United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
þ
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31,
2006
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number
1-11978
The Manitowoc Company, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin |
39-0448110 |
(State or other jurisdiction of incorporation) |
(I.R.S. Employer Identification Number) |
2400 South 44 th Street, Manitowoc, Wisconsin |
54221-0066 |
(Address of principal executive offices) |
(Zip Code) |
(920) 684-4410 |
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(Registrants telephone number, including area code) |
Securities Registered Pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Name of Each Exchange on Which Registered |
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Common Stock, $.01 Par Value |
New York Stock Exchange |
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Common Stock Purchase Rights |
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Securities Registered Pursuant to Section 12(g) of the Act:
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the securities Act.
Yes
þ
No
o
Indicate
by check mark if the Registrant is not required to file reports pursuant to Section 13
or 15(d) of the Securities Act.
Yes
o
No
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Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ |
Accelerated filer o |
Non-accelerated filer o |
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
Yes
o
No
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The Aggregate Market Value on June 30, 2006, of the registrants Common Stock held by non-affiliates of the registrant was $2,739,769,503 based on the closing per share price of $44.50 on that date.
The number of shares outstanding of the registrants Common Stock as of January 31, 2007, the most recent practicable date, was 62,139,062.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants Proxy Statement, to be prepared and filed for the annual Meeting of Shareholders, dated April 2, 2007 (the 2007 Proxy Statement), are incorporated by reference in Part III of this report.
See Index to Exhibits immediately following the signature page of this report, which is incorporated herein by reference.
Founded in 1902, we are a diversified industrial manufacturer in three principal markets: Cranes and Related Products (Crane); Foodservice Equipment (Foodservice) and Marine. We have over a 100-year tradition of providing high-quality, customer-focused products and support services to our markets worldwide. For the year ended December 31, 2006 we had net sales of approximately $2.9 billion.
Our Crane business is a global provider of engineered lift solutions, offering one of the broadest lines of lifting equipment in our industry. We design, manufacture, market, and support a comprehensive line of crawler cranes, mobile telescopic cranes, tower cranes, and boom trucks. Our Crane products are marketed under the Manitowoc, Grove, Potain, National, and Crane CARE brand names and 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.
On January 3, 2006, we acquired certain assets, rights and properties of ExacTech, Inc., a supplier of fabrication, machining, welding, and other services to various parties. Located in Port Washington, Wisconsin, ExacTech, Inc. (n/k/a Port Washington) provides these services exclusively to our U.S. based crane manufacturing facilities.
Our Foodservice business is a leading broad-line manufacturer of cold side commercial foodservice products. We design, manufacture and market full product lines of ice making machines, walk-in and reach-in refrigerators and freezers, fountain beverage delivery systems and other foodservice refrigeration products for the lodging, restaurant, healthcare, convenience store, soft-drink bottling, and institutional foodservice markets. Our Foodservice products are marketed under the Manitowoc, SerVend, Multiplex, Kolpak, Harford-Duracool, McCall, McCanns, Koolaire, Flomatic, Kyees, RDI, and other brand names.
On May 26, 2006, we acquired substantially all of the net assets and business operated by McCanns Engineering & Mfg. Co. and McCanns de Mexico, S.A. de C.V. (McCanns). Headquartered in Los Angeles, California, with operations also in Tijuana, Mexico, McCanns is engaged in the design, manufacture and sale of beverage dispensing equipment primarily used in fast food restaurants, stadiums, cafeterias and convenience stores. McCanns primary products are backroom beverage equipment such as carbonators, water boosters and racks. McCanns also produces accessory components for beverage dispensers including specialty valves, stands and other stainless steel components.
Our Marine segment provides new construction (commercial/government), ship repair and maintenance services for freshwater and saltwater vessels from three shipyards on the U.S. Great Lakes. Our Marine segment serves the Great Lakes maritime market consisting of U.S. and Canadian fleets, inland waterway operators, and ocean going vessels that transit the Great Lakes and St. Lawrence Seaways.
Our principal executive offices are located at 2400 South 44 th Street, Manitowoc, Wisconsin 54220.
