The Manitowoc Company Reports Second-Quarter Financial Results

July 29, 2015 5:12 PM

Foodservice posts improving trends during second quarter;

Weakness in oil and gas further impacts rough-terrain and boom truck markets driving modestly revised full-year guidance

MANITOWOC, Wis.--(BUSINESS WIRE)-- The Manitowoc Company, Inc. (NYSE: MTW) today reported second-quarter 2015 sales of $885.4 million, a 12.6 percent decrease from $1,012.8 million in second quarter of 2014, of which $59.7 million, or 46.9 percent, was caused by unfavorable foreign currency impact.

On a GAAP basis, the company reported net income of $23.3 million, or $0.17 per diluted share, in the second quarter of 2015, versus net income of $46.6 million, or $0.34 per diluted share, in the second quarter of 2014. Foreign currency had a negative $0.03 impact on current-quarter results. Excluding special items, adjusted income from continuing operations was $30.6 million, or $0.22 per diluted share, in the second quarter of 2015, versus adjusted earnings from continuing operations of $47.8 million, or $0.35 per diluted share, in the second quarter of 2014. Adjustments to GAAP results include certain items management considers in evaluating operating performance in each period. A reconciliation of GAAP net earnings to net earnings before special items for the quarter and year-to-date periods is provided later in this press release.

“Our second-quarter results were primarily driven by continued weakness in our rough-terrain and boom truck markets, as well as lingering effects of operational issues in KitchenCare and lower capex spending by large foodservice chains. However, improving trends within Foodservice as we moved through the quarter offer confidence that the corrective actions we have implemented are beginning to pay dividends. Furthermore, our tower crane and all-terrain crane businesses, on a constant currency basis, continue to track to our expectations. In an effort to mitigate the negative factors impacting our results, we continue to take decisive actions that will enhance our operational performance, optimize our cost structure, and maintain our leadership position through innovation and quality,” commented Glen E. Tellock, Manitowoc’s chairman and chief executive officer.

Foodservice Segment Results

Second-quarter 2015 net sales in Foodservice were essentially flat, at $407.7 million versus $406.7 million in the second quarter of 2014. Strong sales from cold-side products were offset by unfavorable foreign currency exchange rates and continued weakness in the APAC region due to reduced spending by large chains.

Foodservice operating earnings for the second quarter of 2015 were $63.6 million versus $65.9 million for the second quarter of 2014. This produced an operating margin of 15.6 percent in Foodservice for the second quarter of 2015, compared to 16.2 percent for the second quarter of 2014. Despite the year-over-year decline, Foodservice operating margins improved 600 basis points sequentially, consistent with the company’s expectations to achieve full-year, mid-teens margins.

“As we closed out the quarter, Foodservice results made solid progress resulting from the benefits of our cost-saving initiatives and several operational improvements in KitchenCare. Despite lackluster capex spending from larger chains, we did see traction with emerging foodservice concepts, recovering volumes, and positive order trends,” stated Tellock. “Our products continue to receive a strong reception from customers and industry recognition through notable awards, such as the ‘2014 Innovator of the Year’ award from McDonald’s Equipment Group for innovations within the Frymaster brand. While we know challenges remain ahead, we expect the encouraging trends we witnessed at the end of the second quarter to continue through the remainder of 2015.”

Crane Segment Results

Second-quarter 2015 net sales in Cranes were $477.7 million, versus $606.1 million in the second quarter of 2014. The decline in sales was primarily due to lower rough-terrain and boom truck sales, which have been significantly impacted by depressed oil and gas markets.

Crane operating earnings for the second quarter of 2015 were $26.2 million, down from $54.4 million in the same period last year. This resulted in an operating margin of 5.5 percent for the second quarter of 2015 versus 9.0 percent for the second quarter of 2014. Second-quarter 2015 margins were affected by the decline in revenue on lower levels of production and absorption.

Crane backlog totaled $731 million as of June 30, 2015, roughly flat with the second quarter 2014 backlog of $728 million. Second-quarter 2015 orders of $438 million decreased from $491 million in the second quarter of 2014, and represented .92 times book-to-bill.

