See Index to Exhibits immediately following the signature page of this report, which is incorporated herein by reference. REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of The Manitowoc Company, Inc. Our audits of the consolidated financial statements referred to in our report dated January 25, 2000, except for information on Note 11, for which the date is February 10, 2000, appearing on page 43 in the 1999 Annual Report of The Manitowoc Comapny, Inc. and Subsidiaries (which report and consolidated financial statements are incorproated by reference in this Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of thsi Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP January 25, 2000 ------------------------------ - ---------------- PRICEWATERHOUSECOOPERS LLP
THE MANITOWOC COMPANY, INC. AND SUBSIDIARIES SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999 BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND END OF DESCRIPTION OF YEAR EXPENSES DEDUCTIONS (1) YEAR ---------------------- ----------------- ----------------------------------------------------- YEAR ENDED DECEMBER 31, 1997: Allowance for doubtful accounts $ 976,207 $1,479,633 $ (573,985) $ 1,881,855 YEAR ENDED DECEMBER 31, 1998: Allowance for doubtful accounts $ 1,881,855 $ 481,924 $ (707,839) $ 1,655,940 YEAR ENDED DECEMBER 31, 1999: Allowance for doubtful accounts $ 1,655,940 $ 2,220,924 $(2,073,863) $ 1,803,001 (1)Deductions represent bad debts written-off, net of recoveries.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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: Dated: March 7, 2000 THE MANITOWOC COMPANY, INC. By: /s/ Terry D. Growcock ---------------------------------------- Terry D. Growcock President & Chief Executive Officer By: /s/ Glen E. Tellock ---------------------------------------- Glen E. Tellock Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons constituting a majority of the Board of Directors on behalf of the registrant and in the capacities and on the dates indicated: /s/ Terry D. Growcock March 6, 2000 - ----------------------------------------------- Terry D. Growcock, President & CEO, Director /s/ Glen E. Tellock March 6, 2000 - ----------------------------------------------- Glen E. Tellock, Vice President & CFO /s/ Gilbert F. Rankin, Jr. March 6, 2000 - ----------------------------------------------- Gilbert F. Rankin, Jr., Director /s/ George T. McCoy March 6, 2000 - ----------------------------------------------- George T. McCoy, Director /s/ Guido R. Rahr, Jr. March 6, 2000 - ----------------------------------------------- Guido R. Rahr, Jr., Director March 6, 2000 - ----------------------------------------------- James P. McCann, Director March 6, 2000 - ----------------------------------------------- Dean H. Anderson, Director March 6, 2000 - ----------------------------------------------- Robert S. Throop, Director March 6, 2000 - ----------------------------------------------- Robert C. Stift, Director
THE MANITOWOC COMPANY, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 INDEX TO EXHIBITS Filed Exhibit Description Herewith No. - ----- ------------------------------------------------------------------ --------- 3.1 Amended and Restated Articles of Incorporation as amended on November 5, 1984 (filed as Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1985 and incorporated herein by reference). 3.2 Restated By-Laws (as amended through May 22, 1995) including amendment to Article II changing the date of the annual meeting (filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). 4.1 Rights Agreement dated August 5, 1996 between the Registrant and First Chicago Trust Company of New York (filed as Exhibit 4 to the Company's current Report on Form 8-K filed on August 5, 1996 and incorporated herein by reference). 4.4 Articles III, V, and VIII of the Amended and Restated Articles of Incorporation (see Exhibit 3.1 above). 4.5 Credit Agreement dated as of October 31, 1997, among The Manitowoc Company, Inc., as Borrower, certain subsidiaries from time to time parties thereto, as Guarantors, the several Lenders, and NationsBank, N.A. as Agent (filed as Exhibit 4.1 to the Company's Report on Form 8-K dated as of October 31, 1997 and incorporated herein by reference). 4.6 Credit Agreement dated as of April 2, 1998, among The Manitowoc Company, Inc., as Borrower and Prudential Insurance Company (filed as Exhibit 4 to the Company's Report on Form 10-Q, dated as of March 31, 1998 and incorporated herein by reference). 4.7 Amended and Restated Credit Agreement, dated as of April 6, 1999 among The Manitowoc Company, Inc., as Borrower, and several lenders, NationsBank, N.A., as Agent and Fleet Bank, N.A., as Documentation Agent (filed as Exhibit 4 to the Company's Report on Form 10-Q, dated as of March 31, 1999, and incorporated herein by reference). 10.1(a) **The Manitowoc Company, Inc. Deferred Compensation Plan effective August 20, 1993 (the "Deferred Compensation Plan") (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8 filed June 23, 1993 (Registration No. 33-65316) and incorporated herein by reference). 10.1(b) **Amendment to Deferred Compensation Plan adopted by the Board of Directors on February 18, 1997. 10.2 ** The Manitowoc Company, Inc. Management Incentive Compensation Plan (Economic Value Added (EVA) Bonus Plan) effective July 4, 1993, and as amended February 15, 1999. 10.3 ** Form of Contingent Employment Agreement between the Company and Messrs. Flynn, Keener, Musial, Growcock, Shaw, Schad, Tellock, Jones and certain other employees of the Company (filed as Exhibit 10(c)to the Company's Annual Report on Form 10-K for the fiscal year ended July 1, 1989 and incorporated herein by reference). 10.4 ** Form of Indemnity Agreement between the Company and each of the directors, executive officers and certain other employees of the Company (filed as Exhibit 10(d) to the Company's Annual Report on Form 10-K for the fiscal year ended July 1, 1989 and incorporated herein by reference). 10.5 ** Supplemental Retirement Agreement between Fred M. Butler and the Company dated March 15, 1993 (filed as Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended July 3, 1993 and incorporated herein by reference). 10.6(a) **Supplemental Retirement Agreement between Robert K. Silva and the Company dated January 2, 1995 (filed as Exhibit 10 to the Company's Report on Form 10-Q for the transition period ended December 31, 1994 and incorporated herein by reference). 10.6(b) **Restatement to clarify Mr. Silva's Supplemental Retirement Agreement dated March 31, 1997. 10.7(a) * The Manitowoc Company, Inc. 1995 Stock Plan (filed as Appendix A to the Company's Proxy Statement dated April 2, 1996 for its 1996 Annual Meeting of Stockholders and incorporated herein by reference). 10.7(b) The Manitowoc Company, Inc. 1999 Non-Employee Director Stock Option Plan (filed as Exhibit 10 to the Company's Report on Form 10-Q, dated as of June 30, 1999 and incorporated herein by reference). 11 Statement regarding computation of basic and diluted earnings per share (see Note 8 to the 1999 Consolidated Financial Statements included herein). X 13 Portions of the 1999 Annual Report to Shareholders of The Manitowoc Company, Inc. incorporated by reference into this Report on Form 10-K. X 21 Subsidiaries of The Manitowoc Company, Inc. X 23.1 Consent of PricewaterhouseCoopers LLP, the Company's Independent Public Accountants. X 27 Financial Data Schedule. X * Pursuant to Item 601(b)(2) of Regulation S-K, the Registrant agrees to furnish to the Securities and Exchange Commission upon request a copy of any unfiled exhibits or schedules to such document. ** Management contracts and executive compensation plans and arrangements required to be filed as exhibits pursuant to Item 14(c) of Form 10-K.
EX-13 2 PORTIONS OF THE 1999 ANNUAL REPORT TO SHAREHOLDERS OF THE MANITOWOC COMPANY, INC. INCORPORATED BY REFERENCE MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - -------------------------------------------------------------- BUSINESS DESCRIPTION. The Manitowoc Company and its affiliates are market leaders in their domestic and international businesses. The Foodservice Equipment Segment includes: Ice/Beverage businesses which include one of the world's largest manufacturers of ice-cube machines and combination ice/beverage dispensers and dispensing valves - serving restaurants, hotels and other institutions, as well as the soft-drink industry. Refrigeration businesses which include one of the largest suppliers of walk-in refrigerator/freezers in the world - serving restaurants, hotels, and other institutions. The Cranes and Related Products Segment includes: Businesses with a leading share of the worldwide market for lattice- boom crawler cranes (over 150-ton capacity) - serving heavy- construction, crane-rental, dockside, and material-handling customers. Operations with a leading share of the North American boom-truck market - serving commercial, industrial, utility, construction, and maintenance applications. The Marine Segment is: The leading provider of ship-repair, maintenance, conversion, and construction services on the U.S. side of the Great Lakes. Additional information on these business segments can be found on pages 6 through 21. FORWARD-LOOKING STATEMENTS. Statements in this report and in other company communications that are not historical facts are forward- looking statements, which are based on management's current expectations. These statements involve risks and uncertainties that could cause actual results to differ materially from what appears here. Forward-looking statements include the company's description 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 identify forward- looking statements. In addition, goals established by Manitowoc should not be viewed as guarantees or promises of future performance. There can be no assurance the company will be successful in achieving its goals. In addition to the assumptions and information referred to specifically in the forward-looking statements, a number of actors relating to each business segment could cause actual results to be materially different from what is presented here. The Foodservice Equipment Segment - demographic changes affecting two- income families and general population growth; household income; weather; consolidation in the restaurant industry; the ability to serve large restaurant chains as they expand their global operations; the ice-cube machine replacement cycle in the U.S.; specialty foodservice market growth; the demand for quick service restaurants and kiosks; and growth in the soft-drink industry. The Cranes and Related Products Segment - market acceptance of new and innovative products; cyclicality in the construction industry; the effects of the U.S. Transportation Equity Act for the 21st century (TEA-21); growth in the world market for heavy cranes; the replacement cycle of technologically obsolete cranes; and demand for used equipment in developing countries. The Marine Segment - shipping volume fluctuations based on performance of the steel industry; weather on the Great Lakes; five-year survey schedule; the replacement cycle of older marine vessels; the growth of existing marine fleets; and the level of vessel construction and industrial maintenance. Corporate - changes in laws or regulations; successful identification and integration of acquisitions; competitive pricing; domestic and international economic conditions; interest rate risk; success in increasing manufacturing efficiencies; and any unanticipated ongoing Year 2000 computer hardware or software issues. QUALITATIVE AND QUANTITATIVE MARKET RISK. Manitowoc is exposed to market risks from changes in interest rates, commodities and, to a lesser extent, foreign currency exchange. To reduce these risks, the company selectively uses financial instruments and other proactive management techniques. All hedging transactions are authorized and executed under clearly define policies and procedures, and prohibit using financial instruments for trading purposes or speculation. Discussions of Manitowoc's accounting policies and further disclosures on financial instruments are included in Notes 1 and 6 of the Notes to Consolidated Financial Statements. Interest Rate Risk - The company uses interest rate swaps to modify its exposure to interest rate movements. This helps minimize the adverse effect of interest rate increases on floating rate debt. Under these agreements, Manitowoc contracts with a counter-party to exchange the difference between a fixed rate and a floating rate applied to the notional amount of the swap. At December 31, 1999, the company's existing swap contracts expire at various times through October 2002. The interest payments or receipts from interest rate swaps are recognized in net income as adjustments to interest expense on a current basis. The company enters into swap agreements only with financial institutions that have high credit ratings, which, in management's opinion, limits Manitowoc's exposure to credit loss. At year-end 1999, Manitowoc had two interest rate swap agreements outstanding with financial institutions, with a total notional principal amount of $17.6 million. The effect of these agreements on the company's interest expense during 1999 was not significant. The fair value of these interest rate swap agreements was $0.2 million at December 31, 1999. On that date, the interest rates under the swap agreements were 5.78% and 6.29%. The weighted average interest rate for the company's floating rate debt during the year was 5.9%. Commodity Prices - Manitowoc is exposed to fluctuating market prices for commodities including steel, copper, and aluminum. Each of its business segments is subject to the effects of changing raw material costs caused by movements in underlying commodity prices. Manitowoc has established programs to manage the negotiations of commodity prices. Some of these programs are centralized within business segments, and others are specific to a business unit. In general, Manitowoc enters into contracts with its vendors to lock in commodity prices at various times and for various periods to limit its near-term exposure to fluctuations in raw material prices. Currency Rick - The company has limited exposure to foreign currency exchange fluctuations in some of its European and Southeast Asian operations due to the small amount of transactions processed, and the relative stability of the currencies exchanged. The company utilizes foreign currency hedges to manage this exposure, when necessary. Use of these instruments and strategies as been modest. Long-Term Goals. Manitowoc has established and will work to achieve these goals by the end of 2002: - - Reach $1.3 billion in sales, with the increase coming equally from internal and external growth. - - Generate 80% of revenues from new products/models introduced or acquisitions made since 1998. - - Be EVA (Economic Value-Added) accretive in each business unit each year. - - Supplement core businesses with strategic acquisitions. - - Continue to make global expansion a key priority. - - Pursue ISO quality certification for all non-marine operations. Reaching these goals includes the following annual financial milestones: - - 17% top-line growth. - - Expanding