UNITED STATESSECURITIES AND EXCHANGE COMMISSION
[X]
Quarterly Report Pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934
For the quarterly period ended June 30, 2001
[ ]
Transition Report Pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934
For the transition period from _________ to ___________
Commission File Number1-11978
Wisconsin
39-0448110
(State or other jurisdictionof incorporation)
(I.R.S. EmployerIdentification Number)
500 S. 16th Street,Manitowoc, Wisconsin
54221-0066
(Address of principal executive offices)
(Zip Code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceeding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( )The number of shares outstanding of the Registrant's common stock, $.01 par value, as of June 30, 2001, the most recent practicable date, was 24,271,731.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE MANITOWOC COMPANY, INC.
Quarter Ended June 30
Six Months Ended June 30
2001
2000
Net sales
$
298,234
243,566
527,585
449,419
Costs and expenses:
Cost of sales
218,460
172,500
391,781
322,636
Engineering, selling and administrative expenses
37,619
28,487
71,305
55,559
Amortization expense
3,152
2,085
5,467
3,987
Total costs and expenses
259,231
203,072
468,553
382,182
Earnings from operations
39,003
40,494
59,032
67,237
Other income (expense):
Interest expense
(8,844
)
(3,938
(12,940
(6,449
Other expenses, net
(425
(386
(540
(757
Total other income (expense)
(9,269
(4,324
(13,480
(7,206
Earnings before taxes on income and extraordinary loss
29,734
36,170
45,552
60,031
Provision for taxes on income
11,799
13,564
17,747
22,512
Earnings before extraordinary loss
17,935
22,606
27,805
37,519
Extraordinary loss on debt extinguishment, net of income tax benefit of $2,216
(3,324
--
Net earnings
14,611
24,481
Basic earnings per share before extraordinary loss
0.74
0.91
1.15
1.48
Extraordinary loss, net of income tax benefit
(0.14
Basic earnings per share
0.60
1.01
Diluted earnings per share before extraordinary loss
0.73
1.13
1.47
(0.13
Diluted earnings per share
1.00
Dividends per share
0.075
0.15
Weighted average shares outstanding - basic
24,269,153
24,725,648
24,265,752
25,287,860
Weighted average shares outstanding - diluted
24,562,957
24,905,159
24,550,046
25,436,958
See accompanying notes which are an integral part of these statements.
Assets
June 30, 2001 (Unaudited)
December 31, 2000
Current Assets:
Cash and cash equivalents
30,240
13,983
Marketable securities
2,098
2,044
Accounts receivable
169,097
88,231
Inventories
152,326
91,178
Other current assets
11,951
7,479
Future income tax benefits
27,002
20,592
Total current assets
392,714
223,507
Intangible assets - net
521,876
308,751
Other non-current assets
31,759
10,332
Property, plant and equipment - net
171,740
99,940
Total assets
1,118,089
642,530
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses
251,668
144,713
Current portion of long-term debt
37,020
270
Short-term borrowings
875
81,000
Product warranties
15,864
13,507
Total current liabilities
305,427
239,490
Non-Current Liabilities:
Long-term debt, less current portion
494,412
137,668
Postretirement health benefit obligations
20,653
20,341
Other non-current liabilities
46,782
11,262
Total non-current liabilities
561,847
169,271
Stockholders' Equity:
Common stock (36,746,482 shares issued)
367
Additional paid-in capital
31,626
31,602
Accumulated other comprehensive loss
(8,313
(2,569
Retained earnings
357,124
334,433
Treasury stock, at cost
(12,474,751 and 12,487,019 shares)
(129,989
(130,064
Total stockholders' equity
250,815
233,769
Total liabilities and stockholders' equity
Six Months Ended June 30,
Cash Flows from Operations:
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation
6,582
4,947
Amortization of goodwill
Amortization of deferred financing fees
566
336
Extraordinary loss on early extinguishment of debt, net of income tax benefit
3,324
- --
Loss on sale of property, plant and equipment
34
46
Changes in operating assets and liabilities
excluding the effects of business acquisitions:
(7,946
(31,084
359
(1,119
(3,879
1,296
Non-current assets
(11,069
(542
Current liabilities
22,263
9,687
Non-current liabilities
2,468
(27
Net cash provided by operations
42,650
25,046
Cash Flows from Investing:
Business acquisitions - net of cash acquired
(282,317
(47,411
Capital expenditures
(7,907
(8,412
Proceeds from sale of property, plant, and
equipment
330
110
Purchase of temporary investments - net
(54
(60
Net cash used for investing
(289,948
(55,773
