EX-13 6 annual00.txt 2000 ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes appearing in this annual report. Overview - The Manitowoc Company, Inc. (referred to as the "company," "MTW," "we," "our," and "us") is a leading manufacturer of engineered capital goods and support services for selected market segments which today include Foodservice Equipment, Cranes and Related Products, and Marine. The centerpiece of our efforts is and will continue to be providing high-quality, customer-focused products and services to the markets we serve in a manner that continuously adds economic value to MTW for our shareholders. In the context of providing high-quality, customer-focused products and services to our customers and creating economic value for our shareholders, we have established the following goals to be achieved by the end of 2002. Crucial to the achievement of these goals has been and will continue to be new-product innovation plus business and product line acquisitions. 2002 GOALS ----------- Reach $1.3 billion in sales. ------------------------------------------------------------ Generate 80% of revenues from new products/models introduced or acquired since 1998. ------------------------------------------------------------ Be EVA(R) 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. ------------------------------------------------------------ On our way to realizing the goals set forth above, we are proud to highlight a few key achievements during 2000: *We posted record 12-month revenues of $873.3 million in 2000 with the increase over 1999 coming from newly acquired businesses. *We completed five acquisitions during 2000 for an aggregate cost of $99.0 million--with at least one acquisition being completed in each of our segments. *We generated $63.0 million in operating cash flows that were used to reinvest in our businesses through capital expenditures of $13.4 million, to repurchase 1.9 million shares of MTW stock, and to complete the acquisitions. *We invested $2.6 million in manufacturing process improvements and growth initiatives as well as $6.7 million in research and development that led to the launch of several new products in each segment. *A total of $35.4 million of EVA was generated during the year. *We reduced our cash gap during the year from 50 days in 1999 to 47 days at the end of 2000. The following discussion and analysis covers the key drivers of our results for 2000. First, we provide an overview of our results of operations for the years 1998 through 2000 on a consolidated basis and by business segment. The following sections contain a discussion of new acquisitions, liquidity and financial condition of MTW, and our market risk management techniques. Lastly, we provide a discussion of contingent liability issues, impact of accounting changes, and cautionary statements. RESULTS OF OPERATIONS Consolidated ------------ In Thousands: 2000 1999 1998 -------- -------- -------- Net sales(1) $873,272 $824,339 $703,920 Cost of sales 637,538 590,627 508,299 --------------------------------------------------------------------- Gross profit 235,734 233,712 195,621 Engineering, selling & administrative expenses 114,901 107,369 98,120 Amortization 8,181 7,392 4,881 --------------------------------------------------------------------- Operating income 112,652 118,951 92,620 Interest expense (14,508) (10,790) (9,741) Other expense (2,024) (2,155) (1,467) --------------------------------------------------------------------- Earnings before taxes 96,120 106,006 81,412 Income taxes 35,852 39,222 30,032 --------------------------------------------------------------------- Net earnings $ 60,268 $ 66,784 $ 51,380 ===================================================================== (1)During 2000, we reclassified certain boom-truck costs formerly reported as a component of net sales to cost of sales, due to the implementation of Emerging Issues Task Force (EITF) No. 99-19, "Reporting Revenues Gross as a Principal versus Net as an Agent." As a result, sales and cost of sales were increased in the Crane segment by $18.8 million and $9.1 million in 1999 and 1998, respectively. ------------------------------------------------ Net sales increased 5.9% in 2000 to $873.3 million from $824.3 million in 1999. This increase was driven by acquisitions. Net sales in 1999 increased 17.1% compared to 1998. This increase was caused half by internal growth and half from acquisitions made since 1997. Gross profit as a percent of net sales declined in 2000 to 27.0% from 28.4% in 1999 and 27.8% in 1998. The decline in 2000 was due to decreased volumes in our Foodservice and Crane segments, inefficiencies caused by current year investments in manufacturing process improvements, increased project work in the Marine segment, and by lower gross margins on businesses acquired in 2000 and 1999. The 1999 increase in gross margin versus 1998 was due to higher volumes in all three segments, synergies achieved in the realignment of the two groups within the Foodservice segment, and productivity improvements achieved within the Crane segment. Engineering, selling, and administrative expenses were maintained during 2000 at 13.2% of net sales versus 13.0% and 13.9% of net sales in 1999 and 1998, respectively. The maintenance of this ES&A ratio in 2000 was due to the flexibility of our fixed cost structure and our resulting ability to control costs in light of lower volumes. We successfully maintained this cost ratio during 2000 notwithstanding our completion and assimilation of five acquisitions and the investigation of several others. The decrease in ES&A as a percent of sales in 1999 versus 1998 was achieved through continuing cost controls in all three segments as well as the implementation of operating efficiencies within the Foodservice and Crane segments. Amortization expense of $8.2 million during 2000 increased 10.7% over the $7.4 million reported in 1999. Amortization expense in 1999 increased 51.4% over the $4.9 million recorded in 1998. This increase in amortization expense in 1999 and 2000 is the result of the additional goodwill recognized related to the eight acquisitions completed since the beginning of 1998. Our operating income in 2000 of $112.7 million, or 12.9% of net sales, decreased 5.3% versus the $119.0 million, or 14.4% of net sales, reported for 1999. Operating earnings for 1999 were 28.4% higher than the $92.6 million, or 13.2% of net sales, reported for 1998. Interest expense during 2000 of $14.5 million was 34.5% higher than the amount recorded during 1999. Interest expense of $10.8 million in 1999 was 10.8% higher than the $9.7 million recorded in 1998. This increase in interest expense during 1999 and 2000 was due to a combination of the additional debt incurred to fund acquisitions and to repurchase 1.9 million shares of MTW stock during 2000. The effective interest rate paid on all outstanding debt as of December 31, 2000, 1999, and 1998 were 6.9%, 6.7%, and 6.3%, respectively. These rates remained relatively stable in spite of the rising interest rate environment that began in the middle of 1999. We controlled our exposure to interest rate increases over this period in three ways. First, we effectively used interest rate hedges on variable-rate debt. Second, we benefited from our favorable fixed-rate borrowings. Third, we effectively used alternative borrowing vehicles outside of our existing revolver facility, such as short-term commercial paper borrowings. The 2000 effective income tax rate was 37.3%, compared to 37.0% in 1999 and 36.9% in 1998. The increase in our effective income tax rate over this three-year period is due to increasing amounts of non-deductible goodwill amortization expense arising from acquisitions. SALES AND OPERATING PROFITS Foodservice Equipment Segment ------------------------------ In Thousands: 2000 1999 1998 -------- -------- -------- Net sales $425,080 $379,625 $319,457 ----------------------------------------------------------- Operating income $ 61,368 $ 65,372 $ 52,950 ----------------------------------------------------------- Operating margin 14.4% 17.2% 16.6% ----------------------------------------------------------- Foodservice segment net sales rose 12.0% to $425.1 million in 2000 compared to 1999 levels. This increase was due exclusively to acquisitions. These acquisitions included: Kyees Aluminum, acquired in April 1999 and included in results for all of 2000, but only part of 1999; Beverage Equipment Supply Company (BESCO), acquired in February 2000; Multiplex Company, Inc., acquired in March 2000; and Harford Duracool LLC, acquired in April 2000. Organic sales growth for the Foodservice segment in 2000 was flat versus 1999 levels. The 18.8% increase in net sales in 1999 versus 1998 was due to increased demand for ice-cube machines resulting from the introduction of the "Q" series product by Manitowoc Ice and the acquisitions made during the year which included Manitowoc Beverage Systems in January 1999 and Kyees Aluminum in April 1999. The 6.1% decrease in operating income during 2000 versus 1999 was due to volume decreases in our businesses serving the beverage industry, decreased sales volumes of walk-in refrigerators and freezers, and $1.5 million invested in manufacturing process improvements at our ice-machine and private-label refrigerator manufacturing locations during 2000. The decrease in operating margin in 2000 was due to the reasons mentioned above compounded by the lower operating margins of acquired businesses. The 23.5% increase in operating income in 1999 over 1998 was primarily due to increased sales volumes and cost reductions achieved in the realignment of the Foodservice segment into groups along market channels. Cranes and Related Products Segment ----------------------------------- In Thousands: 2000 1999 1998 -------- -------- -------- Net sales $376,250 $389,510 $339,051 ---------------------------------------------------------------- Operating income $ 62,876 $ 64,840 $ 48,116 ---------------------------------------------------------------- Operating margin 16.7% 16.6%% 14.2% ---------------------------------------------------------------- The 3.4% decrease in Crane segment sales in 2000 was due to decreased domestic sales volumes of lower tonnage units in our lattice-boom crawler crane business. In addition, our boom-truck business experienced decreased sales volumes combined with a shift in boom-truck sales mix toward lower tonnage units. The 14.9% increase in net sales in 1999 versus 1998 was due to increased sales volumes of medium-to-high tonnage units in the lattice-boom crawler crane business as well as the acquisition of USTC Inc. in November 1998 and increased sales penetration by our boom-truck businesses into the rental industry. Operating income in the Crane segment declined 3.0% in 2000 primarily due to lower sales volumes and the shift of product sales mix in the boom-truck business toward lower tonnage units. Operating margins remained consistent in 2000 with 1999 levels primarily due to the net effect of deteriorating product margins offset by improved ES&A margins. Gross margins declined during 2000 primarily due to lower sales volumes in all of the segment's businesses, the shift in boom-truck product sales mix toward lower tonnage units, and competitive pricing pressures experienced by the boom-truck business. ES&A margins improved during the year as the segment continued to take advantage of cost reduction synergies within the boom-truck business and cost reduction initiatives implemented amongst all Crane segment businesses. Operating income in 1999 increased 34.8% primarily due to the USTC acquisition completed in November 1998 and in- creased sales volumes at each of the segment's businesses. Operating margins improved in 1999 due to the same reasons as noted above. Marine Segment -------------- In Thousands: 2000 1999 1998 ------- ------- ------- Net sales $71,942 $55,204 $45,412 ---------------------------------------------------------------- Operating income $ 8,902 $ 7,297 $ 6,978 ---------------------------------------------------------------- Operating margin 12.4% 13.2% 15.4% ---------------------------------------------------------------- Marine segment revenues increased 30.3% in 2000 versus 1999. Internal sales growth was 8.3%. Sales growth during 2000 was due to increased project and repair revenues at our traditional facilities during the year and the acquisition of Marinette Marine Corporation in November 2000. Revenues increased 21.6% during 1999 versus 1998 primarily due to higher amounts of project work and robust levels of repair and maintenance work during the year. Segment operating income increased 22.0% during 2000 versus 1999 levels due to the acquisition of Marinette Marine in November 2000 and the additional project and repair volumes experienced during the year. Operating