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The Manitowoc Company, Inc. 2006 Form 10-K |
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Financial Information About Business Segments
The following is financial information about the Crane, Foodservice and Marine segments for the years ended December 31, 2006, 2005 and 2004. The accounting policies of the segments are the same as those described in the summary of significant accounting policies of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K, except that certain expenses are not allocated to the segments. These unallocated expenses are corporate overhead, amortization expense of intangible assets with definite lives, interest expense, and income tax expense. The company evaluates segment performance based upon profit and loss before the aforementioned expenses. Restructuring costs separately identified in the Consolidated Statements of Operations are included as reductions to the respective segments operating earnings for each year below. Amounts are shown in millions of dollars.
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2006 |
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2005 |
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2004 |
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Net sales from continuing operations: |
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Cranes and Related Products |
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$ |
2,235.4 |
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$ |
1,628.7 |
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$ |
1,248.5 |
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Foodservice Equipment |
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415.4 |
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399.6 |
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377.2 |
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Marine |
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282.5 |
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225.8 |
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219.2 |
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Total |
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$ |
2,933.3 |
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$ |
2,254.1 |
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$ |
1,844.9 |
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Operating earnings (loss) from continuing operations: |
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Crane and Related Products |
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$ |
280.6 |
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$ |
115.5 |
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$ |
57.0 |
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Foodservice Equipment |
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56.2 |
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54.9 |
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55.7 |
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Marine |
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11.3 |
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(9.2 |
) |
16.5 |
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Corporate |
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(42.4 |
) |
(24.8 |
) |
(21.2 |
) |
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Amortization expense |
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(3.3 |
) |
(3.1 |
) |
(3.1 |
) |
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Operating earnings from continuing operations |
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$ |
302.4 |
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$ |
133.3 |
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$ |
104.9 |
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Capital expenditures: |
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Cranes and Related Products |
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$ |
51.3 |
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$ |
32.9 |
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$ |
24.2 |
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Foodservice Equipment |
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10.9 |
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16.9 |
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11.8 |
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Marine |
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3.1 |
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4.1 |
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4.3 |
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Corporate |
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2.3 |
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1.0 |
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2.9 |
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Total |
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$ |
67.6 |
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$ |
54.9 |
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$ |
43.2 |
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Total assets: |
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Crane and Related Products |
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$ |
1,572.4 |
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$ |
1,224.7 |
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$ |
1,279.7 |
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Foodservice Equipment |
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340.1 |
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313.2 |
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302.9 |
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Marine |
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120.9 |
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123.3 |
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110.3 |
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Corporate |
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186.1 |
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300.6 |
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235.2 |
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Total |
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$ |
2,219.5 |
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$ |
1,961.8 |
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$ |
1,928.1 |
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2 |
The Manitowoc Company, Inc. 2006 Form 10-K |
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We sell our products categorized in the following business segments:
Business Segment |
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Percentage of
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Key Products |
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Key Brands |
Cranes and Related Products |
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76% |
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Lattice-boom Cranes: which include crawler and truck mounted lattice-boom cranes, and crawler crane attachments; Tower Cranes: which include top slewing luffing jib, topless, and self-erecting tower cranes; Mobile Telescopic Cranes: including rough-terrain, all-terrain, truck-mounted and industrial cranes; Boom Trucks: which include telescopic and articulated boom trucks; Parts and Service: which include replacement parts, product services, crane rebuilding and remanufacturing services |
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Manitowoc
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Foodservice Equipment |
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14% |
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Commercial ice-cube machines, ice flakers, and storage bins; ice/beverage dispensers; long-draw soft-drink and beer dispensing systems; walk-in refrigerators and freezers; reach-in refrigerators and freezers; refrigerated under-counters and food prep tables; post-mix beverage dispensing valves; cast aluminum cold plates; carbonator tanks; compressor racks and modular refrigeration systems; backroom beverage equipment distribution |
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Manitowoc
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Marine |
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10% |
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New construction services for commercial, government, and military vessels of all varieties, including research vessels, ice breakers, ferries, patrol boats, self-unloading bulk carriers, double-hull tank barges, articulated tug/barges (AT/B units) and dredges; military vessels; inspection, maintenance and repair of freshwater and saltwater vessels. |
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Our Crane segment designs, manufactures and/or distributes a diversified line of crawler and truck mounted lattice-boom cranes, which we sell under the Manitowoc name. Our Crane segment also designs and manufactures a diversified line of top slewing and self erecting tower cranes, which we sell under the Potain name. We design and manufacture mobile telescopic cranes which we sell under the Grove name. We also design and manufacture a comprehensive line of hydraulically powered telescopic and articulated boom trucks, which we sell under the National brand name. We also provide crane product parts and services, and crane rebuilding and remanufacturing services which are delivered under the Crane CARE brand name. In some cases our products are manufactured for us or distributed for us under strategic alliances. Our crane products are used in a wide variety of applications throughout the world, including energy, petrochemical and industrial projects, infrastructure development such as road, bridge and airport construction, commercial and high-rise residential construction, mining and dredging. Many of our customers purchase one or more crane(s) 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 up to 1,433 U.S. tons.