Cash Flows from Financing:
Proceeds from long-term borrowings
345,116
Proceeds from senior subordinated notes
156,118
Payments on long-term borrowings
(135,629
(21
Proceeds (payments) on short-term borrowings - net
(80,125
76,035
Debt issuance costs
(20,153
Dividends paid
(1,791
(3,770
Options exercised
130
301
Treasury stock purchased
(41,498
Net cash provided by financing
263,666
31,047
Effect of exchange rate changes on cash
(111
(34
Net increase in cash and cash equivalents
16,257
286
Balance at beginning of period
10,097
Balance at end of period
10,383
Supplemental cash flow information:
Interest paid
9,640
5,037
Income taxes paid
3,726
17,845
Quarter Ended June 30,
Other comprehensive loss:
Hedging activities - net of income taxes
(211
Foreign currency translation adjustments
(5,862
(570
(5,533
(754
Total other comprehensive loss
(5,744
Comprehensive income
8,749
22,036
18,737
36,765
1. Accounting Policies
June 30, 2001
Dec. 31, 2000
Components:
Raw materials
60,017
33,935
Work-in-process
51,417
32,914
Finished goods
62,606
45,880
Total inventories at FIFO costs
174,040
112,729
Excess of FIFO costs over LIFO value
(21,714
(21,551
Total inventories
Inventory is carried at lower of cost or market using the first-in, first-out (FIFO) method for 77% and 57% of total inventory at June 30, 2001 and December 31, 2000, respectively. The remainder of the inventory is costed using the last-in, first-out (LIFO) method.3. ContingenciesThe United States Environmental Protection Agency ("EPA") has identified the company as a potentially responsible party ("PRP") under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), liable for the costs associated with investigating and cleaning up contamination at the Lemberger Landfill Superfund Site (the "Site") near Manitowoc, Wisconsin.Approximately 150 PRP's have been identified as having shipped substances to the Site. Eleven of the potentially responsible parties, including the company, 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 allocation of costs for the Site is 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 $3.3 million in connection with this matter. Expenses charged against this reserve during the second quarter and first six months of 2001 and 2000 in connection with this matter were not significant. Remediation work at the Site has been substantially completed, with only long-term pumping and treating of ground water and Site maintenance remaining. The remaining estimated liability for this matter, included in other current and non-current liabilities at June 30, 2001, is $1.2 million.
As of June 30, 2001, various product-related lawsuits were pending. To the extent permitted under applicable law, all of these are insured with self-insurance retentions of $0.1 million for Potain crane accidents; $1.0 million for all other Crane accidents; $1.0 million for Foodservice accidents occurring during 1990 to 1996; and $0.1 million for Foodservice accidents occurring during 1997 to 2001. The insurer's contribution is limited to $50.0 million.Product liability reserves included in accounts payable and accrued expenses at June 30, 2001 are $10.4 million; $4.3 million reserved specifically for the cases referenced above, and $6.1 million for claims incurred but not reported which were estimated using actuarial methods. As of June 30, 2001, the highest reserve for an insured claim is $0.9 million. 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 claims 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 that 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 expected to have a material adverse effect on the consolidated financial statements of the company.4. Stockholders' EquityThe company currently has the board of directors' authorization to repurchase up to 2.5 million shares of common stock at management's discretion. As of June 30, 2001, the company had purchased approximately 1.9 million shares at a cost of $49.8 million pursuant to this authorization. There were no common stock repurchases made during the first six months of 2001.In February 2001, the board of directors adopted a resolution to pay cash dividends annually rather than quarterly. Thus, in October 2001, and at its regular fall meeting each year thereafter, the board of directors will determine the amount and timing of the annual dividend for that year. 5. Earnings per ShareThe following is a reconciliation of the earnings and average shares outstanding used to compute basic and diluted earnings per share.