earnings faster than sales. - - Internal growth rates at double the industry average. MARKET CONDITIONS. NORTH AMERICA. In 1999, the North American economy experienced growth in the foodservice industry (with the exception of the beverage dispensing niche) compared with relatively flat sales between 1998 and 1997. Both the crane and marine industries saw continued expansion in 1999. The Foodservice Equipment Segment is benefiting from a number of long- term trends that have resulted in 3% to 5% annual growth for the foodservice industry: expansion in the restaurant market, particularly among high-volume chains; movement of fast-food franchises into non-traditional locations, such as automotive service stations, convenience stores, and chain retail stores; growth in health care facilities; additional international expansion; and the continued recovery of the hotel and lodging industry. Two long-term trends also support a return to growth for the beverage dispensing niche market: higher quality, more attractive new products that speed the beverage dispenser replacement cycle; and increased demand for self-serve fountain equipment by various quick service industries. All of these factors kept demand for foodservice equipment strong in 1999 in nearly all North American markets. Management expects these industry trends will bring continued growth in 2000. The Cranes and Relations Products Segment experienced greater demand for its products again in 1999. This segment is expected to continue its current growth trend over the next several years due to increasing construction spending in the U.S.; the rebuilding of America's infrastructure, funded by TEA-21 - the federal bill that provides $217 billion for rebuilding roads and bridges over the next five years; growing international demand for cranes; and the continuing replacement cycle for an aging large-capacity liftcrane fleet that is becoming technologically obsolete. The Marine Segment saw a continuation of positive growth trends in 1999 due to high levels of shipping tonnage (despite dumping of foreign steel into the U.S. early in the year); the general economic strength of heavy industry and manufacturing sectors; customer interest in upgrading existing vessels and taking advantage of new automation equipment; and the aging of the Great Lakes fleet - averaging 39 years - which requires more maintenance and repair. In 1997, the Coast Guard changed its regulations and provided a one-year extension of the five-year mandatory dry-docking requirement. Ship owners must apply for the extension , and decisions are made on a ship-by-ship basis. This did not have a significant impact on the Marine Segment during 1999. Repair and construction activity was high at all three facilities in addition to a high level of quoting activity on project business for the year. MARKET CONDITIONS. INTERNATIONAL. International. Manitowoc's international sales grew 10% in 1999, contributing 11% of total revenues. The Foodservice Equipment Segment continued to see strong demand for its refrigeration products in the Southeast Asian market, with Taiwan and China contributing most of its international ice-cube machine sales in 1999. These sales were driven by improvements in sanitation - - where pure water is available, these countries want to offer the Western convenience of ice. European demand remained steady during the year, and some improvements were seen in Latin America. International orders for refrigeration and ice-making equipment from hotel and restaurant chains remained robust. Expansion of U.S. firms into international markets and the desire of these firms to take their proven suppliers with them helped fuel this activity. The Cranes and Related Products Segment also saw improving markets in China and Southeast Asia, as the price of oil firmed up later in the year. Solid levels of demand were seen in Canada. Improving economies in Europe, Africa, and Central and South America led to greater demand for cranes during 1999. The Marine Segment's repair and maintenance sales come primarily from the U.S. While the North American Free Trade Agreement (NAFTA), eliminated tariffs, making U.S. shipyards more competitive with their Canadian counterparts, most Canadian shipping companies still choose to have their vessels serviced in their home country. As a result, Marine's most frequent source of international revenue is emergency repair work on foreign-flagged vessels. RESULTS OF OPERATIONS. This table summarizes the relationship between components of operations as a percent of net sales for the last three years. Percent of Net Sales 1999 1998 1997 ----- ----- ----- Net Sales 100.0 100.0 100.0 Cost of sales 71.0 71.8 72.0 Gross profit 29.0 28.2 28.0 Engineering, selling & Administrative expenses 13.3 14.1 15.4 Amortization 0.9 0.8 0.7 Operating income 14.8 13.3 11.9 Interest and other (1.6) (1.6) (1.3) Earnings before taxes 13.2 11.7 10.6 Income taxes 4.9 4.3 3.9 Net earnings 8.3 7.4 6.7 Net Sales _ Consolidated net sales, at $805.5 million, rose 15.9% for 1999. Approximately half of this increase came from internal growth, with the rest from acquisitions made in the last two years. Foodservice Equipment revenues rose 18.8% and Cranes and Related Products expanded 12.3%. Both benefited from strong acceptance of new products and recent acquisitions. Marine sales increased 21.6% on strong demand for its repair and maintenance services, and the construction of a tank barge and dipper dredge in its off-season. For 1998, sales grew 27.3% to $694.8 million, based on higher revenues at Foodservice Equipment (up 29.3%), Cranes and Related Products (up 27.1%) and Marine (up 16.0%). New products and acquisitions boosted Foodservice Equipment and Cranes and Related Products sales, and the Marine operation completed construction of a large dipper dredge during the year. Gross Profit _ Manitowoc continued its pattern of improving gross margins; 29.0% in 1999 compared with 28.2% in 1998 and 28.0% in 1997. Excluding the results of the two businesses acquired by Foodservice Equipment earlier this year, the company's gross margin would have been higher (at 29.5%). The Foodservice Equipment Segment realigned into two groups along market channels in 1999-Ice/Beverage and Refrigeration _ to strengthen its market presence, improve synergies, and reduce costs, and began to move its ice machine operations to "mixed model/demand flow" manufacturing. Cranes and Related Products is benefiting from higher margins in the crawler crane and boom truck businesses, due to increased productivity, lower labor costs, and the cost effective use of outsourcing. The Marine Segment is the only operation that did not improve its gross margins in 1999. This resulted from a greater amount of project business during the year, versus repair and service work. Increased project work in the Marine Segment benefits the company in other ways, including: consistent work flow throughout the year, smoothing traditional seasonality, and strong cash flows. Engineering, Selling and Administrative Expenses _ ES&A grew 9.4% to $107.4 million for 1999, compared with the 16.5% increase to $98.1 million in 1998 and the 5.9% rise to $84.2 million in 1997. However, ES&A continued to decrease as a percentage of net sales; 13.3% in 1999 versus 14.1% in 1998 and 15.4% in 1997. ES&A costs are not increasing along with sales despite integrating a number of acquisitions, because the company is continuing its tight cost controls in all segments, and is identifying and implementing synergies within the Foodservice Equipment and Cranes and Related Products Segments. Operating Earnings _ The Foodservice Equipment and Cranes and Related Products Segments improved their operating margins again in 1999. This resulted in a 28.4% increase in consolidated operating earnings, at $119.0 million, compared with a 42.5% increase to $92.6 million for 1998, and a 27.7% increase to $65.0 million in 1997. Operating margins grew again this year, to 14.8% of sales versus 13.3% in 1998 and 11.9% in 1997. Manitowoc met its goal of increasing operating margins by more than 50 basis points in both the Foodservice Equipment and Cranes and Related Products Segments for the year. Income Taxes _ The 1999 effective income tax rate was 37.0%, flat with 1998's 36.9% and 1997's 37.0%. In the past three years, Manitowoc has benefited from a 1997 reorganization of its holding and operating company structure along segment lines. Net Earnings _ Higher sales, stronger margins, and a stable effective tax rate led to the fourth straight year of record net earnings in 1999, at $66.8 million, or $2.55 per diluted share. This was 30.0% higher than 1998's $51.4 million, or $1.97 per diluted share, which represented a 41.1% increase over 1997's $36.4 million or $1.40 per diluted share. The 1999 net earnings did not grow as quickly as operating earnings due to an increase in interest expense resulting from a greater amount of debt associated with acquisitions and higher interest rates during the year. In April 1999, Manitowoc completed its third three-for-two stock split in four years. The board approved this move to express its confidence in Manitowoc's future growth, to improve trading liquidity, and to reward shareholders. The split is reflected in all share and per- share figures in this report. Weighted average diluted shares outstanding for 1999 were 26.2 million, compared with 26.1 million for 1998 and 1997. THE FOODSERVICE EQUIPMENT SEGMENT. This segment contributed 47.1% of total sales, making it the largest of Manitowoc's businesses. This contrasts with its 46.0% contribution in 1998 and 45.3% in 1997. At $379.6 million, Foodservice Equipment revenues increased 18.8% over $319.5 million in 1998, which was a 29.3% improvement over $247.1 million in 1997. The major factors driving growth for the latest year included: (1) the 1999 acquisitions of Manitowoc Beverage Systems (MBS) and Kyees Aluminum, and the inclusion of the 50% interest in the F.A.G. joint venture for the first full year; (2) the continued success of the "Q" Series line of ice-cube machine; (3) a more aggressive program by General Electric to market its Monogram residential refrigerator/freezers; (4) McCall Refrigeration's ability to take market share from competitors in the reach-in refrigerator market; and (5) continued progress at SerVend in penetrating the ice/beverage dispensing market. Increased sales in 1998 were attributable to the inclusion of the SerVend acquisition for an entire year and strong performances from continuing operations, led by the positive market reception for the new "Q" Service ice machines. Management believes Foodservice Equipment Segment sales will continue to expand, driven by increasing demand for prepared foods; growth in small kiosk locations and quick-service restaurants; the replacement cycle for larger walk-in coolers, freezers, and ice machines; and the expansion of restaurant chains into less developed markets outside the U.S. Foodservice Equipment operating earnings grew faster than sales in 1999, increasing 23.5% to $65.4 million compared with 1998's $53.0 million and 1997's $36.7 million. This segment generated 47.5% of total segment operating earnings in 1999 excluding general corporate and amortization expenses, versus 49.0% in 1998 and 47.6% in 1997. Foodservice operating margins met the goal of a 50 basis point improvement reaching 17.2% in 1999, compared with 16.6% in 1998 and 14.9% for 1997. The principal factors driving this improvement included productivity improvements at several Foodservice businesses, increased sales volumes (spreading fixed costs over greater revenues), and a continued focus on cost containment measures within engineering, selling and administrative costs. Excluding the acquisitions of MBS and Kyees in 1999, the Foodservice operating margin would have been 18.5%. In addition, 1999 was the first year that the joint venture in China was profitable. The improvement in the 1998 operating margins came from: (1) selling the Tonka operation, which was unprofitable; and (2) margin improvements at McCall and Manitowoc Ice. In the near term, the Foodservice Equipment Segment's greatest opportunities lie in: (1) continuing to introduce new products, such as the QuietQube line of ice machines in 1999; (2) continued implementation of demand flow technology within the Foodservice Segment; (3) benefiting from synergies created within the Ice/Beverage and Refrigeration Groups, including combined purchasing and improved manufacturing processes to help increase operating margins; (4) benefiting from successful completion of the integration of the MBS and Kyees acquisitions and (5) continuing to make acquisitions that are EPS and EVA accretive. Barring unforeseen events, we believe this segment should see another record year in 2000. THE CRANES AND RELATED PRODUCTS SEGMENT. This segment generated 46.0% of total sales in 1999, compared with 47.5% in 1998 and 47.6% in 1997. At $370.7 million, Cranes and Related Products sales grew 12.3% over 1998's $330.0 million, which was 27.1% higher than $259.6 million for 1997. The most significant factors contributing to sales growth in 1999 were the market's strong acceptance of new and innovative products and the first full year's results from the acquisition of USTC. Manitowoc met its goal of introducing one new platform and attachment in 1999. These included the Model 21000 liftcrane, MAX-ER attachments for the 21000 and 2250 liftcranes, the Model 40MTC 40-ton boom truck and continued penetration by the models 888 and 777 introduced in 1995 and 1998, respectively. Products acquired or premiering in the past two years represented 55.3% of the order backlog (other than parts) at the end of 1999, and 42.8% of total Cranes and Related Products sales for the year. Higher sales in 1998 resulted form demand for new products, including the Models 888 and 777, and the Millennium Series of truck cranes. Sales in 1998 were also boosted by the active replacement cycle for crawler cranes, and increased orders from construction contractors. A number of industry trends support Cranes and Related Products' continued sales growth; (1) a large number of cranes in use are more than 25 years old, and they are being replaced as contractors and rental companies are introduced to new models that are technologically advanced and easier to operate; (2) demand for cranes in developed and developing countries outside the U.S. is expected to increase over the long term; and (3) TEA-21 is expected to increase U.S. highway system spending for construction during the next few years. As Cranes and Related Products increases its manufacturing efficiency, its year-end backlogs are decreasing and its order fill rates are increasing. During 1999, the lattice boom crane operations experienced lead time reductions of over 50% for its most popular crane models. In the fourth quarter of 1999, several orders were booked and delivered within the quarter. Backlog at the end of 1999 was $136.0 million, down slightly from 1998's $144.1 million and $149.1 million for 1997. The majority of the 1999 backlog includes orders for U.S. customers, with the remaining units going to Europe, Canada, the Middle East, and other international markets. Operating