Lattice-boom Cranes. Under the Manitowoc brand name we design, manufacture and distribute lattice-boom crawler cranes. Lattice-boom cranes consist of a lattice-boom, which is a fabricated, high-strength steel structure that has four chords and tubular lacings, mounted on a base which is either crawler or truck mounted. Lattice-boom cranes weigh less and provide higher lifting capacities than a telescopic boom of similar length. The lattice-boom cranes are the only category of crane that can pick and move simultaneously. The lattice-boom sections, together with the crane base, are transported to and erected at a project site.
We currently offer models of lattice-boom cranes with lifting capacities up to 1,433 U.S. 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 end markets.
Lattice-boom crawler cranes may be classified according to their lift capacity low capacity and high capacity. Low capacity crawler cranes with 150-U.S. ton capacity or less are often utilized for general construction and duty cycle applications. 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, stadium construction, petrochemical work, and dockside applications. We offer six low-capacity models
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The Manitowoc Company, Inc. 2006 Form 10-K |
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and eight high-capacity models. We also manufacture lattice-boom, self erecting truck cranes. These cranes serve the same markets as our high capacity crawler cranes. They differ from their crawler counterparts only in that they are mounted on a truck rather than a crawler and can travel at highway speeds.
We also offer our lattice-boom crawler crane customers various attachments that provide our cranes with greater capacity in terms of height, movement and lifting. Our principal attachments are: MAX-ER attachment, luffing jibs, and RINGER ® 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.
Tower Cranes. Under the Potain brand name we design and manufacture tower cranes utilized primarily in the building and construction industry. Tower cranes offer the ability to lift and distribute material at the point of use 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 vertical tower. A cable runs through a trolley which is on the jib, enabling the load to move along the jib. The jib rotates 360 degrees, thus increasing the cranes work area. Except when using a remote control device, operators occupy a cabin, 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, and special cranes for dams, harbors and other large building projects. Top slewing cranes are the most traditional form of tower cranes. Self-erecting cranes are bottom slewing cranes which have counterweight located at the bottom of the tower and which are able to be erected, used and dismantled on job sites without assist cranes.
Top slewing tower cranes have a tower and multi-sectioned horizontal jib. 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. We offer 37 models of top slewing tower cranes with maximum jib lengths of 85 meters and lifting capabilities ranging between 40 and 3,600 meter-tons. These cranes are generally sold to medium to large building and construction groups, as well as rental companies.
Topless tower cranes are a type of top slewing crane and, unlike all others, have no cathead or jib tie-bars on the top of the mast. The cranes are utilized primarily when overhead height is constrained or in situations where several cranes are installed close together. We currently offer 7 models of topless tower cranes with maximum jib lengths of 75 meters and lifting capabilities ranging between 90 and 300 meter-tons.
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. The cranes are utilized primarily in urban areas where space is constrained or in situations where several cranes are installed close together. We currently offer 7 models of luffing jib tower cranes with maximum jib lengths of 60 meters and lifting capabilities ranging between 90 and 600 meter-tons.
Self-erecting tower cranes are mounted on axles or transported on a low-loader trailer. One line of tower cranes is marked under the name Igo. The lower segment of the range (Igo cranes up to Igo36) unfolds in four sections, two for the tower and two for the jib. The smallest of our models unfolds in less than 8 minutes; larger models erect in a few hours. Self erecting cranes rotate from the bottom of their mast. We offer 25 models of self erecting cranes with maximum jib lengths of 50 meters and lifting capacities ranging between 10 and 120 meter-tons which are utilized primarily in low to medium rise construction and residential applications.
Mobile Telescopic Cranes. Under the Grove brand name we design and manufacture 35 models of mobile telescopic cranes utilized primarily in industrial, commercial and construction applications, as well as in maintenance applications to lift and move material at job sites. Mobile telescopic cranes consist of a telescopic boom mounted on a wheeled carrier. Mobile telescopic cranes are similar to lattice-boom cranes in that they are designed to lift heavy loads using a mobile carrier as a platform, enabling the crane to move on and around a job site without typically having to re-erect the crane for each particular job. Additionally, many mobile telescopic cranes have the ability to drive between sites, and some are permitted on public roadways. We currently offer the following four types of mobile telescopic cranes capable of reaching tip heights of 427 feet with lifting capacities up to 550 tons: (i) rough-terrain, (ii) all-terrain, (iii) truck-mounted, and (iv) industrial.