Earnings:
Earnings from continuing operations
Extraordinary loss from debt extinguishment, net
Basic weighted average common shares outstanding
Effect of dilutive securities - stock options
293,804
179,511
284,294
149,098
Diluted weighted average common shares outstanding
Basic earnings per share:
Diluted earnings per share:
6. Long-term DebtDuring the second quarter ended June 30, 2001, and in connection with the company's acquisition of Potain SA(see Note 7), the company restructured its long-term debt by entering into a $475 million senior credit facility (the " Senior Credit Facility") and issuing U.S. $156 million (euro 175 million) aggregate principal amount of the company's 10-3/8% Senior Subordinated Notes (the "Notes") due 2011.
The company incurred an extraordinary loss of $3,324, net of income tax benefit of $2,216, related to the prepayment of certain of its existing credit facilities as a result of its refinancing activities. The loss resulted from a prepayment penalty and the write-off of the related unamortized financing fee.The Senior Credit Facility, comprised of a $125 million revolving credit facility and term loans aggregating $350 million, requires the company to meet specified financial tests including the maintenance of various debt and net worth ratios, and contains customary events of default, including a change of control, and other customary covenants, including covenants that limit the company's and its subsidiaries' ability to prepay principal, redeem or repurchase the Notes, incur additional debt, merge with other entities or make acquisitions, pay dividends or make distributions, make investments or advances, create or become subject to liens, and make capital expenditures.Borrowings under the agreement bear interest at a rate equal to the sum of the base rate or a Eurodollar rate plus an applicable percentage. For all credit facilities the percentage is based on the company's consolidated leverage ratio, as defined by the agreement. The company will also pay agency fees and commitment fees on the unused portion of the credit facility as defined by the agreement.The Notes, which were registered with the Securities and Exchange Commission, are unsecured obligations of the company, ranking subordinate in right of payment to all senior debt of the company. The Notes include covenants similar to the senior credit agreement described above. The Notes also contain certain other covenants including restrictions on the repurchase of capital stock and asset sales, as defined.
The company enters into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate debt. As of June 30, 2001 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 interest rate swap is designated as a cash flow hedge instrument based upon the criteria established by SFAS No. 133. For a derivative designated as a cash flow hedge, the effective portion of the derivative's gain or loss due to a change in fair value is initially recorded as a component of other comprehensive income and subsequently reclassified into earnings when the hedged exposure affects earnings. During the period ended June 30, 2001, the cash flow hedge was deemed to be fully effective.7. Acquisition of Potain and Subsidiary GuarantorsOn May 9, 2001, the company, through its subsidiary Manitowoc France SAS, acquired from Legris Industries SA ("Legris") all of the outstanding capital stock of Potain SA ("Potain"), pursuant to a Share Purchase Agreement, dated May 9, 2001 (the "Acquisition") for $307.1 million, plus a post-closing adjustment for Potain's net income from January 1, 2001 through the closing date. Potain is a leading designer, manufacturer and supplier of tower cranes for the building and construction industry.The acquisition of Potain, which is included in the company's financial statements as of May 9, 2001, 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 liabilities assumed. The preliminary estimate of the excess of the cost over the fair value of the net assets acquired is $192.4 million the amortization of which will cease effective January 1, 2002 (see Note 8). Pro forma consolidated net sales, earnings before extraordinary item, net income, basic earnings per share and diluted earnings per share were $628.1 million, $19.0 million, $15.6 million, $0.64 and $0.64, respectively, for the six-month period ended June 30, 2001. The Pro forma financial information assumes the Potain acquisition occurred on January 1, 2001. Comparable prior year six-month pro forma information is not available as the Potain books and records were maintained under French GAAP, however, U.S. GAAP reconcil ed net sales and net income for Potain for the year ended December 31, 2000 were $260.0 million and $15.8 million, respectively.In connection with the Potain acquisition, the company issued Notes, as described in Note 6. The Notes are fully and unconditionally and jointly and severally guaranteed by the company's domestic subsidiaries (the "Guarantor Subsidiaries"). The following condensed consolidating financial statements illustrate the composition of The Manitowoc Company, Inc. ("Parent"), the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries as of June 30, 2001 for the balance sheet, as well as the statement of earnings and cash flows for the six-month period ended June 30, 2001. Separate financial statements of the respective Guarantor Subsidiaries are not provided because the company believes separate financial statements would not provide additional information that would be useful in assessing the financial condition of the Guarantor Subsidiaries.
