Filed Pursuant to Rule 424(b)(3)
Registration No. 333-65000
PROSPECTUS
THE MANITOWOC COMPANY, INC.
Offer to Exchange
All Outstanding
10 3/8% Senior Subordinated Notes due 2011
(Euro)175,000,000 Aggregate Principal Amount
for
New 10 3/8% Senior Subordinated Notes due 2011
(Euro)175,000,000 Aggregate Principal Amount
We are offering to exchange an aggregate principal amount of up to
(Euro)175,000,000 of our new 10 3/8% senior subordinated notes due 2011, which
have been registered under the Securities Act of 1933, for a like amount of our
old 10 3/8% senior subordinated notes due 2011.
----------------
. The exchange offer expires at 5:00 p.m., London time, on September 7,
2001, unless we extend it.
. The terms of the new notes to be issued are substantially identical to
the terms of the old notes, except for transfer restrictions and
registration rights relating to the old notes.
. No established trading market for the new notes currently exists. We
will apply to list the new notes on the Luxembourg Stock exchange in
accordance with the rules of the Luxembourg Stock Exchange.
. You may withdraw tenders of old notes at any time prior to the
expiration of the exchange offer.
. We will not receive any proceeds from the exchange offer.
See "Risk Factors" beginning on page 12 for a discussion of risk factors
that you should consider before deciding to exchange your old notes for new
notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
----------------
The date of this prospectus is August 2, 2001.
TABLE OF CONTENTS
Page
----
Prospectus Summary....................................................... 1
Risk Factors............................................................. 12
Disclosure Regarding Forward-Looking Statements.......................... 20
The Exchange Offer....................................................... 21
The Transactions......................................................... 30
Use of Proceeds.......................................................... 31
Capitalization........................................................... 32
Unaudited Pro Forma Condensed Consolidated Financial Statements.......... 33
Selected Historical Financial and Other Data............................. 41
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 43
Business................................................................. 55
Management............................................................... 71
Description of Indebtedness.............................................. 73
Description of the New Notes............................................. 75
United States Federal Income Tax Considerations.......................... 116
Plan of Distribution..................................................... 117
Legal Matters............................................................ 118
Experts.................................................................. 118
Where You Can Find More Information...................................... 118
General Listing Information.............................................. 119
Information About the Guarantors......................................... 119
Index to Financial Statements............................................ F-1
----------------
In this prospectus, "Manitowoc," "we," "us" and our refer to The Manitowoc
Company, Inc. and its consolidated subsidiaries except where we expressly state
that we are only referring to The Manitowoc Company, Inc. Unless otherwise
indicated, all references in this prospectus to our business and pro forma data
give effect to our acquisition of Potain SA and related financing transactions.
This prospectus incorporates important business and financial information
about us that is not included in or delivered with this prospectus. We will
provide you without charge on your request, a copy of any documents that are
incorporated by reference to this prospectus, other than exhibits to those
documents that are not specifically incorporated by reference into those
documents, by writing or telephoning The Manitowoc Company, Inc., P.O. Box 66,
Manitowoc, Wisconsin 54221-0066; Attention Maurice D. Jones, General Counsel
and Secretary; (920) 684-4410. To ensure timely delivery, please make your
request as soon as practicable and, in any event, no later than five business
days prior to the expiration of the exchange offer.
You should rely only on the information provided in this prospectus. We have
not authorized anyone to provide you with any different information. The
information in this prospectus is current only as of the date on the cover, and
our business or financial condition and other information in this prospectus
may change after that date.
We accept responsibility for the information contained in this prospectus.
To the best of our knowledge, the information we give in this prospectus is in
accordance with the facts and contains no omissions likely to affect the import
of the Luxembourg Stock Exchange Listing particulars.
Solely for your convenience, this prospectus contains translations of some
euro amounts into U.S. dollars and some French franc amounts into U.S. dollars.
We are not making any representation to you regarding those translated amounts.
Unless we otherwise clearly indicate, the translations of euros into U.S.
dollars have been made at (Euro)1.00 = $0.8840, the average rate on the close
of business on March 30, 2001. However, French franc amounts associated with
the acquisition of Potain SA have been translated at the noon buying rate on
May 9, 2001 of (Euro)1.00 = $0.8845. Euros are converted into French francs at
a fixed rate of (Euro)1.00 = FRF 6.55957.
i
PROSPECTUS SUMMARY
The following summary contains basic information about us, the exchange
offer and the new notes and this offering. It likely does not contain all the
information that is important to you. For a more complete understanding of us,
the exchange offer and the new notes, we encourage you to read this prospectus
in its entirety and the other documents we have referred you to.
The Manitowoc Company, Inc.
The Manitowoc Company, Inc. is a diversified industrial manufacturer with
leading positions in its three principal markets: cranes; foodservice
equipment; and marine services in the Great Lakes region. In our crane
business, we design, manufacture and market a comprehensive line of crawler
cranes, tower cranes and boom trucks with capacities ranging from 10 tons to
1,433 tons. Our cranes are used in a wide variety of applications, including
energy, petrochemical and industrial projects, infrastructure development such
as road, bridge and airport construction, commercial and high-rise residential
construction, mining and dredging. In our foodservice business, we design,
manufacture and market full product lines of ice making machines, walk-in and
reach-in refrigerator/freezers, fountain beverage delivery systems and other
foodservice refrigeration products for the restaurant, lodging, convenience
store and institutional foodservice markets. In our marine service business, we
provide ship building, repair and maintenance services in the U.S. Great Lakes
region. We own four shipyards and operate over 55% of the drydock capacity,
based on footage, serving the U.S. Great Lakes commercial fleet.
Our principal executive offices are located at 500 South 16th Street,
Manitowoc, Wisconsin 54220. Our telephone number is (920) 684-4410.
For the year ended December 31, 2000, we had net sales of $873.3 million,
earnings from operations plus depreciation and amortization, or EBITDA, of
$130.7 million and net earnings of $60.3 million, reflecting five-year compound
annual growth rates of 14.4%, 20.4% and 23.8%, respectively. On a pro forma
basis for the same period, we had net sales of $1.1 billion, EBITDA of $172.2
million and net earnings of $49.0 million.
We believe we are:
. the leading provider of high capacity crawler cranes (over 150 tons)
with an estimated 50% of worldwide sales;
. one of two leading providers of tower cranes in the world with an
estimated greater than 25% of worldwide sales;
. the leading provider of ice making machines in the United States with an
estimated 40% of U.S. sales;
. the leading provider of walk-in refrigerator/freezers in the United
States; and
. the leading provider of marine services in the Great Lakes region.
Over the last six years we have grown both internally and through selective
acquisitions. We have introduced or acquired 125 new products since 1996. New
products we have introduced since 1998 represented approximately 60% of our
2000 net product sales. With the completion of the acquisition of Potain, we
have completed 16 acquisitions since 1995. These acquired businesses generated
52.8% of our pro forma 2000 net sales.
In 1993, we adopted economic value added, or EVA(R), as a management tool to
guide our investment, acquisition and operating decisions. EVA defines value
creation as the cash return a business generates over and above its weighted
average cost of capital. We believe the disciplined use of EVA in our decision-
making helps us to invest capital efficiently, reduce operating costs and
maximize our profitability and cashflow from operations.
1
Competitive Strengths
We believe the following strengths are the primary drivers of our track
record of growth and profitability:
Leading Market Positions. We have served the crane and foodservice
industries since 1925 and 1945, respectively, and we believe the Manitowoc name
is among the best-known brands in those markets. We believe we hold a top three
market share in all of our principal product categories and we believe that
approximately 65% of our net sales are derived from product categories in which
we have the first or second largest market share. We believe our strong market
shares and our substantial installed base of equipment in the crane and
foodservice markets, together with our established global distribution networks
and our expertise in product development, provide a significant competitive
advantage.
Diverse Revenue Base. Our revenue base is diversified across three
industries and five continents. Our crane, foodservice and marine segments,
respectively, represent approximately 56.1%, 37.5% and 6.4% of our pro forma
2000 net sales. Approximately 27% of our pro forma 2000 net sales were
generated outside of North America, principally in Europe with 21.7% and Asia
with 2.9%, and we expect our international sales to grow faster than domestic
sales over the next several years. We also have a diverse customer base, with
no single crane or foodservice customer representing greater than 5.0% of our
total pro forma net sales for 2000. While both our crane and foodservice
segments are influenced by general economic conditions, they each serve
different markets that do not react in lockstep with each other. Our marine
segment provides additional stability, as its repair and maintenance services
are primarily non-discretionary and the majority of our new construction
contracts are with government agencies whose investment decisions are not
necessarily influenced by general economic conditions.
Strong Track Record of Product Innovation. Over the last six years we have
introduced or acquired 125 innovative new products to better serve our
customers' needs in all of our markets. We currently hold over 140 patents
covering new product and technology innovations.
. Cranes. In May 2000, we launched the most successful new crane in
Manitowoc's history, the 275-ton capacity Model 999 crawler crane. We
received orders for 80 Model 999 cranes in the first seven months
following its introduction. In April 2001, we introduced the 110-ton
Model 915 duty-cycle crane; the 110-ton Model 1015 foundation crane; the
Model 555, a 150-ton limited duty-cycle lift crane; and the Model 19000,
a 500-ton high-capacity liftcrane.
. Foodservice. In 2000, we introduced our patented QuietQube(TM) ice-cube
machines that feature our proprietary CoolVapor Defrost(R), or CVD,
technology and provide capacities of up to 2,000 pounds of ice per day.
Our QuietQube CVD product line substantially reduces noise and heat
exhaust during operation as well as floor space requirements, compared
to available competing products. In 2000, we also introduced our first
ice flake machine, which expands our penetration into the healthcare
industry and provides an entree into the supermarket segment where
flakes are the preferred type of ice for keeping meat and seafood fresh.
Cost Efficient Manufacturing. We believe we are a highly efficient
manufacturer and service provider in each of our segments. Establishing
production facilities in China for our ice machines in 1995 provided us a low
cost manufacturing base for worldwide distribution of some of our foodservice
products. In 2000, we implemented a "mixed model/demand flow" manufacturing
process in our foodservice segment, which enables us to shorten lead times and
respond more effectively to customer demand, while reducing required inventory
levels. In our crane segment, we maintain modern, efficient production
facilities that enable us to produce a high quality product with low lead time
requirements. Through a series of steps over the last two years, including
outsourcing of non-core manufactured components, redesign of production
processes, elimination of production bottlenecks at our facilities and
investments in technology, we have reduced the average manufacturing lead time
for our crawler cranes from approximately 128 days in 1998 to approximately 70
days in 2000.
2
Excellent Customer Service. We support our products and our customers in the
field through an extensive after-market customer service network. In our crane
segment, we operate full-service machine shops and a fleet of fully equipped
trucks that provide complete machining services at customer locations--or
anywhere in the field--24 hours a day. Down-time in the field can be extremely
costly for our customers and we believe our responsiveness and the quality of
our customer service is an important differentiating factor for us in the
lifting market. In our foodservice segment, we offer a continuous schedule of
maintenance and repair training seminars during the year for independent
service providers and our distributors. In 2000, over 14,000 individuals from
around the world participated in our training seminars. We will only sell our
foodservice products in markets where trained and qualified service personnel
are available locally, and we work to ensure that quality product service is
available in every market served. In our marine segment, we consistently
complete repair, maintenance and new construction projects on time and within
budget, which we believe is an important factor influencing our customers'
decision to select us.
Business Strategy
With manufacturing and marketing operations in the U.S., Europe and Asia,
our strong brand names and leading market positions, we believe we are well-
positioned to serve our existing customers and to capitalize on growth
opportunities around the world. We will continue to pursue our strategy by
focusing on new product development, improving manufacturing efficiency,
expanding our geographic reach and selectively pursuing acquisitions, using EVA
as the principal management tool for evaluation of our operating and investment
decisions.
Emphasize New Product Development and Product Quality. We will continue to
invest capital every year to develop new products with improved cost-effective
functionality in response to changing customer requirements. We will also
continue to improve and enhance our existing products.
Maintain Highly Efficient Manufacturing. With EVA as a guiding principle,
our manufacturing management teams are constantly seeking opportunities to
improve productivity to increase our cash flow and return on invested capital.
Our current initiatives include:
. implementation of mixed model/demand flow in more of our foodservice
business units over the next year;
. introduction of additional welding robotics to our crane segment; and
. expansion of our manufacturing operations in Asia.
Extend Our Geographic Reach. We will continue to extend our reach deeper
into existing geographic regions and into new markets. The Potain acquisition
significantly extends our international presence with the addition of seven
European and one Asian manufacturing sites and an established distribution
network in 75 countries, including within Europe, Asia and Latin America. We
intend to capitalize on the cross-selling opportunities both for our crawler
crane and boom truck products through Potain's distributors overseas and for
Potain's tower crane products through our Manitowoc distributors in North
America. We recently opened a distribution center in Uruguay to serve the
foodservice market in South America. In addition to establishing our own
facilities in new markets, we will pursue joint ventures and licensing
agreements where appropriate to further extend our manufacturing and
distribution networks around the world. For example, we recently entered into a
licensing agreement with Blue Star Limited in India for the production and
marketing of refrigerators and freezers.
3
Selectively Expand Through Acquisition. We will continue to consider
selective acquisitions that improve our market position by extending our
product lines or geographic reach. In evaluating a potential acquisition
candidate, we generally require that the candidate demonstrate the following:
. leadership in its market niche;
. the potential for easy integration into our existing operations; and
. the potential for generating strong cash flow.
Additionally, our objective for each acquisition is for it to be earnings per
share accretive within two years and EVA positive within three years. With the
completion of the acquisition of Potain, we have completed ten acquisitions
since January 1, 1998.
Deploy Capital Efficiently. We believe our track record of strong cash flow
is attributable to our commitment to EVA. We began implementation of EVA
principles in 1993 and have generated nearly $145 million of economic value for
our investors since 1995. More than 25% of our workforce is incentivized by EVA
performance. We plan to continue investing our capital based on EVA principles
in order to maximize cash generation and increase our return on invested
capital.
Potain Acquisition
On March 4, 2001, we submitted a binding offer to acquire from Legris
Industries SA all of the outstanding capital stock of Potain for aggregate cash
consideration of approximately FRF 2.3 billion (approximately U.S. $307.1
million), subject to a post-closing adjustment to reflect Potain's net income
for the period from January 1, 2001 through the closing of the acquisition. On
May 9, 2001, we and Legris entered into a share purchase agreement and
simultaneously closed the acquisition. Concurrently with the closing of the
acquisition, we issued the old notes, established a new senior credit facility
and applied the proceeds from the issuance of the old notes and the new senior
credit facility to consummate the Potain acquisition, refinance our existing
indebtedness and pay fees and expenses arising out of the acquisition and
related financing transactions. See "The Transactions."
Potain SA, founded in 1928, is a leading designer, manufacturer and supplier
of tower cranes for the building and construction industry, with an estimated
greater than 25% of worldwide sales in the tower crane industry. Potain's
product offerings include top slewing, luffing jib, topless and self-erecting
tower cranes, special cranes for dams and other large building projects, and to
a lesser extent hoists and aerial work platforms. Potain currently markets 78
different models and has sold more than 88,000 cranes worldwide. About 80% of
the product range is less than three years old, with 32 models introduced in
1999 and eight models introduced in 2000. Potain operates eight production
plants for the manufacture of tower cranes, located in France, Germany, Italy,
Portugal and China. Potain's products are sold directly by company sales staff
and by independent distributors throughout the world.
This acquisition broadens our product line and establishes us as a leading
global manufacturer of tower cranes, a segment in which we have not previously
participated, and increases the percentage of our crane segment sales derived
outside of North America from 10.0% to 41.4% on a pro forma basis for the year
ended December 31, 2000. The acquisition also provides us manufacturing
capacity in Europe and Asia and adds significantly to our distribution network
throughout the world.
4
Summary Financial Information
We have derived the summary historical financial data as of and for each of
the five years ended December 31, 2000 from our audited consolidated financial
statements. The summary historical financial data as of and for the three
months ended March 31, 2000 and 2001 have been derived from our unaudited
consolidated financial statements. The summary historical data below should be
read in conjunction with "Selected Historical Financial and Other Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes
included elsewhere in this prospectus. We have derived the summary unaudited
pro forma financial information below from our historical financial statements
and the historical financial statements of Potain. You should read this
information in conjunction with "Unaudited Pro Forma Condensed Consolidated
Financial Statements," which include the detailed adjustments and assumptions
used to prepare this information. While this pro forma information is based on
adjustments we deem appropriate and which are factually supported based on
currently available data, the pro forma information may not be indicative of
what actual results would have been, nor does this information purport to
present our financial results for future periods.
Summary Historical and Pro Forma Financial Data
For the Three Months Ended
For the Years Ended December 31,
March 31,
- -------------------------------------------------------------
- -----------------------------
Pro
Forma Pro Forma
1996 1997 1998 1999 2000(1)
2000(2) 2000 2001 2001(2)
-------- -------- -------- -------- ---------
- ---------- -------- -------- ---------
(Thousands of dollars, except
financial ratios)
Statement of Earnings
Data:
Net sales:
Foodservice equipment... $242,317 $247,057 $319,457 $379,625 $ 425,080 $
425,080 $ 92,929 $101,245 $101,245
Cranes and related
products............... 220,821 268,416 339,051 389,510 376,250
636,212 100,770 84,258 158,845
Marine.................. 47,584 39,162 45,412 55,204 71,942
71,942 12,154 43,848 43,848
-------- -------- -------- -------- ---------
- ---------- -------- -------- --------
Total net sales......... 510,722 554,635 703,920 824,339 873,272
1,133,234 205,853 229,351 303,938
-------- -------- -------- -------- ---------
- ---------- -------- -------- --------
Costs and expenses:
Cost of sales.......... 376,081 402,035 508,299 590,627 637,538
822,235 150,136 173,321 231,230
Engineering, selling
and administrative
expenses.............. 79,551 84,231 98,120 107,369 114,901
162,513 27,072 33,686 46,063
Plant relocation
costs................. 1,200 -- -- -- --
-- -- -- --
Amortization........... 3,000 3,394 4,881 7,392 8,181
12,927 1,902 2,315 3,501
-------- -------- -------- -------- ---------
- ---------- -------- -------- --------
Total cost and
expenses.............. 459,832 489,660 611,300 705,388 760,620
997,675 179,110 209,322 280,794
-------- -------- -------- -------- ---------
- ---------- -------- -------- --------
Earnings from
operations............. 50,890 64,975 92,620 118,951 112,652
135,559 26,743 20,029 23,144
Interest expense........ (9,097) (6,230) (9,741) (10,790) (14,508)
(47,399) (2,511) (4,096) (11,850)
Other (expense) income--
net.................... 713 (928) (1,467) (2,155) (2,024)
(2,899) (371) (115) (216)
-------- -------- -------- -------- ---------
- ---------- -------- -------- --------
Earnings before taxes on
income................. 42,506 57,817 81,412 106,006 96,120
85,261 23,861 15,818 11,078
Provision for taxes on
income................. 16,863 21,394 30,032 39,222 35,852
34,957 8,948 5,948 4,542
-------- -------- -------- -------- ---------
- ---------- -------- -------- --------
Net earnings(5)......... $ 25,643 $ 36,423 $ 51,380 $ 66,784 $ 60,268 $
50,304 $ 14,913 $ 9,870 $ 6,536
======== ======== ======== ======== =========
========== ======== ======== ========
Other Financial Data:
EBITDA(3)............... $ 62,208 $ 76,687 $107,230 $135,664 $ 130,705 $
170,298 $ 31,168 $ 25,237 $ 33,466
Cash flows from
operations............. 64,514 43,587 56,814 103,371 63,047
1,112 11,077
Cash flows from
investing.............. (7,352) (75,570) (58,618) (69,416) (109,037)
(35,555) (5,431)
Cash flows from
financing.............. (58,185) 29,520 496 (34,422) 50,006
42,595 (11,451)
Capital expenditures.... 8,396 12,040 11,678 13,714 13,415
43,724 4,853 5,336 8,532
Ratio of total debt to
EBITDA................. 1.4x 1.7x 1.3x 0.8x 1.7x
3.3x 5.7x 8.3x 16.9x
Ratio of EBITDA to
interest expense....... 6.8x 12.3x 11.0x 12.6x 9.0x
3.6x 12.4x 6.2x 2.8x
Ratio of earnings to
fixed charges(4)....... 5.0x 8.9x 8.6x 9.5x 6.5x
2.7x 8.4x 4.2x 1.9x
As of March 31, 2001
----------------------
Actual Pro Forma (2)
-------- -------------
Balance sheet data:
Cash and cash equivalents................................ $ 8,186 $ 47,608
Total assets............................................. 641,782 1,112,705
Total debt............................................... 209,278 566,142
Stockholders' equity..................................... 241,966 238,548
5
- -------
(1) Includes the results of Marinette Marine Corporation only from November 20,
2000, the date of its acquisition.
(2) Pro forma for the acquisition of Potain and related financing transactions
assuming the acquisition of Potain and related financing transactions
occurred on January 1, 2000 for purposes of preparing the pro forma
statements of earnings for the year ended December 31, 2000 and January 1,
2001 for the three month period ended March 31, 2001, respectively, and on
March 31, 2001 for purposes of preparing the pro forma balance sheet.
(3) EBITDA consists of earnings from operations plus depreciation and
amortization. We have presented EBITDA information solely as a supplemental
disclosure because management believes that it is generally accepted as
providing useful information regarding a company's ability to service
and/or incur debt. EBITDA should not be construed as an alternative to
earnings from operations as determined in accordance with generally
accepted accounting principles as an indicator of our operating
performance, or as an alternative to cash flows from operating activities
as determined in accordance with generally accepted accounting principles
as a measure of liquidity. We have significant uses of cash flows,
including capital expenditures and debt principal repayments that are not
reflected in EBITDA. It should also be noted that not all companies that
report EBITDA information calculate EBITDA in the same manner as we do.
(4) For purposes of computing the ratio of earnings to fixed charges, earnings
consists of earnings from operations before income taxes and fixed charges,
excluding capitalized interest. Fixed charges consist of interest expensed
and capitalized, amortization of debt issuance costs and the interest
component of rent expense.
(5) Pro forma net earnings excludes an extraordinary loss (approximately $3.4
million, net of income tax effects) related to the early extinguishment of
our existing debt which will be paid from the proceeds of the financing
upon consummation of this offering.
6
The Exchange Offer
In this exchange offer, we are offering to exchange your old notes for new
notes, which are identical in all material respects to the old notes except
that the new notes have been registered under the Securities Act. The summary
below describes the principal terms of the exchange offer. The "Exchange Offer"
section of this prospectus contains a more detailed description of the exchange
offer.
Old Notes.......................................... On May 9, 2001, we
completed a private
offering of (Euro)175.0
million aggregate
principal amount of 10
3/8% senior subordinated
notes due 2011, which we
refer to in this
prospectus as the old
notes.
Registration Rights Agreements..................... Simultaneously with the
sale of the old notes, we
entered into a
registration rights
agreement, which provides
for the exchange offer.
The exchange offer
satisfies your rights
under the registration
rights agreement. After
the exchange offer is
over, you will not be
entitled to any exchange
or registration rights
with respect to your old
notes, except under
limited circumstances.
The Exchange Offer................................. We are offering to
exchange the old notes for
up to (Euro)175.0 million
aggregate principal amount
of 10 3/8% senior
subordinated notes due
2011 that have been
registered under the
Securities Act, which we
refer to in this
prospectus as the new
notes. You may exchange
old notes only in integral
multiples of (Euro)1,000
principal amount.
Expiration of the Exchange Offer................... The exchange offer will
expire at 5:00 p.m.,
London time, on September
7, 2001, or a later date
and time to which we may
extend it.
Withdrawal......................................... You may withdraw your
tender of old notes
pursuant to the exchange
offer at any time before
expiration of the exchange
offer. We will return any
old notes not accepted for
exchange for any reason
without expense to you
promptly after the
expiration or termination
of the exchange offer.
Conditions to the Exchange Offer................... The exchange offer is
subject to customary
conditions, which we may
waive. Please read the
caption "The Exchange
Offer--Conditions to the
Exchange Offer" for more
information regarding the
conditions to the exchange
offer.
Acceptance of Old Notes and Delivery of New Notes.. We will accept and
exchange any and all old
notes that are validly
tendered in the exchange
offer and not withdrawn
before the exchange offer
expires. The new notes
will be delivered promptly
following the exchange
offer.
7
Resale of New Notes.................. We believe that the new notes issued
pursuant to the exchange offer in
exchange for old notes may be offered
for resale, resold and otherwise
transferred by you without compliance
with the registration and prospectus
delivery provisions of the Securities
Act if:
. you are not our "affiliate" within
the meaning of Rule 405 under the
Securities Act;
. you are acquiring the new notes in
the ordinary course of your business;
and
. you have not engaged in, do not
intend to engage in, and have no
arrangement or understanding with any
person to participate in, a
distribution of the new notes.
If you are an affiliate of ours, or are
engaging in or intend to engage in, or
have any arrangement or understanding
with any person to participate in, a
distribution of the new notes, then:
. you will not be permitted to tender
old notes in the exchange offer; and
. you must comply with the registration
and prospectus delivery requirements
of the Securities Act in connection
with any resale of the old notes.
Each participating broker-dealer that
receives new notes for its own account
under the exchange offer in exchange for
old notes that were acquired by the
broker-dealer as a result of market-
making or other trading activity must
acknowledge that it will deliver a
prospectus in connection with any resale
of the new notes. See the caption "Plan
of Distribution."
Consequences of Failing to Exchange.. If you are a holder of old notes and you
do not tender your old notes in the
exchange offer, then you will continue
to hold your old notes and will be
entitled to all the rights and subject
to all the limitations applicable to the
old notes in the indenture. All
untendered old notes will remain subject
to the restrictions on transfer provided
for in the old notes and in the
indenture. Generally, untendered old
notes will remain restricted securities
and may not be offered or sold, unless
registered under the Securities Act,
except pursuant to an exemption from, or
in a transaction not subject to, the
Securities Act and applicable state
securities laws. Other than in
connection with the exchange offer, we
do not currently anticipate that we will
register the old notes under the
Securities Act. The trading market for
old notes could be adversely affected if
some but not all of the old notes are
tendered and accepted in the exchange
offer.
8
Federal Income Tax The exchange of old notes for new notes in
Considerations................. the exchange offer will not be a taxable
event for U.S. federal income tax purposes.
See the caption "United States Federal
Income Tax Considerations" for a more
detailed description of the tax consequences
of the exchange.
Use of Proceeds................. We will not receive any cash proceeds from
the issuance of new notes pursuant to the
exchange offer.
Exchange Agent.................. The Bank of New York is the exchange agent
for the exchange offer. The address and
telephone number of the exchange agent are
set forth under the caption "The Exchange
Offer--Exchange Agent."
9
The New Notes
The new notes will evidence the same debt as the old notes and will be
governed by the same indenture under which the old notes were issued. The
summary below describes the principal terms of the new notes. The "Description
of the New Notes" section of this prospectus contains a more detailed
description of the terms and conditions of the new notes.
Issuer.................... The Manitowoc Company, Inc.
Securities Offered........ (Euro)175,000,000 principal amount of 10 3/8%
senior subordinated notes due 2011.
Maturity.................. May 15, 2011.
Interest Rate............. 10 3/8% per year (calculated using a 360-day year).
Interest Payment Dates.... Each May 15 and November 15, beginning on November
15, 2001. Interest will accrue from the issue date
of the new notes.
Ranking................... The new notes will:
. be our unsecured senior subordinated
obligations; and
. rank junior to all of our existing and
future senior debt, including borrowings
under our senior credit facility.
The guarantees by our subsidiaries will:
. be unsecured senior subordinated obligations
of each of those subsidiaries; and
. rank junior to all existing and future
senior debt of those subsidiaries, including
guarantees of borrowings under our senior
credit facility.
As of March 31, 2001, pro forma for the acquisition
of Potain and related financing transactions, we
estimate that we and our subsidiaries would have
had $411.4 million of senior debt, excluding
approximately $80.6 million that would have been
available to borrow under our senior credit
facility.
Guarantees................ All of our domestic subsidiaries will
unconditionally, jointly and severally, guarantee
the new notes.
If we create or acquire a new subsidiary that
guarantees any of our other debt, it will guarantee
the new notes unless we designate the subsidiary as
an "unrestricted subsidiary" under the indenture.
Optional Redemption....... We cannot redeem the new notes until May 15, 2006.
Thereafter we may redeem some or all of the notes
at the redemption prices listed in the "Description
of the New Notes" section under the heading
"Optional Redemption" plus accrued and unpaid
interest including additional interest, if any.
Optional Redemption After
Public Equity Offerings...
At any time, which may be more than once, before
the third anniversary of the issue date of the old
notes, we can choose to redeem up to 35% of the
outstanding notes with money that we raise in one
or more public equity offerings, as long as:
10
. we pay 110.375% of the face amount of the
new notes, plus accrued and unpaid interest
and additional interest, if any;
. we redeem the new notes within 90 days of
completing the public equity offering; and
. at least 65% of the aggregate principal
amount of notes issued remains outstanding
afterwards.
Change of Control Offer... If we undergo a change of control, we must give
holders of the new notes the opportunity to sell us
their new notes at 101% of the face amount, plus
accrued and unpaid interest and additional
interest, if any.
We may not be able to pay you the required price
for new notes you present to us at the time of a
change of control, because:
. we may not have enough funds at that time;
or
. the terms of our senior debt may prevent us
from paying.
Asset Sale Proceeds....... If we or our subsidiaries engage in asset sales, we
generally must either invest the net cash proceeds
from these sales in our business within a period of
time, prepay senior debt or make an offer to
purchase a principal amount of the new notes equal
to the excess net cash proceeds. The purchase price
of the new notes will be 100% of the face amount,
plus accrued and unpaid interest and additional
interest, if any.
Restrictive Covenants..... The indenture governing the new notes will contain
covenants limiting our and most or all of our
subsidiaries' ability to:
. incur additional debt or enter into sale and
leaseback transactions;
. pay dividends or distributions on our
capital stock or repurchase our capital
stock;
. issue stock of subsidiaries;
. make certain investments;
. create liens on our assets to secure debt;
. enter into transactions with affiliates;
. merge or consolidate with another company;
and
. transfer and sell assets.
These covenants are subject to a number of
important limitations and exceptions.
Absence of Market for the
New Notes.................
The new notes will be a new issue of securities
with no established trading market. We will apply
to list the new notes on the Luxembourg Stock
Exchange in accordance with its rules after the
completion of the exchange offer. However, we
cannot provide any assurance as to the development
or liquidity of any market for the new notes.
11
RISK FACTORS
Before you decide to exchange your old notes for new notes, you should
carefully consider the following factors in addition to the other information
contained in this prospectus.
Risks Related to the Exchange Offer and the New Notes
You may have difficulty selling the old notes that you do not exchange.
If you do not exchange your old notes for the new notes offered in this
exchange offer, then you will continue to be subject to the restrictions on the
transfer of your old notes. Those transfer restrictions are described in the
indenture governing the new notes and in the legend contained on the old notes,
and arose because we originally issued the old notes under exemptions from, and
in transactions not subject to, the registration requirements of the Securities
Act.
In general, you may offer or sell your old notes only if they are registered
under the Securities Act and applicable state securities laws, or if they are
offered and sold under an exemption from those requirements. We do not intend
to register the old notes under the Securities Act.
If a large number of old notes are exchanged for new notes issued in the
exchange offer, then it may be more difficult for you to sell your unexchanged
old notes. In addition, if you do not exchange your old notes in the exchange
offer, then you will no longer be entitled to have those notes registered under
the Securities Act.
See "The Exchange Offer--Consequences of Failing to Exchange Old Notes" for
a discussion of the possible consequences of failing to exchange your old
notes.
Our substantial leverage may impair our financial condition.
We currently have a substantial amount of debt. As of March 31, 2001, after
giving effect to the acquisition of Potain and related financing transactions,
including the issuance of the old notes, as if these transactions occurred on
March 31, 2001, our total consolidated debt would have been $566.1 million.
See "Capitalization" for additional information.
Our substantial debt could have important consequences to you, including:
. making it more difficult for us to satisfy our obligations with respect
to the new notes;
. increasing our vulnerability to general adverse economic and industry
conditions;
. requiring a substantial portion of our cash flow from operations be used
for the payment of interest on our debt, which will reduce our ability
to use our cash flow to fund working capital, capital expenditures,
acquisitions and general corporate requirements;
. limiting our ability to obtain additional financing to fund future
working capital, capital expenditures, acquisitions and general
corporate requirements;
. limiting our flexibility in planning for, or reacting to, changes in our
business and the industries in which we operate; and
. placing us at a competitive disadvantage to other less leveraged
competitors.
Subject to specified limitations, the indenture will permit us and our
subsidiaries to incur substantial additional debt. In addition, our new senior
credit facility will permit us and our subsidiaries to borrow up to an
additional $50.0 million, all of which borrowings would be senior to the new
notes. If new debt is added to our and our subsidiaries' current debt levels,
then the related risks that we and they now face could intensify. See
"Description of Indebtedness" for additional information.
12
Servicing our debt will require a significant amount of cash and our ability to
generate sufficient cash depends on many factors, some of which are beyond our
control.
Our ability to make payments on and refinance our debt and to fund planned
capital expenditures depends on our ability to generate cash flow in the
future. To some extent, this is subject to general economic, financial,
competitive, legislative and regulatory factors and other factors that are
beyond our control. In addition, our ability to borrow funds under our senior
credit facility in the future will depend on our meeting the financial
covenants contained in the credit agreement for our senior credit facility,
including a minimum consolidated interest coverage ratio test and maximum
consolidated senior and total leverage ratio tests. As of March 31, 2001, we
would have used $43.6 million of our new $125.0 million revolving credit
facility to effect the acquisition of Potain. The undrawn amount under our
revolving credit facility is available for general corporate purposes. As of
March 31, 2001, we also had outstanding letters of credit of $0.8 million and,
accordingly, after giving effect to the acquisition of Potain and related
financing transactions, including the issuance of the old notes, as if these
transactions occurred on March 31, 2001, approximately $80.6 million would
have been available for general corporate purposes under our revolving credit
facility. We cannot assure you that our business will generate cash flow from
operations or that future borrowings will be available to us under our senior
credit facility in an amount sufficient to enable us to pay our debt or to fund
other liquidity needs. As a result, we may need to refinance all or a portion
of our debt on or before maturity. Our senior credit facility matures in stages
between 2006 and 2007. We cannot assure you that we will be able to refinance
any of our debt on favorable terms, if at all. Any inability to generate
sufficient cash flow or refinance our debt on favorable terms could have a
material adverse effect on our financial condition.
Covenant restrictions under our senior credit facility and the indenture may
limit our ability to operate our business.
Our senior credit facility and the indenture governing the notes contain
covenants that may restrict our and the guarantors' ability to finance future
operations or capital needs or to engage in other business activities. Our
senior credit facility and the indenture restrict our ability and the ability
of our restricted subsidiaries to:
. borrow money, pay dividends or make distributions;
. purchase or redeem stock;
. make investments and extend credit;
. engage in transactions with affiliates;
. engage in sale-leaseback transactions;
. consummate certain asset sales;
. effect a consolidation or merger or sell, transfer, lease or otherwise
dispose of all or substantially all of our assets; and
. create liens on our assets.
In addition, our senior credit facility requires us to maintain specified
financial ratios and satisfy certain financial condition tests, which may
require that we take action to reduce our debt or to act in a manner contrary
to our business objectives. Events beyond our control, including changes in
general business and economic conditions, may affect our ability to meet those
financial ratios and financial condition tests. We cannot assure you that we
will meet those tests or that the lenders will waive any failure to meet those
tests. A breach of any of these covenants would result in a default under our
senior credit facility and any resulting acceleration under the senior credit
facility may result in a default under the indenture. If an event of default
under our senior credit facility occurs, the lenders could elect to declare all
amounts outstanding under the senior credit facility, together with accrued
interest, to be immediately due and payable. See the "Description of
Indebtedness" and "Description of the New Notes" for additional information.
13
Your right to receive payment on the notes and the guarantees is junior to all
of our and the guarantors' senior debt.
The new notes will be general unsecured obligations, junior in right of
payment to all of our and the guarantors' existing and future senior debt,
including obligations under our senior credit facility. The new notes will not
be secured by any of our or the guarantors' assets, and as such will be
effectively subordinated to any secured debt that we or the guarantors may have
now or may incur in the future to the extent of the value of the assets
securing that debt.
In the event that we or a guarantor are declared bankrupt, become insolvent
or are liquidated or reorganized, any debt that ranks senior to the notes and
the guarantees will be entitled to be paid in full from our assets or the
assets of the guarantor, as applicable, before any payment may be made with
respect to the notes or the affected guarantees. In any of the foregoing
events, we cannot assure you that we would have sufficient assets to pay
amounts due on the new notes. As a result, you may receive less,
proportionally, than the holders of debt senior to the new notes and the
guarantees of the new notes. The subordination provisions of the indenture also
provides that we can make no payment to you during the continuance of payment
defaults on our senior debt, and payments to you may be suspended for a period
of up to 180 days if a nonpayment default exists under our senior debt. The new
notes also will be effectively subordinated to debt of our restricted
subsidiaries that are not guarantors. See "Description of the New Notes--
Subordination" for additional information.
At March 31, 2001, after giving effect to the acquisition of Potain and
related financing transactions, including the issuance of the old notes, as if
these transactions occurred on March 31, 2001, the notes and the guarantees
would have ranked junior to $411.4 million of our and our subsidiaries' senior
debt and an additional $80.6 million of unused availability would have been
available to borrow under our senior credit facility. In addition, the
indenture and our senior credit facility will permit, subject to specified
limitations, the incurrence of additional debt, some or all of which may be
senior debt. See "Description of the New Notes--Certain Covenants" and
"Description of Indebtedness" for additional information.
If our subsidiaries do not make sufficient distributions to us, we will not be
able to make payment on our debt, including the new notes.
We are a holding company with no material operations and only limited
assets. Because a significant portion of our operations are conducted by our
subsidiaries, our cash flow and our ability to service indebtedness, including
our ability to pay the interest on and principal of the new notes, are
dependent to a large extent upon cash dividends and distributions or other
transfers from our subsidiaries. In addition, any payment of dividends,
distributions, loans or advances by our subsidiaries to us could be subject to
restrictions on dividends or repatriation of earnings under applicable local
law, monetary transfer restrictions and foreign currency exchange regulations
in the jurisdictions in which our subsidiaries operate, and any restrictions
imposed by the current and future debt instruments of our subsidiaries. These
payments to us by our subsidiaries are contingent upon our subsidiaries'
earnings.
Our subsidiaries are separate and distinct legal entities and, except for
the guarantors of the new notes, have no obligation, contingent or otherwise,
to pay any amounts due pursuant to the new notes or to make any funds available
therefor, whether by dividends, loans, distributions or other payments, and do
not guarantee the payment of interest on, or principal of, the new notes. Any
right that we have to receive any assets of any of our subsidiaries that are
not guarantors upon the liquidation or reorganization of any such subsidiary,
and the consequent right of holders of new notes to realize proceeds from the
sale of their assets, will be effectively subordinated to the claims of that
subsidiary creditors, including trade creditors and holders of debt issued by
the subsidiary.
The guarantees may not be enforceable because of fraudulent conveyance laws.
The incurrence of the guarantees by the guarantors may be subject to review
under U.S. federal bankruptcy law or relevant state fraudulent conveyance laws
if a bankruptcy case or lawsuit is commenced by or on behalf
14
of the guarantors' unpaid creditors. Under these laws, if in such a case or
lawsuit a court were to find that, at the time such guarantor incurred a
guarantee of the new notes such guarantor:
. incurred the guarantee of the new notes with the intent of hindering,
delaying or defrauding current or future creditors; or
. received less than reasonably equivalent value or fair consideration for
incurring the guarantee of the new notes and such guarantor:
. was insolvent or rendered insolvent;
. was engaged, or about to engage, in a business or transaction for
which its remaining assets constituted unreasonably small capital to
carry on its business; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay as these debts matured;
then such court could avoid the guarantee of such guarantor or subordinate the
amounts owing under the guarantee to the guarantor's presently existing or
future debt or take other actions detrimental to you.
It may be asserted that the guarantors incurred their guarantees for our
benefit and they incurred the obligations under the guarantees for less than
reasonably equivalent value or fair consideration.
The measure for insolvency for purposes of those considerations will vary
depending on the law of the jurisdiction that is being applied in any such
proceeding. Generally, a company would be considered insolvent if, at the time
it incurred the debt or issued the guarantee, either:
. the sum of its debts, including contingent liabilities, is greater than
its assets, at fair valuation, or
. the present fair saleable value of its assets is less than the amount
required to pay the probable liability on its total existing debts and
liabilities, including contingent liabilities, as they become absolute
and matured.
If a guarantee is avoided as a fraudulent conveyance or found to be
unenforceable for any other reason, you will not have a claim against that
obligor and will only be a creditor of ours and any guarantor whose obligation
was not set aside or found to be unenforceable.
No public market exists for the new notes, and any market for the new notes
may be illiquid.
The new notes are a new issue of securities with no established trading
market. We will apply to list the new notes on the Luxembourg Stock Exchange
in accordance with its rules upon completion of the exchange offer. The
initial purchaser for the old notes has informed us that it intends to make a
market in the notes. However, the initial purchaser is not obligated to do so,
and may cease market-making activities at any time. As a result, you cannot be
sure that an active trading market will develop for the new notes.
In addition, the liquidity of the trading market for the new notes, if any,
and the market price quoted for the new notes, may be adversely affected by
changes in the interest rates in the market for high yield securities and by
changes in our financial performance or prospects, or in the prospects of
companies in similar industries.
We may not have the ability to raise the funds necessary to finance the change
of control offer required by the indenture.
Upon a change of control, we are required to offer to repurchase all
outstanding new notes at 101% of the face amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase.
The source of funds for any such purchase of new notes will be our
available cash or cash generated from our subsidiaries' operations or other
sources, including borrowing, sales of assets or sales of equity. We cannot
15
assure you that sufficient funds will be available at the time of any change of
control to make any required repurchases of new notes tendered. In addition,
the terms of our senior credit facility limit our ability to repurchase your
new notes in those circumstances. Any of our future debt agreements may contain
similar restrictions and provisions. If the holders of the new notes exercise
their right to require us to repurchase all of the new notes upon a change of
control, the financial effect of this repurchase could cause a default under
our other debt, even if the change of control itself would not cause a default.
Accordingly, it is possible that we will not have sufficient funds at the time
of the change of control to make the required repurchase of notes or that
restrictions in our senior credit facility will not allow such repurchases. See
"Description of the New Notes--Change of Control" and "Description of
Indebtedness" for additional information.
Risks Related to Our Business
Some of our markets are cyclical and a decline in any of these markets could
have a material adverse effect on our operating performance.
Historically, sales of products we manufacture and sell have been subject to
cyclical variations caused by changes in general economic conditions. In
particular, our cranes segment is highly cyclical and is impacted by the
strength of the economy generally, interest rates and other factors that may
have an effect on the level of construction activity, either nationally or
regionally. During periods of expansion in construction activity, we generally
have benefited from increased demand for our products. Conversely, during
recessionary periods, we have been adversely affected by reduced demand for our
products. The U.S. construction industry is currently experiencing a downturn,
which is adversely affecting suppliers to the construction industry, including
our cranes segment. We cannot assure you that this downturn will not continue
or become more severe. In addition, the strength of economies generally may
affect the rates of expansion, renovation and equipment replacement within the
restaurant, lodging, convenience store and healthcare industries, which may
affect the performance of our foodservice equipment segment. Furthermore, an
economic recession may impact substantially leveraged companies, such as us,
more than competing companies with less leverage and may have a material
adverse effect on our financial condition, results of operations and ability to
service debt.
A substantial portion of our growth has come through acquisitions and we may
not be able to identify or complete future acquisitions, which could adversely
affect our future growth.
Our growth strategy is based in part upon acquisitions. We may not be able
to identify and successfully negotiate suitable acquisitions, obtain financing
for future acquisitions on satisfactory terms or otherwise complete
acquisitions in the future. If we complete any future acquisitions, then we may
not be able to successfully integrate the acquired businesses or operate them
profitably or accomplish our strategic objectives as a result of those
acquisitions. Our level of indebtedness may increase in the future if we
finance acquisitions with debt, which would cause us to incur additional
interest expense and could increase our vulnerability to general adverse
economic and industry conditions and limit our ability to service our debt or
obtain additional financing. We cannot assure you that future acquisitions will
not have a material adverse effect on our financial condition, results of
operations and debt service capability.
Our future success depends on our ability to effectively integrate acquired
companies and manage our growth.
Our growth has placed, and will continue to place, significant demands on
our management and operational and financial resources. With the completion of
the acquisition of Potain, we have completed ten acquisitions since January 1,
1998, and our number of employees has increased from approximately 3,000 to
5,440 since January 1, 1998. Realization of the benefits of our acquisition of
Potain and any future acquisitions will require integration of the acquired
companies' sales and marketing, distribution, manufacturing, engineering,
finance and administrative organizations. The successful integration of these
companies will require substantial attention from our senior management and the
management of the acquired companies, which will decrease the time they have to
service and attract customers and develop new products and services.
16
We cannot assure you that we will be able to integrate successfully Potain or
any future acquisitions, that these acquired companies will operate profitably
or that the beneficial effect from these acquisitions will be obtained. Our
financial condition, results of operations and debt service capabilities could
be materially and adversely affected if we do not successfully integrate Potain
or any future companies we may acquire or if we do not manage our growth
effectively.
Because we participate in industries that are intensely competitive, our
revenues could decline as we respond to competition.
We sell all of our products in highly competitive industries. We compete in
each of our industries based on product design, quality of products and
services, product performance, maintenance costs and price. Several of our
competitors have greater financial, marketing, manufacturing and distribution
resources than us. We cannot assure you that our products and services will
continue to compete successfully with those of our competitors or that we will
be able to retain our customer base or improve or maintain our profit margins
on sales to our customers, all of which could materially and adversely affect
our financial condition, results of operations and debt service capability.
Price increases in some materials and sources of supply could affect our
profitability.
We use large amounts of steel, stainless steel, aluminum, copper and
electronic controls in the manufacture of our products. Recently, the prices of
some of these materials have increased significantly. For example, the base
price of stainless steel has increased on three occasions since July 1999.
There have also been several changes in the surcharge base levels of nickel and
chrome. These changes have the effect of increasing our overall price for
stainless steel, a significant raw material for our foodservice segment. If we
are not able to pass future raw material price increases on to our customers,
our margins could be adversely affected.
We increasingly manufacture and sell our products outside of the United States,
which may present additional risks to our business.
For the year ended December 31, 2000, on a pro forma basis, approximately
29% of our net sales were attributable to products sold outside of the United
States, and expanding international sales is part of our growth strategy. With
the acquisition of Potain, we have over 2,300 employees and eight manufacturing
facilities located in Europe and Asia. International operations generally are
subject to various risks, including political, religious and economic
instability, local labor market conditions, the imposition of foreign tariffs
and other trade business, the impact of foreign government regulations and the
effects of income and withholding tax, governmental expropriation and
differences in business practices. We may incur increased costs and experience
delays or disruptions in product deliveries and payments in connection with
international manufacturing and sales that could cause loss of revenue.
Unfavorable changes in the political, regulatory and business climate and
currency devaluations could have a material adverse effect on our financial
condition, results of operations and debt service capability.
We depend on our key personnel and the loss of these personnel could have an
adverse affect on our business.
Our success depends to a larger extent upon the continued services of our
key executives, managers and skilled personnel. Generally, our employees are
not bound by employment or non-competition agreements, and we cannot assure you
that we will retain our key officers and employees. We could be seriously
harmed by the loss of key personnel.
Our failure to protect our intellectual property rights or maintain our rights
to use licensed intellectual property could adversely affect our business.
Our patents, trademarks and licenses are important in the operation of our
business. Although we intend to protect our intellectual property rights
vigorously, we cannot assure you that we will be successful in doing so.
17
Third parties may assert or prosecute infringement claims against us in
connection with the services and products we offer, and we may or may not be
able to successfully defend these claims. Litigation, either to enforce our
intellectual property rights or to defend us against claimed infringement of
the rights of others, could result in substantial costs to us and in a
diversion of our resources. In addition, if a third party made a valid claim,
then we would likely need to obtain a license from the third party on
commercial terms, which would likely increase our costs. Our failure to
maintain or obtain necessary licenses or an adverse outcome in any litigation
relating to patent infringement or other intellectual property matters could
have a material adverse effect on our financial condition, results of
operations and debt service capability.
Our results of operations may be negatively impacted by product liability
lawsuits.
Our businesses expose us to potential product liability risks that are
inherent in the design, manufacture and sale of our products. While we
currently maintain what we believe to be suitable product liability insurance,
we cannot assure you that we will be able to maintain this insurance on
acceptable terms or that this insurance will provide adequate protection
against potential liabilities. In addition, we self-insure a portion of product
liability claims. A successful claim against us could materially and adversely
affect our reputation and our financial condition, results of operations and
debt service capability.
Compliance with environmental laws and clean-up of environmental contamination
could be costly.
Our activities are subject to a wide range of supranational (e.g., European
Union), national, provincial, state and local environmental laws and
regulations in each jurisdiction in which we operate. These laws regulate,
among other things:
. air emissions;
. wastewater discharges;
. the generation, storage, treatment, transportation and disposal of
hazardous materials;
. the investigation and remediation of soil and groundwater contamination
associated with the use and disposal of hazardous materials; and
. in some circumstances, the condition of industrial property prior to
transfer or sale.
These environmental laws and regulations are constantly changing, as are the
priorities of those who enforce them.
We have incurred, and will continue to incur, costs for compliance with, and
liability under, environmental laws and regulations. Although we believe that
we are currently in substantial compliance with those laws and regulations,
future regulatory changes, government enforcement initiatives, identification
of currently unknown non-compliance, or new or modified projects could cause us
or our subsidiaries to incur additional liabilities, compliance costs or
penalties, which could be material.
In addition to environmental laws and regulations that regulate our
operations, we are also subject to environmental laws and regulations that
create liability and clean-up responsibility for spills, disposals or other
releases of hazardous materials into the environment. We use and generate
hazardous materials and wastes in our operations. At our facilities in the
U.S., France and elsewhere, we may be subject to substantial claims brought by
regulators or private individuals. Environmental laws and regulations may
impose liability, without regard to fault or legality of the original conduct,
on classes of persons that are considered to have contributed to the release of
hazardous materials into the environment. These persons can include the owner
or operator of the disposal site or the site where the release occurred and
companies that disposed of or arranged for the disposal of the hazardous
materials at the site where the release occurred. Under these laws and
regulations, including those in the U.S., these persons can be subject to joint
and several liability for the costs of cleaning up the hazardous materials that
have been released into the environment and for damages to natural resources,
and it is not uncommon for neighboring landowners and other third parties to
file claims for personal injury and property damage allegedly caused by the
hazardous materials released into the environment. These laws and
18
regulations, including those in the U.S., such as the U.S. Comprehensive
Environmental Response, Compensation and Liability Act, or CERCLA, can impose
the entire cost of site remediation upon a company that releases waste at a
disposal site, regardless of fault. As a practical matter, however, costs
generally are shared with other potentially responsible parties, based on each
potentially responsible party's relative contribution to the problem. At
certain of our facilities, we have identified potential contaminants in soil
and ground water but, based on available information, we do not expect the cost
to address them to be substantial.
We have been identified as a potentially responsible party under CERCLA in
connection with the Lemberger Landfill Superfund Site near Manitowoc,
Wisconsin. Based on the relative size of our contribution to this site, the
existence of other viable potentially responsible parties and current reserves,
we do not believe that any liability imposed in connection with this site will
have a material adverse effect on our financial condition, results of
operations or debt service capability.
Environmental laws and regulations also govern the presence, maintenance and
removal of asbestos-containing building materials, or ACBM. Such laws may
impose fines and penalties on building owners or operators for failure to
comply with these requirements and may allow third parties to seek recovery
from owners or operators for personal injury associated with exposure to
asbestos fibers. Some of our facilities and/or products may contain ACBM.
Stricter enforcement of existing environmental laws and regulations, new
environmental laws and regulations, discovery of previously unknown
contamination or imposition of new or increased requirements could require us
to incur costs or could become the basis of new or increased liabilities that
could have a material adverse effect on financial condition, results of
operations or debt service capability.
The adoption of the euro may lower our profits.
On January 1, 1999, eleven member countries of the European Union adopted
the euro, fixing translation rates between those countries' existing national
currencies and the euro. Until January 1, 2002, either the euro or a
participating country's national currency will be accepted as legal currency.
