UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 -------------- OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission File Number 1-11978 ------------ The Manitowoc Company, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Wisconsin 39-0448110 -------------------------------- ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 500 So. 16th Street, Manitowoc, Wisconsin 54220 ---------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (920) 684-4410 ------------------------------------------------------------------- (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( ) The number of shares outstanding of the Registrant's common stock, $.01 par value, as of June 30, 1999, the most recent practicable date, was 25,970,503. PART I. FINANCIAL INFORMATION ------------------------------------ Item 1. Financial Statements - ------------------------------------- <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Statements of Earnings For the Quarter and Six Months Ended June 30, 1999 and 1998 (Unaudited) (In thousands, except per-share and average shares data) QUARTER ENDED YEAR-TO-DATE --------------------- ---------------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 ---------- --------- ---------- --------- <S> <C> <C> <C> <C> Net Sales $ 226,342 $ 188,899 $ 410,532 $ 343,038 Costs And Expenses: Cost of goods sold 160,624 135,805 292,253 246,472 Engineering, selling and administrative expenses 29,298 25,501 59,209 51,388 ------- --------- -------- -------- Total 189,922 161,306 351,462 297,860 Earnings From Operations 36,420 27,593 59,070 45,178 Other Income (Expense): Interest expense (2,736) (2,858) (5,444) (5,266) Interest and dividend income 17 48 104 39 Other expense (386) (481) (692) (829) ------- -------- -------- -------- Total (3,105) (3,291) (6,032) (6,056) -------- -------- -------- -------- Earnings Before Taxes On Income 33,315 24,302 53,038 39,122 Provision For Taxes On Income 12,329 8,894 19,624 14,377 -------- -------- -------- -------- Net Earnings $ 20,986 $ 15,408 $ 33,414 $ 24,745 -------- -------- -------- -------- Net Earnings Per Share - Basic $ .81 $ .59 $ 1.29 $ .95 Net Earnings Per Share - Diluted $ .80 $ .59 $ 1.27 $ .94 Dividends Per Share $ .075 $ .075 $ .15 $ .15 Average Shares Outstanding - Basic 25,965,034 25,927,854 25,963,711 25,919,895 Average Shares Outstanding - Diluted 26,321,060 26,218,127 26,329,040 26,191,445 See accompanying notes which are an integral part of these statements. </TABLE> <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Balance Sheets As of June 30, 1999 and December 31, 1998 (In thousands, except share data) -ASSETS- June 30, Dec. 31, 1999 1998 -------- --------- (Unaudited) <S> <C> <C> Current Assets: Cash and cash equivalents $ 11,439 $ 10,582 Marketable securities 1,891 1,834 Accounts receivable 81,362 69,504 Inventories 85,533 81,978 Prepaid expenses and other 1,804 5,297 Future income tax benefits 21,682 21,682 -------- --------- Total current assets 203,711 190,877 Intangible assets - net 235,214 184,926 Other assets 15,890 11,628 Property, plant and equipment: At cost 217,310 211,360 Less accumulated depreciation (123,218) (117,777) -------- --------- Property, plant and equipment-net 94,092 93,583 -------- --------- TOTAL $548,907 $481,014 -------- --------- -LIABILITIES AND STOCKHOLDERS' EQUITY- Current Liabilities: Accounts payable and accrued expenses $152,070 $123,534 Current portion of long-term debt 489 10,968 Short-term borrowings 42,300 48,500 Product warranties 14,873 15,110 ---------- ----------- Total current liabilities 209,732 198,112 Non-Current Liabilities: Long-term debt less current portion 106,668 79,834 Product warranties 4,555 4,723 Post-retirement health benefits obligations 19,932 19,705 Other 6,160 6,088 ---------- ----------- Total non-current liabilities 137,315 110,350 ---------- ----------- Stockholders' Equity: Common stock (36,746,482 shares issued at both dates) 245 245 Additional paid-in capital 31,135 31,029 Accumulated other comprehensive income (loss) (500) (212) Retained earnings 252,206 222,687 Treasury stock at cost (10,775,979 and 10,789,616 shares) (81,226) (81,197) ----------- ----------- Total stockholders' equity 201,860 172,552 ----------- ----------- TOTAL $548,907 $481,014 ----------- ----------- See accompanying notes which are an integral part of these statements. </TABLE> <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Statements of Cash Flows For the Six Months Ended June 30, 1999 and 1998 (In thousands) (Unaudited) June 30, 1999 June 30, 1998 --------------- ------------- <S> <C> <C> Cash Flows From Operations: Net earnings $ 33,414 $ 24,745 Non-cash adjustments to income: Depreciation and amortization 8,239 6,945 Deferred financing fees 307 193 Loss on sale of fixed assets 169 148 Changes in operating assets and liabilities: Accounts receivable (4,503) (25,695) Inventories 1,905 (9,602) Other current assets 3,797 