margins declined during the year due to the continued shift of revenues toward project work, exacerbated by the acquisition of Marinette Marine, which traditionally has lower margins. Operating income increased 4.6% in 1999 compared to 1998. This was primarily due to additional volumes in all of the Marine segment's activities including project, repair, and docking services. Operating margins decreased in 1999 due to the shift in revenue mix toward more project work versus 1998 levels. General Corporate Expenses -------------------------- In Thousands: 2000 1999 1998 -------- -------- -------- Net sales $873,272 $824,339 $703,920 ---------------------------------------------------------------- Corporate income (expense) $(12,313) $(11,166) $(10,543) ---------------------------------------------------------------- Percent of sales (1.4%) (1.4%) (1.5%) ---------------------------------------------------------------- Corporate expenses during 2000, 1999, and 1998 were consistent as a percentage of net sales at 1.4% in 2000 and 1999, and 1.5% in 1998. The 10.3% increase in corporate expenses during 2000 was due to $1.1 million of expenses related to unrealized acquisitions. The 5.9% increase in expenses during 1999 was primarily due to increased payroll and travel ex-penses. DOMESTIC MARKET CONDITIONS In 2000, the United States economy experienced a slowdown during the last half of the year. The state of the U.S. economy, high oil prices, weather, and low water levels on the Great Lakes impacted each of our segments during 2000. Our Foodservice businesses experienced flat internal sales growth; Cranes saw a decline in domestic revenues during 2000 as compared to 1999; while internal domestic sales growth for our Marine segment expanded during the year due to increased project and repair work. Foodservice--The foodservice industry started 2000 on a strong note. By the end of the first quarter, the ice-cube machine industry was posting year-over-year growth of over 11% with us almost doubling that rate. Interest rate increases, coupled with the unusually cool and wet summer, resulted in an industry that closed 2000 just under 1% ahead of the year prior. Our other foodservice operations (with the exception of the beverage segment) posted similar results. We believe the fundamentals of the industry are solid. While we expect some slowing in the number of new domestic units being built in the quick-service and lodging segments, there are positive signs for growth in other segments that should offset any slowdown. Those segments include full service, casual dining, and the convenience-store markets. The major oil companies, coming off a period of consolidation and reporting strong financial performance, indicate they will intensify spending in their convenience-store operations in the near-term. We also see opportunities with existing locations. Many of the chain account locations in the U.S. were built during the eighties and early nineties. As their focus for growth turns from increasing the number of units to increasing same store sales, competition likely will drive remodeling and menu expansion. That bodes well for our entire Foodservice segment. At Diversified Refrigeration, Inc. (DRI), the demand for high-end domestic appliances continues to grow. While that segment is certainly not recession proof, we have not experienced any of the slowdown seen by other traditional home appliance manufacturers. Cranes--While the first half of 2000 continued at the brisk industry pace of the last few years, the second half of the year slowed considerably. A combination of interest rate increases and the general economic slowdown had a deteriorating effect on the construction industry as a whole. For Manitowoc's Crane segment, we felt this decrease to the largest extent in our boom-truck business and our smaller tonnage crawler cranes. Large-capacity boom trucks and large crawler cranes were less affected. Crane fleet utilization remains high and contractors continue to report increased quotation activity. Marine--The Marine segment is continuing its recent growth trends driven most dramatically by the acquisition of Mari- nette Marine, but also by the aging of the Great Lakes fleet, increased utilization of the vessels driven by lower water levels (more trips with lighter cargoes), and the strength of the dredging market. The Oil Pollution Act of 1990 (OPA-90) is expected to create a strong demand for double-hulled tankers and barges. INTERNATIONAL MARKET CONDITIONS Our international sales were approximately 9% of total reve- nues in 2000. This is down slightly from 1999. Foodservice--The Foodservice segment international sales increased 14% in 2000 with the largest increases occurring in ice machines and commercial refrigeration. While domestic new-store construction in the quick-service restaurant segment softens, expansion outside the U.S. is intensifying. This is particularly true in Europe and Asia, and to a lesser extent, in Latin America. In Europe, the economy is finally starting to shake off the doldrums of the past few years. The European Union countries experienced real GDP growth of 3.5% in 2000. With a strengthening euro, the investment climate is once again favorable and the demand for ice is steadily increasing as western-style menus capture a larger audience. Certain Asian economies also experienced higher economic growth over 1999, generating accelerated investment activity. China in particular is seeing robust growth in both international and newly developed local quick-service restaurants. Latin America is just beginning to show signs of improved economic conditions. In the past few years, Mexico has become an increasingly important market for the Foodservice segment. In South America, we have intensified our efforts to establish our Foodservice segment's brands. During the fourth quarter of 2000, we opened a distribution center in Uruguay to serve the MERCOSUR trade region. This should enable us to capture a larger market share as the economies recover. Cranes--International business was relatively flat in 2000. Segments related to energy, petrochemical, and oil and gas exploration began to show some improvement late in the year. Mainstream crane utilization appears stable and many markets look to general economic expansion in the near term. Energy related users will begin to look toward upgrading equipment fleets over the next several years. Marine--The Marine segment is primarily focused in the U.S. We continue, however, to prepare and bid vessels for research, patrol, and defense mission profiles to a broad area of foreign governments. We continue to effectively and quickly complete emergency repairs for foreign flag vessels moving through the Great Lakes. We are also expanding our capabilities to serve our customers by investment in what are already the most effective facilities on the Great Lakes and by increasing our capability to complete dockside and in-voyage repairs. ACQUISITIONS Our growth in 2000 versus 1999 was mainly due to the acquisitions that we made during the last several years. Over the past three years, we have completed eight acquisitions and we continue to seek new acquisition candidates in each of our segments. All of the acquisitions described below were funded with cash from our credit facilities in existence at the time of acquisition and recorded using the purchase method of accounting. Each of these acquisitions is included in our Consolidated Statements of Earnings beginning with the date of acquisition. On March 4, 2001, Manitowoc submitted a binding offer to acquire the Potain cranes subsidiary of Groupe Legris Industries SA. The purchase price of the acquisition will be approximately $300 million (2.15 billion French francs), plus net cash at December 31, 2000, subject to an adjustment for net earnings of Potain for the period from January 1, 2001, to the closing date. The transaction is anticipated to be financed by a new pre-arranged banking facility, which is expected to include both senior and subordinated debt. Completion of the transaction is contingent upon certain events, including receipt of applicable regulatory approvals, completion of notification and consultation process with the applicable works' council (labor union), and final acceptance of the offer by the seller. The transaction is currently expected to be finalized by the end of the second quarter of 2001. Potain, headquartered in Lyon, France, is a world leader in the design, manufacture, and supply of tower cranes for the building and construction industry. Potain reported sales of approximately $275 million for the year ended December 31, 2000. Manitowoc believes that Potain's share of the global tower crane market is approximately 30%. 2000 Acquisitions--On November 20, 2000, we completed the acquisition of Marinette Marine Corporation, a builder of mid- sized commercial, research, and military vessels located in Marinette, Wisconsin. Marinette had total revenues in 1999 of approximately $100 million. We paid an aggregate price of $66.1 million for all of the outstanding shares of the company, which is net of $18.6 million of cash acquired and includes $0.5 million for direct acquisition costs and the assumption of $17.4 million of liabilities. The preliminary estimate of the excess of the purchase price over the estimated fair value of the net assets acquired is $45.3 million. The purchase price for this acquisition is subject to a post-closing working capital adjustment to be settled in 2001. On April 7, 2000, we acquired substantially all the net business assets of Harford Duracool, LLC of Aberdeen, Maryland, for an aggregate price of $21.2 million, which includes direct acquisition costs of $0.5 million, assumed liabilities of $1.4 million and the payment of a post-closing working capital adjustment of $0.3 million. Harford had sales of approximately $17.0 million in 1999. The excess of the purchase price over the estimated fair value of the net assets acquired is $15.0 million. We completed the acquisition of all the outstanding stock of Multiplex Company, Inc., of St. Louis, Missouri, on March 31, 2000. Multiplex, which had sales of approximately $31.0 million in 1999, is a manufacturer of beverage-dispensing equipment. We acquired Multiplex for an aggregate purchase price of $20.5 million, which is net of $3.7 million of cash acquired, and included $0.4 million of acquisition costs and $5.3 million of assumed liabilities. The excess of the purchase price over the estimated fair value of the net assets acquired is $12.7 million. During 2000, the company also completed the acquisitions of certain assets of Pioneer Holdings LLC, the outstanding shares of Beverage Equipment Supply Company, and the remaining shares of Hangzhou Manitowoc Wanhua Refrigeration Company, the company's Chinese joint venture. The total aggregate consideration paid by the company for these acquisitions was $18.2 million, which is net of cash received and includes direct acquisition costs of $0.2 million and assumed liabilities of $2.8 million. 1999 Acquisitions--We acquired Kyees Aluminum, Inc., a leading manufacturer of cooling components for all of the major suppliers of fountain soft-drink beverage dispensers, on April 9, 1999. Based in La Mirada, California, Kyees is a technology leader in the manufacture of cold plates--a key component used to chill soft drinks in dispensing equipment. The aggregate purchase price paid for Kyees was $28.5 million, which is net of $1.0 million of cash acquired and includes direct acquisition costs of $0.3 million, assumed liabilities of $2.2 million, and includes the payment of a $1.3 million post- closing net worth adjustment. The excess of the purchase price over the estimated fair value of the net assets acquired is $24.1 million. On January 11, 1999, we 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 serving the beverage needs of restaurants, convenience stores, and other outlets. The aggregate purchase price paid for MBS was $43.7 million, which is net of cash acquired of $0.8 million and includes direct acquisition costs of $0.5 million and assumed liabilities of $5.9 million. The excess of the purchase price over the estimated fair value of the net assets acquired is $34.0 million. 1998 Acquisitions--On November 3, 1998, we purchased Powerscreen U.S.C., Inc. (doing business as USTC, Inc.), based in York, Pennsylvania, for an aggregate price of $51.5 million, which includes $0.5 million of direct acquisition costs, $7.4 million of assumed liabilities, and the receipt of a post-closing net worth adjustment of $2.1 million. USTC builds three proprietary product lines: boom trucks, rough- terrain forklifts, and material-handling equipment. The ex- cess of the purchase price over the estimated fair value of the net assets acquired is $38.0 million. We acquired a 50% ownership interest in Fabbrica Ap- parecchiature per la Produzione del Ghiaccio S.r.l. (F.A.G.) of Milan, Italy, a manufacturer of ice machines, on September 9, 1998. This purchase also included an option to purchase an additional 30% ownership over the next five years. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operations during 2000 were $63.0 million representing a decrease of 39% from $103.4 million in 1999, and an increase of 11% from the $56.8 million reported in 1998. The following table summarizes our sources and uses of cash during 2000. In Thousands: 2000 --------- Sources of cash Net earnings $ 60,268 Non-cash adjustments to income(1) 26,147 Borrowings 106,926 Proceeds from sale of fixed assets 3,481 Exercises of stock options 339 --------- Total 197,161 Uses of cash Acquisitions 98,982 Stock repurchases 49,752 Capital expenditures 13,415 Dividends 7,507 Changes in operating assets and liabilities 23,368 Other 251 -------- Total 193,275 -------- Net cash flow $ 3,886 ======== (1)Non-cash adjustments made to arrive at cash provided by operations include depreciation, amortization, deferred income taxes, deferred finance fees, and loss on sale of fixed assets. During 2000, there was a net increase in our outstanding borrowings under our existing credit facilities of $106.9 million to $218.9 million at December 31, 2000, from $112.0 million at December 31, 1999. As a result, our debt-to-capital ratio at the end of 2000 reached 48.4% versus 32.5% at the end of 1999. This increase during 2000 was driven primarily to fund the five acquisitions and one joint venture buyout we completed during the year as well as the repurchase of 1.9 million shares of MTW stock. The $99.0 million spent on acquisitions during 2000 is broken down by segment as follows: $46 million in the Food- service segment; $49 million in the Marine segment; and $4 million in the Crane segment. Of the total spent, approximately $2.3 million was for acquisition-related expenses. We completed the repurchase of 1.9 million shares of MTW common stock during 2000 at an average price of $26.42 per share. These shares were repurchased under two separate authorizations from the board of directors for the repurchase of a total of 2.5 million shares. At December 31, 2000, the company had authority to purchase up to 600,000 more shares. A total of $13.4 million was spent during 2000 for capital expenditures. The following table summarizes 2000 capital expenditures and depreciation by segment. Capital In Thousands: Expenditures Depreciation Foodservice equipment $ 8,883 $6,168 Cranes and related products 2,883 2,915 Marine 1,481 437 Corporate 168 352 ----------- ---------- Total $13,415 $9,872 =========== =========== We continue to fund capital expenditures to improve the cost structure of our businesses, to invest in new processes and technology, and to maintain high-quality production standards. The level of capital expenditures in the Food-service segment exceeded that of the other two segments and exceeded depreciation due to this segment's current year investment in new processes such as demand flow technology and its investment in new-product introductions. We believe that this trend in capital expenditures outpacing depreciation will continue in 2001 due to continued implementation of demand flow production technology throughout the segment and continued new-product introductions. We expect that the level of capital expenditures in the Crane and Marine segments will be moderately higher than 2000 levels due to process improvement initiatives, new-product introductions, and the addition of Marinette Marine into the Marine segment. The net change in operating assets and liabilities, net of the effects of acquisitions, was an increase of $23.4 million. The details of these changes are reflected in the Consolidated Statements of Cash Flows. The primary drivers of the increase were the following: * $6.6 million increase in accounts receivable in the Crane segment, partially offset by an increased use of our existing receivable factoring program in the Foodservice segment. Our consolidated three-month rolling average days sales outstanding of approximately 34 days, at December 31, 2000, remained consistent with 1999, which was approximately 33 days. * $8.0 million decrease in accounts payable due to lower inventory levels in our Crane segment at year-end 2000 versus 1999. Inventory levels were down at year-end 2000 most significantly in the Crane segment with an 11% reduction versus year-end 1999 levels. * $9.0 million decrease in income taxes payable at year-end 2000 due to the current year recognition of the deferred tax benefit associated with the sale of our Peninsula property. As a primary driver of EVA, we will continue to focus on maximizing our cash flows from operations to attempt to keep the working capital employed in the businesses at the minimum level required for efficient operations. Shareholders' equity was $233.8 million, or $9.31 per di- luted share, at December 31, 2000, versus $232.2 million, or $8.86 per diluted share, at the end of 1999. The increase in shareholders' equity was primarily due to net earnings of $60.3 million and proceeds from the exercise of stock options of $0.3 million, net of the $49.8 million repurchase of MTW common shares and the payment of $7.5 million in common stock dividends during the year. Cash and marketable securities were $16.0 million at December 31, 2000, compared with $12.0 million at year-end 1999. On April 6, 1999, we increased our revolving credit facil-ity to $300 million from $200 million, and extended the termination date to April 6, 2004. This facility, or other future facilities, will be used for funding future acquisitions, seasonal working capital requirements, additional share repurchase activity, capital expenditures, and other investing and financing needs. We believe that our available cash, credit facility, cash generation from operations, and access to public debt and equity markets will be adequate to fund our capital requirements for the foreseeable future. RISK MANAGEMENT We are exposed to market risks from changes in interest rates, commodities, and to a lesser extent, foreign currency exchange. To reduce these risks, we selectively use financial instruments and other proactive management techniques. All hedging transactions are authorized and executed under clearly defined policies and procedures, which prohibit using financial instruments for trading purposes or speculation. Discussion regarding our accounting policies and further disclosures on financial instruments are included in Notes 1 and 5 of the Notes to the Consolidated Financial Statements. Interest Rate Risk--We use interest rate swaps to modify our exposure to interest rate movements. This helps minimize the adverse effect of interest rate increases on floating rate debt. Under these agreements, we contract with a counter-party to exchange the difference between a fixed rate and floating rate applied to the notional amount of the swap. Our existing swap contract expires at 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. We enter into swap agreements only with financial institutions that have high credit ratings, which, in our opinion, limits exposure to credit loss. At year-end 2000, we had outstanding one interest rate swap agreement with a financial institution, with a notional principal amount of $12.5 million. The effect of this agreement on our interest expense in 2000 was not significant. The fair value of this swap agreement was nominal at December 31, 2000. On that date, the interest rate under this swap agreement was 6.3%. Commodity Prices--We are exposed to fluctuating market prices for commodities including steel, copper, and aluminum. Each of our business segments is subject to the effects of changing raw material costs caused by movements in underlying commodity prices. We have 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, we enter into contracts with our vendors to lock in commodity prices at various times and for various periods to limit our near-term exposure to fluctuations in raw material prices. Currency Risk--We have limited exposure to foreign currency exchange fluctuations in some of our European and Southeast Asian operations due to the small amount of transactions processed in relation to the total for the whole company and the relative stability of the currencies exchanged. We utilize foreign currency hedges to manage our exposure, when necessary. Use of these instruments and strategies has been modest. CONTINGENCIES The United States Environmental Protection Agency (EPA) identified MTW 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 Lem- berger Landfill Superfund Site near Manitowoc, Wisconsin. Eleven of the PRPs formed the Lemberger Site Remediation Group (LSRG) and have successfully negotiated with the EPA and Wisconsin Department of National 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. The latest estimates indicate that the remaining costs to clean up the site are nominal. Although liability is joint and several, our share of the liability is estimated to be 11% of the total cleanup costs. Prior to December 31, 1996, we accrued $3.3 million in connection with this matter. Expenses charged against this reserve in 2000, 1999, and 1998 were not significant. Remediation work at this site has been completed, with only long-term pumping and treating of groundwater and site maintenance remaining. FUTURE ACCOUNTING CHANGES In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 137, "Accounting for Derivative Instruments and Hedging Activities- -Deferral of the Effective Date of FASB Statement No. 133." This issuance delayed the effective date of SFAS 133 for us until the first quarter of 2001. SFAS 133 will require us to record all our derivative instruments, as defined by the Statement, on our balance sheet as assets or liabilities, measured at fair value. Any fair value change will be recorded in net income or comprehensive in-come, depending upon whether the derivative is designated as a part of a hedge transaction, and if it is, the type of hedge transaction. The initial adoption of this statement will not have a material effect on our net earnings or financial position. CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION Statements in this report and in other company communications that are not historical facts are forward-looking statements, which are based upon our current expectations. These statements involve risks and uncertainties that could cause actual results to differ materially from what appears within this annual report. Forward-looking statements include descriptions of plans and objectives for future operations, and the assumptions behind those plans. The words "anticipates," "believes," "intends," "estimates," and "expects," or similar expressions, usually identify forward-looking statements. In addition, our goals should not be viewed as guarantees or promises of future performance. There can be no assurance that we will be successful in achieving these goals. In addition to the assumptions and information referred to specifically in the forward-looking statements, a number of factors relating to each business segment could cause actual results to be significantly different from what is presented in this annual report including those listed below: Foodservice--demographic information affecting two-income families and general population growth; household income; weather; consolidations within restaurant and foodservice equipment industries; global expansion of customers; the commercial ice-machine replacement cycle in the United States; specialty foodservice market growth; future strength of the beverage industry; and the demand for quick-service restaurants and kiosks. Cranes--market acceptance of new and innovative products; cyclicality of the construction industry; the effects of government spending on construction-related projects throughout the world; growth in the world market for heavy cranes; the replacement cycle of technologically obsolete cranes; and the demand for used equipment in developing countries. Marine--shipping volume fluctuations based on performance of the steel industry; weather and water levels on the Great Lakes; trends in government spending on new vessels; five-year survey schedule; the replacement cycle of older marine vessels; growth of existing marine fleets; consolidation of the Great Lakes marine industry; frequency of casualties on the Great Lakes; and the level of construction and industrial maintenance. Corporate--changes in laws and regulations; successful identification and integration of acquisitions; competitive pricing; domestic and international economic conditions; changes in the interest rate environment; and success in increasing manufacturing efficiencies.
