PORTIONS OF THE 1997 ANNUAL REPORT TO SHAREHOLDERS
OF THE MANITOWOC COMPANY, INC. INCORPORATED
BY REFERENCE
Management's Discussion and Analysis of Results of Operations and
Financial Condition
- ---------------------------------------------------------------
Business Description
- ---------------------
The Manitowoc Company and its affiliates are market leaders in their
domestic and international businesses. The Foodservice Equipment
Group is one of the largest suppliers of ice-cube machines and walk-in
refrigerators/freezers in North America - serving restaurants, hotels
and other institutions; and one of the world's largest manufacturers
of ice/beverage dispensers and dispensing valves - serving the soft-
drink industry. The Cranes and Related Products Group has a leading
share in the worldwide market for lattice-boom crawler cranes (over
150-ton capacity) - serving heavy-construction, crane-rental, and
cargo-handling customers. The Marine Group is the leading provider of
ship repair, maintenance and conversion services on the U.S. side of
the Great Lakes. Additional information on these business segments
can be found on pages 6 through 19.
Note on Forward-Looking Statements
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This report includes forward-looking statements based on management's
current expectations. This refers in particular to the company's
description of plans and objectives for future operations, and the
assumptions underlying those plans. These statements generally
include words such as "believes," "intends," "estimates," "expects," etc.
Forward-looking statements involve a number of risks and
uncertainties, and they 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; consolidation in the restaurant industry; serving large
restaurant chains as they expand their global operations; specialty
foodservice market growth; the demand for quick-service restaurants;
and growth in the soft-drink industry.
Cranes and Related Products - market acceptance of innovative
products; cyclicality in the construction industry; growth in the
world market for high capacity cranes; the replacement cycle of
technologically obsolete cranes; and demand for used equipment in
developing countries.
Marine Operations - shipping volume fluctuations based on performance
of the steel industry; five-year survey schedule; and reducing
seasonality through non-marine repair work.
Long-Term Goals
- ---------------
Manitowoc has established and will work to achieve these goals by the
year 2000:
* Reach $800 million in revenues.
* Produce 25% of sales from international markets, and perform $75
million in sourcing or manufacturing outside the U.S.
* Generate 80% of sales from new products and models acquired or
introduced after 1996.
* Generate a consistently improving EVA (Economic Value Added) each
year in all business segments.
* All manufacturing operations will be ISO-certified.
Market Conditions: North America
- --------------------------------
North American economic conditions for all three of Manitowoc's
business segments improved again in 1997.
Foodservice Equipment continues to benefit from a number of trends:
growth in the restaurant industry, particularly among high-volume
chains; expansion of fast-food franchises into non-traditional
locations, such as automotive service stations and convenience stores;
growth in health care facilities; and the continued recovery of the
hotel and lodging industry. These factors resulted in higher
foodservice equipment demand in nearly all North American markets in
1997. We expect this market will remain fairly constant into 1998.
Cranes and Related Products saw much improvement over the turnaround
begun a few years ago. We expect this business will continue to grow
over the next several years because of the following: increased
construction spending in the U.S.; the necessary rebuilding of
America's infrastructure (although government funding remains
limited); and the beginning of the replacement cycle for an aging
high-capacity liftcrane fleet that is becoming technically obsolete.
The 1997 Marine market benefited from record levels of shipping
tonnage; the general economic strength of heavy industry and
manufacturing sectors; and the aging of the Great Lakes fleet, which
requires more maintenance and repair. During the year, the Coast
Guard adopted regulations that provide a one-year extension of the
five-year mandatory survey requirement. Ship owners must apply for
the extension, and decisions are made on a ship-by-ship basis. It is
too early to tell how much of an impact the new provision will have.
Demand was good at all three ship-repair facilities: Toledo and
Cleveland, Ohio, and Sturgeon Bay, Wisconsin.
Market Conditions: International
- --------------------------------
Manitowoc's international sales increased 10% over 1996 levels,
providing about 14% of total revenues.
Foodservice Equipment Demand for refrigeration products remained
strong in the Pacific Rim. Of the Asian countries served, Taiwan,
Singapore and China generated the greatest international ice machine
sales for the year. Europe also proved to be a solid market in 1997,
with good growth potential over the next few years. We anticipate
that international orders for refrigeration and ice-making equipment
from hotel and restaurant chains will be robust through the end of the
decade.
Cranes and Related Products saw solid levels of demand from European
countries and Canada, while Asia remained a cost-competitive
marketplace. However, crane sales increased in South and Central
America.
Marine Operations Repair and maintenance is primarily a source of
domestic revenue. While the North American Free Trade Agreement
eliminated tariffs to make U.S. shipyards more competitive with their
Canadian counterparts, this did not generate additional business for
Manitowoc in 1997. In the longer term, the agreement may smooth the
way for alliances between Canadian and U.S. shipyards, joining forces
to build new ships.
Results of Operations
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This table summarizes the relationship between components of
operations as a percent of net sales, for the following years.
Percent of Net Sales 1997 1996 1995
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Net sales 100.0 100.0 100.0
Cost of sales 72.0 73.1 75.9
Gross profit 28.0 26.9 24.1
Engineering, selling &
administrative expenses 16.1 16.5 16.7
Plant relocation costs -- .2 --
Operating income 11.9 10.2 7.4
Interest and other (1.3) (1.7) 0.0
Earnings before taxes 10.6 8.5 7.4
Income taxes 3.9 3.4 2.7
Net earnings 6.7 5.1 4.7
Net Sales - Consolidated net sales for 1997 increased 9.1% to $545.9
million from $500.5 million in 1996. Foodservice Equipment sales were
up 2.0%. Marine sales declined by 17.7%, largely because of a 1996
barge construction project that was not replicated in 1997. However,
this decline was more than offset by a 23.3% increase in Crane sales,
reflecting strong acceptance of new products.
In 1996, net sales rose 59.8% to $500.5 million from $313.1 million in
1995. The improvement came from a 112.9% increase in Foodservice
Equipment sales, a 24.0% rise in Crane sales, and 61.5% higher Marine
sales. Sales increases resulted from: (1) a full year's performance
by The Shannon Group, Inc., acquired in December 1995; (2) positive
market reception of new and recently introduced crane models; (3)
significantly higher sales of crane parts; (4) record winter fleet
activity at our ship-repair facilities; and (5) a self-unloading barge
built for Lafarge Cement Corporation.
Gross Margins - The pattern of improvement continued, with 1997 gross
margins increasing to 28.0%, compared with 26.9% in 1996 and 24.1% in
1995. The primary reasons for the gross margin improvement were
margin expansion in the crawler crane and boom truck businesses. The
ice machine and walk-in and reach-in cooler businesses also
contributed to the higher gross margins. In 1996, the biggest
contributors to higher gross margins were the consolidation and
improvements at Manitowoc Cranes, Inc. (the high-capacity crawler
crane company), which increased productivity and reduced overhead
costs.
Engineering, Selling and Administrative Expenses - ES&A reached $87.6
million in 1997, a 6.1% increase from 1996's $82.6 million. ES&A for
1995 was $52.3 million. However, 1997 ES&A was slightly lower as a
percentage of net sales, amounting to 16.1% compared with 1996's 16.5%
and 1995's 16.7%. The 1997 figure expanded more slowly than sales,
despite the Shannon and SerVend acquisitions, because of tight expense
controls elsewhere.
Plant Relocation Costs - As part of improving its EVA, since 1992
Manitowoc has reviewed its operations and consolidated certain
underperforming operations. In 1996, Manitowoc took a $1.2 million
charge to close its Tonka wood-rail walk-in plant (Mason City, IA) and
Kolpak foamed-in-place walk-in refrigerator/freezer plants (Parsons
and Bethel Springs, TN). The Iowa plant was consolidated with an
expanded Greeneville, TN facility.
Operating Earnings - Foodservice and Cranes saw operating margin
improvements during the year. This resulted in Manitowoc's 27.8%
increase in operating earnings, which reached $65.0 million in 1997,
compared with $50.9 million in 1996 and $23.2 million for 1995.
Income Taxes - The effective income tax rate for 1997 was 37.0%, down
from 1996's 39.7% and equal to 1995's 37.0%. The decrease from 1996
to 1997 is attributed to the full year effect of a corporate
restructuring. The higher 1996 rate was affected by non-deductible
goodwill associated with the Shannon acquisition.
Net Earnings - Higher sales, stronger margins and a lower effective
tax rate led to a 42.0% increase in net earnings in 1997. Net
earnings rose to a record $36.4 million in 1997, or $2.11 per share
(basic), up from $25.6 million, or $1.49 per share (basic) in 1996,
and 1995's $14.6 million, or $.84 per share (basic).
All per-share figures reflect the June 1997 and July 1996 three-for-
two stock splits. Giving effects to these splits, the average shares
outstanding were 17.3 million for all periods.
Foodservice Equipment
- --------------------
This segment generated 45.3% of total sales in 1997. Foodservice
revenues in 1997 were up slightly at $247.1 million, compared with
$242.3 million in 1996 and $113.8 million in 1995. The latest year
was affected by: (1) lower sales of walk-in refrigerators, as several
major fast food chains announced a slowdown in the pace of new
restaurant openings throughout 1997; (2) flat sales for ice machines;
(3) higher sales of reach-in refrigerator/freezers despite a flat
market; (4) lower residential refrigerator/freezer sales as General
Electric (the sole customer for this line) reduced inventories and
consolidated its distribution centers; and (5) two months of SerVend
operations -- with the fourth quarter generally being its weakest
period. The primary reason for higher 1996 sales was the December
1995 acquisition of The Shannon Group, one of the leading
manufacturers of commercial refrigeration equipment. While Shannon's
1996 sales were down slightly compared with 1995, the acquisition was
responsible for nearly all of the Foodservice revenue increase.