978 Current liabilities 20,271 14,578 Non-current liabilities 297 (188) Non-current assets (2,414) (1,251) ---------- ---------- Net cash provided by operations 61,482 10,851 Cash Flows From Investing: Purchase of temporary investments (57) (46) Business acquisitions - net (62,655) - Proceeds from sale of property, plant, and equipment 1,353 237 Capital expenditures (5,590) (8,768) ---------- ---------- Net cash used for investing (66,949) (8,577) Cash Flows From Financing: Dividends paid (3,895) (3,889) Options exercised 77 234 Proceeds from long-term borrowings - 50,000 Payments on long-term borrowings (13,645) (57,834) Change in revolver borrowings - net 23,800 12,900 ---------- ---------- Net cash provided by financing 6,337 1,411 Effect of exchange rate changes on cash (13) 6 ---------- ---------- Net change in cash and cash equivalents 857 3,691 Balance at beginning of period 10,582 11,888 ---------- ---------- Balance at end of period $ 11,439 $ 15,579 ---------- ---------- Supplemental cash flow information: Interest paid $ 4,467 $ 4,379 Income taxes paid $ 14,473 $ 16,832 See accompanying notes which are an integral part of these statements. </TABLE> <TABLE> <CAPTION> THE MANITOWOC COMPANY, INC. Consolidated Statements of Comprehensive Income For the Quarter and Six Months Ended June 30, 1999 and 1998 (In thousands) (Unaudited) Quarter Ended Year-To-Date -------------------- --------------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 ------ ------ ------ ------ <S> <C> <C> <C> <C> Net Earnings $20,986 $15,408 $33,414 $24,745 Other Comprehensive Income: Foreign currency translation adjustments (118) (139) (288) 163 -------- ------- ------- ------- Comprehensive Income $20,868 $15,269 $33,126 $24,908 -------- ------- ------- ------- See accompanying notes which are an integral part of these statements. </TABLE> THE MANITOWOC COMPANY, INC. Notes to Unaudited Consolidated Financial Statements For the Six Months Ended June 30, 1999 and 1998 Note 1. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, representing normal recurring accruals, necessary to present fairly the results of operations, cash flows and comprehensive income for the quarters and six months ended June 30, 1999 and 1998 and the financial position at June 30, 1999. The interim results are not necessarily indicative of results for a full year and do not contain information included in the company's annual consolidated financial statements and notes for the year ended December 31, 1998. The consolidated balance sheet as of December 31, 1998 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the company's latest annual report. All dollar amounts are in thousands throughout these footnotes except where otherwise indicated. Note 2. The components of inventory at June 30, 1999 and December 31, 1998 are summarized as follows: <TABLE> <CAPTION> June 30, December 31, 1999 1998 ----------- ------------- <S> <C> <C> Components: Raw materials $ 43,056 $ 32,564 Work-in-process 24,003 27,882 Finished goods 39,692 42,304 --------- --------- Total inventories at FIFO costs 106,751 102,750 Excess of FIFO costs over LIFO value (21,218) (20,772) --------- --------- Total inventories $ 85,533 $ 81,978 </TABLE> Inventory is carried at lower of cost or market using the first-in, first-out (FIFO) method for 58% and 47% of total inventory at June 30, 1999 and December 31, 1998, respectively. The remainder of the inventory is costed using the last-in, first-out (LIFO) method. Note 3. The United States Environmental Protection Agency ("EPA") has identified the company as a potentially responsible party ("PRP") under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), liable for the costs associated with investigating and cleaning up contamination at the Lemberger Landfill Superfund Site (the "Site") near Manitowoc, Wisconsin. Approximately 150 PRP's have been identified as having shipped substances to the Site. Eleven of the potentially responsible parties, 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 total cost to clean up the Site could be as high as $30 million, however, the ultimate allocation of costs 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 $3.3 million in connection with this matter. The expenses incurred during the second quarter and first six months of 1999 and 1998 in connection with this matter were not material. Remediation work at the Site has been 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 noncurrent liabilities at June 30, 1999, is $1.1 million. As of June 30, 1999, 26 product-related lawsuits were pending. All of these accidents occurred during years in which the company had insurance coverages ranging from a $5.5 million self-insured retention with a $10.0 million limit on the insurer's contribution in 1990, to the current $1.0 million self-insured retention and $50.0 million limit on the insurer's contribution. Product liability reserves at June 30, 1999 are $8.6 million; $3.2 million reserved specifically for the 26 cases referenced above, and $5.4 million for incurred but not reported claims. These reserves were estimated using actuarial methods. 