Eleven-Year Financial Summary Thousands of dollars, except shares and per share data Transition Calendar Period 2000 1999 1998 1997 1996 1995 1994(1) --------------------------------------------------------------------------------------------------------------------------- NET SALES Foodservice equipment $425,080 $379,625 $319,457 $247,057 $242,317 $113,814 $ 44,996 Cranes and related products(2) 376,250 389,510 339,051 268,416 220,821 169,866 70,958 Marine 71,942 55,204 45,412 39,162 47,584 29,469 7,952 --------------------------------------------------------------------------------------------------------------------------- Total $873,272 $824,339 $703,920 $554,635 $510,722 $313,149 $123,906 --------------------------------------------------------------------------------------------------------------------------- Gross profit $235,734 $233,712 $195,621 $152,600 $134,641 $ 75,470 $ 31,302 --------------------------------------------------------------------------------------------------------------------------- EARNINGS (LOSS) FROM OPERATIONS Foodservice equipment $ 61,368 $ 65,372 $ 52,950 $ 36,746 $ 33,989 $ 22,729 $ 9,426 Cranes and related products 62,876 64,840 48,116 34,878 22,582 3,179 870 Marine 8,902 7,297 6,978 5,648 6,197 4,024 (799) General corporate (12,313) (11,166) (10,543) (8,903) (7,678) (6,530) (3,981) Amortization (8,181) (7,392) (4,881) (3,394) (3,000) (250) -- Plant relocation costs -- -- -- -- (1,200) -- (14,000) --------------------------------------------------------------------------------------------------------------------------- Total 112,652 118,951 92,620 64,975 50,890 23,152 (8,484) --------------------------------------------------------------------------------------------------------------------------- Other income (expense)--net (16,532) (12,945) (11,208) (7,158) (8,384) (32) 169 Earnings (loss) before taxes on income 96,120 106,006 81,412 57,817 42,506 23,120 (8,315) Accounting changes -- -- -- -- -- -- -- Provision (benefit) for taxes on income 35,852 39,222 30,032 21,394 16,863 8,551 (3,243) --------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 60,268 $ 66,784 $ 51,380 $ 36,423 $ 25,643 $ 14,569 $ (5,072) --------------------------------------------------------------------------------------------------------------------------- OTHER FINANCIAL INFORMATION Cash from operations $ 63,047 $103,371 $ 56,814 $ 43,587 $ 64,514 $ 16,367 $ (330) --------------------------------------------------------------------------------------------------------------------------- Invested capital (monthly averages): Foodservice equipment(3) $312,842 $274,378 $227,863 $171,647 $ 68,556 $ 32,696 $ 21,979 Cranes and related products 137,562 123,757 96,031 67,596 73,246 85,082 81,800 Marine 14,976 3,416 4,534 6,019 7,335 9,579 11,201 General corporate(3) 14,885 11,520 11,476 11,512 94,166 12,409 4,818 --------------------------------------------------------------------------------------------------------------------------- Total $480,265 $413,071 $339,904 $256,774 $243,303 $139,766 $119,798 --------------------------------------------------------------------------------------------------------------------------- IDENTIFIABLE ASSETS Foodservice equipment(3) $359,196 $314,982 $254,506 $249,384 $ 90,937 $ 90,126 $ 27,828 Cranes and related products 171,867 165,974 178,470 100,591 88,174 109,118 88,068 Marine 75,757 10,162 7,023 6,426 10,648 11,369 13,233 General corporate(3) 35,710 39,122 41,015 39,967 127,951 114,302 30,336 --------------------------------------------------------------------------------------------------------------------------- Total $642,530 $530,240 $481,014 $396,368 $317,710 $324,915 $159,465 --------------------------------------------------------------------------------------------------------------------------- LONG-TERM OBLIGATIONS Long-term debt $137,668 $ 79,223 $ 79,834 $ 66,359 $ 76,501 $101,180 $ -- --------------------------------------------------------------------------------------------------------------------------- DEPRECIATION Foodservice equipment $ 6,168 $ 4,861 $ 4,906 $ 3,613 $ 3,377 $ 1,606 $ 703 Cranes and related products 2,915 3,661 4,085 4,044 4,260 4,162 2,288 Marine 437 415 333 256 600 608 316 General corporate 352 384 405 405 81 80 46 --------------------------------------------------------------------------------------------------------------------------- Total $ 9,872 $ 9,321 $ 9,729 $ 8,318 $ 8,318 $ 6,456 $ 3,353 --------------------------------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES Foodservice equipment $ 8,883 $ 8,974 $ 7,415 $ 6,847 $ 5,110 $ 4,568 $ 3,011 Cranes and related products(4) 2,883 3,536 2,945 4,952 2,816 14,252 528 Marine 1,481 1,165 1,174 233 343 383 109 General corporate(4) 168 39 144 8 127 6 82 --------------------------------------------------------------------------------------------------------------------------- Total $ 13,415 $ 13,714 $ 11,678 $ 12,040 $ 8,396 $ 19,209 $ 3,730 --------------------------------------------------------------------------------------------------------------------------- PER SHARE(5) Basic $ 2.42 $ 2.57 $ 1.98 $ 1.41 $ .99 $ .56 $ (.19) Diluted 2.40 2.55 1.97 1.40 .99 .56 (.19) Dividends .30 .30 .30 .30 .30 .30 .15 --------------------------------------------------------------------------------------------------------------------------- Average shares outstanding: Basic 24,891,387 25,991,711 25,932,356 25,900,682 25,900,553 25,901,342 26,140,122 Diluted 25,122,795 26,200,666 26,125,067 26,096,529 25,993,848 25,906,769 26,140,122 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Fiscal 1994 1993 1992 1991 1990 ----------------------------------------------------------------------------------------------------- NET SALES Foodservice equipment $ 93,171 $ 81,424 $ 74,175 $ 73,944 $ 74,612 Cranes and related products(2) 156,253 178,630 155,743 147,554 117,464 Marine 25,956 18,504 16,471 14,689 33,752 ----------------------------------------------------------------------------------------------------- Total $275,380 $278,558 $246,389 $236,187 $225,828 ----------------------------------------------------------------------------------------------------- Gross profit $ 67,924 $ 55,785 $ 54,443 $ 58,062 $ 54,366 ----------------------------------------------------------------------------------------------------- EARNINGS (LOSS) FROM OPERATIONS Foodservice equipment $ 21,637 $ 18,311 $ 17,585 $ 17,364 $ 19,387 Cranes and related products 2,275 (1,961) (850) 7,602 5,490 Marine 2,447 593 278 (973) 6,497 General corporate (5,274) (5,296) (6,545) (5,734) (6,094) Amortization -- -- -- -- -- Plant relocation costs -- (3,300) -- -- -- ----------------------------------------------------------------------------------------------------- Total 21,085 8,347 10,468 18,259 25,280 ----------------------------------------------------------------------------------------------------- Other income (expense)--net 1,494 582 1,104 2,233 5,077 Earnings (loss) before taxes on income 22,579 8,929 11,572 20,492 30,357 Accounting changes -- (10,214) -- -- -- Provision (benefit) for taxes on income 8,536 2,612 3,315 5,060 9,327 ----------------------------------------------------------------------------------------------------- Net earnings (loss) $ 14,043 $ (3,897) $ 8,257 $ 15,432 $ 21,030 ----------------------------------------------------------------------------------------------------- OTHER FINANCIAL INFORMATION Cash from operations $ 36,995 $ 62,700 $ 28,250 $ 6,472 $ 14,210 ----------------------------------------------------------------------------------------------------- Invested capital (monthly averages): Foodservice equipment(3) $ 25,662 $ 26,503 $ 23,555 $ 25,099 $ 19,018 Cranes and related products 86,288 112,120 137,839 133,777 118,097 Marine 13,953 17,497 16,879 14,621 16,206 General corporate(3) 4,052 2,581 2,025 3,051 6,314 ----------------------------------------------------------------------------------------------------- Total $129,955 $158,701 $180,298 $176,548 $159,635 ----------------------------------------------------------------------------------------------------- IDENTIFIABLE ASSETS Foodservice equipment(3) $ 31,460 $ 29,526 $ 25,608 $ 28,019 $ 24,168 Cranes and related products 93,823 105,750 138,416 136,995 115,804 Marine 16,726 16,720 19,253 18,009 22,683 General corporate(3) 43,839 56,015 41,829 35,983 50,143 ----------------------------------------------------------------------------------------------------- Total $185,848 $208,011 $225,106 $219,006 $212,798 ----------------------------------------------------------------------------------------------------- LONG-TERM OBLIGATIONS Long-term debt $ --$ --$ --$ -- $ -- ----------------------------------------------------------------------------------------------------- DEPRECIATION Foodservice equipment $ 1,320 $ 1,187 $ 1,090 $ 812 $ 657 Cranes and related products 4,211 3,875 4,053 3,691 2,895 Marine 681 756 785 792 748 General corporate 61 44 196 234 431 ----------------------------------------------------------------------------------------------------- Total $ 6,273 $ 5,862 $ 6,124 $ 5,529 $ 4,731 ----------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES Foodservice equipment $ 2,300 $ 2,152 $ 1,099 $ 2,797 $ 748 Cranes and related products(4) 3,120 8,648 4,047 6,347 3,130 Marine (492) (463) 500 113 197 General corporate(4) 414 (39) (508) (2,955) 70 ----------------------------------------------------------------------------------------------------- Total $ 5,342 $ 10,298 $ 5,138 $ 6,302 $ 4,145 ----------------------------------------------------------------------------------------------------- PER SHARE(5) Basic $ .48 $ (.12) $ .24 $ .44 $ .60 Diluted .48 (.12) .24 .44 .60 Dividends .30 .30 .30 .30 .30 ----------------------------------------------------------------------------------------------------- Average shares outstanding: Basic 29,486,006 32,937,933 34,832,861 34,833,356 34,834,217 Diluted 29,486,006 32,937,933 34,832,861 34,833,356 34,834,217 ----------------------------------------------------------------------------------------------------- (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)Net sales for calendar years 1999, 1998, 1997, and 1996 have been restated to reflect the adoption of Emerging Issues Task Force (EITF) 99-19, "Reporting Revenues Gross as a Principal versus Net as an Agent." The impact of this restatement was to reclassify costs formerly reported as a component of net sales to cost of goods sold. The amounts reclassified were $18,848, $9,098, $8,771, and $10,257 for 1999, 1998, 1997, and 1996, respectively. Amounts prior to 1996 have not been restated as the effects are not significant. (3)In 1997, as part of the corporate restructuring, the Shannon acquisition goodwill was transferred to the Foodservice segment. (4)During 1991, certain assets were transferred from general corporate to the Cranes and Related Products segment. (5)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.