The Manitowoc Company, Inc.Condensed Consolidating Statement of EarningsFor the Six Months Ended June 30, 2001(Unaudited)(In thousands)
Guarantor
Non-Guarantor
Parent
Subsidiaries
Eliminations
Consolidated
469,878
57,707
347,725
44,056
Engineering, selling and administrative
6,146
57,988
7,171
294
4,459
714
6,440
410,172
51,941
Earnings (loss) from operations
(6,440
59,706
5,766
(11,792
(1,148
Management fee income (expense)
6,823
(6,823
Other expense - net
(384
(114
(42
(5,353
(8,085
Earnings before taxes on income, equityin earnings of subsidiaries andextraordinary loss
(11,793
51,621
5,724
Provision (benefit) for taxes on income
(4,467
19,554
2,660
Equity in earnings of subsidiaries,
35,131
(35,131
32,067
3,064
The Manitowoc Company, Inc.Condensed Consolidating Statement of Balance Sheetas of June 30, 2001(Unaudited)(In thousands)
Non-
16,534
(6,331
) $
20,037
272
97,136
71,689
82,314
70,012
45
10,545
1,361
22,756
4,246
41,705
183,664
167,345
20,998
303,792
197,086
227
17,339
14,193
4,386
96,423
70,931
Equity in affiliates
886,588
(886,588
953,904
601,218
449,555
29,038
133,220
89,410
Current portion long-term debt
13,830
2,034
66,933
147,050
91,444
472,693
21,719
Postretirement health benefits obligation
1,054
19,599
Intercompany payable/(receivable) - net
157,779
(169,837
12,058
4,630
5,987
36,165
636,156
(144,251
69,942
Stockholders' Equity
598,419
288,169
The Manitowoc Company, Inc.Condensed Consolidating Statement of Cash FlowsFor the Six Months Ended June 30, 2001(Unaudited)(In thousands)
Net cash provided by (used in) operations
31,978
(2,063
12,735
(1,853
(280,464
(721
(7,485
299
Proceeds from sale of property, plant, and equipment
Intercompany investments
(282,900
282,900
Net cash provided by (used for) investing
(283,675
(9,008
2,735
Payments on long-term borrowing
(134,343
(1,286
Net cash provided by (used for) financing
264,952
Net increase (decrease) in cash
and cash equivalents
13,255
(11,071
14,073
3,279
4,740
5,964
(7,351
8. Recent Accounting PronouncementsThe company adopted the Statement of Financial Accounting Standards (SFAS) No. 131, "Accounting for Derivative Instruments and Hedging Activities" as of January 1, 2001. This statement 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 company's derivative instruments are described in Note 6. The cumulative effect of adopting SFAS No. 133 was insignificant.In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets" to establish accounting and reporting standards for business combinations, goodwill and intangible assets. Under SFAS No. 142, effective January 1, 2002, amortization of goodwill recorded on the company's books will cease (goodwill for the first six months of 2001 was $5,467). After January 1, 2002, goodwill will be subject to an annual assessment for impairment, using a fair value based test. An impairment loss would be reported as a reduction to goodwill and a charge to operating expense, except at the transition date. The company is in the process of evaluating the impact of SFAS No. 141 and SFAS No. 142 on its financial statements.9. Business SegmentsThe company determines its segments based upon the internal organization that is used by management to make operating decisions and assess performance. Based upon this approach, the company has three reportable segments: Foodservice Equipment (Foodservice), Cranes and Related Products (Cranes), and Marine Operations (Marine).Information about reportable segments and a reconciliation of total segment sales and profits to the consolidated totals for the quarters and first six months ending June 30, 2001 and 2000 are summarized in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations", to this report on Form 10-Q. As of June 30, 2001 and December 31, 2000, the total assets by segment were as follows:
and assess performance. Based upon this approach, the company has three reportable segments: Foodservice Equipment (Foodservice), Cranes and Related Products (Cranes), and Marine Operations (Marine).Information about reportable segments and a reconciliation of total segment sales and profits to the consolidated totals for the quarters and first six months ending June 30, 2001 and 2000 are summarized in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations", to this report on Form 10-Q. As of June 30, 2001 and December 31, 2000, the total assets by segment were as follows:
Foodservice
370,636
359,196
Cranes
601,181
171,867
Marine
78,957
75,757
General corporate
67,315
35,710
Total
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsResults of Operations for the Quarter and Six Months Ended June 30, 2001 and 2000Net sales and earnings from operations by business segment for the quarter and first six months ended June 30, 2001 and 2000 are shown below (in thousands):
Net Sales:
Foodservice products
116,454
121,948
217,699
214,877
Cranes and related products
133,146
102,770
217,404
203,540
48,634
18,848
92,482
31,002
Earnings (Loss) From Operations:
21,354
22,289
30,895
34,468
17,963
20,134
29,326
37,466
5,854
2,864
10,423
5,241
General corporate expense
(3,017
(2,708
(6,146
(5,951
Amortization
(3,151
(2,085
(5,466
(3,987
Other Income (Expense) - Net
Earnings Before Taxes on Income and Extraordinary Loss
Net sales increased 22.4 % to $298.2 million for the second quarter of 2001, from $243.6 million for the same period in 2000. Earnings for the quarter were $17.9 million, or $.73 per diluted share, excluding the extraordinary loss, net of income tax benefit of $3.3 million related to the prepayment penalty and the asset write-off incurred as a result of the company's refinancing of its long-term debt, compared with $22.6 million, or $.91 per diluted share in the second quarter of 2000. Including the extraordinary loss of $3.3 million, second-quarter 2001 net earnings were $14.6 million or $.60 per diluted share. EVA totaled $10.3 million for the second quarter, compared with $16.3 million for the same period a year ago.
For the first six months of 2001, net sales increased 17.4% to $527.6 million from $449.4 million for the same period in 2000. Earnings, excluding the extraordinary loss, were $27.8 million, or $1.13 per diluted share, compared with $37.5 million, or
$1.47 per diluted share, for the comparable period in 2000. EVA was $12.5 million for the first six months of 2001, compared with $24.2 million for the same period one year ago. The company continues to have profitable results despite the difficult economic conditions that are affecting several of the business units. The company's performance during the second quarter was bolstered by operational improvements and cost-reduction strategies that were implemented over the past 12 months. Equally important, the company continues to gain market share in many of its key businesses.