Beginning on January 1, 2002, only euro-denominated bills and coins will be
issued, and national currencies will be withdrawn from circulation. The use of
a common currency throughout Europe may permit the prices of our products to be
more readily compared. This may lead to uniform pricing of our products in
countries in the European Union. Uniform pricing may adversely affect our
profits. To date, the adoption of the euro has not been a factor in any of our
pricing practices and has not adversely affected our profits.
We are exposed to the risk of foreign currency fluctuations.
Some of our operations are or will be conducted by subsidiaries in foreign
countries. The results of the operations and the financial position of these
subsidiaries will be reported in the relevant foreign currencies and then
translated into U.S. dollars at the applicable exchange rates for inclusion in
our consolidated financial statements which are stated in U.S. dollars. The
exchange rates between many of these currencies and the U.S. dollar have
fluctuated significantly in recent years and may fluctuate significantly in the
future. Such fluctuations may have a material effect on our results of
operations and financial position and may significantly affect the
comparability of our results between financial periods.
In addition, we will incur currency transaction risk whenever one of our
operating subsidiaries enters into a transaction using a different currency
than its functional currency. We will attempt to reduce currency transaction
risk whenever one of our operating subsidiaries enters into a transaction using
a different currency than its functional currency. We will attempt to reduce
currency transaction risk by:
. matching cash flows and payments in the same currency;
. direct foreign currency borrowing; and
. entering into foreign exchange contracts for hedging purposes.
19
However, we may not be able to hedge this risk completely or at an
acceptable cost, which may adversely affect our results of operations and
financial condition.
Principal and interest on the new notes will be payable in euros. Our
ability to pay interest and principal on the new notes when due is in part
dependent on the then current exchange rates between euros, on the one hand,
and the U.S. dollar and other European currencies, as well as U.S. and other
national currencies that our sales are denominated in, on the other hand, which
rates are and will be subject to fluctuation. We cannot assure you that
exchange rate fluctuations will not have a material adverse effect on our
results of operations and financial condition and therefore on our ability to
make principal and interest payments on our debt, including the new notes, when
due.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical facts included in this
prospectus, including statements regarding our future financial position,
business strategy, budgets, projected costs and plans and objectives for future
operations included in the sections "Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements generally
can be identified by the use of forward-looking words such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "believe," or "continue" or words
of similar meaning. These statements are subject to risks and uncertainties
that could cause actual results to differ materially from those anticipated as
of the date of this prospectus. Factors that could cause such a variance are
disclosed in the section "Risk Factors" and elsewhere in this prospectus and
include the following:
. We have a significant amount of debt, which could restrict our future
operating and strategic flexibility and expose us to the risks of
financial leverage.
. Our ability to meet our debt service obligations on the notes and our
other debt will depend on our future performance, which will be subject
to many factors that are beyond our control.
. Some of our markets are cyclical and a decline in these markets could
have a material adverse effect on our operating performance.
. We may not be able to effectively integrate acquired companies or manage
our growth.
. We are subject to risks of competition from other companies that operate
in our industries.
We urge you to consider these factors and to review carefully the section
"Risk Factors" for a more complete discussion of the risks of an investment in
the notes. The forward-looking statements included in this prospectus are made
only as of the date of this prospectus, and we undertake no obligation to
publicly update these statements to reflect subsequent events or circumstances.
20
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
When we issued the old notes on May 9, 2001, we entered into a registration
rights agreement with the initial purchaser of the old notes. A copy of the
registration rights agreement is filed as an exhibit to the registration
statement of which this prospectus is a part. Under the registration rights
agreement, we agreed to:
. file and cause to become effective a registration statement with respect
to an offer to exchange the old notes for new notes that have been
registered under the Securities Act; or
. file and cause to become effective a shelf registration statement with
respect to the resale of the old notes.
If we complete the exchange offer within 180 days after the issuance of the
old notes, then we will satisfy those requirements under the registration
rights agreements. If we do not complete the exchange offer within 180 days of
the issuance of the old notes and a shelf registration statement has not been
declared effective, then we will be required to pay liquidated damages to the
holders of the old notes.
Terms of the Exchange Offer
As of the date of this prospectus, (Euro)175.0 million aggregate principal
amount of the old notes are outstanding. This prospectus and the accompanying
letter of transmittal together constitute the exchange offer. This prospectus
and the letter of transmittal are being sent to all registered holders of old
notes. There will be no fixed record date for determining registered holders of
old notes entitled to participate in the exchange offer.
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept for exchange any old notes
properly tendered and not withdrawn before expiration of the exchange offer. We
will issue (Euro)1,000 principal amount of new notes in exchange for each
(Euro)1,000 principal amount of old notes surrendered under the exchange offer.
Old notes may be tendered only in integral multiples of (Euro)1,000. The
exchange offer is not conditioned upon any minimum aggregate principal amount
of old notes being tendered for exchange.
The form and terms of the new notes will be substantially identical to the
form and terms of the old notes, except that the new notes:
. will be registered under the Securities Act;
. will not bear legends restricting their transfer under the Securities
Act; and
. Will not contain the registration rights and liquidated damages
provisions contained in the old notes.
The new notes will evidence the same debt as the old notes. The new notes
will be issued under and entitled to the benefits of the same indenture that
authorized the issuance of the old notes. For a description of the indenture,
see the caption "Description of the New Notes."
In connection with the exchange offer, holders of notes do not have any
appraisal or dissenters' rights under applicable law or the Indenture. We
intend to conduct the exchange offer in accordance with the applicable
requirements of the Securities Act, the Securities Exchange Act of 1934 and the
rules and regulations of the Securities and Exchange Commission, or SEC. The
exchange offer is not being made to, nor will we accept tenders for exchange
from, holders of old notes in any jurisdiction in which the exchange offer or
the acceptance of it would not be in compliance with the securities or blue sky
laws of the jurisdiction.
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old
21
notes. We will pay all charges and expenses, other than applicable taxes
described below, in connection with the exchange offer. It is important that
you read the caption "--Fees and Expenses" for more details regarding fees and
expenses incurred in the exchange offer.
Expiration of the Exchange Offer; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., London time, on September 7,
2001. We can extend the exchange offer in our sole discretion, in which case
the term "expiration date" shall mean the latest date and time to which we
extend the exchange offer.
We will notify the exchange agent orally, confirmed in writing, or in
writing, of any extension of the exchange offer. We will notify the registered
holders of old notes by public announcement of the extension no later than 5:00
p.m., London time, on the business day after the previously scheduled
expiration of the exchange offer.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the exchange offer, we will have no obligation to publish, advertise, or
otherwise communicate any public announcement, other than by making a timely
release to a financial news service.
Conditions to the Exchange Offer
Despite any other term of the exchange offer, we will not be required to
accept for exchange any old notes or to issue new notes in the exchange offer.
We may terminate or amend the exchange offer as provided in this prospectus
before accepting any old notes for exchange if in our reasonable judgment:
. the new notes to be received will not be tradable by the holder, without
restriction under the Securities Act and the Exchange Act and without
material restrictions under the blue sky or securities laws of
substantially all of the states of the United States;
. the exchange offer, or the making of any exchange by a holder of old
notes, would violate applicable law or any applicable interpretation of
the staff of the SEC; or
. any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that would reasonably be expected to impair our ability to proceed
with the exchange offer.
We will not be obligated to accept for exchange the old notes of any holder
that has not made to us:
. the representations described under the captions, "--Procedures for
Tendering" and "Plan of Distribution;" and
. any other representations that may be reasonably necessary under
applicable SEC rules, regulations or interpretations to make available
to us an appropriate form for registration of the new notes under the
Securities Act.
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we
may delay acceptance of any old notes by giving oral or written notice of an
extension to their holders. During an extension, all old notes previously
tendered will remain subject to the exchange offer, and we may accept them for
exchange.
We expressly reserve the right to amend or terminate the exchange offer and
to reject for exchange any old notes not previously accepted for exchange, upon
the occurrence of any of the conditions of the exchange offer specified above.
By public announcement we will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the old notes as
promptly as practicable. If we amend the exchange offer in a manner that we
consider material, we will disclose the amendment by means of a prospectus
supplement.
22
These conditions are solely for our benefit and we may assert them
regardless of the circumstances that may give rise to them or waive them in
whole or in part at any time or at various times in our sole discretion. If we
fail at any time to exercise any of the foregoing rights, this failure will not
constitute a waiver of that right. Each of these rights will be deemed an
ongoing right that we may assert at any time or at various times.
We will not accept for exchange any old notes tendered, and will not issue
new notes in exchange for any old notes, if at that time a stop order is
threatened or in effect with respect to the registration statement of which
this prospectus constitutes a part or the qualification of the indentures under
the Trust Indenture Act of 1939.
Procedures for Tendering
We have forwarded to you, along with this prospectus, a letter of
transmittal relating to this exchange offer. Because all the old notes are held
in book-entry accounts maintained by the exchange agent at Euroclear Bank
S.A./N.V., or Euroclear, or Clearstream Banking, societe anonyme, Luxembourg,
or Clearstream Luxembourg, a holder need not submit a letter of transmittal if
the holder tenders old notes in accordance with the procedures mandated
Euroclear or Clearstream Luxembourg, as the case may be. To tender old notes
without submitting a letter of transmittal, the electronic instructions sent to
Euroclear or Clearstream Luxembourg and transmitted to the exchange agent must
contain your acknowledgment of receipt of and your agreement to be bound by and
to make all of the representations contained in the letter of transmittal. In
all other cases, a letter of transmittal must be manually executed and
delivered as described in this prospectus.
To tender in the exchange offer, a holder must comply with the procedures of
Euroclear or Clearstream Luxembourg, as applicable, and either:
. complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter is transmittal so requires; and deliver the
letter of transmittal or facsimile to the exchange agent prior to the
expiration date; or
. in lieu of delivering a letter of transmittal, instruct Euroclear or
Clearstream Luxembourg, as the case may be, to transmit on behalf of the
holder an agent's message to the exchange agent, which agent's message
must be received by the exchange agent prior to 5:00 p.m., London time,
on the expiration date.
In addition, either:
. the exchange agent must receive the certificates for the old notes along
with the letter of transmittal; or
. the exchange agent must receive, before the expiration date, timely
confirmation of the book-entry transfer of the old notes being tendered
into the exchange agent's account at Euroclear or Clearstream Luxembourg
according to the procedure for book-entry described below, along with
the letter of transmittal or an agent's message.
The term "agent's message" means a message, transmitted by Euroclear or
Clearstream Luxembourg and received by the exchange agent, which states that
Euroclear or Clearstream Luxembourg has received an express acknowledgment from
a participant tendering old notes that the participant has received and agrees
to be bound by the terms of the letter of transmittal, and that we may enforce
that agreement against the participant.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under the caption "--Exchange Agent" before expiration
of the exchange offer. To receive confirmation of valid tender of old notes, a
holder should contact the exchange agent at the telephone number listed under
the caption "--Exchange Agent."
The tender by a holder that is not withdrawn before expiration of the
exchange offer will constitute an agreement between that holder and us in
accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal. Only a registered holder of old
notes may tender the old notes in
23
the exchange offer. If a holder completing a letter of transmittal tenders less
than all of the old notes held by that holder, then that tendering holder
should fill in the applicable box of the letter of transmittal. The amount of
old notes delivered to the exchange agent will be deemed to have been tendered
unless otherwise indicated.
If old notes, the letter of transmittal or any other required documents are
physically delivered to the exchange agent, the method of delivery is at the
holder's election and risk. Rather than mail these items, we recommend that
holders use an overnight or hand delivery service. In all cases, holders should
allow sufficient time to assure delivery to the exchange agent before
expiration of the exchange offer. Holders should not send the letter of
transmittal or old notes to us. Holders may request their respective brokers,
dealers, commercial banks, trust companies or other nominees to effect the
above transactions for them.
Any beneficial owner whose old notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct it to tender
on the owner's behalf. If the beneficial owner wishes to tender on its own
behalf, then it must, prior to completing and executing the letter of
transmittal and delivering its old notes, either:
. make appropriate arrangements to register ownership of the old notes in
the owner's name; or
. obtain a properly completed bond power from the registered holder of old
notes.
The transfer of registered ownership may take considerable time and may not be
completed prior to the expiration date.
If the applicable letter of transmittal is signed by the record holder(s) of
the old notes tendered, then the signature must correspond with the name(s)
written on the face of the old note without alteration, enlargement or any
change whatsoever. If the applicable letter of transmittal is signed by a
participant in Euroclear or Clearstream Luxembourg, as applicable, then the
signature must correspond with the name as it appears on the security position
listing as the holder of the old notes.
Except as set forth below, a signature on a letter of transmittal or a
notice of withdrawal must be guaranteed by an eligible guarantor institution.
Eligible guarantor institutions include banks, brokers, dealers, municipal
securities dealers, municipal securities brokers, government securities
dealers, government securities brokers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. The signature need not be guaranteed by an eligible guarantor
institution if the old notes are tendered:
. by a registered holder of old notes who has not completed the box
entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the letter of transmittal; or
. for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the registered
holder of any old notes, then the old notes must be endorsed or accompanied by
a properly completed bond power. The bond power must be signed by the
registered holder as the registered holder's name appears on the old notes and
an eligible institution must guarantee the signature on the bond power.
If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, then
these persons should so indicate when signing. Unless we waive this
requirement, they should also submit evidence satisfactory to us of their
authority to deliver the letter of transmittal.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, acceptance and withdrawal of
tendered old notes. Our determination will be final and binding. We reserve the
absolute right to reject any old notes not properly tendered or any old notes
the acceptance of which would, in the opinion of our counsel, be unlawful. We
also reserve the right to waive any defects, irregularities or conditions of
tender as to particular old notes. Our interpretation of the terms and
conditions of the exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties.
24
Unless waived, holders of old notes must cure any defects or irregularities
in connection with tenders of old notes within the time that we determine.
Although we intend to notify holders of defects or irregularities with respect
to tenders of old notes, neither we, the exchange agent nor any other person
will incur any liability for failure to give notification. Tenders of old notes
will not be deemed made until those defects or irregularities have been cured
or waived. Any old notes received by the exchange agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the exchange agent without cost to the tendering
holder, unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.
By signing the letter of transmittal, or causing Euroclear or Clearstream
Luxembourg, as applicable, to transmit an agent's message to the exchange
agent, each tendering holder of old notes will represent to us that, among
other things:
. any new notes that the holder receives will be acquired in the ordinary
course of its business;
. the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the new notes;
. if the holder is not a broker-dealer, that it is not engaged in and does
not intend to engage in the distribution of the new notes;
. if the holder is a broker-dealer that will receive new notes for its own
account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities, that it will
deliver a prospectus, as required by law, in connection with any resale
of those new notes (see the caption "Plan of Distribution"); and
. the holder is not our "affiliate," as defined in Rule 405 of the
Securities Act, or, if the holder is our affiliate, it will comply with
any applicable registration and prospectus delivery requirements of the
Securities Act.
If any holder or any such other person is our "affiliate," or is engaged in
or intends to engage in or has an arrangement or understanding with any person
to participate in a distribution of the new notes to be acquired in the
exchange offer, then that holder or any such other person:
. may not rely on the applicable interpretations of the staff of the SEC;
. is not entitled and will not be permitted to tender old notes in the
exchange offer; and
. must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction.
Each broker-dealer who acquired its old notes as a result of market-making
activities or other trading activities and thereafter receives new notes issued
for its own account in the exchange offer, must acknowledge that it will
deliver a prospectus in connection with any resale of such new notes issued in
the exchange offer. The letter of transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. See "Plan
of Distribution" for a discussion of the exchange and resale obligations of
broker-dealers in connection with the exchange offer.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all old notes properly
tendered and will issue the new notes registered under the Securities Act. For
purposes of the exchange offer, we shall be deemed to have accepted properly
tendered old notes for exchange when, as and if we have given oral or written
notice to the exchange agent, with written confirmation of any oral notice to
be given promptly thereafter. See "--Conditions to the Exchange Offer" for a
discussion of the conditions that must be satisfied before we accept any old
notes for exchange.
25
For each old note accepted for exchange, the holder will receive a new note
registered under the Securities Act having a principal amount equal to, and in
the denomination of, that of the surrendered old note. Accordingly, registered
holders of new notes on the relevant record date for the first interest payment
date following the consummation of the exchange offer will receive interest
accruing from the most recent date to which interest has been paid or, if no
interest has been paid on the old notes, from the date of issuance of the old
notes. Old notes that we accept for exchange will cease to accrue interest from
and after the date of consummation of the exchange offer. Under the
registration rights agreement, we may be required to make additional payments
in the form of liquidated damages to the holders of the old notes under
circumstances relating to the timing of exchange offer.
In all cases, we will issue new notes for old notes that we have accepted
for exchange under the exchange offer only after the exchange agent timely
received:
. the certificates representing the old notes, or a timely confirmation
from Euroclear or Clearstream Luxembourg of book-entry transfer of the
old notes into the exchange agent's account; and
. a properly completed and duly executed letter of transmittal, or in the
case of a book-entry tender, a properly transmitted agent's message; and
. all other required documents.
Book-Entry Transfer
The exchange agent has advised us that it will establish an account with
respect to the old notes at Euroclear and Clearstream Luxembourg as book-entry
transfer facilities, for purposes of the exchange offer within two business
days after the date of this prospectus. Any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of old notes by causing the book-entry transfer facility to transfer
the old notes into the exchange agent's account at the facility in accordance
with the facility's procedures for transfer. However, although delivery of old
notes may be effected through book-entry transfer at the facility, a properly
completed and duly executed letter of transmittal or an agent's message, and
any other required documents, must nonetheless be transmitted to, and received
by, the exchange agent at the address set forth below under "--Exchange Agent"
prior to the expiration date.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, holders of old notes may
withdraw their tenders at any time before expiration of the exchange offer.
For a withdrawal to be effective, the exchange agent must receive a notice
of withdrawal transmitted by Euroclear or Clearstream Luxembourg on behalf of
the holder in accordance with the standard operating procedures of Euroclear or
Clearstream Luxembourg, or a written notice of withdrawal, which may be by
telegram, telex, facsimile transmission or letter, at one of the addresses set
forth below under the caption "--Exchange Agent".
Any notice of withdrawal must:
. specify the name of the person who tendered the old notes to be
withdrawn;
. identify the old notes to be withdrawn, including the principal amount
of the old notes to be withdrawn; and
. where certificates for old notes have been transmitted, specify the name
in which the old notes were registered, if different from that of the
withdrawing holder.
26
If certificates for old notes have been delivered or otherwise identified to
the exchange agent, then, prior to the release of those certificates, the
withdrawing holder must also submit:
. the serial numbers of the particular certificates to be withdrawn; and
. a signed notice of withdrawal with signatures guaranteed by an eligible
institution, unless the withdrawing holder is an eligible institution.
If old notes have been tendered pursuant to the procedure for book-entry
transfer or the blocking procedures described above, any notice of withdrawal
must specify the name and number of the account at Euroclear or Clearstream
Luxembourg, as applicable, to be credited with the withdrawn old notes and
otherwise comply with the procedures of the facility.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of notices of withdrawal, and our determination
shall be final and binding on all parties. We will deem any old notes so
withdrawn not to have been validly tendered for exchange for purposes of the
exchange offer. We will return any old notes that have been tendered for
exchange but that are not exchanged for any reason to their holder without cost
to the holder. You may retender properly withdrawn old notes by following one
of the procedures described under the caption "--Procedures for Tendering"
above at any time on or before expiration of the exchange offer.
Exchange Agent
The Bank of New York has been appointed as exchange agent for the exchange
offer. All executed letters of transmittal should be delivered to our exchange
agent at the address set forth below. You should direct questions and requests
for assistance, requests for additional copies of this prospectus or of the
letter of transmittal to the exchange agent addressed as follows:
By Registered Mail, Hand Delivery or Overnight Courier:
The Bank of New York
Lower Ground Floor
30 Cannon Street
London
EC4M 6XH
Attn: Julie McCarthy
For Information, Call:
011 44 (207) 964-6513 or
011 44 (207) 964-7235
By Facsimile Transmission:
(for Eligible Institutions Only)
011 44 (207) 964-6369 or
011 44 (207) 964-7294
Confirm by Telephone:
011 44 (207) 964-7235
Delivery of the letter of transmittal to an address other than as shown
above or transmission of the letter of transmittal via facsimile other than as
set forth above does not constitute a valid delivery of the letter of
transmittal.
Fees and Expenses
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the
27
exchange agent reasonable and customary fees for its services and reimburse it
for its related reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the exchange
offer, including the following:
. SEC registration fees;
. fees and expenses of the exchange agent and trustee;
. our accounting and legal fees; and
. our printing and mailing costs.
Transfer Taxes
We will pay all transfer taxes, if any, applicable to the exchange of old
notes under the exchange offer. A tendering holder of old notes, however, will
be required to pay any transfer taxes, whether imposed on the registered holder
or any other person, if:
. certificates representing old notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of old notes
tendered;
. new notes are to be delivered to, or issued in the name of, any person
other than the registered holder of the old notes;
. tendered old notes are registered in the name of any person other than
the person signing the letter of transmittal; or
. a transfer tax is imposed for any reason other than the exchange of old
notes under the exchange offer.
If satisfactory evidence of payment of transfer taxes is not submitted with
the letter of transmittal, then the amount of any transfer taxes will be billed
to the tendering holder.
Accounting Treatment
We will record the new notes in our accounting records at the same carrying
value as the old notes, which is the aggregate principal amount, as reflected
in our accounting records on the date of exchange. Accordingly, we will not
recognize any gain or loss for accounting purposes in connection with the
exchange offer. We will record the expenses of the exchange offer as incurred.
Resale of New Notes
Based on interpretations of the staff of the SEC, as set forth in no-action
letters to third parties, we believe that new notes issued under the exchange
offer in exchange for old notes may be offered for resale, resold and otherwise
transferred by any old note holder without further registration under the
Securities Act and without delivery of a prospectus that satisfies the
requirements of Section 10 of the Securities Act if:
. the holder is not our "affiliate" within the meaning of Rule 405 under
the Securities Act;
. the new notes are acquired in the ordinary course of the holder's
business; and
. the holder does not intend to participate in a distribution of the new
notes.
Any holder who exchanges old notes in the exchange offer with the intention
of participating in any manner in a distribution of the new notes must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction.
28
This prospectus may be used for an offer to resell, resale or other
retransfer of new notes. With regard to broker-dealers, only broker-dealers
that acquired the old notes as a result of market-making activities or other
trading activities may participate in the exchange offer. Each broker-dealer
that receives new notes for its own account in exchange for old notes, where
the old notes were acquired by the broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of the new notes. Please read the
caption "Plan of Distribution" for more details regarding the transfer of new
notes.
Consequences of Failing to Exchange Old Notes
Holders who desire to tender their old notes in exchange for new notes
registered under the Securities Act should allow sufficient time to ensure
timely delivery. Neither we nor the exchange agent is under any duty to give
notification of defects or irregularities with respect to the tenders of old
notes for exchange.
Old notes that are not tendered or are tendered but not accepted will,
following the consummation of the exchange offer, continue to be subject to the
provisions in the indenture regarding the transfer and exchange of the old
notes and the existing restrictions on transfer set forth in the legend on the
old notes and in the offering memorandum dated May 4, 2001, relating to the old
notes. Except in limited circumstances with respect to the specific types of
holders of old notes, we will have no further obligation to provide for the
registration under the Securities Act of such old notes. In general, old notes,
unless registered under the Securities Act, may not be offered or sold except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. We do not anticipate that
we will take any action to register the untendered old notes under the
Securities Act or under any state securities laws.
Upon completion of the exchange offer, holders of the old notes will not be
entitled to any further registration rights under the registration rights
agreement, except under limited circumstances.
Old notes that are not exchanged in the exchange offer will remain
outstanding and continue to accrue interest and will be entitled to the rights
and benefits their holders have under the indenture relating to the old notes
and the new notes. Holders of the new notes and any old notes that remain
outstanding after consummation of the exchange offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage of the class have taken certain actions or exercised certain rights
under the indenture.
29
THE TRANSACTIONS
The Acquisition
On March 4, 2001, we submitted a binding offer to acquire from Legris
Industries SA all of the outstanding capital stock of Potain for aggregate cash
consideration of approximately FRF 2.3 billion (approximately U.S. $307.1
million), subject to a post-closing adjustment to reflect Potain's net income
for the period from January 1, 2001 through the closing of the acquisition. On
May 9, 2001, we and Legris entered into a share purchase agreement and
simultaneously closed the acquisition. Concurrently with the closing of the
acquisition, we issued the old notes, established a new senior credit facility
and applied the net proceeds from the issuance of the old notes and the new
senior credit facility to consummate the Potain acquisition, refinance our
existing indebtedness and pay fees and expenses arising out of the acquisition
and related financing transactions.
The share purchase agreement contains what we believe to be customary
representations and warranties from Legris Industries with respect to Potain
and the stock of Potain. Legris has agreed to indemnify Potain and us for any
loss resulting from:
. any breach of any representation and warranty made by Legris in the
share purchase agreement; and
. the failure of Legris to comply with its covenants set forth in the
share purchase agreement.
Legris' obligation to provide indemnification for a breaches of representations
and warranties as described above is generally limited to only losses in excess
of FRF 30.0 million (approximately U.S. $4.0 million) in the aggregate and less
than FRF 430.0 million (approximately U.S. $58.0 million) in the aggregate. The
indemnification obligations of Legris generally expire sixteen months after the
closing, subject to a longer period for tax matters, issues relating to Legris'
ownership of the stock of Potain and selected other matters.
Legris has also agreed to indemnify Potain and us for the remediation of
environmental matters relating to Potain. We have agreed to share in the costs
of any necessary environmental remediation up to an aggregate limit of FRF 10
million (approximately U.S. $1.4 million). Legris' obligation to provide
indemnity for environmental matters extends for a three-year period after
closing and is limited to a cap of FRF 100.0 million (approximately U.S. $13.5
million). This cap, which is part of the overall FRF 430.0 million
(approximately U.S. $58.0 million), may be increased depending on the results
of an environmental investigation that we will have completed prior to closing
of the acquisition.
On April 27, 2001, a former stockholder of Potain, who sold her shares in
1988 and 1989, commenced a summary proceeding against Legris in French court
potentially seeking rescission of the sales of the former stockholder's stock
of Potain. The former stockholder also previously asserted a damages claim
against Legris in connection with her sales of shares. On May 4, 2001, the
French court dismissed the summary proceeding pursuant to which the former
stockholder had sought to have the shares in question placed in judicial
escrow. The stockholder retains the right, however, to appeal this decision. If
the former stockholder were to be successful in obtaining rescission, then it
is possible that the prior sales could be nullified and we would be required to
transfer approximately 6.4% of the outstanding stock of Potain to the former
stockholder. We have reviewed the merits of the rescission claim and we believe
that the former stockholder's claim is without merit. Under the share purchase
agreement, Legris is obligated to indemnify us with respect to any loss
relating to title to these shares.
The Senior Credit Facility
Our new senior credit facility consists of a two-tranche term loan facility
aggregating $350.0 million and a $125.0 million revolving credit facility
entered into with Bankers Trust Company, as agent and lender, and other
financial institutions. The senior credit facility is guaranteed by all of our
domestic subsidiaries. See "Description of Indebtedness."
30
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new notes
under the exchange offer. In consideration for issuing the new notes as
contemplated by this prospectus, we will receive the old notes in like
principal amount, the terms of the which are identical in all material respects
to the new notes. The old notes surrendered in exchange for the new notes will
be retired and canceled and cannot be reissued. Accordingly, the issuance of
the new notes will not result in any increase or decrease in our indebtedness.
We used the net proceeds from the sale of the old notes, together with
borrowings under our new senior credit facility to consummate the Potain
acquisition, refinance our existing indebtedness and pay fees and expenses
arising out of the acquisition and related financing transactions.
31
CAPITALIZATION
The following table sets forth our unaudited historical consolidated cash
and cash equivalents and capitalization as of March 31, 2001 and our pro forma
capitalization at such date after giving effect to the acquisition of Potain
and related financing transactions, including the issuance of the old notes,
and the application of the proceeds from these financing transactions, in each
case as if the acquisition and financing transactions occurred on March 31,
2001. This table should be read in conjunction with "The Transactions," "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," our unaudited historical consolidated and unaudited pro
forma condensed consolidated financial statements and the audited consolidated
historical financial statements of Potain.
As of March 31, 2001(4)
- -------------------------
Actual Pro Forma
-----------
- -------------
(Thousands of Dollars)
Cash and cash equivalents........................... $ 8,186 $ 47,608
=========== ===========
Debt:
Existing credit facility.......................... $ 105,900 $ --
New senior credit facility:
Revolving credit facility(1).................... -- 43,600
Term loan A..................................... -- 175,000
Term loan B..................................... -- 175,000
Senior notes due 2010(2).......................... 75,000 --
Commercial paper.................................. 24,771 --
Industrial revenue bonds.......................... 3,607 3,607
Potain debt(3).................................... -- 14,235
Senior subordinated notes due 2011 ............... -- 154,700
----------- -----------
Total debt...................................... 209,278 566,142
Stockholders' equity................................ 241,966 238,548
----------- -----------
Total capitalization.......................... $451,244 $ 804,690
=========== ===========
- --------
(1) After giving effect to the acquisition of Potain and related financing
transactions, we would have $80.6 million of undrawn availability under our
new $125.0 million revolving credit facility, which is net of estimated
outstanding letters of credit of $0.8 million.
(2) Consists of $50.0 million aggregate principal amount of our series A senior
notes due 2010 and $25.0 million aggregate principal amount of senior shelf
notes due 2010.
(3) See "Description of Indebtedness--Potain Debt".
(4) There has been no material change in our capitalization since March 31,
2001, except as set forth in this prospectus.
32
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements are based
on our historical financial statements and the historical financial statements
of Potain and should be read in conjunction with the historical financial
statements included in this prospectus.
The pro forma financial statements reflect the following:
. the acquisition of Potain;
. the issuance of (Euro)175.0 million (approximately U.S. $154.7 million
computed at the noon buying rate on March 30, 2001) of senior
subordinated notes in this offering;
. borrowings of $393.6 million under our new senior credit facility; and
. the prepayment of outstanding borrowings under our existing revolving
credit facility and our existing senior notes due 2010.
Pro forma adjustments to historical financial statements include adjustments
that we deem appropriate, reflecting items of recurring significance and which
are factually supported based on currently available information. We assumed
that the acquisition of Potain and related financing transactions, including
the issuance of the notes, occurred on January 1, 2000 for purposes of
preparing the unaudited pro forma condensed consolidated statements of earnings
for the year ended December 31, 2000 and January 1, 2001 for the three months
ended March 31, 2001, respectively, and on March 31, 2001 for purposes of
preparing the unaudited condensed consolidated balance sheet. The pro forma
financial statements may not be indicative of what actual results would have
been, nor do the pro forma financial statements purport to present our
condensed consolidated financial results for future periods.
The unaudited pro forma condensed consolidated financial data has been
derived from the historical consolidated financial statements of Manitowoc and
Potain. The pro forma adjustments, as described in the notes that follow, are
based upon available information and upon certain assumptions that management
believes are reasonable. You should read this information in conjunction with
the financial statements of Manitowoc and Potain included elsewhere in this
prospectus. The unaudited pro forma condensed consolidated financial statements
are included for comparative purposes only and do not purport to be indicative
of the results of Manitowoc in the future or what the financial position and
results of operations would have been had Manitowoc acquired Potain on the
dates described above.
Amounts in U.S. dollars have been translated from euro at the rate of
(Euro)1.00 to $0.88, the noon buying rate on March 30, 2001, in the unaudited
pro forma condensed consolidated balance sheet and at the rate of (Euro)1.00 to
$0.92, the average rate on the last business day of each month during the
applicable periods, in the unaudited pro forma condensed consolidated
statements of earnings for the year ended December 31, 2000 and the three
months ended March 31, 2001, respectively.
33
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share data and ratios)
Year Ended December 31, 2000
-----------------------------------------------
Manitowoc Potain(1) Pro Forma Pro
Historical Historical Adjustments Forma
---------- ---------- ----------- ----------
Net sales...................... $873,272 $259,962 $ -- $1,133,234
Costs and expenses:
Cost of sales................ 637,538 184,697 -- 822,235
Engineering, selling and
administrative expenses..... 114,901 47,612 -- 162,513
Amortization................. 8,181 395 4,351 (2) 12,927
-------- -------- -------- ----------
Total costs and expenses... 760,620 232,704 4,351 997,675
Earnings from operations....... 112,652 27,258 (4,351) 135,559
Interest expense............... (14,508) (192) (32,699)(3)
(47,399)
Other (expense) income, net.... (2,024) (472) (403)(4)
(2,899)
-------- -------- -------- ----------
Earnings before income taxes... 96,120 26,594 (37,453) 85,261
Provision for taxes on income.. 35,852 10,750 (11,645)(5) 34,957
-------- -------- -------- ----------
Net earnings(6)................ $ 60,268 $ 15,844 $(25,808) $ 50,304
======== ======== ======== ==========
Per Share Data:
Earnings per share--basic...... $ 2.42 $ 2.02
======== ==========
Weighted average shares
outstanding--basic............ 24,891 24,891
======== ==========
Earnings per share--diluted.... $ 2.40 $ 2.00
======== ==========
Weighted average shares
outstanding--diluted.......... 25,123 25,123
======== ==========
Other financial data:
Depreciation................... $ 9,872 $ 11,940 $ 21,812
Amortization................... 8,181 395 12,927
EBITDA(7)...................... 130,705 39,593 170,298
Capital expenditures........... 13,415 30,309 43,724
Ratio of EBITDA to interest
expense....................... 9.0x 206.2x
3.6x
Ratio of earnings to fixed
charges(8).................... 6.5x 37.7x
2.7x
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
34
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share data and ratios)
For the Three Months Ended March 31, 2001
--------------------------------------------
Manitowoc Potain(1) Pro Forma Pro
Historical Historical Adjustments Forma
---------- ---------- ----------- --------
Net sales........................ $229,351 $74,587 $ -- $303,938
Costs and expenses:
Cost of sales.................. 173,321 57,909 -- 231,230
Engineering, selling and
administrative expenses....... 33,686 12,377 -- 46,063
Amortization................... 2,315 109 1,077 (2) 3,501
-------- ------- ------- --------
Total costs and expenses..... 209,322 70,395 1,077 280,794
Earnings from operations......... 20,029 4,192 (1,077) 23,144
Interest expense................. (4,096) (39) (7,715)(3) (11,850)
Other (expense) income, net...... (115) -- (101)(4) (216)
-------- ------- ------- --------
Earnings before income taxes..... 15,818 4,153 (8,893) 11,078
Provision for taxes on income.... 5,948 1,630 (3,036)(5) 4,542
-------- ------- ------- --------
Net earnings(6).................. $ 9,870 $ 2,523 $(5,857) $ 6,536
======== ======= ======= ========
Per Share Data:
Earnings per share--basic........ $ 0.41 $ 0.27
======== ========
Weighted average shares
outstanding--basic.............. 24,262 24,262
======== ========
Earnings per share--diluted...... $ 0.40 $ 0.27
======== ========
Weighted average shares
outstanding--diluted............ 24,543 24,543
======== ========
Other financial data:
Depreciation..................... $ 2,893 $ 3,928 $ 6,821
Amortization..................... 2,315 109 3,501
EBITDA(7)........................ 25,237 8,229 33,466
Capital expenditures............. 5,336 3,196 8,532
Ratio of EBITDA to interest
expense......................... 6.2x 211.0x 2.8x
Ratio of earnings to fixed
charges(8)...................... 4.2x 25.1x 1.9x
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
35
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
The following adjustments have been made to the historical condensed
consolidated historical statements of earnings of Manitowoc and Potain to
compute the unaudited pro forma amounts.
(1) The table below sets out the adjustments necessary to convert the
Potain historical statement of earnings from French GAAP to U.S. GAAP. The
Potain historical financial information and U.S. GAAP adjustments have been
derived from the Potain consolidated financial statements included
elsewhere in this prospectus.
For the Year ended December 31,
2000 For the Three
Months Ended March 31, 2001
---------------------------------
- ------------------------------------------------
Potain U.S. GAAP Potain Potain
U.S. GAAP Potain
French GAAP Adjustments U.S. GAAP French GAAP
Adjustments U.S. GAAP
----------- ----------- --------- --------------
- -------------- --------------
Net sales............... $264,016 $(4,054) $259,962 $74,046
$ 541 $74,587
Costs and expenses:
Cost of sales......... 188,210 (3,513) 184,697 57,433
476 57,909
Engineering, selling
and administrative... 46,787 825 47,612 12,360
17 12,377
Amortization.......... 228 167 395 109
-- 109
-------- ------- -------- --------------
- ------------ --------------
Total costs and
expenses........... 235,225 (2,521) 232,704 69,902
493 70,395
Earnings from
operations............. 28,791 (1,533) 27,258 4,144
48 4,192
Interest (expense)
income--net............ 799 (991) (192) 201
(240) (39)
Other (expense) income--
net.................... (541) 69 (472) --
-- --
-------- ------- -------- --------------
- ------------ --------------
Earnings before income
taxes.................. 29,049 (2,455) 26,594 4,345
(192) 4,153
Provision for taxes on
income................. 10,634 116 10,750 1,663
(33) 1,630
-------- ------- -------- --------------
- ------------ --------------
Net income.............. $ 18,415 $(2,571) $ 15,844 $ 2,682
$(159) $ 2,523
======== ======= ======== ==============
============ ==============
(2) To adjust amortization based on the increase in goodwill in
connection with the Potain acquisition. Goodwill is being amortized over
forty years.
(3) To adjust interest expense to reflect the issuance of debt in
connection with the acquisition of Potain and the repayment of existing
debt:
For the Year For the Three
Interest Ended December Months ended
Instrument Amount Rate 31, 2000 March 31, 2001
- ---------- -------- -------- -------------- --------------
Senior credit facility:
Revolving credit facility.. $ 43,600 6.825% $ 2,976 $ 744
Term loan A................ 175,000 6.825 11,944 2,986
Term loan B................ 175,000 7.075 12,381 3,095
--------
Total.................... 393,600
Senior subordinated notes.... 154,700 10.375 16,050 4,013
Miscellaneous................ 17,842 Various 1,023 256
Amortization of financing
costs....................... -- -- 3,025 756
-------- ------- -------
$566,142 $47,399 $11,850
======== ======= =======
The revolving credit facility, which provides for maximum borrowings of
$125.0 million, has a 0.500% commitment fee on the unused balance (see Note
(4) below).
36
The above interest amounts related to the revolving credit facility and
term loans assume a LIBOR rate of 4.2%. A 0.125% increase or decrease in
the assumed average interest rate would change the pro forma interest
expense by approximately $493,000 for the year ended December 31, 2000 and
by approximately $123,000 for three months ended March 31, 2001.
(4) To record the commitment fee related to the assumed unused balance of
the new revolving credit facility which provides for maximum borrowings of
$125.0 million.
(5) To adjust the provision for taxes on income to an effective income
tax rate of 41%.
(6) Pro forma net earnings excludes an extraordinary loss (approximately
$3.4 million, net of income tax effects) related to the early
extinguishment of our existing debt which will be paid from the proceeds of
the financing upon consummation of this offering.
(7) EBITDA consists of earnings from operations plus depreciation and
amortization. We have presented EBITDA information solely as a supplemental
disclosure because management believes that it is generally accepted as
providing useful information regarding a company's ability to service
and/or incur debt. EBITDA should not be construed as an alternative to
earnings from operations as determined in accordance with generally
accepted accounting principles as an indicator of our operating
performance, or as an alternative to cash flows from operating activities
as determined in accordance with generally accepted accounting principles
as a measure of liquidity. We have significant uses of cash flows,
including capital expenditures and debt principal repayments that are not
reflected in EBITDA. It should also be noted that not all companies that
report EBITDA information calculate EBITDA in the same manner as we do.
(8) For purposes of computing the ratio of earnings to fixed charges,
earnings consist of earnings from operations before income taxes and fixed
charges, excluding capitalized interest. Fixed charges consist of interest
expensed and capitalized, amortization of debt issuance costs and the
interest component of rent expense.
37
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
March 31, 2001
- ------------------------------------------------
Manitowoc Potain(1) Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- -----------
- ----------
ASSETS
Current Assets:
Cash and cash equivalents.... $ 8,186 $ 39,422 $ -- $
47,608
Accounts receivable--net..... 71,730 72,193 --
143,923
Inventories.................. 101,818 60,719 --
162,537
Other current assets......... 12,898 9,543 --
22,441
Future income tax benefits... 22,756 -- --
22,756
--------- -------- --------
- ----------
Total current assets....... 217,388 181,877 --
399,265
--------- -------- --------
- ----------
Intangible assets--net......... 306,845 8,450 189,836 (3)
505,131
Property, plant and equipment--
net........................... 102,297 69,449 --
171,746
Deferred income taxes.......... -- 4,409 (4,409)(2) --
Deferred financing costs....... 671 -- 19,354 (4)
20,025
Other non-current assets....... 14,581 1,957 --
16,538
--------- -------- --------
- ----------
Total assets............... $ 641,782 $266,142 $204,781
$1,112,705
========= ======== ========
==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts payable and accrued
expenses.................... $ 145,996 $ 55,753 $ (2,059)(5) $
199,690
Short-term borrowings........ 68,671 7,863 (69,705)(6)
6,829
Current portion of long-term
debt........................ 270 -- 27,563 (6)
27,833
Product warranties........... 12,537 3,391 --
15,928
Other current liabilities.... -- 45,569 --
45,569
--------- -------- --------
- ----------
Total current liabilities.. 227,474 112,576 (44,201)
295,849
--------- -------- --------
- ----------
Non-Current Liabilities:
Long-term debt, less current
portion..................... 140,337 12,070 (141,664)(6)
10,743
Senior subordinated notes.... -- -- 154,700 (6)
154,700
Senior credit facility....... -- -- 366,037 (6)
366,037
Postretirement benefit
obligation.................. 20,481 2,652 --
23,133
Deferred income taxes........ -- 6,124 (6,124)(2) --
Other non-current
liabilities................. 11,524 12,171 --
23,695
--------- -------- --------
- ----------
Total non-current
liabilities............... 172,342 33,017 372,949
578,308
--------- -------- --------
- ----------
Minority interest.............. -- 177 (177)(2) --
Stockholders' Equity:
Common stock................. 367 12,055 (12,055)(2)
367
Additional paid-in capital... 31,586 11,035 (11,035)(2)
31,586
Accumulated other
comprehensive loss.......... (2,451) (102) 102 (2)
(2,451)
Retained earnings............ 342,513 97,384 (97,384)(2)
339,095
(3,418)(5)
Treasury stock............... (130,049) -- --
(130,049)
--------- -------- --------
- ----------
Total stockholders'
equity.................... 241,966 120,372 (123,790)
238,548
--------- -------- --------
- ----------
Total liabilities and
stockholders' equity...... $ 641,782 $266,142 $204,781
$1,112,705
========= ======== ========
==========
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
38
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following adjustments have been made to the condensed consolidated
historical balance sheets of Manitowoc and Potain to compute the unaudited pro
forma condensed consolidated balance sheet.
(1) The table below sets out the adjustments necessary to convert the
Potain historical balance sheet from French GAAP to U.S. GAAP. The Potain
historical financial information and U.S. GAAP adjustments have been
derived from the Potain consolidated financial statements included
elsewhere in this prospectus.
Potain Potain
French U.S. GAAP U.S.
GAAP Adjustments GAAP
-------- ----------- --------
Assets
Current Assets:
Cash and cash
equivalents.............. $ 43,772 $(4,350) $ 39,422
Accounts receivable--net.. 72,193 -- 72,193
Inventories............... 60,719 -- 60,719
Other current assets...... 9,543 -- 9,543
Future income tax
benefits................. -- -- --
-------- ------- --------
Total current assets.... 186,227 (4,350) 181,877
Intangible assets--net...... 8,601 (151) 8,450
Property, plant and
equipment--net............. 55,227 14,222 69,449
Deferred income taxes....... 1,896 2,513 4,409
Deferred financing costs.... -- -- --
Other non-current assets.... 2,323 (366) 1,957
-------- ------- --------
Total assets............ $254,274 $11,868 $266,142
======== ======= ========
Liabilities and
Stockholders' Equity
Current Liabilities:
Accounts payable and
accrued expenses......... $ 55,694 $ 59 $ 55,753
Short-term borrowings..... 7,863 -- 7,863
Current portion of long-
term debt................ -- -- --
Product warranties........ 3,391 -- 3,391
Other current
liabilities.............. 39,357 6,212 45,569
-------- ------- --------
Total current
liabilities............ 106,305 6,271 112,576
Non-current Liabilities:
Long-term debt, less
current portion.......... 12,070 -- 12,070
Senior subordinated
notes.................... -- -- --
Senior credit facility.... -- -- --
Post retirement benefit
obligation............... 4,406 (1,754) 2,652
Deferred income taxes..... 5,892 232 6,124
Other non-current
liabilities.............. -- 12,171 12,171
-------- ------- --------
Total non-current
liabilities............ 22,368 10,649 33,017
Minority interest........... 177 -- 177
Stockholders' Equity:
Common stock.............. 12,055 -- 12,055
Additional paid-in
capital.................. 11,035 -- 11,035
Accumulated other
comprehensive loss....... (108) 6 (102)
Retained earnings......... 102,442 (5,058) 97,384
Treasury stock............ -- -- --
-------- ------- --------
Total stockholders'
equity................. 125,424 (5,052) 120,372
-------- ------- --------
Total liabilities and
stockholders' equity... $254,274 $11,868 $266,142
======== ======= ========
39
(2) Represents the elimination of Potain historical amounts related to
deferred income taxes, minority interest, and stockholders' equity.
(3) To record goodwill of $189.8 million in connection with the Potain
acquisition. The purchase price of $312.1 million includes the amount to be
paid to Group Legris Industries SA (seller) of $307.1 million plus
estimated direct acquisition costs of $5.0 million.The purchase price is
subject to an adjustment for the net earnings of Potain from January 1,
2001, to the closing date.
The excess of the purchase consideration over the net assets acquired
(goodwill) is required to be applied to write-up assets to their fair
market value. No appraisals of assets have yet to be performed and all of
the excess of purchase consideration over the net assets to be acquired is
being recorded as goodwill. Subsequent valuation analyses could potentially
change the purchase price allocation. Goodwill is being amortized over
forty years for purposes of the unaudited pro forma condensed consolidated
statement of earnings.
(4) Reflects estimated new debt issuance costs of approximately $20,025
that will be incurred as a result of the acquisition of Potain and related
debt financing, net of a write-off of $671 of unamortized debt issuance
costs related to existing debt which is paid with the proceeds of the
financing. The deferred financing fees are being amortized over the term of
the related debt, which ranges from 6 to 10 years.
(5) To record the effects of the extraordinary loss related to the early
extinguishment of the existing Manitowoc debt as follows:
Prepayment penalty............................................... $ 4,806
Write-off of deferred financing costs............................ 671
-------
5,477
Less-income tax benefit.......................................... (2,059)
-------
Retained earnings adjustment..................................... $ 3,418
=======
(6) The pro forma adjustments required to record the financing portion of
the transactions are as follows:
Payment of short-term borrowings:
Manitowoc................................................... $ (68,671)
Potain...................................................... (1,034)
---------
$ (69,705)
=========
Payment of long-term borrowings:
Manitowoc revolving credit facility......................... $ (62,000)
Manitowoc senior notes due 2010............................. (75,000)
Potain debt................................................. (4,664)
---------
Total..................................................... $(141,664)
=========
Proceeds from senior subordinated notes....................... $ 154,700
=========
Proceeds from senior credit facility:
Revolving credit facility................................... $ 43,600
Term loan A................................................. 175,000
Term loan B................................................. 175,000
---------
393,600
Current portion............................................. (27,563)
---------
Total..................................................... $ 366,037
=========
40
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
The selected historical consolidated financial and other data presented
below as of and for each of the five years ended December 31, 2000 have been
derived from our audited consolidated financial statements. The summary
historical financial data as of and for the three months ended March 31, 2000
and 2001 have been derived from our unaudited consolidated financial
statements. The selected consolidated financial and other data set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and related notes included elsewhere in this prospectus (except for
the consolidated financial statements as of and for the years ended December
31, 1996 and 1997, which are not included in this prospectus).
For the
Three Months
For the Years Ended December 31,
Ended March 31,
-------------------------------------------------
- ------------------
1996 1997 1998 1999 2000(1)
2000 2001(1)
-------- -------- -------- -------- ---------
- -------- --------
(Thousands of dollars, except per share data and
ratios)
Statement of Earnings
Data:
Net sales:
Food service
equipment............ $242,317 $247,057 $319,457 $379,625 $ 425,080 $
92,929 $101,245
Cranes and related
products............. 220,821 268,416 339,051 389,510 376,250
100,770 84,258
Marine................ 47,584 39,162 45,412 55,204 71,942
12,154 43,848
-------- -------- -------- -------- ---------
- -------- --------
Total net sales...... 510,722 554,635 703,920 824,339 873,272
205,853 229,351
-------- -------- -------- -------- ---------
- -------- --------
Costs and expenses:
Cost of sales......... 376,081 402,035 508,299 590,627 637,538
150,136 173,321
Engineering, selling
and administrative
expenses............. 79,551 84,231 98,120 107,369 114,901
27,072 33,686
Plant relocation
costs................ 1,200 -- -- -- --
-- --
Amortization.......... 3,000 3,394 4,881 7,392 8,181
1,902 2,315
-------- -------- -------- -------- ---------
- -------- --------
Total cost and
expenses............ 459,832 489,660 611,300 705,388 760,620
179,110 209,322
-------- -------- -------- -------- ---------
- -------- --------
Earnings from
operations............. 50,890 64,975 92,620 118,951 112,652
26,743 20,029
Interest expense........ (9,097) (6,230) (9,741) (10,790) (14,508)
(2,511) (4,096)
Other (expense) income--
net.................... 713 (928) (1,467) (2,155) (2,024)
(371) (115)
-------- -------- -------- -------- ---------
- -------- --------
Earnings before taxes on
income................. 42,506 57,817 81,412 106,006 96,120
23,861 15,818
Provision for taxes on
income................. 16,863 21,394 30,032 39,222 35,852
8,948 5,948
-------- -------- -------- -------- ---------
- -------- --------
Net earnings............ $ 25,643 $ 36,423 $ 51,380 $ 66,784 $ 60,268 $
14,913 $ 9,870
======== ======== ======== ======== =========
======== ========
Per share data(2):
Basic................. $ .99 $ 1.41 $ 1.98 $ 2.57 $ 2.42 $
0.58 $ 0.41
Diluted............... .99 1.40 1.97 2.55 2.40
0.57 0.40
Other Financial Data:
EBITDA(3)............... $ 62,208 $ 76,687 $107,230 $135,664 $ 130,705 $
31,168 $ 25,237
Cash flows from
operations............. 64,514 43,587 56,814 103,371 63,047
1,112 11,077
Cash flows from
investing.............. (7,352) (75,570) (58,618) (69,416) (109,037)
(35,555) (5,341)
Cash flows from
financing.............. (58,185) 29,520 496 (34,422) 50,006
42,595 (11,451)
Capital expenditures.... 8,396 12,040 11,678 13,714 13,415
4,853 5,336
Ratio of total debt to
EBITDA................. 1.4x 1.7x 1.3x 0.8x 1.7x
5.7x 8.3x
Ratio of EBITDA to
interest expense....... 6.8x 12.3x 11.0x 12.6x 9.0x
12.4x 6.2x
Ratio of earnings to
fixed charges(4)....... 5.0x 8.9x 8.6x 9.5x 6.5x
8.4x 4.2x
Balance Sheet Data (at
end of period):
Cash and cash
equivalents............ $ 14,364 $ 11,888 $ 10,582 $ 10,097 $ 13,983 $
18,239 $ 8,186
Total assets............ 317,710 396,368 481,014 530,240 642,530
595,612 641,782
Total debt.............. 87,565 130,859 139,302 112,012 218,938
179,202 209,278
Stockholders' equity.... 100,329 128,618 172,552 232,176 233,769
222,310 241,966
41
- --------
(1) Includes the results of Marinette Marine Corporation from November 20,
2000, the date of its acquisition.
(2) Per share data has been adjusted to reflect the three-for-two stock splits
that occurred in 1996, 1997 and 1999.
(3) EBITDA consists of earnings from operations plus depreciation and
amortization. We have presented EBITDA information solely as a supplemental
disclosure because management believes that it is generally accepted as
providing useful information regarding a company's ability to service
and/or incur debt. EBITDA should not be construed as an alternative to
earnings from operations as determined in accordance with generally
accepted accounting principles as an indicator of our operating
performance, or as an alternative to cash flows from operating activities
as determined in accordance with generally accepted accounting principles
as a measure of liquidity. We have significant uses of cash flows,
including capital expenditures and debt principal repayments that are not
reflected in EBITDA. It should also be noted that not all companies that
report EBITDA information calculate EBITDA in the same manner as we do.