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. 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. Assets currently held for sale include land and improvements, buildings, and certain machinery and equipment at the "Peninsula facility" located in Manitowoc, Wisconsin, as well as closed walk-in refrigeration plants located in Iowa and Tennessee. The current carrying value of these assets, determined through independent appraisals, is approximately $3.8 million and is included in other assets. The future holding costs, included in accounts payable and accrued expenses and in other non-current liabilities, consist primarily of utilities, security, maintenance, property taxes, and insurance. These reserves also include estimates for potential environmental liabilities at the Peninsula location. For the second quarter and first six months of 1999 and 1998, the charges against the reserve were not material. Note 4. On February 17, 1999, the company's board of directors authorized a 3- for-2 stock split of the company's shares in the form of a 50-percent stock dividend payable on April 1, 1999 to shareholders of record on March 1, 1999. As a result of the stock split, 8,654,900 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 the split. The company also split its common stock on a 3-for-2 basis on June 30, 1997 and July 2, 1996. Note 5. The following is a reconciliation of the average shares outstanding used to compute basic and diluted earnings per share. There is no earnings impact for the assumed conversions of the stock options in each of the quarters. <TABLE> <CAPTION> Quarter Ended June 30 Six Months Ended June 30 --------------------------------- ----------------------------------- 1999 1998 1999 1998 ------------------ ----------------- ------------------ ----------------- Per Share Per Share Per Share Per Share Shares Amount Shares Amount Shares Amount Shares Amount ------- --------- ------- ------- ------ --------- ------- -------- <S> <C> <C> <C> <C> <C> <C> <C> <C> Basic EPS 25,965,034 $.81 25,927,854 $.59 25,963,711 $1.29 25,919,895 $.95 Effect of Dilutive Securities Stock Options 356,026 290,273 365,329 271,550 --------- --------- --------- --------- Diluted EPS 26,321,060 $.80 26,218,127 $.59 26,329,040 $1.27 26,191,445 $.94 </TABLE> Note 6. 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 1960's 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 $42,854 which is net of cash acquired of $732 and includes direct acquisition costs of $394 and assumed liabilities of $5,192. The acquisition was financed through the Company's existing credit facility. The purchase price for PSG is subject to a post-closing adjustment based upon net worth as set forth in the Purchase and Sale Agreement. The Company has not recorded any adjustment to the purchase price based upon the post-closing adjustment as of June 30, 1999. The acquisition of PSG 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 $32,141 and is being amortized over 40 years. The results of MBS's operations subsequent to the date of acquisition are included in the Consolidated Statements of Earnings for the quarter and six months ended June 30, 1999. On April 9, 1999, the Company acquired all of the issued and outstanding shares of Kyees Aluminum, Inc., a leading supplier of cooling components for the major suppliers of fountain soft drink beverage dispensers, for $25,750 in cash. 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 was financed through the Company's existing credit facility. The acquisition of Kyees has been recorded using the purchase method of accounting. The cost of the acquisition has been allocated on the basis of the estimated fair values of the assets acquired and the liabilities assumed. The preliminary estimate of the excess of the cost over the fair value of the net assets acquired is $22,686 and is being amortized over 40 years. The results of Kyees' operations subsequent to the date of acquisition are included in the Consolidated Statements of Earnings for the quarter and six months ended June 30, 1999. Note 7. On May 28, 1999, the company entered into an accounts receivable sales arranement with a bank. Under this arrangement, the company sold $15.1 million of accounts receivable to the bank through June 30, 1999. 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 to extend the termination date to April 6, 2004. The amended and restated Agreement provides for maximum borrowings of $300 million under revolving loans and a letter of credit subfacility. 