While sales for the Foodservice segment declined by 4.5% this quarter when compared to the second quarter of 2000, this segment was able to sustain operating margins at 18.3%. For the first six months of 2001 sales and operating earnings were $217.7 million and $30.9 million, respectively. This compares to sales and operating earnings of $214.9 million and $34.5 million for the first six months of 2000.Cranes and related products sales for the second quarter were $133.1 million, up from $102.8 million for the second quarter of 2000. Operating earnings were $18.0 million, compared to $20.1 million for the second quarter of 2000. The increase in sales was the result of the Potain SA ("Potain") acquisition completed during the second quarter. Without this acquisition, sales and operating earnings would have decreased by 17.8% and 39.5%, respectively, compared to the same quarter last year. Market conditions and economic uncertainty continued to affect the buying patterns of small contractors and rental companies alike, which is reflected in the lower sales of boom trucks and small-capacity lattice-boom cranes during the quarter. To strengthen its position in the boom-truck market, the company is now consolidating its boom truck operations into a single facility, while also improving this product line to simplify its production, enhance efficiency, and boost margins. Conversely, sales of high-capacity cr anes remain strong. Power generation, petrol-chemical, refinery, and other energy-related applications are driving the utilization for this type of specialized equipment. As a result, crane segment backlog, including Potain, increased to $125 million at the end of the second quarter of 2001, as compared to $66 million at the end of the first quarter. For the first six months of 2001, Cranes' sales were $217.4 million, compared to $203.5 million for the first six months of 2000. Operating earnings were $29.3 million compared to $37.5 million for the same period in 2000. Marine segment sales and operating earnings for the second quarter were $48.6 million and $5.9 million, respectively, compared with $18.8 million and $2.9 million for the same period in 2000. The company's acquisition of Marinette Marine in the fourth quarter of 2000 accounted for the sales and earnings increase. Excluding Marinette's results, sales and operating earnings declined by 1% and 19%, respectively. The decline in organic margins is due to the higher percentage of project work revenue. Across all of the marine businesses, project revenue was particularly strong this quarter as work on commercial and government contracts progressed faster than anticipated. For the first six months of 2001, sales and operating earnings for this segment were $92.5 million and $10.4 million, respectively, compared with $31.0 million and $5.2 million for 2000.Interest expense for the six months ended June30, 2001 was $12.9 million, compared to $6.4 million for the same period last year. The increase in interest expense is due to the additional debt incurred to fund the Potain and Marinette acquisitions and higher interest rates on the new credit facility.The effective tax rate for the first six months of 2001 is approximately 39%, compared with 37.5% for the first six months of 2000. The increase is attributed to the higher foreign tax rates related to the Potain acquisition.Financial Condition at June 30, 2001Cash flow from operations was positive in the first six months of 2001, totaling $37.8 million compared with cash from operations of $25.0 million in the first six months of 2000. This increase was the result of changes in working capital amounts. Total funded debt was $532.3 million at June 30, 2001, representing a debt-to-capital ratio of 68% at June 30, 2001, as compared to 48% at December 31, 2000. This increase was primarily due to the additional debt incurred to fund the Potain acquisition.On May 9, 2001, in connection with the acquisition of Potain, the company entered into a new $475 million secured senior credit facility (the "Senior Credit Facility") consisting of a $175.0 million five-year term loan, a $175.0 million six-year term loan, and a $125.0 million five-year revolving credit facility, under which the company borrowed $43.6 million at the closing of the acquisition. The Senior Credit Facility requires the company to meet specified financial tests including the maintenance of various debt and net worth ratios, and contains customary events of default, including a change of control, and other customary covenants, including covenants that limit the company's and its subsidiaries' ability to prepay principal, redeem or repurchase the Notes, incur additional debt, merge with other entities or make acquisitions, pay dividends or make distributions, make investments or advances; create or become subject to liens, and make capital expenditures.Borrowings under the agreement bear interest at a rate equal to the sum of the base rate or a Eurodollar rate plus an applicable margin. The margin is based on the company's consolidated leverage ratio. The company will also pay agency fees and commitment fees on the unused portion of the Credit Facility. At June 30, the company's effective rate for borrowings under this Senior Credit Facility was Also, on May 9, 2001, the company issued (euro) 175 million (U.S. $156 million) of 10-3/8% Senior Subordinated Notes due 2011. The Notes, which were registered with the Securities and Exchange Commission, are unsecured obligations of the company, ranking subordinate in right of payment to all senior debt of the company and are fully and unconditionally guaranteed by the company's domestic subsidiaries. The Notes include covenants similar to the Senior Credit Facility described above. The Notes also contain certain other covenants including restrictions on the repurchase of capital stock and asset sales, as defined.AcquisitionsOn May 9, 2001, the company, through its subsidiary Manitowoc France SAS, acquired from Legris Industries SA ("Legris") all of the outstanding capital stock of Potain SA ("Potain"), pursuant to a Share Purchase Agreement, dated May 9, 2001, among the company, Manitowoc France SAS and Legris SA (the "Acquisition"). The total purchase price for the Acquisition was FRF 2.3 billion (U.S. $307.1 million, based upon exchange rates as of May 7, 2001), subject to a post-closing adjustment for Potain's net income from January 1, 2001 through the closing date. Potain is a leading designer, manufacturer and supplier of tower cranes for the building and construction industry.