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CONSOLIDATED STATEMENTS OF EARNINGS (Thousands of dollars, except per share data) 2000 1999 1998 -------- -------- -------- EARNINGS Net sales $873,272 $824,339 $703,920 Costs and expenses: Cost of sales 637,538 590,627 508,299 Engineering, selling and administrative expenses 114,901 107,369 98,120 Amortization 8,181 7,392 4,881 ------- -------- ------- Total costs and expenses 760,620 705,388 611,300 ------- -------- ------- Earnings from operations 112,652 118,951 92,620 Interest expense (14,508) (10,790) (9,741) Other expense--net (2,024) (2,155) (1,467) ------- -------- ------- Earnings before taxes on income 96,120 106,006 81,412 Provision for taxes on income 35,852 39,222 30,032 ------- -------- ------- Net earnings $ 60,268 $ 66,784 $ 51,380 ======= ======== ======= Per Share Data Basic $ 2.42 $ 2.57 $ 1.98 Diluted $ 2.40 $ 2.55 $ 1.97 The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED BALANCE SHEETS (Thousands of dollars, except share data) As of December 31 2000 1999 -------- -------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 13,983 $ 10,097 Marketable securities 2,044 1,923 Accounts receivable, less allowances of $3,037 and $1,803 88,231 62,802 Inventories 91,178 91,437 Other current assets 7,479 2,211 Future income tax benefits 20,592 22,528 -------- ------- Total current assets 223,507 190,998 -------- ------- Intangible assets--net 308,751 232,729 Property, plant and equipment--net 99,940 92,023 Other non-current assets 10,332 14,490 -------- ------- Total assets $ 642,530 $530,240 ======== ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 144,713 $141,909 Short-term borrowings 81,000 32,300 Current portion of long-term debt 270 489 Product warranties 13,507 14,610 -------- ------- Total current liabilities 239,490 189,308 -------- ------- NON-CURRENT LIABILITIES Long-term debt, less current portion 137,668 79,223 Postretirement health benefits obligation 20,341 19,912 Other non-current liabilities 11,262 9,621 Commitments and contingencies -- -- -------- ------- Total non-current liabilities 169,271 108,756 -------- ------- STOCKHOLDERS' EQUITY Common stock (36,746,482 shares issued) 367 367 Additional paid-in capital 31,602 31,476 Accumulated other comprehensive loss (2,569) (814) Retained earnings 334,433 281,672 Treasury stock, at cost (12,487,019 and 10,658,113 shares in 2000 and 1999, respectively) (130,064) (80,525) -------- ------- Total stockholders' equity 233,769 232,176 -------- ------- Total liabilities and stockholders' equity $ 642,530 $530,240 ======== ======== The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of dollars) For the Years Ended December 31 2000 1999 1998 CASH FLOWS FROM OPERATIONS Net earnings $ 60,268 $ 66,784 $ 51,380 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation 9,872 9,321 9,729 Amortization of goodwill 8,181 7,392 4,881 Amortization of deferred financing fees 672 637 420 Deferred income taxes 7,148 (592) (5,748) Loss on sale of property, plant and equipment 274 557 928 Changes in operating assets and liabilities, excluding effects of business acquisitions: Accounts receivable (6,568) 14,057 (6,120) Inventories 6,402 (4,169) (18,662) Other current assets (17) 3,389 (2,535) Non-current assets 777 (2,935) 483 Current liabilities (25,452) 9,914 24,291 Non-current liabilities 1,490 (984) (2,233) --------- --------- --------- Net cash provided by operations 63,047 103,371 56,814 --------- --------- --------- CASH FLOWS FROM INVESTING Business acquisitions--net of cash acquired (98,982) (62,104) (48,175) Capital expenditures (13,415) (13,714) (11,678) Proceeds from sale of property, plant and equipment 3,481 6,491 1,329 Purchase of marketable securities--net (121) (89) (94) --------- --------- --------- Net cash used for investing (109,037) (69,416) (58,618) --------- --------- --------- CASH FLOWS FROM FINANCING Dividends paid (7,507) (7,799) (7,781) Proceeds from long-term debt -- -- 75,000 Payments on long-term debt (1,093) (11,090) (65,957) Proceeds (payments) from revolver borrowings--net 83,319 (16,200) (600) Proceeds from issuance of commercial paper--net 24,700 -- -- Debt acquisition costs -- (574) (521) Treasury stock purchases (49,752) -- -- Exercises of stock options 339 1,241 355 --------- --------- --------- Net cash provided by (used for) financing 50,006 (34,422) 496 --------- --------- --------- Effect of exchange rate changes on cash (130) (18) 2 --------- --------- --------- Net increase (decrease) in cash and cash equivalents 3,886 (485) (1,306) --------- --------- --------- Balance at beginning of year 10,097 10,582 11,888 --------- --------- --------- Balance at end of year $ 13,983 $ 10,097 $ 10,582 ========= ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 11,837 $ 10,137 $ 8,490 Income taxes paid $ 36,632 $ 41,327 $ 37,108 The accompanying notes are an integral part of these financial statements.
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (Thousands of dollars, except shares and per share data) For the Years Ended December 31 2000 1999 1998 ----------- ----------- ---------- COMMON STOCK -- SHARES OUTSTANDING Balance at beginning of year 26,088,369 17,304,578 17,269,175 Treasury stock purchases (1,882,900) -- -- Three-for-two stock split -- 8,652,289 -- Stock options exercised 68,919 144,177 39,694 Stock swaps for stock options exercised (14,925) (12,675) (4,291) ---------- ---------- ---------- Balance at end of year 24,259,463 26,088,369 17,304,578 ---------- ---------- ---------- COMMON STOCK -- PAR VALUE Balance at beginning of year $ 367 $ 245 $ 245 Three-for-two stock split -- 122 -- ---------- ---------- ---------- Balance at end of year $ 367 $ 367 $ 245 ---------- ---------- ---------- ADDITIONAL PAID-IN CAPITAL Balance at beginning of year $ 31,476 $ 31,029 $ 30,980 Three-for-two stock split -- (122) -- Stock options exercised 126 569 49 ---------- ---------- ---------- Balance at end of year $ 31,602 $ 31,476 $ 31,029 ---------- ---------- ---------- ACCUMULATED OTHER COMPREHENSIVE LOSS Balance at beginning of year $ (814) $ (212) $ (192) Other comprehensive loss (1,755) (602) (20) ---------- ---------- ---------- Balance at end of year $ (2,569) $ (814) $ (212) ---------- ---------- ---------- RETAINED EARNINGS Balance at beginning of year $ 281,672 $222,687 $179,088 Net earnings 60,268 66,784 51,380 Cash dividends* (7,507) (7,799) (7,781) ---------- ---------- ---------- Balance at end of year $ 334,433 $281,672 $222,687 ---------- ---------- ---------- TREASURY STOCK Balance at beginning of year $ (80,525) $(81,197) $ (81,503) Treasury stock purchases (49,752) -- -- Stock options exercised 675 1,088 448 Stock swaps for stock options exercised (462) (416) (142) ---------- ---------- ---------- Balance at end of year $ (130,064) $ (80,525) $(81,197) ---------- ---------- ---------- COMPREHENSIVE INCOME Net earnings $ 60,268 $ 66,784 $ 51,380 Other comprehensive loss: Foreign currency translation adjustment (1,755) (602) (20) ---------- ---------- ---------- Comprehensive income $ 58,513 $ 66,182 $ 51,360 ---------- ---------- ---------- *Cash dividends per share after giving effect to the three-for-two stock split in 1999 was $.30 per share. The accompanying notes 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 Principles of Consolidation - The consolidated financial statements include the accounts of The Manitowoc Company, Inc. (the "company") and its wholly and partially owned domestic and non-U.S. subsidiaries. All significant intercompany balances and transactions have been eliminated. Use of Estimates - The financial statements of the company have been prepared in accordance with generally accepted ac- counting principles, which require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures for the years presented. They also affect the disclosures of contingencies. Actual results could differ from those esti-mates. Cash Equivalents - All short-term investments purchased with an original maturity of three months or less are considered cash equivalents. Marketable Securities - Marketable securities at December 31, 2000 and 1999, included $2.0 million and $1.9 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. Inventories - Inventories are stated at the lower of cost or market as described in Note 3. Finished goods and work-in- process include material, labor, and manufacturing overhead costs. Advance payments from customers are netted against inventories to the extent of related accumulated costs. Ad- vance payments netted against inventories at December 31, 2000 and 1999, were $539 and $202, respectively. Advance payments received in excess of related costs on uncompleted contracts are classified with accrued expenses. Intangible Assets - Intangible assets consist primarily of costs in excess of net assets of businesses acquired (goodwill). 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, 2000 and 1999, of $308,751 and $232,729, respectively, are net of accumulated amortization of $29,368 and $20,515, respectively. Property, Plant and Equipment - Property, plant and equipment is depreciated over the estimated useful lives of the assets primarily using the straight-line depreciation method. Expen- ditures for maintenance, repairs, and renewals of relatively minor items are charged to expense as incurred. Renewals of significant items that substantially extend the capacity or useful life of an asset are capitalized. The cost and accumulated depreciation for property, plant and equipment sold, retired, or otherwise disposed of are relieved from the accounts, and resulting gains or losses are reflected in income. Property, plant and equipment is depreciated over the following estimated useful lives: Buildings and improvements 40 Drydocks and dock fronts 15-27 Machinery, equipment and tooling 4-15 Furniture and fixtures 10 Computer hardware and software 3-5 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 im-mediate 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, 2000. The fair value of interest rate swaps is the amount at which they could be settled, based on estimates obtained from financial institutions. Warranties - Estimated warranty costs are provided at the time of sale of the warranted products, based on historical warranty experience for the related product. 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 long-term expenditures for environmental remediation obligations are not discounted to their present value. Postretirement Benefits Other Than Pensions - The expected cost of postretirement benefits is recorded during the years that the employees render service. The obligation for these benefits and the related periodic costs are measured using actuarial techniques and assumptions, including an appropriate discount rate. Actuarial gains and losses are deferred and amortized over future periods. 