earnings for Cranes and Related Products grew 34.8% above 1998 levels, reaching $64.8 million in 1999, compared with 1998's 38.0% increase to $48.1 million, and 1997's 54.5% increase to $34.9 million. Cranes and Related Products contributed 47.2% of Manitowoc's total segment operating earnings for 1999, excluding general corporate and amortization expenses, compared with 44.5% in 1998 and 45.1% in 1997. Cranes and Related Products operating margins met the goal of a 50 basis point improvement in 1999, reaching 17.5% compared with 14.6% in 1998 and 13.4% in 1997. This resulted from the increased sales volumes at each operation, continued manufacturing efficiencies through better integration of operations, better technology, increased strategic outsourcing, and successful new product introductions. Operating margins in 1998 rise on strong sales at each operation and higher margins at Manitowoc Cranes and Manitex. Near-term growth opportunities for Cranes and Related Products include: (1) benefiting from continued new product development and market acceptance; (2) continuing to improve manufacturing efficiencies through additional outsourcing and capital improvements; and (3) continued successful assimilation of acquisitions. THE MARINE SEGMENT. This segment generated 6.9% of Manitowoc's 1999 sales, compared with 6.5% in 1998 and 7.2% in 1997. At $55.2 million, Marine revenues grew 21.6% from $45.4 million in 1998, which was 16.0% higher than the $39.2 million seen in 1997. The 1999 increase came from higher amounts of project work (contributing 47.5% of revenues in 1999 compared to 30.2% in 1998) and solid levels of repair and maintenance work (contributing 41.8% of revenues). The projects included building a double-hull tank barge, completing a dipper dredge, and the installation of a cargo handling/automation system. At the end of 1999, Marine met its goal of having a 12-18 month backlog of project work which included a hopper dredge and cutterhead dredge. Revenues for 1998 included revenue from building a dipper dredge and more small, higher margin service and construction projects. Marine operating earnings reached $7.3 million, up 4.6% over 1998's $7.0 million, and an improvement over 1997's $5.6 million. This segment contributed 5.3% of segment operating earnings for the year, excluding general corporate and amortization expenses, compared with 6.5% in 1998 and 7.3% in 1997. For 1999, its operating margin was 13.2%, compared with 15.4% in 1998 and 14.4% for 1997. The decrease in 1999 was due to a higher percentage of project work in its revenue mix. However, each project Marine undertakes generates positive EVA and keeps its experienced workforce and facilities busy during what traditionally had been a slow period. Marine's near-term growth opportunities include: (1) more dry- dockings of 1,000-foot vessels scheduled for its Sturgeon Bay facility; (2) increased interest in upgrading existing vessels and taking advantage of new automation equipment; and (3) new and potential construction projects, similar to the double-hull tank barge and such as the Great Lakes Dredge & Dock hopper dredge, scheduled for delivery in 2001. LIQUIDITY AND CAPITAL RESOURCES. Cash flows from operations of $103.4 million increased 81.9% from 1998's $56.8 million, which were 30.3% higher than $43.6 million in 1997. The improvement came from higher net earnings and a continued focus on working capital management and EVA. The primary uses of cash for 1999 were: (1) $62.1 million for acquisitions; (2) $27.3 million in debt payments; (3) $13.7 million in capital expenditures; and (4) $7.8 million in dividend payments. Management estimates that capital expenditures for 2000 will range between $17 and $20 million. At December 31, 1999, total debt decreased to $112.0 million, or 32.5% of capitalization. This compares to total debt of $139.3 million at December 31, 1998, or 44.7% of capitalization, in spite of the two acquisitions completed during 1999. Cash and marketable securities were $12.0 million at year-end 1999, compared with $12.4 million for 1998. The company currently has an authorization from the board of directors to repurchase up to 1.5 million (or 5.7%) of Manitowoc's outstanding common shares. During 1999, the company did not repurchase any common shares under this program. Inventories increased 11.5% to $91.4 million at the end of 1999 from $82.0 million at year-end 1998. Excluding the 1999 acquisitions of MBS and Kyees, inventories increased $2.7 million (or 3.2%), however account receivable decreased $11.9 million (or 17.2%). Working capital was a positive $1.7 million, compared with a negative $7.2 million in 1998. On April 6, 1999, Manitowoc increased its revolving credit facility to $300 million from $200 million, and extended the termination date to April 6, 2004. This facility will be used for funding future acquisitions, seasonal working capital requirements, and other financing needs. Management believes that available cash, the credit facility, cash generated from operations, and access to public debt and equity markets will be adequate to fund Manitowoc's capital requirements for the foreseeable future. ACQUISITIONS Acquisitions are expected to contribute 50% of Manitowoc's sales growth through 2002. The company acquired seven businesses over the past three years and continues to seek new candidates in each of its segments. All of these acquisitions were funded with cash and recorded using the purchase method of accounting. On February 10, 2000, Manitowoc purchased Beverage Equipment Supply Company (BESCO), a leading Midwest wholesale distributor of beverage dispensing equipment. BESCO was integrated with the company's MBS operation. On January 14, 2000, the company acquired certain assets of Pioneer Holdings LLC, a manufacturer of hydraulic boom trucks, from Mega Manufacturing. The acquisition complements the company's Manitex and USTC product lines. On April 9, 1999, Manitowoc purchased Kyees Aluminum, Inc., a leading provider of cooling components for all of the major suppliers of fountain soft-drink beverage dispensers. Based in LaMirada, California, Kyees is a technology leader in manufacturing cold plates - -- a key component used to chill soft drinks in dispensing equipment. This acquisition gives Manitowoc access to a secure supply of technologically superior cold plates, putting the company closer to its goal of becoming fully integrated in the food-cooling marketplace. Manitowoc purchased Kyees for $28.5 million using existing credit facilities. On January 11, 1999 Manitowoc completed the acquisition of Purchasing Support Group, renamed Manitowoc Beverage Systems (MBS). MBS is a beverage systems integrator, with nationwide distribution of backroom equipment and support system components. It serves the beverage needs of restaurants, convenience stores, and other outlets. MBS operates in the Northeast and Atlantic Coast regions, as well as in portions of Arizona, California, Florida, Georgia, and Nevada. This acquisition is improving the distribution of Manitowoc's beverage dispensing equipment and opening new markets. Manitowoc purchased MBS for a total of $43.7 million using existing credit facilities. On November 3, 1998, Manitowoc purchased Powerscreen USC Inc. (doing business as USTC, Inc.), based in York, Pennsylvania. USTC builds three proprietary product lines: boom-truck cranes, rough-terrain forklifts, and material-handling equipment. Combined with Manitex, the resulting operation is believed to be the number two competitor in this $300 million market. Manitowoc funded the $51.5 million purchase price using existing credit facilities. On September 9, 1998, Manitowoc acquired a 50% ownership interest in Fabbrica Apparecchiature per la Produzione del Ghiaccio S.r.l. (F.A.G.), and an option to purchase an additional 30% ownership over the next five years. This Milan, Italy-based company produces Icetronic and Compact brand ice makers and private label machines, with capacities between 22-132 pounds per day. The acquisition gives Manitowoc a manufacturing base in Europe and broadens its product offering to include smaller models, which are more appropriate for European and developing markets. The $2.5 million purchase price was funded using existing credit facilities. On October 31, 1997, Manitowoc acquired SerVend International, Inc., a leading manufacturer of ice/beverage dispensers and dispensing valves for the soft-drink industry. The acquisition, headquartered in Sellersburg, Indiana, helped Manitowoc enter this foodservice market niche. The $72.9 million purchase price was funded using existing credit facilities. CONTINGENCIES The United States Environmental Protection Agency (EPA) identified the company as a potentially responsible party (PRP) under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), liable for the costs associated with investigating and cleaning up the contamination at the Lemberger Landfill Superfund Site near Manitowoc, Wisconsin. Eleven of the PRPs have formed the Lemberger Site Remediation Group (LSRG) and have successfully negotiated with the EPA and Wisconsin Department of Natural Resources to settle the potential liability at the site and fund the cleanup. Approximately 150 PRPs have been identified as having shipped substances to the site. Recent estimates indicate that the total costs to clean up the site are approximately $30 million. Although liability is joint and several, the company's share of liability is estimated to be 11% of the total cleanup costs. To date, Manitowoc expensed a total of $3.3 million in connection with this matter. NEW ACCOUNTING STANDARDS In June 1999, the Financial Accounting Standard Board issued Financial Accounting Standard No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133." This issuance delays the effective date of FAS 133 one year. FAS 133 will now be effective for the company's first quarter financial statements in the year 2001. FAS 133 requires companies to record all derivative instruments on the balance sheet as assets or liabilities, measured at fair value. Any fair value change will be recorded in net income or comprehensive income, depending on whether the derivative is designated as part of a hedge transaction and if it is, the type of hedge transaction. The adoption of this statement is not anticipated to have a significant impact on the company's earnings or financial position. YEAR 2000 (Y2K) COMPLIANCE Manitowoc undertook various initiatives intended to ensure its computer equipment and software would function properly with respect to the Y2K issue and completed its Y2K remediation efforts prior to the end of 1999. In addition, prior to the end of 1999, the company developed various contingency plans to address any unforeseen circumstances that may have arisen. In total, Manitowoc spent about $5.0 million since the second half of 1997 to address the Y2K issue, which included significant upgrades to current hardware and software systems. About $1.0 million was spent during 1999. These expenditures were funded using cash flows from operations. Manitowoc has experienced no system failures or miscalculations as a result of the Y2K computer issue. In addition, the company is not aware of any failures attributable to the Y2K problem at its customers or suppliers that threaten to have an adverse impact on the company's business at this time. Even though Manitowoc has not experienced problems related to the Y2K issue at this time and does not expect to experience any problems in the future, it is still remotely possible that the company could be affected by Y2K issues in the future. Future Y2K issues may arise due to unforeseen problems with the company's systems or due to Y2K issues of other entities which may affect the company.
Eleven-Year Financial Summary ---------------------------------------------------------------- (Thousands of dollars, except shares and per share data) Transition Fiscal Years Calendar Calendar Calendar Calendar Calendar Period -------------------- 1999 1998 1997 1996 1995 1994 (1) 1994 1993 - -------------------------------------------------------------------------------------------------------------------------------- NET SALES Foodservice equipment $ 379,625 $319,457 $247,057 $242,317 $113,814 $ 44,996 $ 93,171 $ 81,424 Cranes & related products 370,662 329,953 259,645 210,564 169,866 70,958 156,253 178,630 Marine 55,204 45,412 39,162 47,584 29,469 7,952 25,956 18,504 - -------------------------------------------------------------------------------------------------------------------------------- Total $ 805,491 $694,822 $545,864 $500,465 $313,149 $123,906 $275,380 $278,558 - -------------------------------------------------------------------------------------------------------------------------------- Gross margin $ 233,712 $195,621 $152,600 $134,641 $ 75,470 $ 31,302 $ 67,924 $ 55,785 - -------------------------------------------------------------------------------------------------------------------------------- EARNINGS (LOSS) FROM OPERATIONS Foodservice equipment $ 65,372 $ 52,950 $ 36,746 $ 33,989 $ 22,729 $ 9,426 $ 21,637 $ 18,311 Cranes & related products 64,840 48,116 34,878 22,582 3,179 870 2,275 (1,961) Marine 7,297 6,978 5,648 6,197 4,024 (799) 2,447 593 General corporate (11,166) (10,543) (8,903) (7,678) (6,530) (3,981) (5,274) (5,296) Amortization (7,392) (4,881) (3,394) (3,000) (250) -- -- -- Plant relocation costs -- -- -- (1,200) -- (14,000) -- (3,300) - -------------------------------------------------------------------------------------------------------------------------------- Total 118,951 92,620 64,975 50,890 23,152 (8,484) 21,085 8,347 - -------------------------------------------------------------------------------------------------------------------------------- Other income (expense) - net (12,945) (11,208) (7,158) (8,384) (32) 169 1,494 582 - -------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) before taxes on income 106,006 81,412 57,817 42,506 23,120 (8,315) 22,579 8,929 Accounting changes -- -- -- -- -- -- -- (10,214) Provision (benefit) for taxes on income 39,222 30,032 21,394 16,863 8,551 (3,243) 8,536 2,612 - -------------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 66,784 $ 51,380 $36,423 $ 25,643 $ 14,569 $ (5,072) $ 14,043 $ (3,897) - -------------------------------------------------------------------------------------------------------------------------------- OTHER FINANCIAL INFORMATION Cash from operations $103,371 $ 56,814 $43,587 $ 64,514 $ 16,367 $ (330) $ 36,995 $ 62,700 - -------------------------------------------------------------------------------------------------------------------------------- Invested capital (monthly averages): Foodservice equipment(2) $274,378 $227,863 $171,647 $ 68,556 $ 32,696 $ 21,979 $ 25,662 $ 26,503 Cranes & related products 123,757 96,031 67,596 73,246 85,082 81,800 86,288 112,120 Marine 3,416 4,534 6,019 7,335 9,579 11,201 13,953 17,497 General corporate (2) 11,520 11,476 11,512 94,166 12,409 4,818 4,052 2,581 - -------------------------------------------------------------------------------------------------------------------------------- Total $413,071 $339,904 $256,774 $243,303 $139,766 $119,798 $129,955 $158,701 - -------------------------------------------------------------------------------------------------------------------------------- IDENTIFIABLE ASSETS Foodservice equipment (2) $314,982 $254,506 $249,384 $ 90,937 $ 90,126 $ 27,828 $ 31,460 $ 29,526 Cranes & related products 165,974 178,470 100,591 88,174 109,118 88,068 93,823 105,750 Marine 10,162 7,023 6,426 10,648 11,369 13,233 16,726 16,720 General corporate (2) 39,122 41,015 39,967 127,951 114,302 30,336 43,839 56,015 - -------------------------------------------------------------------------------------------------------------------------------- Total $530,240 $481,014 $396,368 $317,710 $324,915 $159,465 $185,848 $208,011 - -------------------------------------------------------------------------------------------------------------------------------- LONG-TERM OBLIGATIONS Long-term debt $ 79,223 $ 79,834 $ 66,359 $ 76,501 $101,180 $ -- $ -- $ -- - -------------------------------------------------------------------------------------------------------------------------------- DEPRECIATION Foodservice equipment $ 4,861 $ 4,906 $ 3,613 $ 3,377 $ 1,606 $ 703 $ 1,320 $ 1,187 Cranes & related products 3,661 4,085 4,044 4,260 4,162 2,288 4,211 3,875 Marine 415 333 256 600 608 316 681 756 General corporate 384 405 405 81 80 46 61 44 - -------------------------------------------------------------------------------------------------------------------------------- Total $ 9,321 $ 9,729 $ 8,318 $ 8,318 $ 6,456 $ 3,353 $ 6,273 $ 5,862 - -------------------------------------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES Foodservice equipment $ 8,974 $ 7,415 $ 6,847 $ 5,110 $ 4,568 $ 3,011 $ 2,300 $ 2,152 Cranes & related products (3) 3,536 2,945 4,952 2,816 14,252 528 3,120 8,648 Marine 1,165 1,174 233 343 383 109 (492) (463) General corporate (3) 39 144 8 127 6 82 414 (39) - -------------------------------------------------------------------------------------------------------------------------------- Total $ 13,714 $ 11,678 $ 12,040 $ 8,396 $ 19,209 $ 3,730 $ 5,342 $ 10,298 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE (4) Basic $ 2.57 $ 1.98 $ 1.41 $ .99 $ .56 $ (.19) $ .48 $ (.12) Diluted 2.55 1.97 1.40 .99 .56 (.19) .48 (.12) Dividends .30 .30 .30 .30 .30 .15 .30 .30 Stockholders' equity 8.90 6.65 4.97 3.87 3.15 2.90 3.44 3.87 - -------------------------------------------------------------------------------------------------------------------------------- AVERAGE SHARES OUTSTANDING: Basic 25,991,711 25,932,356 25,900,682 25,900,553 25,901,342 26,140,122 29,486,006 32,937,933 Diluted 26,200,666 26,125,067 26,096,529 25,993,848 25,906,769 26,140,122 29,486,006 32,937,933 - --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEARS --------------------------------------------------------------------------------- 1992 1991 1990 1989 - ------------------------------------------------------------------------------------------------ NET SALES Foodservice equipment $ 74,175 $ 73,944 $ 74,612 $ 74,431 Cranes & related products 155,743 147,554 117,464 102,430 Marine 16,471 14,689 33,752 23,735 - ------------------------------------------------------------------------------------------------ Total $246,389 $236,187 $225,828 $200,596 - ------------------------------------------------------------------------------------------------ Gross profit $ 54,443 $ 58,062 $ 54,366 $ 50,860 - ------------------------------------------------------------------------------------------------ EARNINGS (LOSS) FROM OPERATIONS Foodservice equipment $ 17,585 $ 17,364 $ 19,387 $18,468 Cranes & related products (850) 7,602 5,490 3,454 Marine 278 (973) 6,497 3,416 General corporate (6,545) (5,734) (6,094) (5,623) Amortization -- -- -- -- Plant relocation costs -- -- -- -- - -------------------------------------------------------------------------------------------------- Total 10,468 18,259 25,280 19,715 - -------------------------------------------------------------------------------------------------- Other income (expense) - net 1,104 2,233 5,077 4,527 - -------------------------------------------------------------------------------------------------- Earnings (loss) before taxes on income 11,572 20,492 30,357 24,242 Accounting changes -- -- -- -- Provision (benefit) for taxes on income 3,315 5,060 9,327 7,344 - -------------------------------------------------------------------------------------------------- Net earnings (loss) $ 8,257 $ 15,432 $ 21,030 $ 16,898 - -------------------------------------------------------------------------------------------------- OTHER FINANCIAL INFORMATION Cash from operations $ 28,250 $ 6,472 $ 14,210 $ (5,278) - -------------------------------------------------------------------------------------------------- Invested capital (monthly averages): Foodservice equipment (2) $ 23,555 $ 25,099 $ 19,018 $ 22,859 Cranes & related products 137,839 133,777 118,097 99,147 Marine 16,879 14,621 16,206 28,600 General corporate (2) 2,025 3,051 6,314 7,656 - ------------------------------------------------------------------------------------------------- Total $180,298 $176,548 $159,635 $158,262 - ------------------------------------------------------------------------------------------------- IDENTIFIABLE ASSETS Foodservice equipment(2) $ 25,608 $ 28,019 $ 24,168 $ 26,074 Cranes & related products 138,416 136,995 115,804 96,623 Marine 19,253 18,009 22,683 32,451 General corporate (2) 41,829 35,983 50,143 61,966 - ------------------------------------------------------------------------------------------------- Total $225,106 $219,006 $212,798 $217,114 - ------------------------------------------------------------------------------------------------- LONG-TERM OBLIGATION Long-term debt $ -- $ -- $ -- $ -- - ------------------------------------------------------------------------------------------------- DEPRECIATION Foodservice equipment $ 1,090 $ 812 $ 657 $ 771 Cranes & related products 4,053 3,691 2,895 2,953 Marine 785 792 748 465 General corporate 196 234 431 380 - ------------------------------------------------------------------------------------------------ Total $ 6,124 $ 5,529 $ 4,731 $ 4,569 - ------------------------------------------------------------------------------------------------ CAPITAL EXPENDITURES Foodservice equipment $ 1,099 $ 2,797 $ 748 $ (169) Cranes & related products (3) 4,047 6,347 3,130 2,225 Marine 500 113 197 108 General corporate (3) (508) (2,955) 70 586 - ------------------------------------------------------------------------------------------------ Total $ 5,138 $ 6,302 $ 4,145 $ 2,750 - ------------------------------------------------------------------------------------------------ PER SHARE (4) Basic $ .24 $ .44 $ .60 $ .48 Diluted .24 .44 .60 .48 Dividends .30 .30 .30 .23 Stockholders' equity 4.75 4.80 4.64 4.63 - ------------------------------------------------------------------------------------------------ AVERAGE SHARES OUTSTANDING: Basic 34,832,861 34,833,356 34,834,217 34,880,849 Diluted 34,832,861 34,833,356 34,834,217 34,880,849 - ------------------------------------------------------------------------------------------------ (1) The company changed its year-end to December 31, effective with the period ended December 31, 1994 (transition period). The prior fiscal year-end ended on the Saturday nearest to June 30. (2) In 1997, as part of the corporate restructuring, the Shannon acquisition goodwill was transferred to the Foodservice segment. (3) During 1991, certain assets were transferred from general corporate to the Cranes and Related Products segment. (4) Per share data and average shares outstanding have been adjusted to reflect the three-for-two stock splits which occurred in 1999, 1997 and 1996. See Note 9 of the notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF EARNINGS (Thousands of dollars, except per share data) For The Years Ended December 31 ----------------------------------------------------------- 1999 1998 1997 ----------- ----------- --------- EARNINGS Net Sales $ 805,491 $694,822 $545,864 ---------- ----------- ---------- Costs and expenses: Cost of sales 571,779 499,201 393,264 Engineering, selling, and administrative expenses 107,369 98,120 84,231 Amortization 7,392 4,881 3,394 ---------- --------- --------- Total costs and expenses 686,540 602,202 480,889 --------- --------- -------- Earnings from operations 118,951 92,620 64,975 Interest expense (10,790) (9,741) (6,230) Other expense _ net (2,155) (1,467) ( 928) ---------- --------- --------- Earnings before taxes on income 106,006 81,412 57,817 Provision for taxes on income 39,222 30,032 21,394 ----------- --------- --------- Net earnings $ 66,784 $ 51,380 $ 36,423 ----------- --------- --------- PER SHARE DATA Basic $ 2.57 $ 1.98 $ 1.41 Diluted $ 2.55 $ 1.97 $ 1.40 The accompanying notes to consolidated financial statements are an integral part of these financial statements.
CONSOLIDATED BALANCE SHEETS (Thousands of dollars, except shares data) As of December 31 ------------------------------------ 1999 1998 ---- ---- ASSETS CURRENT ASSETS Cash and cash equivalents $10,097 $ 10,582 Marketable securities 1,923 1,834 Accounts receivable, less allowances of $1,803 and $1,656 62,802 69,504 Inventories 91,437 81,978 Prepaid expenses and other 2,211 5,297 Future income tax benefits 22,528 21,682 ------- --------- Total current assets 190,998 190,877 ------- --------- Intangible assets _ net 232,729 184,926 Property, plant and equipment _ net 92,023 93,583 Other assets 14,490 11,628 -------- --------- Total assets $530,240 $481,014 -------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $141,909 $123,534 Short-term borrowings 32,300 48,500 Current portion of long-term debt 489 10,968 Product warranties 14,610 15,110 -------- --------- Total current liabilities 189,308 198,112 -------- --------- NON-CURRENT LIABILITIES Long-term debt, less current portion 79,223 79,834 Postretirement health benefits obligation 19,912 19,705 Other liabilities 9,621 10,811 -------- --------- Total non-current liabilities 108,756 110,350 -------- --------- STOCKHOLDERS' EQUITY Common stock (36,746,482 and 24,497,655 shares issued in 1999 and 1998, respectively) 367 245 Additional paid-in capital 31,476 31,029 Accumulated other comprehensive loss (814) (212) Retained earnings 281,672 222,687 Treasury stock, at cost (10,658,113 and 7,193,077 shares in 1999 and 1998, respectively) (80,525) (81,197) --------- --------- Total stockholders' equity 232,176 172,552 --------- --------- Total liabilities and stockholders' equity $530,240 $481,014 --------- --------- The accompanying notes to consolidated financial statements are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of dollars) For The Years Ended December 31 -------------------------------- 1999 1998 1997 CASH FLOWS FROM OPERATIONS ------- ------- ------- Net earnings $ 66,784 $ 51,380 $ 36,423 Adjustments to reconcile net cash from operations: Depreciation 9,321 9,729 8,318 Amortization of goodwill 7,392 4,881 3,394 Amortization of deferred financing fees 637 420 300 Deferred income taxes (592) (5,748) (3,172) Loss on sale of property, plant and equipment 557 928 218 Changes in operating assets and liabilities excluding effects of business acquisitions: Accounts receivable 14,057 (6,120) 2,532 Inventories (4,169) (18,662) (6,006) Other current assets 3,389 (2,535) (1,264) Non-current assets (2,935) 483 842 Current liabilities 9,764 24,064 2,492 Non-current liabilities (834) (2,006) (490) -------- -------- --------- Net cash provided by operations 103,371 56,814 43,587 --------- --------- --------- CASH FLOWS FROM INVESTING Business acquisitions - net of cash acquired (62,104) (48,175) (66,979) Capital expenditures (13,714) (11,678) (12,040) Proceeds from sale of property, plant and equipment 6,491 1,329 3,533 Purchase of marketable securities - net (89) (94) (84) ---------- --------- --------- Net cash used for investing (69,416) (58,618) (75,570) ---------- --------- --------- CASH FLOWS FROM FINANCING Dividends paid (7,799) (7,781) (7,722) Proceeds from long-term debt -- 75,000 -- Payments on long-term debt (11,090) (65,957) (11,606) Proceeds (payments) from short-term borrowings - net (16,200) (600) 49,100 Debt acquisition costs (574) (521) (290) Exercises of stock options 1,241 355 38 ---------- --------- --------- Net cash (used for) provided by financing (34,422) 496 29,520 ---------- --------- --------- Effect of exchange rate changes on cash (18) 2 (13) ---------- --------- --------- Net decrease in cash and cash equivalents (485) (1,306) (2,476) ---------- --------- --------- Balance at beginning of year 10,582 11,888 14,364 ---------- --------- --------- Balance at end of year $ 10,097 $ 10,582 $ 11,888 ---------- --------- --------- SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 10,137 $ 8,490 $ 6,927 ---------- --------- --------- Income taxes paid $ 41,327 $ 37,108 $ 21,449 ---------- --------- --------- The accompanying notes to consolidated financial statements are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (Thousands of dollars, except shares and per share data) For The Years Ended December 31 ----------------------------------------------------------------- 1999 1998 1997 -------- --------- -------- COMMON STOCK - SHARES OUTSTANDING Balance at beginning of year 17,304,578 17,269,175 11,511,357 Three-for-two stock split 8,652,289 -- 5,755,679 Stock options exercised 144,177 39,694 3,296 Stock swaps for stock options exercised (12,675) (4,291) (1,157) --------- -------- -------- Balance at end of year 26,088,369 17,304,578 17,269,175 --------- -------- -------- COMMON STOCK . PAR VALUE Balance at beginning of year $ 245 $ 245 $ 163 Three-for-two stock split 122 -- 82 --------- -------- -------- Balance at end of year $ 367 $ 245 $ 245 --------- -------- -------- ADDITIONAL PAID-IN CAPITAL Balance at beginning of year $ 31,029 $ 30,980 $ 31,061 Three-for-two stock split (122) -- (82) Stock options exercised 569 49 1 --------- -------- -------- Balance at end of year $ 31,476 $ 31,029 $ 30,980 --------- -------- -------- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Balance at beginning of year $ (212) $ (192) $ 220 Other comprehensive loss (602) (20) (412) --------- -------- -------- Balance at end of year $ (814) $ (212) $ (192) --------- -------- -------- RETAINED EARNINGS Balance at beginning of year $ 222,687 $ 179,088 $ 150,387 Net earnings 66,784 51,380 36,423 Cash dividends * (7,799) (7,781) (7,722) --------- -------- -------- Balance at end of year $ 281,672 $ 222,687 $ 179,088 --------- -------- -------- TREASURY STOCK Balance at beginning of year $ (81,197) $ (81,503) $ (81,502) Stock options exercised 1,088 448 37 Stock swaps for stock options exercised (416) (142) (38) --------- -------- -------- Balance at end of year $ (80,525) $ (81,197) $ (81,503) --------- -------- -------- COMPREHENSIVE INCOME Net earnings $ 66,784 $ 51,380 $ 36,423 Other comprehensive loss: Foreign currency translation adjustment (602) (20) (412) --------- -------- -------- Comprehensive income $ 66,182 $ 51,360 $ 36,011 --------- -------- -------- * Cash dividends per share after giving effect to the three-for-two stock splits in 1999 and 1997, were $.30 per share in all years. The accompanying notes to consolidated financial statements are an integral part of these financial statements.