Rough-terrain cranes are designed to lift materials and equipment on rough or uneven terrain. These cranes cannot be driven on public roadways, and, accordingly, must be transported by truck to a work site. We produce, under the Grove brand name, 10 models of rough-terrain cranes capable of tip heights of up to 279 feet and maximum load capacities of up to 130 U.S. tons.
All-terrain cranes are versatile cranes designed to lift materials and equipment on rough or uneven terrain and yet are highly maneuverable and capable of highway speeds. We
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The Manitowoc Company, Inc. 2006 Form 10-K |
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produce, under the Grove brand name, 14 models of all-terrain cranes capable of tip heights of up to 427 feet and maximum load capacities of up to 550 tons.
Truck-mounted cranes are designed to provide simple set-up and long reach high capacity booms and are capable of traveling from site to site at highway speeds. These cranes are suitable for urban and suburban uses. We produce, under the Grove brand name, 4 models of truck-mounted cranes capable of tip heights of up to 237 feet and maximum load capacities of up to 90 U.S. tons.
Industrial cranes are designed primarily for plant maintenance, storage yard and material handling jobs. We distribute, under the Grove brand name, 8 models of industrial cranes capable of tip heights of up to 92 feet and maximum load capacities of up to 22 tons. On January 3, 2007 we acquired from our private label manufacturer all the rights to manufacture the industrial cranes.
Boom Trucks. We offer our hydraulic and articulated boom truck products under the National Crane product line. A boom truck is a hydraulically powered telescopic crane or articulated crane mounted on a truck chassis. Telescopic boom trucks are used primarily for lifting material on a job site, while articulated boom trucks are utilized primarily to load and unload truck beds at a job site. We currently offer, under the National Crane brand name, 15 models of telescoping and 8 models of articulating cranes capable of reaching maximum heights of 176 feet and lifting capacity up to 40 U.S. tons.
Backlog. The year-end backlog of crane products includes accepted orders that have been placed on a production schedule that we expect to be shipped and billed during the next year. Manitowocs backlog of unfilled orders for the Crane segment at December 31, 2006 was $1,534.3 million, as compared with $866.1 million at December 31, 2005.
Our Foodservice segment designs, manufactures and markets commercial ice-cube and flaker machines and storage bins; walk-in refrigerators and freezers; reach-in refrigerators and freezers; refrigerated undercounter and food preparation tables; ice/beverage dispensers; post-mix beverage dispensing valves; cast aluminum cold plates; carbonator tanks; long-draw beer dispensing systems; compressor racks and modular refrigeration systems; pumps; valves; and backroom beverage equipment distribution services. Products are sold under the brand names Manitowoc, SerVend, Multiplex, Kolpak, Harford-Duracool, McCall, McCanns, Koolaire, Flomatic, Kyees, RDI, and other brand names.
Ice-Cube Machines, Ice Flaker Machines and Storage Bins. Ice machines are classified as either self-contained or modular machines and can be further classified by size, capacity and the type of ice they produce. There are two basic types of ice made by ice machines: cubes and flakes. Machines that make ice cubes, the most popular type of machine, are used by the foodservice industry for drinks, ice displays and salad bars. Flake ice 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.
Our subsidiary Manitowoc Ice, Inc. manufactures 26 models of commercial ice machines under the Manitowoc and Snoball brand names, serving the foodservice, convenience store, healthcare, restaurant and lodging markets. Our ice machines make ice in cube and flake form, and range in daily production capacities from 45 to 2,150 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 worlds 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. Majority of the 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 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. Our ice machines are sold throughout North America, Europe and Asia.
Walk-in Refrigerators and Freezers. We manufacture under the brand names Kolpak and Harford-Duracool. Products include 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. We also produce a complete line of express or pre-assembled walk-ins.