“While we saw strength in certain markets and product lines, our results were negatively impacted by a difficult oil and gas market, as well as unfavorable exchange rates. In light of these challenges, we have lowered our full-year outlook for Cranes,” continued Tellock. “As we look to the remainder of 2015, we continue to focus on the agility of our business, enabling us to maximize our performance in the near term and positioning us well to capture growth when our end markets improve.”

Cash Flow

Cash flow from operating activities of continuing operations in the second quarter of 2015 was $55.4 million, which compares to $72.5 million in the second quarter of 2014. Second-quarter capital expenditures totaled $17.5 million compared to $18.3 million in the second quarter of 2014.

2015 Guidance

For the full-year 2015, Manitowoc is revising its previous guidance and now expects:

Manitowoc also remains on track regarding the separation of its Cranes and Foodservice businesses, which is anticipated to occur during the first quarter of 2016. Additional run-rate costs associated with separating into two publicly traded companies are expected to be in a range of $20 to $30 million on an annual basis.

Investor Conference Call

On July 30, 2015, at 10:00 a.m. ET (9:00 a.m. CT), Manitowoc’s senior management will discuss its second-quarter results during an investor conference call. All interested parties may listen to the live conference call via the Internet by going to the Investor Relations area of Manitowoc’s Web site at http://www.manitowoc.com. A replay of the conference call will also be available at the same location on the Web site.

About The Manitowoc Company, Inc.

Founded in 1902, The Manitowoc Company, Inc. is a multi-industry, capital goods manufacturer with 92 manufacturing, distribution, and service facilities in 25 countries. The company is recognized globally as one of the premier innovators and providers of crawler cranes, tower cranes, and mobile cranes for the heavy construction industry. Manitowoc is also one of the world's leading innovators and manufacturers of commercial foodservice equipment, which includes 24 market-leading brands of hot- and cold-focused equipment. In addition, both segments are complemented by a slate of industry-leading product support services. In 2014, Manitowoc’s revenues totaled $3.9 billion, with approximately half of these revenues generated outside of the United States.

Forward-looking Statements

This press release includes "forward-looking statements" intended to qualify for the safe harbor from liability under the Private Securities Litigation Reform Act of 1995. Any statements contained in this press release that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations of the management of the company and are subject to uncertainty and changes in circumstances. Forward-looking statements include, without limitation, statements typically containing words such as "intends," "expects," "anticipates," "targets," "estimates," and words of similar import. By their nature, forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results and developments to differ materially include, among others:

Manitowoc undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. Forward-looking statements only speak as of the date on which they are made. Information on the potential factors that could affect the company's actual results of operations is included in its filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

THE MANITOWOC COMPANY, INC.
Unaudited Consolidated Financial Information
For the Three and Six Months Ended June 30, 2015 and 2014
(In millions, except share data)
INCOME STATEMENT
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Net sales $ 885.4 $ 1,012.8 $ 1,637.5 $ 1,862.8
Cost of sales 662.9 742.0 1,232.5 1,366.3
Gross profit 222.5 270.8 405.0 496.5
Engineering, selling and administrative expenses 144.7 165.5 303.3 326.8
Restructuring expense 0.1 1.0 1.2 3.0
Separation expense 8.3 - 9.8 -
Amortization expense 8.6 8.8 17.2 17.6
Other 0.4 0.1 0.4 0.1
Operating earnings 60.4 95.4 73.1 149.0
Amortization of deferred financing fees (1.0 ) (1.1 ) (2.1 ) (2.3 )
Interest expense (24.4 ) (25.1 ) (48.0 ) (44.4 )
Loss on debt extinguishment - - - (25.3 )
Other income (expense) - net 2.9 (3.1 ) 5.4 (2.3 )
Earnings from continuing operations before taxes on income 37.9 66.1 28.4 74.7
Provision for taxes on income 14.7 19.2 13.5 21.8
Earnings from continuing operations 23.2 46.9 14.9 52.9
Discontinued operations:
Earnings (loss) from discontinued operations, net of income taxes 0.1 (0.3 ) - (1.3 )
Loss on sale of discontinued operations, net of income taxes - - - (9.9 )
Net earnings 23.3 46.6 14.9 41.7
Less net earnings attributable to noncontrolling interests - - - 3.9
Net earnings attributable to Manitowoc 23.3 46.6 14.9 37.8