Foodservice Equipment sales should continue to expand, driven by
continued strong demand for prepared foods, growth in small kiosk
locations and quick service restaurants, industry movement from single
location restaurants to chain operations, and the expansion of chains
into less developed markets outside the U.S.
Despite flat sales, Foodservice operating earnings grew 8.1% in 1997
to $36.7 million, as compared to 1996's $34.0 million and $22.7
million in 1995. This segment generated 47.6% of total operating
earnings for the year, compared with 54.2% in 1996 and 75.9% in 1995.
In the near term, we believe Foodservice's greatest opportunities lie
in continuing to expand its operating margins and the benefits of
integrating the SerVend acquisition. In 1997, operating margins
reached 14.9%, versus 14.0% in 1996 and 1995's 20.0%. The latest
year's improvement resulted from the combined purchasing program,
plant consolidations, and the closing of the former Shannon Group
corporate offices. The difference between 1996 and 1995 was caused by
the Shannon acquisition, which historically has had lower margins.
Cranes and Related Products
- --------------------------
Strong sales from this business made it Manitowoc's largest segment in
1997, contributing 47.6% of total revenues. Net cranes sales rose
23.3%, reaching $259.6 million for the year. Sales were $210.6
million in 1996 and $169.9 million in 1995. Strong acceptance of new
products, such as Manitowoc's Model 777 (175-ton capacity, self-
erecting crawler crane), and Manitex's expanding Millennium(TM) Series
boom trucks continue to drive this increase. Products introduced in
the last four years represented 90% of the order backlog at the end of
1997.
The following industry trends support growth opportunities in cranes:
with a large number of cranes over 25 years old, the replacement cycle
is beginning, and contractors and rental companies are looking at new
models that are technologically advanced and easier to operate; the
level of activity in off-shore fabrication yards on the Gulf of Mexico
is the highest since the 1970's; and demand for cranes in developed
and developing countries beyond the U.S. is expected to increase over
the long term.
Backlogs for all crane products at year end were: 1997 -- $149.1
million, 1996 -- $136.0 million, and 1995 -- $85.8 million. The 1997
backlog included orders for cranes primarily destined for the U.S.:
93% domestic and 7% international (Europe).
Operating earnings for the crane segment increased 54.5% over 1996
levels and contributed 45.1% of the company's total segment operating
income. Operating earnings were $34.9 million in 1997, $22.6 million
in 1996, and $3.2 million in 1995. Operating margins during these
years were: 1997 -- 13.4%, 1996 -- 10.7%, and 1995 - 1.9%. The 1996
results reflected higher sales from all crane businesses and improved
operating efficiencies from earlier restructurings and plant
consolidations.
Marine Operations
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In 1997, the Marine segment accounted for 7.2% of Manitowoc's net
sales. For this year, Marine revenues were $39.2 million, down 17.7%
from 1996's $47.6 million and up from 1995's $29.5 million. While the
1997 figure included revenue from a large barge conversion, this
generated only half the revenue received from the construction of a
self-unloading cement barge during 1996.
Operating earnings in this business were $5.6 million, compared with
$6.2 million in 1996 and $4.0 million in 1995. Marine contributed
7.3% of total operating segment earnings for the year. The 1997
operating margin, at 14.4%, increased from 1996's 13.0% and 1995's
13.7%, reflecting the traditionally higher margin on repair work
versus new construction.
Liquidity and Capital Resources
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Cash flows from operations for 1997 were $43.6 million, down 32.4%
from 1996's $64.5 million, but higher than the $16.4 million in 1995.
The decrease reflected an expansion in working capital and more normal
levels of customer deposits. The primary uses of cash in 1997 were:
(1) $11.6 million in debt payments; (2) $12.0 million in capital
expenditures, which focused on developing the Q-series ice machines
plus upgrading equipment and facilities from The Shannon Group
acquisition; and (3) $7.7 million in dividend payments. At December
31, 1997, long-term debt of $66.4 million represented 25.6% of
capitalization, versus $76.5 million, or 40.7% of capitalization at
December 31, 1996. Estimated capital expenditures for 1998 are in the
$12-$14 million range.
Cash and marketable securities were $13.6 million at the end of 1997,
compared with $16.0 million for 1996 and $16.6 million for 1995. From
1992 through 1994, the Board of Directors authorized management to
repurchase up to 3.0 million shares of its common stock. At December
31, 1996, a total of 2,646,379 shares had been purchased under these
authorizations, and are carried as treasury shares. On February 19,
1997, the Board discontinued this stock repurchase program.
Acquisitions are a key strategy in reaching Manitowoc's growth goals.
We acquired two business groups in the past three years.
On October 31, 1997, Manitowoc acquired SerVend International, Inc., a
leading manufacturer of ice/beverage dispensers and dispensing valves
for the soft-drink industry, with nearly $50 million in 1996 sales.
The $72.9 million purchase price was funded through existing bank
financing. Over 70% of the purchase price was goodwill, which is tax-
deductible over 15 years for tax purposes and should not affect
Manitowoc's effective tax rate.
On December 1, 1995, the company purchased the outstanding common
stock of The Shannon Group, Inc. Manitowoc paid $127.3 million, which
was net of cash acquired of $0.7 million and includes direct
acquisition costs of $2.7 million and $1.3 million in other assumed
liabilities.
On December 31, 1997, short-term borrowings were $49.1 million,
compared with no borrowings for the prior year and $26.8 million for
1995.
Inventories stood at $54.7 million at the end of 1997, compared with
$44.0 million at year-end 1996 and $52.9 million for 1995. Working
capital reflected a deficit of $25.3 million for the latest year,
compared with a positive $17.6 million for 1996 and a positive $24.2
million for 1995.
The company expects current cash reserves and future cash flows from
operations will meet its liquidity requirements for the foreseeable
future. This includes payments on long-term debt, line of credit and
capital expenditures.
Contingencies
- -------------
The United States Environmental Protection Agency (EPA) identified the
company as a potentially responsible party (PRP) under the
Comprehensive Environmental Response Compensation and Liability Act
(CERCLA), liable for the costs associated with investigating and
cleaning up the contamination at the Lemberger Landfill Superfund Site
near Manitowoc, Wisconsin.
Eleven of the PRPs have formed the Lemberger Site Remediation Group
(LSRG) and have successfully negotiated with the EPA and Wisconsin
Department of Natural Resources to settle the potential liability at
the site and fund the cleanup. Approximately 150 PRPs have been
identified as having shipped substances to the site.
Recent estimates indicate that the total 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 Manitowoc's share of
liability is estimated to be 11% of the total cleanup costs.
To date, the company has expensed $3.3 million in connection with this
matter. There were no expenses incurred for the year ended December
31, 1997. The company expensed $0.2 million in each of the years
ended December 31, 1996, and 1995.
New Accounting Principles
- -------------------------
The company is required to adopt Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income," and SFAS
No. 131, "Disclosure About Segments of an Enterprise and Related
Information," in 1998. (See Basis of Presentation in Summary of
Significant Accounting Policies and note 15 to the company's
consolidated financial statements.)
YEAR 2000 COMPLIANCE
- ---------------------
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field (i.e.,
"98" for "1998"), and will need to be modified or upgraded to
accept four digit entries in order to distinguish 21st century codes
(i.e., "2002") from 20th century dates (i.e., "1902"). As a
result, in less than two years, the computer systems and/or software
used by many companies will need to be upgraded to comply with the
"Year 2000" requirements. Significant uncertainty exists concerning
the potential effects associated with such compliance.
In 1996, Manitowoc began to assess and design a plan to resolve Year
2000 compliance issues potentially affecting the company, both with
respect to internal systems and systems on which the Manitowoc's major
vendors, suppliers, and distributors are reliant. To date, a
comprehensive review has been conducted of Manitowoc's systems and
software to identify applications that could be affected by the Year
2000 issue, and an implementation plan to resolve potential problems,
has been developed. Manitowoc is currently in the process of
converting, modifying, and upgrading its systems and software to Year
2000 compliant systems and software, as necessary. Manitowoc believes
many of its systems and much of its software are currently Year 2000
compliant, and is engaged in tests and diagnostic procedures to verify
such compliance. Manitowoc has incurred approximately $2.5 million in
costs to upgrade its systems, including Year 2000 issues. Manitowoc
estimates costs associated with scheduled system upgrades for 1998 and
1999 will approximate $2.0 million, including upgrades to address Year
2000 compliance issues. The company anticipates that it will be able
to achieve Year 2000 compliance by the end of 1999 with respect to
internal systems and software, and does not currently anticipate any
material disruption in its business operations to achieve this goal.
Manitowoc has begun the process of making inquiries and gathering
information regarding Year 2000 compliance exposures faced by its
principal vendors and suppliers and its major dealers and
distributors. Manitowoc has insufficient information at this time to
fully assess the degree to which such vendors, suppliers, dealers, and
distributors have addressed or are addressing Year 2000 compliance
issues, and to fully evaluate the risk of disruption to operations
that those businesses might face relating to Year 2000 compliance
issues. However, no major part or critical operation of any segment
of Manitowoc's business is reliant on a single source for raw
materials, supplies, or services, and Manitowoc has multiple
distribution channels for most of its products. In the event
information presently being gathered indicates that certain vendors,
suppliers, or distributors will not be Year 2000 compliant, we believe
we will be able to find cost-competitive, alternative sources for raw
materials, supplies, and services necessary to continue production and
distribution.