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. Borrowings under the Agreement bear interest at a rate equal to the sum of a base rate, or a Eurodollar rate, at the option of the company, plus an applicable percentage, 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. Note 8. The 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, 1999 and 1998 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, 1999 and December 31, 1998, the total assets by segment were as follows: <TABLE> <CAPTION> June 30, Dec. 31, 1999 1998 -------- -------- <S> <C> <C> Foodservice $332,209 $254,506 Cranes 164,793 178,470 Marine 8,253 7,023 General corproate 43,652 41,015 ------- ------- Total $548,907 $481,014 </TABLE> Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for the Quarter and Six Months Ended June 30, 1999 and 1998 - -------------------------------------------------------------------------------- Net sales and earnings from operations by business segment for the quarter and first six months ended June 30, 1999 and 1998 are shown below (in thousands): <TABLE> <CAPTION> QUARTER ENDED YEAR-TO-DATE ----------------- -------------- June 30, June 30, June 30, June 30, 1999 1998 1999 1998 -------- --------- --------- --------- <S> <C> <C> <C> <C> NET SALES: Foodservice equipment $110,561 $ 87,230 $194,851 $154,237 Cranes and related products 98,147 86,145 187,577 162,337 Marine 17,634 15,524 28,104 26,464 -------- -------- -------- -------- Total $226,342 $188,899 $410,532 $343,038 EARNINGS (LOSS) FROM OPERATIONS: Foodservice equipment $ 21,081 $ 15,627 $ 32,853 $ 24,943 Cranes and related products 17,325 12,928 30,602 22,690 Marine 2,880 2,751 5,192 5,056 General corporate expense (2,998) (2,542) (5,989) (5,168) Amortization (1,868) (1,171) (3,588) (2,343) -------- -------- -------- -------- Total 36,420 27,593 59,070 45,178 OTHER INCOME (EXPENSE) -NET (3,105) (3,291) (6,032) (6,056) -------- -------- -------- -------- EARNINGS BEFORE TAXES ON INCOME $ 33,315 $ 24,302 $ 53,038 $ 39,122 </TABLE> Net earnings for the second quarter of 1999 increased 36% to $21.0 million, or $.80 per diluted share, from $15.4 million, or $.59 per diluted share, for the second quarter of 1998. Net sales increased 20% to $226.3 million in the second quarter of 1999, from $188.9 million for the same period in 1998. Sales and earnings growth was driven by gains at each of the company's three business segments. For the first six month period of 1999, net earnings increased 35% to $33.4 million, or $1.27 per diluted share, from $24.7 million, or $.94 per diluted share, for the first six months of 1998. Net sales increased 20% to $410.5 million in the first six-month period of 1999 from $343.0 million for the same period in 1998. The recent acquisitions of USTC, MBS and Kyees accounted for approximately 60% of the increase in revenue. The remainder was due mainly to volume increases in the Foodservice and Crane segments. The increase in operating earnings was the result of improved operating efficiencies, continued margin expansion and additional cost reductions in each of our business segments. Sales for the Foodservice segment were $110.6 million for the quarter, up 27% from the second quarter of 1998. Operating earnings increased 35% to $21.1 million, from $15.6 million in 1998. Manitowoc Ice continues to benefit from the strong demand for its new "Q" series ice machines. SerVend's sales increased significantly from the benefits of the recent acquisition of Manitowoc Beverage Systems, which is expanding our geographic reach into new sales territories. McCall achieved record production levels while introducing seven new products at the National Restaurant Association show. For the first six months of 1999 sales and operating earnings increased 26% and 32%, respectively. All of the Foodservice operations contributed to this strong performance on a year-over-year basis. Cranes and related products sales for the second quarter increased 14%, to $98.1 million, from $86.1 million for the second quarter of 1998. Operating earnings were $17.3 million, a 34% gain over the second quarter of 1998. This performance is being driven by continued customer demand for our innovative new crane designs. Highlighting this quarter was the shipment of our first Model 21000, a 1,000-ton capacity crawler crane, which was introduced at Conexpo earlier this year. For the first six months of 1999, Cranes sales were $187.6 million, a 16% increase over the first six months of 1998. Operating earnings increased 35%, to $30.6 million, from $22.7 million for the same period in 1998. A significant factor in the performance of the crane segment is the progress made in reducing the manufacturing time for the high-capacity crawler cranes. Workflow improvements and aggressive subcontracting have added manufacturing capacity and reduced the time needed to produce Manitowoc's 175- to 300-ton capacity cranes by 40 percent. Marine segment sales and operating earnings for the second quarter were $17.6 million and $2.9 million, respectively, compared with $15.5 million and $2.8 million for the same period in 1998. In May, work was completed on