- ------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars, except share and per share data or where otherwise indicated) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------- BASIS OF PRESENTATION - --------------------- The financial statements of The Manitowoc Company, Inc. (the "company") have been prepared in accordance with generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the years presented. They also affect the disclosures of contingencies. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION - --------------------------- The consolidated financial statements include the accounts of the company and its wholly and partially owned domestic and non-U.S. subsidiaries. Significant intercompany balances and transactions have been eliminated. COMPREHENSIVE INCOME - -------------------- Comprehensive income includes, in addition to net income, other items that are reported as direct adjustments to stockholders' equity. Presently, the company's foreign currency translation item is the only item which requires inclusion in the Statements of Stockholders' Equity and Comprehensive Income. INVENTORIES - ----------- Inventories are stated at the lower of cost or market as described in Note 4. Advance payments from customers are netted against inventories to the extent of related accumulated costs. Advance payments netted against inventories at December 31, 1999 and 1998 were $202 and $1,242, respectively. Advance payments received in excess of related costs on uncompleted contracts are classified as accrued expenses. REVENUE RECOGNITION - ------------------- Revenues and expenses in all business segments are generally recognized upon shipment or completion of service provided. However, revenues and costs on contracts for long-term projects are recognized according to the percentage-of-completion method, commencing when work has progressed to a state where estimates are reasonably accurate. These estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to income resulting from such revisions are recorded in the accounting period in which the revisions are made. Estimated losses on such contracts are recognized in full when they are identified. FOREIGN CURRENCY TRANSLATION - ---------------------------- The financial statements of the company's non-U.S. subsidiaries are translated using the current exchange rate for assets and liabilities and the weighted average exchange rate for the year for statement of earnings items. Resulting translation adjustments are recorded directly to a separate component of stockholders' equity referred to as other comprehensive income. PROPERTY, PLANT AND EQUIPMENT - ----------------------------- Property, plant and equipment is depreciated over the estimated useful lives of the assets using the straight-line depreciation method for all property acquired after June 29, 1991. Property acquired prior to June 30, 1991 is depreciated using the sum-of-the-years-digits method. Property, plant and equipment is depreciated over the following estimated useful lives: Years ----- Buildings and improvements 40 Drydocks and dock fronts 15-27 Machinery, equipment and tooling 4-15 Computer hardware and software 3-5 Vehicles 4-5 INTANGIBLE ASSETS - ----------------- Intangible assets consist primarily of costs in excess of net assets of businesses acquired (see Note 11). Intangible assets are amortized using the straight-line method over their estimated beneficial lives, not to exceed 40 years. Subsequent to an acquisition, the company annually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of intangibles may warrant revision or that the remaining balance of intangibles may not be recoverable. When factors indicate that intangibles should be evaluated for possible impairment, the company uses an estimate of the related business' undiscounted net cash flows over the remaining life of the intangibles in measuring whether the intangibles are recoverable. Intangible assets at December 31, 1999 and 1998 of $232,729 and $184,926, respectively, are net of accumulated amortization of $20,574 and $12,545, respectively. FAIR VALUE OF FINANCIAL INSTRUMENTS - ----------------------------------- The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, and short-term borrowings approximate fair value due to the immediate short-term maturity of these financial instruments. The carrying amount reported for long-term debt approximates fair value since either the underlying instrument bears interest at a variable rate that reprices frequently or the interest rate approximates the market rate at December 31, 1999. The fair value of interest rate swaps is the amount at which they could be settled, based on estimates obtained from financial institutions (see Note 6). DERIVATIVE FINANCIAL INSTRUMENTS - --------------------------------- Derivative financial instruments are used by the company to manage risks associated with interest rate market volatility. Interest rate swap agreements are used to modify the company's exposure to interest rate movements and reduce borrowing costs. For interest rate swap agreements, net interest payments or receipts are recorded as adjustments to interest expense on a current basis. In June 1998, the Financial Accounting Standards Board issued FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" which is now effective beginning with the company's 2001 first quarter financial statements. It requires all derivative instruments to be recorded on the balance sheet as assets or liabilities, at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or comprehensive income, depending on the terms of the derivative. The adoption of this statement is not anticipated to have a significant impact on the company's earnings or financial position. INCOME TAXES - ------------ The company utilizes the liability method to recognize deferred tax assets and liabilities for the expected future income tax consequences of events that have been recognized in the company's financial statements. Under this method, deferred tax assets and liabilities are determined based on the temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - ------------------------------------------- The expected cost of postretirement health care benefits is recorded during the years that the employees render service. RESEARCH AND DEVELOPMENT - ------------------------ Research and development costs are charged to expense as incurred and amounted to $6,876, $4,704 and $4,412 in 1999, 1998 and 1997, respectively. WARRANTIES - ---------- Estimated warranty costs are provided at the time of sale of the warranted products, based on historical warranty experience for the related product. EARNINGS PER SHARE - -------------------- Basic earnings per share is computed by dividing net earnings by the weighted average shares outstanding during each year/period. Diluted earnings per share is computed similar to basic earnings per share except that the weighted average shares outstanding is increased to include the number of additional shares that would have been outstanding if stock options were exercised and the proceeds from such exercise were used to acquire shares of common stock at the average market price during the year/period. CASH EQUIVALENTS - ---------------- All short-term investments purchased with an original maturity of three months or less are considered cash equivalents. ENVIRONMENTAL LIABILITIES - ------------------------- The company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Such accruals are adjusted as information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. 2. ______________________________________________________________________ PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31 is summarized as follows:
1999 1998 ---- ---- Land $ 3,440 $ 3,207 Buildings 65,651 64,230 Drydocks and dock fronts 21,675 21,675 Machinery, equipment and tooling 117,542 118,230 Construction in progress 6,044 4,018 ---------- --------- Total cost 214,352 211,360 Less accumulated depreciation (122,329) (117,777) ---------- --------- Property, plant and equipment - net $ 92,023 $ 93,583 ---------- ---------
3. ______________________________________________________________________ MARKETABLE SECURITIES Marketable securities at December 31, 1999 and 1998 included $1.9 million and $1.8 million, respectively, of securities which are available for sale. The difference between fair market value and cost for these investments was not significant in either year. 4. ______________________________________________________________________ INVENTORIES The components of inventories at December 31 are summarized as follows:
1999 1998 ---- ---- Raw materials $ 39,134 $ 32,564 Work-in-process 30,218 27,882 Finished goods 42,352 42,304 ---------- -------- Total inventories at FIFO cost 111,704 102,750 Excess of FIFO cost over LIFO value (20,267) (20,772) ---------- -------- Total inventories $ 91,437 $ 81,978 ---------- --------
Inventories are carried at the lower of cost or market using the first-in, first-out (FIFO) method for 57% and 47% of total inventory for 1999 and 1998, respectively. The remainder of the inventories are costed using the last-in, first-out (LIFO) method. 5. ______________________________________________________________________ ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses at December 31 are summarized as follows:
1999 1998 ---- ---- Trade accounts payable $ 59,609 $ 43,603 Profit sharing and incentives 26,974 24,851 Income taxes payable 6,877 4,905 Customer progress payments 3,518 7,209 Accrued product liability 8,219 10,167 Miscellaneous accrued expenses 36,712 32,799 ---------- --------- Total $141,909 $123,534 ---------- ---------
6. ______________________________________________________________________ DEBT Long-term debt at December 31 is summarized as follows:
1999 1998 ---- ---- Notes payable $ 75,000 $ 75,000 Industrial revenue bonds 4,712 5,323 Term loan payable -- 10,479 -------- --------- 79,712 90,802 Less current portion 489 10,968 -------- --------- $ 79,223 $ 79,834 ======== =========
On April 6, 1999, the company amended and restated its existing Credit Agreement (Agreement) with a group of banks in order to increase the amount of funds available and extend the termination date to April 6, 2004. Currently, the Agreement provides for maximum borrowings of $300 million under revolving loans and a letter of credit subfacility. There were $32.3 million and $48.5 million of borrowings outstanding under the revolving loan portion of the Agreement at December 31, 1999 and 1998, respectively. The Agreement includes covenants, the most restrictive of which require the maintenance of various debt and net worth ratios. An annual commitment fee, calculated based upon the company's consolidated leverage ratio, as defined by the Agreement, is due on the unused portion of the facility quarterly. The commitment fee in effect at the end of both 1999 and 1998 on the unused portion of the available credit was 0.15% for both years. Borrowings under the Agreement bear interest at a rate equal to the sum of the base rate, or a Eurodollar rate, at the option of the company, plus an applicable percentage based on the company's consolidated leverage ratio, as defined by the Agreement. The base rate is equal to the greater of the federal funds rate in effect on such day plus 0.5%, or the prime rate in effect on such day. Borrowings under the Agreement are not collateralized. The weighted average interest rate for the borrowings outstanding under the Agreement at December 31, 1999 and 1998 was 7.62% and 6.28%, respectively. On April 2, 1998, the company privately placed $50 million of Series A Senior Notes with Prudential Insurance Company. On October 31, 1998, the company issued, also with Prudential Insurance Company, $25 million in principal amount of Senior Shelf Notes (collectively referred to as the "Notes"). The company used the proceeds from the sale of the Notes to pay down existing borrowings under the term loan and finance an acquisition. The Notes are not collateralized and bear interest at a fixed weighted average rate of 6.53%. The Notes mature in 12 years after issuance and require equal principal payments annually beginning in 2006. The agreement between the company and Prudential Insurance Company pursuant to which the Notes were issued includes covenants, the most restrictive of which require the company to maintain certain debt ratios and levels of net worth. These covenants are no more restrictive than the covenants made by the company in connection with the aforementioned Credit Agreement. The company has entered into interest rate swap agreements, which expire at various times through October 2002, to reduce the impact of changes in interest rates on its floating rate debt. At December 31, 1999, the company had outstanding two interest rate swap agreements with financial institutions, having a total notional principal amount of $17.6 million. The effect of these agreements on the company's interest rates during 1999 was not significant. Interest expense has been adjusted for the net receivable or payable under these agreements. The fair value of these interest rate swap agreements was $0.2 million at December 31, 1999. The company is exposed to credit loss in the event of non-performance by the financial institutions. However, management does not anticipate such non-performance. Industrial revenue bonds relate to the company's obligations on two properties located in Tennessee and Indiana. These obligations are due in monthly or annual installments including principal and interest at rates varying from 5.7% to 10.0% at December 31, 1999. These obligations mature at various dates through 2004. The aggregate scheduled maturities of long-term debt and industrial revenue bond obligations in subsequent years are as follows: 2000 $ 489 2001 851 2002 222 2003 250 2004 2,900 Thereafter 75,000 -------- $ 79,712 ======== On May 28, 1999, the company entered into an accounts receivable sales arrangement with a bank. The company has sold $67.2 million in accounts receivable to the bank during 1999 under this arrangement. At December 31, 1999, the company had outstanding $8.4 million of accounts receivable which have been sold to the bank but for which the customers' cash has not yet been collected. The cash flow impact of this arrangement is reported as cash flows from operations in the 1999 Consolidated Statement of Cash Flows. Under this arrangement, the company is required to repurchase from the bank the first $0.5 million and amounts greater than $1.0 million of the aggregate uncollected receivables during a twelve month period. 7. ______________________________________________________________________ INCOME TAXES Components of earnings before income taxes are as follows:
1999 1998 1997 ---- -------- --------- Earnings (loss) before income taxes: Domestic $106,234 $ 81,081 $ 58,706 Foreign (228) 331 (889) -------- -------- -------- TOTAL $106,006 $ 81,412 $ 57,817 -------- -------- --------
The provision for taxes on income is as follows: 1999 1998 1997 -------- -------- --------- Current: Federal $ 36,715 $ 32,251 $ 22,307 State 3,291 3,424 1,973 Foreign (192) 105 286 -------- -------- -------- Total current 39,814 35,780 24,566 -------- -------- -------- Deferred . federal and state (592) (5,748) (3,172) -------- -------- -------- Provision for taxes on income $ 39,222 $ 30,032 $ 21,394 ======== ======== ========
The Federal statutory income tax rate is reconciled to the company's effective income tax rate as follows: 1999 1998 1997 -------- -------- --------- Federal income tax at statutory rate 35.0% 35.0 % 35.0 % State income taxes, net of federal income tax benefit 2.2 2.6 2.2 Non-deductible goodwill amortization 1.4 1.1 1.4 Tax-exempt FSC income (1.2) (1.1) (1.9) Adjustments to prior years' income tax accruals -- -- (1.1) Provision for tax on foreign income, net of foreign tax credit (0.1) -- 1.5 Elimination of valuation allowance -- (1.0) -- Other (0.3) 0.3 (0.1) -------- -------- -------- Provision for taxes on income 37.0% 36.9 % 37.0 % ======== ======== ========
The deferred income tax accounts reflect the impact of temporary differences between the basis of assets and liabilities for financial reporting purposes and their related basis as measured by income tax regulations. A summary of the deferred income tax accounts at December 31 is as follows:
1999 1998 -------- -------- Current deferred tax assets: Inventories $ 4,365 $ 3,559 Accounts receivable 925 793 Product warranty reserves 5,339 4,567 Product liability reserves 3,165 3,988 Environmental reserves 186 194 Future customer discount reserves 425 742 Other employee-related benefits and allowances 5,124 4,616 Property, plant and equipment 1,016 1,205 Other 1,983 2,018 -------- -------- Future income tax benefits, current $ 22,528 $ 21,682 ======== ======== Non-current deferred tax assets (liabilities): Property, plant and equipment $( 11,753) $(10,040) Postretirement benefits other than pensions 7,775 7,694 Deferred employee benefits 4,782 3,034 Severance benefits 1,106 1,167 Product warranty reserves 1,130 1,057 Environmental reserves 399 458 Net operating loss carryforwards 1,874 2,186 Other -- 11 -------- -------- Net future income tax benefits, non-current $ 5,313 $ 5,567 ======== ========
The company does not provide for taxes which would be payable if undistributed earnings of foreign subsidiaries were remitted because the company either considers these earnings to be invested for an indefinite period or anticipates that when such earnings are distributed, the U.S. income taxes payable would be substantially offset by foreign tax credits. As of December 31, 1999, the company has approximately $16.7 million of state net operating loss carryforwards, which are available to reduce future state tax liabilities. The company also has acquired federal net operating losses of $4.8 million available to reduce federal taxable income. These loss carryforwards expire in varying amounts through 2012. A valuation allowance was recorded at December 31, 1997, to reflect the estimated amount of deferred assets which may not be realized due to the possible limitation on the future use of certain state tax net operating loss carryforwards. During 1998, the company eliminated the valuation allowance to reflect certain tax strategies designed to utilize these net operating loss carryforwards. 8. - --------------------------------------------------- EARNINGS PER SHARE The following is a reconciliation of the average shares outstanding used to compute basic and diluted earnings per share.