Nonetheless, given the inherent uncertainty of the scope of the Year
2000 compliance issue worldwide and the various levels of severity and
catastrophe that have been predicted by numerous "experts" and
commentators, there can be no absolute assurance that we will be able
to identify all Year 2000 compliance risks faced by Manitowoc, or that
all of our contingency plans will assure uninterrupted business
operations across the millennium.
Eleven-Year Financial Summary & Business Segment Information
(Thousands of dollars, except shares and per share data)
Transition FISCAL YEARS
Calendar Calendar Calendar Period ------------------------------
1997 1996 1995 Calendar 1994 (1) 1994 1993
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NET SALES
Foodservice $247,057 $242,317 $113,814 $ 44,996 $ 93,171 $ 81,424
Cranes & related products 259,645 210,564 169,866 70,958 156,253 178,630
Marine 39,162 47,584 29,469 7,952 25,956 18,504
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Total $545,864 $500,465 $313,149 $123,906 $275,380 $278,558
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Gross margin $152,600 $134,641 $ 75,470 $ 31,302 $ 67,924 $ 55,785
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EARNINGS (LOSS) FROM OPERATIONS
Foodservice $ 36,746 $ 33,989 $ 22,729 $ 9,426 $ 21,637 $ 18,311
Cranes & related products 34,878 22,582 3,179 870 2,275 (1,961)
Marine 5,648 6,197 4,024 (799) 2,447 593
General corporate (8,903) (7,678) (6,530) (3,981) (5,274) (5,296)
Amortization (3,394) (3,000) (250) -- -- --
Plant Relocation costs -- (1,200) -- (14,000) -- (3,300)
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Total 64,975 50,890 23,152 (8,484) 21,085 8,347
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Other income (expense) - net (7,158) (8,384) (32) 169 1,494 582
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Earnings (loss) before
taxes on income 57,817 42,506 23,120 (8,315) 22,579 8,929
Accounting changes -- -- -- -- -- (10,214)
Provision (benefit) for
taxes on income 21,394 16,863 8,551 (3,243) 8,536 2,612
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Net earnings (loss) $36,423 $ 25,643 $ 14,569 $ (5,072) $ 14,043 $ (3,897)
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OTHER FINANCIAL INFORMATION
Cash from operations $43,587 $ 64,514 $ 16,367 $ (330) $ 36,995 $ 62,700
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Invested capital
(monthly averages):
Foodservice $171,647 $ 68,556 $ 32,696 $ 21,979 $ 25,662 $ 26,503
Cranes & related products 67,596 73,246 85,082 81,800 86,288 112,120
Marine 6,019 7,335 9,579 11,201 13,953 17,497
General corporate 11,512 94,166 12,409 4,818 4,052 2,581
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Total (2) $256,774 $243,303 $139,766 $119,798 $129,955 $158,701
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IDENTIFIABLE ASSETS
Foodservice $249,384 $ 90,937 $ 90,126 $ 27,828 $ 31,460 $ 29,526
Cranes & related products 100,591 88,174 109,118 88,068 93,823 105,750
Marine 6,426 10,648 11,369 13,233 16,726 16,720
General corporate 39,967 127,951 114,302 30,336 43,839 56,015
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Total (2) $396,368 $317,710 $324,915 $159,465 $185,848 $208,011
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LONG-TERM OBLIGATIONS
Long-term debt $ 66,359 $ 76,501 $101,180 $ -- $ -- $ --
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DEPRECIATION
Foodservice $ 3,613 $ 3,377 $ 1,606 $ 703 $ 1,320 $ 1,187
Cranes & related products 4,044 4,260 4,162 2,288 4,211 3,875
Marine 256 600 608 316 681 756
General corporate 405 81 80 46 61 44
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Total $ 8,318 $ 8,318 $ 6,456 $ 3,353 $ 6,273 $ 5,862
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CAPITAL EXPENDITURES
Foodservice $ 6,847 $ 5,110 $ 4,568 $ 3,011 $ 2,300 $ 2,152
Cranes & related products 4,952 2,816 14,252 528 3,120 8,648
Marine 233 343 383 109 (492) (463)
General corporate (3) 8 127 6 82 414 (39)
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Total $ 12,040 $ 8,396 $ 19,209 $ 3,730 $ 5,342 $ 10,298
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PER SHARE (4)
Basic $ 2.11 $ 1.49 $ .84 $ (.29) $ .71 $ (.18)
Diluted 2.09 1.48 .84 (.29) .71 (.18)
Dividends .45 .45 .45 .22 .45 .45
Stockholders' equity 7.45 5.81 4.73 4.35 5.16 5.81
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AVERAGE SHARES OUTTANDING:
Basic 17,267,121 17,267,035 17,267,561 17,426,748 19,657,337 21,958,622
Diluted 17,397,686 17,329,232 17,271,179 17,426,748 19,657,337 21,958,622
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FISCAL YEARS
--------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987
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NET SALES
Foodservice $ 74,175 $ 73,944 $ 74,612 $ 74,431 $ 72,986 $ 72,501
Cranes & related products 155,743 147,554 117,464 102,430 81,593 46,571
Marine 16,471 14,689 33,752 23,735 17,710 103,995
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Total $246,389 $236,187 $225,828 $200,596 $172,289 $223,067
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Gross margin $ 54,443 $ 58,062 $ 54,366 $ 50,860 $ 37,033 $ 29,921
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EARNINGS (LOSS) FROM OPERATIONS
Foodservice $ 17,585 $ 17,364 $ 19,387 $18,468 $ 17,203 $ 17,910
Cranes & related products (850) 7,602 5,490 3,454 (1,974) 4,532
Marine 278 (973) 6,497 3,416 (15,921) (9,693)
General corporate (6,545) (5,734) (6,094) (5,623) (4,744) (3,628)
Amortization -- -- -- -- -- --
Plant relocation costs -- -- -- -- -- --
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Total 10,468 18,259 25,280 19,715 (5,436) 9,121
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Other income (expense) - net 1,104 2,233 5,077 4,527 4,187 7,510
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Earnings (loss) before taxes
on income 11,572 20,492 30,357 24,242 (1,249) 16,631
Accounting changes -- -- -- -- -- --
Provision (benefit) for taxes
on income 3,315 5,060 9,327 7,344 (1,341) 4,868
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Net earnings (loss) $ 8,257 $ 15,432 $ 21,030 $ 16,898 $ 92 $ 11,763
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OTHER FINANCIAL INFORMATION
Cash from operations $ 28,250 $ 6,472 $ 14,210 $ (5,278) $ 3,658 $(33,833)
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Invested capital
(monthly averages):
Foodservice $ 23,555 $ 25,099 $ 19,018 $ 22,859 $ 21,940 $ 16,427
Cranes & related products 137,839 133,777 118,097 99,147 76,335 77,382
Marine 16,879 14,621 16,206 28,600 18,894 26,122
General corporate 2,025 3,051 6,314 7,656 14,151 4,227
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Total (2) $180,298 $176,548 $159,635 $158,262 $131,320 $124,158
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IDENTIFIABLE ASSETS
Foodservice $ 25,608 $ 28,019 $ 24,168 $ 26,074 $ 27,449 $ 33,486
Cranes & related products 138,416 136,995 115,804 96,623 75,217 61,306
Marine 19,253 18,009 22,683 32,451 24,049 41,366
General corporate 41,829 35,983 50,143 61,966 82,374 94,628
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Total (2) $225,106 $219,006 $212,798 $217,114 $209,089 $230,786
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LONG-TERM OBLIGATION
Long-term debt -- -- -- -- -- --
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DEPRECIATION
Foodservice $ 1,090 $ 812 $ 657 $ 771 $ 785 $ 817
Cranes & related products 4,053 3,691 2,895 2,953 3,000 2,972
Marine 785 792 748 465 2,362 2,600
General corporate 196 234 431 380 327 303
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Total $ 6,124 $ 5,529 $ 4,731 $ 4,569 $ 6,474 $ 6,692
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Foodservice $ 1,099 $ 2,797 $ 748 $ (169) $ 229 $ 201
Cranes & related products 4,047 6,347 3,130 2,225 2,264 2,580
Marine 500 113 197 108 1 112
General corporate (3) (508) (2,955) 70 586 317 86
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 5,138 $ 6,302 $ 4,145 $ 2,750 $ 2,811 $ 2,979
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE (4)
Basic $ .36 $ .66 $ .91 $ .73 $ .00 $ .48
Diluted .36 .66 .91 .73 .00 .48
Dividends .45 .45 .89 .35 .35 .35
Stockholders' equity 7.13 7.20 6.96 6.95 6.61 6.98
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE SHARES OUTSTANDING:
Basic 23,221,907 23,222,237 23,222,811 23,253,899 23,917,734 24,458,304
Diluted 23,221,907 23,222,237 23,222,811 23,253,899 23,917,734 24,458,304
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The company changed its year-end to December 31, effective with the
period ended December 31, 1994 (transition period). The prior fiscal
year-end ended on the Saturday nearest to June 30.
(2) In 1997, as part of the corporate restructuring, the Shannon acquisition
goodwill was transferred to the foodservice segment.
(3) During 1991, certain assets were transferred from general corporate to
the cranes and related products segment.
(4) Per share data and average shares outstanding have been adjusted to
reflect the three-for-two stock splits which occurred in 1997 and 1996.
See Note 8 of notes to the consolidated financial statements.