the NEW YORK dipper dredge. Other projects during the quarter included repair work on several tugs, a passenger ferry, and a hull repair for a 767' self-unloading bulk carrier that ran aground. In June, Bay Shipbuilding began recognizing revenues and earnings from the Mobil tank barge contract, which will keep the yards busy during the traditionally slower summer months. For the first six months of 1999, sales and operating earnings for this segment were $28.1 million and $5.2 million, respectively, compared with $26.5 million and $5.1 million for 1998. Cash flow from operations was a record $61 million, a more than four-fold increase over the first six months of last year. Strong earnings, combined with dramatic reductions in working capital, contributed to this performance. During the quarter, total debt was also reduced by $27 million, down to $149 million. The effective tax rate remains unchanged at 37 percent. Financial Condition at June 30, 1999 - ---------------------------------------- The Company's financial condition remains strong. Cash and marketable securities of $13.3 million and future cash flows from operations are expected to be adequate to meet the Company's liquidity requirements for the foreseeable future, including payments for long-term debt, line of credit, and anticipated capital expenditures of between $15-$18 million. This 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 "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: Foodservice Equipment - demographic changes affecting the number of women in the workforce, general population growth, and household income; serving large restaurant chains as they expand their global operations; specialty foodservice market growth; and the demand for equipment for small kiosk-type locations. Cranes and Related Products - market acceptance of innovative products; cyclicality in the construction industry; growth in the world market for heavy cranes; demand for used equipment in developing countries. Marine - shipping volume fluctuations based on performance of the steel industry; five-year drydocking schedule; reducing seasonality through non-marine repair work. Year 2000 Compliance - ---------------------------- The Year 2000 (or Y2K) issue is the result of computer systems and software products that are coded to accept two digits rather than four in their date code fields to define a year. A company's computer equipment and software devices with embedded technology that are time-sensitive may recognize a date using "00" as the year 1900 rather than 2000. This could result in a system failure or miscalculations causing disruptions of operations including, among other things, a temporary inability to process transactions, send invoices, or engage in other normal business activities. The company continues to undertake various initiatives intended to ensure its computer equipment and software will function properly with respect to Y2K and beyond. For this purpose, the term "computer equipment and software" includes systems commonly thought of as Information Technology (IT) systems - including accounting, data processing and telephone systems - as well as those that are not commonly thought of as IT systems - such as manufacturing equipment, company products, alarm systems, fax machines or other miscellaneous systems. Both IT and non-IT systems may contain embedded technology, which complicates Y2K identification, assessment, remediation, and testing efforts. Based upon its identification and assessment efforts through the end of the second quarter of 1999, the company is in the process of converting, modifying, and upgrading its computer equipment and software to be Y2K compliant, as necessary. In addition, in the ordinary course of replacing computer equipment and software, the company attempts to get replacements that are Y2K compliant. The company continues to anticipate that its Y2K identification, assessment, remediation, and testing efforts, which began in 1996, will be complete by October 1999, and contingency plans will be developed, as necessary, to address unforseen circumstances prior to the end of 1999. The company believes that these efforts will be completed prior to any currently anticipated impact on its computer equipment and software. It also does not anticipate any significant disruption to its normal business operations to achieve this goal. The company estimates that as of June 30, 1999, it had completed approximately 95% of the initiatives it believes will be necessary to fully address potential Y2K issues. The company has made inquiries and gathered information on the Y2K compliance of its significant vendors, suppliers, dealers and distributors. This was done in an attempt to determine the extent to which interfaces with these companies are vulnerable to Y2K issues, and whether the products and services purchased from or by these companies are Y2K compliant. During the first