1999 1998 1997 -------------------- ------------------- -------------------- Per Per Per Share Share Share Shares Amount Shares Amount Shares Amount ----- ----- ----- ----- ----- ----- Basic EPS 25,991,711 $2.57 25,932,356 $1.98 25,900,682 $1.41 ===== ===== ===== Effect of dilutive securities stock options 208,955 192,711 195,847 ------------ ---------- --------- Diluted EPS 26,200,666 $2.55 26,125,067 $1.97 26,096,529 $1.40 ========== ===== ========== ===== ========== =====
9. - ------------------------------------------------ STOCKHOLDERS' EQUITY Authorized capitalization consists of 75 million shares of $.01 par value common stock and 3.5 million shares of $.01 par value preferred stock. None of the preferred shares have been issued. Pursuant to a Rights Agreement dated August 5, 1996, each common share carries with it four-ninths of a Right to purchase additional stock. The Rights are not currently exercisable and cannot be separated from the shares unless certain specified events occur, including the acquisition of 20% or more of the common stock by a person or group, or the commencement of a tender offer for 20% or more of the common stock. In the event a person or group actually acquires 20% or more of the common stock, or if the company is merged with an acquiring person, subject to approval by the board of directors, each full Right permits the holder to purchase one share of common stock for $100. The Rights expire on September 18, 2006 and may be redeemed by the company for $.01 per Right (in cash or stock) under certain circumstances. On February 17, 1999, the company's board of directors authorized a three-for-two stock split of the company's shares in the form of a 50- percent stock dividend payable on April 1, 1999, to shareholders of record on March 1, 1999. As a result of the stock split, 8,652,289 shares were issued. All references in the financial statements to average number of shares outstanding, earnings per share amounts, and market prices per share of common stock have been restated to reflect this split. The company also split its common stock on a three-for- two basis on June 30, 1997. On October 19, 1999, the board of directors authorized the company to repurchase up to 1.5 million shares of common stock. Such repurchases will be in the open market as the company may determine from time to time. As of December 31, 1999, no shares had been repurchased pursuant to this authorization. 10. - -------------------------------------------- STOCK OPTIONS The company maintains two stock plans, The Manitowoc Company, Inc. Stock Plan and The Manitowoc Company, Inc. Non-Employee Director Stock Plan, for the granting of stock options as an incentive to certain employees and to non-employee members of the board of directors. Under these Plans, stock options to acquire up to 1.125 million (employees) and 0.125 million (non-employee directors) shares of common stock, in the aggregate, may be granted under a time-vesting formula at an exercise price equal to the market price of the common stock at the date of grant. The options 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. Stock option transactions under these Plans for the years ended December 31, 1999, 1998 and 1997 are summarized as follows:
1999 1998 1997 ---------------------- -------------------------- ------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ ------- ------- ---------- ------- ---------- Options outstanding, beginning of year 610,006 $18.63 608,181 $13.66 322,650 $ 8.97 Options granted 221,557 $25.58 209,400 $30.54 290,475 $18.78 Options exercised (144,177) $11.50 ( 59,541) $ 8.33 ( 4,944) $ 7.78 Options forfeited ( 75,505) $25.84 (148,034) $19.19 -- -- -------- ------- ------- Options outstanding, end of year 611,881 $21.94 610,006 $18.63 608,181 $13.66 ======== ======= ======= Options exercisable, end of year 47,444 $15.58 54,134 $9.02 31,083 $ 7.78 ======== ======= =======
The outstanding stock options at December 31, 1999, have a range of exercise prices of $7.78 to $30.54 per option. The following shows the options outstanding and exercisable by range of exercise prices at December 31, 1999:
Options Outstanding Options Exercisable - -------------------------------------------------------------------------------------- Weighted Average Weighted Weighted Remaining Average Average Range of Contractual Exercise Exercise Exercise Prices Outstanding Life (Years) Price Exercisable price - --------------- ---------- ----------- -------- ---------- ---------- $7.78-$9.93 106,625 6.0 $ 9.26 20,724 $ 9.32 $18.78-$25.58 366,052 8.1 $22.37 22,970 $18.78 $30.54 139,204 7.6 $30.54 3,750 $30.54 --------- ----------- -------- -------- -------- 611,881 7.6 $21.94 47,444 $15.58 --------- --------
The weighted average fair value at date of grant for options granted during 1999, 1998 and 1997 was $9.56, $11.77 and $6.29 per option, respectively. The fair value of options at date of grant was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
1999 1998 1997 ---- ---- ---- Expected life (years) 7 7 7 ------- ------- ------- Risk-free interest rate 5.0% 5.8 % 6.7 % ------- ------- ------- Expected volatility 30.9% 31.9 % 27.6 % ------- ------- ------- Expected dividend yield 1.3% 1.5 % 2.3 % ------- ------- -------
The company applies Accounting Principles Board Opinion No. 25, under which no compensation cost has been recognized in the statements of earnings. Had compensation cost been determined under an alternative method suggested by FAS No. 123, "Accounting for Stock-Based Compensation," net income would have decreased $877, $547, and $263 in 1999, 1998, and 1997, respectively; and diluted earnings per share would have been $2.52, $1.95 and $1.38 in 1999, 1998, and 1997, respectively. 11. - --------------------------------------- ACQUISITIONS On January 11, 1999, the company acquired all of the issued and outstanding shares of Purchasing Support Group LLC (PSG), a four- member beverage service organization. The new operation, renamed Manitowoc Beverage Systems, Inc. (MBS), provides full-service parts, components, and dispenser systems support to bottlers in the beverage industry. MBS is made up of companies that have been serving soft- drink bottling operations throughout the United States since the 1960s with a variety of equipment services for beverage dispensing systems. MBS operates in the Northeast, Atlantic Coast, Southeast, Central and Western United States. The aggregate consideration paid by the company for the issued and outstanding shares of the four-member companies of PSG was $43,686, which is net of cash acquired of $764 and includes direct acquisition costs of $538, assumed liabilities of $5,912, and the receipt of a post-closing net worth adjustment in January 2000 of $141. The acquisition of MBS has been recorded using the purchase method of accounting. The cost of the acquisition has been allocated on the basis of the estimated fair values of the assets acquired and the liabilities assumed. The excess of the cost over the fair value of the net assets acquired is $34,019 and is being amortized over a weighted average life of 38 years. The results of MBS's operations subsequent to the date of acquisition are included in the Consolidated Statement of Earnings for the year ended December 31, 1999. On April 9, 1999, the company acquired all of the issued and outstanding shares of Kyees Aluminum, Inc., a leading supplier of cooling components for the major suppliers of fountain soft-drink beverage dispensers. The aggregate consideration paid by the company was $28,471 which is net of cash acquired of $1,010 and includes direct acquisition costs of $319, assumed liabilities of $2,151, and the payment of a post-closing net worth adjustment during the third quarter of $1,263 to the former owners of the company. Kyees' aluminum "cold plates" are a key component used to chill soft-drink beverages in dispensing equipment. Located in La Mirada, California, Kyees is a technology leader in manufacturing cold plate equipment, in both quality and engineering design. The acquisition of Kyees has been recorded using the purchase method of accounting. The cost of the acquisition has been allocated on the basis of the estimated fair values of the assets acquired and the liabilities assumed. The preliminary estimate of the excess of the cost over the fair value of the net assets acquired of $24,024 is being amortized over a weighted average life of 38 years. The results of Kyees' operations subsequent to the date of acquisition are included in the Consolidated Statement of Earnings for the year ended December 31, 1999. Pro-forma results of operations for MBS and Kyees are not presented, as the amounts do not differ significantly from the actual results of the company. On November 3, 1998, the company acquired substantially all of the net assets and business of U.S. Truck Crane, Inc. (USTC), from a subsidiary of UK-based Powerscreen International PLC. Located in York, Pennsylvania, USTC builds three proprietary product lines, including boom trucks, rough terrain forklifts, and other types of material handling equipment. The aggregate consideration paid by the company for the net assets of USTC was $51,478 which includes direct acquisition costs of $478, assumed liabilities of $7,425, and the receipt of a post-closing net worth adjustment in July 1999 of $2,053. The acquisition of USTC has been recorded using the purchase method of accounting. The cost of the acquisition has been allocated on the basis of the estimated fair values of the assets acquired and the liabilities assumed. The excess of the cost over the fair value of the net assets acquired is $38,039 and is being amortized over a weighted average life of 38 years. The results of USTC's operations subsequent to the date of acquisition are included in the Consolidated Statements of Earnings for the years ended December 31, 1999 and 1998. The following unaudited information presents, on a pro-forma basis, the USTC acquisition as if it had occurred at the beginning of 1998: Net sales $723,178 -------- Net earnings $ 52,476 -------- Basic earnings per share $ 2.02 ------- Diluted earnings per share $ 2.01 -------- On October 31, 1997, the company acquired substantially all of the net assets and business operated by SerVend International, Inc. (SerVend) from SerVend and its affiliate, Fischer Enterprises, Ltd. SerVend is one of the world's largest manufacturers of ice/beverage dispensers and dispensing valves for the soft drink industry. Its customers include many of the major quick-service restaurant chains, convenience stores, and soft-drink bottlers in the nation. The aggregate consideration paid by the company for the net business assets of SerVend was $72,946 which is net of cash acquired of $119, and includes direct acquisition costs of $1,167, and assumed liabilities of $6,250. The acquisition has been recorded using the purchase method of accounting. The cost of the acquisition has been allocated on the basis of the estimated fair values of the assets acquired and the liabilities assumed. The excess of the cost over the fair value of the net assets acquired of $57,596 is being amortized over a weighted average life of 36 years. The results of SerVend's operations subsequent to the date of acquisition are included in the Consolidated Statements of Earnings for the years ended December 31, 1999, 1998 and 1997. On January 14, 2000, the company acquired certain assets of Pioneer Holdings LLC, a manufacturer of hydraulic boom trucks, from Mega Manufacturing. The acquisition compliments the company's Manitex and USTC product lines. On February 10, 2000, the company acquired all the outstanding common stock of Beverage Equipment Supply Company (BESCO), a leading mid-west wholesale distributor of beverage dispensing equipment. BESCO was integrated with the company's MBS operation. 12. - --------------------------------------- ASSETS HELD FOR SALE The company holds assets for sale which include land and improvements, buildings, and certain machinery and equipment at the "Peninsula facility" located in Manitowoc, Wisconsin, and land and building located in Scotts Hill, Tennessee. The current carrying value of these assets, determined through independent appraisals, is $3,287 and is included in other assets on the consolidated balance sheet at December 31, 1999. The company has reserved for the future holding costs, which are included in accounts payable and accrued expenses, consisting primarily of utilities, security, maintenance, property taxes and insurance. The company has also recorded reserves for potential environmental liabilities on the Peninsula location. During the year ended December 31, 1999, $363 was charged against these reserves. Charges against these reserves in 1998 and 1997 were insignificant. 