</FN>
CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands of dollars, except per share data)
For The Years Ended December 31
---------------------------------------------------
1997 1996 1995
--------- --------- ---------
EARNINGS
Net Sales $545,864 $500,465 $313,149
--------- --------- ---------
Costs and expenses:
Cost of sales 393,264 365,824 237,679
Engineering, selling, and
administrative expenses 84,231 79,551 52,068
Amortization 3,394 3,000 250
Plant relocation costs -- 1,200 --
--------- --------- ---------
Total costs and expenses 480,889 449,575 289,997
--------- --------- ---------
Earnings from operations 64,975 50,890 23,152
Interest expense (6,230) (9,097) (1,865)
Interest and dividend income 190 394 47
Other income (expense) (1,118) 319 1,786
--------- --------- ---------
Earnings before taxes
on income 57,817 42,506 23,120
Provision for
taxes on income 21,394 16,863 8,551
--------- --------- ---------
Net earnings $ 36,423 $ 25,643 $ 14,569
--------- --------- ---------
PER SHARE DATA
Basic $ 2.11 $ 1.49 $ .84
Diluted $ 2.09 $ 1.48 $ .84
<FN>
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are an integral part of these
financial statements.
</FN>
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars, except shares data)
As of December 31
------------------------------------
1997 1996
---- ----
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 11,888 $ 14,364
Marketable securities 1,741 1,657
Accounts receivable, less
allowances of $1,882 and $976 59,237 53,876
Inventories 54,701 43,978
Prepaid expenses and other 2,662 1,281
Future income tax benefits 15,287 12,719
--------- --------
Total current assets 145,516 127,875
--------- --------
Intangible assets - net 146,983 92,200
Property, plant and equipment - net 91,191 84,703
Other assets 12,678 12,932
--------- --------
Total assets $396,368 $317,710
--------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 15,400 $ 11,064
Accounts payable and accrued expenses 96,540 90,967
Short-term borrowings 49,100 --
Product warranties 9,772 8,271
--------- --------
Total current liabilities 170,812 110,302
--------- --------
NON-CURRENT LIABILITIES
Long-term debt, less current portion 66,359 76,501
Product warranties 4,955 4,914
Postretirement health benefits obligation 19,699 19,455
Other liabilities 5,925 6,209
--------- --------
Total non-current liabilities 96,938 107,079
--------- --------
STOCKHOLDERS' EQUITY
Common stock (24,497,655 and 16,331,770
shares issued) 245 163
Additional paid-in capital 30,980 31,061
Cumulative foreign currency
translation adjustments (192) 220
Retained earnings 179,088 150,387
Treasury stock, at cost (81,503) (81,502)
--------- --------
Total stockholders' equity 128,618 100,329
--------- --------
Total liabilities and stockholders' equity $396,368 $317,710
--------- --------
<FN>
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are an integral part of these
financial statements.
</FN>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
For The Years Ended December 31
----------------------------------------
1997 1996 1995
CASH FLOWS FROM OPERATIONS ------- ------- -------
Net earnings $ 36,423 $ 25,643 $ 14,569
Adjustments to reconcile
net cash from operations:
Depreciation 8,318 8,318 6,456
Amortization of goodwill 3,394 3,000 250
Amortization of deferred
financing fees 300 300 95
Deferred income taxes (3,172) (4,383) (815)
Plant relocation costs -- 1,200 --
(Gain) loss on sale of property,
plant, and equipment 218 259 (1,964)
Changes in operating assets and
liabilities excluding effects
of business acquisitions:
Accounts receivable 2,532 (2,865) (843)
Inventories (6,006) 8,950 (5,913)
Other current assets (1,264) 909 999
Current liabilities 2,492 23,432 4,015
Non-current liabilities (490) (573) (1,052)
Non-current assets 842 324 570
--------- --------- ---------
Net cash provided by
operations 43,587 64,514 16,367
--------- --------- ---------
CASH FLOWS FROM INVESTING
Sale (purchase) of
marketable securities - net (84) (99) 10,487
Capital expenditures (12,040) (8,396) (19,209)
Business acquisitions -
net of cash acquired (66,979) (300) (105,944)
Proceeds from sale of property,
plant, and equipment 3,533 1,443 5,656
--------- --------- ---------
Net cash used for investing (75,570) (7,352) (109,010)
--------- --------- ---------
CASH FLOWS FROM FINANCING
Dividends paid (7,722) (7,674) (7,674)
Proceeds from long-term debt -- 15,000 110,000
Payments on long-term debt (11,606) (38,704) --
Proceeds (payments) from short-term
borrowings - net 49,100 (26,807) 3,001
Debt acquisition costs (252) -- (1,687)
--------- --------- ---------
Net cash provided by
(used for) financing 29,520 (58,185) 103,640
--------- --------- ---------
Effect of exchange rate
changes on cash (13) 310 (38)
--------- --------- ---------
Net change in cash and
cash equivalents (2,476) (713) 10,959
--------- --------- ---------
Balance at beginning of year 14,364 15,077 4,118
--------- --------- ---------
Balance at end of year $ 11,888 $ 14,364 $ 15,077
--------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 6,927 $ 8,215 $ 1,163
--------- --------- ---------
Income taxes paid $ 21,449 $ 19,319 $ 7,929
--------- --------- ---------
<FN>
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are an integral part of these
financial statements.
</FN>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Thousands of dollars, except shares and per share data)
For The Years Ended December 31
------------------------------------------------
1997 1996 1995
-------- --------- ---------
COMMON STOCK - SHARES OUTSTANDING
Balance at beginning of year 11,511,357 7,674,468 7,674,475
Three-for-two stock split 5,755,679 3,836,889 --
Stock options exercised 3,296 -- --
Treasury stock purchases (1,157) -- (7)
--------- -------- --------
Balance at end of year 17,269,175 11,511,357 7,674,468
--------- -------- --------
COMMON STOCK - PAR VALUE
Balance at beginning of year $ 163 $ 109 $ 109
Three-for-two stock split 82 54 --
--------- -------- --------
Balance at end of year $ 245 $ 163 $ 109
--------- -------- --------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year $ 31,061 $ 31,115 $ 31,115
Three-for-two stock split (82) (54) --
Stock options exercised 1 -- --
--------- -------- --------
Balance at end of year $ 30,980 $ 31,061 $ 31,115
--------- -------- --------
CUMULATIVE FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS
Balance at beginning of year $ 220 $ (479) $ (188)
Foreign currency
translation adjustments (412) 699 (291)
--------- -------- --------
Balance at end of year $ (192) $ 220 $ (479)
--------- -------- --------
RETAINED EARNINGS
Balance at beginning of year $ 150,387 $132,418 $125,523
Net earnings 36,423 25,643 14,569
Cash dividends * (7,722) (7,674) (7,674)
--------- -------- --------
Balance at end of year $ 179,088 $150,387 $132,418
--------- -------- --------
TREASURY STOCK
Balance at beginning of year $ (81,502) $(81,502) $(81,502)
Treasury stock purchases (38) -- --
Stock options exercised 37 -- --
--------- -------- --------
Balance at end of year $ (81,503) $(81,502) $(81,502)
--------- -------- --------
<FN>
* Cash dividends per share after giving effect to the three-for-two
stock splits in 1997 and 1996, were $.45 per share in all periods.
The accompanying summary of significant accounting policies and notes
to the consolidated financial statements are an integral part of these
financial statements.
</FN>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Thousands of dollars, except per share data)
- ---------------------------------------------
BASIS OF PRESENTATION
- ---------------------
The financial statements of The Manitowoc Company, Inc. ("the
company") have been prepared in accordance with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses for the years presented. They also affect the
disclosures of contingencies. Actual results could differ from those
estimates.
The company is required to adopt Statement of Financial Accounting
Standard (SFAS) No. 130, "Reporting Comprehensive Income," in 1998.
SFAS No. 130 establishes standards for reporting and display of
comprehensive income, as defined, and its components within the
financial statements, which includes, in addition to net income, other
items that are reported as direct adjustments to stockholders' equity.
Presently, the company's foreign currency translation items are the
only items which would require inclusion in this statement.
Reclassification of financial statements for prior periods is
required.
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The consolidated financial statements include the accounts of the
company and its wholly owned domestic and non-U.S. subsidiaries.
Significant intercompany balances and transactions have been
eliminated.
INVENTORIES
- -----------
Inventories are stated at the lower of cost or market as described in
Note 3. Advance payments from customers are netted against
inventories to the extent of related accumulated costs. Advance
payments netted against inventories at December 31, 1997 and 1996 were
$1,574 and $8,552, respectively. Advance payments received in excess
of related costs on uncompleted contracts are classified as accrued
expenses.
REVENUE RECOGNITION
- -------------------
Revenues and expenses in all business segments are generally
recognized upon shipment or completion of service provided. However,
revenues and costs on contracts for long-term projects are recognized
on the percentage-of-completion method, commencing when work has
progressed to a state where estimates are reasonably accurate. These
estimates are reviewed and revised periodically throughout the lives
of the contracts, and adjustments to income resulting from such
revisions are recorded in the accounting period in which the revisions
are made. Estimated losses on such contracts are recognized in full
when they are identified.
FOREIGN CURRENCY TRANSLATION
- ----------------------------
The financial statements of the company's non-U.S. subsidiaries are
translated using the current exchange rate for assets and liabilities
and the weighted average exchange rate for the year for income
statement items. Resulting translation adjustments are recorded
directly to a separate component of stockholders' equity.