(4) For purposes of computing the ratio of earnings to fixed charges, earnings
consists of earnings from operations before income taxes and fixed charges,
excluding capitalized interest. Fixed charges consist of interest expensed
and capitalized, amortization of debt issuance costs and the interest
component of rent expense.
42
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
section "Selected Historical Financial and Other Data" and the consolidated
financial statements and related notes appearing in this prospectus. Unless
otherwise indicated, all references in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" to our business are
not pro forma for the acquisition of Potain and related financing transactions.
Overview
We are a diversified industrial manufacturer with leading positions in our
three principal markets: cranes, foodservice equipment and marine services. In
our crane segment, we design, manufacture and market a comprehensive line of
crawler cranes, tower cranes and boom trucks with capacities ranging between 10
and 1,433 tons. In our foodservice segment, we design, manufacture and market
full product lines of ice making machines, walk-in and reach-in refrigerators,
fountain beverage dispenser systems and other foodservice refrigeration
products for the restaurant, lodging, convenience store and institutional
foodservice markets. Our marine segment provides shipbuilding, repair and
maintenance services in the Great Lakes region.
In 2000, we invested $2.6 million in manufacturing process improvements and
growth initiatives as well as $6.7 million in research and development that led
to the introduction of 46 new or improved products among all of our segments.
Nearly 60% of the products we now sell have been acquired or introduced within
the last three years. In 2000, SerVend, our largest beverage-equipment company,
broadened its market reach by introducing a line of counter-electric beverage
dispensers. Manitowoc Ice launched a number of new ice machines, including a
series of ice flakers and the Series 800 IB ice/beverage dispenser, which
leverages our patented CVD technology introduced in 1999. With orders received
for 80 units in the first seven months on the market, our Model 999 lattice-
boom crane became the most successful new-product launch in the 75-year history
of our large-crane subsidiary.
Our 2000 worldwide sales in our cranes and related products segment were
$376.2 million. A number of process improvements in our crane operations, along
with new robotic welding equipment and a new paint system, are driving down the
time it takes us to manufacture a crane. Reduced lead times for our cranes
allow us to receive an order, assemble and deliver a crane in less than 90
days. We believe that lattice-boom crane fleet utilization remains high and
contractors continue to report increased quotation activity. We expect to
benefit from the U.S. Transportation Equity Act for the 21st Century, which
authorizes up to $217.0 billion in funding for highway and infrastructure
through 2003. We believe rising energy prices and electrical power shortages
are increasing the demand for cranes as nearly every segment of the energy
industry strives to increase supply.
Our foodservice equipment segment sales were $425.1 million for 2000. In
2000, we made more than $8.9 million in capital investments within our
foodservice segment to improve our ability to serve our customers, reduce costs
and cycle times and boost productivity. The conversion of our main ice-machine
production facility to Demand Flow Technology(R) allows us to "build-to-order"
and to substantially eliminate excess inventory. We expect to introduce demand
flow manufacturing across the majority of our foodservice operations in the
near future. The foodservice equipment industry is one of the most vibrant
industries as food and drink sales are forecast to reach $399.0 billion in 2001
according to the National Restaurant Association. As disposable income
continues to grow, combined with higher numbers of dual family incomes, we
believe more of today's food dollar is spent away from home. We also see
opportunities with existing locations as chain accounts and quick service
restaurants focus their growth from increasing new store sales to increasing
same store sales.
43
Our 2000 sales for our marine segment were $71.9 million. Our acquisition of
Marinette Marine Corporation in November 2000, combined with our existing
Marine Group, creates the largest and most comprehensive shipbuilding and ship-
repair organization on the Great Lakes. While we have concentrated on the
repair, maintenance and construction of commercial vessels, Marinette is best
known for its construction of military and research vessels. We now expect to
combine our steel fabrication and repair capabilities with Marinette's skill
and expertise in outfitting. We also expect to gain new economies and
efficiencies of scale in purchasing, marketing, and support services. In
addition, we anticipate that we will benefit from the proven skills and
experience of Marinette's engineering staff, while we will provide the
financial resources required to pursue larger contracts and fund new growth.
With a current combined backlog of over $200.0 million at December 31, 2000, we
are positioned to become one of the leading builders of mid-sized ships in the
country.
In 2000, we focused on acquisitions as we invested nearly $100 million to
acquire five companies: three foodservice businesses, a boom truck manufacturer
and one of the largest shipyards on the Great Lakes. Since 1995, we have more
than doubled the size of each of our three businesses through acquisitions.
With the completion of the acquisition of Potain, we have completed ten
acquisitions since January 1, 1998, which we believe has given us a broad base
of experience in identifying the right companies to acquire and integrating
them into our operations. We look for companies that complement our current
operations, fill voids in our product lines and geographic areas and are market
leaders. We require acquisitions to contribute to earnings within two years and
to be EVA positive within three years. Many of our acquisitions, and our
purchase of the remaining percentage of our Chinese joint venture, have helped
build our presence in international markets.
Results of Operations for the Quarters Ended March 31, 2000 and 2001
Net sales increased 11.4% to $229.4 million in the first quarter of 2001,
from $205.9 million for the same period in 2000. Net earnings for the quarter
were $9.9 million, or $.40 per diluted share, compared with $14.9 million, or
$.57 per diluted share, in the first quarter of 2000. Weighted-average shares
outstanding used to calculate diluted earnings per share were 24.5 million for
the first quarter of 2001 and 26.0 million for the first quarter of 2000.
Foodservice equipment segment sales were $101.2 million for the first
quarter of 2001, up 9% from the first quarter of 2000. Operating earnings from
foodservice equipment were $9.5 million for the quarter, a 22% drop from the
$12.2 million earned during the same period last year. The increase in sales
was the result of acquisitions made during 2000. Without the acquisitions,
sales would have declined by 22% and operating earnings would have declined by
24% compared to the same period last year. Capital spending constraints in the
beverage equipment industry continue to lower volumes in this business. These
volume decreases, along with product mix issues and slower ice-machine sales,
contributed to the decline in foodservice equipment margins.
First quarter sales for the crane segment were $84.3 million, compared to
$100.8 million for 2000, a decline of 16%. Crane segment operating earnings
dropped 34% to $11.4 million from $17.3 million in the first quarter of 2000.
Sales of our boom trucks continued to be weak due to greater economic pressures
on smaller contractors, reflecting the reduced order patterns for light-duty
construction equipment that we have seen in the past two quarters. In addition,
pricing pressures due to the strong U.S. dollar and greater competitiveness in
the global market impacted our crane segment. These factors negatively impacted
our crane margins.
We believe prospects for our crane segment remain solid. Quoting activity
for our higher-capacity lift cranes continued to climb, driven by demand in the
energy-related markets. We believe this is evidenced by the positive response
we received at BAUMA 2001, the international construction equipment trade fair
in Germany. We introduced five major new crane products--a number unprecedented
in the lattice-boom crane industry and a testament to our technological and
manufacturing capabilities. Including sales made at BAUMA, our overall crane
segment backlog stood at $85 million as of April 13, 2001.
44
Marine segment sales for the first quarter were $43.8 million, compared with
$12.2 million for the same period in 2000. Marine segment operating earnings
for the first quarter were $4.6 million, compared with $2.4 million for the
first quarter of 2000. Our acquisition of Marinette Marine in the fourth
quarter of 2000 accounted for the majority of the sales and earnings increase.
However, our organic sales rate was 22% and our earnings growth rate was 13%.
The marine segment has just completed another active winter repair season. This
season included more than 20 dry dockings at our Sturgeon Bay and Toledo
facilities, and work continued steadily on the hopper dredge Liberty Island. In
addition, quoting activity remained high at our Sturgeon Bay, Toledo, and
Cleveland operations, as well as at Marinette Marine.
Interest expense for the quarter ended March 31, 2001 was $4.1 million,
compared to $2.5 million for the same period last year. This increase in
interest expense is due to the additional debt incurred to fund acquisitions
and to repurchase shares of Manitowoc stock during 2000.
Our effective tax rate was approximately 38% for the quarters ended March
31, 2001 and 2000.
Results of Operations for the Years Ended December 31, 1998, 1999 and 2000
The following table sets forth selected items from our consolidated
statements of earnings as a percentage of net sales, for the periods indicated:
Years ended
December 31,
-------------------
1998 1999 2000
----- ----- -----
Net sales:
Foodservice equipment................................. 45.4% 46.0% 48.7%
Cranes and related products(1)........................ 48.2 47.3 43.1
Marine................................................ 6.4 6.7 8.2
----- ----- -----
Total............................................... 100.0 100.0 100.0
Cost of sales........................................... 72.2 71.6 73.0
----- ----- -----
Gross Profit............................................ 27.8 28.4 27.0
Engineering, selling and administrative expenses........ 13.9 13.0 13.2
Amortization............................................ 0.7 0.9 0.9
----- ----- -----
Earnings from operations................................ 13.2 14.5 12.9
Interest expense........................................ (1.4) (1.3) (1.7)
Other expense-net....................................... (0.2) (0.3) (0.2)
----- ----- -----
Earnings before income tax.............................. 11.6 12.9 11.0
Income taxes............................................ 4.3 4.8 4.1
----- ----- -----
Net earnings............................................ 7.3 8.1 6.9
===== ===== =====
- --------
(1) During 2000, we reclassified certain boom truck costs formerly reported as
a component of net sales to cost of sales, due to the implementation of
Emerging Issues Task Force (EITF) No. 99-19, "Reporting Revenues Gross as a
Principal versus Net as an Agent." As a result, sales and cost of sales
were increased in our crane segment by $18.8 million in 1999 and $9.1
million in 1998.
Net sales increased 5.9% in 2000 to $873.3 million from $824.3 million in
1999. This increase was driven by acquisitions. Net sales in 1999 increased
17.1% compared to $703.9 million in 1998. This increase was caused half by
internal growth and half from acquisitions made since 1997.
Gross profit as a percent of net sales declined in 2000 to 27.0% from 28.4%
in 1999 and 27.8% in 1998. The decline in 2000 was due to decreased volumes in
our foodservice and crane segments, inefficiencies caused by current year
investments in manufacturing process improvements, increased project work in
our marine segment and by lower gross margins on businesses acquired in 2000
and 1999. The 1999 increase in gross margin versus 1998 was due to higher
volumes in all three segments, synergies achieved in the realignment of the two
groups within our foodservice segment and productivity improvements achieved
within our crane segment.
45
We maintained engineering, selling and administrative expenses during 2000
at 13.2% of net sales versus 13.0% of net sales in 1999 and 13.9% of net sales
in 1998. The maintenance of this engineering, selling and administrative
expenses ratio in 2000 was due to the flexibility of our fixed cost structure
and our resulting ability to control costs in light of lower volumes. We
successfully maintained this cost ratio during 2000 notwithstanding our
completion and assimilation of five acquisitions and the investigation of
several others. The decrease in engineering, selling and administrative
expenses as a percent of sales in 1999 versus 1998 was achieved through
continuing cost controls in all three segments as well as the implementation of
operating efficiencies within our foodservice and crane segments.
Amortization expense of $8.2 million during 2000 increased 10.7% over the
$7.4 million reported in 1999. Amortization expense in 1999 increased 51.4%
over the $4.9 million recorded in 1998. This increase in amortization expense
in 1999 and 2000 is the result of the additional goodwill recognized related to
the eight acquisitions we have completed since the beginning of 1998 (not
including the acquisition of Potain).
Our operating income in 2000 of $112.7 million, or 12.9% of net sales,
decreased 5.3% versus the $119.0 million, or 14.4% of net sales, reported for
1999. Operating earnings for 1999 were 28.4% higher than the $92.6 million, or
13.2% of net sales, reported for 1998.
Interest expense during 2000 of $14.5 million was 34.5% higher than the
amount recorded during 1999. Interest expense of $10.8 million in 1999 was
10.8% higher than the $9.7 million recorded in 1998. This increase in interest
expense during 1999 and 2000 was due to a combination of the additional debt
incurred to fund acquisitions and to repurchase 1.9 million shares of our stock
during 2000. The effective interest rate paid on all outstanding debt remained
constant at 6.9% as of December 31, 2000, 6.7% as of December 31, 1999 and 6.3%
as of December 31, 1998. These rates remained relatively stable in spite of the
rising interest rate environment that began in the middle of 1999. We
controlled our exposure to interest rate increases over this period in three
ways. First, we effectively used interest rate hedges on variable rate debt.
Second, we benefited from our favorable fixed-rate borrowings. Third, we
effectively used alternative borrowing vehicles outside of our existing
revolver facility, such as short-term commercial paper borrowings.
The 2000 effective income tax rate was 37.3%, compared to 37.0% in 1999 and
36.9% in 1998. The increase in our effective income tax rate over this three-
year period is due to increasing amounts of non-deductible goodwill
amortization expense arising from acquisitions.
Cranes and Related Products Segment
1998 1999 2000
-------- -------- --------
(In Thousands)
Net sales......................................... $339,051 $389,510 $376,250
Operating income.................................. 48,116 64,840 62,876
Operating margin.................................. 14.2% 16.6% 16.7%
The 3.4% decrease in crane segment sales in 2000 was due to decreased
domestic sales volumes of lower tonnage units in our lattice-boom crawler crane
business. In addition, our boom truck business also experienced decreased sales
volumes combined with a shift in boom truck sales mix toward lower tonnage
units.
The 14.9% increase in net sales in 1999 versus 1998 was due to increased
sales volumes of medium-to-high tonnage units in the lattice-boom crawler crane
business as well as the acquisition of USTC Inc. in November 1998 and increased
sales penetration by our boom truck businesses into the rental industry.
Operating income in our crane segment declined 3.0% in 2000 primarily due to
lower sales volumes and the shift of product sales mix in the boom truck
business toward lower tonnage units. Operating margins remained consistent in
2000 with 1999 levels primarily due to the net effect of deteriorating product
margins offset by improved engineering, selling and administrative expenses
margins. Gross margins declined during 2000 primarily due to lower sales
volumes in all of the segment's businesses, the shift in boom truck product
46
sales mix toward lower tonnage units and competitive pricing pressures
experienced by the boom truck business. Engineering, selling and administrative
expenses margins improved during the year as the segment continued to take
advantage of cost reduction synergies within the boom truck business and cost
reduction initiatives implemented amongst all crane segment businesses.
Operating income in 1999 increased 34.8% primarily due to the USTC
acquisition completed in November 1998 and increased sales volumes at each of
the segment's businesses. Operating margins improved in 1999 due to the same
reasons as noted above.
Foodservice Equipment Segment
1998 1999 2000
-------- -------- --------
(In Thousands)
Net sales......................................... $319,457 $379,625 $425,080
Operating income.................................. 52,950 65,372 61,368
Operating margin.................................. 16.6% 17.2% 14.4%
Foodservice segment net sales rose 12.0% to $425.1 million in 2000 compared
to 1999 levels. This increase was due exclusively to acquisitions. These
acquisitions included: Kyees Aluminum, acquired in April 1999 and included in
results for all of 2000, but only part of 1999; Beverage Equipment Supply
Company, acquired in February 2000; Multiplex Company, Inc., acquired in March
2000; and Harford Duracool LLC, acquired in April 2000. Internal sales for the
foodservice segment in 2000 were flat versus 1999 levels.
The 18.8% increase in net sales in 1999 versus 1998 was due to increased
demand for ice-cube machines resulting from the introduction of the "Q" series
product by Manitowoc Ice and the acquisitions made during the year, which
included Manitowoc Beverage Systems in January 1999 and Kyees Aluminum in April
1999.
The 6.1% decrease in operating income during 2000 versus 1999 was due to
volume decreases in our businesses serving the beverage industry, decreased
sales volumes of walk-in refrigerators and freezers, and $1.5 million invested
in manufacturing process improvements at our ice-machine and private label
refrigerator manufacturing locations during 2000. The decrease in operating
margin in 2000 was due to the reasons mentioned above compounded by the lower
operating margins of acquired businesses.
The 23.5% increase in operating income in 1999 over 1998 was primarily due
to increased sales volumes and cost reductions achieved in the realignment of
our foodservice segment into groups along market channels.
Marine Segment
1998 1999 2000
------- ------- -------
(In Thousands)
Net sales............................................ $45,412 $55,204 $71,942
Operating income..................................... 6,978 7,297 8,902
Operating margin..................................... 15.4% 13.2% 12.4%
Marine segment revenues increased 30.3% in 2000 versus 1999. Internal sales
growth was 8.3%. Sales growth during 2000 was due to increased project and
repair revenues at our traditional facilities during the year and the
acquisition of Marinette in November 2000.
Revenues increased 21.6% during 1999 versus 1998 primarily due to higher
amounts of project work and robust levels of repair and maintenance work during
the year.
Segment operating income increased 22.0% during 2000 versus 1999 levels due
to the acquisition of Marinette in November 2000 and the additional project and
repair volumes experienced during the year. Operating margins declined during
the year due to the continued shift of revenues toward project work,
exacerbated by the acquisition of Marinette, which traditionally has lower
margins.
47
Operating income increased 4.6% in 1999 compared to 1998. This was primarily
due to additional volumes in all of the marine segment's activities including
project, repair, and docking services. Operating margins decreased in 1999 due
to the shift in revenue mix toward more project work versus 1998 levels.
General Corporate Expenses
1998 1999 2000
-------- -------- --------
(In Thousands)
Net sales (consolidated)....................... $703,920 $824,339 $873,272
Corporate expenses............................. (10,543) (11,166) (12,313)
Percent of sales............................... (1.5%) (1.4%) (1.4%)
Corporate expenses during 2000, 1999 and 1998 were consistent as a percent
of net sales at 1.4% in 2000 and 1999, and 1.5% in 1998. The 10.3% increase in
corporate expenses during 2000 was due to $1.1 million of expenses related to
unrealized acquisitions. The 5.9% increase in expenses during 1999 was
primarily due to increased payroll and travel expenses.
Domestic Market Conditions
The United States economy experienced a slowdown during the last half of
2000. The state of the U.S. economy, high oil prices, weather and low water
levels on the Great Lakes impacted each of our segments during 2000. Our
foodservice businesses experienced flat internal sales growth; cranes saw a
decline in domestic revenues during 2000 as compared to 1999; and internal
domestic sales growth for our marine segment expanded during the year due to
increased project and repair work.
Cranes
While the first half of 2000 continued at the brisk industry pace of the
last few years, the second half of the year slowed considerably. A combination
of interest rate increases and the general economic slowdown had a
deteriorating effect on the construction industry as a whole. We felt this
decrease to the largest extent in our boom truck business and our smaller
tonnage crawler cranes. Large capacity boom trucks and large crawler cranes
were less affected. Crane fleet utilization remains high and contractors
continue to report increased quotation activity.
Foodservice
The foodservice industry started 2000 on a strong note. By the end of the
first quarter, the ice cube machine industry was posting year-over-year growth
of over 11%, and we almost doubled that rate. Interest rate increases coupled
with an unusually cool and wet summer resulted in an industry that closed 2000
just under 1% ahead of 1999. Our other foodservice operations (with the
exception of the beverage segment) posted similar results.
While we expect some slowing in the number of new domestic units being built
in the quick service and lodging segments, there are positive signs for growth
in other segments that should partially offset any slowdown. Those segments
include full service, casual dining and the convenience store markets. The
major oil companies, coming off a period of consolidation and reporting strong
financial performance, indicate they will intensify spending in their
convenience operations in the near-term.
We also see opportunities with existing locations. Many of the chain account
locations in the U.S. were built during the eighties and early nineties. As
their focus for growth turns from increasing the number of units to increasing
same store sales, competition likely will drive remodeling and menu expansion.
At Diversified Refrigeration, Inc., the demand for high-end domestic
appliances continues to grow. While that segment is certainly not recession
proof, we have not experienced any of the slowdown seen by other traditional
home appliance manufacturers.
48
Marine
The marine segment is continuing its recent growth trends driven most
dramatically by the acquisition of Marinette, but also by the aging of the
Great Lakes fleet, increased utilization of the vessels driven by lower water
levels resulting in more trips with lighter cargoes and the strength of the
dredging market. We expect the Oil Pollution Act of 1990 requirements to create
a strong demand for double-hulled tanks and barges.
International Market Conditions
Our international sales were approximately 9% of total revenues in 2000.
This amount was down slightly from 1999.
Cranes
International business was relatively flat in 2000. Segments related to
energy, petrochemical and oil and gas exploration began to show some
improvement late in the year. Mainstream crane utilization appears stable and
many markets look to general economic expansion in the near term. Energy
related users will begin to look toward upgrading equipment fleets over the
next several years.
Foodservice
The foodservice segment international sales increased approximately 41% in
2000 driven primarily by the acquisition of Multiplex in March 2000.
While domestic new-store construction in the quick service restaurant
segment softens, expansion outside the U.S. is intensifying. This is
particularly true in Europe and Asia, and to a lesser extent in Latin America.
In Europe, the economy is finally starting to shake off the doldrums of the
past few years. The euro countries experienced real gross domestic product
growth of 3.5% in 2000. With a strengthening euro, the investment climate is
once again favorable and the demand for ice is steadily increasing as western
menus capture a larger audience.
Certain Asian economies also experienced higher economic growth in 2000,
generating accelerated investment activity. China, in particular, is seeing
robust growth in both international and newly developed local quick service
restaurants.
Latin America is just beginning to show signs of improved economic
conditions. In the past few years, Mexico has become an increasingly important
market for the foodservice segment.
In South America, we have intensified our efforts to establish our
foodservice segment's brands. During the fourth quarter of 2000, we opened a
distribution center in Uruguay to serve South America. This should enable us to
capture a larger market share as the South American economies recover.
Marine
The marine segment is primarily focused on the U.S. We continue, however, to
prepare and bid vessels for research, patrol and defense mission profiles to a
broad range of foreign governments.
We continue to effectively and quickly complete emergency repairs for
foreign flag vessels moving through the Great Lakes. We are also expanding our
capabilities to serve our customers by investment in what are already the most
effective facilities on the Great Lakes and by increasing our capability to
complete dockside and in-voyage repairs.
Acquisitions
Our growth in 2000 versus 1999 was mainly due to the acquisitions that we
made during the last several years. With the completion of the acquisition of
Potain, we have completed ten acquisitions since January 1, 1998, and we
continue to seek new acquisition candidates in each of our segments. All of the
acquisitions
49
described below were funded with cash flow from operations as well as
borrowings under our credit facilities in existence at the time of the
acquisition and recorded using the purchase method of accounting. Each of these
acquisitions is included in our consolidated statements of earnings beginning
with the date of acquisition.
2000 Acquisitions
On November 20, 2000, we completed the acquisition of Marinette, a builder
of mid-sized commercial, research and military vessels located in Marinette,
Wisconsin. Marinette had total revenues in 1999 of approximately $100.0
million. We paid an aggregate price of approximately $66.1 million for all of
the outstanding shares of the company, which is net of $18.6 million of cash
acquired and includes $0.5 million for direct acquisition costs and $17.4
million of assumed liabilities. The preliminary estimate of the excess of the
purchase price over the estimated fair value of the net assets acquired is
$45.3 million. The purchase price for this acquisition is subject to a post-
closing working capital adjustment to be settled in 2001.
On April 7, 2000, we acquired substantially all the net business assets of
Harford Duracool, LLC of Aberdeen, Maryland for an aggregate purchase price of
$21.2 million, which includes direct acquisition costs of $0.5 million, assumed
liabilities of $1.4 million and the payment of a post-closing working capital
adjustment of $0.3 million. Harford had sales of approximately $17.0 million in
1999. The excess of the purchase price over the estimated fair value of the net
assets acquired is $15.0 million.
We completed the acquisition of all the outstanding stock of Multiplex
Company, Inc., of St. Louis, Missouri, on March 31, 2000. Multiplex, which had
sales of approximately $31.0 million in 1999, is a manufacturer of beverage-
dispensing equipment. We acquired Multiplex for an aggregate purchase price of
$20.5 million, which is a net of $3.7 million of cash acquired, and included
$0.4 million of direct acquisition costs and assumed liabilities of
$5.3 million. The excess of the purchase price over the estimated fair value of
the net assets acquired is $12.7 million.
During 2000, we also completed the acquisitions of certain assets of Pioneer
Holdings LLC, the outstanding shares of Beverage Equipment Supply Company, and
the remaining shares of Hangzhou Manitowoc Wanhua Refrigeration Company, our
Chinese joint venture. We paid a total aggregate consideration for these
acquisitions of $18.2 million, which is net of cash received and includes
direct acquisition costs of $0.2 million and assumed liabilities of
$2.8 million.
1999 Acquisitions
We acquired Kyees Aluminum, Inc., a leading manufacturer of cooling
components for all of the major suppliers of fountain soft-drink beverage
dispensers on April 9, 1999. Based in La Mirada, California, Kyees is a
technology leader in the manufacture of cold plates--a key component used to
chill soft drinks in dispensing equipment. The aggregate purchase price paid
for Kyees was $28.5 million, which is net of $1.0 million of cash acquired and
includes direct acquisition costs of $0.3 million, assumed liabilities of $2.2
million and includes payment of a $1.3 million post-closing net worth
adjustment. The excess of the purchase price over the estimated fair value of
the net assets acquired is $24.1 million.
On January 11, 1999, we completed the acquisition of Purchasing Support
Group, renamed Manitowoc Beverage Systems. Manitowoc Beverage Systems is a
beverage systems integrator, with nationwide distribution of backroom equipment
and support system components serving the beverage needs of restaurants,
convenience stores, and other outlets. The aggregate purchase price paid for
Manitowoc Beverage Systems was $43.7 million, which is net of cash acquired of
$0.8 million and includes direct acquisition costs of $0.5 million and assumed
liabilities of $5.9 million. The excess of the purchase price over the
estimated fair value of the net assets acquired is $34.0 million.
50
1998 Acquisitions
On November 3, 1998 we purchased Powerscreen U.S.C., Inc. (doing business as
USTC, Inc.), based in York, Pennsylvania for an aggregate price of $51.5
million, which includes $0.5 million of direct acquisition costs, $7.4 million
of assumed liabilities and the receipt of a post-closing net worth adjustment
of $2.1 million. USTC builds three proprietary product lines: boom trucks,
rough terrain forklifts, and material-handling equipment. The excess of the
purchase price over the estimated fair value of the net assets acquired is
$38.0 million.
We acquired a 50% ownership interest in Fabbrica Apparecchiature per la
Produzione del Ghiaccio S.r.l. (F.A.G.) of Milan, Italy, a manufacturer of ice
machines, on September 9, 1998. This purchase also included an option to
purchase an additional 30% ownership over the next five years.
Liquidity and Capital Resources
Historical for the Quarter Ended March 31, 2001
Cash flow from operations was positive in the first quarter, totaling $11.1
million, compared with cash from operations of $1.1 million in the first
quarter of 2000. This increase was primarily the result of changes in working
capital amounts and decreased net income. Total funded debt was $209.3 million
at the end of the first quarter 2001, representing a debt-in capital ratio of
46% at March 31, 2001, as compared to 48% at December 31, 2000.
Historical for the Year Ended December 31, 2000
Cash flows from operations during 2000 were $63.0 million, representing a
decrease of 39.1% from $103.4 million in 1999 and an increase of 11.0% from the
$56.8 million reported in 1998.
The following table summarizes our sources and uses of cash during 2000.
2000
----------
(In
Thousands)
Sources of cash
Net earnings.................... $ 60,268
Non-cash adjustments to
income(1)...................... 26,147
Borrowings...................... 106,926
Proceeds from sale of fixed
assets......................... 3,481
Exercises of stock options...... 339
--------
Total......................... 197,161
--------
Uses of cash
Acquisitions.................... 98,982
Stock repurchases............... 49,752
Capital expenditures............ 13,415
Dividends....................... 7,507
Changes in operating assets and
liabilities.................... 23,368
Other........................... 251
--------
Total......................... 193,275
--------
Net cash flow..................... $ 3,886
========
- --------
(1) Includes depreciation, amortization, deferred income taxes, deferred
finance fees and loss on sale of fixed assets.
51
During 2000, there was a net increase in our outstanding borrowings under
our existing credit facilities of $106.9 million to $218.9 million at December
31, 2000 from $112.0 million at December 31, 1999. As a result, our debt-to-
capital ratio at the end of 2000 reached 48.4% versus 32.5% at the end of 1999.
This increase during 2000 was driven primarily to fund the five acquisitions
and one joint venture buy-out we completed during the year as well as the
repurchase of 1.9 million shares of our stock.
The $99.0 million we spent on acquisitions during 2000 is broken down by
segment as follows: $46.0 million in our foodservice segment; $49.0 million in
our marine segment; and $4.0 million in our crane segment. Of the total spent
for all our 2000 acquisitions, approximately $2.3 million was for acquisition
related expenses.
We completed the repurchase of 1.9 million shares of our common stock during
2000 at an average price of $26.42 per share. These shares were repurchased
under two separate authorizations from the board of directors for the
repurchase of a total of 2.5 million shares. At December 31, 2000, we had
authority to purchase up to 600,000 more shares.
A total of $13.4 million was spent during 2000 for capital expenditures. The
following table summarizes 2000 capital expenditures and depreciation by
segment.
Capital
Expenditures Depreciation
------------ ------------
(In Thousands)
Foodservice equipment.............................. $ 8,883 $6,168
Cranes and related products........................ 2,883 2,915
Marine............................................. 1,481 437
Corporate.......................................... 168 352
------- ------
Total............................................ $13,415 $9,872
======= ======
As a primary driver of EVA, we will continue to focus on maximizing our cash
flows from operations to attempt to keep the working capital employed in the
businesses at the minimum level required for efficient operations.
Shareholders' equity was $233.8 million, or $9.31 per diluted share, at
December 31, 2000, versus $232.2 million, or $8.86 per diluted share, at the
end of 1999. The increase in shareholders' equity was primarily due to net
earnings of $60.3 million and proceeds from the exercise of stock options of
$0.3 million, net of the $49.8 million repurchase of our common shares and the
payment of $7.5 million in common stock dividends during the year.
Pro Forma
After consummation of the acquisition of Potain and the related financing
transactions, including the sale of the old notes, we would have had pro forma
indebtedness as of March 31, 2001 of approximately $566.1 million. At the
closing of the acquisition of Potain, we borrowed the following amounts under
the senior credit facility:
. $175.0 million on term loan A, which matures in five years;
. $175.0 million on term loan B, which matures in six years; and
. $44.6 million on the $125.0 million revolving credit facility, which
matures in five years.
The undrawn amount under the revolving credit facility is available for working
capital and general corporate purposes, including the issuance of letters of
credit, which were approximately $0.8 million at the closing. After giving
effect to the acquisition of Potain and the related financing transactions,
including the sale of the old notes, we had approximately $80.6 million of
availability under the terms of the revolving credit facility at the closing.
52
The new senior credit facility and the indenture for the notes pose various
restrictions and covenants on us that could potentially limit our ability to
respond to market conditions, to provide for unanticipated capital investments,
to raise additional debt or equity capital or to take advantage of business
opportunities. See "Description of Indebtedness" and "Description of the
Notes--Certain Covenants."
We continue to fund capital expenditures to improve the cost structure of
our businesses, to invest in new processes and technology, and to maintain high
quality production standards. The level of capital expenditures in our
foodservice segment exceeded that of the other two segments and exceeded
depreciation due to this segment's current year investment in new processes
such as demand flow technology, and its investment in new-product
introductions. We believe that this trend in capital expenditures outpacing
depreciation will continue in 2001 due to continued implementation of demand
flow production technology throughout the segment and continued new-product
introductions. We expect that the level of capital expenditures in our crane
and marine segments will be moderately higher than 2000 levels due to process
improvement initiatives, new-product introductions and the addition of
Marinette into our marine segment. Our pro forma capital expenditures are
anticipated to increase to $34.5 million in 2001 from $23.2 million in 2000.
This increase is due to expenditures of $3.0 million on a new corporate
headquarters building and $11.3 million of expenditures associated with year
2000 acquisitions. We expect our pro forma capital expenditures to decline to
$32.0 million in 2002. This two-year capital expenditure level is in line with
our historic average capital expenditures.
After giving effect to the acquisition of Potain on the related financing
transactions, our pro forma cash and marketable securities would have been
$47.6 million at March 31, 2001, compared with $16.0 million at March 31, 2000.
Our primary cash requirements are expected to include working capital, interest
and principal payments on indebtedness, capital expenditures, dividends and
potentially future acquisitions. Our primary sources of cash are expected to be
cash flow from operations and borrowing under the new revolving credit
facility. Based upon current and anticipated future operations, we believe that
cash on hand and available borrowings will be adequate to meet future working
capital, capital expenditures, debt service and other capital requirements for
at least the next two years. We cannot assure you, however, that our business
will generate cash flow that, together with the other sources of capital, will
enable us to meet those requirements.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks from changes in interest rates, commodities
and, to a lesser extent, foreign currency exchange. To reduce these risks, we
selectively use financial instruments and other proactive management
techniques. All hedging transactions are authorized and executed under clearly
defined policies and procedures, which prohibit using financial instruments for
trading purposes or speculation.
Discussion regarding our accounting policies and further disclosures on
financial instruments are included in notes 1 and 5 of our notes to the
consolidated financial statements.
Interest Rate Risk
We use interest rate swaps to modify our exposure to interest rate
movements. This helps minimize the adverse effect of interest rate increases on
floating rate debt. Under these agreements, we contract with a counter-party to
exchange the difference between a fixed rate and floating rate applied to the
notional amount of the swap. Our existing swap contract expires at October,
2002.
The interest payments or receipts from interest rate swaps are recognized in
net income as adjustments to interest expense on a current basis. We enter into
swap agreements only with financial institutions that have high credit ratings,
which, in our opinion, limits exposure to credit loss.
At March 31, 2001, we had outstanding one interest rate swap agreement with
a financial institution, with a notional principal amount of $12.5 million. The
effect of this agreement on our interest expense in 2000 was not significant.
The fair value of this swap agreement was nominal at March 31, 2001. On that
date, the interest rate under this swap agreement was 6.3%.
53
Commodity Prices
We are exposed to fluctuating market prices for commodities including steel,
copper and aluminum. Each of our business segments is subject to the effects of
changing raw material costs caused by movements in underlying commodity prices.
We have established programs to manage the negotiations of commodity prices.
Some of these programs are centralized within business segments, and others are
specific to a business unit. In general, we enter into contracts with our
vendors to lock in commodity prices at various times and for various periods to
limit our near-term exposure to fluctuations in raw material prices.
Currency Risk
In 2000, we had limited exposure to foreign currency exchange fluctuations
in our European and Southeast Asian operations due to the small amount of
transactions processed in relation to the total for the whole company, and the
relative stability of the currencies exchanged. We will continue to utilize
foreign currency hedges to manage our exposure, when necessary. Use of these
instruments and strategies has been modest in the past.
Contingencies
The United States Environmental Protection Agency identified us as a
potentially responsible party under the Comprehensive Environmental Response
Compensation and Liability Act, liable for the costs associated with
investigating and cleaning up the contamination at the Lemberger Landfill
Superfund Site near Manitowoc, Wisconsin.
Eleven of the potentially responsible parties formed the Lemberger Site
Remediation Group and have successfully negotiated with the United States
Environmental Protection Agency and Wisconsin Department of Natural Resources
to settle the potential liability at the site and fund the cleanup.
Approximately 150 potentially responsible parties have been identified as
having shipped substances to the site.
The latest estimates indicate that the remaining costs to clean up the site
are nominal. Although liability is joint and several, our share of the
liability is estimated to be 11% of the total cleanup costs. Prior to December
31, 1996, we accrued $3.3 million in connection with this matter. Expenses
charged against this reserve in 2000, 1999 and 1998 were not significant.
Remediation work at this site has been completed, with only long-term pumping
and treating of groundwater and site maintenance remaining.
Recently Adopted Accounting Changes
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133." This issuance delayed the effective date of SFAS 133 for us
until the first quarter of 2001.
We adopted SFAS 133 on January 1, 2001. The effects of the adoption were
immaterial to our financial statements.
54
BUSINESS
We are a diversified industrial manufacturer with leading market positions
in our three principal markets: cranes; foodservice equipment; and marine
services in the Great Lakes region. In our crane business, we design,
manufacture and market a comprehensive line of crawler cranes, tower cranes
and boom trucks with capacities ranging from 10 tons to 1,433 tons. Our cranes
are used in a wide variety of applications, including energy, petrochemical
and industrial projects, infrastructure development such as road, bridge and
airport construction, commercial and high-rise residential construction,
mining and dredging. In our foodservice business, we design, manufacture and
market full product lines of ice making machines, walk-in and reach-in
refrigerator/freezers, fountain beverage delivery systems and other
foodservice refrigeration products for the restaurant, lodging, convenience
store and institutional foodservice markets. In our marine service business,
we provide shipbuilding repair and maintenance service in the U.S. Great Lakes
region. We own four shipyards and operate over 55% of the drydock capacity,
based on footage, serving the U.S. Great Lakes commercial fleet.
For the year ended December 31, 2000, we had net sales of $873.3 million,
EBITDA of $130.7 million and net earnings of $60.3 million, reflecting five-
year compound annual growth rates of 14.4%, 20.4% and 23.8%, respectively. On
a pro forma basis for the same period, we had net sales of $1.1 billion,
EBITDA of $172.2 million and net earnings of $49.0 million.
We believe we are:
. the leading provider of high capacity crawler cranes (over 150 tons)
with an estimated 50% of worldwide sales;
. one of two leading providers of tower cranes in the world with an
estimated greater than 25% of worldwide sales;
. the leading provider of ice making machines in the United States with an
estimated 40% of U.S. sales;
. the leading provider of walk-in refrigerator/freezers in the United
States; and
. the leading provider of marine services in the Great Lakes region.
Over the last six years we have grown both internally and through selective
acquisitions. We have introduced or acquired 125 new products since 1996. New
products we have introduced since 1998 represented approximately 60% of our
2000 net product sales. With the completion of the acquisition of Potain, we
have completed 16 acquisitions since 1995. These acquired businesses generated
52.8% of our pro forma 2000 net sales.
In 1993, we adopted EVA as a management tool to guide our investment,
acquisition and operating decisions. EVA defines value creation as the cash
return a business generates over and above its weighted average of capital. We
believe the disciplined use of EVA in our decision-making helps us to invest
capital efficiently, reduce operating costs and maximize our profitability and
cashflow from operations.
Competitive Strengths
We believe the following strengths are the primary drivers of our track
record of growth and profitability:
Leading Market Positions. We have served the crane and foodservice
industries since 1925 and 1945, respectively, and we believe the Manitowoc
name is among the best-known brands in those markets. We believe we hold a top
three market share in all of our principal product categories and we believe
that approximately 65% of our net sales are derived from product categories in
which we have the first or second largest market share. We believe our strong
market shares and our substantial installed base of equipment in the crane and
55
foodservice markets, together with our established global distribution networks
and our expertise in product development, provide a significant competitive
advantage.
Diverse Revenue Base. Our revenue base is diversified across three
industries and five continents. Our crane, foodservice and marine segments,
respectively, represent approximately 56.1%, 37.5% and 6.4% of our pro forma
2000 net sales. Approximately 27% of our pro forma 2000 net sales were
generated outside of North America, principally in Europe with 21.7% and Asia
with 2.9%, and we expect our international sales to grow faster than domestic
sales over the next several years. We also have a diverse customer base, with
no single crane or foodservice customer representing greater than 5.0% of our
total pro forma net sales for 2000. While both our crane and foodservice
segments are influenced by general economic conditions, they each serve
different markets that do not react in lockstep with each other. Our marine
segment provides additional stability, as its repair and maintenance services
are primarily non-discretionary and the majority of our new construction
contracts are with government agencies whose investment decisions are not
necessarily influenced by general economic conditions.
Strong Track Record of Product Innovation. Over the last six years we have
introduced or acquired 125 innovative new products to better serve our
customers' needs in all of our markets. We currently hold over 140 patents
covering new product and technology innovations.
. Cranes. In May 2000, we launched the most successful new crane in
Manitowoc's history, the 275-ton capacity Model 999 crawler crane. We
received orders for 80 Model 999 cranes in the first seven months
following its introduction. In April 2001, we introduced the 110-ton
Model 915 duty-cycle; the 110-ton Model 1015 foundation crane; the Model
555, a 150-ton limited duty-cycle lift crane; and the Model 19000, a
500-ton high-capacity liftcrane.
. Foodservice. In 2000, we introduced our patented QuietQube ice-cube
machines that feature our proprietary CVD technology and provide
capacities of up to 2,000 pounds of ice per day. Our QuietQube CVD
product line substantially reduces noise and heat exhaust during
operation as well as floor space requirements, compared to available
competing products. In 2000, we also introduced our first ice flake
machine, which expands our penetration into the healthcare industry and
provides an entree into the supermarket segment where flakes are the
preferred type of ice for keeping meat and seafood fresh.
Cost Efficient Manufacturing. We believe we are a highly efficient
manufacturer and service provider in each of our segments. Establishing
production facilities in China for our ice machines in 1995 provided us a low
cost manufacturing base for worldwide distribution of some of our foodservice
products. In 2000, we implemented a "mixed model/demand flow" manufacturing
process in our foodservice segment, which enables us to shorten lead times and
respond more effectively to customer demand, while reducing required inventory
levels. In our crane segment, we maintain modern, efficient production
facilities that enable us to produce a high quality product with low lead time
requirements. Through a series of steps over the last two years, including
outsourcing of non-core manufactured components, redesign of production
processes, elimination of production bottlenecks at our facilities and
investment in technology, we have reduced the average manufacturing lead time
for our crawler cranes from approximately 128 days in 1998 to approximately 70
days in 2000.
Excellent Customer Service. We support our products and our customers in the
field through an extensive after-market customer service network. In our crane
segment, we operate full-service machine shops and a fleet of fully equipped
trucks that provide complete machining services at customer locations--or
anywhere in the field--24 hours a day. Down-time in the field can be extremely
costly for our customers and we believe our responsiveness and the quality of
our customer service is an important differentiating factor for us in the
lifting market. In our foodservice segment, we offer a continuous schedule of
maintenance and repair training seminars during the year for independent
service providers and our distributors. In 2000, over 14,000 individuals from
around the world participated in our training seminars. We will only sell our
foodservice
56
products in markets where trained and qualified service personnel are available
locally, and we work to ensure that quality product service is available in
every market served. In our marine segment, we consistently complete repair,
maintenance and new construction projects on time and within budget, which we
believe is an important factor influencing our customers' decision to select
us.
Business Strategy
With manufacturing and marketing operations in the U.S., Europe and Asia,
our strong brand names and leading market positions, we believe we are well-
positioned to serve our existing customers and to capitalize on growth
opportunities around the world. We will continue to pursue our strategy by
focusing on new product development, improving manufacturing efficiency,
expanding our geographic reach and selectively pursuing acquisitions, using EVA
as the principal management tool for evaluation of our operating and investment
decisions.
Emphasize New Product Development and Product Quality. We will continue to
invest capital every year to develop new products with improved cost-effective
functionality in response to changing customer requirements. We will also
continue to improve and enhance our existing products.
Maintain Highly Efficient Manufacturing. With EVA as a guiding principle,
our manufacturing management teams are constantly seeking opportunities to
improve productivity to increase our cash flow and return on invested capital.
Our current initiatives include:
. implementation of mixed model/demand flow in more of our foodservice
business units over the next year;
. introduction of additional welding robotics to our crane segment; and
. expansion of our manufacturing operations in Asia.
Extend Our Geographic Reach. We will continue to extend our reach deeper
into existing geographic regions and into new markets. The Potain acquisition
significantly extends our international presence with the addition of seven
European and one Asian manufacturing sites and an established distribution
network in 75 countries, including within Europe, Asia and Latin America. We
intend to capitalize on the cross-selling opportunities both for our crawler
crane and boom truck products through Potain's distributors overseas and for
Potain's tower crane products through our Manitowoc distributors in North
America. We recently opened a distribution center in Uruguay to serve the
foodservice market in South America. In addition to establishing our own
facilities in new markets, we will pursue joint ventures and licensing
agreements where appropriate to further extend our manufacturing and
distribution networks around the world. For example, we recently entered into a
licensing agreement with Blue Star Limited in India for the production and
marketing of refrigerators and freezers.
Selectively Expand Through Acquisition. We will continue to consider
selective acquisitions that improve our market position by extending our
product lines or geographic reach. In evaluating a potential acquisition
candidate, we generally require that the candidate demonstrate the following:
. leadership in its market niche;
. the potential for easy integration into our existing operations; and
. the potential for generating strong cash flow.
Additionally, our objective for each acquisition is for it to be earnings per
share accretive within two years and EVA positive within three years. With the
completion of the acquisition of Potain, we have completed ten acquisitions
since January 1, 1998.
57
Deploy Capital Efficiently. We believe our track record of strong cash flow
is attributable to our commitment to EVA. We began implementation of EVA
principles in 1993 and have generated nearly $145.0 million of economic value
for our investors since 1995. More than 25% of our workforce is incentivized by
EVA performance. We plan to continue investing our capital based on EVA
principles in order to maximize cash generation and increase our return on
invested capital.
Industry Overview
Cranes and Related Products
Our crane segment principally manufactures products for three markets in the
crane industry: lattice-boom crawler cranes, tower cranes and boom trucks. Our
lattice-boom crawler cranes are used to lift material and equipment in a wide
variety of applications and end markets, including heavy construction, bridge
and highway, duty cycle, infrastructure, energy-related and crane rental
industries. Our boom truck cranes serve commercial, industrial, utility,
construction and maintenance applications. Our top slewing tower cranes are
generally sold to large building and construction contractors as well as to
rental companies. Our self-erecting tower cranes are sold primarily to small
and medium-sized building and construction contractors as well as rental
companies. We also manufacture scissor lift platforms used in maintenance and
construction, which we primarily sell to general equipment companies as a safer
alternative to scaffolding and ladders.
According to published industry sources, aggregate world demand for lifting
equipment, including cranes, draglines and excavators, is estimated to have
grown at an annual compound rate of 4.5% from $6.0 billion in 1989 to an
estimated $9.3 billion in 1999, strongly outpacing growth in overall gross
fixed investment with a growth rate of 2.7% and the construction industry as a
whole with a growth rate of 3.8%. North America's market for lifting equipment
was roughly $4.0 billion in 1998, the largest among the world's regions and
equivalent to over 40% of total global demand. The North American market has
grown briskly since the early 1990's, benefiting from economic expansion in the
U.S. and Canada. The second largest regional market for lifting equipment is
the Asia/Pacific region. Aggregate Asia/Pacific demand for lifting equipment in
1998 equaled $2.2 billion or roughly 24% of the world market. Although the
level of industrialization, size and quality of building stock, degree of
development of the infrastructure and similar factors vary widely across the
region, a significant number of the countries in the region are advanced enough
to be intensive users of lifting equipment and associated capital equipment.
The majority of demand is generated in Japan, China and South Korea. The
Western European market for lifting equipment was approximately $2.1 billion in
1998, third largest in the world behind North America and Asia/Pacific. As in
those regions, the economies of Western Europe feature highly evolved
industrial, commercial, residential and public sectors which are intensive
users of infrastructural networks.
Lattice-Boom Cranes. Lattice-boom cranes were developed in the 1920s to fill
the need for heavy lift construction applications and continue to be utilized
today principally in heavy construction and infrastructure development
applications. Lattice-boom crawler cranes are widely accepted as the most
economical lifting tool for capacity requirements above 100 tons and are unique
in their ability to maneuver while lifting. Typical product applications
include infrastructure work, petroleum-related projects, power generation
projects and dockside/material handling. As each project may require differing
boom lengths and lifting capacities, contractors generally tend to rent
specific machines as needed rather than own a fleet of machines with varying
capabilities. We sell our lattice-boom cranes in various markets, including
North America, Europe, the Middle East and Asia. Demand for lattice-boom cranes
is primarily dependent upon industrial and construction activity as well as
replacement cycles for existing cranes.
Tower Cranes. Tower cranes were developed in the 1950s to lift and place
construction material accurately and quickly at various heights, without
utilizing substantial square footage on the ground for set-up or operation.
Tower cranes are primarily utilized in the commercial building and construction
industry, as well as in specialty infrastructure development, such as ports and
dams; to a lesser extent, tower cranes are utilized in residential
construction.
58
The tower crane market is divided into two major segments, top slewing
cranes and self-erecting cranes.
We believe the worldwide market for top slewing cranes is focused in
Western Europe. We believe that prior to the 1997 economic crisis in Asia,
Asia represented a significantly larger portion of total top slewing crane
sales. Other significant markets include North America, Latin America and
Russia.
We believe France, Germany and Italy currently represent the largest
markets for self-erecting cranes, and together currently account for a
majority of total estimated sales of new cranes. However, we believe that
other geographic markets, notably the Americas, should experience significant
growth as self-erecting cranes are introduced and the cost effectiveness of
tower cranes becomes more widely appreciated.
Boom Trucks. A boom truck is a hydraulic telescopic crane mounted to a
commercial truck chassis. The telescopic boom truck is used primarily by
contractors engaged in the industrial, commercial, public works, residential
construction, utility and oilfield service industries. They are also used in
maintenance and materials-handling applications to lift materials or personnel
at the same job site or to move material to another location. Over the past 20
years, boom trucks have replaced truck mobile cranes in the market for under
30 ton lifting devices, due to their mobility.
Aerial Work Platforms. The aerial work platform market can be divided into
three product types. These are scissor lifts, articulated lifts and telescopic
boom lifts. Our product offering is currently focused on the scissor lift
market. The aerial work platform industry in North America has developed over
the past two decades as end-users have realized that aerial work platforms are
an efficient and safer alternative to scaffolding and ladders. The products
are used for indoor or outdoor applications in a variety of construction,
industrial and commercial settings that require workers to be lifted to high
elevations. Rapid growth of the industry can be attributed to efficiency
considerations as well as federal and supranational regulations mandating
safety standards for people working in elevated areas.
Foodservice Equipment
Our ice-cube machines, combination ice/beverage dispensers and dispensing
valves, long-draw soft drink and beer dispensing systems and our other
foodservice equipment are used by restaurants, hotels and other institutions,
as well as the soft-drink industry. Our walk-in refrigerators and freezers are
used in restaurants, hotels and other institutions. Sales of our various
foodservice equipment products are driven primarily by demand from
participants in the food and beverage industry.
According to published industry sources, the foodservice industry, which
includes restaurants, cafeterias, institutions, hotel kitchens, kiosks and
caterers, had estimated sales of $376.0 billion in 2000. Over the past 30
years, the industry has grown at a compounded annual rate of 7.5% from $43.0
billion to its current level. According to published industry sources, the
foodservice industry spent approximately $7.5 billion to purchase new
equipment in 2000, up 3.0% from 1999.
A major driver of foodservice equipment sales is consumption of food
prepared away from home. This includes expenditures on food and beverage
served in restaurants and institutional cafeterias as well as food prepared in
supermarkets and other stores. Although the growth in overall food consumption
is slow and driven primarily by population growth, growth in food prepared
away from home has enjoyed strong secular expansion in past decades. This is
due to several trends: the increase in the labor participation among women,
rising disposable incomes, greater value placed on leisure and personal time
and the emergence of eating out as a lifestyle trend.
According to the U.S. Bureau of Economic Analysis, approximately 40% of
inflation-adjusted food spending in the U.S. is spent on purchased meals,
which includes restaurants and take-out food, up from 27% in 1970, 33% in 1980
and 37% in 1990. This measure may even underestimate the consumption of food
and beverage prepared away from home, as it does not include food served in
institutions and prepared food bought
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at supermarkets. Additionally, one in every 2.5 meals is prepared outside the
home and almost half of all U.S. adults are restaurant patrons on a typical
day.
Demand in the commercial foodservice and retail food equipment industries is
driven by several industry trends. These trends include continued expansion and
ongoing replacement and renovation by major restaurant and lodging chains,
increased consumer expenditures for food prepared away from home, increased
prepared food offerings at supermarkets and convenience stores, supplier
consolidation and increased international foodservice demand.
Marine Operations
The Great Lakes commercial fleet is comprised of over 140 vessels and
integrated tug/barges. In addition, many U.S. Coast Guard vessels and other
smaller ships sail the lakes. A number of foreign-flagged oceangoing ships also
sail the Great Lakes via the St. Lawrence Seaway. The owners of the commercial
fleets are primarily companies engaged in transporting and transloading of bulk
commodities, including iron ore, coal, grain, limestone and petroleum, and
finished goods primarily for the steel, utility, mining, and chemical
industries.
This entire fleet of vessels comprise the potential market for Great Lakes
shipyards, providing ship-repair and shipbuilding services. Commercial vessels
must receive inspections every five years, providing shipyards with a steady
stream of recurring business. Under the Merchant Marine Act of 1920, U.S.
flagged vessels are obligated to utilize U.S. based shipyards for rebuilding
services.