quarter of 1999, the company completed a follow-up mailing to significant vendors, suppliers, dealers and distributors for newly acquired companies and for those that did not initially respond, or whose responses were deemed unsatisfactory by the company. Although the company cannot assure Y2K compliance by its key suppliers, dealers, and distributors, no major part of critical operation of any company segment relies on a single source for raw materials, supplies, or services, and the company has multiple distribution channels for most of its products. Beginning in the second half of 1997, through June 30, 1999, the company has spent approximately $4.4 million to upgrade its systems, including Y2K issues. Approximately $0.5 million was spent during the first six months of 1999, with about $0.3 million was spent in the second quarter. Estimated additional costs for system upgrades during the last two quarters of 1999, including addressing Y2K concerns, will approximate $0.5 million. These expenditures were and will be funded using cash flows from operations. The costs of the company's Y2K conversion efforts and dates by which it believes these efforts will be completed are based on management's best estimates. These were developed using many assumptions regarding future events, including continued availability of certain resources, third-party remediation plans, and other factors. There can be no assurance that these estimates will prove to be accurate, and actual results could differ materially from those currently anticipated. The company believes that the Y2K issue will not pose significant operational problems for it. However, if all Y2K issues are not properly identified, or assessment, remediation, or testing are not completed for Y2K problems that are identified, there can be no assurance that the Y2K issue will not have a material adverse affect on the company's relationships with customers, vendors, distributors, and others. In addition, there can be no assurance that the Y2K issues of other entities will not have a material adverse impact on the company's systems or results of operations. Item 3. Quantitative and Qualitative Disclosure About Market Risk ------------------------------------------------------- See Item 7A of the company's Annual Report on Form 10-K for the year ended December 31, 1998. PART II. OTHER INFORMATION ---------------------------------------- Item 4. Submission of Matters to a Vote of Security Holders ------------------------------------------------------- At the annual meeting of the company's shareholders on May 4, 1999, management's nominees named below were elected as directors by the indicated votes cast for each nominee. Of the 15,819,390 shares of Common Stock which were represented at the meeting, at least 99.1 percent of the shares voting were voted for the election of each of management's nominees. Three directors were elected to serve until the Annual Meeting of Shareholders to be held in the year 2002: Name of Nominee For Withheld - --------------- ---------- -------- Dean H. Anderson 15,697,897 121,493 James P. McCann 15,683,500 135,890 Robert S. Throop 15,704,047 115,343 One director was elected to serve until the Annual Meeting of Shareholders to be held in the year 2001: Name of Nominee For Withheld - --------------- ---------- -------- Robert C. Stift 15,683,179 136,211 One director was elected to serve until the Annual Meeting of Shareholders to be held in the year 2000: Name of Nominee For Withheld - --------------- --------- -------- Terry D. Growcock 15,703,192 116,198 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 George T. McCoy, Guido R. Rahr, Jr., and Gilbert F. Rankin, Jr. Proposal 2, the 1999 Non-Employee Director Stock Option Plan, was approved as follows: Shares Voted For 14,421,504 Shares Voted Against 1,217,119 Shares Abstaining 180,767 Further information concerning the matters voted upon at the 1999 Annual Meeting of Shareholders is contained in the company's proxy statement dated March 15, 1999 with respect to the 1999 Annual Meeting. Item 6. Exhibits and Reports on Form 8-K ---------------------------------- (a) Exhibits: See exhibit index following the signatures on this Report, which is incorporated herein by reference. (b) Reports on Form 8-K: None. 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. THE MANITOWOC COMPANY, INC. (Registrant) /s/ Terry D. Growcock ------------------------------- Terry D. Growcock President and Chief Executive Officer /s/ Robert R. Friedl ------------------------------- Robert R. Friedl Senior V.P. and Chief Financial Officer /s/ E. Dean Flynn ------------------------------- E. Dean Flynn Secretary August 9, 1999 THE MANITOWOC COMPANY, INC. EXHIBIT INDEX TO FORM 10-Q FOR QUARTERLY PERIOD ENDED June 30, 1999 Exhibit Filed No Description Herewith - ------- --------------- ------------ 10 1999 Non-Employee Director X Stock Option Plan 27 Financial Data Schedule X