13. - ------------------------------------------ CONTINGENCIES The United States Environmental Protection Agency (EPA) has identified the company as a Potentially Responsible Party (PRP) under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), liable for the costs associated with investigating and cleaning up contamination at the Lemberger Landfill Superfund Site (the "Site") near Manitowoc, Wisconsin. Approximately 150 PRP's have been identified as having shipped substances to the Site. Eleven of the potentially responsible parties have formed a group (the Lemberger Site Remediation Group, or "LSRG") and have successfully negotiated with the EPA and the Wisconsin Department of Natural Resources to settle the potential liability at the Site and fund the cleanup. Recent estimates indicate that the total costs to clean up the Site are approximately $30,000. Although liability is joint and several, the company's percentage share of liability is estimated to be 11% of the total cleanup costs. Prior to December 31, 1996, the company accrued $3,300 in connection with this matter. Expenses recorded in 1999, 1998 and 1997 were insignificant. Remediation work at the Site has been completed, with only long-term pumping and treating of groundwater and Site maintenance remaining. The remaining estimated liability for this matter, included in other current and noncurrent liabilities at December 31, 1999, is $1,100. As of December 31, 1999, 29 product-related lawsuits were pending. Of these, two occurred between 1985 and 1990 when the company was completely self-insured. The remaining lawsuits occurred subsequent to June 1, 1990, at which time the company has insurance coverages ranging from a $5,500 self-insured retention with a $10,000 limit on the insurer's contribution in 1990, to the current $1,000 self-insured retention for Cranes and Marine cases ($100 for Foodservice cases) and $50,000 limit on the insurer's contribution. Product liability reserves included in accounts payable and accrued expenses at December 31, 1999 are $8,219; $2,602 reserved specifically for the 29 cases referenced above, and $5,617 for claims incurred but not reported. These reserves were estimated using actuarial methods. The reserves for the two uninsured claims are insignificant. The highest current reserve for an insured claim is $985. Based on the company's experience in defending itself against product liability claims, management believes the current reserves are adequate for estimated settlements on aggregate self-insured and insured claims. Any recoveries from insurance carriers are dependent upon the legal sufficiency of claims and the solvency of insurance carriers. It is reasonably possible that the estimates for environmental remediation and product liability costs may change in the near future based upon new information which may arise. Presently, there is no reliable means to estimate the amount of any such potential changes. The company is also involved in various other legal actions arising in the normal course of business. After taking into consideration legal counsels' evaluation of such actions, in the opinion of management, ultimate resolution is not expected to have a material adverse effect on the consolidated financial statements of the company. 14. - --------------------------------------------- RETIREMENT AND HEALTH CARE PLANS The company provides retirement benefits through noncontributory deferred profit sharing plans covering substantially all employees. Company contributions to the plans are based upon formulas contained in such plans. The company also has a defined contribution plan in which the company matches 25% of participant contributions up to a maximum of 5% of a participant's compensation. Total costs incurred under these plans were $14,271, $12,909 and $10,371, in 1999, 1998 and 1997, respectively. The company also provides certain health care benefits for eligible retired employees. Substantially all of the company's domestic employees hired before January 1, 1990, may become eligible for these benefits if they reach a normal retirement age while working for the company and satisfy certain years-of-service requirements. The components of the periodic postretirement health benefit cost are as follows:
1999 1998 1997 ----- ------ ------- Service cost - benefits earned during the year $ 395 $ 296 $ 260 Interest cost on accumulated postretirement health benefit obligation 1,325 1,144 1,088 Amortization of actuarial gain -- (127) (197) ------ ------ ------ Net periodic postretirement health benefit cost $1,720 $ 1,313 $1,151 ------ ------ ------
The following is a reconciliation of the change in the accumulated periodic postretirement health benefit obligation from January 1, 1998, through December 31, 1999, and a reconciliation of the postretirement benefit obligation to the accrued amount at December 31, 1999 and 1998:
1999 1998 ---- ---- Benefit obligation, beginning of year $ 16,948 $ 15,712 Service cost 395 296 Interest cost 1,325 1,144 Participant contributions 810 818 Actuarial loss 1,946 1,093 Benefits paid (2,333) (2,115) -------- --------- Benefit obligation, end of year $ 19,091 $ 16,948 ======== ========= Status of the plan, unfunded $ 19,091 $ 16,948 Unrecognized net gain 821 2,757 -------- --------- Accrued benefit, end of year $ 19,912 $ 19,705 ======== =========
The health care cost trend rate assumed in the determination of the accumulated postretirement benefit obligation is 5%. Increasing the assumed health care cost trend rate by one percentage point in each year would increase the accumulated postretirement health benefit obligation by $2,699 at December 31, 1999, and the aggregate of the service and interest cost components of net periodic postretirement health benefit cost by $298 for 1999. Decreasing the assumed health care cost trend rate by one percentage point in each year would decrease the accumulated postretirement health benefit obligation by $2,208 at December 31, 1999, and the aggregate of the service and interest cost components of net periodic postretirement health benefit costs by $240 for 1999. The discount rate used in determining the accumulated postretirement health benefit obligation is 7.25% for 1999 and 7.00% for 1998. The plan is unfunded. It is reasonably possible that the estimate for future retirement and health care costs may change in the near future based upon changes in the health care environment or changes in interest rates which may arise. Presently, there is no reliable means to estimate the amount of any such potential changes. 15. - ---------------------------------------- LEASES The company leases various property, plant and equipment. Terms of the leases vary, but generally require the company to pay property taxes, insurance premiums, and maintenance costs associated with the leased property. Rental expense attributable to operating leases was $4,847, $2,848 and $3,390 in 1999, 1998 and 1997, respectively. Future minimum rental obligations under noncancelable operating leases, as of December 31, 1999 are payable as follows: 2000 $ 5,748 2003 $ 4,120 2001 $ 5,191 2004 $ 3,399 2002 $ 4,566 Thereafter $ 11,399 16. - ------------------------------------------ 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: Foodservice Equipment (Foodservice), Cranes and Related Products (Cranes), and Marine. Foodservice products consist primarily of commercial ice cube machines, dispensers, and related accessories, as well as commercial refrigerators and freezers and beverage dispensers. Foodservice distributes its products primarily in the United States, Southeast Asia and Europe. Foodservice products serve the lodging, restaurant, health care, convenience store and soft-drink bottling markets which are impacted by demographic changes and business cycles. Cranes products consist primarily of crawler and truck-mounted lattice boom and hydraulic cranes and excavators which serve the construction, energy, and mining industries. Cranes distributes its products primarily in the United States, Europe, Southeast Asia and the Middle East. Cranes operations are tied most closely to energy and infrastructure projects throughout the world. Marine provides ship-repair and construction services to foreign and domestic vessels operating on the Great Lakes and eastern seaboard. Marine serves the Great Lakes maritime market consisting of both U.S. and Canadian fleets, inland waterway operators, and oceangoing vessels that transit the Great Lakes and St. Lawrence Seaway. The accounting policies of the segments are the same as those described in the summary of significant accounting policies except that certain expenses are not allocated to the segments. These unallocated expenses are corporate overhead, intangible asset amortization, interest expense and income taxes. The company evaluates segment performance based upon profit or loss before the aforementioned expenses. The company is organized primarily on the basis of products and is broken down into 19 business units. Nine of the business units have been aggregated into the Foodservice Segment; seven of the business units have been aggregated into the Cranes Segment; and three business units make up the Marine Segment. Information about reportable segments and a reconciliation of total segment assets to the consolidated totals as of December 31, 1999 and 1998, and total segment sales and profits to the consolidated totals for the years ending December 31, 1999, 1998 and 1997 are summarized on page 30. The following is sales and long-lived asset information by geographic area as of and for the years ended December 31:
Sales Long-Lived Assets --------------------------------------- ---------------------- 1999 1998 1997 1999 1998 ------- ------- ------- ------- ---- United States $718,768 $616,129 $459,704 $331,758 $282,747 Other North America 25,213 16,881 8,309 -- -- Europe 32,246 36,917 23,345 5,479 5,548 Asia 11,174 12,920 27,235 2,005 1,842 Middle East 2,113 5,610 3,289 -- -- Central & South America 4,073 1,949 14,766 -- -- Africa 5,890 1,774 663 -- -- South Pacific & Caribbean 6,014 2,642 8,553 -- -- -------- -------- -------- -------- --------- $805,491 $694,822 $545,864 $339,242 $290,137 ======= ======= ======= ======== =======
Foreign revenue is based upon the location of the customer. Revenue from no single foreign country was material to the consolidated sales of the company. MANAGEMENT'S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------- Company management is responsible for the integrity of this annual report's consolidated financial statements. Those statements were prepared in accordance with generally accepted accounting principles. Where necessary, amounts are based on judgments and estimates by management. All financial information in this report matches the financial statements. The company maintains an internal accounting system designed to provide reasonable assurance that assets are safeguarded and that books and records reflect only authorized transactions. To further safeguard assets, the company has established an audit committee composed of directors who are neither officers nor employees of the company. The audit committee is responsible for reviewing the company's financial reports and accounting practices and meets periodically with the company's independent accountants. The company's independent accountants provide an objective examination of the company's financial statements. They evaluate the company's system of internal controls and perform tests and other procedures necessary to express an opinion on the fairness of the presentation of the consolidated financial statements. /s/ Terry D. Growcock /s/ Glen E. Tellock ----------------------- -------------------- Terry D. Growcock Glen E. Tellock President & Vice President & Chief Executive Officer Chief Financial Officer REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - ---------------------------------------- To the Stockholders and Board of Directors of The Manitowoc Company, Inc. and Subsidiaries In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, stockholders' equity and comprehensive income, and cash flows present fairly, in all material respects, the financial position of The Manitowoc Company, Inc. and its Subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for the years ended December 31, 1999, 1998 and 1997, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP - ---------------------------------- PRICEWATERHOUSECOOPERS LLP Milwaukee, Wisconsin January 25, 2000 except for information in Note 4, for which the date is February 10, 2000
SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The table below presents unaudited quarterly data for the years ended December 31, 1999 and 1998 (Thousands of dollars, except per share data) 1999 1998 --------------------------------------------- ------------------------------------------ First Second Third Fourth First Second Third Fourth ------ ------ ------ ------ ------ ------ --------- --------- Net sales $184,189 $226,342 $213,898 $181,062 $154,139 $188,899 $184,023 $167,761 Gross profit 52,560 65,718 62,515 52,919 43,472 53,094 53,280 45,775 Net earnings 12,428 20,986 19,378 13,992 9,337 15,408 15,203 11,432 Per share amounts: * Basic earnings per share .48 .81 .75 .54 .36 .59 .59 .44 Diluted earnings per share .47 .80 .74 .53 .36 .59 .58 .44 Dividends per common share .075 .075 .075 .075 .075 .075 .075 .075 * Per share data adjusted to reflect the April 1, 1999 three-for-two stock split.
QUARTERLY COMMON STOCK PRICE RANGE Year Ended Year Ended Year Ended December 31, 1999 December 31, 1998 December 31, 1997 ------------------ ------------------ -------------------------- High Low Close High Low Close High Low Close ---- ---- ---- ---- ---- ----- ---- ---- ----- 1st Quarter $30.33 $24.21 $27.92 $26.75 $19.42 $25.75 $17.78 $14.89 $16.06 2nd Quarter 42.00 27.00 41.63 31.21 25.40 26.87 21.11 15.33 20.78 3rd Quarter 43.75 32.56 34.13 27.92 16.33 20.09 26.63 21.13 23.79 4th Quarter 35.63 26.00 34.00 29.59 16.46 29.59 25.46 19.67 21.67 The company's common stock is traded on the New York Stock Exchange. The share prices shown above have been adjusted for the 1999 and 1997 three-for-two stock splits.