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 (loss). 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 on floating rate debt 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. These activities are subject to established policies which, among other matters, prohibit the use of derivative financial instruments for trading or speculative purposes. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement, as amended by SFAS 137 and 138, is effective January 1, 2001, for the company. 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 whether a derivative is designated and qualifies as part of a hedge transaction and if so, the type of hedge transaction. The adoption of SFAS 133 will not have a significant effect on the company's earnings or its financial position. Revenue Recognition - Revenues and expenses in all business segments are generally recognized upon shipment or completion of service provided, reflecting the time that title and risk and reward of ownership generally are transferred to the customer. Revenues and costs on contracts for long-term projects, however, 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. The cost of shipping and handling is included in cost of sales. During the fourth quarter of 2000, the company adopted Emerging Issues Task Force (EITF) Issue 99-19 "Reporting Revenue Gross as a Principal versus Net as an Agent." Net sales amounts have been restated for 1999 and 1998 to reclassify certain Crane segment costs from net sales to cost of sales. The impact of this reclassification was to increase net sales and cost of sales by $3,863, $4,279, and $3,684 in the first, second, and third quarters of 2000, respectively, and increase net sales and cost of goods sold by $18,848 and $9,098 for the years ended December 31, 1999 and 1998, respectively, from amounts previously reported. Research and Development - Research and development costs are charged to expense as incurred and amounted to $6,747, $6,876, and $4,704 in 2000, 1999, and 1998, respectively. 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. Earnings per Share - Basic earnings per share is computed by dividing net earnings by the weighted average number of common 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. 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 Consolidated Statements of Stockholders' Equity and Comprehensive Income. Reclassifications - Certain prior year amounts have been re- classified to conform to the current year's presentation. 2. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment at December 31 is summarized as follows: 2000 1999 --------- --------- Land $ 3,888 $ 3,440 Buildings and improvements 75,430 65,651 Drydocks and dock fronts 21,389 21,675 Machinery, equipment, and tooling 116,950 105,124 Furniture and fixtures 4,628 3,623 Computer hardware and software 11,710 8,795 Construction in progress 3,876 6,044 --------- --------- Total cost 237,871 214,352 --------- --------- Less accumulated depreciation (137,931) (122,329) --------- --------- Property, plant and equipment--net $ 99,940 $ 92,023 ========= ========= 3. INVENTORIES - The components of inventories at December 31 are summarized as follows: 2000 1999 -------- -------- Raw materials $ 33,935 $ 39,134 Work-in-process 32,914 30,218 Finished goods 45,880 42,352 -------- -------- Total inventories at FIFO cost 112,729 111,704 Excess of FIFO cost over LIFO value (21,551) (20,267) -------- -------- Total inventories $ 91,178 $ 91,437 ======== ======== Inventories are carried at the lower of cost or market using the first-in, first-out (FIFO) method for 57% of total inventory for 2000 and 1999. The remainder of the inventories are cost-ed using the last-in, first-out (LIFO) method. 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES - Accounts payable and accrued expenses at December 31 are summarized as follows: 2000 1999 --------- --------- Trade accounts payable $ 64,269 $ 59,609 Employee related expenses 13,964 8,473 Profit sharing and incentives 23,280 26,974 Income taxes payable -- 6,877 Customer progress payments 877 3,518 Accrued product liability 8,432 8,219 Miscellaneous accrued expenses 33,891 28,239 --------- --------- Total $144,713 $141,909 ========= ========= 5. DEBT - Debt at December 31 is summarized as follows: 2000 1999 --------- ---------- Notes payable $ 75,000 $ 75,000 Industrial revenue bonds 3,619 4,712 Revolver borrowings 115,600 32,300 Commercial paper 24,719 -- --------- ---------- 218,938 112,012 Less current portion 81,270 32,789 --------- ---------- $137,668 $ 79,223 ========= ========= 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 maturity date to April 6, 2004. Currently, the Agreement provides for maximum borrowings of $300 million under a revolving line-of-credit and a letter-of-credit subfacility. There were $115.6 million and $32.3 million of borrowings outstanding under the revolving line-of-credit portion of the Agreement at December 31, 2000 and 1999, 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 2000 and 1999 on the unused portion of the available credit was 0.15%. 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, 2000 and 1999, was 7.2% and 7.6%, respectively. In January 2000, the company initiated a program under which it may borrow up to $25 million through the issuances of commercial paper to be used for general purposes. Borrowings through the program are not collateralized and are fully and unconditionally guaranteed by the company. The company is required to maintain an available unused balance under its Credit Agreement sufficient to support outstanding amounts of commercial paper. There were $24.7 million of commercial paper borrowings outstanding at December 31, 2000, with an average maturity of 27 days and an average interest rate of 7.0%. 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 a 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 enters into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate debt. At December 31, 2000, the company had outstanding one interest rate swap agreement with a financial institution, having a total notional principal amount of $12.5 million and expiring October 2002. The effect of this agreement on the company's interest rates during 2000 was not significant. Interest expense has been adjusted for the net receivable or payable under this agreement. The fair value of this interest rate swap agreement was nominal at December 31, 2000. The company is exposed to credit losses in the event of nonperformance by the financial institution. However, management does not anticipate such nonperformance. 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 of 2.7% and 10.0% at December 31, 2000. These obligations mature at various dates through 2004. The aggregate scheduled maturities of debt and industrial revenue bond obligations as well as projected paydown of the revolving line-of-credit in subsequent years are as follows: 2001 $ 81,270 2002 59,518 2003 250 2004 2,900 2005 -- Thereafter 75,000 ----------- $218,938 =========== On May 28, 1999, the company entered into an accounts receivable sales arrangement with a bank. The company sold $148.0 million and $67.2 million in accounts receivable to the bank under this arrangement during 2000 and 1999, respectively. The company had a $23.1 million and $8.4 million net factoring liability of uncollected accounts receivable due to the bank at December 31, 2000 and 1999, respectively. The cash flow impact of this arrangement is reported as cash flows from operations in the 2000 and 1999 Consolidated Statements 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. 6. INCOME TAXES - Components of earnings before income taxes are as follows: For the Years Ended December 31 2000 1999 1998 ------ ------ ------ Earnings (loss) before income taxes: Domestic $94,220 $106,234 $81,081 Foreign 1,900 (228) 331 ------- -------- -------- Total $96,120 $106,006 $81,412 ======= ======== ======== The provision for taxes on income is as follows: For the Years Ended December 31 2000 1999 1998 ------- ------- ------- Current: Federal $24,418 $36,715 $32,251 State 3,081 3,291 3,424 Foreign 252 (192) 105 ------- ------- ------- Total current 27,751 39,814 35,780 ------- ------- ------- Deferred--federal and state 8,101 (592) (5,748) ------- ------- ------- Provision for taxes on income $35,852 $39,222 $30,032 ======= ======= ====== The Federal statutory income tax rate is reconciled to the company's effective income tax rate as follows: For the Years Ended December 31 2000 1999 1998 ------- ------- ------- Federal income tax at statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal income tax benefit 2.3 2.2 2.6 Non-deductible goodwill amortization 1.7 1.4 1.1 Tax-exempt FSC income (0.9) (1.2) (1.1) Other items (0.8) (0.4) (0.7) ------- ------- ------- Provision for taxes on income 37.3% 37.0% 36.9% ======= ======= ======= 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: 2000 1999 -------- -------- Current deferred tax assets: Inventories $ 6,037 $ 4,365 Accounts receivable 1,035 925 Product warranty reserves 4,553 5,339 Product liability reserves 3,245 3,165 Other employee-related benefits and allowances 4,474 5,124 Other 1,248 3,610 -------- -------- Future income tax benefits, current $ 20,592 $ 22,528 -------- -------- Non-current deferred tax assets (liabilities): Property, plant and equipment $ (17,510) $(11,753) Postretirement benefits 7,853 7,775 Deferred employee benefits 4,938 4,782 Severance benefits 1,069 1,106 Product warranty reserves 1,205 1,130 Net operating loss carryforwards 1,976 1,874 Other 1,862 399 ---------- ---------- Net future income tax benefits, non-current $ 1,393 $ 5,313 ---------- ---------- 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, 2000, the company had repurchased approximately $25.0 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 $2.0 million available to reduce federal taxable income. These loss carryforwards expire in varying amounts through 2012. The company does not maintain a valuation allowance against deferred tax assets due to the existence of certain tax strategies designed to utilize these net operating loss carryforwards. 7. EARNINGS PER SHARE - The following is a reconciliation of the average shares outstanding used to compute basic and diluted earnings per share.