Amounts attributable to the Manitowoccommon shareholders:

Earnings from continuing operations 23.2 46.9 14.9 48.6
Earnings (loss) from discontinued operations, net of income taxes 0.1 (0.3 ) - (0.9 )
Loss on sale of discontinued operations, net of income taxes - - - (9.9 )
Net earnings attributable to Manitowoc 23.3 46.6 14.9 37.8
BASIC EARNINGS (LOSS) PER SHARE:
Earnings from continuing operations attributable to the Manitowoc $ 0.17 $ 0.35 $ 0.11 $ 0.36
common shareholders, net of income taxes
Loss from discontinued operations attributable to the Manitowoc 0.00 (0.00 ) - (0.01 )
common shareholders, net of income taxes
Loss on sale of discontinued operations attributable to the Manitowoc - - - (0.07 )
common shareholders, net of income taxes
BASIC EARNINGS PER SHARE: $ 0.17 $ 0.35 $ 0.11 $ 0.28
DILUTED EARNINGS (LOSS) PER SHARE:
Earnings from continuing operations attributable to the Manitowoc $ 0.17 $ 0.34 $ 0.11 $ 0.35
common shareholders, net of income taxes
Loss from discontinued operations attributable to the Manitowoc 0.00 (0.00 ) - (0.01 )
common shareholders, net of income taxes
Loss on sale of discontinued operations attributable to the Manitowoc - - - (0.07 )
common shareholders, net of income taxes
DILUTED EARNINGS PER SHARE $ 0.17 $ 0.34 $ 0.11 $ 0.28
AVERAGE SHARES OUTSTANDING:
Average Shares Outstanding - Basic 136,130,861 134,990,382 135,887,738 134,590,994
Average Shares Outstanding - Diluted 137,985,899 137,426,642 137,431,565 137,420,479
SEGMENT SUMMARY
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Net sales from continuing operations:
Cranes and related products $ 477.7 $ 606.1 $ 884.4 $ 1,072.8
Foodservice equipment 407.7 406.7 753.1 790.0
Total $ 885.4 $ 1,012.8 $ 1,637.5 $ 1,862.8

Operating earnings (loss) fromcontinuing operations:

Cranes and related products $ 26.2 $ 54.4 $ 35.9 $ 77.0
Foodservice equipment 63.6 65.9 96.6 123.8
General corporate expense (12.0 ) (15.0 ) (30.8 ) (31.1 )
Restructuring expense (0.1 ) (1.0 ) (1.2 ) (3.0 )
Separation expense (8.3 ) - (9.8 ) -
Amortization (8.6 ) (8.8 ) (17.2 ) (17.6 )
Other (0.4 ) (0.1 ) (0.4 ) (0.1 )
Total $ 60.4 $ 95.4 $ 73.1 $ 149.0
THE MANITOWOC COMPANY, INC.
Unaudited Consolidated Financial Information

For the Three Months and Six Months Ended June 30, 2015 and 2014

(In millions)
BALANCE SHEET
June 30, December 31,
ASSETS 2015 2014
Current assets:
Cash and temporary investments $ 67.7 $ 68.0
Restricted cash 20.2 23.7
Accounts receivable - net 251.0 227.4
Inventories - net 743.4 644.5
Deferred income taxes 68.8 71.3
Other current assets 129.5 151.2