GLOSSARY - -------- Financial Terms - --------------- BACKLOG: Firm, unfilled orders. An indicator of future sales. BOOK VALUE: Another term for shareholder equity, most often shown on a per-share basis. CAPITALIZATION: The total market value of a company's outstanding stock . that is, the stock price multiplied by the number of shares. CASH FLOW: Funds generated by a company to operate the business, make capital investments, repay debt, pay dividends, repurchase stock, and make acquisitions. COST OF CAPITAL: A weighted average of the after-tax cost of equity and borrowed funds used to invest in operating capital for a business. CURRENT RATIO: Current assets divided by current liabilities, an indicator of liquidity. ECONOMIC VALUE-ADDED (EVA): A measure to determine if a company is creating or destroying value for its shareholders. EVA is calculated by taking after-tax operating profits and subtracting the cost of capital. Manitowoc uses this measure to evaluate its performance, to drive its decision-making, to incentivize management, and to evaluate acquisition opportunities. OUTSOURCING: Contracting with an external supplier to provide a product or function deemed to be a non-core operation. PRICE TO EARNINGS RATIO: The price of a stock divided by its earnings per share. Also known as P/E, multiple or valuation. This measure tells investors how much they are paying for a company's earnings. RETURN ON EQUITY: Net earnings divided by stockholders' equity; a measurement of the amount earned on the shareholders' investment. RETURN OF INVESTED CAPITAL: An EVA measurement of operating profit after-tax divided by invested capital, an indicator of how efficiently the company employs its assets. STOCK REPURCHASE PLAN: A systematic approach in which a company repurchases its stock. The result of this action increases the percent of ownership each remaining shareholder has in the company. TOTAL RETURN: Return on an investment that includes any dividends or interest as well as price appreciation. Industry Terms - -------------- BACKHOE DREDGE: Excavates underwater material ranging from clay and sand to blasted and unblasted rock from a channel or harbor one bucketful at a time. The dredge hull is usually unpowered and must be towed to the digging site. Most backhoe dredges are equipped with hydraulic excavators capable of digging at depths up to 75 feet. BACKROOM BEVERAGE EQUIPMENT: Refers to the backroom support equipment necessary to deliver syrup, carbonated water, and pre-mixed soft drinks from their storage containers to the dispensing device. This equipment would include pre-chillers, carbonators, regulators, pumps, valves, tubing, and fabricated box racks. BOOM TRUCK: A hydraulic telescopic crane mounted to a commercial truck chassis. A boom truck differs from a truck crane because it can haul up to several thousand pounds of payload on its cargo deck. COLD PLATE: An integral component of an ice/beverage dispenser that consists of a cast aluminum block and stainless steel tubing that cools syrup and carbonated water to an ideal serving temperature as these liquids flow through the cold plate to the beverage dispensing valve. CRAWLER CRANE: Usually refers to lattice-boom cranes that are mounted on crawlers rather than a truck chassis. This method of mounting significantly reduces ground bearing pressures and enables the crane to pick-and-carry virtually any rated load. FIVE-YEAR SURVEY: A thorough ship inspection and maintenance process that must be performed every five years to satisfy stringent maritime regulations developed by the U.S. Coast Guard, American Bureau of Shipping, and other regulatory agencies. GRAVING DOCK: An in-ground concrete structure in which ships can be built or repaired. Because a graving dock is equipped with pumps and watertight gates, it can be flooded so ships can float in, then be pumped dry so crews can work on parts of the ship that are normally underwater. HOPPER DREDGE: A fully powered vessel that excavates underwater material using powerful suction devices. Dredged material is then stored onboard the vessel for transportation to an approved disposal site, or can be pumped onboard dump scows or split-hull barges. ICE/BEVERAGE DISPENSER: A foodservice appliance that dispenses ice and soft drinks for self-serve applications in quick-service restaurants and convenience stores. KIOSK: A limited-menu, walk-up, quick-service restaurant that sells food which usually is prepared elsewhere. LATTICE BOOM: A fabricated, high-strength steel structure that usually has four cords and tubular lacings. Lattice booms typically weigh less and provide higher lifting capacities than telescopic booms of similar length. LUFFING JIB: A fabricated structure similar to, but smaller than, a lattice boom. Mounted at the tip of a lattice boom, a ffing jib easily adjusts its angle of operation - a capability that is not possible with a conventional fixed-jib attachment. REACH-IN: A refrigerated cabinet typically used in foodservice applications for short-term storage of perishable items at safe temperatures prior to preparation or serving. SELF-UNLOADING VESSEL: The fleet of ships operating on the Great Lakes that are equipped with cargo-hold conveyors and lattice discharge booms. This equipment enables vessels to offload their bulk cargoes, such as iron ore, coal, or limestone, without requiring dockside assist equipment. TELESCOPIC BOOM: A box-section boom, made of several overlapping sections, that are extended or retracted to a desired length using hydraulic or mechanical means. TRUCK CRANE: Can refer to either a hydraulic telescopic or lattice- boom crane that is mounted on a rubber-tired carrier and is capable of traveling at highway speeds from one project to the next. TUG/BARGE: A new form of Great Lakes bulk cargo transportation that uses a non-powered notch barge that is pushed by a high horsepower diesel tugboat. WALK-IN: A large, foamed-in-place, refrigerated structure, often found in restaurants, that can be equipped with cooling or freezing systems for long-term storage of food-service items before preparation. INVESTOR INFORMATION - -------------------- Corporate Headquarters - ---------------------- The Manitowoc Company, Inc. 500 South 16th Street P. O. Box 66 Manitowoc, WI 54221-0066 Telephone: 920-684-4410 Telefax: 920-683-8129 Independent Public Accountants - ------------------------------ PricewaterhouseCoopers LLP 100 East Wisconsin Avenue Suite 1500 Milwaukee, WI 53202 Stock Transfer Agent and Registrar - -------------------------------- First Chicago Trust Company of New York P. O. Box 2500 Jersey City, NJ 07303-2500 Annual Meeting - -------------- The annual meeting of Manitowoc shareholders will be held at 9:00 a.m., CDT, Tuesday, May 2, 2000, in the ballroom of the Holiday Inn at 4601 Calumet Avenue, Manitowoc, WI. We encourage shareholders to participate in this meeting in person or by proxy. Stock Listing - ------------- Manitowoc's common stock is traded on the New York Stock Exchange and is identified by the ticker symbol MTW. Current trading volume, share price, dividends, and related information can be found in the financial section of most daily newspapers. Quarterly common stock price information for our three most recent fiscal years can be found on page 44 of this annual report. Manitowoc Shareholders - ---------------------- On December 31, 1999, there were 26,088,369 shares of Manitowoc common stock outstanding. At such date, there were 2,746 shareholders of record. Form 10-K Report - ---------------- Each year, Manitowoc files its Annual Report on Form 10-K with the Securities and Exchange Commission. Most of the financial information contained in that report is included in the Annual Report to Shareholders. A COPY OF FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR 1999, MAY BE OBTAINED BY ANY SHAREHOLDERS, WITHOUT CHARGE, UPON WRITTEN REQUEST TO: Maurice D. Jones, General Counsel and Secretary The Manitowoc Company, Inc. P. O. Box 66 Manitowoc, WI 54221-0066 Dividends - --------- Common stock dividends are usually considered in conjunction with quarterly meetings of Manitowoc's board of directors. Manitowoc has paid quarterly dividends, without interruption, since 1971. Dividend Reinvestment And Stock Purchase Plan - --------------------------------------------- The Dividend Reinvestment and Stock Purchase Plan provides a convenient method to acquire additional shares of Manitowoc stock through the investment of quarterly dividends. Shareholders may also purchase shares by investing cash as often as once a month in varying amounts from $10 up to a maximum of $60,000 each calendar year. Participation is voluntary and all fees associated with stock purchases under these plans are paid for by Manitowoc. To receive an information booklet and enrollment form, please contact our stock transfer agent and registrar, First Chicago Trust Company of New York. Investor Inquiries - ------------------ Security analysts, portfolio managers, individual investors, and media professionals seeking information about Manitowoc are encouraged to contact the following: Analysts & Portfolio Managers: - ------------------------------ Glen E. Tellock, Vice President & Chief Financial Officer Telephone: 920-683-8122 Telefax: 920-683-8138 Media Inquiries: - ---------------- Steven C. Khail, Director of Investor Relations and Corporate Communications Telephone: 920-683-8128 Telefax: 920-683-8138 General Inquiries: - ------------------ Joan Risch, Shareholder Relations Telephone: 920-683-8150 Telefax: 920-683-8138 Quarterly Earnings - ------------------ Manitowoc is planning to announce its quarterly earnings for calendar 2000 according to the following schedule: 1st Quarter - April 13, 2000 2nd Quarter - July 13, 2000 3rd Quarter - October 12, 2000 4th Quarter - To be announced Join MTW on the Internet at www.manitowoc.com - --------------------------------------------- Manitowoc provides a variety of information about its businesses, products, and markets at its website address: http:\\www.manitowoc.com Equal Opportunity - ----------------- Manitowoc believes that a diverse workforce is required to compete successfully in today's global markets. The company provides equal employment opportunities in its global operations without regard to race, color, age, gender, religion, national origin, or physical disability. EXHIBIT 13 - APPENDIX A
Cross Reference or Graph No. Description of Graph Narrative Discussion - --------- -------------------- --------------------- 1 Bar Graph of Gross Margin Gross Margin (Millions of Dollars) for fiscal year 1994 -------------------------------- and calendar years 1995-1999. 1994 67.9 1995 74.5 1996 134.6 1997 152.6 1998 195.6 1999 233.7 In 1999, Manitowoc's gross margin set a record for the sixth consecutive year, climbing to $233.7 million, up 19.5% from the previous record of $195.6 million in 1998. 2 Bar Graph of Capital Expenditures Capital Expenditures (Millions of Dollars) for fiscal year 1994 ------------------------------------------ and calendar years 1995-1999. 1994 5.3 1995 19.2 1996 8.4 1997 12.0 1998 11.7 1999 13.7 The conversion to mixed model manufacturing at Manitowoc Ice, the upgrade of a information system at Kolpak, and installation of new process equipment at Kolpak were three major capital investments Manitowoc made during 1999. 3 Bar Graph of Cash Flow from Cash Flow From Operations (Millions of Dollars) Operations for fiscal year ----------------------------------------------- 1994 and calendar years 1994 37.0 1995-1999. 1995 16.4 1996 64.5 1997 43.6 1998 56.8 1999 103.4 Although cash flow has fluctuated from year-to-year, Manitowoc has generated a record $103.4 million of cash in 1999, which easily eclipsed the prior record set in 1996 by 60%. 4 Bar Graph of Invested Capital Invested Capital (Millions of Dollars) for fiscal year 1994 and -------------------------------------- calendar years 1995-1999. 1994 130.0 1995 139.8 1996 243.3 1997 256.8 1998 339.9 1999 413.1 As Manitowoc continues to grow, it prudently manages its invested capital using EVA principles to ensure optimum shareholder returns. 5 Bar Graph of Debt to Capital Debt to Capital (Percent) fiscal year 1994 and calendar -------------------------------------------- calendar years 1995-1999. 1994 -- 1995 62.8 1996 46.6 1997 50.4 1998 44.7 1999 32.5 Manitowoc does not impose a limit on its debt-to- capital ratio, but prefers to evaluate acquisitions based on their ability to generate cash for debt repayment purposes. Prior to 1995, Manitowoc had no debt. 6 Bar Graph of International Shipment International Shipments (Millions of Dollars) for fiscal year 1994 and calendar ---------------------------------------- years 1995-1999. 1994 56.9 1995 61.0 1996 67.6 1997 74.6 1998 78.7 1999 86.7 As international economies improve and as Manitowoc expands into targeted foreign markets, our export shipments will become a larger percentage of our sales mix.
EX-21 3 EXHIBIT 21 1999 10-K LIST OF SUBSIDIARIES JURISDICTION SUBSIDIARY OF INCORPORATION - ----------------------------------------------------------------- Femco Machine Co., Inc. Nevada Diversified Refrigeration, Inc. Tennessee Manitex, Inc. Texas Manitowoc MEC, Inc. Nevada Manitowoc Equipment Works PTE, Ltd. Singapore Manitowoc Equipment Works, Inc. Nevada Manitowoc Europe Holdings, Ltd. England Manitowoc Europe Limited England Manitowoc International Sales Corp. Barbados Manitowoc Korea Company, Ltd. Korea Manitowoc Marine Group, LLC Nevada Manitowoc Re-Manufacturing, Inc. Wisconsin Manitowoc Western Company, Inc. Wisconsin North Central Crane & Excavator Sales Corp. Nevada West Manitowoc, Inc. Wisconsin Manitowoc CP, Inc. Nevada Manitowoc FP, Inc. Nevada KMT Refrigeration, Inc. Wisconsin Manitowoc Foodservice Group, Inc. Nevada Manitowoc Crane Group, Inc. Nevada Manitowoc Ice, Inc. Wisconsin Manitowoc Cranes, Inc. Wisconsin SerVend International, Inc. Nevada Manitowoc Beverage Systems, Inc. Nevada KMT Sales Corporation Nevada SerVend Sales Corporation Nevada USTC, Inc. Nevada EX-23.1 4 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the registration statements on Form S-8 (File Nos. 333-11729 and 333- 11731) of The Manitowoc Company, Inc. of our report dated January 25, 2000, except for information in Note 11, for which the date is February 10, 2000, relating to the financial statements, which appears in the 1999 Annual Report, which is incorporated in this Form 10-K. We also consent to the incorporation by reference of our report dated January 25, 2000 relating to the financial statement schedule, which appears on this Form 10-K. /s/ PricewaterhouseCoopers LLP PRICEWATERHOUSECOOPERS LLP March 6, 2000 EX-27 5
5 1000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 10097 1923 62802 1803 91437 190998 214352 122329 530240 189308 0 0 0 367 231809 530240 805491 805491 571779 686540 2155 0 10790 106006 39222 66784 0 0 0 66784 2.57 2.55
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