Per Share Per Share Per Share For the Years Ended December 31 Shares Amount Shares Amount Shares Amount 2000 2000 1999 1999 1998 1998 ---------- --------- ---------- ---------- ---------- --------- Basic EPS 24,891,387 $2.42 25,991,711 $2.57 25,932,356 $1.98 Effect of dilutive securities--stock options 231,408 208,955 192,711 ---------- ---------- ---------- Diluted EPS 25,122,795 $2.40 26,200,666 $2.55 26,125,067 $1.97 ========== ========== ==========
8. 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. 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% 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. Currently, the company has the authorization to repurchase up to 2.5 million shares of common stock at management's discretion. As of December 31, 2000, the company repurchased approximately 1.9 million shares at a cost of $49,752 pursuant to this authorization. 9. 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, 2000, 1999, and 1998 are summarized as follows:
Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise For the Years Ended December 31 Shares Price Shares Price Shares Price 2000 2000 1999 1999 1998 1998 ---------- ----- ------- ----- ------- ----- Options outstanding, beginning of year 611,881 $21.94 610,006 $18.63 608,181 $13.66 Options granted 936,900 21.20 221,557 25.58 209,400 30.54 Options exercised (68,919) 11.97 (144,177) 11.50 (59,541) 8.33 Options forfeited (162,733) 23.08 (75,505) 25.84 (148,034) 19.19 ---------- ----- ------- ----- ------- ----- Options outstanding, end of year 1,317,129 21.80 611,881 21.94 610,006 18.63 ---------- ----- ------- ----- ------- ----- Options exercisable, end of year 120,906 $19.53 47,444 $15.58 54,134 $ 9.02 ---------- ----- ------- ----- ------- -----
The outstanding stock options at December 31, 2000, have a range of exercise prices of $7.78 to $33.06 per option. The following shows the options outstanding and exercisable by range of exercise prices at December 31, 2000:
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 46,505 4.3 $ 9.33 34,353 $ 9.12 $18.78-$25.58 1,158,723 9.0 21.44 53,704 19.44 $30.54-$33.06 111,901 6.9 30.61 32,849 30.54 ----------------------------------------------------------------------------------------------------------- 1,317,129 8.7 $21.80 120,906 $19.53
The weighted average fair value at date of grant for options granted during 2000, 1999, and 1998 was $8.92, $9.56, and $11.77 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 : 2000 1999 1998 ----- ----- ----- Expected life (years) 7 7 7 Risk-free interest rate 5.5% 5.0% 5.8% Expected volatility 34.0% 30.9% 31.9% Expected dividend yield 1.0% 1.3% 1.5% 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 SFAS No. 123, "Accounting for Stock-Based Compensation," net income would have decreased $1,336, $877, and $547 in 2000, 1999, and 1998, respectively; and diluted earnings per share would have been $2.35, $2.52, and $1.95 in 2000, 1999, and 1998, respectively. 10. 2000 ACQUISITIONS - On November 20, 2000, the company purchased all of the issued and outstanding shares of MMC Acquisition Company, the parent of Marinette Marine Cor- poration. Marinette Marine, located in Marinette, Wisconsin, operates one of the largest shipyards on the U.S. Great Lakes. Marinette Marine is currently under contract to build a series of oceangoing buoy tenders for the United States Coast Guard. Marinette Marine presently employs approximately 800 people and features complete in-house capabilities for all shipbuilding disciplines. The aggregate consideration paid by the company for Marinette Marine was $66,092, which is net of $18,640 of cash acquired and includes direct acquisition costs of $531 and assumed liabilities of $17,431. The purchase price for this acquisition is subject to a post-closing working capital adjustment to be settled in 2001. The acquisition of Marinette Marine has been recorded using the purchase method of accounting. The cost of the acquisition has been allocated on the basis of the estimated fair values of the assets acquired and the liabilities assumed. The preliminary estimate of the excess of the cost over the fair value of the net assets acquired is $45,297 and is being amortized over a weighted average life of 38 years. On April 7, 2000, the company, through a wholly owned subsidiary, acquired substantially all of the net business assets of Harford Duracool, LLC (Harford). Harford is a leading manufacturer of walk-in refrigerators and freezers and maintains a 67,000-square-foot manufacturing facility in Aber- deen, Maryland. Its primary distribution channels are foodservice equipment dealers and commercial refrigeration distributors and its products range in size from 200 to 60,000 cubic feet. Harford also manufactures a line of modular, temperature-controlled structures for other niche markets. The aggregate consideration paid by the company for the assets of Harford was $21,228 which includes direct acquisition costs of $534, assumed liabilities of $1,448, and the payment of a post-closing working capital adjustment in Sep-tember 2000 of $267. The acquisition of Harford 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 $14,959 and is being amortized over a weighted average life of 35 years. On March 31, 2000, the company acquired all of the issued and outstanding shares of Multiplex Company, Inc. (Multiplex). Multiplex is headquartered in St. Louis, Missouri, where its production facility is located and has operations in Frankfurt, Germany, and Glasgow, UK. Multiplex manufactures soft-drink and beer dispensing equipment as well as water purification systems and supplies leading quick-service restaurants, convenience stores, and movie theatres. In addition, Multiplex designs and builds custom applications to meet the needs of customers with requirements that cannot be met by conventional dispensing equipment. The aggregate consideration paid by the company for the shares of Multiplex was $20,509, which is net of cash ac- quired of $3,698 and includes direct acquisition costs of $386 and assumed liabilities of $5,305. The acquisition of Multiplex 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 $12,687 and is being amortized over a weighted average life of 37 years. During 2000, the company also completed the acquisitions of certain assets of Pioneer Holdings LLC, the outstanding shares of Beverage Equipment Supply Company, and the remaining shares of Hangzhou Manitowoc Wanhua Refriger-ation Company, the company's Chinese joint venture. The total aggregate consideration paid by the company for these acquisitions was $18,168, which is net of cash received and includes direct acquisition costs of $159 and assumed liabilities of $2,831. The following unaudited pro forma financial information for the years December 31, 2000 and 1999 assumes the 2000 acquisitions occurred as of January 1 of each year. 2000 1999 --------- ---------- Net sales $970,843 $1,005,381 Net earnings $60,859 $72,702 Basic earnings per share $2.45 $2.80 Diluted earnings per share $2.42 $2.77 1999 ACQUISITIONS - 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 1999 of $1,263. 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 excess of the cost over the fair value of the net assets acquired of $24,073 is being amortized over a weighted average life of 38 years. 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 and assumed liabilities of $5,912. 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. 1998 ACQUISITIONS - 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 acquistion 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 operations subsequent to the date of each of the aforementioned acquisitions have been included in the Consolidated Statements of Earnings for the years ended December 31, 2000, 1999, and 1998. 11. 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 PRPs 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 remaining costs to clean up the Site are nominal, however the ultimate allocations of cost for the Site are not yet final. Although liability is joint and several, the company's percentage share of liability is estimated to be 11% of the total cleanup costs. Prior to December 31, 1996, the company accrued $3,300 in connection with this matter. Expenses charged against this reserve during 2000, 1999, and 1998 were not significant. Remediation work at the Site has been completed, with only long-term pumping and treating of groundwater and Site maintenance remaining. The company's remaining estimated liability for this matter, included in other current and non-current liabilities at December 31, 2000, is $900. As of December 31, 2000, 32 product-related lawsuits were pending. All 32 cases are insured with self-insurance retentions of $1,000 for Crane accidents; $1,000 for Foodservice accidents occurring during 1990 to 1996; and $100 for Foodservice accidents occurring during 1997 to 2000. The insurer's contribution is limited to $50,000. Product liability reserves included in accounts payable and accrued expenses at December 31, 2000 are $8,432; $2,657 reserved specifically for the 32 cases referenced above, and $5,775 for claims incurred but not reported which were estimated using actuarial methods. The highest current reserve for an insured claim is $950. 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 counsel's evaluation of such actions, in the opinion of management, ultimate resolution is not ex- pected to have a material adverse effect on the consolidated financial statements of the company. 12. 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 $14,854, $14,271, and $12,909, in 2000, 1999, and 1998, respectively. The company also provides certain health care and death benefits for eligible retirees and their dependents. The benefits are not funded, but are paid as incurred. Eligibility for coverage is based on meeting certain years of service and retirement qualifications. These benefits may be subject to de-ductibles, co-payment provisions, and other limitations. The company has reserved the right to modify these benefits. The tables that follow contain the components of the periodic postretirement health and other benefits cost for 2000, 1999, and 1998, respectively, and the reconciliation of the change in the accumulated periodic postretirement health benefit obligation, from January 1, 1999, through December 31, 2000. Acquisition related changes presented in the table relate to the acquisition of Marinette Marine in November 2000. Benefit costs for Marinette Marine from November 20, 2000 to December 31, 2000 are not significant.
The components of the periodic postretirement health benefit cost are as follows: 2000 1999 1998 -------- ------- ------- Service cost--benefits earned during the year $398 $395 $ 296 Interest cost on accumulated postretirement health benefit obligation 1,517 1,325 1,144 Amortization of actuarial gain -- -- (127) -------- ------- ------- Net periodic postretirement health and other benefit cost $1,915 $1,720 $1,313 ======== ======== ======
The following is a reconciliation of the change in the accumulated periodic postretirement health benefit obligation from January 1, 1999, through December 31, 2000, and a reconciliation of the postretirement benefit obligation to the accrued amount at December 31, 2000 and 1999: 2000 1999 ------- ------- Benefit obligation, beginning of year $19,091 $16,948 Service cost 398 395 Interest cost 1,517 1,325 Acquisition 478 -- Participant contributions 796 810 Actuarial loss 2,509 1,946 Benefits paid (2,589) (2,333) ------- ------- Benefit obligation, end of year $22,200 $19,091 ------- ------- Status of the plan, unfunded $22,200 $19,091 Unrecognized net (loss) gain (1,689) 821 ------- ------- Accrued benefit, end of year $20,511 $19,912 ======= ======= 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 $3,195 at December 31, 2000, and the aggregate of the service and interest cost components of net periodic postretirement health benefit cost by $301 for 2000. Decreasing the assumed health care cost trend rate by one percentage point in each year would decrease the accumulated postretirement health benefit obligation by $2,624 at December 31, 2000, and the aggregate of the service and interest cost components of net periodic postretirement health benefit costs by $244 for 2000. The discount rate used in determining the accumulated postretirement health benefit obligation is 7.25% for 2000 and 1999. Marinette Marine sponsored a defined benefit pension plan in which substantially all of its salaried employees are participants. Benefits under the plan were based upon years of service and average compensation. The funding policy was to contribute to the plan an amount equal to the current service costs taking into consideration the amount deductible for federal income tax purposes. A summary of the funded status of the plan at December 31, 2000 follows: 2000 -------- Benefit obligation $11,364 Fair value of plan assets 12,052 -------- Funded status, overfunded $ 688 -------- Prepaid pension costs $ 2,286 ======== It is reasonably possible that the estimate for future retirement and health care costs may change in the near future due to 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. 13. 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 $8,533, $4,847, and $2,848 in 2000, 1999, and 1998, respectively. Future minimum rental obligations under noncancelable operating leases, as of December 31, 2000, are payable as follows: 2001 $ 9,825 2002 8,612 2003 7,655 2004 6,404 2005 5,548 Thereafter 16,124 14. BUSINESS SEGMENTS - The company identifies its segments using the "management approach," which designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the company's reportable segments. The company has three reportable segments: Foodservice Equipment (Foodservice), Cranes and Related Products (Cranes), and Marine. Foodservice products consist primarily of commercial ice- cube machines; ice/beverage dispensers; walk-in and reach-in refrigerators and freezers; refrigerated undercounter and food preparation tables; private label residential refrigerators and freezers; backroom beverage equipment; and distribution services. Foodservice sells its products primarily in the United States, Europe, Southeast Asia, and in the Middle East. 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 lattice-boom crawler cranes; truck-mounted hydraulic cranes; rough-terrain forklifts; and material-handling equipment. Cranes also specializes in industrial machinery repair and rebuilding services as well as crane rebuilding and remanufacturing services. Cranes distributes its products in North America (primarily the United States), Europe, Southeast Asia, and the Middle East. Cranes' operations serve the construction, energy, and mining industries and are mainly impacted by the level of activities related to heavy construction and infrastructure projects around the world. Marine provides ship repair, maintenance, conversion, and construction services to foreign and domestic vessels operating on the Great Lakes. Marine is also a leading provider of Great Lakes and oceangoing mid-sized commercial, research, and military vessels. 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. Eleven of the business units have been aggregated into the Foodservice segment; four of the business units have been aggregated into the Cranes segment; and four 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, 2000 and 1999, and total segment sales and profits to the consolidated totals for the years ending December 31, 2000, 1999, and 1998 are summarized on page 32. Sales and long-lived asset information by geographic area as of and for the years ended December 31 are as follows:
Sales Long-Lived Assets -------------------------------------- ----------------------- 2000 1999 1998 2000 1999 --------- -------- -------- --------- ---------- United States $793,843 $737,616 $625,227 $410,596 $331,758 Other North America 25,132 25,213 16,881 -- -- Europe 17,375 32,246 36,917 5,468 5,479 Asia 17,393 11,174 12,920 2,959 2,005 Middle East 5,479 2,113 5,610 -- -- Central & South America 4,873 4,073 1,949 -- -- Africa 3,277 5,890 1,774 -- -- South Pacific & Caribbean 5,900 6,014 2,642 -- -- --------- -------- -------- --------- ---------- Total $873,272 $824,339 $703,920 $419,023 $339,242 ========= ======== ======== ========= ==========
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. 15. SUBSEQUENT EVENT - On March 4, 2001, Manitowoc submitted a binding offer to acquire the Potain cranes subsidiary of Groupe Legris Industries SA. The purchase price of the acquisition will be approximately $300 million (2.15 billion French francs), plus net cash at December 31, 2000, subject to an adjustment for net earnings of Potain for the period from January 1, 2001 to the closing date. The transaction is anticipated to be financed by a new pre-arranged banking facility, which is expected to include both senior and subordinated debt. Completion of the transaction is contingent upon certain events, including receipt of applicable regulatory approvals, completion of notification and consultation process with the applicable works' council (labor union) and final acceptance of the offer by the seller. The transaction is currently expected to be finalized by the end of the second quarter of 2001. Potain, headquartered in Lyon, France, is a world leader in the design, manufacture, and supply of tower cranes for the building and construction industry. Potain reported sales of approximately $275 million for the year ended December 31, 2000. MANAGEMENT'S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS The Manitowoc Company, Inc. management is responsible for the integrity of the consolidated financial statements and other information included in this annual report and for ascertaining that the data fairly reflect the company's financial position and results of operations. The company prepared the consolidated statements in accordance with generally accepted accounting principles appropriate in the circumstances, and such statements necessarily include amounts that are based on best estimates and judgements with appropriate considerations given to materiality. The company maintains an internal accounting system de- signed to provide reasonable assurance that company assets are safeguarded from loss or unauthorized use or disposition and that transactions are executed in accordance with management's authorization and are properly recorded to permit the preparation of the financial statements in accordance with generally accepted accounting principles. To further safeguard company 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 audit plans, internal controls, financial reports, and accounting practices and meets regularly with the company's internal auditors and independent accountants, both of whom have open access to the committee. The company's independent accountants, Pricewaterhouse- Coopers LLP, audited the company's Consolidated Financial Statements and issued the opinion below. /s/ Terry D. Growcock Terry D. Growcock President & Chief Executive Officer /s/ Glen E. Tellock Glen E. Tellock Senior Vice President & Chief Financial Officer REPORT OF INDEPENDENT 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, 2000 and 1999, and the results of their operations and their cash flows for the years ended December 31, 2000, 1999, and 1998, in conformity with accounting principles generally accepted in the United States of America. 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 of America, 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 examin-ing, 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 presen-tation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Milwaukee, Wisconsin January 26, 2001, except for information in Note 15, for which the date is March 4, 2001.
SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATIN (unaudited) Thousands of dollars, except per share data 2000 1999 --------------------------------------- ------------------------------------------ First Second Third Fourth First Second Third Fourth -------- -------- -------- -------- -------- -------- -------- -------- Net sales(1) $205,853 $243,566 $214,531 $209,322 $189,061 $231,629 $218,816 $184,833 Gross profit 55,717 71,066 55,657 53,294 52,560 65,718 62,515 52,919 Net earnings 14,913 22,606 12,299 10,450 12,428 20,986 19,378 13,992 Per share amounts:(2) Basic eps .58 .91 .50 .43 .48 .81 .75 .54 Diluted eps .57 .91 .50 .42 .47 .80 .74 .53 Dividends per common share .075 .075 .075 .075 .075 .075 .075 .075 (1)Net sales have been restated to reflect the adoption of EITF 99-19. (See "Revenue Recognition" in Note 1 to the Consolidated Financial Statements.) The amounts reclassified were $3,684; $4,279; $3,863; $3,771; $4,918; $5,287; and $4,872 for the third, second, and first quarters of 2000, and the fourth, third, second, and first quarters of 1999, respectively. (2)Per share data adjusted to reflect the April 1, 1999 three- for-two stock split.
QUARTERLY COMMON STOCK PRICE RANGE Year Ended December 31 2000 1999 1998 ------------------------ ------------------------- -------------------------- High Low Close High Low Close High Low Close 1st Quarter $32.63 $24.56 $27.50 $30.33 $24.21 $27.92 $26.75 $19.42 $25.75 2nd Quarter 34.88 26.75 26.75 42.00 27.00 41.63 31.21 25.40 26.87 3rd Quarter 30.88 19.00 19.75 43.75 32.56 34.13 27.92 16.33 20.09 4th Quarter 31.06 17.63 29.00 35.63 26.00 34.00 29.59 16.46 29.59 The company's common stock is traded on the New York Stock Exchange. The share prices shown above have been adjusted for the April 1, 1999 three-for-two stock split.
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, re-purchase stock, and make acquisitions. Cash Gap - A working capital measure that is equal to accounts receivable days sales outstanding plus inventory days less ac- counts payable days outstanding. Cost of Capital - A weighted average of the after-tax cost of equity and borrowed funds. Current Ratio - Current assets divided by current liabilities, an indicator of liquidity. EVA(R) (Economic Value-Added) - A financial measure to determine if a company is creating or depleting value for its shareholders. EVA is calculated by taking after-tax operating profits and subtracting the capital charge. 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 outside supplier to provide a service or function that had been previously performed within the company. 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 shareholder's investment. Return on Invested Capital - A 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 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 process that must be performed every five years to satisfy stringent maritime regulations developed by the U.S. Coast Guard, the American Bureau of Shipping, and other regulatory agencies. Graving Dock - An in-ground concrete structure in which ships can be built or repaired. A graving dock is equipped with pumps and watertight gates. It is flooded so ships can float in; then it is pumped dry so crews can work on those parts of a ship that normally are underwater. Hopper Dredge - A hopper dredge is 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, movie theatres, and convenience stores. Integrated Tug/Barge - A new form of Great Lakes bulk-cargo transportation that combines a non-powered notch barge that is pushed by a high horsepower diesel tug. Kiosk - A limited-menu, walk-up, quick-service restaurant that sells food that usually is prepared elsewhere. Lattice Boom - A fabricated, high-strength steel structure that usually has four chords 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 luffing jib easily adjusts its angle of operation - a capability that is not possible with a conventional fixed-jib attachment. MAX-ER(TM) - Manitowoc's trailing counterweight heavy-lift attachment that dramatically improves the reach, capacity, and lift dynamics of the basic crane to which it is mounted. 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 - Refers to 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, consisting of multiple telescopic 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 ca-pable of traveling at highway speeds from one project to the next. Walk-in - A large, foamed-in-place, refrigerated structure, frequently used in restaurants, that can be equipped with cooling or freezing systems for long-term storage of foodservice items prior to 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 Accountants ----------------------- PricewaterhouseCoopers LLP 100 East Wisconsin Avenue Suite 1500 Milwaukee, WI 53202 Stock Transfer Agent and Registrar ---------------------------------- First Chicago Trust Company A division of EquiServe P.O. Box 2500 Jersey City, NJ 07303-2500 Annual Meeting -------------- The annual meeting of Manitowoc Company shareholders will be held at 9:00 a.m., CDT, Tuesday, May 1, 2001, 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 47 of this an-nual report. Shares of Manitowoc's common stock have been publicly traded since 1971. Manitowoc Shareholders ---------------------- On December 31, 2000, there were 24,259,463 shares of Manitowoc common stock outstanding. At such date, there were 2,787 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 this Annual Report to Shareholders. A copy of Form 10-K, as filed with the Securities and Exchange Commission for 2000, may be obtained by any shareholder, without charge, upon written request to: Maurice D. Jones General Counsel & Secretary The Manitowoc Company, Inc. P.O. Box 66 Manitowoc, WI 54221-0066 Dividends --------- Manitowoc has paid continuous dividends, without interruption, since 1971. On February 14, 2001, Manitowoc switched from a quarterly cash dividend to an annual common stock cash dividend. In October of this year, and in its regular fall meetings each year thereafter, the board of directors will determine the amount and timing of the annual dividend for that year. 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 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 Manitowoc pays for all fees associated with stock purchases under these plans. To receive an information booklet and enrollment form, please contact our stock transfer agent and registrar, First Chicago Trust Company. Manitowoc also participates in the Own Your Share of America and the Low-Cost Stock Ownership Plans as offered and administered by the National Association of Investors Corporation. INVESTOR INQUIRIES Security analysts, portfolio managers, individual investors, and media professionals seeking information about Mani-towoc are encouraged to visit our Web site, or contact the following: Analysts & Portfolio Managers ----------------------------- Glen E. Tellock Senior Vice President & Chief Financial Officer Telephone: 920-683-8122 Telefax: 920-683-8138 Media Inquiries --------------- Steven C. Khail Director of Investor Relations & 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 2001 according to the following schedule: 1st Quarter - April 17, 2001 2nd Quarter - July 12, 2001 3rd Quarter - October 11, 2001 4th Quarter - To be announced Join MTW on the Internet ------------------------ Manitowoc provides a variety of information about its businesses, products, and markets at its Web site address: www.manitowoc.com. Equal Opportunity ----------------- Manitowoc believes that a diverse workforce is required to compete successfully in today's global markets. The com-pany 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 Profit Gross Profit ($ Millions) for 1995-2000 -------------------------------- 1995 74.5 1996 134.6 1997 152.6 1998 195.6 1999 233.7 2000 235.7 Although gross profit improved in 2000, the degree of improvement was affected by the economic slow- down experienced by our Foodservice and Crane segments in the second half of the year. 2 Bar Graph of Capital Expenditures Capital Expenditures ($ Millions) for 1995-2000 ------------------------------------------ 1995 19.2 1996 8.4 1997 12.0 1998 11.7 1999 13.7 2000 13.4 The $13.4 million of capital expenditures that Manitowoc made in 2000 included $1.5 million for demand flow initiatives, $1.5 million for a new evaporator plating line at Manitowoc Ice, and $829,000 for robotic welding equipment at Manitowoc Cranes. 3 Bar Graph of SG&A as a SG&A as a Percent of Sales (Percent of Sales) Percent of Sales for ----------------------------------------------- 1995-2000. 1995 16.7 1996 16.2 1997 15.4 1998 13.9 1999 13.0 2000 13.2 Despite lower revenues in our continuing businesses and the completion of five acquisitions in 2000, Manitowoc's selling, general and administrative expense as a percent of sales was only 13.2%.