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
Property, plant and equipment is depreciated over the estimated useful
lives of the assets using the straight-line depreciation method for
all property acquired after June 29, 1991. Property acquired prior to
June 30, 1991, is depreciated using the sum-of-the-years-digits
method.
Property, plant and equipment is depreciated over the following
estimated useful lives:
Years
-----
Buildings 40
Drydocks and dock fronts 15-27
Machinery, equipment and tooling 4-15
INTANGIBLE ASSETS
- -----------------
Intangible assets consist primarily of costs in excess of net assets
of businesses acquired (see Note 10). 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
continually 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' discounted net cash flows
over the remaining life of the intangibles in measuring whether the
intangibles are recoverable. Intangible assets at December 31, 1997
and 1996 of $146,983 and $92,200, respectively, are net of accumulated
amortization of $7,244 and $3,550, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
- -----------------------------------
The carrying amounts reported in the consolidated balance sheets for
cash and cash equivalents, accounts receivable, accounts payable and
short-term borrowings approximate fair value due to the immediate
short-term maturity of these financial instruments. The carrying
amount reported for long-term debt approximates fair value since the
underlying instrument bears interest at a variable rate that reprices
frequently.
The fair value of interest rate swaps is the amount at which they
could be settled, based on estimates obtained from financial
institutions (see Note 5).
INCOME TAXES
- ------------
The company utilizes the liability method to recognize deferred tax
assets and liabilities for the expected future income tax consequences
of events that have been recognized in the company's financial
statements. Under this method, deferred tax assets and liabilities
are determined based on the temporary differences between financial
statement carrying amounts and the tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the temporary
differences are expected to reverse.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
- -------------------------------------------
The expected cost of postretirement health care benefits is recorded
during the years that the employees render service.
RESEARCH AND DEVELOPMENT
- ------------------------
Research and development costs are charged to expense as incurred and
amount to $4,412 in 1997, $3,502 in 1996, and $3,110 in 1995.
WARRANTIES
- ----------
Estimated warranty costs are provided at the time of sale of the
warranted products, based on historic experience for the relevant
product.
EARNINGS PER SHARE
- --------------------
The company adopted SFAS No. 128, "Earnings Per Share," in 1997.
SFAS No. 128 establishes standards for computing and presenting
earnings per share. All previously reported earnings per share
amounts included herein have been restated.
Basic earnings per share is computed by dividing net earnings by the
weighted average shares outstanding during each year/period. Diluted
earnings per share is computed similar to basic earnings per share
except that the weighted average shares outstanding is increased to
include the number of additional shares that would have been
outstanding if stock options were exercised and the proceeds from such
exercise were used to acquire shares of common stock at the average
market price during the year/period.
CASH EQUIVALENTS
- ----------------
All short-term investments purchased with an original maturity of
three months or less are considered cash equivalents.
ENVIRONMENTAL LIABILITIES
- -------------------------
The company adopted the AICPA Statement of Position (SOP) No. 96-1
"Environmental Remediation Liabilities" in 1997. The company
accrues for losses associated with environmental remediation
obligations when such losses are probable and reasonably estimable.
Such accruals are adjusted as information develops or circumstances
change. Costs of future expenditures for environmental remediation
obligations are not discounted to their present value. The adoption
of this SOP did not have a significant effect on the company's
estimates relating to environmental contingencies.
RECLASSIFICATIONS
- -----------------
Certain reclassifications have been made to the financial statements
of prior periods to conform to the presentation for 1997.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of dollars, except shares and per share data)
1.
___________________________________________________________________________
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized at December 31 as follows:
1997 1996
---- ----
Land $ 3,133 $ 3,489
Buildings 63,276 59,606
Drydocks and dock fronts 21,743 21,743
Machinery, equipment and tooling 111,919 102,512
Construction in progress 2,760 2,033
--------- ---------
Total cost $ 202,831 $ 189,383
Less accumulated depreciation (111,640) (104,680)
--------- ---------
Property, plant and equipment - net $ 91,191 $ 84,703
--------- ---------
2.
___________________________________________________________________________
MARKETABLE SECURITIES
Marketable securities at December 31, 1997 and 1996 included $1.7
million of securities which are available for sale. The difference
between fair market value and cost for these investments was not
material in either year.
3.
___________________________________________________________________________
INVENTORIES
The components of inventories are summarized at December 31 as
follows:
1997 1996
---- ----
Components:
Raw materials $ 25,881 $ 20,153
Work-in-process 22,331 19,447
Finished goods 27,972 25,725
------- --------
Total inventories at FIFO cost 76,184 65,325
Excess of FIFO cost over LIFO value (21,483) (21,347)
------- --------
Total inventories $ 54,701 $ 43,978
------- --------
Inventories are carried at the lower of cost or market using the
first-in, first-out (FIFO) method for 60% and 56% of total inventory
for 1997 and 1996, respectively. The remainder of the inventories are
costed using the last-in, first-out (LIFO) method.
4.
___________________________________________________________________________
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are summarized at December 31 as
follows:
1997 1996
---- ----
Trade accounts payable $ 34,277 $ 31,215
Profit sharing and incentives 20,630 14,748
Income taxes payable 5,766 2,836
Miscellaneous accrued expenses 35,867 42,168
-------- ---------
Total $ 96,540 $ 90,967
-------- ---------
5.
___________________________________________________________________________
DEBT
Long-term debt is summarized at December 31 as follows:
1997 1996
---- ----
Term loan payable $ 75,390 $ 86,365
Capital lease obligations 6,369 1,200
-------- --------
$ 81,759 $ 87,565
Less current portion 15,400 11,064
-------- --------
$ 66,359 $ 76,501
======== ========
The company entered into a Credit Agreement ("Agreement") on
December 1, 1995 with a group of banks to fund the purchase of The
Shannon Group, Inc. (see Note 10). The Agreement was amended and
restated on October 28, 1997 at the time of the SerVend acquisition.
Currently, the Agreement provides for maximum borrowings of $78
million under a term loan and maximum borrowings of $125 million under
revolving loans. There were $49.1 million of borrowings under the
revolving loan portion of the Agreement at December 31, 1997, and none
at December 31, 1996.
The Agreement includes covenants which require the maintenance of
various debt and net worth ratios. Annual commitment fees at the end
of 1997 were .15% on the unused portion of the available credit.
Borrowings under the Agreement bear interest at a rate equal to the
sum of a base rate, or LIBOR rate (London Interbank Offered Rate), at
the option of the company, plus an applicable percentage, as defined.
The base rate is equal to the greater of the Federal Funds rate in
effect on such day plus .5% or the prime rate in effect on such day.
The weighted average interest rate for the term and revolving loans at
December 31, 1997 and 1996 was 6.50% and 6.38%, respectively.
Payments of principal and interest for the term loan are due quarterly
through December 31, 2001. Borrowings under the Agreement are not
collateralized.
The company has entered into interest rate swap agreements, which
expire at various times through October, 2002, to reduce the impact of
changes in interest rates on its floating rate long-term debt. At
December 31, 1997, the company had outstanding five interest rate swap
agreements with financial institutions, having a total notional
principal amount of $99 million. The effect of these agreements on
the company's interest rates during 1997 was not significant.
Interest expense has been adjusted for the net receivable or payable
under these agreements. The fair value of these interest rate swap
agreements is $0.5 million at December 31, 1997. The company is
exposed to credit loss in the event of non-performance by the
financial institutions. However, management does not anticipate such
non-performance.
Capital lease obligations relate to the company's obligations on two
property leases for industrial property located in the State of
Tennessee and one in the State of Indiana. These obligations are due
in monthly or annual installments including principal and interest at
rates varying from 3.8% to 10.0%. These obligations mature at various
dates through 2004.
The aggregate scheduled maturities of long-term debt and capital lease
obligations in subsequent years are as follows:
1998 $ 15,400
1999 19,628
2000 19,482
2001 23,667
2002 232
Thereafter 3,350
---------
$ 81,759
=========
6.
___________________________________________________________________________
INCOME TAXES
Components of earnings before income taxes are as follows:
1997 1996 1995
---- -------- ---------
Earnings before income taxes:
Domestic $ 58,706 $ 41,702 $ 22,273
Foreign (889) 804 847
-------- -------- --------
TOTAL $ 57,817 $ 42,506 $ 23,120
-------- -------- --------
The provision for taxes on income is as follows:
1997 1996 1995
-------- -------- ---------
Current:
Federal $ 22,307 $ 17,743 $ 8,093
State 1,973 3,190 1,105
Foreign 286 313 168
-------- -------- --------
Total current 24,566 21,246 9,366
-------- -------- --------
Deferred:
Federal and state (3,172) (4,383) (815)
Foreign -- -- --
-------- -------- --------
Total deferred (3,172) (4,383) (815)
-------- -------- --------
Provision for taxes on income $ 21,394 $ 16,863 $ 8,551
======== ======== ========
Federal income taxes at statutory rates and the provision for income
taxes as reported are reconciled as follows:
1997 1996 1995
-------- -------- ---------
Federal income tax at statutory rate $ 20,236 $ 14,877 $ 8,092
State income taxes, net of federal
income tax benefit 1,246 2,019 1,137
Non-deductible goodwill amortization 810 713 --
Tax-exempt FSC income (1,086) (564) (373)
Adjustments to prior years' income
tax accruals (631) (360) (132)
Provision for tax on foreign income, net of
foreign tax credits 861 80 (119)
Other (42) 98 (54)
-------- -------- --------
Provision for taxes on income $ 21,394 $ 16,863 $ 8,551
======== ======== ========
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:
1997 1996
-------- --------
Current deferred tax assets:
Inventories $ 2,503 $ 826
Accounts receivable 312 392
Product warranty reserves 3,715 3,021
Product liability reserves 3,074 2,679
Environmental reserves 59 311
Customer profit sharing reserves 655 497
Other employee-related benefits
and allowances 2,985 3,453
Property, plant and equipment 599 201
Other 1,385 1,339
-------- --------
Future income tax benefits, current $ 15,287 $ 12,719
======== ========
Non-current deferred tax assets (liabilities):
Property, plant and equipment $ (8,337) $ (8,271)
Postretirement benefits
other than pensions 7,903 7,791
Deferred employee benefits 2,321 1,239
Severance benefits 1,098 1,097
Product warranty reserves 1,123 1,248
Environmental reserves 431 502
Net operating loss carryforwards 2,556 2,517
Valuation allowance (881) (513)
-------- --------
Net future income tax
benefits, non-current $ 6,214 $ 5,610
======== ========
The company does not provide for taxes which would be payable if
undistributed earnings of foreign subsidiaries or its foreign
affiliate 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, 1997, the company has approximately $15 million of
state net operating loss carryforwards, which are available to reduce
future state tax liabilities. The company also has acquired federal
net operating losses of $4.8 million available to reduce federal
taxable income. These loss carryforwards expire in varying amounts
through 2012. A valuation allowance was recorded to reflect the
estimated amount of deferred assets which may not be realized due to
the possible limitation on the future use of certain state tax net
operating loss carryforwards.