Demand for ship repair, maintenance, conversion and new construction
services is currently being driven by longer shipping seasons, an aging fleet
serving the Great Lakes, continued high utilization of the existing fleet and
moves toward automating the existing fleet to enhance operating efficiency and
reduce shore time.
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Products and Services
We are a diversified manufacturing company with market-leading operations in
cranes and related products, foodservice equipment and marine services. We sell
our key products through the following principal business segments:
Percentage of
Pro Forma
Business Segment 2000 Net Sales Key Products Key Brands
---------------- -------------- --------------------------- ------------
Cranes and Related
Products........... 56.1% Crawler- and truck-mounted Manitowoc
lattice-boom cranes; top Potain
slewing, topless, self- CraneCare
erecting cranes; special Femco
cranes; hydraulically
powered telescopic boom
trucks; scissor lift
platforms; crane rebuilding
and remanufacturing
services; aftermarket
replacement parts for
cranes and excavators;
industrial repair and
rebuilding services for
metal-forming, scrapyard,
steel recycling, and
aggregate equipment.
Foodservice
Equipment.......... 37.5% Commercial ice-cube Manitowoc
machines, ice flakers, and SerVend
storage bins; ice/beverage Multiplex
dispensers; long-draw soft- Kolpak
drink and beer dispensing Harford-
systems; walk-in Duracool
refrigerators and freezers; McCall
reach-in refrigerators and Koolaire
freezers; refrigerated RDI
under-counters and food Flomatic
prep tables; private label Compact
residential Icetronic
refrigerator/freezers;
post-mix beverage
dispensing valves; cast
aluminum cold plates;
compressor racks and
modular refrigeration
systems; backroom beverage
equipment distribution
services.
Marine.............. 6.4% Inspection, maintenance and
repair of freshwater and
saltwater vessels. New
construction services for
commercial, government,
military, and research
vessels of all varieties,
including self-unloading
bulk carriers, double-hull
tank barges, integrated
tug/barges and dredges.
Also provides industrial
repair and maintenance
services for refineries,
power plants and heavy
industrials.
Cranes and Related Products
Our crane segment designs and manufactures a diversified line of crawler-
and truck-mounted lattice-boom cranes, hydraulically powered telescopic boom
trucks, rough-terrain forklifts and material handling equipment, which we sell
under the "Manitowoc" name for use by the energy, petrochemical, construction,
mining, pulp and paper and other industries. Our crane segment also designs and
manufactures a diversified line of top slewing and self-erecting cranes, which
we sell under the "Potain" name, for use in construction and other industries
primarily in Europe and Asia. We also specialize in crane rebuilding and
remanufacturing services, aftermarket replacement parts for cranes and
excavators, and industrial repair and rebuilding services for metal-forming,
scrapyard and recycling equipment, which we sell under the "Femco" name. Many
of our customers purchase one crane together with several attachments to permit
use of the crane in a broader range of lifting applications and other
operations. Various crane models combined with available options have lifting
capacities ranging from approximately 10 to 1,433 U.S. tons and excavating
capacities ranging from 3 to 15 cubic yards. We also offer a line of scissor
lift aerial platforms that are sold under the "Liftlux" name.
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Lattice-boom cranes. We market our lattice-boom crawler cranes through our
subsidiary, Manitowoc Cranes, Inc., the largest manufacturer of lattice-boom
crawlers in North America. Lattice-boom cranes consist of a lattice-boom, which
is a fabricated, high-strength steel structure which weighs less and provides
higher lifting capacities than a telescopic boom of similar length, mounted on
a base which is either crawler- or truck-mounted. The lattice-boom design
significantly reduces ground-bearing pressures enabling a lattice-boom crane to
pick-and-carry virtually any rated load. The lattice-boom sections, together
with the crane base, are transported to and erected at a project site.
We currently offer ten models of lattice-boom cranes with lifting capacities
ranging from approximately 80 to 1,433 tons, which are used to lift material
and equipment in a wide variety of applications and end markets, including
heavy construction, bridge and highway, duty cycle and infrastructure and
energy related projects. These cranes are also used by the crane rental
industry, which serves all of the above industries.
Lattice-boom crawler cranes may be classified according to their lift
capacity--low capacity and high capacity. Low capacity crawler cranes with 150-
ton capacity or less are often utilized for general construction and duty cycle
applications. We offer two models in this crane category: the Model 111, an 80-
ton capacity, self-erecting crawler crane; and the Model 222, a 100-ton
capacity, self-erecting crawler crane.
High capacity crawler cranes with greater than 150-ton capacity are utilized
to lift materials in a wide variety of applications and are often utilized in
heavy construction, energy-related, bridge and highway and dockside
applications. We offer five high-capacity models: the Model 777, a 175-ton
capacity, self-erecting crawler crane; the Model 888, a 230-ton capacity, self-
erecting crawler crane; the Model 999, a 275-ton capacity, self-erecting
crawler crane; the Model 2250, a 300-ton capacity, self-erecting crawler crane;
and the Model 21000, a 1,000-ton capacity liftcrane. The Model 999, which we
introduced in 2000, is the most successful new crane in our history with orders
received for 80 units at December 31, 2000. The Model 999 is one of the largest
self-erecting crawler cranes available and offers the industry's first ever,
fully interchangeable crawler that can be mounted on either side of the crane
base. This allows for shorter set up time, increased reliability and the
opportunity to offer our customers the ability to expand their crane fleets at
a lower cost.
In April 2001, we introduced the 110-ton Model 915 duty-cycle crane; the
110-ton Model 1015 foundation crane; the Model 555, a 150-ton limited duty-
cycle lift crane; and the Model 19000, a 500-ton high-capacity liftcrane.
We also manufacture two lattice-boom, self-erecting truck cranes: the M-
250T, a 300-ton capacity crane; and the Model 777T, a 220-ton capacity crane.
These cranes serve the same markets as our high capacity, crawler cranes and
differ from their crawler counterparts only to the extent that they are mounted
onto a truck rather than a crawler, and can travel at highway speeds.
Crawler Crane Attachments. Manitowoc Cranes offers customers various
attachments that provide our cranes with greater capacity in terms of height,
movement and lifting. Our principal attachments are: MAX-ER(TM) attachment,
luffing jibs, tower attachments and RINGER(TM) attachments. The MAX-ER is a
trailing, counterweight, heavy-lift attachment that dramatically improves the
reach, capacity and lift dynamics of the basic crane to which it is mounted. It
can be transferred between cranes of the same model for maximum economy and
occupies less space than competitive heavy-lift systems. A luffing jib is a
fabricated structure similar to, but smaller than, a lattice-boom. Mounted at
the tip of a lattice-boom, a luffing jib easily adjusts its angle of operation
permitting one crane with a luffing jib to make lifts at additional locations
on the project site. It can be transferred between cranes of the same model to
maximize utilization. A RINGER attachment is a high-capacity lift attachment
that distributes load reactions over a large area to minimize ground-bearing
pressure. It can also be more economical than transporting and setting up a
larger crane.
During 2000, Manitowoc Cranes introduced several new attachments, including
the MAX-ER 2000, which boosts the capacity of the Model 2250 lattice-boom
crawler from 300 to 500 tons and the Model 21000 from 831 to 1,433 tons, while
also providing over 600 feet of reach for the Model 2250 and 640 feet of reach
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for the Model 21000. In April 2001, we introduced a 78.5-ton luffing jib for
the Model 999, which will enable boom-and-jib combinations having a total reach
of up to 480 feet.
Tower Cranes. Manitowoc Cranes, under the Potain brand name, designs and
manufactures tower cranes utilized primarily in the building and construction
industry. Tower cranes offer the ability to lift and place material more
quickly and accurately than other types of lifting machinery without utilizing
substantial square footage on the ground. Tower cranes include a stationary
vertical tower and a horizontal jib with a counterweight, which is placed near
the top of the vertical tower. A load carrying cable runs through a trolley
which is on the jib, enabling the load to move along the jib. The jib rotates
360 degrees, which compensates for the crane's inability to move, thus
increasing the crane's work area. Operators are primarily located where the jib
and tower meet, which provides superior visibility above the worksite. We offer
a complete line of tower crane products, including top slewing, luffing jib,
topless, self-erecting cranes and special cranes for dams, harbors and other
large building projects.
Top slewing cranes are the most traditional form of tower cranes. Top
slewing tower cranes have a tower and multi-sectioned horizontal jib.
Suspension cables supporting the jib extend from the tower. These cranes rotate
from the top of their mast and can increase in height with the project. Top
slewing cranes are transported in separate pieces and assembled at the
construction site in one to three days depending on the height. Potain offers
56 models of top slewing tower cranes with lifting capabilities ranging between
40 and 2,200 meter-tons. These cranes are generally sold to large building and
construction groups, as well as rental companies.
Luffing jib tower cranes, which are a type of top slewing crane, have an
angled rather than horizontal jib. Unlike other tower cranes which have a
trolley that controls the lateral movement of the load, luffing jib cranes move
their load by changing the angle of the jib. These cranes are transported in
separate pieces and assembled at the construction site in one to three days
depending on the height. The cranes are utilized primarily in urban areas where
space is constrained or in situations where several cranes are installed close
together. Potain currently offers 11 models of luffing jib tower cranes with
maximum jib lengths of 23 meters.
Self-erecting tower cranes are generally trailer-mounted and unfold from
four sections, two for the tower and two for the jib. The smallest of Potain's
models unfolds in less than 8 minutes; larger models erect in a few hours.
Self-erecting cranes rotate from the bottom of their mast. Potain offers 22
models of self-erecting cranes with lifting capacities ranging between 10 and
80 meter-tons which are utilized primarily in light construction and
residential applications.
Boom Trucks. In 2000, we consolidated our hydraulic boom truck operations
under a single new entity--Manitowoc Boom Trucks. The name change represents
the unification of operations of our three former boom truck product lines:
Manitex, USTC and Pioneer. A boom truck is a hydraulically powered telescopic
crane mounted on a commercial truck chassis. Boom trucks are generally lighter
and have lower lifting capacities than truck cranes. Additionally, unlike a
truck crane, a boom truck can haul up to several thousand pounds of payload on
its cargo deck while travelling at highway speeds. Manitowoc Boom Trucks offers
48 different models on four different platforms: the S-series rear-mounted
cranes; the C-series traditional behind-the-cab cranes; the X-series mid-
capacity cranes; and the new T-series tractor-mount design. These models have
lifting capacities ranging from 10 to 42 tons, the largest capacity boom truck
in the marketplace.
Backlog. The year-end backlog of crane products includes orders that have
been placed on a production schedule, and those orders that we have accepted
and that we expect to be shipped and billed during the next year. Manitowoc's
backlog of unfilled orders for cranes and related products at December 31, 2000
approximated $93.4 million, as compared with $136.0 million a year earlier. The
decrease is primarily due to reduced lead times and increased operations
throughput as we have implemented flexible manufacturing process and improved
efficiencies. As a result, order rates are a better indicator of business
strength than traditional backlog figures. Potain's backlog of unfilled orders
for cranes and related products as of December 31, 2000, approximated $56.0
million and has historically remained consistent throughout the year at
approximately two months' sales.
63
Foodservice Equipment
Our foodservice equipment segment designs, manufactures and markets
commercial ice-cube machines and storage bins; walk-in refrigerators and
freezers; reach-in refrigerators and freezers; refrigerated undercounters and
food preparation tables; private label residential refrigerators/freezers;
ice/beverage dispensers; post-mix beverage dispensing valves; cast aluminum
cold plates; long draw beer dispensing systems; compressor racks and modular
refrigeration systems; plus backroom beverage equipment distribution services.
Products are sold under the brand names Manitowoc, Kolpak, SerVend, McCall,
Flomatic, Compact, Icetronic and RDI.
Commercial Ice-Cube Machines. Ice machines are classified as either
dedicated or combination machines and can be further classified by size,
capacity and the type of ice they produce. There are four basic types of ice
made by ice machines: cubes, flakes, chiplets and nuggets. Machines that make
ice-cubes, the most popular type of machine, are used by the foodservice
industry for drinks, ice displays and salad bars. The average salad bar uses 35
pounds of cubed ice per day per cubic foot of display area. Flake ice can cool
an item faster than any other form of ice and is used to a great extent in
processing applications, such as keeping meats and seafood fresh as well as in
medical facilities for use in ice packs. Nuggets, which are made by compacting
flaked ice, are used mostly in drink dispensing machines.
Manitowoc Ice manufactures 22 models of commercial ice-cube machines,
serving the foodservice, convenience store, healthcare, restaurant and lodging
markets. Our ice-cube machines make ice in cube, flake and chiplet form, and
range in daily production capacities from 45 to 2,000 pounds. The ice-cube
machines are either self-contained units, which make and store ice, or modular
units, which make, but do not store, ice. We offer the world's only commercial
ice making machines with patented cleaning and sanitizing technology. This
feature eliminates the downtime and labor costs associated with periodic
cleaning of the water distribution system. All units feature patented
technology with environmentally friendly hydrofluorocarbon refrigerants. We
also manufacture the patented QuietQube ice-cube machines, which feature CVD,
or cool vapor defrost, technology, operate heat-free, are 75% quieter than non-
CVD units and produce more ice in a smaller footprint. These new QuietQube
machines are ideally suited for use in new restaurants, which often feature
more open designs, and for use with the self-service beverage systems
increasingly found in quick service restaurants and convenience stores. The
QuietQube Ice/Beverage Series is the only ice-cube machine especially made to
fit on beverage dispensers. Our ice-cube machines are sold throughout North
America, Europe and Asia.
Walk-in Refrigerators and Freezers. Kolpak and Harford-Duracool manufacture
modular and fully assembled walk-in refrigerators, coolers and freezers for
restaurants, institutions, commissaries and convenience stores. Walk-in
refrigerators and freezers are large, insulated storage spaces fitted with
refrigeration systems. Most walk-ins are custom-made from modular insulated
panels constructed with steel or aluminum exteriors and foamed-in-place
urethane insulation. Refrigerator/blower units are installed in order to
maintain an even temperature throughout the refrigerated space. Walk-ins come
in many models with various types of doors, interior shelving, and viewing
windows. Larger units, such as refrigerated warehouses, may utilize liquid
chillers as a refrigeration system due to their greater efficiency in large
scale applications. Units range in size from 200 to 60,000 cubic feet. We also
produce a complete line of express or pre-assembled walk-ins.
Reach-in Refrigerators and Freezers. Reach-in coolers and freezers are
typically constructed from stainless steel and have a thick layer of insulation
in the walls, doors and floor. The cabinets have one to three doors, either
glass or steel and come in a variety of sizes. Although reach-ins resemble
household refrigerators, commercial versions utilize few plastic parts,
incorporate larger compressor units and do not usually combine refrigerator and
freezer compartments in the same unit. These design features stem from the
needs of end-users and heavy duty usage of most reach-ins. For example, in
contrast to the typical household refrigerator, commercial reach-ins may be
opened and closed hundreds of times per day, placing mechanical strain on the
structure and greatly increasing the cooling load on the refrigeration system.
McCall Refrigeration produces
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self-contained upright and under-counter refrigeration equipment, including a
full line of reach-ins and refrigerated food preparation equipment for
restaurants, institutions and commissaries. We make over 50 standard models of
reach-ins plus custom-built units. The units come in one, two and three-door
models with storage capabilities up to 72 cubic feet.
Dispensers and Products. Manitowoc Ice, SerVend, Manitowoc Beverage Systems,
Multiplex and Kyees Aluminum produce ice-cube dispensers, beverage dispensers,
ice/beverage dispensers, post-mix dispensing valves and cast aluminum cold
plates and related equipment for use by quick service restaurants, convenience
stores, bottling operations, movie theaters and the soft-drink industry. Ice-
cube dispensers come in the form of floor and countertop models with daily
production capacities ranging from 45 to 310 pounds, while ice/beverage
dispensers include traditional combination ice/beverage dispensers, drop-in
dispensers and electric countertop units. Dispensing systems are manufactured
for the dispensing of soda, water and beer. Soda systems include remote systems
that produce cold carbonated water and chill incoming water and syrup prior to
delivery to dispensing towers. Beer systems offer technically advanced remote
beer delivery systems which are superior by design, allow increased yields,
provide better under-bar space utilization and allow multiple stations to
operate from one central unit. In 2000, SerVend broadened its market by
introducing a line of counter-electric beverage dispensers.
Manitowoc Beverage Systems, Inc., or MBS, is a systems integrator with
nationwide distribution of backroom equipment and support system components.
MBS serves the needs of restaurants, convenience stores and other outlets. It
operates in the Northeast and Atlantic Coast regions, as well as portions of
Arizona, California, Florida, Texas, Georgia and Nevada. In February 2000,
Beverage Equipment Supply Company, or BESCO, was integrated into MBS. BESCO is
a leading wholesale distributor of beverage dispensing equipment serving 14
states primarily in the Midwest. BESCO represents more than 50 different
equipment manufacturers with products ranging from beverage dispensing
equipment and systems to draft beer-dispensing systems.
Backlog. The backlog for unfilled orders for our foodservice equipment
segment at December 31, 2000 and 1999 was not significant because orders are
generally filled within 24 to 48 hours.
Marine
We operate four shipyards located in Sturgeon Bay, Wisconsin; Marinette,
Wisconsin; Toledo, Ohio; and Cleveland, Ohio. Our shipyard in Sturgeon Bay
consists of approximately 55 acres of waterfront property. Four of those acres,
which connect two operating areas of the shipyard, are leased under a long term
ground lease. Our Sturgeon Bay facilities include approximately 295,000 square
feet of enclosed manufacturing and office space, a 140 foot by 1,158 foot
graving dock, a 250 foot graving dock, and a 600 foot, 7,000-ton, floating dry-
dock. We also lease shipyard facilities at Toledo and Cleveland for our marine
segment. These facilities include waterfront land, buildings, and 800-foot and
550-foot graving docks.
On November 20, 2000, we acquired Marinette, a leading builder of mid-sized
commercial, research and military vessels in the U.S. Located in Marinette,
Wisconsin, just across Green Bay from our Bay Shipbuilding facility, Marinette
operates one of the largest shipyards in the Great Lakes. Marinette offers
complete in-house capabilities for all shipbuilding disciplines and is
currently under contract to build a series of 16 ocean-going buoy tenders for
the U.S. Coast Guard, seven of which have been delivered to date. Marinette is
one of three firms competing to replace all of the Coast Guard's larger
deepwater vessels under a multi-year contract. Marinette's new build capability
provides a strong compliment to our historic expertise in repair, maintenance
and refurbishment.
The year-end backlog for our marine segment includes repair and maintenance
work presently scheduled which will be completed in the next year. At December
31, 2000, the backlog for our marine segment approximated $33.4 million,
compared to $39.3 million one year ago. The project backlog for Marinette at
December 31, 2000 was $160.0 million to be completed over the next several
years. Marinette's backlog does not include options for additional vessels, yet
to be awarded.
65
Marketing and Distribution
Cranes
Our crane segment benefits from two strong distribution networks: an
established base of independent distributors and two wholly-owned distributors
around the world, which currently focus on crawler cranes and boom trucks; and
a network of agents around the world currently focused on Potain's tower crane
products. While our distributors do not generally sell our products
exclusively, we believe that, in many cases, our products represent a
significant portion of the distributor's business.
Distributors generally do not carry inventories of new cranes, except for
the smaller truck cranes. Most distributors maintain service facilities and
inventories of replacement parts. We employ service representatives that
usually assist customers in the initial set-up of new cranes.
We do not generally provide financing for our independent distributors or
their customers; however, dealers frequently assist customers in arranging
financing and may accept used cranes as partial payment on the sale of new
cranes.
Export sales are usually made to our foreign subsidiaries or independent
distributors, in addition to sales made to domestic customers for foreign
delivery. Foreign sales are made on letter of credit or similar terms.
Foodservice Equipment
Our foodservice equipment segment markets its products worldwide through
independent wholesale distributors, chain accounts and government agencies. Our
distribution network now extends to 80 distributors in 70 countries in Western
Europe, the Far East, the Middle East, the Near East, Latin America, North
America, the Caribbean and Africa. We have overseas distribution facilities in
Scotland, Uruguay and Italy. Our acquisition of Multiplex, a manufacturer of
beverage dispensers and backroom equipment and support system components, in
2000 has enabled us to increase sales of ice and refrigerated foodservice
equipment in Europe.
Marine
All of our shipbuilding operations are conducted at our Sturgeon Bay,
Wisconsin and Marinette, Wisconsin facilities. Our ship repair, servicing and
dry-docking services are provided at our Toledo, Ohio and Cleveland, Ohio
facilities.
Engineering, Research and Development
Our extensive engineering, research and development capabilities have been
key drivers of our marketplace success. We engage in research and development
activities at all of our significant manufacturing facilities. We have a staff
of over 175 engineers and technicians who are responsible for improving
existing products and developing new products. We incurred research and
development expenditures of $4.7 million in 1998, $6.9 million in 1999 and $6.7
million in 2000.
Our team of engineers focuses on developing innovative, high performance,
low maintenance products, which are intended to create significant brand
loyalty among customers. Design engineers work closely with our manufacturing
and marketing staff, enabling us to identify quickly changing end-user
requirements, implement new technologies and effectively introduce product
innovations. Close, carefully managed relationships with dealers, distributors
and end users help us identify their needs, not only for products, but for the
service and support that is critical to their profitable operation. As part of
our ongoing commitment to provide superior products, we intend to continue our
efforts to design products that meet evolving customer demands and reduce the
period from product conception to product introduction.
Nearly 60% of the products we now sell have been acquired or introduced
within the last three years. In 2000, SerVend, our largest beverage-equipment
company, broadened its market reach by introducing a line of
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counter-electric beverage dispensers. Manitowoc Ice launched a number of new
ice machines, including a series of ice flakers and the Series 800 IB
ice/beverage dispenser, which leverages our patented Cool Vapor Defrost
technology introduced in 1999. With orders received for 80 units in the first
seven months on the market, our Model 999 lattice-boom crane became the most
successful new product launched in the 75-year history of our large-crane
subsidiary.
Raw Materials and Supplies
The primary raw material that we use is structural and rolled steel, which
is purchased from various domestic sources. We also purchase engines and
electrical equipment and other semi- and fully-processed materials. Our policy
is to maintain, wherever possible, alternate sources of supply for our
important materials and parts. We maintain inventories of steel and other
purchased material. We have been successful in our goal to maintain alternative
sources of raw materials and supplies, and therefore, are not dependent on a
single source for any particular raw material or supply.
Patents, Trademarks, Licenses
We hold in excess of 140 patents pertaining to our crane and foodservice
products, and have presently pending applications for additional patents in the
United States and foreign countries. In addition, we have various registered
and unregistered trademarks and licenses that are of material importance to our
business. While we believe our ownership of this intellectual property is
adequately protected in customary fashions under applicable law, no single
patent, trademark or license is critical to our overall business.
Seasonality
Typically, the second and third quarters represent our best quarters in all
of our business segments. Since the summer brings warmer weather, there is an
increase in the use of ice machines. As a result, distributors build
inventories during the second quarter for the increased demand. In our cranes
and related products segment, summer also represents the main construction
season. Customers require new machines, parts, and service in advance of that
season. With respect to our marine segment, the Great Lakes shipping industry's
sailing season is normally May through November. Thus, barring any emergency
groundings, the majority of repair and maintenance work is performed during the
winter months and the work is typically completed during the first and second
quarter of the year.
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Competition
We sell all of our products in highly competitive industries. We compete in
each of our industries based on product design, quality of products and
services, product performance, maintenance costs and price. Several of our
competitors have greater financial, marketing, manufacturing and distribution
resources than we do. We believe that we benefit from the following competitive
advantages: leading market positions, a strong brand name, a reputation for
quality products and service, an established network of global distributors, a
broad product line and a commitment to engineering design and product
innovation. However, we cannot assure you that our products and services will
continue to compete successfully with our competitors or that we will be able
to retain our customer base or improve or maintain our profit margins on sales
to our customers. The following table sets forth our primary competitors in
each of our business segments:
Business Segment Products Primary Competitors
---------------- --------------------- --------------------------------
Cranes and Related Lattice-Boom Crawler Hitachi Construction Machinery
Products Cranes Co., Ltd.; Kobelco; Liebherr-
Werk Ehingen GmbH; Link Belt
Construction Equipment Co., a
subsidiary of Sumitomo
Corporation; and Mannesmann
Dematic.
Tower Cranes Comensa; Favelle Favco; Jaso
Eqiipos de Obra S.A.; Liebherr-
Werk Ehingen GmbH; Raimondi;
SCM; and Terex Corporation.
Boom Truck Cranes Grove Crane and Terex
Corporation.
Scissor Lift Genie Industries; JLG Industries
Platforms Inc.; Pinguely-Haulotte; Skyjack
Inc.; and Upright.
Foodservice Equipment Ice/Beverage Devices Hoshizaki America, Inc.; Ice-o-
matic; I.M.I. Cornelius; Lancer
Corporation; Scotsman
Industries; and Welbilt Company.
Refrigeration Devices American Panel Corporation;
Beverage Air; Delfield Company;
Kysor/Warren; Master-Bilt; Nor-
Lake Incorporated; Traulsen &
Co., Inc.; True Food Service
Company; and W.A. Brown & Son,
Inc.
Marine Ship Repair and Alabama Shipbuilding and
Construction Drydock; Atlantic Marine; Bender
Shipbuilding and Repair;
BollingerShip Building; Erie
Marine Enterprises; Fraser
Shipyards, Inc.; Halter Marine;
H. Hansen Industries; Port
Weller Drydocks and Swiftships.
Employee Relations
As of December 31, 2000, we employed approximately 3,200 persons, of whom
about 660 were salaried. We believe our relationship with our employees is
good.
We have labor agreements with 17 union locals in North America. There have
been no work stoppages during the three years ended December 31, 2000.
As of September, 2000, Potain employed approximately 2,240 persons and a
large majority of Potain's employees belong to French trade unions.
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Facilities
The following table outlines the principal facilities we own or lease:
Approximate
Facility Location Type of Facility Square Footage Owned/Leased
- ----------------- ------------------------- -------------- ------------
Cranes and Related
Products
Europe/Asia
Moulins, France Manufacturing 345,000 Owned
Charliev, France Manufacturing 323,000 Owned/Leased
Zhangjiagang, China Manufacturing 245,500 Leased
Noe Pereira, Portugal Manufacturing 183,000 Leased
La Clayette, France Manufacturing 130,000 Leased
Charolles, France Manufacturing 113,000 Leased
Niella, Italy Manufacturing 105,500 Owned
Arneburg, Germany Manufacturing 63,500 Owned
Decines, France Logistics 47,500 Leased
Lusigny, France Crane Testing Site 10,000 Owned
La Clayette, France Manufacturing 7,000 Owned
United States
Manitowoc, Wisconsin Manufacturing/Office 278,000 Owned
Georgetown, Texas Manufacturing/Office 191,000 Owned
York, Pennsylvania Manufacturing/Office 110,000 Owned
Punxsutawney,
Pennsylvania Manufacturing/Office 71,000 Owned
Manitowoc, Wisconsin Assembly/Office 67,000 Leased
Pompano Beach, Florida Manufacturing 23,000 Leased
Bauxite, Arkansas Manufacturing/Office 22,000 Owned
Foodservice Equipment
Europe/Asia
Hangzhou, China Manufacturing/Office 80,000 Owned
Milan, Italy Manufacturing 20,000 Leased
Frankfurt, Germany Manufacturing/Office 15,000 Owned
United States
Manitowoc, Wisconsin Manufacturing 376,000 Owned
Parsons, Tennessee Manufacturing 214,000 Owned
Sparks, Nevada Manufacturing 150,000 Leased
Sellersburg, Indiana Manufacturing/Office 140,000 Owned
River Falls, Wisconsin Manufacturing 133,000 Owned
St. Louis, Missouri Manufacturing/Office 105,000 Leased
La Mirada, California Manufacturing/Office 77,000 Owned/Leased
Selmer, Tennessee Manufacturing 72,000 Owned
Aberdeen, Maryland Manufacturing/Office 67,000 Owned
Clackamus, Oregon Manufacturing 21,000 Leased
Marine
Marinette, Wisconsin Shipyard 450,000 Owned
Sturgeon Bay, Wisconsin Shipyard 220,000 Owned/Leased
Toledo, Ohio Shipyard 60,000 Leased
Cleveland, Ohio Marine Repair and Storage 8,000 Leased
In addition, we lease sales office and warehouse space in Mokena, Illinois;
Franklin, Tennessee; Danbury, Connecticut; Roanoke, Virginia; East Granby,
Connecticut; Lithonia, Georgia; Orlando, Florida; Irwindale, California;
Dallas, Texas; Buena Park, California; Holland, Ohio; Lombard, Illinois;
Decaturville, Tennessee; Reno, Nevada; and Selmer, Tennessee. We lease
additional office space in Manitowoc, Wisconsin. We also own a sales office and
warehouse facility in Northampton, England and a manufacturing facility in
Scott Hills,
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Tennessee, which is closed and held for sale, and we lease sales offices in
Beijing, China; Glasgow, United Kingdom and Seoul, South Korea.
Potain leases office and warehouse space in Nantes (Coueron), Toulouse,
Lille (Haubourdin), Begles, Montbrison, Dole, Nice, Orleans (Saint Cyr en Val),
Vitry sur Seine (which is currently for sale) and Rouen (Le Mesnil Esnard), all
of which are located in France; Singapore; and Diligen/Saar, Germany. Potain
also owns office and warehouse facilities in Ecully, Bretigny, Vaux en Velin
and Vitrolles, all of which are located in France.
Environmental Matters
The United States Environmental Protection Agency has identified us as a
potentially responsible party under the Comprehensive Environmental Response
Compensation and Liability Act, liable for the costs associated with
investigating and cleaning up contamination at the Lemberger Landfill Superfund
Site near Manitowoc, Wisconsin.
Approximately 150 potentially responsible parties have been identified as
having shipped substances to this site. Eleven of the potentially responsible
parties have formed the Lemberger Site Remediation Group and have successfully
negotiated with the United States Environmental Protection Agency and the
Wisconsin Department of Natural Resources to settle the potential liability at
this site and fund the cleanup.
Recent estimates indicate that the total costs to clean up this site are
nominal. However the ultimate allocations of cost for this site are not yet
final. Although liability is joint and several, our percentage share of
liability is estimated to be 11% of the total cleanup costs. Prior to December
31, 1996, we accrued $3.3 million in connection with this matter. Expenses
charged against this reserve during the quarter ended March 31, 2001 and during
2000, 1999 and 1998 were insignificant. Remediation work at this site has been
completed, with only long-term pumping and treating of groundwater and site
maintenance remaining. Our remaining estimated liability for this matter,
included in other current and noncurrent liabilities at March 31, 2001, is $0.9
million.
We are also involved in various other environmental matters, in the United
States as well as in other countries, arising from time to time in the normal
course of business. At this time, management does not expect these matters to
have a material adverse effect on our consolidated financial statements.
Potain may similarly have liabilities for environmental matters that arise
from time to time in the normal course of business. Based on current
information, we do not expect any of these matters to have a material adverse
effect on Potain's consolidated financial statements.
Legal Proceedings
As of March 31, 2001, we had various product-related lawsuits pending. All
of these cases are insured with self-insurance retentions of $1.0 million for
crane accidents; $1.0 million for foodservice accidents occurring during 1990
to 1996; and $0.1 million for foodservice accidents occurring during 1997 to
2001. The insurer's contribution is limited to $50.0 million.
Product liability reserves included in accounts payable and accrued expenses
at March 31, 2001 were $8.5 million with $2.7 million reserved specifically for
the various cases referenced above and $5.8 million for claims incurred but not
reported which were estimated using actuarial methods. The highest current
reserve for an insured claim is $0.9 million. Based on our experience in
defending against product liability claims, management believes the current
reserves are adequate for estimated settlements on aggregate self-insured and
insured claims. Any recoveries from insurance carriers are dependent upon the
legal sufficiency of claims and the solvency of insurance carriers.
We are also involved in various other legal actions, in the United States as
well as in other countries, arising from time to time in the normal course of
business. After taking into consideration legal counsels' evaluation of such
actions, in the opinion of management, we do not expect ultimate resolution to
have a material adverse effect on our consolidated financial statements.
Potain is similarly involved from time to time in actions for product
liability and other matters arising out of its ordinary business operations.
Based on current information, we do not expect any of the actions presently
pending to have a material adverse effect on Potain's consolidated financial
statements.
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MANAGEMENT
The table below sets forth information about our directors and executive
officers as of May 31, 2001.
Name Age Position
- ---- --- --------
Terry D. Growcock............. 55 President, Chief Executive Officer and
Director
Glen E. Tellock............... 40 Senior Vice President and Chief Financial
Officer
Maurice D. Jones.............. 41 General Counsel and Secretary
Thomas G. Musial.............. 49 Senior Vice President of Human Resources and
Administration
Carl J. Laurino............... 39 Vice President and Treasurer
Timothy J. Kraus.............. 47 Vice President; President and General
Manager, Foodservice Group
Robert A. Giebel, Jr. ........ 41 Vice President; President and General
Manager, Crane Group
Thomas J. Byrne............... 63 Vice President; President and General
Manager, Marine Group
Dean H. Anderson.............. 60 Director
Virgis W. Colbert............. 61 Director
Daniel W. Duval............... 65 Director
James P. McCann............... 70 Director
James L. Packard.............. 58 Director
Gilbert F. Rankin, Jr. ....... 68 Director
Robert C. Stift............... 59 Director
Robert S. Throop.............. 63 Director
Terry D. Growcock. Mr. Growcock has been our president and chief executive
officer since 1998. He has also been a director since 1998. From 1996 to 1998,
he was president and general manager of Manitowoc Ice, and from 1994 to 1996 he
was executive vice president of Manitowoc Equipment Works. Prior to joining us,
Mr. Growcock served in numerous management and executive positions with Siebe
plc and United Technologies.
Glen E. Tellock. Mr. Tellock has been our senior vice president and chief
financial officer since 2000. From 1999 to 2000, he was our vice president and
chief financial officer, and from 1998 to 1999 he was our vice president of
finance and treasurer. He served as our corporate controller from 1992 to 1998,
and as our director of accounting from 1991 to 1992. Prior to joining us, Mr.
Tellock served as financial planning manager with the Denver Post Corporation
and as audit manager for Ernst and Whitney.
Maurice D. Jones. Mr. Jones has served as our general counsel and secretary
since 1999. Prior to joining us, Mr. Jones was a partner in the law firm of
Davis & Kuelthau, S.C. and served as legal counsel for Banta Corporation.
Thomas G. Musial. Mr. Musial has been our senior vice president of human
resources and administration since 2000. He served as vice president of human
resources and administration from 1995 to 2000, as manager of human resources
from 1987 to 1995 and as personnel/industrial relations specialist from 1976 to
1987.
Carl J. Laurino. Mr. Laurino became vice president and treasurer in May
2001. From 2000 until that time, he was our assistant treasurer. Prior to
joining us, Mr. Laurino spent 15 years in the commercial banking industry with
Firstar Bank, Norwest Bank and Associated Bank.
Timothy J. Kraus. Mr. Kraus became a vice president in 2000. He is also the
president and general manager of our foodservice group. He served as general
manager of our ice/beverage group from 1999 to 2000, and as executive vice
president and general manager of Manitowoc Ice from 1998 to 1999. From 1995 to
1998, Mr. Kraus was vice president of sales and marketing, and from 1989 to
1995 he served as national sales manager. Prior to joining us, Mr. Kraus was
president of Universal Nolin.
Robert A. Giebel, Jr. Mr. Giebel has served as a vice president since 2000.
He also serves as president and general manager of our crane group. Prior to
joining us, Mr. Giebel served as vice president and general
71
manager of P&H MinePro Services and as president and chief executive officer of
Unit Rig, a division of Terex Corporation.
Thomas J. Byrne. Mr. Byrne has been a vice president since 2000. He is also
the president and general manager of our marine group. From 1998 to 2000, he
served as our vice president of business development. Prior to joining us, Mr.
Byrne served as vice president and general manager for the Robertshaw division
of Siebe Automotive, N.A. and as vice president of operations for Hamilton
Industries. Mr. Byrne also has held senior management positions with Stanley
Works and White Consolidated Industries.
Dean H. Anderson. Mr. Anderson has been a member of our board of directors
since his election in 1992. Since 1997, he has served as senior vice
president--strategic development of ABB Vetco Gray Inc., an oilfield equipment
manufacturer headquartered in Houston, Texas. Previously, Mr. Anderson served
as president of Foster Valve Corporation and as president and chief executive
officer of Steego Corporation.
Virgis W. Colbert. Mr. Colbert was appointed to our board of directors in
2001. He is executive vice president of Miller Brewing Company, a leading beer
brewer and producer headquartered in Milwaukee, Wisconsin. Since 1979, Mr.
Colbert has held a variety of operational and senior management positions with
Miller Brewing Company. He is also a director of Delphi Automotive Systems
Corporation of Troy, Michigan, and of Weyco Group, Inc. of Milwaukee,
Wisconsin.
Daniel W. Duval. Mr. Duval was appointed to our board of directors in 2000.
He is a former vice chairman, president and chief executive officer of Robbins
& Myers, Inc., a global manufacturer of specialized fluid management products
and systems headquartered in Dayton, Ohio. Previously, Mr. Duval served as
president and chief operating officer of Midland-Ross Corp. He also serves on
the boards of directors of Arrow Electronics Corp. of Melville, New York; ABC-
NACO, Inc. of Downers Grove, Illinois; and National City Bank, the Ohio
chartered bank of National City Corporation of Cleveland, Ohio.
James P. McCann. Mr. McCann has been a director since his election in 1990.
He is a former vice chairman, president and chief operating officer of
Bridgestone/Firestone, Inc., a global tire and rubber manufacturer
headquartered in Nashville, Tennessee. Previously, Mr. McCann served as
executive vice president of North American Tire for Bridgestone/Firestone, Inc.
He also has served as president and chief executive officer of Bridgestone
U.S.A., Inc.
James L. Packard. Mr. Packard was appointed to our board in 2000. Since
1986, he has served as chairman, president and chief executive officer of
Regal-Beloit Corporation, a worldwide manufacturer of mechanical power
transmission equipment, electric motors and controls, and electric power
generators headquartered in Beloit, Wisconsin. Mr. Packard is also a director
of Clarcor, Inc. of Rockford, Illinois.
Gilbert F. Rankin, Jr. Mr. Rankin has served on our board of directors since
his election in 1974. He is a former director of administration, operations and
facilities for the College of Engineering at Cornell University in Ithaca, New
York.
Robert C. Stift. Mr. Stift was elected to our board of directors in 1998.
Since 1999, he has been chairman and chief executive officer of Strategic
Industries, LLC of Hagerstown, Maryland, a manufacturer of industrial and
consumer products. Previously, Mr. Stift served as chairman and chief executive
officer of USI Diversified of Hagerstown Maryland, and as chairman and chief
executive officer of Grove Worldwide.
Robert S. Throop. Mr. Throop was elected to our board of directors in 1992.
He is a former chairman and chief executive officer of Anthem Electronics,
Inc., a distributor of electronic products headquartered in San Jose,
California. Mr. Throop is also a member of the boards of directors of the Coast
Distribution System, of Morgan Hill, California, and Azerity, of San Jose,
California.
72
DESCRIPTION OF INDEBTEDNESS
Senior Credit Facility
At the closing of the Potain acquisition, we entered into the senior credit
facility. The facilities consist of:
. a $175.0 million five-year term loan A;
. a $175.0 million six-year term loan B; and
. a $125.0 million five-year revolving credit facility.
The senior credit facility is guaranteed by all of our domestic
subsidiaries. The senior credit facility is secured by a first priority
security interest on substantially all of our and our domestic subsidiaries'
real and personal property, including all capital stock of our domestic
subsidiaries and 65% of the capital stock of our foreign subsidiaries.
The senior credit agreement requires us to meet specified financial tests on
an ongoing basis, including a minimum consolidated interest coverage ratio, a
minimum consolidated fixed charge coverage ratio, maximum consolidated total
and senior leverage ratios and minimum net worth. In addition, the senior
credit agreement includes customary representations and warranties, customary
events of default, including a change of control, and other customary
covenants, including covenants that limit our and our subsidiaries' ability to:
. prepay principal of or redeem or repurchase the notes or make amendments
to the indenture governing the notes;
. incur additional debt;
. merge with other entities or make acquisitions;
. pay dividends or make distributions;
. make investments or advances;
. create or become subject to liens; and
. make capital expenditures.
We obtained the senior credit facility, together with issuing the old notes:
. to effect the acquisition of Potain;
. to retire our existing revolving credit facility and substantially all
other outstanding debt, including all of our series A senior notes due
2010 and senior shelf notes due 2010;
. to finance fees and expenses associated with the acquisition of Potain
and related financing transactions; and
. for general corporate and working capital purposes.
As of March 31, 2001, we would have used $43.6 million of the $125.0 million
revolving credit facility to effect the acquisition of Potain. The undrawn
amount under the revolving credit facility is available for general corporate
purposes. After completing the acquisition of Potain and the sale of the old
notes, we would have had approximately $393.6 million outstanding under the
senior credit facility as of March 31, 2001. The senior credit agreement
includes provisions permitting an increase on an uncommitted basis in the
aggregate amount of the revolving credit facility or the term loan B by up to
an aggregate of $100.0 million, subject to certain conditions.
Interest on outstanding balances under the senior credit agreement is
determined by adding a margin to the base or Eurodollar rate existing for each
interest calculation date. For the revolving credit facility, the term loan
73
A and the term loand B, the margin is based on our leverage ratio, which is the
ratio of our consolidated debt to last four quarters EBITDA, as defined. As of
the closing of the senior credit facility, the interest rate margins on the
revolving credit facility and the term loan A were 1.625% in the case of base
rate loans and 2.625% in the case of Eurodollar loans, but the margin may range
from 1.000% to 1.625% in the case of base rate loans and from 2.000% to 2.625%
in the case of Eurodollar loans. For the term loan B, the interest margins at
the closing of the senior credit facility were 1.875% in the case of base rate
loans and 2.875% in the case of Eurodollar loans, but may range from 1.750% to
1.875% in the case of base rate loans and from 2.750% to 2.875% in the case of
Eurodollar loans. We also pay commitment fees on unused availabilities and
agency fees in connection with the senior credit agreement.
Under the senior credit agreement, we are required to prepay the term loans
with 100% of the net proceeds of incurrence of certain debt (other than the
notes), certain asset sales, certain insurance and condemnation events and 50%
of annual excess cash flow. We may also voluntarily prepay the loans.
Industrial Revenue Bonds
As of March 31, 2001, we had $3.6 million of industrial revenue bonds
outstanding, which relate to our obligations on two properties located in
Tennessee and Indiana. These obligations are due in monthly or annual
installments, including principal and interest at rates of 2.7% and 10.0% as of
March 31, 2001. These obligations mature at various dates through 2004.
Potain Debt
As of March 31, 2001, Potain had $7.4 million of outstanding bank debt in
China with a weighted average interest rate of 6.4%, which matures at various
dates in the next five years. Potain also had $1.8 million of bank overdrafts
and other miscellaneous debt, with an interest rate of 4.8%. In addition,
Potain had $6.7 million of capital lease obligations with a weighted average
interest rate of 5.8%. These three instruments will remain in place subsequent
to closing of the acquisition.
Potain also had outstanding $1.8 million of existing indebtedness in France,
which had varying maturities and bore no interest, and $3.9 million of existing
indebtedness in Germany, which matures in 2014 and had an interest rate of
8.55% at March 31, 2001. These two debt instruments were fully repaid as part
of the transaction.
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DESCRIPTION OF THE NEW NOTES
You can find definitions of capitalized terms used in this description under
"--Definitions." For purposes of this section, references to "we," "us" and
"our" include only The Manitowoc Company, Inc. and not our subsidiaries. In
this description, we refer to the old notes and the new notes collectively as
the notes.
We issued the old notes, and we will issue the new notes, under an indenture
among us, the guarantors and The Bank of New York, as trustee. The following is
a summary of the material provisions of the indenture. It does not include all
of the provisions of the indenture. We urge you to read the indenture because
it defines your rights. The terms of the notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939. We have filed the indenture as an exhibit to the
registration statement of which this prospectus is a part and incorporate by
reference that exhibit into this prospectus.
The new notes will be our unsecured obligations, ranking subordinate in
right of payment to all of our Senior Debt.
We will issue the new notes in fully registered form in denominations of
(Euro)1,000 and integral multiples thereof. The trustee will initially act as
paying agent and registrar for the notes. The notes may be presented for
registration or transfer and exchange at the offices of the registrar. We will
pay principal (and premium, if any) on the notes at the trustee's corporate
office in New York, New York. At our option, interest may be paid at the
trustee's corporate trust office or by check mailed to the registered address
of holders of the notes. Any old notes that remain outstanding after the
completion of the exchange offer, together with the new notes issued in
connection with the exchange offer, will be treated as a single class of
securities under the indenture.
Luxembourg Listing
We will apply to list the new notes on the Luxembourg Stock Exchange in
accordance with its rules once the exchange offer has been completed. We must
use our best efforts to obtain and maintain such listing in respect of the new
notes at all times. So long as the old notes or the new notes are listed on the
Luxembourg Stock Exchange and the rules of that stock exchange so require, a
paying agent will be maintained in Luxembourg at all times that payments are
required to be made in respect of the old notes or the the new notes. So long
as the old notes or the new notes are listed on the Luxembourg Stock Exchange
and the rules of that stock exchange so require, a transfer agent will be
maintained in Luxembourg, at which office the old notes or the new notes may be
transferred. So long as the old notes or the new notes are listed on the
Luxembourg Stock Exchange and the rules of that stock exchange so require, we
will cause a copy of the notice of any change in the paying agents, as well as
any other notices to holders of the notes, to be published in a daily newspaper
with general circulation in Luxembourg, which we expect to be the Luxemburger
Wort.
Principal, Maturity and Interest
The notes are limited in aggregate principal amount to (Euro)275.0 million.
We will issue up to (Euro)175.0 million in aggregate principal amount of new
notes in exchange for old notes in the exchange offer. The notes will mature on
May 15, 2011. We may issue additional notes from time to time, subject to the
limitations set forth under "Covenants--Limitation on Incurrence of Additional
Indebtedness." Interest on the notes will accrue at the rate of 10 3/8% per
annum and will be payable semiannually in cash on each May 15 and November 15
commencing on November 15, 2001, to the persons who are registered holders of
the notes at the close of business on the May 1 and November 1 immediately
preceding the applicable interest payment date. Interest on the notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from and including the date of issuance.
The notes will not be entitled to the benefit of any mandatory sinking fund.
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Redemption
Optional Redemption
Except as described below, we may not redeem the notes before May 15, 2006.
After that date, we may redeem the notes at our option, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the 12-month period commencing on May 15 of the year set forth
below:
Year Percentage
---- ----------
2006........................................................... 105.188%
2007........................................................... 103.458%
2008........................................................... 101.729%
2009 and thereafter............................................ 100.000%
In addition, we must pay accrued and unpaid interest on the notes redeemed.
Optional Redemption Upon Public Equity Offerings
At any time, or from time to time, on or prior to May 15, 2004, we may, at
our option, use the Net Cash Proceeds of one or more Public Equity Offerings to
redeem up to 35% of the face amount of the notes, including any additional
notes, outstanding under the indenture at a redemption price of 110.375% of the
face amount thereof plus accrued and unpaid interest thereon, if any, to the
date of redemption; provided that:
(1) at least 65% of the face amount of notes, including any additional notes,
outstanding under the indenture remains outstanding immediately after any
such redemption; and
(2) we make such redemption not more than 90 days after the consummation of any
such Public Equity Offering.
"Public Equity Offering" means an underwritten public offering of our
Qualified Capital Stock pursuant to a registration statement filed with the SEC
in accordance with the Securities Act.
Selection and Notice of Redemption
In the event that we choose to redeem less than all of the notes, selection
of the notes for redemption will be made by the trustee either:
(1) in compliance with the requirements of the Luxembourg Stock Exchange, if
the notes are so listed, and any other principal securities exchange, if
any, on which the notes are listed; or,
(2) on a pro rata basis, by lot or by such method as the trustee deems fair and
appropriate.
No notes of a principal amount of (Euro)1,000 or less shall be redeemed in
part. If a partial redemption is made with the proceeds of a Public Equity
Offering, the trustee will select the notes only on a pro rata basis or on as
nearly a pro rata basis as is practicable, subject to Euroclear and Clearstream
Luxembourg procedures. Notice of redemption will be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each holder
of notes to be redeemed at its registered address. So long as the notes are
listed on the Luxembourg Stock Exchange and the rules of that stock exchange so
require, we will cause a copy of this notice to be published in a daily
newspaper with general circulation in Luxembourg, which we expect to be the
Luxemburger Wort. On and after the redemption date, interest will cease to
accrue on notes or portions of notes called for redemption as long as we have
deposited with the paying agents funds in satisfaction of the applicable
redemption price.
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In connection with any redemption, we will notify the Luxembourg Stock
Exchange of any change in the principal amount of the notes outstanding.
Subordination
The payment of all Obligations on the notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt, including all Obligations with respect to the
Credit Agreement, whether outstanding on the Issue Date or incurred after that
date. However, payments and distributions made from the trust established
pursuant to the provisions described under "--Legal Defeasance and Covenant
Defeasance" will not be so subordinated in right of payment so long as the
payments into the trust were made in accordance with the requirements described
under "--Legal Defeasance and Covenant Defeasance" and did not violate the
subordination provisions when they were made.
The holders of Senior Debt will be entitled to receive payment in full in
cash or Cash Equivalents of all Obligations due in respect of Senior Debt,
including interest accruing after the commencement of any bankruptcy or other
like proceeding at the rate specified in the applicable Senior Debt whether or
not such interest is an allowed claim in any such proceeding, before the
holders of notes will be entitled to receive any payment with respect to the
notes in the event of any distribution to our creditors:
(1) in a total or partial liquidation, dissolution or winding up of our
company;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to us or our assets;
(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of our assets and liabilities.
We also may not make any payment in respect of the notes if:
(1) a payment default on Designated Senior Debt or other Senior Debt of at
least $25.0 million aggregate principal amount occurs and is continuing; or
(2) any other default occurs and is continuing on Designated Senior Debt that
permits holders of the Designated Senior Debt to accelerate its maturity
and the trustee receives a notice of such default (a "Payment Blockage
Notice") from the Representative of any Designated Senior Debt.
Payments on the notes may and will be resumed:
(1) in the case of a payment default, upon the date on which such default is
cured or waived; and
(2) in case of a nonpayment default, upon the earlier of (x) the date on which
such nonpayment default is cured or waived (so long as no other event of
default exists) and (y) 180 days after the date on which the applicable
Payment Blockage Notice is received.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
No nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the trustee will be, or be made, the basis
for a subsequent Payment Blockage Notice unless such default has been cured or
waived for a period of not less than 90 consecutive days.
We must promptly notify holders of Senior Debt if payment of the notes is
accelerated because of an Event of Default.
77
As a result of the subordination provisions described above in the event of
a bankruptcy, liquidation or reorganization of our company, holders of the
notes may recover less ratably than our creditors who are holders of Senior
Debt. See "Risk Factors--Your right to receive payment on the notes and
guarantees is junior to all of our and the guarantors' senior debt."
After giving effect to the acquisition of Potain and the related financing
transactions and the application of the proceeds therefrom, on a pro forma
basis, at March 31, 2001, the aggregate principal amount of our Senior Debt
outstanding would have been approximately $411.4 million and we would have had
$80.6 million of borrowings available under the Credit Agreement.
Guarantees
The guarantors will jointly and severally guarantee, on an unsecured senior
subordinated basis, our obligations under the indenture and the notes. Each
guarantee will be subordinated to Guarantor Senior Debt on the same basis as
the notes are subordinated to our Senior Debt. A form of the guarantee is
attached as an exhibit to the indenture. The obligations of each guarantor
under its guarantee will be limited as necessary to prevent the guarantee from
constituting a fraudulent conveyance or fraudulent transfer under applicable
law.
Each guarantor may consolidate with or merge into or sell its assets to us
or another guarantor that is a Wholly Owned Restricted Subsidiary of ours
without limitation, or with other Persons, upon the terms and conditions set
forth in the indenture. See "Covenants--Merger, Consolidation and Sale of
Assets." In the event all of the Capital Stock of a guarantor is sold by us and
the sale complies with the provisions set forth in "Covenants--Limitation on
Asset Sales," the guarantor's guarantee will be released.
Separate financial statements of the guarantors are not included herein
because the guarantors are jointly and severally liable with respect to our
obligations pursuant to the notes, and our and the guarantors' aggregate net
assets, earnings and equity are substantially equivalent to our net assets,
earnings and equity on a consolidated basis.