Borrowings under the agreement bear interest at a rate equal to the sum of the base rate or a Eurodollar rate plus an applicable margin. The margin is based on the company's consolidated leverage ratio. The company will also pay agency fees and commitment fees on the unused portion of the Credit Facility. At June 30, the company's effective rate for borrowings under this Senior Credit Facility was Also, on May 9, 2001, the company issued (euro) 175 million (U.S. $156 million) of 10-3/8% Senior Subordinated Notes due 2011. The Notes, which were registered with the Securities and Exchange Commission, are unsecured obligations of the company, ranking subordinate in right of payment to all senior debt of the company and are fully and unconditionally guaranteed by the company's domestic subsidiaries. The Notes include covenants similar to the Senior Credit Facility described above. The Notes also contain certain other covenants including restrictions on the repurchase of capital stock and asset sales, as defined.
Special Note Regarding Forward-Looking StatementsThis Quarterly Report on Form 10-Q includes forward-looking statements based on management's current expectations. Reference is made in particular to the description of the company's plans and objectives for future operations, assumptions underlying such plans and objectives and other forward-looking statements in this report. Such forward-looking statements generally are identifiable by words such as "anticipates," "believes," "intends," "estimates," "expects" and similar expressions.These statements involve a number of risks and uncertainties and must be qualified by factors that could cause results to be materially different from what is presented here. This includes the following factors for each business segment: 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; the ability of the company to effectively integrate Potain; growth in the world market for heavy cranes; the replacement cycle of technologically obsolete cranes; and 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.Recent Accounting PronouncementsThe company adopted the Statement of Financial Accounting Standards (SFAS) No. 131, "Accounting for Derivative Instruments and Hedging Activities" as of January 1, 2001. This statement 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 company's derivative instruments are described in Note 6. The cumulative effect of adopting SFAS No.
133 was insignificant.In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets" to establish accounting and reporting standards for business combinations, goodwill and intangible assets. Under SFAS No. 142, effective January 1, 2002, amortization of goodwill recorded on the company's books will cease (goodwill for the first six months of 2001 was $5,467). After January 1, 2002, goodwill will be subject to an annual assessment for impairment, using a fair value based test. An impairment loss would be reported as a reduction to goodwill and a charge to operating expense, except at the transition date. The company is in the process of evaluating the impact of SFAS No. 141 and SFAS No. 142 on its financial statements.Item 3. Quantitative and Qualitative Disclosure about Market RiskThe company's quantitative and qualitative disclosures about market risk for changes in interest rates and foreign exchange risk are incorporated by reference in Item 7A of the company's Annual Report on Form 10-K for the year ended December 31, 2000. Other than the foreign exchange risk and related financing associated with the Potain SA acquisition, the company's market risk disclosures have not materially changed since that report was filed. Potain SA has significant manufacturing operations and assets in France, Germany, Italy, Portugal and China. With the Potain SA acquisition, the company expects that less than 20% of its 2001 annual consolidated operating income will be impacted by movements in current exchange rates between the U.S. dollar and the Euro and, to a lesser extent, the French Franc, German Mark, Italian Lira, and Singapore Dollar.Foreign Exchange Risk The company is exposed to fluctuations in foreign currency cash flows related to third party purchases and sales, intercompany product shipments and intercompany loans. The company is also exposed to fluctuations in the value of foreign currency investments in subsidiaries and cash flows related to repatriation of these investments. Additionally, the company is exposed to volatility in the translation of foreign currency earnings to U.S. Dollars. Primary exposures include the U.S. Dollars versus functional currencies of the company's major markets which include the Euro, French Franc, German Mark, Italian Lira, British Pound, Japanese Yen and Singapore Dollar.Interest Rate Risk The company is exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing issuances of variable rate debt. Primary exposure includes movements in the U.S. prime rate and London Interbank Offer Rate ("LIBOR"). The company is considering various alternative strategies to reduce the impact of foreign currency fluctuations on future earnings. At June 30, 2001, the company had outstanding one interest rate swap agreement with a notional principal amount of $12.5 million and a fixed interest rate of 6.29%. The fair market value of these arrangements, which represents the costs to settle these contracts, approximates a loss of $0.2 million at June 30, 2001.