Reach-in Refrigerators and Freezers. Reach-in refrigerators 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, made of either glass or steel, and come in a variety of sizes with storage capabilities up to 72 cubic feet. Although reach-ins resembles 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 heavy duty usage needs of most reach-ins by customers. 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
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The Manitowoc Company, Inc. 2006 Form 10-K |
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the refrigeration system. We market these products under our McCall, Kolpak, and Koolaire brand names. We offer over 60 self-contained upright and under-counter refrigeration equipment units, including a full line of reach-ins and refrigerated food preparation equipment for restaurants, institutions and commissaries. We also manufacture custom-built units for select national chains restaurants.
Beverage Dispensers and Other Products. Our subsidiary Manitowoc Beverage Equipment, Inc. produces, 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/beverage dispensers include traditional combination ice/beverage dispensers, drop-in dispensers and electric countertop units. Dispensing systems are manufactured for the dispensing of soda, juice, water, beer and other specialty drinks. 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.
Our subsidiary Manitowoc Beverage Systems, Inc., or MBS, is a systems integrator with nationwide distribution of beverage dispensing and backroom equipment and support system components. MBS serves the needs of major beverage and bottler customers, restaurants, convenience stores and other outlets and provides our customers with one point of contact for their beverage dispenser and backroom equipment needs. It operates throughout the United States, with locations in Ohio, California, and Virginia.
On May 26, 2006, we acquired substantially all of the net assets and business operated by McCanns. Headquartered in Los Angeles, California, and with a manufacturing location in Tijuana, Mexico, McCanns is engaged in the design, manufacture and sale of beverage dispensing equipment primarily used in fast food restaurants, stadiums, cafeterias and convenience stores. McCanns primary products are backroom beverage equipment such as carbonators, water boosters and racks. McCanns also produces accessory components for beverage dispensers including specialty valves, stands and other stainless steel components.
Backlog. The backlog for unfilled orders for our Foodservice segment at December 31, 2006 and 2005 was not significant because orders are generally filled within 24 to 48 hours.
We operate three shipyards located in Marinette, Wisconsin; Sturgeon Bay, Wisconsin; and Cleveland, Ohio.
Marinette, Wisconsin. Marinette Marine Corporation (Marinette) was founded along the Menominee River in Marinette, Wisconsin in 1942 to meet Americas growing need for naval construction. Since its first contract to build five wooden barges, Marinette has built more than 1,300 vessels. Marinette is a full service shipyard with in-house capabilities to design and construct the most complex military and commercial vessels. The Marinette facility has 300,000 square feet of heated indoor production area, 53,000 square feet of secure indoor warehouse and receiving area, a 4,500 long ton certified ship launch ways and a 1,600 ton ship transport system. These features of the Marinette facility allow the vessels to be constructed and outfitted completely indoors. When ready for launching, they are moved outdoors. Typically, vessels are significantly material and labor complete when launched which allows for high quality of finished product and greater manufacturing efficiency.
Sturgeon Bay, Wisconsin. Located in Sturgeon Bay, Wisconsin, Bay Shipbuilding Co. (Sturgeon Bay) is an industry leader in the construction of Oil Pollution Act (OPA) 90 double-hulled tank vessels, articulated tug and barge (AT/B) units, dredges, and dredging support equipment, along with bulk cargo self unloading solutions. This shipyard specializes in large ship construction projects and repair work. Our Sturgeon Bay shipyard consists of approximately 55 acres of waterfront property, 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.
Cleveland, Ohio. Cleveland Shiprepair Company specializes in all types of voyage and topside marine repair.
Backlog The year-end backlog for our Marine segment includes new project work to be completed over a series of years and repair and maintenance work presently scheduled which will be completed in the next year. At December 31, 2006, the backlog for our Marine segment approximated $422 million, compared to $152 million one year ago. The backlog is primarily made up of new vessel construction projects and does not include options for additional vessels, yet to be awarded.
The primary raw materials that we use are structural and rolled steel, aluminum, and copper, which is purchased from various domestic and international 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, and Licenses
We hold numerous 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
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The Manitowoc Company, Inc. 2006 Form 10-K |
|
unregistered trademarks and licenses that are of material importance to our business and 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.
Typically, the second and third quarters represent our best quarters for our consolidated financial results. In our Crane segment, summer represents the main construction season. Customers require new machines, parts, and service during that season. Since the summer brings warmer weather, there is also an increase in the use and replacement of ice machines, as well as new construction and remodeling within the foodservice industry. As a result, distributors build inventories during the second quarter for the increased demand. More recently, due to the strengthening end markets for our Crane segment, the traditional seasonality has been slightly muted due to strong cyclical demand, as well as more diversified product and geographic end markets. In our Marine segment, the Great Lakes shipping industrys sailing season is normally April through December. Thus, barring any emergency grounding, 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. As a result our overall increase in new construction project work in our Marine segment, the seasonality of our traditional repair and maintenance work is less extreme as new construction projects are performed throughout the year.