Holding Company Structure
We are a holding company for our subsidiaries, with no material operations
of our own and only limited assets. Accordingly, we are dependent upon the
distribution of the earnings of our subsidiaries, whether in the form of
dividends, advances or payments on account of intercompany obligations, to
service our debt obligations. In addition, the claims of the holders of the
notes are subject to the prior payment of all liabilities, whether or not for
borrowed money, and to any preferred stock interest of our subsidiaries other
than the guarantors. We cannot assure you that, after providing for all prior
claims, there would be sufficient assets available from us and our subsidiaries
to satisfy the claims of the holders of notes. See "Risk Factors--If our
subsidiaries do not make sufficient distributions to us, we will not be able to
make payment on our debt, including the notes."
Change of Control
Upon the occurrence of a Change of Control, each holder of the notes will
have the right to require that we purchase all or a portion of such holder's
notes pursuant to the offer described below (the "Change of Control Offer"), at
a purchase price equal to 101% of the face amount of the notes plus accrued and
unpaid interest on the notes to the date of purchase.
Within 30 days following the date upon which the Change of Control occurred,
we must send, by first class mail, a notice to each holder of the notes, with a
copy to the trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which, unless otherwise required by law, must be no earlier than 30 days nor
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"). So long as the notes are listed on the Luxembourg Stock
Exchange and the rules of that stock exchange so require, we will cause a copy
of this notice to be published in
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a daily newspaper with general circulation in Luxembourg, which we expect to be
the Luxemburger Wort. In connection with any Change of Control, we will notify
the Luxembourg Stock Exchange of any Change of Control Offer. Holders of the
notes electing to have a note purchased pursuant to a Change of Control Offer
will be required to surrender the note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the note completed, to the paying
agents at the address specified in the notice prior to the close of business on
the third business day prior to the Change of Control Payment Date.
Prior to the mailing of the notice referred to above, but in any event
within 30 days following any Change of Control, we covenant to:
(1) repay in full and terminate all commitments under Indebtedness under the
Credit Agreement and all other Senior Debt the terms of which require
repayment upon a Change of Control or offer to repay in full and terminate
all commitments under all Indebtedness under the Credit Agreement and all
other such Senior Debt and to repay the Indebtedness owed to (and terminate
the commitments of) each lender that has accepted such offer; or
(2) obtain the requisite consents under the Credit Agreement and all other such
Senior Debt to permit the repurchase of the notes as provided below. We
must first comply with the covenant in the immediately preceding sentence
before we will be required to either repurchase notes pursuant to the
provisions described below or send the notice pursuant to the provisions
described above. Our failure to comply with the covenant described in the
immediately preceding sentence will constitute an Event of Default
described in clause (3) after the giving of the notice and the lapse of
time as described therein and not in clause (2) under "Events of Default"
below.
If a Change of Control Offer is made, we cannot assure you that we will have
available funds sufficient to pay the Change of Control purchase price for all
the notes that might be delivered by holders of the notes seeking to accept the
Change of Control Offer. In the event we are required to purchase outstanding
notes pursuant to a Change of Control Offer, we expect that we would seek third
party financing to the extent we do not have available funds to meet our
purchase obligations. However, we cannot assure you that we would be able to
obtain this financing.
Neither our Board of Directors nor the trustee may waive the covenant
relating to a holder's right to redemption upon a Change of Control.
Restrictions in the indenture described herein on our ability and the ability
of our Restricted Subsidiaries to incur additional Indebtedness, to grant liens
on our or the guarantor's property, to make Restricted Payments and to make
Asset Sales may also make more difficult or discourage a takeover of us,
whether favored or opposed by our management. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of
the notes, and we cannot assure you that we or the acquiring party will have
sufficient financial resources to effect such redemption or repurchase. These
restrictions and the restrictions on transactions with Affiliates may, in some
circumstances, make more difficult or discourage any leveraged buyout of us or
any of our subsidiaries by our management. While these restrictions cover a
wide variety of arrangements which have traditionally been used to effect
highly leveraged transactions, the indenture may not afford the holders of the
notes protection in all circumstances from the adverse aspects of a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction.
We will comply with the requirements of Rule 14e-1 under the Securities
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the indenture, we will comply with the applicable
securities laws and regulations and shall not be deemed to have breached our
obligations under the "Change of Control" provisions of the indenture by virtue
thereof.
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Notwithstanding anything to the contrary in this section, we will not be
required to make a Change of Control Offer upon a Change of Control if a third
party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this section and
purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.
Covenants
The indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create, incur, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness other than
Permitted Indebtedness; provided, however, that if no Default or Event of
Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, we and the guarantors
may incur Indebtedness, including Acquired Indebtedness, and any Restricted
Subsidiary of ours that is not or will not, upon such incurrence, become a
guarantor may incur Acquired Indebtedness, in each case if on the date of the
incurrence of such Indebtedness, after giving effect to the incurrence thereof,
our Consolidated Fixed Charge Coverage Ratio is greater than 2.0 to 1.0 if such
Indebtedness is incurred on or before May 15, 2003 and 2.25 to 1.0 if such
Indebtedness is incurred thereafter.
Limitation on Restricted Payments
We will not, and will not cause or permit any of our Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any distribution, other than
dividends or distributions payable in our Qualified Capital Stock, on
or in respect of shares of our Capital Stock to holders of such Capital
Stock;
(2) purchase, redeem or otherwise acquire or retire for value any of our
Capital Stock or any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock;
(3) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any of our Indebtedness that is subordinate or junior in right
of payment to the notes or any Indebtedness of a guarantor that is
subordinate or junior in right of payment to such guarantor's
guarantee; or
(4) make any Investment other than Permitted Investments (each of the
foregoing actions set forth in clauses (1), (2), (3) and (4) being
referred to as a "Restricted Payment"),
if at the time of such Restricted Payment or immediately after giving
effect thereto,
(i) a Default or an Event of Default shall have occurred and be
continuing; or
(ii) we are not able to incur at least $1.00 of additional Indebtedness
other than Permitted Indebtedness in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; or
(iii) the aggregate amount of Restricted Payments, including such
proposed Restricted Payment, made subsequent to the Issue Date
(the amount expended for such purposes, if other than in
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cash, being the fair market value of such property as determined in
good faith by our Board of Directors) shall exceed the sum of:
(w) 50% of our cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such
loss) earned subsequent to the Issue Date and on or prior to the
date the Restricted Payment occurs (the "Reference Date")
(treating such period as a single accounting period); plus
(x) 100% of the aggregate net cash proceeds received by us from any
Person other than a subsidiary of ours from the issuance and
sale subsequent to the Issue Date and on or prior to the
Reference Date of our Qualified Capital Stock; plus
(y) without duplication of any amounts included in clause (iii)(x)
above, 100% of the aggregate net cash proceeds of any equity
contribution received by us from a holder of our Capital Stock,
excluding, in the case of clauses (iii)(x) and (y), any net cash
proceeds from a Public Equity Offering to the extent used to
redeem the notes in compliance with the provisions set forth
under "Redemption--Optional Redemption Upon Public Equity
Offerings," plus
(z) without duplication, the sum of:
(1) the aggregate amount returned in cash on or with respect to
Investments other than Permitted Investments made subsequent
to the Issue Date whether through interest payments,
principal payments, dividends or other distributions or
payments;
(2) the net cash proceeds received by us or any of our Restricted
Subsidiaries from the disposition of all or any portion of
such Investments other than to a subsidiary of ours; and
(3) upon redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the fair market value of that
subsidiary; provided, however, that the sum of clauses (1),
(2) and (3) above shall not exceed the aggregate amount of
all such Investments made subsequent to the Issue Date.
However, the provisions set forth in the immediately preceding paragraph do
not prohibit:
(1) the payment of any dividend within 60 days after the date of declaration
of such dividend if the dividend would have been permitted on the date of
declaration;
(2) if no Default or Event of Default shall have occurred and be continuing,
the acquisition of any shares of Capital Stock of the Company, either (i)
solely in exchange for shares of our Qualified Capital Stock or (ii)
through the application of net proceeds of a substantially concurrent sale
for cash other than to a subsidiary of ours of shares of our Qualified
Capital Stock;
(3) if no Default or Event of Default shall have occurred and be continuing,
the acquisition of any Indebtedness of ours or a guarantor that is
subordinate or junior in right of payment to the notes or such guarantor's
guarantee, as the case may be, either (i) solely in exchange for shares of
our Qualified Capital Stock or (ii) through the application of net
proceeds of a substantially concurrent sale for cash other than to a
subsidiary of ours of (a) shares of our Qualified Capital Stock or (b)
Refinancing Indebtedness;
(4) if no Default or Event of Default shall have occurred and be continuing,
repurchases by us of our Common Stock (or options or warrants to purchase
such Common Stock) from our directors, officers and employees or those of
our subsidiaries or their authorized representatives upon the death,
disability, retirement or termination of employment of such directors,
officers or employees, in an aggregate amount not to exceed $500,000 in
any calendar year;
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(5) if no Default or Event of Default shall have occurred and be continuing,
Restricted Payments in an amount not to exceed $5.0 million; and
(6) if no Default or Event of Default shall have occurred and be continuing,
any transfer or other disposition of our Capital Stock or the Capital
Stock of any subsidiary of ours, pursuant to an Inversion Transaction;
provided that (i) the Supplemental Indenture is executed and in effect
concurrently with the consummation of such Inversion Transaction; (ii)
immediately following such Inversion Transaction, we apply to Standard &
Poor's Rating Group ("S&P") and Moody's Investors Service, Inc.
("Moody's") to have our debt rating and outlook updated and such updated
debt rating and outlook is no less favorable to us than immediately prior
to such Inversion Transaction; (iii) immediately following such Inversion
Transaction, our Consolidated Fixed Charge Coverage Ratio is at least
equal to the Consolidated Fixed Charge Coverage Ratio immediately prior to
such Inversion Transaction; and (iv) immediately following such Inversion
Transaction, we are able to incur at least $1.00 of additional
Indebtedness other than Permitted Indebtedness in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant.
In determining the aggregate amount of Restricted Payments made subsequent
to the Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2)(ii), 3(ii)(a), (4)
and (5) shall be included in such calculation.
Limitation on Asset Sales
We will not, and will not permit any of our Restricted Subsidiaries to,
consummate an Asset Sale unless:
(1) we or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed of (as determined in
good faith by our Board of Directors);
(2) at least 75% of the consideration received by us or the applicable
Restricted Subsidiary, as the case may be, from such Asset Sale shall be
in the form of cash or Cash Equivalents and shall be received at the time
of such disposition; provided that, for purposes of this clause (2), the
following will be considered "cash" or "Cash Equivalents":
(a) any Senior Debt or Guarantor Senior Debt that is assumed by the
transferee of any such assets, to the extent we or the applicable
Restricted Subsidiary are released from any further liability with
respect thereto; and
(b) any securities, notes or other obligations received by us or the
applicable Restricted Subsidiary from such transferee that are
converted by us or the applicable Restricted Subsidiary into cash or
Cash Equivalents (to the extent of the cash or Cash Equivalents
received) within 30 days after receipt; and
(3) upon the consummation of an Asset Sale, we will apply, or cause the
applicable Restricted Subsidiary to apply, the Net Cash Proceeds relating
to such Asset Sale within 365 days of receipt thereof either:
(a) to prepay any Senior Debt, Guarantor Senior Debt or Indebtedness of a
Restricted Subsidiary that is not a guarantor and, in the case of any
Senior Debt, Guarantor Senior Debt or such other Indebtedness under any
revolving credit facility, effect a permanent reduction in the
availability under such revolving credit facility;
(b) to make an investment in properties and assets that replace the
properties and assets that were the subject of such Asset Sale or in
properties and assets (including Capital Stock) that will be used in
our business and the business of our Restricted Subsidiaries as
existing on the Issue Date or in businesses reasonably related thereto
("Replacement Assets"); or
(c) a combination of prepayment and investment permitted by the foregoing
clauses (3)(a) and (3)(b).
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On the 366th day after an Asset Sale or such earlier date, if any, as our
Board of Directors or the Board of Directors of the applicable Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset
Sale as set forth in clauses (3)(a), (3)(b) and (3)(c) of the preceding
paragraph (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of
Net Cash Proceeds that have not been applied on or before such Net Proceeds
Offer Trigger Date as permitted in clauses (3)(a), (3)(b) and (3)(c) of the
preceding paragraph (each a "Net Proceeds Offer Amount") shall be applied by us
or the applicable Restricted Subsidiary to make an offer to purchase (the "Net
Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less
than 30 nor more than 45 days following the applicable Net Proceeds Offer
Trigger Date, from all holders of the notes on a pro rata basis, the maximum
amount of notes that may be purchased with the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the notes to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase; provided,
however, that if at any time any non-cash consideration received by us or any
of our Restricted Subsidiaries, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant.
We may defer the Net Proceeds Offer until there is an aggregate unutilized
Net Proceeds Offer Amount equal to or in excess of $10.0 million resulting from
one or more Asset Sales (at which time, the entire unutilized Net Proceeds
Offer Amount, and not just the amount in excess of $10.0 million, shall be
applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of our and
our Restricted Subsidiaries' property and assets as an entirety to a Person in
a transaction permitted under "--Merger, Consolidation and Sale of Assets",
which transaction does not constitute a Change of Control, the successor
corporation will be deemed to have sold our and our Restricted Subsidiaries'
properties and assets not so transferred for purposes of this covenant and
shall comply with the provisions of this covenant with respect to such deemed
sale as if it were an Asset Sale. In addition, the fair market value of our and
our Restricted Subsidiaries' properties and assets deemed to be sold shall be
deemed to be Net Cash Proceeds for purposes of this covenant.
Notwithstanding the first two paragraphs of this covenant, we and our
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraphs to the extent that:
(1) at least 75% of the consideration for such Asset Sale constitutes
Replacement Assets; and
(2) such Asset Sale is for fair market value; provided that any consideration
not constituting Replacement Assets received by us or any of our Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated
under this paragraph shall constitute Net Cash Proceeds subject to the
provisions of the first two paragraphs of this covenant.
The provisions of this covenant shall not apply to transactions undertaken
pursuant to an Inversion Transaction; provided that (i) the Supplemental
Indenture is executed and in effect concurrently with the consummation of such
Inversion Transaction; (ii) immediately following such Inversion Transaction,
we apply to S&P and Moody's to have our debt rating and outlook updated and
such updated debt rating and outlook is no less favorable to us than
immediately prior to such Inversion Transaction; (iii) immediately following
such Inversion Transaction, our Consolidated Fixed Charge Coverage Ratio is at
least equal to the Consolidated Fixed Charge Coverage Ratio immediately prior
to such Inversion Transaction; and (iv) immediately following such Inversion
Transaction, we are able to incur at least $1.00 of additional Indebtedness
other than Permitted Indebtedness in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant.
Each Net Proceeds Offer will be mailed to the record holders of the notes as
shown on the register of holders within 25 days following the Net Proceeds
Offer Trigger Date, with a copy to the trustee, and will comply with the
procedures set forth in the indenture. So long as the notes are listed on the
Luxembourg Stock
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Exchange and the rules of that stock exchange so require, we will cause a copy
of the notice of the Net Proceeds Offer to be published in a daily newspaper
with general circulation in Luxembourg, which we expect to be the Luxemburger
Wort. Upon receiving notice of the Net Proceeds Offer, holders of the notes may
elect to tender their notes in whole or in part in integral multiples of
(Euro)1,000 in exchange for cash. To the extent holders of the notes properly
tender notes in an amount exceeding the Net Proceeds Offer Amount, notes of
tendering holders will be purchased on a pro rata basis based on amounts
tendered. A Net Proceeds Offer must remain open for a period of 20 business
days or such longer period as may be required by law.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of notes
pursuant to a Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Asset Sale" provisions of the
indenture, we will comply with the applicable securities laws and regulations
and shall not be deemed to have breached our obligations under the "Asset Sale"
provisions of the Indenture by virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
We will not, and will not cause or permit any of our Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or permit to exist or
become effective any encumbrance or restriction on the ability of any of our
Restricted Subsidiaries to:
(1) pay dividends or make any other distributions on or in respect of its
Capital Stock;
(2) make loans or advances or to pay any Indebtedness or other obligation owed
to us or to any of our other Restricted Subsidiaries; or
(3) transfer any of its property or assets to us or to any of our other
Restricted Subsidiaries, in each case except for such encumbrances or
restrictions existing under or by reason of:
(a) applicable law;
(b) the notes or the indenture;
(c) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any of our Restricted Subsidiaries;
(d) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or assets
of the Person so acquired;
(e) agreements existing on the Issue Date to the extent and in the manner
such agreements are in effect on the Issue Date;
(f) the Credit Agreement or an agreement governing other Senior Debt or
Guarantor Senior Debt permitted to be incurred under the Indenture;
provided that, with respect to any agreement governing such other
Senior Debt or Guarantor Senior Debt, the provisions relating to such
encumbrance or restriction are no less favorable to us in any material
respect as determined by our Board of Directors in its reasonable and
good faith judgment than the provisions contained in the Credit
Agreement as in effect on the Issue Date;
(g) restrictions on the transfer of assets subject to any Lien permitted
under the indenture imposed by the holder of such Lien;
(h) restrictions imposed by any agreement to sell assets or Capital Stock
permitted under the indenture to any Person pending the closing of such
sale;
(i) restrictions imposed by agreements governing Indebtedness of a Foreign
Restricted Subsidiary incurred pursuant to clauses (14) and (19) of the
definition of "Permitted Indebtedness";
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(j) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
(k) any Purchase Money Note or other Indebtedness or other contractual
requirements of a Securitization Entity in connection with a Qualified
Securitization Transaction; provided that such restrictions apply only
to such Securitization Entity;
(l) customary provisions in joint venture agreements and other similar
agreements (in each case relating solely to the respective joint
venture or similar entity or the equity interests therein) entered into
in the ordinary course of business; and
(m) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clause (b) and (d) through (l) above; provided, however,
that the provisions relating to such encumbrance or restriction
contained in any such agreements are no less favorable to us in any
material respect as determined by our Board of Directors in its
reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such
clause (b) and (d) through (l) above.
Limitation on Preferred Stock of Restricted Subsidiaries
We will not permit any of our Restricted Subsidiaries that are not
guarantors to issue any Preferred Stock (other than to us or to any of our
Wholly Owned Restricted Subsidiaries) or permit any Person (other than us or
any of our Wholly Owned Restricted Subsidiaries) to own any Preferred Stock of
any of our Restricted Subsidiaries that is not a guarantor.
Limitation on Liens
We will not, and will not cause or permit any of our Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or permit or suffer to exist
any Liens of any kind against or upon any of our Restricted Subsidiaries'
property or assets whether owned on the Issue Date or acquired after the Issue
Date, or any proceeds therefrom, or assign or otherwise convey any right to
receive income or profits therefrom unless:
(1) in the case of Liens securing Indebtedness that is expressly subordinate or
junior in right of payment to the notes or the guarantees, the notes or the
guarantees are secured by a Lien on such property, assets or proceeds that
is senior in priority to such Liens; and
(2) in all other cases, the notes or guarantees, as the case may be, are
equally and ratably secured, except for:
(a) Liens existing as of the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date;
(b) Liens securing Senior Debt and Liens securing Guarantor Senior Debt;
(c) Liens securing the notes and the guarantees;
(d) Liens of ours or a Wholly Owned Restricted Subsidiary of ours on assets
of any of our Restricted Subsidiaries and Liens on our assets in favor
of a Wholly Owned Restricted Subsidiary that is a guarantor;
(e) Liens securing Refinancing Indebtedness which is incurred to Refinance
any Indebtedness that has been secured by a Lien permitted under the
indenture and that has been incurred without violation of the
indenture; provided, however, that such Liens: (i) are no less
favorable to the holders of the notes and are not more favorable to the
lienholders, in each case in any material respect, with respect to such
Liens than the Liens in respect of the Indebtedness being Refinanced;
and (ii) do not extend to or cover any categories of our or any of our
Restricted Subsidiaries' property or assets not securing the
Indebtedness so Refinanced; and
(f) Permitted Liens.
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Prohibition on Incurrence of Senior Subordinated Debt
We will not, and will not permit any Restricted Subsidiary that is a
guarantor to, incur or suffer to exist Indebtedness that is senior in right of
payment to the notes or such guarantor's guarantee, as the case may be, and
subordinate in right of payment to any of our or such guarantor's other
Indebtedness, as the case may be.
Merger, Consolidation and Sale of Assets
We will not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person, or sell, assign, transfer, lease,
convey or otherwise dispose of (or cause or permit any of our Restricted
Subsidiaries to sell, assign, transfer, lease, convey or otherwise dispose of)
all or substantially all of our assets (determined on a consolidated basis for
us and our Restricted Subsidiaries) whether as an entirety or substantially as
an entirety to any Person unless:
(1) either:
(a) we will be the surviving or continuing corporation; or
(b) the Person (if other than us) formed by such consolidation or into
which we are merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition our and our Restricted
Subsidiaries' properties and assets substantially as an entirety (the
"Surviving Entity"):
(x) will be a corporation organized and validly existing under the laws
of any country that is a member of the European Union as currently
constituted or the United States or any State thereof or the
District of Columbia; and
(y) will expressly assume, by supplemental indenture (in form and
substance satisfactory to the trustee), executed and delivered to
the trustee, the due and punctual payment of the principal of, and
premium, if any, and interest on all of the notes and the
performance of every covenant of the notes, the indenture and the
registration rights agreement on our part to be performed or
observed;
(2) immediately after giving effect to such transaction and the assumption
contemplated by clause (1)(b)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), we or such
Surviving Entity, as the case may be, (a) will have a Consolidated Net
Worth equal to or greater than our Consolidated Net Worth immediately prior
to such transaction and (b) will be able to incur at least $1.00 of
additional Indebtedness other than Permitted Indebtedness pursuant to the
"--Limitation on Incurrence of Additional Indebtedness" covenant;
(3) immediately before and immediately after giving effect to such transaction
and the assumption contemplated by clause (1)(b)(y) above (including giving
effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred and any Lien granted in connection with or in
respect of the transaction), no Default or Event of Default shall have
occurred or be continuing; and
(4) we or the Surviving Entity shall have delivered to the trustee an officers'
certificate and an opinion of counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or
other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with
the applicable provisions of the indenture and that all conditions
precedent in the indenture relating to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more of our Restricted
Subsidiaries the Capital Stock of which constitutes all or substantially all of
our properties and assets, shall be deemed to be the transfer of all or
substantially all of our properties and assets.
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The indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of our assets in accordance with the
foregoing, in which we are not the continuing corporation, the successor Person
formed by such consolidation or into which we are merged or to which such
conveyance, lease or transfer is made shall succeed to, and be substituted for,
and may exercise all of our rights and powers under the indenture and the notes
with the same effect as if such surviving entity had been named as such.
Each guarantor (other than any guarantor whose guarantee is to be released
in accordance with the terms of its guarantee and the indenture in connection
with any transaction complying with the provisions of the "Limitation on Asset
Sales" covenant) will not, and we will not cause or permit any guarantor to,
consolidate with or merge with or into any Person other than us or any other
guarantor unless:
(1) the entity formed by or surviving any such consolidation or merger (if
other than the guarantor) or to which such sale, lease, conveyance or other
disposition shall have been made is a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia;
(2) such entity assumes by supplemental indenture all of the obligations of the
guarantor on its guarantee;
(3) immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and
(4) immediately after giving effect to such transaction and the use of any net
proceeds therefrom on a pro forma basis, we could satisfy the provisions of
clause (2) of the first paragraph of this covenant.
Any merger or consolidation of a guarantor with and into us (in which we are
the surviving entity) or another guarantor that is our Wholly Owned Restricted
Subsidiary need only comply with clause (4) of the first paragraph of this
covenant.
The provisions of this covenant shall not apply to transactions undertaken
pursuant to an Inversion Transaction; provided that (i) the Supplemental
Indenture is executed and in effect concurrently with the consummation of such
Inversion Transaction; (ii) immediately following such Inversion Transaction,
our debt ratings and outlook by S&P and Moody's are no less favorable to us
than prior to such Inversion Transaction; (iii) immediately following such
Inversion Transaction, our Consolidated Fixed Charge Coverage Ratio is at least
equal to our Consolidated Fixed Charge Coverage Ratio prior to such Inversion
Transaction; and (iv) immediately following such Inversion Transaction, we are
able to incur at least $1.00 of additional Indebtedness other than Permitted
Indebtedness in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant.
Limitations on Transactions with Affiliates
(a) We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction or series
of related transactions (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with, or for
the benefit of, any of our Affiliates (each an "Affiliate Transaction"), other
than (x) Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are no less favorable than those that
might reasonably have been obtained in a comparable transaction at such time on
an arm's-length basis from a Person that is not our Affiliate or an Affiliate
of such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $5.0 million
shall be approved by our Board of Directors or the Board of Directors of such
Restricted Subsidiary, as the case may be, such approval to be evidenced by a
Board Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If we or any of our
Restricted Subsidiaries enters into an Affiliate Transaction (or a series of
related Affiliate Transactions related to a
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common plan) that involves an aggregate fair market value of more than $10.0
million, we or such Restricted Subsidiary, as the case may be, shall, prior to
the consummation of the Affiliate Transaction, obtain a favorable opinion as to
the fairness of such transaction or series of related transactions to us or the
relevant Restricted Subsidiary, as the case may be, from a financial point of
view, from an Independent Financial Advisor and file the same with the trustee.
(b) The restrictions set forth in the first paragraph of this covenant shall
not apply to:
(1) reasonable fees and compensation paid to and indemnity provided on behalf
of, our or any of our Restricted Subsidiaries' officers, directors,
employees or consultants as determined in good faith by our Board of
Directors or senior management;
(2) transactions exclusively between or among us and any of our Restricted
Subsidiaries or exclusively between or among such Restricted Subsidiaries;
provided such transactions are not otherwise prohibited by the indenture;
(3) any agreement as in effect as of the Issue Date or any amendment thereto or
any transaction contemplated thereby (including pursuant to any amendment
thereto) in any replacement agreement thereto so long as any such amendment
or replacement agreement is not more disadvantageous to the holders of the
notes in any material respect than the original agreement as in effect on
the Issue Date;
(4) Restricted Payments or Permitted Investments permitted by the indenture;
(5) transactions between us or any of our subsidiaries and any Securitization
Entity in connection with a Qualified Securitization Transaction, in each
case provided that such transactions are not otherwise prohibited by the
indenture; and
(6) transactions undertaken pursuant to an Inversion Transaction; provided that
(i) the Supplemental Indenture is executed and in effect concurrently with
the consummation of such Inversion Transaction; (ii) immediately following
such Inversion Transaction, we apply to S&P and Moody's to have our debt
rating and outlook updated and such updated debt rating and outlook is be
no less favorable to us than immediately prior to such Inversion
Transaction; (iii) immediately following such Inversion Transaction, our
Consolidated Fixed Charge Coverage Ratio is at least equal to the
Consolidated Fixed Charge Coverage Ratio immediately prior to such
Inversion Transaction; and (iv) immediately following such Inversion
Transaction, we are able to incur at least $1.00 of additional Indebtedness
other than Permitted Indebtedness in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant.
Additional Subsidiary Guarantees
If any existing or future Domestic Restricted Subsidiary shall, after the
Issue Date, guarantee any of our or a gurantor's Indebtedness, then we will
cause such Domestic Restricted Subsidiary to:
(1) execute and deliver to the trustee a supplemental indenture in form
reasonably satisfactory to the trustee pursuant to which such Domestic
Restricted Subsidiary shall unconditionally guarantee all of our
obligations under the notes and the indenture on the terms set forth in the
indenture; and
(2) deliver to the trustee an opinion of counsel that such supplemental
indenture has been duly authorized, executed and delivered by such Domestic
Restricted Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Domestic Restricted Subsidiary. Thereafter,
such Domestic Restricted Subsidiary will be a guarantor for all purposes of
the indenture until such Domestic Subsidiary is released from its guarantee
as provided in the indenture.
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Conduct of Business
We will not, and will not permit any of our Restricted Subsidiaries to,
engage in any businesses that are not the same, similar or reasonably related
to the businesses in which we and our Restricted Subsidiaries are engaged on
the Issue Date.
Reports to Holders
Whether or not required by the rules and regulations of the SEC, so long as
any notes are outstanding, we will furnish the holders of notes:
(1) all quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if we were
required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of us and our
consolidated subsidiaries (showing in reasonable detail, either on the face
of the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations,
the financial condition and results of operations of us and our Restricted
Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of ours, if any) and, with
respect to the annual information only, a report thereon by our certified
independent accounts; and
(2) all current reports that would be required to be filed with the SEC on Form
8-K if we were required to file such reports, in each case within the time
periods specified in the SEC's rules and regulations.
In addition, following the consummation of the exchange offer contemplated
by the registration rights agreement, whether or not required by the rules and
regulations of the SEC, we will file a copy of all such information and reports
with the SEC for public availability within the time periods specified in the
SEC's rules and regulations (unless the SEC will not accept such a filing) and
make such information available to securities analysts and prospective
investors upon request. In addition, we have agreed that, for so long as any
notes remain outstanding, we will furnish to the holders of the notes and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
For so long as the notes are listed on the Luxembourg Stock Exchange and the
rules of that stock exchange so require, reports filed with the SEC or required
to be provided to the holders of the notes pursuant to the indenture may be
obtained, free of charge, at the office of the Luxembourg paying agent.
Events of Default
The following events are defined in the Indenture as "Events of Default":
(1) the failure to pay interest on any notes when the same becomes due and
payable and the default continues for a period of 30 days, whether or not
such payment shall be prohibited by the subordination provisions of the
indenture;
(2) the failure to pay the principal on any notes, when such principal becomes
due and payable, at maturity, upon redemption or otherwise (including the
failure to make a payment to purchase notes tendered pursuant to a Change
of Control Offer or a Net Proceeds Offer) on the date specified for such
payment in the applicable offer to purchase, whether or not such payment
shall be prohibited by the subordination provisions of the indenture;
(3) a default in the observance or performance of any other covenant or
agreement contained in the Indenture which default continues for a period
of 45 days after we receive written notice specifying the default (and
demanding that such default be remedied) from the trustee or the holders of
at least 25% of the outstanding principal amount of the notes (except in
the case of a default with respect to the "Merger,
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Consolidation and Sale of Assets" covenant, which will constitute an Event
of Default with such notice requirement but without such passage of time
requirement);
(4) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of ours or any Restricted Subsidiary of ours, or the
acceleration of the final stated maturity of any such Indebtedness (which
acceleration is not rescinded, annulled or otherwise cured within 20 days
of receipt by us or such Restricted Subsidiary of notice of any such
acceleration) if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final stated maturity or which has
been accelerated (in each case with respect to which the 20-day period
described above has passed), aggregates $10.0 million or more at any time;
(5) one or more judgments in an aggregate amount in excess of $10.0 million
shall have been rendered against us or any of our Significant Subsidiaries
and such judgments remain undischarged, unpaid or unstayed for a period of
60 days after such judgment or judgments become final and non-appealable;
(6) some events of bankruptcy affecting us or any of our Significant
Subsidiaries; or
(7) any guarantee of a Significant Subsidiary ceases to be in full force and
effect or any guarantee of a Significant Subsidiary is declared to be null
and void and unenforceable or any guarantee of a Significant Subsidiary is
found to be invalid or any guarantor that is a Significant Subsidiaries
denies its liability under its guarantee (other than by reason of release
of a guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(6) above with respect to us) shall occur and be continuing, the trustee or
the holders of at least 25% in principal amount of outstanding notes may
declare the principal of and accrued interest on all the notes to be due and
payable by notice in writing to us, the representative under the Credit
Agreement and the trustee specifying the applicable Event of Default and that
it is a "notice of acceleration" (the "Acceleration Notice"), and the same:
(1) shall become immediately due and payable; or
(2) if there are any amounts outstanding under the Credit Agreement, shall
become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement and five business days after
receipt by us and the Representative under the Credit Agreement of such
Acceleration Notice but only if such Event of Default is then continuing.
If an Event of Default specified in clause (6) above with respect to us
occurs and is continuing, then all unpaid principal of, and premium, if
any, and accrued and unpaid interest on all of the outstanding notes shall
ipso facto become and be immediately due and payable without any
declaration or other act on the part of the trustee or any holder of the
notes.
The indenture provides that, at any time after a declaration of
acceleration with respect to the notes as described in the preceding
paragraph, the holders of a majority in principal amount of the notes may
rescind and cancel such declaration and its consequences:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
the acceleration;
(3) to the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due
otherwise than by such declaration of acceleration, has been paid;
(4) if we have paid the trustee its reasonable compensation and reimbursed the
trustee for its expenses, disbursements and advances; and
(5) in the event of the cure or waiver of an Event of Default of the type
described in clause (6) of the description above of Events of Default, the
trustee shall have received an officers' certificate and an
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opinion of counsel that such Event of Default has been cured or waived. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The holders of a majority in principal amount of the notes may waive any
existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest
on any notes.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture and under the Trust Indenture Act. Subject to the
provisions of the indenture relating to the duties of the trustee, the trustee
is under no obligation to exercise any of its rights or powers under the
indenture at the request, order or direction of any of the holders of the
notes, unless such holders have offered to the trustee reasonable indemnity.
Subject to all provisions of the indenture and applicable law, the holders of
a majority in aggregate principal amount of the then outstanding notes have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee or exercising any trust or power
conferred on the trustee.
Under the indenture, we are required to provide an officers' certificate to
the trustee promptly upon any such officer obtaining knowledge of any Default
or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or
Event of Default) that has occurred and, if applicable, describe such Default
or Event of Default and the status thereof.
Legal Defeasance and Covenant Defeasance
We may, at our option and at any time, elect to have our Obligations and
the Obligations of the guarantors discharged with respect to the outstanding
notes ("Legal Defeasance"). Such Legal Defeasance means that we will be deemed
to have paid and discharged the entire indebtedness represented by the
outstanding notes, except for:
(1) the rights of holders of the notes to receive payments in respect of the
principal of, premium, if any, and interest on the notes when such
payments are due;
(2) our Obligations with respect to the notes concerning issuing temporary
notes, registration of notes, mutilated, destroyed, lost or stolen notes
and the maintenance of an office or agency for payments;
(3) the rights, powers, trust, duties and immunities of the trustee and our
Obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our
obligations released with respect to certain covenants that are described in
the indenture ("Covenant Defeasance") and thereafter any omission to comply
with such Obligations shall not constitute a Default or Event of Default with
respect to the notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership, reorganization and
insolvency events) described under "Events of Default" will no longer
constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) we must irrevocably deposit with the trustee, in trust, for the benefit of
the holders of the notes cash in euros, non-callable government
obligations of any member nation of the European Union whose official
currency is the euro, rated AAA or better by S&P and Aaa by Moody's, or a
combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest on the notes on the stated
date for payment thereof or on the applicable redemption date, as the case
may be;
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(2) in the case of Legal Defeasance, we must have delivered to the trustee an
opinion of counsel in the United States reasonably acceptable to the
trustee confirming that:
(a) we have received from, or there has been published by, the Internal
Revenue Service a ruling; or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion of counsel shall confirm that, the
holders of the notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, we must have delivered to the trustee
an opinion of counsel in the United States reasonably acceptable to the
trustee confirming that the holders of the notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit (other than a Default or an Event of Default resulting
from the borrowing of funds to be applied to such deposit and the grant of
any Lien securing such borrowing);
(5) such Legal Defeasance or Covenant Defeasance shall not result in a breach
or violation of, or constitute a default under the Indenture (other than a
Default or an Event of Default resulting from the borrowing of funds to be
applied to such deposit and the grant of any Lien securing such borrowing)
or any other material agreement or instrument (including without limitation
the Credit Agreement) to which we or any of our subsidiaries are a party or
by which we or any of our subsidiaries are bound;
(6) we must have delivered to the trustee an officers' certificate stating that
the deposit was not made by us with the intent of preferring the holders of
the notes over any of our other creditors or with the intent of defeating,
hindering, delaying or defrauding any of our other creditors or creditors
of others;
(7) we must have delivered to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided for
or relating to the Legal Defeasance or the Covenant Defeasance have been
complied with;
(8) we must have delivered to the trustee an opinion of counsel to the effect
that:
(a) the trust funds will not be subject to any rights of holders of Senior
Debt, including, without limitation, those arising under the indenture;
and
(b) assuming no intervening bankruptcy of us between the date of deposit
and the 124th day following the date of deposit and that no holder of
the notes is our insider, after the 124th day following the date of
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and
(9) certain other customary conditions precedent are satisfied.
Notwithstanding the foregoing, the opinion of counsel required by clause (2)
above with respect to a Legal Defeasance need not be delivered if all notes not
theretofore delivered to the trustee for cancellation (1) have become due and
payable or (2) will become due and payable on the maturity date or a redemption
date within one year under arrangements satisfactory to the trustee for the
giving of notice of redemption by the trustee in our name and at our expense.
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Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect,
except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture, as to all outstanding notes
when:
(1) either:
(a) all the notes theretofore authenticated and delivered (except lost,
stolen or destroyed notes that have been replaced or paid and notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by us and thereafter repaid to us or
discharged from such trust) have been delivered to the trustee for
cancellation; or
(b) all notes not theretofore delivered to the trustee for cancellation
have become due and payable, and we have irrevocably deposited or
caused to be deposited with the trustee funds in an amount sufficient
to pay and discharge the entire Indebtedness on the notes not
theretofore delivered to the trustee for cancellation, for principal
of, premium, if any, and interest on the notes to the date of deposit
together with irrevocable instructions from us directing the trustee to
apply such funds to the payment thereof at maturity or redemption, as
the case may be;
(2) we have paid all other sums payable under the indenture by us; and
(3) we have delivered to the trustee an officers' certificate and an opinion of
counsel stating that all conditions precedent under the indenture relating
to the satisfaction and discharge of the indenture have been complied with.
Modification of the Indenture
From time to time, we, the guarantors and the trustee, without the consent
of the holders of the notes, may amend the indenture for certain specified
purposes, including curing ambiguities, defects or inconsistencies, so long as
such change does not, in the opinion of the trustee, adversely affect the
rights of any of the holders of the notes in any material respect. In
formulating its opinion on such matters, the trustee will be entitled to rely
on such evidence as it deems appropriate, including, without limitation, solely
on an opinion of counsel. Other modifications and amendments of the indenture
may be made with the consent of the holders of a majority in principal amount
of the then outstanding notes issued under the indenture, except that, without
the consent of each holder affected thereby, no amendment may:
(1) reduce the amount of notes whose holders must consent to an amendment;
(2) reduce the rate of or change or have the effect of changing the time for
payment of interest, including defaulted interest, on any notes;
(3) reduce the principal of or change or have the effect of changing the fixed
maturity of any notes, or change the date on which any notes may be subject
to redemption or reduce the redemption price therefor;
(4) make any notes payable in money other than that stated in the notes;
(5) make any change in provisions of the indenture protecting the right of each
holder of the notes to receive payment of principal of and interest on such
note on or after the due date thereof or to bring suit to enforce such
payment, or permitting holders of a majority in principal amount of notes
to waive Defaults or Events of Default;
(6) after our obligation to purchase notes arises thereunder, amend, change or
modify in any material respect our obligation to make and consummate a
Change of Control Offer in the event of a Change of Control or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that has
been consummated or, after such Change of Control has occurred or such
Asset Sale has been consummated, modify any of the provisions or
definitions with respect thereto;
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(7) modify or change any provision of the indenture or the related definitions
affecting the subordination or ranking of the notes or any guarantee in a
manner which adversely affects the holders of the notes; or
(8) release any guarantor that is a Significant Subsidiary from any of its
obligations under its guarantee or the indenture otherwise than in
accordance with the terms of the indenture.
Governing Law
The indenture provides that it, the notes and the guarantees will be
governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the law of another jurisdiction would be
required thereby.
The Trustee
The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set
forth in the indenture. During the existence of an Event of Default, the
trustee will exercise such rights and powers vested in it by the indenture, and
use the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
The indenture and the provisions of the Trust Indenture Act contain some
limitations on the rights of the trustee, should it become a creditor of ours,
to obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
Trust Indenture Act, the trustee will be permitted to engage in other
transactions; provided that if the trustee acquires any conflicting interest as
described in the Trust Indenture Act, it must eliminate such conflict or
resign.
Definitions
Set forth below is a summary of some of the defined terms used in the
indenture. Reference is made to the indenture for the full definition of all
such terms, as well as any other terms used in this section for which no
definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of ours or at the time it merges or consolidates with or into us or any of our
Restricted Subsidiaries or that is assumed in connection with the acquisition
of assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of ours or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Asset Acquisition" means (1) an Investment by us or any Restricted
Subsidiary of ours in any other Person pursuant to which such Person shall
become a Restricted Subsidiary of ours or any Restricted Subsidiary of ours, or
shall be merged with or into us or any Restricted Subsidiary of ours, or (2)
the acquisition by us or any Restricted Subsidiary of ours of the assets of any
Person (other than a Restricted Subsidiary of ours) that constitute all or
substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
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"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer for value by us or any of our
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than us or a Wholly Owned Restricted Subsidiary of ours of: (1)
any Capital Stock of any Restricted Subsidiary of ours; or (2) any other
property or assets of ours or any Restricted Subsidiary of ours other than in
the ordinary course of business; provided, however, that Asset Sales or other
dispositions shall not include:
(a) a transaction or series of related transactions for which we or our
Restricted Subsidiaries receive aggregate consideration of less than $2.0
million;
(b) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of our assets as permitted under "Certain Covenants--
Merger, Consolidation and Sale of Assets";
(c) the sale or discount, in each case without recourse, of accounts receivable
arising in the ordinary course of business, but only in connection with the
compromise or collection thereof;
(d) sales of accounts receivable and related assets, including contract rights,
of the type specified in the definition of "Qualified Securitization
Transaction" to a Securitization Entity for the fair market value thereof;
(e) sales of accounts receivable and related assets, including contract rights,
to the Factor pursuant to the Factoring Agreement;
(f) disposals or replacements of obsolete equipment in the ordinary course of
business;
(g) sales pursuant to the GE Agreement;
(h) any Restricted Payment permitted by the "Limitation on Restricted Payments"
covenant or that constitutes a Permitted Investment; and
(i) any transfer of up to 6.4% of the Capital Stock of Potain S.A. ("Potain")
to comply with the judgment or order of any court or to settle any judicial
proceeding in whole or in part.
"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to the
trustee.
"Borrowing Base Amount" means, as of any date, an amount equal to the sum
of:
(1) 80% of the aggregate book value of all accounts receivable of ours and our
Restricted Subsidiaries; and
(2) 50% of the aggregate book value of all inventory owned by us and our
Restricted Subsidiaries,
all calculated on a consolidated basis and in accordance with GAAP.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means:
(1) with respect to any Person that is a corporation, any and all shares,
interests, participations or other equivalents (however designated and
whether or not voting) of corporate stock, including each class of Common
Stock and Preferred Stock of such Person; and
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(2) with respect to any Person that is not a corporation, any and all
partnership, membership or other equity interests of such Person.
"Cash Equivalents" means:
(1) marketable direct obligations issued by, or unconditionally guaranteed by,
the United States Government or issued by any agency thereof and backed by
the full faith and credit of the United States, in each case maturing
within one year from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's;
(3) commercial paper maturing no more than one year from the date of creation
thereof and, at the time of acquisition, having a rating of at least A-1
from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any bank organized under the
laws of the United States of America or any state thereof or the District
of Columbia or any U.S. branch of a foreign bank having at the date of
acquisition thereof combined capital and surplus of not less than $250.0
million;
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above;
(6) investments in money market funds that invest substantially all their
assets in securities of the types described in clauses (1) through (5)
above; and
(7) Foreign Cash Equivalents.
"Change of Control" means the occurrence of one or more of the following
events:
(1) any sale, lease, exchange or other transfer, in one transaction or a series
of related transactions, of all or substantially all of our assets to any
Person or group of related Persons for purposes of Section 13(d) of the
Exchange Act (a "Group"), together with any Affiliates thereof, whether or
not otherwise in compliance with the provisions of the indenture;
(2) the approval by the holders of our Capital Stock of any plan or proposal
for the liquidation or dissolution of our company, whether or not otherwise
in compliance with the provisions of the Indenture;
(3) any Person or Group (other than entities formed for the purpose of holding,
directly or indirectly, our Capital Stock) shall become the owner, directly
or indirectly, beneficially or of record, of shares representing more than
50% of the aggregate ordinary voting power represented by our issued and
outstanding Capital Stock; or
(4) the replacement of a majority of our Board of Directors over a two-year
period from the directors who constituted our Board of Directors at the
beginning of such period, and such replacement shall not have been approved
by a vote of at least a majority of our Board of Directors then still in
office who either were members of such Board of Directors at the beginning
of such period or whose election as a member of such Board of Directors was
previously so approved.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
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"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of:
(1) Consolidated Net Income; and
(2) to the extent Consolidated Net Income has been reduced thereby:
(a) all income taxes of such Person and its Restricted Subsidiaries paid or
accrued in accordance with GAAP for such period (other than income
taxes attributable to extraordinary, unusual or nonrecurring gains or
losses (other than in connection with an Inversion Transaction) or
taxes attributable to sales or dispositions outside the ordinary course
of business);
(b) Consolidated Interest Expense; and
(c) Consolidated Non-cash Charges less any non-cash items increasing
Consolidated Net Income for such period, all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in
accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio for which financial statements are available (the "Transaction
Date") to Consolidated Fixed Charges of such Person for the Four Quarter
Period. In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall
be calculated after giving effect on a pro forma basis for the period of such
calculation to:
(1) the incurrence or repayment of any Indebtedness of such Person or any of
its Restricted Subsidiaries (and the application of the proceeds thereof)
giving rise to the need to make such calculation and any incurrence or
repayment of other Indebtedness (and the application of the proceeds
thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to
working capital facilities, occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the
case may be (and the application of the proceeds thereof), occurred on the
first day of the Four Quarter Period; and
(2) any asset sales or Asset Acquisitions (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a
result of such Person or one of its Restricted Subsidiaries (including any
Person who becomes a Restricted Subsidiary as a result of the Asset
Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (including any pro
forma expense and cost reductions calculated on a basis consistent with
Regulation S-X under the Exchange Act) attributable to the assets that are
the subject of the Asset Acquisition or asset sale during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent
to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such asset sale or Asset Acquisition (including the
incurrence or assumption of any such Acquired Indebtedness) occurred on the
first day of the Four Quarter Period. If such Person or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or any Restricted Subsidiary
of such Person had directly incurred or otherwise assumed such other
Indebtedness that was so guaranteed.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio":
(1) interest on outstanding Indebtedness determined on a fluctuating basis as
of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal
to the rate of interest on such Indebtedness in effect on the Transaction
Date; and
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(2) notwithstanding clause (1) of this paragraph, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation
of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of:
(1) Consolidated Interest Expense; plus
(2) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person and, to the extent permitted under the
Indenture, its Restricted Subsidiaries (other than dividends paid in
Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued
during such period times (y) a fraction, the numerator of which is one and
the denominator of which is one minus the then current effective
consolidated federal, state and local income tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication:
(1) the aggregate of the interest expense of such Person and its Restricted
Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation: (a) any amortization of
debt discount and amortization or write-off of deferred financing costs;
(b) the net costs under Interest Swap Obligations; (c) all capitalized
interest; and (d) the interest portion of any deferred payment obligation;
and
(2) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person and its Restricted
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom:
(1) after-tax gains from Asset Sales (without regard to the $2.0 million
limitation set forth in the definition thereof) or abandonments or reserves
relating thereto;
(2) after-tax items classified as extraordinary or nonrecurring gains or
losses;
(3) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of
the referent Person or is merged or consolidated with the referent Person
or any Restricted Subsidiary of the referent Person;
(4) the net income (but not loss) of any Restricted Subsidiary of the referent
Person to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by
contract, operation of law or otherwise;
(5) the net income of any Person, other than a Restricted Subsidiary of ours,
except to the extent of cash dividends or distributions paid to us or to a
Restricted Subsidiary of ours by such Person;
(6) income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued);
(7) in the case of a successor to the referent Person by consolidation or
merger or as a transferee of the referent Person's assets, any earnings of
the successor corporation prior to such consolidation, merger or transfer
of assets;
(8) non-cash charges relating to compensation expense in connection with
benefits provided under employee stock option plans, restricted stock
option plans and other employee stock purchase or stock incentive plans;
and
(9) income or loss attributable solely to fluctuations in currency values and
related tax effects.
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"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges that
require an accrual of or a reserve for cash charges for any future period).
"Credit Agreement" means the Credit Agreement to be dated as of May 9, 2001,
among us, the lenders party thereto in their capacities as lenders thereunder
and Bankers Trust Company, as agent, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder or adding Restricted Subsidiaries of ours as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect us or
any Restricted Subsidiary of ours against fluctuations in currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Debt" means (1) Indebtedness under or in respect of the
Credit Agreement and (2) any other Indebtedness constituting Senior Debt that,
at the time of determination, has an aggregate principal amount of at least
$25.0 million and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by us.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event (other than an event which would constitute a Change of
Control), matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Change of Control) on
or prior to the final maturity date of the notes.
"Domestic Restricted Subsidiary" means any Restricted Subsidiary of ours
incorporated or otherwise organized or existing under the laws of the United
States, any state thereof or the District of Columbia.
"Factor" means, collectively, one or more purchasers of receivables under
the Factoring Agreement.
"Factoring Agreement" means one or more receivables purchase agreements or
similar agreements entered into by us or any of our Restricted Subsidiaries
with the Factor, as the same may be amended, modified, supplemented and/or
replaced from time to time so long as any such replacement agreement is on
terms no less favorable to us or any of our Restricted Subsidiaries in any
material respect than those terms set forth in the Factoring Agreement as in
effect on the Issue Date.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by our Board of Directors acting reasonably and in
good faith and shall be evidenced by a Board Resolution of our Board of
Directors delivered to the Trustee.
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"Foreign Cash Equivalents" means certificates of deposit or bankers
acceptances of any bank organized under the laws of Canada or any country that
is a member of the European Union, whose short-term commercial paper rating
from S&P is at least A-1 or the equivalent thereof or from Moody's is at least
P-1 or the equivalent thereof, in each case with maturities of not more than
one year from the date of acquisition.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary of ours that
is not a Domestic Restricted Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"GE Agreement" means the agreement, dated March 10, 1998, between us and
General Electric Capital Corporation, as Lessor, as the same may be amended,
modified, supplemented and/or replaced from time to time, providing for the
sale of equipment by us to the Lessor and subsequent leaseback by the Lessor to
us or to some of our subsidiaries in an aggregate outstanding principal amount
not to exceed $20.0 million at any time.
"guarantor" means: (1) each of Manitowoc Crane Companies, Inc.; Manitowoc
Marine Group, LLC; Manitowoc Foodservice Companies, Inc.; North Central Crane &
Excavator Sales Corp.; Environmental Rehab, Inc.; Manitowoc Crane & Shovel
Sales Corp.; Manitowoc Western Company, Inc.; Manitowoc Re-Manufacturing, Inc.;
Manitowoc Cranes, Inc.; Manitowoc Boom Trucks, Inc.; West-Manitowoc, Inc.;
Femco Machine Company, Inc.; Manitowoc CP, Inc.; Manitowoc MEC, Inc.; KMT
Refrigeration, Inc.; Harford Duracool, LLC; Diversified Refrigeration, Inc.;
SerVend International, Inc.; SerVend Sales Corp.; Manitowoc Beverage Systems,
Inc.; Manitowoc Ice, Inc.; Manitowoc Equipment Works, Inc.; Manitowoc FP, Inc.;
KMT Sales Corp.; Multiplex Company, Inc.; Marinette Marine Corporation; and
Potain Corporation and (2) each of our Domestic Restricted Subsidiaries that in
the future executes a supplemental indenture in which such Domestic Restricted
Subsidiary agrees to be bound by the terms of the indenture as a guarantor;
provided that any Person constituting a guarantor as described above shall
cease to constitute a guarantor when its respective guarantee is released in
accordance with the terms of the indenture.
"Guarantor Senior Debt" means, with respect to any guarantor, the principal
of, premium, if any, and interest (including any interest accruing subsequent
to the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on any Indebtedness of a guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
guarantee of such guarantor. "Guarantor Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of:
(x) all monetary obligations (including guarantees) of every nature of such
guarantor under the Credit Agreement, including obligations (including
guarantees) to pay principal , premium and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities;
(y) all Interest Swap Obligations and guarantees thereof; and
(z) all obligations under Currency Agreements and guarantees thereof;
in each case whether outstanding on the Issue Date or thereafter incurred.