PART II. OTHER INFORMATION
directors by the indicated votes cast for each nominee. Of the 17,465,938 shares of Common Stock which were represented at the meeting, at least 98.4% of the shares voting were voted for the election of each of management's nominees.Two directors were elected to serve until the Annual Meeting of Shareholders to be held in the year 2003:
Name of Nominee
For
Withheld
Daniel W. Duvall
17,300,371
164,989
James L. Packard
17,280,040
185,898
Three directors were elected to serve until the Annual Meeting of Shareholders to be held in the year 2004:
Gilbert F. Rankin, Jr.
17,301,951
163,987
Robert C. Stift
17,192,108
273,830
Virgis W. Colbert
165,567
There were no abstentions or broker non-votes with respect to the election of directors. In addition to the directors elected at the meeting, the company's continuing directors are Dean H. Anderson, James P. McCann, Robert S. Throop, and Terry D. Growcock.Further information concerning the matters voted upon at the 2001 Annual Meeting of Shareholders is contained in the company's proxy statement dated April 2, 2001 with respect to the 2001 Annual Meeting.
Filing
Report
Items
Financial
Date
Reported
Statements
May 11
May 9
Items 2 and 7 reporting the acquisition of Potain SA
Potain financial statements for the years ended December 31, 2000 and 1999 and Manitowoc pro forma financial statement for the year ended December 31, 2001
April 20
Items 7 and 9 reporting Manitowoc pro forma financial information for the acquisition of Potain
N/A
April 19
April 17
Items 5 and 7 reporting Manitowoc's announcement of first quarter earnings
April 16
Items 5 and 7 reporting Manitowoc's announcement to offer its senior subordinated notes due 2011
April 3
March 26
Items 5 and 7 reporting Manitowoc's announcement of expected first quarter earnings.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
(Registrant)
/s/ Terry D. Growcock
Terry D. Growcock
President and Chief Executive Officer
/s/ Glen E. Tellock
Glen E. Tellock
Senior VP and Chief Financial Officer
/s/ Maurice D. Jones
Maurice D. Jones
General Counsel and Secretary
August 14, 2001
Exhibit No.
Description
FiledHerewith
2*
Share Purchase Agreement, dated May 9, 2001, among The Manitowoc Company, Inc., Manitowoc France SAS and Legris Industries SA (filed as Exhibit 2 to the Company's Report on Form 8-K dated May 11, 2001).
4.1
Credit Agreement dated May 9, 2001, among The Manitowoc Company, Inc., the lenders party thereto and Bankers Trust Company, as Agent (filed as Exhibit 4.1 to the Company's Report on Form 8-K dated May 11, 2001).
4.2
Indenture, dated May 9, 2001, among The Manitowoc Company, Inc., the Guarantors named therein and The Bank of New York, as Trustee (filed as Exhibit 4.2 to the Company's Report on Form 8-K dated May 11, 2001).
4.3
Registration Rights Agreement, dated May 9, 2001, among The Manitowoc Company, Inc., the Guarantors named therein and Deutsche Bank AG London (filed as Exhibit 4.4 of the Company's Report on Form S-4 dated July 12, 2001)
10
The Manitowoc Company, Inc. 401(k) Retirement Plan as restated effective January 1, 2001
X
* Pursuant to Item 601(b)(2) of Regulation S-K, the Registrant agrees to furnish to the Securities and Exchange Commission upon request a copy of any unfiled exhibits or schedules to such document.