Manitowoc (MTW) Sees Q1 EPS 50%+ Below Street Expectations
The Manitowoc Company, Inc. (NYSE: MTW) today announced that the current trends in the end markets for its businesses, particularly for the Crane segment, are driving financial performance that is significantly softer than projected when the company announced its full-year 2009 guidance in January. Over the last six to nine months, global demand for the company's crane products has not stabilized and continues to decline further than previously anticipated due to the continuing global recession. Accordingly, the company no longer believes that it will be able to achieve its previous guidance for sales, earnings per share, or cash flow. The company's first-quarter results for earnings per share from continuing operations are anticipated to be more than 50 percent below the current Wall Street average estimate.
While global demand has continued to weaken for its products, the company has been taking actions to mitigate the impact of this downturn. These actions, while aggressive, are designed to preserve the company's long-term opportunities and its ability to capture business when markets improve. The actions taken to date include: global workforce reductions and a hiring freeze; capital expenditures being limited primarily to new product development, production efficiencies, and safety; temporary production shutdowns; in-sourcing of previously outsourced production activities; shifting certain crane production to lower cost jurisdictions; strict discretionary and travel expense reductions; deferral of salary increases; and reduction in benefits.
The continued impact of the global recession on the company's business, partially offset by the cost cutting and other mitigating actions being taken, has resulted in an environment where it is more difficult to accurately predict financial results. Accordingly, the company is withdrawing its previous 2009 full-year guidance and will not be issuing new guidance.
The company previously announced that it had signed a definitive agreement to sell the Enodis global ice machine operations to Braveheart Acquisition, Inc., an affiliate of Warburg Pincus Private Equity X, L.P., for $160 million. Subject to the receipt of customary governmental and regulatory approvals, the sale is expected to be completed in May 2009. The company intends to use the after-tax net proceeds of approximately $150 million to reduce a portion of the debt incurred in November 2008 to acquire Enodis plc, specifically the Term Loan "X" which matures in 2010. The final sale price will result in the company recording an additional approximate $30 million non-cash impairment charge to reduce the value of the Enodis ice business in the first quarter of 2009. Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc. served as financial advisors to Manitowoc on this transaction.
The lower-than-expected proceeds from the sale of the Enodis ice machine operations increases the possibility that the company could violate certain debt covenants during the second half of 2009. The result of this sale process combined with the lower projected earnings results further increases that risk. However, at the current time, all covenant requirements are being met, and the company is making business adjustments with the intent to remain in compliance with its covenants. If it becomes necessary, Manitowoc would work with its lender group and would expect to obtain covenant relief. Any such relief could involve upfront fees, higher interest cost, and other terms potentially less favorable to the company than those in its current Credit Agreement.
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