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Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include:
(1) any Indebtedness of such guarantor to us or to a subsidiary of ours;
(2) Indebtedness to, or guaranteed on behalf of, any director, officer or
employee of ours or any subsidiary of ours (including, without limitation,
amounts owed for compensation);
(3) Indebtedness owed to trade creditors and other amounts incurred (but not
under the Credit Agreement) in connection with obtaining goods, materials
or services;
(4) Indebtedness represented by Disqualified Capital Stock;
(5) any liability for federal, state, local or other taxes owed or owing by
such guarantor;
(6) that portion of any Indebtedness incurred in violation of the indenture
provisions set forth under "Limitation on Incurrence of Additional
Indebtedness," but, as to any such obligation, no such violation shall be
deemed to exist for purposes of this clause (6) if the holder(s) of such
obligation or their representative and the trustee must have received an
officers' certificate of ours to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit indebtedness,
that the incurrence of the entire committed amount thereof at the date on
which the initial borrowing thereunder is made would not) violate such
provisions of the indenture;
(7) Indebtedness that, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Bankruptcy Code, is without
recourse to such guarantor; and
(8) any Indebtedness that is, by its express terms, subordinated in right of
payment to any other Indebtedness of such guarantor.
"Indebtedness" means with respect to any Person, without duplication:
(1) all Obligations of such Person for borrowed money;
(2) all Obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(3) all Capitalized Lease Obligations of such Person;
(4) all Obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all Obligations
under any title retention agreement (but excluding trade accounts payable
and other accrued liabilities arising in the ordinary course of business);
(5) all Obligations for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction;
(6) guarantees and other contingent obligations in respect of Indebtedness
referred to in clauses (1) through (5) above and clause (8) below;
(7) all Obligations of any other Person of the type referred to in clauses (1)
through (6) above that are secured by any Lien on any property or asset of
such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the
Obligation so secured;
(8) all Obligations under Currency Agreements and interest swap agreements of
such Person; and
(9) all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to
the greater of its voluntary or involuntary liquidation preference and its
maximum fixed repurchase price, but excluding accrued dividends, if any.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
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"Independent Financial Advisor" means a firm: (1) that does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in us; and (2) that, in the judgment of our Board
of Directors, is otherwise independent and qualified to perform the task for
which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Inversion Transaction" means a transaction or series of related
transactions undertaken to facilitate the global movement of cash assets among
affiliated group members in a tax efficient manner pursuant to which (i) a U.S.
parent company ("Former Parent") becomes a wholly owned subsidiary of a newly
organized offshore/foreign entity or entities (in either case, or together, a
"New Parent"); (ii) all of the issued and outstanding capital stock of Former
Parent is converted into an equivalent number of shares of capital stock of a
New Parent; (iii) the foreign subsidiaries of Former Parent would then be owned
by New Parent, either directly or through a foreign subsidiary of New Parent,
and would be sister companies of Former Parent, and the domestic subsidiaries
would be held through Former Parent as a U.S. subsidiary of New Parent.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit by
us and our Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of ours or such Restricted Subsidiary,
as the case may be, and the acquisition of up to 6.4% of the Capital Stock of
Potain. If we or any Restricted Subsidiary of ours sells or otherwise disposes
of any Common Stock of any direct or indirect Wholly Owned Restricted
Subsidiary of ours such that, after giving effect to any such sale or
disposition, we no longer own, directly or indirectly 100% of the outstanding
Common Stock of such Restricted Subsidiary, we (other than, in the case of
Potain, up to 6.4% of the Capital Stock of Potain) shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Common Stock of such Restricted Subsidiary not sold or
disposed of.
"Issue Date" means May 9, 2001.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement to
give any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale net of:
(1) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking
fees and sales commissions);
(2) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions and
any tax sharing arrangements;
(3) repayment of Indebtedness that is secured by the property or assets that
are the subject of such Asset Sale; and
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(4) appropriate amounts to be provided by us or any Restricted Subsidiary, as
the case may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by us or any
Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnification, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Indebtedness" means, without duplication, each of the following:
(1) Indebtedness under the notes issued in the Offering in an aggregate
principal amount not to exceed (Euro)175.0 million and the related
guarantees;
(2) Indebtedness incurred pursuant to the Credit Agreement in an aggregate
principal amount at any time outstanding not to exceed
the greater of
(a) $475.0 million (i) less the amount of all mandatory principal
payments actually made by us or any Restricted Subsidiary with the
Net Cash Proceeds from Asset Sales in respect of the term loans
thereunder, excluding any such payments to the extent refinanced at
the time of payment under a replaced Credit Agreement; and (ii)
reduced by any mandatory permanent repayments of revolving loans made
by us thereunder, which are accompanied by a corresponding permanent
commitment reduction, with the Net Cash Proceeds from Asset Sales,
excluding any such payments and commitment reductions to the extent
refinanced at the time of payment under a replaced Credit Agreement;
and
(b) the Borrowing Base Amount plus $30.0 million;
(3) other Indebtedness of ours and our Restricted Subsidiaries outstanding on
the Issue Date reduced by the amount of any scheduled amortization payments
or mandatory prepayments when actually paid or permanent reductions
thereon;
(4) Interest Swap Obligations of ours or any of our Restricted Subsidiaries
covering Indebtedness of ours or such Restricted Subsidiary; provided,
however, that such Interest Swap Obligations are entered into to protect us
and our Restricted Subsidiaries from fluctuations in interest rates on
Indebtedness incurred without violation of with the Indenture to the extent
the notional principal amount of such Interest Swap Obligation does not
exceed, at the time of the incurrence thereof, the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;
(5) Indebtedness under Currency Agreements; provided that in the case of
Currency Agreements which relate to Indebtedness, such Currency Agreements
do not increase the Indebtedness of us and our Restricted Subsidiaries
outstanding other than as a result of fluctuations in foreign currency
exchange rates or by reason of fees, indemnities and compensation payable
thereunder;
(6) Indebtedness of a Restricted Subsidiary of ours to us, to a guarantor or to
another Wholly Owned Restricted Subsidiary of ours for so long as such
Indebtedness is held by us, such guarantor, such Wholly Owned Restricted
Subsidiary or the holders of a Lien permitted under the indenture, in each
case subject to no Lien held by a Person other than us, a guarantor, such
Wholly Owned Restricted Subsidiary or holders of a Lien permitted under the
indenture; provided that if as of any date any Person other than us, a
guarantor, a Wholly Owned Restricted Subsidiary of ours or the holders of a
Lien permitted under the indenture owns or holds any such Indebtedness or
holds a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness pursuant to this clause (6);
(7) Indebtedness of ours to a Wholly Owned Restricted Subsidiary of ours for so
long as such Indebtedness is held by a Wholly Owned Restricted Subsidiary
of ours or the holders of a Lien permitted under the
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indenture, in each case subject to no Lien other than a Lien permitted
under the indenture; provided that (a) any Indebtedness of ours to any
Wholly Owned Restricted Subsidiary of ours that is not guarantor is
unsecured and subordinated, pursuant to a written agreement, to our
obligations under the indenture and the notes and (b) if as of any date
any Person other than a Wholly Owned Restricted Subsidiary of ours or the
holders of a Lien permitted under the indenture owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by us pursuant to this clause (7);
(8) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business; provided, however, that such Indebtedness
is extinguished within four business days of incurrence;
(9) Indebtedness of ours or any of our Restricted Subsidiaries represented by
letters of credit for the account of us or such Restricted Subsidiary, as
the case may be, in order to provide security for workers' compensation
claims, payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(10) Indebtedness represented by guarantees by us or our Restricted
Subsidiaries of Indebtedness otherwise permitted to be incurred under the
Indenture; provided that, in the case of a guarantee by a Restricted
Subsidiary, such Restricted Subsidiary complies with the "Additional
Subsidiaries Guarantees" covenant to the extent applicable;
(11) Indebtedness of ours or any of our Restricted Subsidiaries in respect of
bid, payment and performance bonds, bankers' acceptances, workers'
compensation claims, surety or appeal bonds, payment obligations in
connection with self-insurance or similar obligations, and bank
overdrafts (and letters of credit in respect thereof) in the ordinary
course of business;
(12) Indebtedness of ours or any Restricted Subsidiary consisting of
guarantees, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets;
(13) Indebtedness represented by Capitalized Lease Obligations and Purchase
Money Indebtedness of ours and our Restricted Subsidiaries incurred in
the ordinary course of business not to exceed $15.0 million at any one
time outstanding;
(14) Indebtedness of our Foreign Restricted Subsidiaries in an aggregate
principal amount not to exceed $20.0 million under lines of credit to any
such Foreign Restricted Subsidiary from Persons other than us or any of
our subsidiaries, the proceeds of which Indebtedness are used for such
Foreign Restricted Subsidiary's working capital and other general
corporate purposes;
(15) Indebtedness that may be deemed to exist pursuant to the Factoring
Agreement and Indebtedness by a Securitization Entity in a Qualified
Securitization Transaction that is not recourse (except for Standard
Securitization Undertakings) to us or any of our Restricted Subsidiaries;
provided that any amounts incurred under this clause (15) in excess of
$50.0 million will reduce the amounts available for borrowing under
clause (2) above in an equal amount;
(16) Indebtedness of ours evidenced by commercial paper issued by us; provided
that the aggregate outstanding principal amount of Indebtedness incurred
pursuant to clause (2) of this definition and this clause (16) does not
exceed the maximum amount of Indebtedness permitted under clause (2) of
this definition;
(17) Refinancing Indebtedness;
(18) Indebtedness of ours or any of our Restricted Subsidiaries consisting of
obligations to repurchase equipment incurred in the ordinary course of
business, to the extent such obligations do not exceed the fair market
value of such equipment; and
(19) additional Indebtedness of ours and our Restricted Subsidiaries in an
aggregate principal amount not to exceed $30.0 million at any one time
outstanding (which amount may, but need not, be incurred in whole or in
part under the Credit Agreement).
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For purposes of determining any particular amount of Indebtedness under
"Limitation on Incurrence of Additional Indebtedness" covenant, guarantees,
Liens or letter of credit obligations supporting Indebtedness otherwise
included in the determination of such particular amount shall not be included.
For purposes of determining compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant, in the event that an item of Indebtedness
meets the criteria of more than one of the categories of Permitted Indebtedness
described in clauses (1) through (19) above or is permitted to be incurred
pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such
covenant, we shall, in our sole discretion, classify or later reclassify such
item of Indebtedness in any manner that complies with such covenant. Accrual of
interest, accretion or amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional Indebtedness with the
same terms, the payment of dividends on Disqualified Capital Stock in the form
of additional shares of the same class of Disqualified Capital Stock and change
in the amount outstanding due solely to the result of fluctuations in the
exchange rates of currencies will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Capital Stock for purposes of the
"Limitations on Incurrence of Additional Indebtedness" covenant.
"Permitted Investments" means:
(1) Investments by us or any Restricted Subsidiary of ours in any Person that
is or will become immediately after such Investment a Wholly Owned Domestic
Restricted Subsidiary of ours or that will merge or consolidate into us or
a Wholly Owned Domestic Restricted Subsidiary of ours and other Investments
to the extent constituting intercompany Indebtedness permitted under clause
(6) or (7) of the definition of "Permitted Indebtedness";
(2) Investments in us by any Restricted Subsidiary of ours; provided that any
Indebtedness evidencing such Investment, to the extent held by a Restricted
Subsidiary that is not a guarantor, is unsecured and subordinated, pursuant
to a written agreement, to our obligations under the notes and the
indenture;
(3) Investments in cash and Cash Equivalents;
(4) loans and advances to employees and officers of ours and our Restricted
Subsidiaries in the ordinary course of business for bona fide business
purposes not in excess of $2.0 million at any one time outstanding;
(5) Currency Agreements and Interest Swap Obligations entered into in the
ordinary course of ours or our Restricted Subsidiaries' businesses and
otherwise in compliance with the indenture;
(6) additional Investments not to exceed $15.0 million at any one time
outstanding;
(7) Investments in securities of trade creditors or customers received pursuant
to any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers or in good faith settlement
of delinquent obligations of such trade creditors or customers;
(8) Investments made by us or our Restricted Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance
with the "Limitation on Asset Sales" covenant;
(9) Investments represented by guarantees that are otherwise permitted under
the indenture;
(10) Investments the payment for which is our Qualified Capital Stock;
(11) any Investment by us or a Wholly Owned Subsidiary of ours in a
Securitization Entity or any Investment by a Securitization Entity in any
other Person in connection with a Qualified Securitization Transaction;
provided that any Investment in a Securitization Entity is in the form of
a Purchase Money Note or an equity interest;
(12) Investments by us consisting of obligations of one or more officers,
directors or other employees of ours or any of our subsidiaries in
connection with such officers', directors' or employees' acquisition of
shares of our capital stock so long as no cash is paid by us or any of our
Subsidiaries to such officers, directors or employees in connection with
the acquisition of any such obligations; and
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(13) Investments in joint ventures not to exceed $15.0 million at any one time
outstanding.
"Permitted Liens" means the following types of Liens:
(1) Liens for taxes, assessments or governmental charges or claims either (a)
not delinquent or (b) contested in good faith by appropriate proceedings
and as to which we or our Restricted Subsidiaries shall have set aside on
its books such reserves as may be required pursuant to GAAP;
(2) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen and repairmen and other Liens imposed by
law incurred in the ordinary course of business for sums not yet delinquent
or being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP has been made in respect
thereof;
(3) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(4) judgment Liens not giving rise to an Event of Default so long as such Lien
is adequately bonded and any appropriate legal proceedings which may have
been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(5) easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of ours or any of our
Restricted Subsidiaries;
(6) Liens upon specific items of inventory or other goods and proceeds of any
Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(7) Liens securing reimbursement obligations with respect to commercial letters
of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
(8) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of ours or any
of our Restricted Subsidiaries, including rights of offset and set-off;
(9) Liens securing Interest Swap Obligations which Interest Swap Obligations
relate to Indebtedness that is otherwise permitted under the Indenture;
(10) Liens securing Capitalized Lease Obligations and Purchase Money
Indebtedness permitted pursuant to clause (13) of the definition of
"Permitted Indebtedness"; provided, however, that in the case of Purchase
Money Indebtedness (a) the Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets of
ours or any Restricted Subsidiary of ours other than the property and
assets so acquired or constructed and (b) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition or
construction or, in the case of a refinancing of any Purchase Money
Indebtedness, within 90 days of such refinancing;
(11) Liens securing Indebtedness under Currency Agreements;
(12) Liens securing Acquired Indebtedness incurred in accordance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; provided
that:
(a) such Liens secured such Acquired Indebtedness at the time of and prior
to the incurrence of such Acquired Indebtedness by us or a Restricted
Subsidiary of ours and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by us or
a Restricted Subsidiary of ours; and
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(b) such Liens do not extend to or cover any property or assets of ours or
of any of our Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of ours or a Restricted
Subsidiary of ours and are no more favorable to the lienholders than
those securing the Acquired Indebtedness prior to the incurrence of
such Acquired Indebtedness by us or a Restricted Subsidiary of ours;
(13) Liens on assets of a Restricted Subsidiary of ours that is not a guarantor
to secure Indebtedness of such Restricted Subsidiary that is otherwise
permitted under the indenture;
(14) Liens on assets transferred to a Securitization Entity or on assets of a
Securitization Entity, in either case incurred in connection with a
Qualified Securitization Transaction and Liens in favor of the Factor
solely on those accounts receivable and the rights ancillary thereto of
ours and our Restricted Subsidiaries that are purchased by the Factor
pursuant to the Factoring Agreement from time to time;
(15) leases, subleases, licenses and sublicenses granted to others that do not
materially interfere with the ordinary course of business of us and our
Restricted Subsidiaries;
(16) banker's Liens, rights of setoff and similar Liens with respect to cash
and Cash Equivalents on deposit in one or more bank accounts in the
ordinary course of business;
(17) Liens arising from filing Uniform Commercial Code financing statements
regarding leases;
(18) Liens in favor of customs and revenue authorities arising as a matter of
law to secure payment of custom duties in connection with the importation
of goods;
(19) rights of customers with respect to inventory which arise from deposits
and progress payments made in the ordinary course of business;
(20) additional Liens not to exceed $5.0 million at any one time; and
(21) the escrow of up to 6.4% of the Capital Stock of Potain to comply with the
judgment or order of any court or to settle any judicial proceeding in
whole or in part.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness of ours and our Restricted
Subsidiaries incurred in the normal course of business for the purpose of
financing all or any part of the purchase price, or the cost of installation,
construction or improvement, of property or equipment.
"Purchase Money Note" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from us or any
subsidiary of ours in connection with a Qualified Securitization Transaction to
a Securitization Entity, which note shall be repaid from cash available to the
Securitization Entity other than amounts required to be established as reserves
pursuant to agreements, amounts paid to investors in respect of interest and
principal and amounts paid in connection with the purchase of newly generated
receivables or newly acquired equipment.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Securitization Transaction" means any transaction or series of
transactions that may be entered into by us, any of our Restricted Subsidiaries
or a Securitization Entity pursuant to which we or such Restricted Subsidiary
or that Securitization Entity may, pursuant to customary terms, sell, convey or
otherwise transfer to, or grant a security interest in for the benefit of, (1)
a Securitization Entity or us or any of our Restricted Subsidiaries that
subsequently transfers to a Securitization Entity (in the case of a transfer by
us or such Restricted Subsidiary) and (2) any other Person (in the case of
transfer by a Securitization Entity), any
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accounts receivable (whether now existing or arising or acquired in the future)
of ours or any of our Restricted Subsidiaries that arose in the ordinary course
of business of us and our Restricted Subsidiaries, and any assets related
thereto, including, without limitation, all collateral securing such accounts
receivable, all contracts and contract rights and all guarantees or other
obligations in respect of such accounts receivable, proceeds of such accounts
receivable and other assets (including contract rights) that are customarily
transferred or in respect of which security interests are customarily granted
in connection with asset securitization transactions involving accounts
receivable.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by us or any Restricted
Subsidiary of ours of Indebtedness incurred in accordance with the "Limitation
on Incurrence of Additional Indebtedness" covenant (other than pursuant to
clauses (2), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13), (14), (15)
or (19) of the definition of Permitted Indebtedness), in each case that does
not:
(1) result in an increase in the aggregate principal amount of Indebtedness of
such Person as of the date of such proposed Refinancing (plus the amount of
any premium required to be paid under the terms of the instrument governing
such Indebtedness and plus the amount of reasonable expenses incurred by us
in connection with such Refinancing); or
(2) create Indebtedness with: (a) a Weighted Average Life to Maturity that is
less than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced; or (b) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced; provided that (x) if such Indebtedness being
Refinanced is Indebtedness solely of ours, then such Refinancing
Indebtedness shall be Indebtedness solely of ours and (y) if such
Indebtedness being Refinanced is subordinate or junior to the notes, then
such Refinancing Indebtedness shall be subordinate to the notes at least to
the same extent and in the same manner as the Indebtedness being
Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to us or a Restricted Subsidiary of any property, whether owned by us
or any Restricted Subsidiary at the Issue Date or later acquired, which has
been or is to be sold or transferred by us or such Restricted Subsidiary to
such Person or to any other Person from whom funds have been or are to be
advanced by such Person on the security of such Property.
"Securitization Entity" means a Wholly Owned Subsidiary of ours (or another
Person in which we or any subsidiary of ours makes an Investment and to which
we or any subsidiary of ours transfers accounts receivable and related assets)
that engages in no activities other than in connection with the financing of
accounts receivable and that is designated by our Board of Directors as
provided below as a Securitization Entity; and
(1) no portion of the Indebtedness or any other obligations (contingent or
otherwise) of which:
(a) is guaranteed by us or any Restricted Subsidiary of ours (other than
the Securitization Entity) (excluding guarantees of obligations (other
than the principal of, and interest on, Indebtedness)) pursuant to
Standard Securitization Undertakings,
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(b) is recourse to or obligates us or any Restricted Subsidiary of ours
(other than the Securitization Entity) in any way other than pursuant
to Standard Securitization Undertakings or
(c) subjects any asset of ours or any Restricted Subsidiary of ours (other
than the Securitization Entity), directly or indirectly, contingently
or otherwise, to the satisfaction thereof, other than pursuant to
Standard Securitization Undertakings and other than any interest in the
accounts receivable and related assets being financed (whether in the
form of an equity interest in such assets or subordinated indebtedness
payable primarily from such financed assets), retained or acquired by
us or any Restricted Subsidiary of ours;
(2) with which neither we nor any Restricted Subsidiary of ours has any
material contract, agreement, arrangement or understanding other than on
terms no less favorable to us or such Restricted Subsidiary than those that
might be obtained at the time from Persons that are not Affiliates of ours,
other than fees payable in the ordinary course of business in connection
with servicing receivables of such entity; and
(3) to which neither we nor any Restricted Subsidiary of ours has any
obligation to maintain or preserve such entity's financial condition or
cause such entity to achieve certain levels of operating results.
Any such designation by our Board of Directors shall be evidenced to the
trustee by filing with the trustee a certified copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing conditions.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of ours, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium,
if any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of:
(1) all monetary obligations (including guarantees thereof) of every nature of
ours under the Credit Agreement, including, without limitation, obligations
(including guarantees) to pay principal, premium (if any) and interest,
reimbursement obligations under letters of credit, fees, expenses and
indemnities;
(2) all Interest Swap Obligations (including guarantees thereof); and
(3) all obligations under Currency Agreements (including guarantees thereof),
in each case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(1) any Indebtedness of ours to a subsidiary of ours;
(2) any Indebtedness to, or guaranteed on behalf of, any director, officer or
employee of (x) ours or (y) any subsidiary of ours (including amounts owed
for compensation);
(3) Indebtedness to trade creditors and other amounts incurred (but not under
the Credit Agreement) in connection with obtaining goods, materials or
services;
(4) Indebtedness represented by Disqualified Capital Stock;
(5) any liability for federal, state, local or other taxes owed or owing by us;
(6) that portion of any Indebtedness incurred in violation of the indenture
provisions set forth under "Covenants--Limitation on Incurrence of
Additional Indebtedness" (but, as to any such obligation, no
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such violation shall be deemed to exist for purposes of this clause (6) if
the holder(s) of such obligation or their representative and the trustee
shall have received an officers' certificate of ours to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving
credit indebtedness, that the incurrence of the entire committed amount
thereof at the date on which the initial borrowing thereunder is made would
not) violate such provisions of the indenture);
(7) Indebtedness that, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Bankruptcy Code, is without
recourse to us; and
(8) any Indebtedness that is, by its express terms, subordinated in right of
payment to any other Indebtedness of ours.
"Significant Subsidiary", with respect to any Person, means any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by us or any subsidiary of ours that
are reasonably customary in an accounts receivable securitization transaction.
"subsidiary" with respect to any Person, means:
(1) any corporation of which the outstanding Capital Stock having at least a
majority of the votes entitled to be cast in the election of directors
under ordinary circumstances shall at the time be owned, directly or
indirectly, by such Person; or
(2) any other Person of which at least a majority of the voting interest under
ordinary circumstances is at the time, directly or indirectly, owned by
such Person.
"Supplemental Indenture" means a supplemental indenture in the form to be
attached to the indenture, executed and delivered to the trustee, pursuant to
which each New Parent (i) will become a guarantor of the notes by executing a
guarantee in the form also to be attached to the indenture, and (ii) becomes
subject to the covenants contained in the indenture as described in such
supplemental indenture.
"Unrestricted Subsidiary" of any Person means:
(1) any subsidiary of such Person that at the time of determination shall be
or continue to be designated an Unrestricted Subsidiary by the Board of
Directors of such Person in the manner provided below; and
(2) any subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any subsidiary, including any newly
acquired or newly formed subsidiary, to be an Unrestricted subsidiary unless
such subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, ours or any other subsidiary of ours that is not a subsidiary of
the subsidiary to be so designated; provided that:
(1) we certify to the trustee that such designation complies with the
"Limitation on Restricted Payments" covenant; and
(2) each subsidiary to be so designated and each of its subsidiaries has not
at the time of designation, and does not thereafter, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender has recourse to
any of the assets of ours or any of our Restricted Subsidiaries.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if:
(1) immediately after giving effect to such designation, we are is able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant; and
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(2) immediately before and immediately after giving effect to such designation,
no Default or Event of Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the
trustee by promptly filing with the trustee a copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying
that such designation complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Wholly Owned
Subsidiary of such Person which at the time of determination is a Restricted
Subsidiary of such Person.
"Wholly Owned Subsidiary" of any Person means any subsidiary of such Person
of which all the outstanding voting securities (other than (i) in the case of a
Restricted Subsidiary that is incorporated in a jurisdiction other than a State
in the United States or the District of Columbia, directors' qualifying shares
or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law and (ii) in the case of Potain, up to 6.4% of the
Capital Stock of Potain) are owned by such Person or any Wholly Owned
Subsidiary of such Person.
Registration Rights
We, the guarantors and the initial purchaser entered into a registration
rights agreement pursuant to which each of us and the guarantors agreed that
they would: (1) within 75 days after the issue date of the old notes, file an
exchange offer registration statement with respect to a registered offer to
exchange the old notes for the new notes, and (2) cause the exchange offer
registration statement to be declared effective under the Securities Act within
150 days after the issue date of the old notes. We will offer the new notes and
the related guarantees in exchange for surrender of the old notes. We will keep
the exchange offer open for not less than 30 days after the date notice of the
exchange offer is mailed to holders of the old notes. For each of the old notes
surrendered to us pursuant to the exchange offer, the holder of the old note
who surrendered such note will receive a new note having a principal amount
equal to that of the surrendered note. Interest on each new note will accrue
(A) from the later of the last interest payment date on which interest was paid
on the old note surrendered in exchange therefor, or if the old note is
surrendered for exchange on a date in a period which includes the record date
for an interest payment date to occur on or after the date of such exchange and
as to which interest will be paid, the date of such interest payment date or
(B) if no interest has been paid on such old note, from the issue date of the
old notes.
If (1) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, we are not permitted to effect an
exchange offer, (2) we do not consummate the exchange offer within 180 days of
the issue date of the old notes, (3) some holders of unregistered new notes so
request, (4) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, a holder of the old notes is not
permitted to participate in the exchange offer or (5) in the case of any holder
of the old notes that participates in the exchange offer, such holder does not
receive new notes on the date of the exchange that may be sold without
restriction under state and federal securities laws, other than due solely to
the status of such holder as an affiliate of ours or within the meaning of the
Securities Act, then we will promptly deliver to the holders of the notes and
the trustee written notice of these circumstances. We will then, at our sole
expense, as promptly as practicable, file a shelf registration statement
covering resales of the notes and use our best efforts to keep effective the
shelf registration statement until the earlier of two years after the issue
date of the old notes and such time as all of the applicable notes have been
sold thereunder. If we file a shelf registration statement, then
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we will provide to each holder of the old notes copies of the prospectus that
is a part of the shelf registration statement, notify each such holder when the
shelf registration statement for the old notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
notes. A holder of the old notes that sells old notes pursuant to the shelf
registration statement will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers,
will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement that are applicable to such a
holder, including indemnification rights and obligations.
If we fail to meet the targets listed above, then additional interest will
become payable in respect of the notes as follows:
(1) if (A) we fail to file the exchange offer registration statement on
or prior to the date specified for such filing or the shelf registration
statement on or prior to 75 days after we deliver a shelf registration
statement notice or (B) notwithstanding that we have consummated or will
consummate an exchange offer, we are required to file a shelf registration
statement and we do not file the shelf registration statement on or prior
to the date required by the registration rights agreement, then commencing
on the day after either such required filing date, additional interest will
accrue on the principal amount of the notes at a rate of 0.50% per annum
for the first 90 days immediately following each such filing date, such
additional interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; or
(2) if (A) neither the exchange offer registration statement is declared
effective by the SEC on or prior to the specified date nor the shelf
registration statement is declared effective by the SEC on or prior to 150
days after we deliver a shelf registration statement notice or (B)
notwithstanding that we have consummated or will consummate an exchange
offer, we are required to file a shelf registration statement and the shelf
registration statement is not declared effective by the SEC on or prior to
the date required by the registration rights agreement, then commencing on
the day after such required effective date, additional interest will accrue
on the principal amount of the notes at a rate of 0.50% per annum for the
first 90 days immediately following such date, such additional interest
rate increasing by an additional 0.50% per annum at the beginning of each
subsequent 90-day period; or
(3) if (A) we have not exchanged new notes for all old notes validly
tendered in accordance with the terms of the exchange offer on or prior to
the 180th day after the issue date of the old notes or (B) if applicable,
the shelf registration statement has been declared effective and the shelf
registration statement ceases to be effective at any time prior to the
second anniversary of the issue date of the old notes, then additional
interest will accrue on the principal amount of the notes at a rate of
0.50% per annum for the first 90 days commencing on the 181st day after the
issue date of the old notes, in the case of (A) above, or the day the shelf
registration statement ceases to be effective, in the case of (B) above,
such additional interest rate increasing by an additional 0.50% per annum
at the beginning of each subsequent 90-day period;
provided, however, that the additional interest rate on the old notes may not
accrue under more than one of the clauses above at any one time and at no time
will the aggregate amount of additional interest accruing exceed in the
aggregate 2.0% per annum; provided, further, however, that (a) upon the filing
of the exchange offer registration statement or a shelf registration statement
in the case of clause (1) above, (b) upon the effectiveness of the exchange
offer registration statement or a shelf registration statement in the case of
clause (2) above, or (c) upon the exchange of new notes for all old notes
tendered in the case of clause (3) (A) above, or upon the effectiveness of the
shelf registration statement which had ceased to remain effective in the case
of clause (3) (B) above, additional interest on the old notes as a result of
that clause will cease to accrue.
Any amounts of additional interest due will be payable in cash on the same
original interest payment dates as the old notes.
112
We will apply to list the new notes on the Luxembourg Stock Exchange in
accordance with its rules once the exchange offer is completed. All notices
regarding the new notes will, if and so long as the new notes are listed on
the Luxembourg Stock Exchange and the rules of that stock exchange so require,
be published in a daily newspaper having general circulation in Luxembourg,
which we expect to be the Luxemburger Wort. So long as the new notes are
listed on the Luxembourg Stock Exchange and the rules of that stock exchange
so require, copies of all documentation in connection with the exchange offer
will be available and all actions necessary in connection with the exchange
offer can be carried out during normal business hours on any weekday at the
office of the Luxembourg listing agent for the new notes. We will advise the
Luxembourg Stock Exchange when the exchange offer opens and closes and will
provide the Luxembourg Stock Exchange with a supplementary prospectus
providing the new code, deposit date, exchange amount and principal amount of
the notes and new notes outstanding.
Description of Book-Entry System
The new notes to be issued in the exchange offer will be represented by one
or more global notes, which will be deposited with a common depositary for
Euroclear and Clearstream Luxembourg, or its nominee. Thereafter, book-entry
interests in the new notes will be shown on, and transfers thereof will be
effected only through, records maintained in book-entry form by Euroclear and
Clearstream Luxembourg and their participants. All holders of new notes who
exchanged their old notes in the exchange offer will hold their interests
through the global notes regardless of whether they purchased their interests
pursuant to Rule 144A or Regulation S.
Book-entry interests will not be held in definitive form. Instead,
Euroclear or Clearstream Luxembourg will credit on their respective book-entry
registration and transfer systems a participant's account with the interest
beneficially owned by the participant. The laws of some jurisdictions,
including some states of the United States, may require that some purchasers
of securities take physical delivery of the securities in definitive form.
These limitations may impair the ability to own, transfer or pledge book-entry
interests. In addition, while the new notes are in global form, holders of
book-entry interests will not be considered the owners or holders of new notes
for any purpose.
So long as the new notes are held in global form, the common depositary or
its nominee will be considered the sole holders of global notes for all
purposes under the indenture. In addition, participants must rely on the
procedures of Euroclear and Clearstream Luxembourg and indirect participants
must rely on the procedures of the participants through which they own book-
entry interests to exercise any rights of holders of the new notes under the
indenture.
None of us, the trustee or the registrars will have any responsibility or
be liable for any aspect of the records relating to the book-entry interests.
Definitive Registered Notes
Under the terms of the indenture, owners of book-entry interests will
receive definitive registered notes:
. if either Euroclear or Clearstream Luxembourg notifies us that it is
unwilling or unable to continue to act as depositary and a successor
depositary is not appointed by us within 120 days;
. if Euroclear or Clearstream Luxembourg so request following an event of
default under the indenture;
. in whole (but not in part) at any time if we in our sole discretion
determine that the global notes should be exchanged for definitive
registered notes; or
. the owner of a book-entry interest requests such exchange in writing
delivered through either Euroclear or Clearstream Luxembourg following
an event of default under the indenture.
113
In such an event, the registrar will issue definitive registered notes
registered in the name or names and issued in any approved denominations,
requested by or on behalf of Euroclear or Clearstream Luxembourg, as
applicable, in accordance with their respective customary procedures and based
upon directions received from participants reflecting the beneficial ownership
of book-entry interests.
Redemption of Global Notes
In the event any global note, or any portion thereof, is redeemed, the
depositary will redeem an equal amount of the book-entry interests in such
global note from the amount received by it in respect of the redemption of
such global note. The redemption price payable in connection with the
redemption of such book-entry interests will be equal to the amount received
by the common depositary in connection with the redemption of such global
note, or any portion thereof. We understand that under existing practices of
Euroclear and Clearstream Luxembourg, if fewer than all of the notes are to be
redeemed at any time, Euroclear and Clearstream Luxembourg will credit their
respective participants' accounts on a proportionate basis with adjustments to
prevent fractions or by lot or on such other basis as they deem fair and
appropriate; provided, however, that no book-entry interest of less than
(Euro)1,000 principal amount may be redeemed in part.
Payments on Global Notes
Payments of any amounts owing in respect of a global note, including
principal, premium, if any, and interest and additional interest, if any, will
be made by us in euros to the relevant paying agents. The relevant paying
agents will, in turn, make such payments to the common depositary for
Euroclear and Clearstream Luxembourg which will distribute such payments to
participants in accordance with its procedures.
Under the terms of the indenture, we and the trustee will treat the
registered holder of a global notes (e.g., the common depositary or its
nominee) as the owner thereof for the purpose of receiving payments and for
all other purposes. Consequently, none of us, the trustee or any agent of us
or the trustee has or will have any responsibility or liability for:
. any aspect of the records of Euroclear, Clearstream Luxembourg or any
participant or indirect participant relating to or payments made on
account of a book-entry interest or for maintaining, supervising or
reviewing any of the records of Euroclear, Clearstream Luxembourg or any
participant or indirect participant relating to or payments made on
account of a book-entry interest; or
. Euroclear, Clearstream Luxembourg or any participant or indirect
participant.
Payments by participants to owners of book-entry interests held through
participants are the responsibility of such participants, as is now the case
with securities held for the accounts of customers registered in "street
name."
Action by Owners of Book-Entry Interests
Euroclear and Clearstream Luxembourg have advised us that they will take
any action permitted to be taken by a holder of notes, including the
presentation of notes for exchange as described above, only at the direction
of one or more participants to whose account the book-entry interests in the
global notes are credited and only in respect of such portion of the aggregate
principal amount of notes as to which such participant or participants has or
have given such direction. The common depositary will not exercise any
discretion in the granting of consents, waivers or the taking of any other
action in respect of the global notes. However, if there is an event of
default under the notes, each of Euroclear and Clearstream Luxembourg reserve
the right to exchange the global notes for definitive registered notes in
certificated form, and to distribute such notes to its participants.
114
Information Concerning Euroclear and Clearstream Luxembourg
We understand as follows with respect to Euroclear and Clearstream
Luxembourg:
Euroclear and Clearstream Luxembourg each hold securities for participating
organizations and facilitate the clearance and settlement of securities
transactions between their respective participants through electronic book-
entry changes in accounts of such participants. Euroclear and Clearstream
Luxembourg provide to their participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Euroclear and Clearstream
Luxembourg interface with domestic securities markets. Euroclear and
Clearstream Luxembourg participants are financial institutions such as
underwriters, securities brokers and dealers, banks, trust companies and
certain other organizations. Indirect access to Euroclear or Clearstream
Luxembourg is also available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodian relationship with a
Euroclear or Clearstream Luxembourg participant, either directly or indirectly.
Global Clearance and Settlement Under the Book-Entry System
Initial Settlement
Initial settlement for the notes will be made in euros. Book-entry interests
owned through Euroclear or Clearstream Luxembourg accounts will follow the
settlement procedures applicable to conventional eurobonds in registered form.
Book-entry interests will be credited to the securities custody accounts of
Euroclear and Clearstream Luxembourg holders on the business day following the
settlement date against payment for value on the settlement date.
Secondary Market Trading
The book-entry interests will trade through participants of Euroclear or
Clearstream Luxembourg, and will settle in same-day funds. Since the purchase
determines the place of delivery, it is important to establish at the time of
trading of any book-entry interests where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
115
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes the material U.S. federal
income tax aspects of the exchange offer to holders of old notes. The
discussion is for general information purposes only, is limited to U.S.
federal income tax consequences of the exchange offer, and does not consider
the aspects of the ownership and dispositions of the old notes or the new
notes. A discussion of the U.S. federal income tax consequences of holding and
disposing of the notes is contained in the offering memorandum with respect to
the old notes.
This discussion does not consider the impact, if any, of the holder's
personal circumstances on the tax consequences of the exchange offer to such
holder. The discussion also does not address the U.S. federal income tax
consequences of holders subject to special treatment under U.S. federal income
tax laws, such as dealers in securities or foreign currency, tax-exempt
entities, banks, thrifts, insurance companies, persons that hold the
outstanding notes as part of a straddle, a hedge against currency risk, a
conversion transaction, or other risk reduction transactions, or persons that
have a functional currency other than the U.S. dollar and investors in pass-
through entities. In addition, this discussion does not describe any state,
local or foreign tax consequences from the exchange offer.
This discussion is based upon the Internal Revenue Code, existing and
proposed regulations thereunder, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject
to change, possibly on a retroactive basis. This discussion does not foreclose
the possibility of a contrary decision by the IRS or a court of competent
jurisdiction, or of a contrary position by the IRS or Treasury Department in
regulations or rulings issued in the future.
Holders of old notes should consult their own tax advisors regarding the
application of U.S. federal income tax laws, as well as the tax laws of any
state, local, or foreign jurisdiction, to the exchange offer (and to holding
and disposing of the securities) in light of their particular circumstances.
The exchange of old notes for the new notes under the terms of the exchange
offer should not constitute a taxable exchange. As a result:
. A holder should not recognize taxable gain or loss as a result of
exchanging old notes for the new notes under the terms of the exchange
offer;
. The holder's holding period of the new notes should include the holding
period of the old notes exchanged for the new notes; and
. A holder's adjusted tax basis in the new notes should be the same as the
adjusted tax basis, immediately before the exchange, of the old notes
exchanged for the new notes.
116
PLAN OF DISTRIBUTION
If you are a broker-dealer and hold old notes for your own account as a
result of market-making activities or other trading activities and you receive
new notes in exchange for old notes in the exchange offer, then you may be a
statutory underwriter and must acknowledge that you will deliver a prospectus
in connection with any resale of these new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired as a result of market-making activities or other
trading activities. We acknowledge and, unless you are a broker-dealer, you
must acknowledge that you are not engaged in, do not intend to engage in, and
have no arrangement or understanding with any person to participate in a
distribution of new notes. We have agreed that, starting on the expiration date
of the exchange offer and ending on the close of business on the 180th day
following the expiration date of the exchange offer, we will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
Neither we nor any of the guarantors will receive any proceeds from any sale
of new notes by broker-dealers. New notes received by broker-dealers for their
own account pursuant to the exchange offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the new notes or a combination
of those methods of resale, at market prices prevailing at the time of resale,
at prices related to such prevailing market prices or negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such new notes. Any
broker-dealer that resells new notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of these new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of new notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests those documents in the letter of
transmittal.
We have agreed to pay all expenses incident to the exchange offer, including
the expenses of one counsel for the holders of the notes other than commissions
or concessions of any broker-dealers and will indemnify the holders of the new
notes, including any broker-dealers, against various liabilities, including
liabilities under the Securities Act. We note, however, that, in the opinion of
the SEC, indemnification against liabilities arising under federal securities
laws is against public policy and may be unenforceable.
117
LEGAL MATTERS
The validity of the new notes will be passed upon for us by Foley &
Lardner, Milwaukee, Wisconsin.
EXPERTS
The financial statements of Manitowoc as of December 31, 2000 and 1999 and
for each of the three years in the period ended December 31, 2000 included in
this prospectus, have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Potain as of December 31, 2000 and 1999 and for
each of the two years in the period ended December 31, 2000 included in this
prospectus, have been so included in reliance on the report of Ernst & Young
Audit, independent auditors, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document that we file at
the SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C.
and at regional SEC offices in Chicago, Illinois and New York, New York. You
can call the SEC at 1-800-SEC-0330 for further information on the operation of
the public reference rooms. You can also find our public filings with the SEC
on the internet at a website maintained by the SEC located at
http://www.sec.gov.
We are "incorporating by reference" specified documents that we file with
the SEC, which means:
. incorporated documents are considered part of this prospectus;
. we are disclosing important information to you by referring you to those
documents; and
. information we file with the SEC will automatically update and supersede
information contained in this prospectus.
We incorporate by reference the documents we list below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus and before
the expiration date of the exchange offer:
. Our Annual Report on Form 10-K for the year ended December 31, 2000.
. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
. Our Current Reports on Form 8-K dated March 26, 2001, April 16, 2001,
April 17, 2001, April 20, 2001 and May 9, 2001.
You may request a copy of any of these filings, at no cost, by writing to
Maurice D. Jones, General Counsel and Secretary, The Manitowoc Company, Inc.,
P.O. Box 66, Manitowoc, Wisconsin 54221-0066, or by calling Mr. Jones at (920)
684-4410. So long as the notes are listed on the Luxembourg Stock Exchange and
the rules of that stock exchange shall require, copies of those filings will
be available, at no cost, during normal business hours on any weekday at the
office of the Luxembourg listing agent for the notes.
118
GENERAL LISTING INFORMATION
We will apply to list the new notes on the Luxembourg Stock Exchange in
accordance with its rules once the exchange offer has been completed. Prior to
the listing, a legal notice relating to the issuance of the new notes and our
articles of incorporation and those of the guarantors will be deposited with
the Chief Registrar of the District Court of Luxembourg (Greffier en Chef du
Tribunal d'Arrondissement de et a Luxembourg), where these documents are
available for inspection and where copies of these documents may be obtained
free of charge on request.
As long as the notes are listed on the Luxembourg Stock Exchange and the
rules of the Luxembourg Stock Exchange so require, copies of our articles of
incorporation and those of the guarantors and the indenture and the
registration rights agreement relating to the new notes may be inspected, and
our most recent audited annual consolidated financial statements and unaudited
quarterly consolidated financial statements may be obtained, on any business
day free of charge, at the office of the paying agent in Luxembourg.
Our board of directors approved the issuance of the new notes on March 4,
2001.
Except as disclosed in this prospectus, neither we nor the guarantors are
involved in, or have any knowledge of a threat of, any litigation,
administrative proceeding or arbitration which, in our judgment, is or may be
material in the context of the issuance of the notes.
Except as disclosed in this prospectus, there has been no material adverse
change in our consolidated financial position since December 31, 2000.
The new notes have been accepted for clearance through Euroclear and
Clearstream Luxembourg with a Common Code of 013207810 and an International
Securities Identification Number of US563571AB45.
INFORMATION ABOUT THE GUARANTORS
All of the guarantors are our direct or indirect wholly owned subsidiaries.
The address of the guarantors is c/o The Manitowoc Company, Inc., 500 South
16th Street, Manitowoc, Wisconsin 54221.
We are a holding company for our subsidiaries, including the guarantors,
with no material operations of our own and only limited assets. Separate
financial statements of the guarantors are not included in this prospectus
because the guarantors are jointly and severally liable with respect to our
obligations pursuant to the notes, and the aggregate net assets, earnings and
equity of the guarantors and us are substantially equivalent to our net assets,
earnings and equity on a consolidated basis. In addition, we do not prepare
non-consolidated financial statements. Financial reports for the guarantors and
us are available, free of charge, at the office of the paying agent in
Luxembourg.
The only guarantors that constitute at least 10% of our net assets or at
least 10% of our consolidated net profit or loss are Manitowoc Foodservice
Companies, Inc., a holding company for our food service businesses, and
Manitowoc Crane Companies, Inc., a manufacturer of lattice-boom crawler cranes.
As of December 31, 2000, Manitowoc Foodservice held 24.6%, and Manitowoc Cranes
held 10.7%, of our assets on a pro forma basis. As of December 31, 2000,
Manitowoc Foodservice had $213.0 million of shareholder's equity and Manitowoc
Cranes had $41.9 million of shareholder's equity.
119
INDEX TO FINANCIAL STATEMENTS
THE MANITOWOC COMPANY, INC.
Consolidated Financial Statements
Report of Independent Accountants......................................... F-2
Consolidated Statements of Earnings for the Years Ended December 31, 2000,
1999 and 1998............................................................ F-3
Consolidated Balance Sheets as of December 31, 2000 and 1999.............. F-4
Consolidated Statements of Cash Flow for the Years Ended December 31,
2000, 1999 and 1998...................................................... F-5
Consolidated Statements of Stockholders' Equity and Comprehensive Income
for the Years Ended December 31, 2000, 1999 and 1998..................... F-6
Notes to Consolidated Financial Statements................................ F-7
Unaudited Consolidated Financial Statements
Consolidated Statements of Earnings for the Three Months Ended March 31,
2001 and 2000 (unaudited)................................................ F-24
Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000
(unaudited).............................................................. F-25
Consolidated Statements of Cash Flows for the Three Months Ended March 31,
2001 and 2000 (unaudited)................................................ F-26
Consolidated Statements of Comprehensive Income for the Three Months Ended
March 31, 2001 and 2000 (unaudited)...................................... F-27
Notes to Consolidated Financial Statements (unaudited).................... F-28
INDEX TO FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants on Financial Statement Schedule......... F-32
Schedule II--Valuation and Qualifying Accounts............................ F-33
All other schedules are omitted because they are not applicable, not
required or because the required information is included in the consolidated
financial statements or notes thereto.
POTAIN SA
Consolidated Financial Statements
Report of Independent Auditors............................................ F-34
Consolidated Statements of Income for the Years Ended December 31, 2000
and 1999................................................................. F-35
Consolidated Balance Sheets as of December 31, 2000 and 1999.............. F-36
Consolidated Statements of Cash Flow for the Years Ended December 31, 2000
and 1999................................................................. F-37
Notes to Consolidated Financial Statements................................ F-38
Unaudited Consolidated Financial Statements
Consolidated Statement of Income for the Three Months Ended March 31,
2001 (unaudited)........................................................ F-55
Consolidated Balance Sheet as of March 31, 2001 (unaudited).............. F-56
Consolidated Statement of Cash Flow for the Three Months Ended March 31,
2001 (unaudited)........................................................ F-57
Notes to Consolidated Financial Statements (unaudited)................... F-58
F-1
THE MANITOWOC COMPANY, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
The Manitowoc Company, Inc. and Subsidiaries
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, stockholders' equity and comprehensive
income, and cash flows present fairly, in all material respects, the financial
position of The Manitowoc Company, Inc. and its Subsidiaries at December 31,
2000 and 1999, and the results of their operations and their cash flows for the
years ended December 31, 2000, 1999 and 1998, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
January 26, 2001, except for information in Note 15,
for which the date is March 4, 2001.
F-2
THE MANITOWOC COMPANY, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands of dollars, except per share data)
For the Years Ended
December 31,
----------------------------
2000 1999 1998
-------- -------- --------
Earnings
Net sales....................................... $873,272 $824,339 $703,920
-------- -------- --------
Costs and expenses:
Cost of sales.................................. 637,538 590,627 508,299
Engineering, selling and administrative
expenses...................................... 114,901 107,369 98,120
Amortization................................... 8,181 7,392 4,881
-------- -------- --------
Total costs and expenses..................... 760,620 705,388 611,300
-------- -------- --------
Earnings from operations........................ 112,652 118,951 92,620
Interest expense................................ (14,508) (10,790) (9,741)
Other expense--net.............................. (2,024) (2,155) (1,467)
-------- -------- --------
Earnings before taxes on income................. 96,120 106,006 81,412
Provision for taxes on income................... 35,852 39,222 30,032
-------- -------- --------
Net earnings.................................... $ 60,268 $ 66,784 $ 51,380
======== ======== ========
Per Share Data
Basic........................................... $ 2.42 $ 2.57 $ 1.98
Diluted......................................... $ 2.40 $ 2.55 $ 1.97
The accompanying notes are an integral part of these financial statements.
F-3
THE MANITOWOC COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars, except share data)
As of December 31,
-------------------
2000 1999
--------- --------
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 13,983 $ 10,097
Marketable securities..................................... 2,044 1,923
Accounts receivable, less allowances of $3,037 and
$1,803................................................... 88,231 62,802
Inventories............................................... 91,178 91,437
Other current assets...................................... 7,479 2,211
Future income tax benefits................................ 20,592 22,528
--------- --------
Total current assets.................................... 223,507 190,998
--------- --------
Intangible assets--net...................................... 308,751 232,729
Property, plant and equipment--net.......................... 99,940 92,023
Other non-current assets.................................... 10,332 14,490
--------- --------
Total assets............................................ $ 642,530 $530,240
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 144,713 $141,909
Short-term borrowings..................................... 81,000 32,300
Current portion of long-term debt......................... 270 489
Product warranties........................................ 13,507 14,610
--------- --------
Total current liabilities............................... 239,490 189,308
--------- --------
Non-Current Liabilities:
Long-term debt, less current portion...................... 137,668 79,223
Postretirement benefit obligation......................... 20,341 19,912
Other non-current liabilities............................. 11,262 9,621
--------- --------
Total non-current liabilities........................... 169,271 108,756
--------- --------
Commitments and contingencies............................... -- --
Stockholders' Equity:
Common stock (36,746,482 shares issued)................... 367 367
Additional paid-in capital................................ 31,602 31,476
Accumulated other comprehensive loss...................... (2,569)
(814)
Retained earnings......................................... 334,433 281,672
Treasury stock, at cost (12,487,019 and 10,658,113 shares
in 2000 and 1999, respectively).......................... (130,064)
(80,525)
--------- --------
Total stockholders equity............................... 233,769 232,176
--------- --------
Total liabilities and stockholders' equity.............. $ 642,530 $530,240
========= ========
The accompanying notes are an integral part of these financial statements.
F-4
THE MANITOWOC COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Thousands of dollars)
For the Years Ended December
31,
-------------------------------
2000 1999 1998
--------- --------- ---------
Cash Flows From Operations
Net earnings................................. $ 60,268 $ 66,784 $ 51,380
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation................................ 9,872 9,321 9,729
Amortization of goodwill.................... 8,181 7,392 4,881
Amortization of deferred financing fees..... 672 637 420
Deferred income taxes....................... 7,148 (592) (5,748)
Loss on sale of property, plant and
equipment.................................. 274 557 928
Changes in operating assets and liabilities,
excluding effects of business acquisitions:
Accounts receivable......................... (6,568) 14,057 (6,120)
Inventories................................. 6,402 (4,169) (18,662)
Other current assets........................ (17) 3,389 (2,535)
Non-current assets.......................... 777 (2,935) 483
Current liabilities......................... (25,452) 9,914 24,291
Non-current liabilities..................... 1,490 (984) (2,233)
--------- --------- ---------
Net cash provided by operations........... 63,047 103,371 56,814
========= ========= =========
Cash Flows From Investing
Business acquisitions--net of cash acquired.. (98,982) (62,104) (48,175)
Capital expenditures......................... (13,415) (13,714) (11,678)
Proceeds from sale of property, plant and
equipment................................... 3,481 6,491 1,329
Purchase of marketable securities--net....... (121) (89) (94)
--------- --------- ---------
Net cash used for investing............... (109,037) (69,416) (58,618)
========= ========= =========
Cash Flows From Financing
Dividends paid............................... (7,507) (7,799) (7,781)
Proceeds from long-term debt................. -- -- 75,000
Payments on long-term debt................... (1,093) (11,090) (65,957)
Proceeds (payments) from revolver
borrowings--net............................. 83,319 (16,200) (600)
Proceeds from issuance of commercial paper--
net......................................... 24,700 -- --
Debt acquisition costs....................... -- (574) (521)
Treasury stock purchases..................... (49,752) -- --
Exercises of stock options................... 339 1,241 355
--------- --------- ---------
Net cash provided by (used for) financing..... 50,006 (34,422) 496
--------- --------- ---------
Effect of exchange rate changes on cash....... (130) (18) 2
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. 3,886 (485) (1,306)
Balance at beginning of year.................. 10,097 10,582 11,888
--------- --------- ---------
Balance at end of year........................ $ 13,983 $ 10,097 $ 10,582
========= ========= =========
Supplemental Cash Flow Information
Interest paid................................ $ 11,837 $ 10,137 $ 8,490
--------- --------- ---------
Income taxes paid............................ $ 36,632 $ 41,327 $ 37,108
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-5
THE MANITOWOC COMPANY, INC.