7.
___________________________________________________________________________
EARNINGS PER SHARE
The following is a reconciliation of the average shares outstanding
used to compute basic and diluted earnings per share. There is no
earnings impact from the assumed conversions of the stock options in
each of the years.
1997 1996 1995
-------------------- -------------------- --------------------
Per Per Per
Share Share Share
Shares Amount Shares Amount Shares Amount
----- ----- ----- ----- ----- -----
Basic EPS 17,267,121 $2.11 17,267,035 $1.49 17,267,561 $.84
===== ===== ====
Effect of Dilutive
Securities
Stock Options 130,565 62,197 3,618
---------- -------- --------
Diluted EPS 17,397,686 $2.09 17,329,232 $1.48 17,271,179 $.84
========== ===== =========== ===== =========== ====
8.
___________________________________________________________________________
STOCKHOLDERS' EQUITY
Authorized capitalization consists of 35 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 two-thirds of a Right (as adjusted to reflect the 1997 three-for-
two stock split) to purchase additional stock. The Rights are not
currently exercisable and cannot be separated from the shares unless
certain specified events occur, including the acquisition of 20% or
more of the common stock by a person or group, or the commencement of
a tender offer for 20% or more of the common stock. In the event a
person or group actually acquires 20% or more of the common stock, or
if the company is merged with an acquiring person, each 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 September 8, 1992, the board of directors authorized the company to
repurchase up to 1.5 million shares of its common stock. In addition,
on January 11, 1994 and February 1, 1994, the board of directors
authorized the repurchase of an additional 0.5 million and 1.0 million
shares, respectively. As of December 31, 1996, a total of 2,646,379
treasury shares were purchased pursuant to these authorizations. On
February 19, 1997, the board of directors discontinued this stock
repurchase program.
On May 19, 1997, the company's board of directors authorized a three-
for-two stock split of the company's common stock in the form of a 50%
stock dividend payable on June 30, 1997 to shareholders of record on
June 2, 1997. As a result of the stock split, a total of 5,755,679
shares of the company's common stock were issued. All references in
the financial statements to average number of common shares
outstanding and related earnings per share amounts, market prices per
share of common stock, and stock option plan data have been restated
to reflect the split. The company also split its common stock on a 3-
for-2 basis on July 2, 1996.
9.
___________________________________________________________________________
STOCK OPTIONS
Effective May 22, 1995, the company's board of directors approved The
Manitowoc Company, Inc. Stock Plan (the "Plan") which provides for
the granting of stock options as an incentive to certain key
employees. Under the Plan, stock options to acquire up to 1.125
million 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 are
summarized as follows:
1997 1996 1995
--------------------------- ---------------------------- ---------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ------- ------- ---------- ------- ---------
Options outstanding,
beginning of year 215,100 $ 13.45 96,075 $11.67 -- $ --
Options granted 193,650 $ 28.17 119,025 $14.89 96,075 $ 11.67
Options exercised (3,296) $(11.67) -- -- -- $ --
-------- ------- -------
Options outstanding,
end of year 405,454 $ 20.49 215,100 $13.45 96,075 $ 11.67
======== ======= =======
Options exercisable,
end of year 20,722 -- --
======== ======= =======
The outstanding stock options at December 31, 1997 have a range of
exercise prices of $11.67 to $28.17 per option. The options with
exercise prices ranging between $11.67 and $14.89 per option have a
remaining weighted average contractual life of 8.0 years; of such
shares, 20,722 shares with a weighted average exercise price of $11.67
per option are currently exercisable. Options with a weighted average
exercise price of $28.17 per option have a remaining contractual life
of approximately 9.4 years; of such shares, none are currently
exercisable. The weighted average fair value at date of grant for
options granted during 1997, 1996, and 1995 was $9.44, $4.69, and
$3.26 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:
1997 1996 1995
---- ---- ----
Expected life (years) 7 7 7
Risk-free interest rate 6.7 % 6.8 % 6.6 %
Expected volatility 27.6 % 25.4 % 26.5 %
Expected dividend yield 2.3 % 2.4 % 3.8 %
The company applies Accounting Principles Board Opinion No. 25, under
which no compensation cost has been recognized in the statements of
operations. Had compensation cost been determined under an
alternative method suggested by SFAS No. 123, "Accounting for Stock-
Based Compensation," net income would have decreased $263, $82, and
$23 in 1997, 1996, and 1995, respectively; basic earnings per share
would have been $2.09, $1.48, and $.84 in 1997, 1996, and 1995,
respectively.
10.
___________________________________________________________________________
ACQUISITIONS
On October 31, 1997, the company acquired substantially all of the net
assets and business operated by SerVend International, Inc.
("SerVend") from SerVend and its affiliate, Fischer Enterprises,
Ltd. SerVend is one of the world's largest manufacturers of
ice/beverage dispensers and dispensing valves for the soft drink
industry. Its customers include many of the major quick-service
restaurant chains, convenience stores, and soft-drink bottlers in the
nation.
The aggregate consideration paid by the company for the net business
assets of SerVend was $72,946 which includes cash acquired of $119,
direct acquisition costs of $1,167, and assumed liabilities of $6,250.
The purchase price paid for SerVend was subject to a post-closing
adjustment based on net worth at October 31, 1997, as set forth in the
Purchase Agreement. The company has recorded a receivable of $654 at
December 31, 1997 relating to this adjustment. The transaction was
financed through credit facilities provided under the new Credit
Agreement dated October 28, 1997 (see Note 5).
The acquisition has been recorded using the purchase method of
accounting. The cost of the acquisition has been allocated on the
basis of the estimated fair value 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 $58,478, and is
being amortized over an average life of 36 years. The results of
SerVend's operations subsequent to the date of acquisition are
included in the Consolidated Statements of Earnings for the year ended
December 31, 1997.
The following unaudited information presents on a pro forma basis, the
SerVend acquisition as if it had occurred at the beginning of the year
indicated:
1997 1996
-------- --------
Net sales $587,376 $540,698
-------- --------
Net earnings $ 35,711 $ 23,944
-------- --------
Basic earnings
per share $ 2.07 $ 1.39
-------- --------
Diluted earnings
per share $ 2.05 $ 1.38
-------- --------
On December 1, 1995, the company completed the purchase of the
outstanding common stock of The Shannon Group, Inc. ("Shannon").
Shannon is a manufacturer of commercial refrigerators, freezers and
related products, ranging from small under-counter units to 300,000
square foot refrigerated warehouses. Among its wide range of
products, Shannon is best known for its foamed-in-place walk-in
refrigeration units, wood rail walk-in units, refrigerated food-prep
tables, reach-in refrigerator/freezers and modular refrigeration
systems.
The aggregate consideration paid by the company for Shannon was
$127,320 which is net of cash acquired of $651, and includes direct
acquisition costs of $2,671 and other assumed liabilities of $1,269.
The acquisition has been recorded using the purchase method of
accounting. The cost of the acquisition has been allocated on the
basis of the estimated fair value of the assets acquired and the
liabilities assumed. The excess of the cost over the fair value of
net assets acquired of $91,384 is being amortized over an average life
of 32 years. The results of operations of Shannon subsequent to the
date of acquisition are included in the Consolidated Statements of
Earnings for the years ended December 31, 1997, 1996, and 1995.
The following unaudited information presents, on a pro forma basis,
the Shannon acquisition as if it had occurred at the beginning of
1995:
Net sales $436,114
--------
Net earnings $ 14,983
--------
Basic earnings per share $ .87
--------
Diluted earnings per share $ .87
--------
11.
___________________________________________________________________________
PLANT CONSOLIDATIONS AND ASSETS HELD FOR SALE
During the fourth quarter of 1996, the company's decision to
consolidate and close walk-in refrigeration plants located in Iowa and
Tennessee resulted in a $1.2 million charge to earnings in the
Foodservice segment. The charge includes a write-down to the
estimated net realizable values of the assets being abandoned and
takes into consideration future holding costs and costs related to the
sale of the properties. During 1997, $132 was charged against the
reserve.