Total current assets

1,280.6 1,186.1
Property, plant and equipment - net 569.5 591.0
Intangible assets - net 1,872.6 1,912.8
Other long-term assets 122.8 126.7
TOTAL ASSETS $ 3,845.5 $ 3,816.6
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 764.7 $ 807.4
Short-term borrowings 67.5 80.3
Customer advances 38.9 21.3
Product warranties 73.6 77.7
Product liabilities 25.4 24.6
Total current liabilities 970.1 1,011.3
Long-term debt 1,561.4 1,443.2
Other non-current liabilities 514.8 538.0
Stockholders' equity 799.2 824.1
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 3,845.5 $ 3,816.6
CASH FLOW SUMMARY
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Net earnings attributable to Manitowoc $ 23.3 $ 46.6 $ 14.9 $ 37.8
Non-cash adjustments 27.8 28.2 62.2 70.7
Changes in operating assets and liabilities 4.3 (2.3 ) (157.3 ) (300.6 )
Net cash provided by (used for) operating activities of continuing operations 55.4 72.5 (80.2 ) (192.1 )
Net cash provided by (used for) operating activities of discontinued operations 0.1 (0.3 ) - (7.1 )
Net cash provided by (used for) operating activities 55.5 72.2 (80.2 ) (199.2 )
Capital expenditures (17.5 ) (18.3 ) (29.2 ) (35.0 )
Restricted cash 3.0 - 3.0 (13.2 )
Proceeds from sale of fixed assets 3.1 1.1 5.1 2.1
(Payments) proceeds from borrowings - net

(44.1

) (27.8 )

109.0

296.1
Payments on receivable financing - net

(3.8

) (5.4 )

(9.3

) (12.6 )
Stock options exercised 0.5 2.9 3.9 22.8
Debt issuance costs - - - (4.9 )
Net cash used for financing activities of discontinued operations - - - (7.2 )
Effect of exchange rate changes on cash 2.8 - (2.6 ) (0.3 )
Net (decrease) increase in cash & temporary investments $

(0.5

) $ 24.7 $ (0.3 ) $ 48.6

Adjusted EBITDA

The company defines Adjusted EBITDA as earnings before interest, taxes, depreciation, and amortization, plus certain items such as pro-forma acquisition results and the addback of certain restructuring charges, that are adjustments per the credit agreement definition. The company's trailing twelve-month Adjusted EBITDA for covenant compliance purposes as of June 30, 2015 was $369.9 million. The reconciliation of net income attributable to Manitowoc to Adjusted EBITDA is as follows (in millions):

Net income attributable to Manitowoc $ 121.6
Loss from discontinued operations 0.1
Loss on sale of discontinued operations 1.1
Depreciation and amortization 104.2
Interest expense and amortization of deferred financing fees 101.8
Costs due to early extinguishment of debt 0.2
Restructuring expense 7.2
Separation expense 9.8
Income taxes 0.3
Pension and post-retirement 13.1
Stock-based compensation 11.7
Other (1.2 )
Adjusted EBITDA $ 369.9

GAAP Reconciliation

In this release, the company refers to various non-GAAP measures. We believe that these measures are helpful to investors in assessing the company's ongoing performance of its underlying businesses before the impact of special items. In addition, these non-GAAP measures provide a comparison to commonly used financial metrics within the professional investing community which do not include special items. Earnings and earnings per share before special items reconcile to earnings presented according to GAAP as follows (in millions, except per share data):

Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Net earnings attributable to Manitowoc $ 23.3 $ 46.6 $ 14.9 $ 37.8
Special items, net of tax:
(Earnings) loss from discontinued operations (0.1 ) 0.3 - 0.9
Loss on sale of discontinued operations - - - 9.9
Early extinguishment of debt - - - 16.4
Restructuring expense 0.1 0.9 0.8 2.2
Separation expense 7.3 - 8.6 -
Forgiveness of loan to Manitowoc Dong Yue - - - 4.3
Net earnings before special items $ 30.6 $ 47.8 $ 24.3 $ 71.5
Diluted earnings per share $ 0.17 $ 0.34 $ 0.11 $ 0.28
Special items, net of tax:
(Earnings) loss from discontinued operations (0.00 ) 0.00 - 0.01
Loss on sale of discontinued operations - - - 0.07
Early extinguishment of debt - - - 0.12
Restructuring expense 0.00 0.01 0.01 0.02
Separation expense 0.05 - 0.06 -
Forgiveness of loan to Manitowoc Dong Yue - - - 0.03
Diluted earnings per share before special items $ 0.22 $ 0.35 $ 0.18 $ 0.52

The Manitowoc Company, Inc.

Carl J. Laurino, 920-652-1720

Senior Vice President & Chief Financial Officer

Source: The Manitowoc Company, Inc.

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