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(Thousands of dollars, except shares and per share data)
For the Years Ended December 31,
----------------------------------
2000 1999 1998
---------- ---------- ----------
Common Stock--Shares Outstanding
Balance at beginning of year............... 26,088,369 17,304,578 17,269,175
Treasury stock purchases................... (1,882,900) -- --
Three-for-two stock split.................. -- 8,652,289 --
Stock options exercised.................... 68,919 144,177 39,694
Stock swaps for stock options exercised.... (14,925) (12,675) (4,291)
---------- ---------- ----------
Balance at end of year..................... 24,259,463 26,088,369 17,304,578
---------- ---------- ----------
Common Stock--Par Value
Balance at beginning of year............... $ 367 $ 245 $ 245
Three-for-two stock split.................. -- 122 --
---------- ---------- ----------
Balance at end of year..................... $ 367 $ 367 $ 245
---------- ---------- ----------
Additional Paid-In Capital
Balance at beginning of year............... $ 31,476 $ 31,029 $ 30,980
Three-for-two stock split.................. -- (122) --
Stock options exercised.................... 126 569 49
---------- ---------- ----------
Balance at end of year..................... $ 31,602 $ 31,476 $ 31,029
---------- ---------- ----------
Accumulated Other Comprehensive Loss
Balance at beginning of year............... $ (814) $ (212) $ (192)
Other comprehensive loss................... (1,755) (602) (20)
---------- ---------- ----------
Balance at end of year..................... $ (2,569) $ (814) $ (212)
---------- ---------- ----------
Retained Earnings
Balance at beginning of year............... $ 281,672 $ 222,687 $ 179,088
Net earnings............................... 60,268 66,784 51,380
Cash dividends*............................ (7,507) (7,799) (7,781)
---------- ---------- ----------
Balance at end of year..................... $ 334,433 $ 281,672 $ 222,687
---------- ---------- ----------
Treasury Stock
Balance at beginning of year............... $ (80,525) $ (81,197) $ (81,503)
Treasury stock purchases................... (49,752) -- --
Stock options exercised.................... 675 1,088 448
Stock swaps for stock options exercised.... (462) (416) (142)
---------- ---------- ----------
Balance at end of year..................... $ (130,064) $ (80,525) $ (81,197)
---------- ---------- ----------
Comprehensive Income
Net earnings............................... $ 60,268 $ 66,784 $ 51,380
Other comprehensive loss:
Foreign currency translation adjustment.... (1,755) (602) (20)
---------- ---------- ----------
Comprehensive income....................... $ 58,513 $ 66,182 $ 51,360
========== ========== ==========
- --------
* Cash dividends per share after giving effect to the three-for-two stock split
in 1999 were $.30 per share.
The accompanying notes are an integral part of these financial statements.
F-6
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of dollars, except share and per share data or where otherwise
indicated)
1. Summary of Significant Accounting Policies
Principles of Consolidation--The consolidated financial statements include
the accounts of The Manitowoc Company, Inc. (the "company") and its wholly and
partially owned domestic and non-U.S. subsidiaries. All significant
intercompany balances and transactions have been eliminated.
Use of Estimates--The financial statements of the company have been prepared
in accordance with generally accepted accounting principles, which require
management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues, expenses, and related disclosures for the
years presented. They also affect the disclosures of contingencies. Actual
results could differ from those estimates.
Cash Equivalents--All short-term investments purchased with an original
maturity of three months or less are considered cash equivalents.
Marketable Securities--Marketable securities at December 31, 2000 and 1999
included $2.0 million and $1.9 million, respectively, of securities which are
available for sale. The difference between fair market value and cost for these
investments was not significant in either year.
Inventories--Inventories are stated at the lower of cost or market as
described in Note 4. Finished goods and work-in-process include material, labor
and manufacturing overhead costs.
Advance payments from customers are netted against inventories to the extent
of related accumulated costs. Advance payments netted against inventories at
December 31, 2000 and 1999 were $539 and $202, respectively. Advance payments
received in excess of related costs on uncompleted contracts are classified
with accrued expenses.
Intangible Assets--Intangible assets consist primarily of costs in excess of
net assets of businesses acquired (goodwill). Intangible assets are amortized
using the straight-line method over their estimated beneficial lives, not to
exceed 40 years. Subsequent to an acquisition, the company annually evaluates
whether later events and circumstances have occurred that indicate the
remaining estimated useful life of intangibles may warrant revision or that the
remaining balance of intangibles may not be recoverable. When factors indicate
that intangibles should be evaluated for possible impairment, the company uses
an estimate of the related business' undiscounted net cash flows over the
remaining life of the intangibles in measuring whether the intangibles are
recoverable. Intangible assets at December 31, 2000 and 1999 of $308,751 and
$232,729, respectively, are net of accumulated amortization of $29,368 and
$20,515, respectively.
Property, Plant and Equipment--Property, plant and equipment is depreciated
over the estimated useful lives of the assets primarily using the straight-line
depreciation method. Expenditures for maintenance, repairs and renewals of
relatively minor items are charged to expense as incurred. Renewals of
significant items that substantially extend the capacity or useful life of an
asset are capitalized. The cost and accumulated depreciation for property,
plant and equipment sold, retired, or otherwise disposed of are relieved from
the accounts, and resulting gains or losses are reflected in income.
Property, plant and equipment is depreciated over the following estimated
useful lives:
Years
-----
Buildings and improvements............. 40
Drydocks and dock fronts............... 15-27
Machinery, equipment and tooling....... 4-15
Furniture and fixtures................. 10
Computer hardware and software......... 3-5
F-7
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fair Value of Financial Instruments--The carrying amounts reported in the
Consolidated Balance Sheets for cash and cash equivalents, accounts receivable,
accounts payable, and short-term borrowings approximate fair value due to the
immediate short-term maturity of these financial instruments. The carrying
amount reported for long-term debt approximates fair value since either the
underlying instrument bears interest at a variable rate that reprices
frequently or the interest rate approximates the market rate at December 31,
2000.
The fair value of interest rate swaps is the amount at which they could be
settled, based on estimates obtained from financial institutions.
Warranties--Estimated warranty costs are provided at the time of sale of the
warranted products, based on historical warranty experience for the related
product.
Environmental Liabilities--The company accrues for losses associated with
environmental remediation obligations when such losses are probable and
reasonably estimable. Such accruals are adjusted as information develops or
circumstances change. Costs of long-term expenditures for environmental
remediation obligations are not discounted to their present value.
Postretirement Benefits--The expected cost of postretirement benefits are
recorded during the years that the employees render service. The obligation for
these benefits and the related periodic costs are measured using actuarial
techniques and assumptions, including an appropriate discount rate. Actuarial
gains and losses are deferred and amortized over future periods.
Foreign Currency Translation--The financial statements of the company's non-
U.S. subsidiaries are translated using the current exchange rate for assets and
liabilities and the weighted average exchange rate for the year for statement
of earnings items. Resulting translation adjustments are recorded directly to a
separate component of stockholders' equity referred to as other comprehensive
income.
Derivative Financial Instruments--Derivative financial instruments are used
by the company to manage risks associated with interest rate market volatility.
Interest rate swap agreements are used to modify the company's exposure to
interest rate movements on floating rate debt and reduce borrowing costs. For
interest rate swap agreements, net interest payments or receipts are recorded
as adjustments to interest expense on a current basis. These activities are
subject to established policies which, among other matters, prohibit the use of
derivative financial instruments for trading or speculative purposes. In June
1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement, as amended by SFAS 137 and 138, is
effective January 1, 2001 for the company. It requires all derivative
instruments to be recorded on the balance sheet as assets or liabilities, at
fair value. Changes in the fair value of derivatives are recorded each period
in current earnings or comprehensive income, depending on whether a derivative
is designated and qualifies as part of a hedge transaction and if so, the type
of hedge transaction. Management anticipates that, due to the nature of its
risk management activities, the adoption of SFAS 133 will not have a
significant effect on the company's earnings or its financial position.
Revenue Recognition--Revenues and expenses in all business segments are
generally recognized upon shipment or completion of service provided,
reflecting the time that title and risk and reward of ownership generally are
transferred to the customer. Revenues and costs on contracts for long-term
projects, however, are recognized according to the percentage-of-completion
method, commencing when work has progressed to a state where estimates are
reasonably accurate. These estimates are reviewed and revised periodically
throughout the lives of the contracts, and adjustments to income resulting from
such revisions are recorded in the accounting period in which the revisions are
made. Estimated losses on such contracts are recognized in full when they are
identified.
F-8
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The cost of shipping and handling is included in cost of sales.
During the fourth quarter of 2000, the company adopted Emerging Issues Task
Force (EITF) Issue 99-19 "Reporting Revenue Gross as a Principal versus Net as
an Agent." Net sales amounts have been restated for 1999 and 1998 to reclassify
certain Crane segment costs from net sales to cost of sales. The impact of this
reclassification was to increase net sales and cost of sales by $3,863, $4,279,
and $3,684 in the first, second and third quarters of 2000, respectively, and
increase net sales and cost of sales by $18,848 and $9,098 for the years ended
December 31, 1999 and 1998, respectively, from amounts previously reported.
Research and Development--Research and development costs are charged to
expense as incurred and amounted to $6,747, $6,876 and $4,704 in 2000, 1999 and
1998, respectively.
Income Taxes--The company utilizes the liability method to recognize
deferred tax assets and liabilities for the expected future income tax
consequences of events that have been recognized in the company's financial
statements. Under this method, deferred tax assets and liabilities are
determined based on the temporary differences between financial statement
carrying amounts and the tax basis of assets and liabilities using enacted tax
rates in effect in the years in which the temporary differences are expected to
reverse.
Earnings Per Share--Basic earnings per share is computed by dividing net
earnings by the weighted average number of common shares outstanding during
each year/period. Diluted earnings per share is computed similar to basic
earnings per share except that the weighted average shares outstanding is
increased to include the number of additional shares that would have been
outstanding if stock options were exercised and the proceeds from such exercise
were used to acquire shares of common stock at the average market price during
the year/period.
Comprehensive Income--Comprehensive income includes, in addition to net
income, other items that are reported as direct adjustments to stockholders'
equity. Presently, the company's foreign currency translation item is the only
item which requires inclusion in the Consolidated Statements of Stockholders'
Equity and Comprehensive Income.
Reclassifications-- Certain prior year amounts have been reclassified to
conform to the current year's presentation.
2. Property, Plant and Equipment
Property, plant and equipment at December 31 is summarized as follows:
2000 1999
--------- ---------
Land................................................... $ 3,888 $ 3,440
Buildings and improvements............................. 75,430 65,651
Drydocks and dock fronts............................... 21,389 21,675
Machinery, equipment, and tooling...................... 116,950 105,124
Furniture and fixtures................................. 4,628 3,623
Computer hardware and software......................... 11,710 8,795
Construction in progress............................... 3,876 6,044
--------- ---------
Total cost........................................... 237,871 214,352
Less accumulated depreciation.......................... (137,931) (122,329)
--------- ---------
Property, plant and equipment--net..................... $ 99,940 $ 92,023
========= =========
F-9
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Inventories
The components of inventories at December 31 are summarized as follows:
2000 1999
-------- --------
Raw materials............................................ $ 33,935 $ 39,134
Work-in-process.......................................... 32,914 30,218
Finished goods........................................... 45,880 42,352
-------- --------
Total inventories at FIFO cost........................... 112,729 111,704
Excess of FIFO cost over LIFO value...................... (21,551) (20,267)
-------- --------
Total inventories...................................... $ 91,178 $ 91,437
======== ========
Inventories are carried at the lower of cost or market using the first-in,
first-out (FIFO) method for 57% of total inventory for 2000 and 1999. The
remainder of the inventories are costed using the last-in, first-out (LIFO)
method.
4. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31 are summarized as
follows:
2000 1999
-------- --------
Trade accounts payable.................................... $ 64,269 $ 59,609
Employee related expenses................................. 13,964 8,473
Profit sharing and incentives............................. 23,280 26,974
Income taxes payable...................................... -- 6,877
Customer progress payments................................ 877 3,518
Accrued product liability................................. 8,432 8,219
Miscellaneous accrued expenses............................ 33,891 28,239
-------- --------
Total................................................... $144,713 $141,909
======== ========
5. Debt
Debt at December 31 is summarized as follows:
2000 1999
-------- --------
Notes payable............................................. $ 75,000 $ 75,000
Industrial revenue bonds.................................. 3,619 4,712
Revolver borrowings....................................... 115,600 32,300
Commercial paper.......................................... 24,719 --
-------- --------
218,938 112,012
Less current portion...................................... 81,270 32,789
-------- --------
$137,668 $ 79,223
======== ========
On April 6, 1999, the company amended and restated its existing Credit
Agreement (Agreement) with a group of banks in order to increase the amount of
funds available and extend the maturity date to April 6, 2004. Currently, the
Agreement provides for maximum borrowings of $300 million under revolving line-
of-credit and a letter-of-credit subfacility. There were $115.6 million and
$32.3 million of borrowings outstanding under the revolving line-of-credit
portion of the Agreement at December 31, 2000 and 1999, respectively.
F-10
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Agreement includes covenants, the most restrictive of which require the
maintenance of various debt and net worth ratios. An annual commitment fee,
calculated based upon the company's consolidated leverage ratio, as defined by
the Agreement, is due on the unused portion of the facility quarterly. The
commitment fee in effect at the end of both 2000 and 1999 on the unused portion
of the available credit was 0.15%. Borrowings under the Agreement bear interest
at a rate equal to the sum of the base rate, or a Eurodollar rate, at the
option of the company, plus an applicable percentage based on the company's
consolidated leverage ratio, as defined by the Agreement. The base rate is
equal to the greater of the federal funds rate in effect on such day plus 0.5%,
or the prime rate in effect on such day. Borrowings under the Agreement are not
collateralized. The weighted average interest rate for the borrowings
outstanding under the Agreement at December 31, 2000 and 1999 was 7.2% and
7.6%, respectively.
In January 2000, the company initiated a program under which it may borrow
up to $25 million through the issuances of commercial paper to be used for
general purposes. Borrowings through the program are not collateralized and are
fully and unconditionally guaranteed by the company. The company is required to
maintain an available unused balance under its Credit Agreement sufficient to
support outstanding amounts of commercial paper. There were $24.7 million of
commercial paper borowings outstanding at December 31, 2000 with an average
maturity of 27 days and an average interest rate of 7.0%.
On April 2, 1998, the company privately placed $50 million of Series A
Senior Notes with Prudential Insurance Company. On October 31, 1998, the
company issued, also with Prudential Insurance Company, $25 million in
principal amount of Senior Shelf Notes (collectively referred to as the
"Notes"). The company used the proceeds from the sale of the Notes to pay down
existing borrowings under a term loan and finance an acquisition.
The Notes are not collateralized and bear interest at a fixed weighted
average rate of 6.53%. The Notes mature in 12 years after issuance and require
equal principal payments annually beginning in 2006. The agreement between the
company and Prudential Insurance Company pursuant to which the Notes were
issued includes covenants, the most restrictive of which require the company to
maintain certain debt ratios and levels of net worth. These covenants are no
more restrictive than the covenants made by the company in connection with the
aforementioned Credit Agreement.
The company enters into interest rate swap agreements to reduce the impact
of changes in interest rates on its floating rate debt. At December 31, 2000,
the company had outstanding one interest rate swap agreement with a financial
institution, having a total notional principal amount of $12.5 million and
expiring October 2002. The effect of this agreement on the company's interest
rates during 2000 was not significant. Interest expense has been adjusted for
the net receivable or payable under this agreement. The fair value of this
interest rate swap agreement was nominal at December 31, 2000. The company is
exposed to credit losses in the event of non-performance by the financial
institution. However, management does not anticipate such non-performance.
Industrial revenue bonds relate to the company's obligations on two
properties located in Tennessee and Indiana. These obligations are due in
monthly or annual installments including principal and interest at rates of
2.7% and 10.0% at December 31, 2000. These obligations mature at various dates
through 2004.
F-11
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The aggregate scheduled maturities of debt and industrial revenue bond
obligations as well as projected paydown of the revolving line-of-credit in
subsequent years are as follows:
2001................................ $ 81,270
2002................................ 59,518
2003................................ 250
2004................................ 2,900
2005................................ --
Thereafter.......................... 75,000
--------
$218,938
========
On May 28, 1999, the company entered into an accounts receivable sales
arrangement with a bank. The company sold $148.0 million and $67.2 million in
accounts receivable to the bank under this arrangement during 2000 and 1999,
respectively. The company had a $23.1 and $8.4 million net factoring liability
of uncollected accounts receivable due to the bank at December 31, 2000 and
1999, respectively. The cash flow impact of this arrangement is reported as
cash flows from operations in the 2000 and 1999 Consolidated Statements of Cash
Flows. Under this arrangement, the company is required to repurchase from the
bank the first $0.5 million and amounts greater than $1.0 million of the
aggregate uncollected receivables during a twelve month period.
6. Income Taxes
Components of earnings before income taxes are as follows:
For the Years Ended
December 31,
-------------------------
2000 1999 1998
------- -------- -------
Earnings (loss) before income taxes:
Domestic........................................ $94,220 $106,234 $81,081
Foreign......................................... 1,900 (228) 331
------- -------- -------
Total......................................... $96,120 $106,006 $81,412
======= ======== =======
The provision for taxes on income is as follows:
For the Years Ended
December 31,
------------------------
2000 1999 1998
------- ------- -------
Current:
Federal.......................................... $24,418 $36,715 $32,251
State............................................ 3,081 3,291 3,424
Foreign.......................................... 252 (192) 105
------- ------- -------
Total current.................................. 27,751 39,814 35,780
Deferred--federal and state........................ 8,101 (592) (5,748)
------- ------- -------
Provision for taxes on income...................... $35,852 $39,222 $30,032
======= ======= =======
F-12
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Federal statutory income tax rate is reconciled to the company's
effective income tax rate as follows:
For the Years
Ended December
31,
----------------
2000 1999 1998
---- ---- ----
Federal income tax at statutory rate....................... 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit...... 2.3 2.2 2.6
Non-deductible goodwill amortization....................... 1.7 1.4 1.1
Tax-exempt FSC income...................................... (0.9) (1.2) (1.1)
Other items................................................ (0.8) (0.4) (0.7)
---- ---- ----
Provision for taxes on income.............................. 37.3% 37.0% 36.9%
==== ==== ====
The deferred income tax accounts reflect the impact of temporary
differences between the basis of assets and liabilities for financial
reporting purposes and their related basis as measured by income tax
regulations. A summary of the deferred income tax accounts at December 31 is
as follows:
2000 1999
-------- --------
Current deferred tax assets:
Inventories........................................... $ 6,037 $ 4,365
Accounts receivable................................... 1,035 925
Product warranty reserves............................. 4,553 5,339
Product liability reserves............................ 3,245 3,165
Other employee-related benefits and allowances........ 4,474 5,124
Other................................................. 1,248 3,610
-------- --------
Future income tax benefits, current..................... $ 20,592 $ 22,528
======== ========
Non-current deferred tax assets (liabilities):
Property, plant and equipment......................... $(17,510) $(11,753)
Postretirement benefits............................... 7,853 7,775
Deferred employee benefits............................ 4,938 4,782
Severance benefits.................................... 1,069 1,106
Product warranty reserves............................. 1,205 1,130
Net operating loss carryforwards...................... 1,976 1,874
Other................................................. 1,862 399
-------- --------
Net future income tax benefits, non-current............. $ 1,393 $ 5,313
======== ========
The company does not provide for taxes which would be payable if
undistributed earnings of foreign subsidiaries 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, 2000, the company had repurchased approximately $25.0
million of state net operating loss carryforwards, which are available to
reduce future state tax liabilities. The company also has acquired federal net
operating losses of $2.0 million available to reduce federal taxable income.
These loss carryforwards expire in varying amounts through 2012. The company
does not maintain a valuation allowance against deferred tax assets due to the
existence of certain tax strategies designed to utilize these net operating
loss carryforwards.
F-13
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Earnings Per Share
The following is a reconciliation of the average shares outstanding used to
compute basic and diluted earnings per share.
For the Years Ended December 31,
-------------------------------------------------------
2000 1999 1998
----------------- ----------------- -----------------
Per Per Per
Share Share Share
Shares Amount Shares Amount Shares Amount
---------- ------ ---------- ------ ---------- ------
Basic EPS............... 24,891,387 $ 2.42 25,991,711 $ 2.57 25,932,356 $ 1.98
Effect of dilutive
securities--stock
options................ 231,408 (0.02) 208,955 (0.02) 192,711
(0.01)
---------- ------ ---------- ------ ---------- ------
Diluted EPS............. 25,122,795 $ 2.40 26,200,666 $ 2.55 26,125,067 $ 1.97
========== ====== ========== ====== ========== ======
8. Stockholders' Equity
Authorized capitalization consists of 75 million shares of $.01 par value
common stock and 3.5 million shares of $.01 par value preferred stock. None of
the preferred shares have been issued. Pursuant to a Rights Agreement dated
August 5, 1996, each common share carries with it four-ninths of a Right to
purchase additional stock. The Rights are not currently exercisable and cannot
be separated from the shares unless certain specified events occur, including
the acquisition of 20% or more of the common stock by a person or group, or the
commencement of a tender offer for 20% or more of the common stock. In the
event a person or group actually acquires 20% or more of the common stock, or
if the company is merged with an acquiring person, subject to approval by the
board of directors, each full Right permits the holder to purchase one share of
common stock for $100. The Rights expire on September 18, 2006 and may be
redeemed by the company for $.01 per Right (in cash or stock) under certain
circumstances.
On February 17, 1999, the company's board of directors authorized a three-
for-two stock split of the company's shares in the form of a 50 percent stock
dividend payable on April 1, 1999 to shareholders of record on March 1, 1999.
As a result of the stock split, 8,652,289 shares were issued. All references in
the financial statements to average number of shares outstanding, earnings per
share amounts, and market prices per share of common stock have been restated
to reflect this split.
Currently, the company has the authorization to repurchase up to 2.5 million
shares of common stock at management's discretion. As of December 31, 2000 the
company repurchased approximately 1.9 million shares at a cost of $49,752
pursuant to this authorization.
9. Stock Options
The company maintains two stock option plans, The Manitowoc Company, Inc.
Stock Plan and The Manitowoc Company, Inc. Non-Employee Director Stock Plan,
for the granting of stock options as an incentive to certain employees and to
non-employee members of the board of directors. Under these Plans, stock
options to acquire up to 1.125 million (employees) and 0.125 million (non-
employee directors) shares of common stock, in the aggregate, may be granted
under a time-vesting formula at an exercise price equal to the market price of
the common stock at the date of grant. The options become exercisable in equal
25% increments beginning on the second anniversary of the grant date over a
four year period and expire ten years subsequent to the grant date. Stock
option transactions under these Plans for the years ended December 31, 2000,
1999 and 1998 are summarized as follows:
F-14
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the Years Ended December 31,
- ---------------------------------------------------------
2000 1999 1998
------------------- ------------------
- ------------------
Weighted Weighted
Weighted
Average Average
Average
Exercise Exercise
Exercise
Shares Price Shares Price Shares
Price
--------- -------- -------- -------- --------
- --------
Options outstanding,
beginning of year...... 611,881 $21.94 610,006 $18.63 608,181
$13.66
Options granted......... 936,900 21.20 221,557 25.58 209,400
30.54
Options exercised....... (68,919) 11.97 (144,177) 11.50 (59,541)
8.33
Options forfeited....... (162,733) 23.08 (75,505) 25.84 (148,034)
19.19
--------- ------ -------- ------ --------
- ------
Options outstanding, end
of year................ 1,317,129 21.80 611,881 21.94 610,006
18.63
========= ====== ======== ====== ========
======
Options exercisable, end
of year................ 120,906 $19.53 47,444 $15.58 54,134 $
9.02
========= ====== ======== ====== ========
======
The outstanding stock options at December 31, 2000, have a range of exercise
prices of $7.78 to $33.06 per option. The following shows the options
outstanding and exercisable by range of exercise prices at December 31, 2000:
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Life Exercise Exercise
Range of Exercise prices Outstanding (Years) Price Exercisable Price
- ------------------------ ----------- ----------- -------- ----------- --------
$7.78-$9.93.............. 46,505 4.3 $ 9.33 34,353 $ 9.12
$18.78-$25.58............ 1,158,723 9.0 21.44 53,704 19.44
$30.54-$33.06............ 111,901 6.9 30.61 32,849 30.54
--------- --- ------ ------- ------
1,317,129 8.7 $21.80 120,906 $19.53
========= === ====== ======= ======
The weighted average fair value at date of grant for options granted during
2000, 1999 and 1998 was $8.92, $9.56 and $11.77 per option, respectively. The
fair value of options at date of grant was estimated using the Black-Scholes
option pricing model with the following weighted average assumptions:
2000 1999 1998
---- ---- ----
Expected life (years)...................................... 7 7 7
Risk-free interest rate.................................... 5.5% 5.0% 5.8%
Expected volatility........................................ 34.0% 30.9% 31.9%
Expected dividend yield.................................... 1.0% 1.3% 1.5%
The company applies Accounting Principles Board Opinion No. 25, under which
no compensation cost has been recognized in the Consolidated Statements of
Earnings. Had compensation cost been determined under an alternative method
suggested by SFAS No. 123, "Accounting for Stock-Based Compensation," net
income would have decreased $1,336, $877, and $547 in 2000, 1999, and 1998,
respectively; and diluted earnings per share would have been $2.35, $2.52 and
$1.95 in 2000, 1999, and 1998, respectively.
10. Acquisitions
2000
On November 20, 2000, the company, purchased all of the issued and
outstanding shares of MMC Acquisition Company, the parent of Marinette Marine
Corporation. Marinette Marine, located in Marinette, Wisconsin, operates one of
the largest shipyards on the U.S. Great Lakes. Marinette Marine is currently
under contract to build a series of ocean-going buoy tenders for the United
States Coast Guard. Marinette Marine
F-15
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
presently employs approximately 800 people and features complete in-house
capabilities for all shipbuilding disciplines.
The aggregate consideration paid by the company for Marinette Marine was
$66,092, which is net of $18,640 of cash acquired and includes direct
acquisition costs of $531 and assumed liabilities of $17,431. The purchase
price for this acquisition is subject to a post-closing working capital
adjustment to be settled in 2001.
The acquisition of Marinette Marine has been recorded using the purchase
method of accounting. The cost of the acquisition has been allocated on the
basis of the estimated fair values of the assets acquired and the liabilities
assumed. The preliminary estimate of the excess of the cost over the fair value
of the net assets acquired is $45,297 and is being amortized over a weighted
average life of 38 years.
On April 7, 2000, the company, through a wholly-owned subsidiary, acquired
substantially all of the net business assets of Harford Duracool, LLC
(Harford). Harford is a leading manufacturer of walk-in refrigerators and
freezers and maintains a 67,000-square-foot manufacturing facility in Aberdeen,
Maryland. Its primary distribution channels are foodservice equipment dealers
and commercial refrigeration distributors and its products range in size from
200 to 60,000 cubic feet. Harford also manufactures a line of modular,
temperature-controlled structures for other niche markets.
The aggregate consideration paid by the company for the assets of Harford
was $21,228 which includes direct acquisition costs of $534, assumed
liabilities of $1,448 and the payment of a post-closing working capital
adjustment in September 2000 of $267.
The acquisition of Harford has been recorded using the purchase method of
accounting. The cost of the acquisition has been allocated on the basis of the
estimated fair values of the assets acquired and the liabilities assumed. The
excess of the cost over the fair value of the net assets acquired is $14,959
and is being amortized over a weighted average life of 35 years.
On March 31, 2000, the company acquired all of the issued and outstanding
shares of Multiplex Company, Inc. (Multiplex). Multiplex is headquartered in
St. Louis, Missouri, where its production facility is located and has
operations in Frankfurt, Germany and Glasgow, UK. Multiplex manufactures soft-
drink and beer dispensing equipment as well as water purification systems and
supplies leading quick-service restaurants, convenience stores, and movie
theatres. In addition, Multiplex designs and builds custom applications to meet
the needs of customers with requirements that cannot be met by conventional
dispensing equipment.
The aggregate consideration paid by the company for the shares of Multiplex
was $20,509, which is net of cash acquired of $3,698 and includes direct
acquisition costs of $386, and assumed liabilities of $5,305.
The acquisition of Multiplex has been recorded using the purchase method of
accounting. The cost of the acquisition has been allocated on the basis of the
estimated fair values of the assets acquired and the liabilities assumed. The
excess of the cost over the fair value of the net assets acquired is $12,687
and is being amortized over a weighted average life of 37 years.
During 2000, the company also completed the acquisitions of certain assets
of Pioneer Holdings LLC, the outstanding shares of Beverage Equipment Supply
Company and the remaining shares of Hangzhou Manitowoc Wanhua Refrigeration
Company, the company's Chinese joint venture. The total aggregate consideration
paid by the company for these acquisitions was $18,168, which is net of cash
received and includes direct acquisition costs of $159 and assumed liabilities
of $2,831.
F-16
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following unaudited proforma financial information for the years
December 31, 2000 and 1999 assumes the 2000 acquisitions occurred as of January
1 of each year.
2000 1999
-------- ----------
Net sales............................................... $970,843 $1,005,381
Net earnings............................................ 60,859 72,702
Basic earnings per share................................ $ 2.45 $ 2.80
Diluted earnings per share.............................. 2.42 2.77
1999
On April 9, 1999, the company acquired all of the issued and outstanding
shares of Kyees Aluminum, Inc., a leading supplier of cooling components for
the major suppliers of fountain soft-drink beverage dispensers. The aggregate
consideration paid by the company was $28,471 which is net of cash acquired of
$1,010 and includes direct acquisition costs of $319, assumed liabilities of
$2,151, and the payment of a post-closing net worth adjustment during the third
quarter of 1999 of $1,263. Kyees' aluminum cold plates are a key component used
to chill soft-drink beverages in dispensing equipment. Located in La Mirada,
California, Kyees is a technology leader in manufacturing cold plate equipment,
in both quality and engineering design.
The acquisition of Kyees has been recorded using the purchase method of
accounting. The cost of the acquisition has been allocated on the basis of the
estimated fair values of the assets acquired and the liabilities assumed. The
excess of the cost over the fair value of the net assets acquired of $24,073 is
being amortized over a weighted average life of 38 years.
On January 11, 1999, the company acquired all of the issued and outstanding
shares of Purchasing Support Group LLC (PSG), a four-member beverage service
organization. The new operation, renamed Manitowoc Beverage Systems, Inc.
(MBS), provides full-service parts, components, and dispenser systems support
to bottlers in the beverage industry. MBS is made up of companies that have
been serving soft drink bottling operations throughout the United States since
the 1960s with a variety of equipment services for beverage dispensing systems.
MBS operates in the Northeast, Atlantic Coast, Southeast, Central and Western
United States.
The aggregate consideration paid by the company for the issued and
outstanding shares of the four member companies of PSG was $43,686, which is
net of cash acquired of $764 and includes direct acquisition costs of $538 and
assumed liabilities of $5,912.
The acquisition of MBS has been recorded using the purchase method of
accounting. The cost of the acquisition has been allocated on the basis of the
estimated fair values of the assets acquired and the liabilities assumed. The
excess of the cost over the fair value of the net assets acquired is $34,019
and is being amortized over a weighted average life of 38 years.
1998
On November 3, 1998, the company acquired substantially all of the net
assets and business of U.S. Truck Crane, Inc., (USTC), from a subsidiary of UK-
based Powerscreen International PLC. Located in York, Pennsylvania, USTC builds
three proprietary product lines, including boom trucks, rough terrain
forklifts, and other types of material-handling equipment.
The aggregate consideration paid by the company for the net assets of USTC
was $51,478 which includes direct acquisition costs of $478, assumed
liabilities of $7,425, and the receipt of a post-closing net worth adjustment
in July 1999 of $2,053.
F-17
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The acquisition of USTC has been recorded using the purchase method of
accounting. The cost of the acquisition has been allocated on the basis of the
estimated fair values of the assets acquired and the liabilities assumed. The
excess of the cost over the fair value of the net assets acquired is $38,039,
and is being amortized over a weighted average life of 38 years.
The results of operations subsequent to the date of each of the
aforementioned acquisitions have been included in the Consolidated Statements
of Earnings for the years ended December 31, 2000, 1999, and 1998.
11. Contingencies
The United States Environmental Protection Agency (EPA) has identified the
company as a Potentially Responsible Party (PRP) under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA), liable for the
costs associated with investigating and cleaning up contamination at the
Lemberger Landfill Superfund Site (the "Site") near Manitowoc, Wisconsin.
Approximately 150 PRP's have been identified as having shipped substances to
the Site. Eleven of the potentially responsible parties have formed a group
(the Lemberger Site Remediation Group, or "LSRG") and have successfully
negotiated with the EPA and the Wisconsin Department of Natural Resources to
settle the potential liability at the Site and fund the cleanup.
Recent estimates indicate that the remaining costs to clean up the Site are
nominal; however, the ultimate allocations of cost for the Site are not yet
final. Although liability is joint and several, the company's percentage share
of liability is estimated to be 11% of the total cleanup costs. Prior to
December 31, 1996, the company accrued $3,300 in connection with this matter.
Expenses charged against this reserve during 2000, 1999 and 1998 were not
significant. Remediation work at the Site has been completed, with only long-
term pumping and treating of groundwater and Site maintenance remaining. The
company's remaining estimated liability for this matter, included in other
current and non-current liabilities at December 31, 2000, is $900.
As of December 31, 2000, 32 product-related lawsuits were pending. All 32
cases are insured with self-insurance retentions of $1,000 for Crane accidents;
$1,000 for Foodservice accidents occurring during 1990 to 1996; and $100 for
Foodservice accidents occurring during 1997 to 2000. The insurer's contribution
is limited to $50,000.
Product liability reserves included in accounts payable and accrued expenses
at December 31, 2000 are $8,432; $2,657 reserved specifically for the 32 cases
referenced above, and $5,775 for claims incurred but not reported which were
estimated using actuarial methods. The highest current reserve for an insured
claim is $950. Based on the company's experience in defending itself against
product liability claims, management believes the current reserves are adequate
for estimated settlements on aggregate self-insured and insured claims. Any
recoveries from insurance carriers are dependent upon the legal sufficiency of
claims and the solvency of insurance carriers.
It is reasonably possible that the estimates for environmental remediation
and product liability costs may change in the near future based upon new
information which may arise. Presently, there is no reliable means to estimate
the amount of any such potential changes.
The company is also involved in various other legal actions arising in the
normal course of business. After taking into consideration legal counsels'
evaluation of such actions, in the opinion of management, ultimate resolution
is not expected to have a material adverse effect on the consolidated financial
statements of the company.
F-18
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Retirement and Health Care Plans
The company provides retirement benefits through noncontributory deferred
profit sharing plans covering substantially all employees. Company
contributions to the plans are based upon formulas contained in such plans. The
company also has a defined contribution plan in which the company matches 25%
of participant contributions up to a maximum of 5% of a participant's
compensation. Total costs incurred under these plans were $14,854, $14,271, and
$12,909, in 2000, 1999 and 1998, respectively.
The company also provides certain healthcare and death benefits for eligible
retirees and their dependents. The benefits are not funded, but are paid as
incurred. Eligibility for coverage is based on meeting certain years of service
and retirement qualifications. These benefits may be subject to deductibles,
co-payment provisions, and other limitations. The company has reserved the
right to modify these benefits.
The tables that follow contain the components of the periodic postretirement
health and other benefits cost for 2000, 1999, and 1998, respectively, and the
reconciliation of the change in the accumulated periodic postretirement health
benefit obligation, from January 1, 1999, through December 31, 2000.
Acquisition related changes presented in the table relate to the acquisition of
Marinette Marine in November 2000. Benefit costs for Marinette Marine from
November 20, 2000 to December 31, 2000 are not significant.
The components of the periodic postretirement health benefit cost are as
follows:
2000 1999 1998
------ ------ ------
Service cost--benefits earned during the year........ $ 398 $ 395 $ 296
Interest cost on accumulated postretirement health
benefit obligation.................................. 1,517 1,325 1,144
Amortization of actuarial gain....................... -- -- (127)
------ ------ ------
Net periodic postretirement health and other
benefit cost........................................ $1,915 $1,720 $1,313
====== ====== ======
The following is a reconciliation of the change in the accumulated periodic
postretirement health benefit obligation from January 1, 1999, through December
31, 2000, and a reconciliation of the postretirement benefit obligation to the
accrued amount at December 31, 2000 and 1999:
2000 1999
------- -------
Benefit obligation, beginning of year...................... $19,091 $16,948
Service cost............................................. 398 395
Interest cost............................................ 1,517 1,325
Acquisition.............................................. 478 --
Participant contributions................................ 796 810
Actuarial loss........................................... 2,509 1,946
Benefits paid............................................ (2,589) (2,333)
------- -------
Benefit obligation, end of year............................ $22,200 $19,091
------- -------
Status of the plan, unfunded............................... $22,200 $19,091
Unrecognized net (loss) gain............................... (1,689) 821
------- -------
Accrued benefit, end of year............................... $20,511 $19,912
======= =======
The health care cost trend rate assumed in the determination of the
accumulated postretirement benefit obligation is 5%. Increasing the assumed
health care cost trend rate by one percentage point in each year would increase
the accumulated postretirement health benefit obligation by $3,195 at December
31, 2000, and the
F-19
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
aggregate of the service and interest cost components of net periodic
postretirement health benefit cost by $301 for 2000. Decreasing the assumed
health care cost trend rate by one percentage point in each year would decrease
the accumulated postretirement health benefit obligation by $2,624 at December
31, 2000, and the aggregate of the service and interest cost components of net
periodic postretirement health benefit costs by $244 for 2000.
The discount rate used in determining the accumulated postretirement health
benefit obligation is 7.25% for 2000 and 1999.
Marinette Marine sponsored a defined benefit pension plan in which
substantially all of its salaried employees are participants. Benefits under
the plan were based upon years of service and average compensation. The funding
policy was to contribute to the plan an amount equal to the current service
costs taking into consideration the amount deductible for federal income tax
purposes.
A summary of the funded status of the plan at December 31, 2000 follows:
Benefit obligation................... $11,364
Fair value of plan assets............ 12,052
Funded status, overfunded............ 688
-------
Prepaid pension costs................ $ 2,286
=======
The assumptions utilized to determine the amounts above were: discount rate
7.75%; expected return on assets 9%; and rate of compensation increase 4%.
The plan assets are primarily invested in government and corporate bonds and
equity mutual funds.
It is reasonably possible that the estimate for future retirement and health
care costs may change in the near future due to changes in the health care
environment or changes in interest rates which may arise. Presently, there is
no reliable means to estimate the amount of any such potential changes.
13. Leases
The company leases various property, plant and equipment. Terms of the
leases vary, but generally require the company to pay property taxes, insurance
premiums, and maintenance costs associated with the leased property. Rental
expense attributable to operating leases was $8,533, $4,847, and $2,848 in
2000, 1999, and 1998, respectively. Future minimum rental obligations under
noncancelable operating leases, as of December 31, 2000, are payable as
follows:
2001.................................. $9,825
2002.................................. 8,612
2003.................................. 7,655
2004.................................. 6,404
2005.................................. 5,548
Thereafter............................ 16,124
14. Business Segments
The company identifies its segments using the "management approach" which
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the company's
reportable segments.
F-20
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The company has three reportable segments: Foodservice Equipment
(Foodservice), Cranes and Related Products (Cranes), and Marine.
Foodservice products consist primarily of commercial ice-cube machines;
ice/beverage dispensers; walk-in and reach-in refrigerators and freezers;
refrigerated undercounter and food preparation tables; private label
residential refrigerators and freezers; backroom beverage equipment; and
distribution services. Foodservice sells its products primarily in the United
States, Europe, Southeast Asia, and in the Middle East. Foodservice products
serve the lodging, restaurant, health care, convenience store and soft-drink
bottling markets which are impacted by demographic changes and business cycles.
Cranes products consist primarily of lattice-boom crawler cranes; truck-
mounted hydraulic cranes; rough-terrain forklifts; and material handling
equipment. Cranes also specializes in industrial machinery repair and
rebuilding services as well as crane rebuilding and remanufacturing services.
Cranes distributes its products primarily in North America (primarily the
United States), Europe, Southeast Asia, and the Middle East. Cranes' operations
serve the construction, energy and mining industries and are mainly impacted by
the level of activities related to heavy construction, energy-related and
infrastructure projects around the world.
Marine provides ship-repair maintenance, conversion and construction
services to foreign and domestic vessels operating on the Great Lakes. Marine
is also a leading provider of Great Lakes and ocean-going mid-sized commercial,
research and military vessels. Marine serves the Great Lakes maritime market
consisting of both U.S. and Canadian fleets, inland waterway operators, and
oceangoing vessels that transit the Great Lakes and St. Lawrence Seaway.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies except that certain expenses are
not allocated to the segments. These unallocated expenses are corporate
overhead, intangible asset amortization, interest expense and income taxes. The
company evaluates segment performance based upon profit or loss before the
aforementioned expenses.
The company is organized primarily on the basis of products and is broken
down into 19 business units. Eleven of the business units have been aggregated
into the Foodservice Segment; four of the business units have been aggregated
into the Cranes Segment; and four business units make up the Marine Segment.
F-21
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Financial information relating to the company's reportable segments for the
years ended December 31, 2000, 1999 and 1998 is as follows:
2000 1999 1998
-------- -------- --------
Net Sales:
Foodservice equipment.......................... $425,080 $379,625 $319,457
Cranes and related products.................... 376,250 389,510 339,051
Marine......................................... 71,942 55,204 45,412
-------- -------- --------
Total........................................ $873,272 $824,339 $703,920
======== ======== ========
Operating Income:
Foodservice equipment.......................... $ 67,536 $ 70,233 $ 57,856
Cranes and related products.................... 65,791 68,501 52,201
Marine......................................... 9,339 7,712 7,311
General corporate.............................. (11,961) (10,782) (10,138)
-------- -------- --------
Total........................................ 130,705 135,664 107,230
Amortization................................... (8,181) (7,392) (4,881)
Depreciation................................... (9,872) (9,321) (9,729)
-------- -------- --------
Total........................................ $112,652 $118,951 $ 92,620
======== ======== ========
Capital Expenditures:
Foodservice equipment.......................... $ 8,883 $ 8,974 $ 7,415
Cranes and related products.................... 2,883 3,536 2,945
Marine......................................... 1,481 1,165 1,174
General corporate.............................. 168 39 144
-------- -------- --------
Total........................................ $ 13,415 $ 13,714 $ 11,678
======== ======== ========
Total Assets:
Foodservice equipment.......................... $359,196 $314,982 $254,506
Cranes and related products.................... 171,867 165,974 178,470
Marine......................................... 75,757 10,162 7,023
General corporate.............................. 35,710 39,122 41,015
-------- -------- --------
Total........................................ $642,530 $530,240 $481,014
======== ======== ========
Sales and long-lived asset information by geographic area as of and for the
years ended December 31 are as follows:
Sales Long-Lived Assets
-------------------------- -----------------
2000 1999 1998 2000 1999
-------- -------- -------- -------- --------
United States..................... $793,843 $737,616 $625,227 $410,596 $331,758
Other North America............... 25,132 25,213 16,881 -- --
Europe............................ 17,375 32,246 36,917 5,468 5,479
Asia.............................. 17,393 11,174 12,920 2,959 2,005
Middle East....................... 5,479 2,113 5,610 -- --
Central & South America........... 4,873 4,073 1,949 -- --
Africa............................ 3,277 5,890 1,774 -- --
South Pacific & Caribbean......... 5,900 6,014 2,642 -- --
-------- -------- -------- -------- --------
Total........................... $873,272 $824,339 $703,920 $419,023 $339,242
======== ======== ======== ======== ========
F-22
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Foreign revenue is based upon the location of the customer. Revenue from no
single foreign country was material to the consolidated sales of the company.
15. Subsequent Event
On March 4, 2001, Manitowoc submitted a binding offer to acquire the Potain
cranes subsidiary of Groupe Legris Industries SA. The purchase price of the
acquisition will be approximately $300 million (2.15 billion French francs),
plus net cash at December 31, 2000, subject to an adjustment for net earnings
of Potain for the period from January 1, 2001 to the closing date. The
transaction is anticipated to be financed by a new pre-arranged banking
facility, which is expected to include both senior and subordinated debt. The
subordinated debt will be guaranteed by the company, including its 100% owned
domestic subsidiaries (the "Guarantors"); such guarantees will be full and
unconditional and joint and several. Non-domestic subsidiaries which will not
be Guarantors are minor. There will be no significant restrictions on the
ability of the company or any of the guarantor subsidiaries to obtain funds
from its subsidiaries by dividend or loan. Completion of the transaction is
contingent upon certain events, including receipt of applicable regulatory
approvals, completion of notification and consultation process with the
applicable works' council (labor union) and final acceptance of the offer by
the seller. The transaction is currently expected to be finalized by the end of
the second quarter of 2001.
Potain, headquartered in Lyon, France, is a world leader in the design,
manufacture, and supply of tower cranes for the building and construction
industry. Potain reported sales of approximately $275 million for the year
ended December 31, 2000.
F-23
THE MANITOWOC COMPANY, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands of dollars, except share data)
For the Three Months
Ended March 31,
---------------------------
2001 2000
---------- ----------
(Unaudited)
Earnings
Net sales................... $ 229,351 $ 205,853
Costs and expenses:
Cost of sales............. 173,321 150,136
Engineering, selling and
administrative expenses.. 36,001 28,974
---------- ----------
Total costs and
expenses............... 209,322 179,110
---------- ----------
Earnings from operations.... 20,029 26,743
Other income (expense):
Interest expense.......... (4,096) (2,511)
Other expenses, net....... (115) (371)
---------- ----------
Total................... (4,211) (2,882)
---------- ----------
Earnings before taxes on
income..................... 15,818 23,861
Provision for taxes on
income..................... 5,948 8,948
---------- ----------
Net earnings................ $ 9,870 $ 14,913
========== ==========
Per Share Data
Net earnings per share--
basic...................... $ 0.41 $ 0.58
Net earnings per share--
diluted.................... $ 0.40 $ 0.57
Dividends per share......... $ 0.075 $ 0.075
Weighted average shares
outstanding--basic......... 24,262,313 25,850,072
Weighted average shares
outstanding--diluted....... 24,543,198 25,997,317
The accompanying notes are an integral part of these financial statements.
F-24
THE MANITOWOC COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars, except share data)
March 31, December 31,
2001 2000
----------- ------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 8,186 $ 13,983
Marketable securities............................... 2,071 2,044
Accounts receivable................................. 71,730 88,231
Inventories......................................... 101,818 91,178
Other current assets................................ 10,827 7,479
Future income tax benefits.......................... 22,756 20,592
--------- ---------
Total current assets.............................. 217,388 223,507
Intangible assets--net................................ 307,516 308,751
Other non-current assets.............................. 14,581 10,332
Property, plant and equipment--net.................... 102,297 99,940
--------- ---------
Total assets...................................... $ 641,782 $ 642,530
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses............... $ 145,996 $ 144,713
Current portion of long-term debt................... 270 270
Short term borrowings............................... 68,671 81,000
Product warranties.................................. 12,537 13,507
--------- ---------
Total current liabilities......................... 227,474 239,490
Non-Current Liabilities:
Long-term debt, less current portion................ 140,337 137,668
Postretirement health benefit obligations........... 20,481 20,341
Other non-current liabilities....................... 11,524 11,262
--------- ---------
Total non-current liabilities..................... 172,342 169,271
Stockholders' Equity:
Common stock (36,746,482 shares issued)............. 367 367
Additional paid-in capital.......................... 31,586 31,602
Accumulated other comprehensive loss................ (2,451) (2,569)
Retained earnings................................... 342,513 334,433
Treasury stock, at cost (12,480,442 and 12,487,019
shares)............................................ (130,049) (130,064)
--------- ---------
Total stockholders' equity........................ 241,966 233,769
--------- ---------
Total liabilities and stockholder's equity........ $ 641,782 $ 642,530
========= =========
The accompanying notes are an integral part of these financial statements.
F-25
THE MANITOWOC COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Thousands of dollars)
For the Three
Months Ended
March 31,
------------------
2001 2000
-------- --------
Cash Flows from Operations
Net earnings............................................. $ 9,870 $ 14,913
Non-cash adjustments to income:
Depreciation........................................... 2,893 2,523
Amortization of goodwill............................... 2,315 1,902
Amortization of deferred financing fees................ 45 169
Loss on sale of property, plant and equipment.......... 64 79
Changes in operating assets and liabilities excluding
the effects of business acquisitions:
Accounts receivable................................... 16,501 (14,807)
Inventories........................................... (10,640) (3,170)
Other current assets.................................. (3,349) (677)
Non-current assets.................................... (7,125) 807
Current liabilities................................... 143 (768)
Non-current liabilities............................... 360 141
-------- --------
Net cash provided by operations...................... 11,077 1,112
-------- --------
Cash Flows from Investing
Purchase of temporary investments--net................... (27) (30)
Business acquisitions--net of cash acquired.............. -- (30,694)
Proceeds from sale of property, plant, and equipment..... 22 22
Capital expenditures..................................... (5,336) (4,853)
-------- --------
Net cash used for investing.......................... (5,341) (35,555)
-------- --------
Cash Flows from Financing
Dividends paid............................................. (1,791) (1,957)
Treasury stock purchased................................... -- (22,638)
Proceeds (payments) on long-term borrowings................ 2,669 (11)
Proceeds (payments) on short-term borrowings--net.......... (12,329) 67,201
-------- --------
Net cash (used for) provided by financing............ (11,451) 42,595
Effect of exchange rate changes on cash.................... (82) (10)
-------- --------
Net increase (decrease) in cash and cash equivalents..... (5,797) 8,142
Balance at beginning of period............................. 13,983 10,097
-------- --------
Balance at end of period................................... $ 8,186 $ 18,239
======== ========
Supplemental Cash Flow Information
Interest paid............................................ $ 3,786 $ 1,920
Income taxes paid........................................ $ 2,632 $ 4,022
The accompanying notes are an integral part of these financial statements.
F-26
THE MANITOWOC COMPANY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Thousands of dollars)
For the Three
Months Ended
March 31,
---------------
2001 2000
------ -------
Net earnings.................................................... $9,870 $14,913
Other comprehensive income (loss):
Hedging activities--net of income taxes (see Note 8).......... (211) --
Foreign currency translation adjustments...................... 329
(184)
------ -------
Total other comprehensive income (loss)......................... 118
(184)
------ -------
Comprehensive income............................................ $9,988 $14,729
====== =======
The accompanying notes are an integral part of these financial statements.
F-27
THE MANITOWOC COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2001 and 2000
(Thousands of dollars, except share and per share data or where otherwise
indicated)
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the results of operations, cash flows and comprehensive
income for the three months ended March 31, 2001 and 2000 and the financial
position at March 31, 2001. The interim results are not necessarily
indicative of results for a full year and do not contain information
included in the company's annual consolidated financial statements and notes
for the year ended December 31, 2000. The consolidated balance sheet as of
December 31, 2000 was derived from audited financial statements, but does
not include all disclosures required by generally accepted accounting
principles. It is suggested that these financial statements be read in
conjunction with financial statements and the notes thereto included in the
company's latest annual report.
All dollar amounts are in thousands throughout these notes, except where
otherwise indicated.
2. The components of inventories at March 31, 2001 and December 31, 2000 are
summarized as follows:
March December 31,
31, 2001 2000
-------- ------------
Components:
Raw materials....................................... $ 34,881 $ 33,935
Work-in-process..................................... 38,316 32,914
Finished goods...................................... 50,487 45,880
-------- --------
Total inventories at FIFO costs..................... 123,684 112,729
Excess of FIFO costs over LIFO value................ (21,866) (21,551)
-------- --------
Total inventories................................... $101,818 $ 91,178
======== ========
Inventories are carried at lower of cost or market using the first-in,
first-out (FIFO) method for 50% and 57% of total inventories at March 31,
2001 and December 31, 2000, respectively. The remainder of the inventories
are costed using the lower of the last-in, first-out (LIFO) method.
3. The United States Environmental Protection Agency ("EPA") has identified
the company as a potentially responsible party ("PRP") under the
Comprehensive Environmental Response Compensation and Liability Act
("CERCLA"), liable for the costs associated with investigating and cleaning
up contamination at the Lemberger Landfill Superfund Site (the "Site") near
Manitowoc, Wisconsin.
Approximately 150 PRP's have been identified as having shipped substances
to the Site. Eleven of the potentially responsible parties have formed a
group (the Lemberger Site Remediation Group, or LSRG) and have successfully
negotiated with the EPA and the Wisconsin Department of Natural Resources
to settle the potential liability at the Site and fund the cleanup.