The assets currently held for sale include land and improvements,
buildings, and certain machinery and equipment at the "Peninsula
facility" located in Manitowoc, Wisconsin. The current carrying
value of these assets, and the assets mentioned above, 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, insurance, and demolition costs for various buildings.
These reserves also include estimates for potential environmental
liabilities on the Peninsula location. During the years ended
December 31, 1997, 1996, and 1995, $35, $1,100, and $600 was charged
against these reserves, respectively.
12.
___________________________________________________________________________
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 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. To date, the company has expensed
$3.3 million in connection with this matter. There were no expenses
incurred for the year ended December 31, 1997. The Company expensed
$0.2 million for each of the years ended December 31, 1996, and 1995.
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 December 31, 1997, is $1.1
million.
As of December 31, 1997, 25 product-related lawsuits were pending. Of
these, two occurred between 1985 and 1990 when the company was
completely self-insured. The remaining lawsuits occurred subsequent
to June 1, 1990, at which time the company has insurance coverages
ranging from a $5.5 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 $25.0 million limit on the
insurer's contribution.
Product liability reserves included in accounts payable and accrued
expenses at December 31, 1997 are $7.8 million; $3.6 million reserved
specifically for the 25 cases referenced above, and $4.2 million for
claims incurred but not reported. These reserves were estimated using
actuarial methods. The highest current reserve for a non-insured
claim is $0.6 million, and $0.5 million for an insured claim. 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 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 expected to have a material adverse effect
on the consolidated financial statements.
13.
___________________________________________________________________________
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
were $10,371, $8,810, and $4,657 in 1997, 1996 and 1995, respectively.
The company also provides certain health care benefits for eligible
retired employees. Substantially all of the company's domestic
employees hired before January 1, 1990, may become eligible for these
benefits if they reach a normal retirement age while working for the
company and satisfy certain years-of-service requirements.
The components of the periodic postretirement health benefit cost are
as follows:
1997 1996 1995
----- ------ -------
Service cost - benefits earned
during the year $ 260 $ 260 $ 323
Interest cost on accumulated
postretirement health
benefit obligation 1,088 1,044 1,393
Amortization of actuarial gain (197) (136) --
------ ------ ------
Net periodic postretirement
health benefit cost $1,151 $1,168 $1,716
------ ------ ------
The components of the accumulated periodic postretirement health
benefit obligation at December 31, 1997 and 1996 are as follows:
1997 1996
------- -------
Retirees $ 8,228 $ 8,325
Active participants 7,484 6,497
Unrecognized gain 3,987 4,633
------- --------
Accumulated postretirement
health benefit obligation $19,699 $ 19,455
------- --------
The health care cost trend rate assumed in the determination of the
accumulated postretirement benefit obligation is 7.0% in 1997,
decreases 1.0% per year to 5.0% for 1999, and remains at that level
thereafter. Increasing the assumed medical trend rates by one
percentage point in each year would increase the accumulated
postretirement health benefit obligation by $1,978 at December 31,
1997 and the aggregate of the service and interest cost components of
net periodic postretirement health benefit cost by $212 for 1997.
The discount rate used in determining the accumulated postretirement
health benefit obligation is 7.25% for 1997, and 7.50% for 1996. The
plan is unfunded.
It is reasonably possible that the estimate for future retirement and
health care costs may change in the near future based upon changes in
the health care environment or changes in interest rates which may
arise. Presently, there is no reliable means to estimate the amount
of any such potential changes.
14.
___________________________________________________________________________
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
$3,390, $4,474, and $7,232 in 1997, 1996 and 1995, respectively.
Total minimum rental obligations under noncancelable operating leases,
as of December 31, 1997, aggregated $18,580 and were payable as
follows:
1998 $2,659 2001 1,562
1999 2,038 2002 1,402
2000 1,737 Thereafter 9,182
15.
___________________________________________________________________________
BUSINESS INFORMATION
The company's business units, which consist of Foodservice Equipment
("Foodservice"), Cranes and Related Products ("Cranes"), and Marine
Operations ("Marine"), operate in both domestic and international
markets.
Foodservice products consist primarily of commercial ice cube
machines, dispensers, and related accessories, as well as commercial
refrigerators and freezers. Foodservice distributes its products
primarily in the United States. Foodservice products serve the
lodging, restaurant, healthcare, and convenience store markets which
are impacted by demographic changes and business cycles.
Cranes' products consist primarily of crawler and truck-mounted
lattice boom and hydraulic cranes and excavators which serve the
construction, energy, and mining industries. Cranes distributes its
products worldwide, primarily in the U.S., Southeast Asia, Middle East
and Europe. Cranes' operations are tied most closely to energy and
infrastructure projects throughout the world.
Marine provides ship-repair services to foreign and domestic vessels
operating on the Great Lakes. 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.
Information concerning the company's operations in various businesses
is presented beginning on page 24. Export sales were approximately
$75 million, $68 million, and $61 million in 1997, 1996 and 1995,
respectively. Sales, operating losses, and identifiable assets
related to foreign operations for 1997 are $15.1 million, $1.3
million, and $15.9 million, respectively.
The company is required to adopt SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," in 1998. SFAS
No. 131 establishes standards for the way public companies report
certain information about their operating segments using a management
approach for determining what segment information is to be reported.
Comparative disclosure is required. The company is evaluating the
extent to which its segment reporting may be affected by SFAS No. 131.
MANAGEMENT'S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------
Company management is responsible for the integrity of this annual
report's consolidated financial statements. Those statements were
prepared in accordance with generally accepted accounting principles.
Where necessary, amounts are based on judgments and estimates by
management. All financial information in this report matches the
financial statements.
The company maintains an internal accounting system designed to
provide reasonable assurance that assets are safeguarded and that
books and records reflect only authorized transactions.
To further safeguard assets, the company has established an audit
committee composed of directors who are neither officers nor employees
of the company. The audit committee is responsible for reviewing the
company's financial reports and accounting practices and meets
periodically with the company's independent accountants.
The company's independent accountants provide an objective examination
of the company's financial statements. They evaluate the company's
system of internal controls and perform tests and other procedures
necessary to express an opinion on the fairness of the presentation of
the consolidated financial statements.
/s/ Fred M. Butler /s/ Robert R. Friedl
----------------------- -------------------------
Fred M. Butler Robert R. Friedl
President & Chief Executive Officer Senior Vice President &
Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------
To The Stockholders Of
The Manitowoc Company, Inc.
We have audited the accompanying consolidated balance sheets of The
Manitowoc Company, Inc. and Subsidiaries as of December 31, 1997 and
1996 and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the years ended December 31,
1997, 1996, and 1995. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of The Manitowoc Company, Inc. and Subsidiaries as
of December 31, 1997 and 1996, and the consolidated results of their
operations and their cash flows for the years ended December 31, 1997,
1996, and 1995, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
-----------------------------
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
January 26, 1998
SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The table below presents unaudited quarterly data for the years ended December 31, 1997 and 1996
(Thousands of dollars, except per share data)
1997 1996
--------------------------------------------- ------------------------------------------
First Second Third Fourth First Second Third Fourth
------ ------ ------ ------ ------ ------ ------ ------
Net sales $116,041 $144,985 $133,935 $150,903 $114,099 $139,219 $132,042 $115,105
Gross margin 32,008 41,829 37,354 41,409 28,637 37,891 36,778 31,335
Net earnings 6,478 11,929 9,521 8,495 4,114 8,798 8,534 4,197
Per share amounts: *
Basic earnings
per share .38 .69 .55 .49 .24 .51 .49 .24
Diluted earnings
per share .37 .69 .55 .49 .24 .51 .49 .24
Dividends per
common share .11 .11 .11 .11 .11 .11 .11 .11
<FN>
* Per share data adjusted to reflect the 1997 and 1996 three-for-two stock splits.
</FN>
QUARTERLY COMMON STOCK PRICE RANGE
Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1996 December 31, 1995
------------------ ------------------ -------------------
High Low Close High Low Close High Low Close
---- ---- ---- ---- ---- ----- ---- ---- -----
1st Quarter $40.00 $33.50 $36.13 $33.25 $27.75 $31.50 $25.00 $21.00 $24.88
2nd Quarter 47.50 34.50 46.75 38.00 31.75 35.88 28.88 24.88 28.88
3rd Quarter 39.94 31.69 35.69 35.75 23.50 32.13 30.00 26.88 29.63
4th Quarter 38.19 29.50 32.50 43.88 31.50 40.50 30.63 28.13 30.63
The company's common stock is traded on the New York Stock Exchange.
The share prices shown above are not adjusted for the 1997 and 1996
three-for-two stock splits.
GLOSSARY
- --------
Financial Terms
- ---------------
BACKLOG: Firm, unfilled orders. An indicator of future sales.
BOOK VALUE: Another term for shareholder equity, most often shown on
a per-share basis.
CAPITALIZATION: The total market value of a company's outstanding
stock - that is, the stock price multiplied by the number of shares.
Generally, the higher the market cap, the larger the company and the
less volatile the stock. Manitowoc is considered a small-cap stock,
having a market value of less than $1 billion.
CASH FLOW: Funds generated by a company to operate the business, make
capital investments, repay debt, pay dividends, repurchase stock, and
make acquisitions.
COST OF CAPITAL: A weighted average of the after-tax cost of equity
and borrowed funds used to invest in operating capital for business.
CURRENT RATIO: Current assets divided by current liabilities, an
indicator of liquidity.
ECONOMIC VALUE-ADDED (EVA): Represents the growth in economic profit
from year to year.
OUTSOURCING: Contracting with an outside supplier to take over a
function that had been 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.
PRODUCT MIX: A company that sells more than one product can have its
amount of sales vary from year to year, even when the overall number
of units sold remains the same. This occurs when multiple products
have different sales values, or when a greater number of units with
higher sales values are sold in comparison to lower-priced units.
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
- --------------
BLAST CHILLER: A refrigerated structure similar to a walk-in that is
specially designed to rapidly chill and/or freeze food items in
compliance with safety standards established by the FDA.
BOOM TRUCK: A hydraulic telescopic crane mounted to a commercial
truck chassis. A boom truck is different than a truck crane since it
can haul up to several thousand pounds of payload on its cargo deck.
CRAWLER CRANE: Usually refers to lattice-boom cranes that are mounted
on crawlers rather than a truck chassis. This method of mounting
significantly reduces ground bearing pressures and enables the crane
to pick-and-carry virtually any rated load.
FIVE-YEAR SURVEY: A thorough ship inspection and maintenance process
that must be performed every five years to satisfy stringent maritime
regulations developed by the U.S. Coast Guard, American Bureau of
Shipping, and other regulatory agencies.
GRAVING DOCK: An in-ground concrete structure in which ships can be
constructed or repaired. Because a graving dock is equipped with
pumps and watertight gates, it can be flooded so ships can float in,
then be pumped dry so crews can work on those portions of the ship
that are normally underwater.
ICE/BEVERAGE DISPENSER: A foodservice appliance that dispenses ice
and soft drinks for self-serve applications in quick-service
restaurants and convenience stores.
KIOSK: A limited-menu, walk-up, quick-service restaurant that sells
various food items usually prepared off-premise.
LATTICE BOOM: A fabricated structure usually consisting of four
chords and tubular lacings. Lattice booms are typically lighter in
weight than similar-length telescopic booms. In addition, lattice
booms generally provide higher lifting capacities than telescopic
booms in most situations.
LUFFING JIB: A fabricated structure similar to, but smaller than, a
lattice boom. Mounted at the tip of a lattice boom, luffing jibs can
readily adjust their angles of operation, a capability that is not
possible with conventional fixed-jib attachments.
REACH-IN: A refrigerated cabinet typically used in foodservice
applications for short-term storage of perishable items at safe-
keeping temperatures prior to preparation or serving.
RINGER: Manitowoc's patented heavy-lift attachment that dramatically
improves the reach, capacity, and lift dynamics of the basic crane to
which it is mounted.
SELF-UNLOADING VESSEL: Refers to the fleet of vessels operating on
the Great Lakes that are equipped with cargo-hold conveyors and
lattice discharge booms that enable these vessels to offload their
bulk cargoes, such as iron ore, coal, or cement, without requiring
dockside assist equipment.
TELESCOPIC BOOM: A box-section boom, composed of several overlapping
sections, that is extended or retracted to a desired length by
hydraulic or mechanical means.
TUG/BARGE: A new form of Great Lakes bulk cargo transportation that
consists of a non-powered notch barge that is pushed by a high-horse
power diesel tug.
WALK-IN: A large, foamed-in-place, refrigerated structure often found
in restaurants that can be equipped with cooling or freezing systems
for long-term storage of 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 Public Accountants
- ------------------------------
Coopers & Lybrand L.L.P.
411 East Wisconsin Avenue
Milwaukee, WI 53202
Stock Transfer Agent and Registrar
- --------------------------------
First Chicago Trust Company of New York
P. O. Box 2500
Jersey City, NJ 07303-2500
Annual Meeting
- --------------
The annual meeting of Manitowoc shareholders will be held at 9:00
a.m., CDT, on Tuesday, May 5, 1998, on the third floor of the
company's corporate offices at 500 South 16th Street, 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 38 of this annual report.
Manitowoc Shareholders
- ----------------------
On December 31, 1997, 17,269,175 shares of Manitowoc common stock were
outstanding. At such date, there were 2,464 shareholders of record.
Form 10-K Report
- ----------------
Each year, Manitowoc files its Annual Report on Form 10-K with the
Securities and Exchange Commission. Most of the financial information
contained in that report is included in the Annual Report to
Shareholders.
A COPY OF FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR 1997, MAY BE OBTAINED BY ANY SHAREHOLDERS, WITHOUT
CHARGE, UPON WRITTEN REQUEST TO:
E. Dean Flynn, Secretary
The Manitowoc Company, Inc.
P. O. Box 66
Manitowoc, WI 54221-0066
Dividends
- ---------
Common stock dividends are usually considered in conjunction with
quarterly meetings of Manitowoc's board of directors.
Dividend Reinvestment And Stock Purchase Plan
- ---------------------------------------------
The Dividend Reinvestment and Stock Purchase Plan provides a
convenient method to acquire additional shares of Manitowoc stock
through the investment of quarterly dividends. Shareholders may also
purchase shares by investing cash as often as once a month in varying
amounts from $10 up to a maximum of $60,000 each calendar year.
Participation is voluntary and all fees associated with stock
purchases under these plans are paid for by Manitowoc.
To receive an information booklet and enrollment form, please contact
our stock transfer agent and registrar, First Chicago Trust Company of
New York.
Investor Inquiries
- ------------------
Security analysts, portfolio managers, individual investors, and media
professionals seeking information about Manitowoc are encouraged to
contact the following:
Analysts & Portfolio Managers:
- ------------------------------
Robert R. Friedl, Senior Vice President & CFO
Telephone: 920-683-8136
Telefax: 920-683-8138
Media Inquiries:
- ----------------
Steven C. Khail, Corporate Communications Manager
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
1998 according to the following schedule:
1st Quarter - April 9, 1998
2nd Quarter - July 13, 1998
3rd Quarter - October 12, 1998
4th Quarter - January 26, 1999
Join MTW on the Internet
- ------------------------
Manitowoc provides a variety of information about its businesses,
products, and markets at its website address:
http:\\www.manitowoc.com
Equal Opportunity
- -----------------
Manitowoc believes that a diverse workforce is required to compete
successfully in today's global markets. The company provides equal
employment opportunities in its global operations without regard to
race, color, age, gender, religion, national origin, or physical
disability.
EXHIBIT 13 - APPENDIX A
Cross Reference or
Graph No. Description of Graph Narrative Discussion
- --------- -------------------- ---------------------
1 Bar Graph of Gross Margin Gross Margin (Millions of Dollars)
for fiscal years 1992-1994 -----------------------------------
and calendar years 1995-1997. 1992 54
1993 56
1994 68
1995 75
1996 135
1997 153
Manitowoc increased its gross margin by
183% since 1992, reaching a record in 1997.
2 Line Graph of Segment Operating Segment Operating Margins (Millions of Dollars)
Margins for fiscal years -----------------------------------------------
1992-1994 and calendar years Foodservice Cranes Marine
1995-1997. ----------- ----- -----
1992 17.6 (0.9) 0.3
1993 18.3 (2.0) 0.6
1994 21.6 2.3 2.4
1995 22.7 3.2 4.0
1996 34.0 22.6 6.2
1997 36.7 34.9 5.6
All three segments have seen dramatic increases
since 1992, benefiting from higher sales volumes
and the discipline EVA helped to instill.
3 Bar Graph of Cash Flow from Cash Flow From Operations (Millions of Dollars)
Operations for fiscal years -----------------------------------------------
1992-1994 and calendar years 1992 28.3
1995-1997. 1993 62.7
1994 37.0
1995 16.4
1996 64.5
1997 43.6
Earnings increases were more than offset by higher
working capital requirements and a more normal
level of customer deposits, reducing cash flow in 1997.
4 Bar Graph of Invested Capital Invested Capital (Millions of Dollars)
for fiscal years 1992-1994 and --------------------------------------
calendar years 1995-1997. 1992 180
1993 159
1994 130
1995 140
1996 243
1997 257
Excess or unproductive capital has been eliminated
since 1992, while investments in higher-yielding
undertakings were made in recent years. This boosted
our after-tax return on capital from 8% in 1993 to 17%
in 1997.
5 Bar Graph of Consolidated Net Consolidated Net Sales (Millions of Dollars)
Sales for fiscal years 1992- --------------------------------------------
1994 and calendar years 1992 246
1995-1997. 1993 279
1994 275
1995 313
1996 500
1997 546
Strong expansion in foodservice equipment and
crane sales led to a 17.2% compound annual growth
rate for the last five years.
6 Bar Graph of Operating Earnings Operating Earnings (Millions of Dollars)
for fiscal years 1992-1994 and ----------------------------------------
calendar years 1995-1997. 1992 10.5
1993 8.3
1994 21.1
1995 23.2
1996 50.9
1997 65.0
A dramatic increase by our crane segment helped
boost total operating earnings 27.7% during 1997.
7 Bar Graph of International International Shipments (Millions of Dollars)
Shipments for fiscal years ---------------------------------------------
1992-1994 and calendar years 1992 40.0
1995-1997. 1993 64.6
1994 56.9
1995 60.7
1996 67.6
1997 74.6
Demand for foodservice equipment in Europe and
the Pacific Rim, and crane products in Europe,
Canada plus South and Central America, boosted
international sales to record levels in 1997.
8 Bar Graph of Average Shares Average Shares Outstanding (Millions)
Outstanding for fiscal years -------------------------------------
1992-1994 and calendar years 1992 23.2
1995-1997. 1993 22.0
1994 19.7
1995 17.3
1996 17.3
1997 17.3
From 1992 through 1995, Manitowoc repurchased 2.6
million shares of its common stock. In 1996 and 1997,
Manitowoc declared consecutive three-for-two stock
splits.