Recent estimates indicate that the remaining costs to clean up the Site
are nominal. However, the ultimate allocations of cost for the Site are not
yet final. Although liability is joint and several, the company's
percentage share of liability is estimated to be 11% of the total cleanup
costs. Prior to December 31, 1996, the company accrued $3.3 million in
connection with this matter. Expenses charged against this reserve for the
quarters ended March 31, 2001 and 2000 were not significant. 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 March 31, 2001, is $0.9 million.
F-28
THE MANITOWOC COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of March 31, 2001, various product-related lawsuits were pending. All of
these cases are insured with self-insurance retentions of $1.0 million for
Crane accidents; $1.0 million for Foodservice accidents occurring during
1990 to 1996; and $0.1 million for Foodservice accidents occurring during
1997 to 2001. The insurer's contribution is limited to $50.0 million.
Product liability reserves included in accounts payable and accrued
expenses at March 31, 2001 were $8.5 million; $2.7 million is reserved
specifically for the cases referenced above and $5.8 million is reserved
specifically for claims incurred but not reported which were estimated
using actuarial methods. The highest current reserve for an insured claim
is $0.9 million. Based on the company's experience in defending itself
against product liability claims, management believes the current reserves
are adequate for estimated settlements on aggregate self-insured and
insured claims. Any recoveries from insurance carriers are dependent upon
the legal sufficiency of claims and the solvency of insurance carriers.
It is reasonably possible that the estimates for environmental remediation
and product liability costs may change in the near future based upon new
information that may arise. Presently, there is no reliable means to
estimate the amount of any such potential changes.
The company is also involved in various other legal actions arising in the
normal course of business. After taking into consideration legal counsel's
evaluation of such actions, in the opinion of management, ultimate
resolution is not expected to have a material adverse effect on the
consolidated financial statements of the company.
4. The company currently has the board of directors' authorization to
repurchase up to 2.5 million shares of common stock at management's
discretion. As of March 31, 2001, the company had purchased approximately
1.9 million shares at a cost of $49.8 million pursuant to this
authorization. There were no common stock repurchases made during the first
quarter of 2001.
In February 2001, the board of directors adopted a resolution to pay cash
dividends annually rather than quarterly. Thus, in October 2001, and at its
regular fall meeting each year thereafter, the board of directors will
determine the amount and timing of the annual dividend for that year.
5. The following is a reconciliation of the weighted average shares
outstanding used to compute basic and diluted earnings per share.
Quarter Ended Quarter Ended
March 31, 2001 March 31, 2000
-------------------- --------------------
Per Share Per hare
Shares Amount Share Amount
---------- --------- ---------- ---------
Basic EPS........................ 24,262,313 $ 0.41 25,850,072 $ 0.58
Effect of Dilutive Securities--
Stock Options................... 280,885 (0.01) 147,245 (0.01)
---------- ------ ---------- ------
Diluted EPS...................... 24,543,198 $ 0.40 25,997,317 $ 0.57
========== ====== ========== ======
6. On May 9, 2000, The Manitowoc Company, Inc. ("Manitowoc") acquired from
Legris Industries SA ("Legris") all of the outstanding capital stock of
Potain SA, pursuant to a Share Purchase Agreement, dated May 9, 2001, among
Manitowoc, Manitowoc France SAS and Legris (the "Acquisition"). The total
purchase price for the Acquisition was FRF 2.3 billion (U.S. $307.1 million,
based upon exchange rates as of May 7, 2001). The purchase price paid by
Manitowoc was determined on the basis of arm's length negotiations between
the parties. There is no material relationship between Legris and Manitowoc
or any of its affiliates, directors or officers or any of their associates.
This acquisition was financed through the company's $475 million credit
facility and the issuance of the company's 10 3/8% Senior Subordinated
Notes due 2011 in the aggregate principal amount of (euro) 175
F-29
THE MANITOWOC COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
million (U.S. $156 million, based upon exchange rates as of May 7, 2001).
See Management's Discussion and Analysis of Financial Condition and Results
of Operations for a summary of the terms of the credit facility and the 10
3/8% Senior Subordinated Notes due 2011, both of which were completed on
May 9, 2001.
Founded in 1928, Potain is considered a technology leader in the tower
crane market with a long history of product innovations and patents. The
company manufactures a variety of tower cranes, including top slewing,
luffing jib, topless, and self-erecting units, plus special models for dams
and other large building projects. The company employs approximately 2,200
people and has sold more than 88,000 cranes worldwide. Potain operates
eight manufacturing facilities for tower cranes and related products in
France, Germany, Italy, Portugal and China, and is active in more than 50
countries through distribution subsidiaries or agents.
On April 24, 2001, the assets of Kern Electric were acquired by the
Manitowoc Marine Group. The final acquisition price was $0.4 million. Kern
Electric, located in Toledo, Ohio, will be managed and operated from the
company's Toledo Shiprepair location and will be recognized as the
"Manitowoc Electrical Service Division" within the Marine Group. Kern adds
electrical capabilities for both the company's marine and industrial
operations, provides an expanded customer base, fills a service void, and
will allow us additional opportunities for turnkey, automation, and capital
projects.
7. The company determines its segments based upon the internal organization
that is used by management to make operating decisions and assess
performance. Based upon this approach, the company has three reportable
segments: Foodservice Equipment (Foodservice), Cranes and Related Products
(Cranes), and Marine Operations (Marine).
Information about reportable segments and a reconciliation of total
segment sales and profits to the consolidated totals for the quarters
ending March 31, 2001 and 2000 are summarized in "Management's Discussion
and Analysis of Financial Condition and Results of Operations." As of March
31, 2001 and December 31, 2000, the total assets by segment were as
follows:
March December 31,
31, 2001 2000
-------- ------------
Foodservice.......................................... $372,115 $359,196
Cranes............................................... 156,868 171,867
Marine............................................... 77,277 75,757
General corporate.................................... 35,522 35,710
-------- --------
Total................................................ $641,782 $642,530
======== ========
8. As of January 1, 2001 the company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement requires all derivative instruments to be
recorded on the balance sheet as assets or liabilities, at fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or comprehensive income, depending on whether a derivative is
designated and qualifies as part of a hedge transaction and if so, the type
of hedge transaction.
The company enters into interest rate swap agreements to reduce the impact
of changes in interest rates on its floating rate debt. As of March 31,
2001 the company had outstanding one interest rate swap agreement with a
financial institution, having a total notional principal amount of $12.5
million and expiring October 2002. The interest rate swap is designated as
cash flow hedge instrument based upon the
F-30
THE MANITOWOC COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
criteria established by SFAS No. 133. For a derivative designated as a cash
flow hedge, the effective portion of the derivative's gain or loss due to a
change in fair value is initially recorded as a component of other
comprehensive income and subsequently reclassified into earnings when the
hedged exposure affects earnings. During the period ended March 31, 2001,
the cash flow hedge was deemed to be fully effective.
The cumulative effect of adopting SFAS No. 133 as of January 1, 2001 was
insignificant. The impact of SFAS No. 133 during the quarter ended March
31, 2001 resulted in a net loss, recognized in comprehensive income, of
approximately $0.2 million.
F-31
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
The Manitowoc Company, Inc. and Subsidiaries
Our audits of the consolidated financial statements referred to in our report
dated January 26, 2001, except for information in Note 15, for which the date
is March 4, 2001, on page F-2 also included an audit of the information as of
and for each of the three years ended December 31, 2000 set forth in the
Financial Statement Schedule included herein. In our opinion, the Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PricwaterhouseCoopers LLP
Milwaukee, Wisconsin
January 26, 2001
F-32
THE MAINTOWOC COMPANY, INC.
Schedule II--Valuation and Qualifying Accounts
(in thousands)
Balance Charged Balance
at to Costs At End
Beginning and Deductions of
Description of Period Expenses (1) Period
----------- --------- -------- ---------- -------
Allowance for losses--trade accounts
receivable
December 31, 1998....................... $1,882 $ 482 $ (708) $1,656
====== ====== ======= ======
December 31, 1999....................... $1,656 $2,221 $(2,074) $1,803
====== ====== ======= ======
December 31, 2000....................... $1,803 $2,120 $ (886) $3,037
====== ====== ======= ======
- --------
(1) Deductions represent bad debts written-off, net of recoveries.
F-33
POTAIN SA
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of Potain SA
We have audited the accompanying consolidated balance sheets of Potain Group
as of December 31, 2000 and 1999, and the related consolidated statements of
income and cash flows for the years then ended, which have been prepared on the
basis of accounting principles generally accepted in France. 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 auditing standards generally
accepted in the United States. 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 Potain Group at December 31, 2000 and 1999, and the consolidated results of
its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in France which differ in certain
respects from those generally accepted in the United States (see Note IV to the
financial statements).
Ernst & Young Audit
Daniel Mary-Dauphin
April 19, 2001
F-34
POTAIN SA
CONSOLIDATED STATEMENTS OF INCOME
December 31, 2000 and 1999
Note 12/31/2000 12/31/1999
---- ---------- ----------
(in thousands Euros)
Operating revenues
Sales...................... 1 286,974 239,644
Other operating revenues... 2 33,018 29,870
Operating expenses
Raw material, supplies and
services.................. (185,935) (160,748)
Payroll expenses........... 3 (69,276) (64,204)
Other operating expenses... 4 (32,504) (30,119)
-------- --------
Current operating income... 32,277 14,443
======== ========
Non recurring operating
income (expenses)......... 5 (553) (343)
-------- --------
Operating income........... 31,724 14,100
-------- --------
Interest expense, net...... 6 868 (1,408)
Amortization of goodwill,
net....................... (429) (391)
Other income and (expense),
net....................... 7 (564) 0
-------- --------
Income before taxes........ 31,599 12,301
======== ========
Income taxes, current and
deferred.................. 8 (11,559) (4,433)
-------- --------
Net income before minority
interests of fully
consolidated entities..... 20,040 7,868
======== ========
Minority interests......... 14 24 1,592
Results of entities
accounted for by the
equity method............. 0 (4)
-------- --------
Net income................. 20,016 6,272
======== ========
Number of shares at
December 31............... 909,945 909,945
Net income per share (in
euros).................... 22.0 6.9
F-35
POTAIN SA
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
Note 12/31/2000 12/31/1999
---- ---------- ----------
(in thousands Euros)
ASSETS
Intangible assets.................................... 7,241 6,850
Goodwill............................................. 2,616 2,075
Property, plant and equipment........................ 62,421 59,902
Financial assets..................................... 3,197 3,941
------- -------
Total Fixed Assets............................... 9 75,475 72,768
======= =======
Inventories.......................................... 10 60,070 48,722
Accounts receivable.................................. 11 81,743 76,577
Other receivables.................................... 36,788 9,977
Cash................................................. 12 16,637 14,949
------- -------
Total Current Assets............................. 195,238 150,225
======= =======
Deferred tax assets.................................. 13 2,147 7,546
------- -------
Total Assets..................................... 272,860 230,539
======= =======
LIABILITIES
Share capital........................................ 13,649 13,649
Additional paid-in capital........................... 12,495 12,495
Retained earnings.................................... 93,869 84,833
Net income for the year.............................. 20,016 6,272
Translation adjustment............................... (857) 834
------- -------
Shareholders' Equity............................... 139,172 118,083
======= =======
Minority interests................................... 93 5,624
------- -------
Shareholders' Equity & Minority Interests.......... 14 139,265 123,707
======= =======
Reserves for losses and contingencies.............. 15 12,535 7,260
Borrowings........................................... 16 23,316 12,940
Accounts payable..................................... 17 84,311 70,843
Other liabilities.................................... 7,070 8,522
------- -------
Total Liabilities................................ 114,697 92,305
======= =======
Deferred tax liabilities............................. 13 6,363 7,267
------- -------
Total Liabilities & Shareholders' Equity......... 272,860 230,539
======= =======
F-36
POTAIN SA
CONSOLIDATED STATEMENTS OF CASH FLOW
December 31, 2000 and 1999
Note 12/31/00 12/31/99
---- -------- --------
(in thousands Euros)
Cash Flows from Operations.............................. 18 31,088 19,648
Change in working capital............................... (5,160) 1,748
Cash Flows from Operating Activities.................... 25,928 21,396
(Increase)/decrease in fixed assets (excluding rented
equipment)........................................... (8,035) (6,309)
(Increase)/decrease in rented equipment............... (5,495) (4,927)
Investing activities.................................. 4,722 227
------ -------
Total Cash Used in Investing Activities............. (8,808) (11,009)
====== =======
Financing Activities.................................... (489) (17)
Exchange rate fluctuation............................. (679) (514)
(Increase) Decrease in Net Indebtedness................. 15,952 9,856
F-37
POTAIN SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000 AND 1999
I--KEY EVENTS
1--Purchase of the minority interests of Zhangjiagang Potain
An agreement was negotiated in 1999 and finalized in early 2000 under which
Potain acquired the minority interest in its joint venture in China. All items
affecting earnings, including planned restructuring expense, appear in 1999
financial statements.
2--Acquisition of the Liftlux business
The group created Liftlux Potain GmbH as of July 1st, 2000, in connection
with the acquisition of the Liftlux assets. This company was included in the
consolidation in 2000.
3--Application of the new French regulation for the consolidated financial
statements
Potain group accounting principles were changed in 2000 in order to include
the effects of the new R99-02 regulation. The effective application of this
new regulation induced:
. the full consolidation of B.P.G.R. S.A.R.L., previously accounted for by
the equity method,
. the full consolidation of Solum Grundstuck Vermietung GmbH and Axiome de
Re, entities being considered as controlled by Potain SA, previously not
included in consolidation,
. the accounting for part of pensions and similar benefits for France and
Portugal employees, which were previously considered as fully covered by
the insurance premiums paid and expensed when paid,
. the accounting for deferred tax (a) considering deferred tax assets on
all existing tax losses, (b) considering deferred tax on a purchase
accounting and (c) netting the deferred tax assets and liabilities
positions of each subsidiary, with (d) adequate valuation allowance when
necessary of the net assets.
As a consequence of the above modifications, the movements in equity
between December 31, 1999 and December 31, 2000 include:
. the first consolidation of Axiome de Re, increasing net equity by an
amount of 676 K(Euro)
. the partial accounting for the first year of pensions and similar
benefits, increasing net equity by 390 K(Euro)
The income statement of year 2000 is impacted by the December 31, 1999
effect of the new deferred tax accounting method. It represents a deferred tax
benefit of K(Euro).547.
II--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1--General principles
The consolidated financial statements as of December 31, 2000 are prepared
in accordance with accounting principles generally accepted in France, as
stated in the R99-02 regulation issued by the "Comite de Reglementation
Comptable", the regulatory authority for accounting in France, and comply
with:
. the Law dated January 3, 1985
. the ministerial decree dated February 17, 1986
. methodology of the C.R.C. (June 22, 1999 decision enacting the 99.02
regulation of the C.R.C.)
F-38
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2--Consolidation principles
The consolidated financial statements include the financial statements of
all significant companies directly or indirectly controlled by Potain SA. All
companies included in the scope of consolidation are fully consolidated, with
the exception of B.P.G.R. in 1999, which was consolidated by the equity
method. The financial year of all consolidated companies ends on December 31.
A full list of consolidated companies appears in Note 21 to consolidated
financial statements.
A full list of non-consolidated entities is presented in Note 6 hereafter.
3--Foreign currency translation
The financial statements of foreign subsidiaries are translated into euros
at year-end exchange rates for their assets and liabilities and at weighted
average exchange rates for the year for their income statement. Resulting
translation adjustments are recorded to shareholders' equity.
4--Intangible assets & goodwill
Internally generated goodwill, start-up costs and research and development
costs are expensed as incurred.
Significant software costs are amortized using the straight-line method
over the estimated useful life of the software, which may not exceed three
years.
Patents, trademarks and licenses are amortized over 20 years.
Goodwill on first consolidation consists of costs in excess of net assets
of acquired businesses. It is amortized on a straight-line basis over 15
years.
5--Property, plant and equipment
Property, plant and equipment are stated at historical acquisition or
production cost. Maintenance and repair costs, other than those intended to
extend the life of an asset, are expensed when incurred. Leased equipment is
recorded as an asset when the terms of the lease are those of a capital lease.
Depreciation is calculated on a straight-line basis over the following
estimated useful lives:
Buildings and improvements................................. 20 to 25 years
Machinery and equipment.................................... 5 to 10 years
Leased cranes.............................................. 6 to 8 years
Others..................................................... 3 to 10 years
6--Financial assets
Financial assets mainly include investments in non-consolidated entities
and housing contribution loans.
The housing contribution loans are non-interest bearing loans over 20
years. They are recorded at discounted value, assuming a 2% interest rate per
year.
Subsidiaries with low materiality (less than 0.6 million (Euro) sales or
total balance sheet) are not included in the consolidation.
F-39
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Investments in non-consolidated companies are stated at cost and written
down when economic value falls below cost.
The list of non-consolidated entities as of December 31, 2000 is as follows:
Net
share
Non-consolidated entities % ownership value Equity
------------------------- ----------- -------- --------
Potain Ireland.............................. 51,0% 0 KEUR 10
Potain Inc (Philippines).................... 70,0% KEUR 249 KEUR 698
Potain Pty (Australia)...................... 100,0% KEUR 2 KEUR 596
SCI Les Aulnettes (France).................. 100,0% KEUR 155 KEUR 20
7--Inventories and work in progress
Inventories of all group companies are stated at lower of cost or market.
Cost is defined as acquisition or production cost and is computed using the
weighted average cost method. Production costs include direct and indirect
production costs and an allocation of overheads assuming normal levels of
activity. Intercompany margins are eliminated. Intercompany goods in transit
are included both in inventories and purchases of the receiving company.
Allowances to write down inventories to their net realizable value and for
surplus inventories are recorded in the year in which they become known.
8--Receivables
Receivables are stated at their nominal value and provisions are recorded
when appropriate to cover any risk of non-recovery.
9--Other accounts receivables and other liabilities
The Potain group is owned by Legris Industries. In connection therewith, the
management of excess cash or cash requirements is done at Legris level through
a cash pooling agreement. The cash lended to the cash pooling is recorded as
other accounts receivable respectively for 4,159 K(Euro) and 28,539 k(Euro) as
of December 31, 1999 and 2000. The cash borrowed from the cash pooling is
recorded as other liabilities respectively for 3,842 K(Euro) and 3,582 k(Euro)
as of December 31, 1999 and 2000.
10--Social contributions
Potain SA benefits since 1997 from the "De Robien" social law, which enables
the company to pay reduced social contributions over the seven-year period
ending June 30, 2003, provided that Potain SA keeps a minimum headcount level.
Related benefits are recorded on the respective years and represented
respectively (Euro)2,871 and (Euro)2,865 for 1999 and 2000.
11--Transactions in foreign currencies
Monetary assets and liabilities denominated in foreign currencies that are
not hedged are translated at year-end exchange rates. Hedged foreign currency
transactions are translated at the hedging rate. Differences arising from
translation, together with gains and losses realized on transactions carried
out during the year, are included in income statement. The potential
differences arising from fair value of the hedging positions related to the
backlog orders are considered as off-balance sheet commitments.
F-40
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12--Taxation
Tax charged to earnings corresponds to the tax due from each taxable
consolidated entity after correction of deferred taxes. The company uses the
deferral 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
statements carrying amounts and the tax basis of assets and liabilities.
The deferred tax liability on the restatement of the "Foreign Investment
reserve" is recorded at its discounted value assuming a 5% rate.
Where taxable entities show a loss, the deferred tax assets recorded for
loss carry forwards were limited until December 31, 1999 to the losses over two
financial years. This is no longer applicable beginning in 2000, under the new
enacted 99-02 French GAAP. Deferred tax assets on loss carry forwards and
deemed deferred depreciation are fully depreciated if their application to
future earnings is uncertain.
13--Pensions and similar benefits
Commitments to employees relating to retirement, or seniority bonuses, or
other deferred benefits, are partly accrued for since 2000 in accordance with
generally accepted accounting principles in France. The overall impact of this
change of method on shareholders' equity on the opening balance sheet is not
significant, amounting to (Euro)0.39 million, and does not require the
presentation of pro forma accounts.
The accrual recorded in the consolidated financial statements, K(Euro)4,989,
does not take into account the preferred method for computation of the full
commitment. The schedule below shows the assumptions used for valuation of the
liability:
Assumptions As computed under IAS 19
----------- ------------------------
Retirement age...................... 60 for executive and 63 for employees
Type of departure................... Voluntary
Discount rate....................... 4.9% (incl. inflation)
Inflation rate...................... 2%
Social contributions................ 47%
Salary increase..................... Depends on age & category
Turnover............................ Depends on age & category
Commitment.......................... K(Euro) 9,123
Out of the K(Euro)9,123, K(Euro)1,073 were paid to an external insurance
company.
F-41
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
III--NOTES TO FINANCIAL STATEMENTS
(in thousands Euros)
1--SALES
By business 2000 1999
----------- ------- -------
Cranes.................................................... 286,974 239,644
------- -------
Total................................................... 286,974 239,644
======= =======
By geographic area 2000 1999
------------------ ------- -------
France.................................................... 83,021 70,097
Europe (excl France and Eastern Europe)................... 159,812 138,283
Asia--Pacific............................................. 16,485 11,864
America................................................... 13,260 8,322
Near and middle East...................................... 5,236 4,210
Africa.................................................... 4,130 2,190
Eastern Europe............................................ 5,028 4,680
------- -------
Total................................................... 286,974 239,644
======= =======
2--OTHER OPERATING REVENUES
2000 1999
------- -------
Change in inventory....................................... 1,113 4,652
Capitalized production.................................... 14,476 10,589
Operating subsidies....................................... 103 151
Reversals of accruals, expense transfers.................. 4,327 5,097
Other revenues (1)........................................ 13,000 9,392
------- -------
Total................................................... 33,018 29,870
======= =======
- --------
(1)including sale of capitalized rented cranes 11,277 8,015
3--PAYROLL EXPENSES
2000 1999
------- -------
Wages and salaries...................................... (52,938) (48,190)
Social security contributions........................... (16,338) (16,014)
------- -------
Total................................................. (69,276) (64,204)
======= =======
Headcounts average 2000 12/31/00 12/31/99
---------- ------------ -------- --------
Cranes.................................. 2,464 2,285 2,558
----- ------- -------
Total................................. 2,464 2,285 2,558
===== ======= =======
- --------
(1)out of which Potain China headcounts: 397 231 616
4--OTHER OPERATING EXPENSES
2000 1999
-------- --------
Total................................. (32,504) (30,119)
======= =======
- --------
(1)out of which, net book value of sold
rented cranes (7,058) (6,353)
F-42
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5--NON RECURRING OPERATING INCOME (EXPENSES)
2000 1999
------- ------
Non recurring operating expenses....................... (5,166) (5,545)
Non recurring operating income......................... 4,613 5,202
Non recurring operating items.......................... (553) (343)
6--INTEREST EXPENSE, NET
2000 1999
------- ------
Interest expense, net of interest income............... (514) (1,303)
Net gains on disposal of short term investments........ 7 0
Subtotal............................................. (507) (1,303)
Foreign exchange gains (losses)........................ 716 (325)
Amortizations and provisions........................... (404) (212)
Reversal of reserves and expense transfers............. 152 222
Other financial income (expense)....................... 912 210
------- ------
Subtotal............................................. 1,375 (105)
======= ======
Interest expense, net.............................. 868 (1,408)
7--OTHER INCOME AND (EXPENSE) NET
2000 1999
------- ------
Non operating expenses................................. (2,664) 0
Non operating income................................... 2,100 0
------- ------
Non operating items.................................. (564) 0
======= ======
8--INCOME TAXES
8a--Detail
2000 1999
------- ------
Current income tax..................................... (11,221) (5,380)
Deferred income tax.................................... (338) 947
------- ------
Total................................................ (11,559) (4,433)
======= ======
The total income tax charge can be analyzed as follows:
Tax on operating income.............................. (11,559) (4,433)
Decrease/(increase) in tax linked to non operating
items...............................................
------- ------
Total.............................................. (11,559) (4,433)
======= ======
F-43
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8b--Tax rationalization
2000
------- ---
Income before income taxes................................... 31,559
Corporate income tax rate.................................... 36.3%
Theoretical tax charge....................................... (11,456)
Impact of permanent differences
--Potain China net loss.................................... (671)
--Goodwill amortization.................................... (161)
--Tax credit on previously not recognized tax losses....... 1,658
--Changes in income tax rate............................... (144)
--Change in consolidation principles....................... (1,175)
--Other.................................................... 390
------- ---
Effective tax charge......................................... (11,559)
======= ===
9--FIXED ASSETS
9a--Fixed assets, at cost and net
2000 1999
-------- --------
At cost:
Intangible assets..................................... 12,403 10,204
Goodwill.............................................. 6,686 5,716
Property, plant & equipment........................... 159,846 153,509
Financial assets...................................... 3,774 3,070
Investments accounted for by the equity method........ 0 1,194
-------- --------
Total fixed assets at cost.......................... 182,709 173,693
======== ========
Amortization/depreciation
Intangible assets..................................... (5,163) (3,353)
Goodwill.............................................. (4,070) (3,641)
Property, plant & equipment........................... (97,424) (93,607)
Financial assets...................................... (577) (323)
Investments accounted for by the equity method........ 0 0
-------- --------
Total fixed assets depreciation/amortization........ (107,234) (100,925)
======== ========
Net book value
Intangible assets..................................... 7,241 6,850
Goodwill.............................................. 2,616 2,075
Property, plant & equipment........................... 62,421 59,902
Financial assets...................................... 3,197 2,747
Investments accounted for by the equity method........ 0 1,194
-------- --------
Fixed assets, net................................... 75,475 72,768
======== ========
9b--Movements in fixed assets
Gross Dep. Net
------- -------- -------
Value as of December 31, 1999................. 173,693 (100,925) 72,768
Acquisitions.................................. 26,037 (13,189) 12,848
Disposals..................................... (24,300) 7,091 (17,209)
Other......................................... 7,279 (211) 7,068
------- -------- -------
Value as of December 31, 2000............... 182,709 (107,234) 75,475
======= ======== =======
F-44
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9c--Assets acquired under capital leases
2000 1999
------ ------
At cost................................................... 12,861 10,879
Depreciation.............................................. (5,546) (5,115)
Net assets acquired under capital lease................... 7,315 5,764
------ ------
Obligations under capital lease........................... 6,298 6,269
------ ------
9d--Goodwill
Goodwill at December 31, 1999.................................. 2,075
Exchange rate difference on amortization
Acquisitions................................................... 970
Amortization................................................... (429)
----- ---
Goodwill at December 31, 2000.................................. 2,616
===== ===
Goodwill breakdown by companies
12/31/99
Net book
Gross value Accumulated Depreciation Translat.
value
at 12/31/00 amortization For the year adjustment
at 12/31/00
----------- ------------ ------------ ----------
- -----------
Potain Industria Spa.... 5,716 (3,641) (391)
1,684
Liftux Potain........... 970 (38)
932
----- ------ ---- ---
-----
Total................. 6,686 (3,641) (429) 0
2,616
===== ====== ==== ===
=====
10--INVENTORIES
2000 1999
------ ------
Raw materials and other supplies.......................... 23,166 15,642
Work in Process........................................... 21,338 16,879
Semi-finished and finished goods.......................... 12,167 14,491
Resale goods.............................................. 8,414 6,230
Inventories--gross value.................................. 65,085 53,242
Provision for decline in value............................ (5,015) (4,520)
------ ------
Inventories--net book value............................. 60,070 48,722
====== ======
11--ACCOUNTS RECEIVABLES
2000 1999
------ ------
Prepayments............................................. 211 397
Accounts receivables from customers..................... 82,966(1) 79,109
Other receivables....................................... 2,392 907
Gross trade accounts receivable......................... 85,569 80,413
Provision for depreciation.............................. (3,826) (3,836)
------ ------
Net trade accounts receivables........................ 81,743 76,577
====== ======
- --------
(1) out of which receivables over 1 year : 0.5 Me
F-45
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12--CASH AND SHORT-TERM INVESTMENTS
2000 1999
------ ------
Short term investments at
cost..................... 11,544 0
Depreciation.............. 0 0
Short-term investment,
net...................... 11,544 0
Cash...................... 5,093 14,949
Other..................... 0 0
Cash...................... 5,093 14,949
------ ------
Total................... 16,637 14,949
====== ======
13--DEFERRED TAXES BALANCE AT YEAR-END
13a--Movements in deferred tax balances
2000 1999
------ ------
Net opening deferred tax
assets/liabilities....... 279 (705)
Net deferred taxes........ (338) 947
Impact of deferred taxes
on pensions & similar
benefits................. (222)
Impact of changes in
consolidation area....... (3,979)
Other changes............. 44 37
------ ------
Net closing deferred tax
assets/liabilities..... (4,216) 279
====== ======
13b--Deferred tax analysis by sources of deferred tax
(Presented before netting by company)
2000
------------------------
Gross Dep. Net
------- ------ -------
Deferred tax assets arising from
--Book to tax adjustments..................... 2,730 0 2,730
--Restatements of local books................. 3,942 (694) 3,248
--Tax losses and tax credits.................. 6,201 (5,276) 925
12,873 (5,970) 6,903
Deferred tax liabilities arising from
--Book to tax adjustments..................... (5,556) 0 (5,556)
--Restatements of local books................. (5,563) 0 (5,563)
(11,119) 0 (11,119)
------- ------ -------
Total net................................... 1,754 (5,970) (4,216)
======= ====== =======
F-46
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14--SHAREHOLDERS' EQUITY
Capital and Retained Net
premiums earnings Income Other Total
----------- -------- ------ ----- -------
Shareholders' equity at
December 31, 1999............. 115,843 7,864 123,707
Dividend distribution........ (497) (497)
Capital increase.............
Capital reduction............
Net income for the year........ 20,040 20,040
Translation adjustment....... 472 472
Acquisition of Potain China
minority interests.......... (5,550) (5,550)
Other........................ 1,092 7,367 (7,367) 1,092
------- ----- ------ --- -------
Shareholders' equity at
December 31, 2000............. 111,857 7,367 20,040 0 139,264
======= ===== ====== === =======
Number of shares
1999......................... 909,945
2000......................... 909,945
15--RESERVE FOR LOSSES AND CONTINGENCIES
2000 1999
------ -----
Reserve for contingencies
Claims and litigations....................................... 520 438
Warranty costs(1)............................................ 2,582 2,440
Technical updates(2)......................................... 1,083 475
Technical and industrial risks............................... 518 517
Miscellaneous................................................ 860 433
Total...................................................... 5,563 4,303
Reserve for losses
Pensions and other benefits(3)............................... 4,989 624
Restructuring................................................ 1,006 1,719
Initial assembly costs....................................... 121 171
Miscellaneous................................................ 857 433
Total........................................................ 6,972 2,957
------ -----
Total...................................................... 12,535 7,260
====== =====
- --------
(1) Contractual warranty on sold cranes
(2) Covers the estimated cost of parts replacement initiated by the group
(3) Change in accounting method for pensions and similar benefits accruals
Corresponding value at December 31, 1999: 4,2 millions Euros
F-47
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16--BORROWINGS
2000 1999
------ ------
16a--Breakdown by nature
Bank borrowings......................................... 16,831 6,542
Subordinated debts...................................... 0 65
Other................................................... 5,486 6,333
------ ------
Total................................................. 23,317 12,940
====== ======
16b--Breakdown by maturity
Less than 1 year........................................ 9,170 5,362
From 1 to 5 years....................................... 8,215 4,427
More than 5 years....................................... 5,931 3,151
------ ------
Total*................................................ 23,316 12,940
====== ======
*of which obligations under capital lease............... 6,298 6,269
16c--Financial instruments
As of December 31, 2000, there is no interest rate hedging.
17--ACCOUNTS PAYABLE
2000 1999
------ ------
Prepayments received.................................... 1,509 1,276
Trade accounts payable.................................. 51,543 46,086
Tax and social contributions payable.................... 20,273 18,113
Debt related to fixed assets............................ 299 676
Corporate income tax payable............................ 7,358 3,431
Other liabilities....................................... 3,328 1,262
------ ------
Total accounts payable................................ 84,311 70,843
====== ======
18--CASH FLOWS FROM OPERATIONS
2000 1999
------ ------
Consolidated net income................................. 20,039 7,864
Income from companies accounted for by the equity
method................................................. 0
Depreciation, amortization and operating provisions..... 18,032 16,489
Reversals of operating provisions....................... (4,326) (4,988)
Allowance for financial provisions...................... 404 212
Reversals of financial provisions....................... (152) (222)
Allowance for non recurring provisions.................. 179 1,004
Reversals of exceptional provisions..................... (3,918) (246)
Gains on disposal of fixed assets....................... 58 (408)
Amortization of goodwill, net........................... 429 381
Net movement in deferred taxes.......................... 338 (947)
------ ------
Total cash flows from operations...................... 31,088 19,648
====== ======
F-48
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
19--IMPACT OF CHANGES IN CONSOLIDATION SCOPE
2000
-------
Fixed assets............................................ 6,897
Current assets*......................................... 19,711
Deferred tax assets.....................................
-------
Total assets.......................................... 26,608
=======
Equity.................................................. 7,646
Reserves................................................ 5,990
Liabilities*............................................ 8,993
Deferred tax liabilities................................ 3,979
-------
Total liabilities..................................... 26,608
=======
*of which, net borrowings............................... (10,984)
20--OFF-BALANCE SHEET COMMITMENTS
2000 1999
------- ------
Given commitments
Guaranties given to banks (incl. Discounted bills)...... 11,217 14,244
Future lease payments................................... 0 0
Buy-back commitments.................................... 14,253 11,682
Other................................................... 0 0
------- ------
Total................................................. 25,470 25,926
======= ======
Received commitments
Discounted bills........................................ 1,358 631
Discounted bills secured by collateral/Sabatini law,
Italy(1)............................................... 2,616 2,709
Backlog orders received................................. 52,537 55,796
Buy-back commitments.................................... 14,253 11,682
Other(2)................................................ 11,766 13,643
------- ------
Total................................................. 82,530 84,461
======= ======
Debts secured by collateral
Mortgages and pledges................................... 0 0
Obligations under capital lease......................... 6,298 6,269
------- ------
Total................................................. 6,298 6,269
======= ======
--------
(1) guaranted by pledge on material
(2) export guarantees, other guarantees, equipment lodged as
collateral for payment guarantees given, excluding
discounted bills
F-49
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
21--CONSOLIDATION AREA
% %
ownership ownership
at at
Entities City Country 31/12/2000 31/12/1999
- -------- ------------- ------------------ ---------- ----------
Potain.................. Ecully France Mother Mother
B.P.G.R................. Ecully France 100.00% 100.00%
Sam Sologat............. Bretigny France 99.80% 99.80%
Sci Les Sthenes du
Plateau................ Ecully France 100.00% 100.00%
Cadillon GmbH........... Moerfelden Allemagne 100.00% 100.00%
Potain GmbH............. Moerfelden Allemagne 100.00% 100.00%
Potain Technik Gmbh..... Arneburg Allemagne 100.00% 100.00%
Potain Belgium.......... Malines Belgique 100.00% 100.00%
Potain UK............... West-Drayton Grande-Bretagne 100.00% 100.00%
Potain Hungaria......... Budapest Hongrie 100.00% 100.00%
Potain Industrie Spa.... Niellatanaro Italie 99.98% 99.98%
Potain Spa.............. Parabiago Italie 99.97% 99.97%
Potain Italia........... Cuggiono Italie 99.97% 99.97%
Potain International.... Cuggiono Italie 99.97% 99.97%
Potain Polska........... Varsovie Pologne 100.00% 100.00%
Noe Pereira............. Fanzeres Portugal 99.64% 99.64%
Potain Portugal......... Ermesinde Portugal 99.56% 99.56%
Potain S.R.O............ Netvorice Republique tcheque 100.00% 100.00%
Potain Corporation...... Miami Etats-Unis 100.00% 100.00%
Potain Ltda............. Sao-Paulo Bresil 99.91% 99.91%
Zhangjiagang Potain..... Zhangjiagang Chine 100.00% 62.77%
Potain Pte Ltd.......... Singapour Singapour 100.00% 100.00%
Liftlux Potain Gmbh..... DILLINGEN Allemagne 100.00%
Solum................... Dusseldorf Allemagne 100.00%
Axiome de Re............ Senningerberg Luxembourg 100.00%
F-50
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
IV--PROFIT AND LOSS PRESENTATION
Under French accounting principles, profit and loss statement can be
presented either by nature or by destination. Below is a presentation of
profit and loss statement by destination under French GAAP.
(in thousands Euros) 12/31/2000 (12/31/1999
- -------------------- ---------- -----------
Sales.................................................. 286,974 239,644
Cost of sales.......................................... (206,503) (182,032)
Gross profit........................................... 80,471 57,612
Engineering, selling & administrative expenses......... (48,747) (43,512)
Operating profit....................................... 31,724 14,100
Interest expense, net.................................. 868 (1,408)
Goodwill amortization.................................. (429) (391)
Other income and (expense), net........................ (564) 0
Income before taxes.................................... 31,599 12,301
Income tax............................................. (11,559) (4,433)
Net income before minority interests of fully
consolidated entities................................. 20,040 7,868
Minority interests..................................... 24 1,592
Results of entities accounted for by the equity
method................................................ 0 (4)
Net income............................................. 20,016 6,272
The cost of sales includes the following:
. logistic expenses such as inventory warehousing and transportation costs,
. manufacturing costs including direct and indirect standard costs,
variances with actual costs and allowances for inventory depreciation,
. margin on sale of capitalized cranes.
Engineering, selling & administrative expenses include all operating
expenses not included in cost of sales.
V--COMPARISON BETWEEN FRENCH AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The Group's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in France ("French GAAP") which
differ in certain respects from accounting principles generally accepted in
the United States ("U.S. GAAP"). The significant differences applicable to the
Group are summarized below.
Revenue recognition on sales with guaranteed buyback commitments
Under French GAAP, revenue related to sales with guaranteed buyback
commitments are recognized and a liability is established at the time of sale
for the difference, if any, between the amount of the buyback commitment and
the estimated fair value of the equipment at the foreseeable buyback
commitment date.
Under U.S. GAAP, revenue related to such sales is recorded in accordance
with EITF 95-1, "Revenue Recognition on Sales with Guaranteed Minimum Resale
Value" which states that a manufacturer is precluded from recognizing a sale
of equipment if the manufacturer guarantees the resale value of the equipment
to the
F-51
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
purchaser. Rather, the manufacturer should account for the transaction as a
lease, using the principles of lease accounting in Statement 13.
Revenue recognition on sales with guarantees
The Company enters into sales agreements with financing companies who in
turn lease equipment to third parties. Under some of these agreements, the
Company has guaranteed the third party lease payments to the financing
companies. Under other such agreements, the Company has agreed to absorb a
portion of the losses resulting from default by the third parties.
Under French GAAP, revenue related to such transactions is recorded upon
delivery of the equipment and a liability, if necessary, is established for any
anticipated future losses related to the guarantees. The guarantees are
considered to be off-balance sheet commitments.
Under U.S. GAAP, revenue related to such transactions in which the Company
retains substantial risks of ownership in the property is recorded as if the
transaction was a lease.
Deferred taxation
For French GAAP purposes, on January 1, 2000, the Group adopted French
accounting standard 99-02 which addresses the accounting for income taxes. This
new rule is effective from January 1, 2000. This standard is similar to U.S.
GAAP in that deferred taxes are computed for all temporary differences between
the tax and book bases of assets and liabilities. Deferred tax assets are
recognized to the extent their realization is more likely than not. The main
difference between this standard and U.S. GAAP is that long-term deferred tax
liabilities are discounted. For U.S. GAAP purposes, deferred taxes are computed
for all temporary differences between the tax and book bases of assets and
liabilities. Deferred tax assets are recognized to the extent their realization
is more likely than not.
Consolidation and tax provisions
Under French GAAP, prior to the issuance of accounting standard 99-02,
companies were not required to consolidate majority-owned subsidiaries which
operated in a different business activity. Therefore, Axiome, a wholly-owned
subsidiary was not consolidated in 1998 and 1999 as a result of which
provisions recorded to obtain certain tax benefits were not reversed for
consolidation purposes under French GAAP. Starting from January 1, 2000, the
application of accounting standard 99-02 requires that all majority-owned
subsidiaries for which a company has control be consolidated and as a
consequence, such provisions have been reversed.
Under U.S. GAAP, all majority-owned subsidiaries for which a company has
control are consolidated and as a consequence, provisions recorded to obtain
certain tax benefits are reversed all over the periods presented with the
related deferred tax effect.
Pensions and retirement indemnities
Under French GAAP, companies have the option of recording pension
liabilities in full in the balance sheet, partially in the balance sheet and
partially as an off balance sheet commitment, or entirely as an off balance
sheet commitment. Under U.S. GAAP, pensions are accounted for in accordance
with Statement of Financial Accounting Standards No. 87, "Employers' Accounting
for Pensions" (FAS 87). Under FAS 87, pension assets or liabilities are
recorded in the balance sheet for the difference between the projected benefit
obligation and the fair value of any plan assets. Annual pension costs are
recorded in the income statement.
F-52
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
IBNR Reserves
For French GAAP purposes, liabilities for amounts due related to deductibles
for insurance claims are recorded when the invoices are received from the
insuror.
For U.S. GAAP purposes, such liabilities are recorded when they are
incurred. Therefore, an estimate of claims incurred but not yet reported (IBNR)
is calculated by an actuary and the estimated amount is recorded in the balance
sheet.
Foreign currency hedges
Under French GAAP, gains and losses on foreign currency hedges can be
deferred until the hedged transaction actually occurs.
Under U.S. GAAP, hedging of foreign currency transactions with forward
exchange contracts is only permissible for transactions which are firm
commitments. Some of the Group's foreign currency contracts hedge forecasted or
budgeted transactions which do not meet the definition of a firm commitment.
Gains and losses on these contracts cannot be deferred but must be recognized
in net income.
Restructuring costs
For French GAAP purposes, the Group recorded a restructuring reserve for
Potain China in December 1999 because it was considered that management had
approved the plan and communicated the plan and related benefits to be received
to the employees affected by the plan. However, the plan was not officially
approved by the Board and other regulatory authorities until January 2000.
For U.S. GAAP purposes, restructuring costs are recognized when the
following have occurred: management approves and commits the company to the
restructuring plan; the benefit arrangement for any employees to be terminated
has been communicated to employees in sufficient detail to enable them to
determine the type and amount of benefits they will receive if terminated; the
plan of termination specifically identifies the number of employees to be
terminated, their job classifications or functions and their locations; and the
period of time to complete the plan indicates that changes to the plan are not
likely. It was considered for U.S. GAAP purposes that Potain China was not
committed to the plan until January 2000.
Impairment of assets
Under French GAAP, there are no specific rules specifying impairment
criteria and how impairment should be measured.
Under U.S. GAAP, long-lived assets and certain identifiable intangibles to
be held and used are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the estimated future cash flows expected to result
from the asset and its eventual disposition is less than the carrying value of
the asset, an impairment loss is recognized.
Non-interest bearing notes receivable
Under French GAAP, non-interest bearing notes receivable are recorded at the
amounts stipulated in the agreements. No consideration is given to the impact
of imputed interest.
Under U.S. GAAP, non-interest bearing notes receivable exchanged for
property, goods or services are recorded at their present value by discounting
all future payments on the notes using an imputed rate of interest. Premiums
are amortized into income over the life of the notes.
F-53
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Rental agreement
The Group has a lease agreement for 20 years and for which the lease
payments are not uniform throughout the term of the lease.
For French GAAP purposes, payments under operating leases are recorded as
rent expense for the amounts incurred according to the lease agreement.
Under U.S. GAAP, the total expense to be incurred under the lease is
amortized uniformly on a straight-line basis over the term of the lease.
The following is a summary of the significant adjustments to net income and
shareholders' equity which would be required if U.S. GAAP were to be applied
instead of French GAAP:
Shareholders' Shareholders' Adoption
Shareholders'
Equity Net Equity Net of
Equity
December 31, income December 31, income Standard
December 31,
In thousands of Euros 1998 1999 1999 2000 99-02
2000
- --------------------- ------------- ------- ------------- ------- --------
- -------------
Amount in accordance
with French GAAP....... 111,005 6,272 118,083 20,016 1,106
139,172
Revenue recognition..... (1,746) (897) (2,643) (1,790)
(4,433)
Deferred taxation....... 1,428 (994) 434 (697)
(263)
Consolidation........... 811 (95) 716 (716)
Pensions & retirement
indemnities............ (2,266) (184) (2,450) 183 (612)
(2,879)
IBNR reserve............ (115) 2 (113) (6)
(119)
Foreign currency hedge.. (82) (82) 82
Restructuring--China.... 902 902 (902)
Impairment of assets.... (181)
(181)
Non-interest bearing
notes receivable....... (412) (15) (427) 13
(414)
Rental agreement........ (67)
(67)
Tax effect of the above
adjustments............ 1,731 342 2,073 572 222
2,867
Amount in accordance
with U.S. GAAP......... 110,435 5,261 116,493 17,224 0
133,683
Number of shares........ 909,945 909,945
Net income per share
U.S. GAAP (Euros)...... 5.77 18.93
VI--SUPPLEMENTAL CASH FLOW INFORMATION
December 31
-------------------------
(in thousands Euros) 2000 1999 1998
-------------------- ------- ------- -------
Cash......................................... 16,637 14,949 6,838
Borrowings................................... (23,316) (12,940) (15,693)
Amounts due from affiliates (included in
other receivables).......................... 28,538 4,158 3,388
Amounts due to affiliates (included in other
liabilities)................................ (3,582) (3,842) (2,064)
------- ------- -------
Net indebtedness............................. 18,277 2,325 (7,531)
F-54
POTAIN SA
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(in thousands Euros)
Operating revenues
Sales.................................................................. 80,450
Operating expenses
Raw material, supplies and services.................................... (62,400)
Other operating expenses............................................... (13,429)
-------
Current operating income............................................... 4,621
=======
Interest (expense) income, net......................................... (218)
Amortization of goodwill, net.......................................... (118)
Other income and (expense), net........................................ 0
-------
Income before taxes.................................................... 4,721
=======
Income taxes, current and deferred..................................... (1,807)
-------
Net income............................................................. 2,914
=======
Number of shares at March 31........................................... 909,945
Net income per share (in euros)........................................ 3.2
F-55
POTAIN SA
CONSOLIDATED BALANCE SHEET
MARCH 31, 2001
Note March 31, 2001
---- --------------
(in thousands Euros)
ASSETS
Intangible assets........................................... 7,070
Goodwill.................................................... 2,669
Property, plant and equipment............................... 62,530
Other non-current assets.................................... 2,630
-------
Total Fixed Assets...................................... 74,899
=======
Inventories................................................. 3 68,749
Accounts receivable......................................... 81,741
Other current assets........................................ 10,804
Cash........................................................ 49,561
-------
Total Current Assets.................................... 210,855
=======
Deferred tax assets......................................... 2,147
-------
Total Assets............................................ 287,901
=======
LIABILITIES
Share Capital............................................... 13,649
Additional paid-in capital.................................. 12,495
Retained earnings........................................... 112,953
Net income for the year..................................... 2,914
-------
Shareholders' Equity.................................... 142,011
=======
Minority interests.......................................... 200
-------
Shareholders' Equity & Minority Interests............... 142,211
=======
Reserves for losses and contingencies
Borrowings.................................................. 22,569
Accounts payable............................................ 63,059
Other liabilities........................................... 4 53,390
-------
Total Liabilities....................................... 139,018
=======
Deferred tax liabilities.................................... 6,672
-------
Total Liabilities & Shareholders' Equity................ 287,901
=======
F-56
POTAIN SA
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(in thousands of Euros)
Cash Flows from Operations.............................................. 7,458
Change in working capital............................................... 4,371
Cash Flows from Operating Activities.................................... 11,829
Cash Flows from Investing Activities.................................... (3,473)
Cash Flows from Financing Activities.................................... (480)
(Increase) Decrease in Net Indebtedness................................. 7,876
F-57
POTAIN SA
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
NOTE 1--In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of Potain SA (Potain) contain all adjustments
necessary to present fairly the financial position, results of operations and
cash flows of Potain for the three months ended March 31, 2001 in conformity
with French generally accepted accounting principals. These interim results are
not necessarily indicative of results for a full year and do not contain
information included in Potain's annual consolidated financial statements and
notes for the year ended December 31, 2000. It is suggested that these
financial statements be read in conjunction with Potain's financial statements
and notes thereto included in Potain's year 2000 audited financial statements.
NOTE 2--The consolidated financial statements of Potain include the
financial statements of all significant companies directly or indirectly
controlled by Potain SA. All companies included in the scope of consolidation
are fully consolidated.
NOTE 3--The components of inventories at March 31, 2001 are summarized as
follows:
Components:
-----------
Raw materials and other supplies..................................... 26,311
Work-in-process...................................................... 25,647
Finished goods....................................................... 21,807
Resale goods......................................................... 166
------
Inventories at gross value........................................... 73,931
Provision for decrease in value...................................... (5,182)
------
Inventories at net book value........................................ 68,749
======
Inventories are stated at the lower of cost or market. Cost is defined as
acquisition or production cost and is computed using the weighted average cost
method.
NOTE 4--As of March 31, 2001, various product-related lawsuits were pending.
All of these cases are insured with a deductible amount of $0.067 million per
accident, except in the U.S. and Canada where the deductible is $0.025 million
per accident. The insurer's coverage is limited to $13 millions per year for
the whole group, except the US and Canada where it is limited to $31 millions
in the aggregate for all accidents.
Product liability reserves included in other current liabilities at March
31, 2001 were $0.9 million (excludes warranty accruals and technical updates).
Based upon Potain's experience in defending itself against product liability
claims, management believes the current reserves are adequate to cover
estimated settlements or losses on the aggregate amount of claims.
It is reasonably possible that the estimate for product liability claim
costs may change in the near future based upon new information that may arise.
Presently, there is no reliable means to estimate the amount of any such
potential changes.
Potain is involved in various other legal actions arising in the normal
course of business. After taking into consideration legal counsel's evaluation
of such actions, in the opinion of management, ultimate resolution is not
expected to have a material adverse effect on the consolidated financial
statements of Potain.
NOTE 5--On May 9, 2001, all of the outstanding capital stock of Potain SA
was acquired by The Manitowoc Company, Inc. (Manitowoc) from Legris Industries
SA (Legris) pursuant to a Share Purchase
F-58
POTAIN SA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Agreement, dated May 9, 2001, between Manitowoc and Legris. The total purchase
price paid by Manitowoc was FRF 2.3 billion ($307.1 million, based upon
exchange rates as of May 7, 2001).
NOTE 6--Potain determines its business segments based upon the internal
organization that is used by management to make operating decisions and assess
performance. Based upon this approach, Potain has one business segment which is
Cranes.
NOTE 7--The Group's consolidated financial statements are prepared in
accordance with accounting principals generally accepted in France ("French
GAAP") which differ in certain respects from accounting principals generally
accepted in the United States ("U.S. GAAP"). The significant differences
applicable to the Group are summarized in the audited consolidated financial
statements. The following is a summary of the significant adjustments to net
income and shareholder's equity which would be required if U.S. GAAP were
applied instead of French GAAP for the three month period ended March 31, 2001:
Net Shareholder's
in thousands of Euros Income Equity
- --------------------- ------- -------------
Amount in accordance with French GAAP.................... 2,914 142,011
Revenue recognition...................................... (159) (4,803)
Deferred taxation........................................ 36 1,591
Pension and retirement indemnities....................... (60) (1,898)
Impairment of assets..................................... 10 (171)
Rental agreement......................................... -- (138)
Miscellaneous other...................................... -- (301)
------- -------
Amount in accordance with U.S. GAAP...................... 2,741 136,291
Number of shares......................................... 909,945
Net income per share U.S. GAAP (Euros)................... 3.01
F-59
ISSUER
The Manitowoc Company, Inc.
500 South 16th Street
Manitowoc, Wisconsin 54221
ADVISERS
Legal Advisors to Manitowoc
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Independent Accountants for Manitowoc
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 53202
Independent Auditors for Potain
Ernst & Young Audit
Tour Cristal Parc
113, Boulevard Stalingrad
69626 Villeurbanne Cedex
France
Trustee, Registrar, Principal Paying and Transfer Agent
The Bank of New York
101 Barclay Street
New York, New York 10286
Luxembourg Listing Agent, Transfer Agent and Special Paying Agent
The Bank of New York (Luxembourg) S.A.
6D, route de Treves
B.P. 263
L-2633 Senningerberg
Luxembourg
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[LOGO] Manitowoc
The Manitowoc Company, Inc.
(Euro)175,000,000
10 3/8% Senior Subordinated Notes
due 2011
-------------------------------------
PROSPECTUS
-------------------------------------
August 2, 2001
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