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 aftermarket support services, product performance, maintenance costs, and price. Our competitors may have greater financial, marketing, manufacturing or distribution resources than we do. We believe that we benefit from the following competitive advantages: a strong brand name, a reputation for quality products and aftermarket support services, an established network of global distributors, broad product line offerings in the markets we serve, and a commitment to engineering design and product innovation. However, we cannot be certain 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 Products |
|
Lattice-boom Crawler Cranes |
|
Hitachi Sumitomo; Kobelco; Liebherr; Sumitomo/Link-Belt; Terex; XCMG; Fushun; Zoomlion; and Sany |
|
|
Tower Cranes |
|
Comansa; Terex Comedil/Peiner; Liebherr; FM Gru; Jaso; Raimondi; FMGru; Viccario; Saez; Benezzato; Cattaneo; Sichuan Construction Machinery; Shenyang; Zoomlion; Jiangilu; and Yongmao |
|
|
Mobile Telescopic Cranes |
|
Liebherr; Link-Belt; Terex; Changjiang; Tadano; XCMG; Kato; and Zoomlion |
|
|
Boom Trucks |
|
Terex; Manitex; Altec; Elliott; Tadano; Fassi; Palfinger; Furukawa; and Hiab |
Foodservice Equipment |
|
Ice Machines |
|
Hoshizaki; Scotsman; Follet; Ice-O-Matic |
|
|
Ice/Beverage Dispensers |
|
Automatic Bar Controls; Celli; Cornelius; Enodis; Hoshizaki/Lancer Corporation; and Vin Service |
|
|
Walk-in Refrigerators/Freezers |
|
American Panel; ICS; Nor-Lake; Master-Bilt; Thermo-Kool; and W.A. Brown |
|
|
Reach-in Refrigerators/Freezers |
|
Beverage Air; Delfield; Traulsen; and True Foodservice |
Marine |
|
Ship Repair and Construction |
|
Atlantic Marine; Bender Shipbuilding & Repair; Bollinger-Lockport & Larose; Fraser Shipyards; VT Halter Marine; and Port Weller Drydocks |
Engineering, Research and Development
Our extensive engineering, research and development capabilities have been key drivers of our success. We engage in research and development activities at all of our significant manufacturing facilities. We have a staff of engineers and technicians on three continents that are responsible for improving existing products and developing new products. We incurred research and development expenditures of $31.2 million in 2006, $26.0 million in 2005 and $21.4 million in 2004.
Our team of engineers focuses on developing innovative, high performance, low maintenance products that 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
|
The Manitowoc Company, Inc. 2006 Form 10-K |
7 |
critical to their profitable operations. 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.
We employ approximately 9,500 persons and have labor agreements with 12 union locals in North America. In addition, a large majority of our European employees belong to European trade unions. There were no work stoppages during 2006, 2005 or 2004, however, the following work stoppages occurred during 2003 and 2002:
· At our Manitowoc Crane Facility for 4 days during November of 2003 by the Local International Association of Machinists.
· At our Marinette Marine facility for 44 days beginning January 21, 2003, by the local boilermakers union.
· At our Bay Shipbuilding facility for 5 days during February of 2002 by the local boilermakers, electrical workers, pipefitters, and carpenters unions.
In 2007, one collective bargaining contract expires at Marinette Marine Corporation. We believe that we have satisfactory relations with our union and, therefore, anticipate reaching a new agreement on satisfactory terms when the existing agreement expires.
Our Internet address is www.manitowoc.com. Where we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC). Our SEC reports can be accessed through the investor relations section of our website. The information found on our website is not part of this or any other report we file with or furnish to the SEC.
The public may read and copy any materials that we file with the SEC at the SECs Public Reference Room located at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains electronic versions of our reports on its website at www.sec.gov.
Net sales from continuing operations and long-lived asset information by geographic area as of and for the years ended December 31 are as follows:
|
|
Net Sales |
|
Long-Lived Assets |
|
|||||||||||
|
|
2006 |
|
2005 |
|
2004 |
|
2006 |
|
2005 |
|
|||||
United States |
|
$ |
1,535.1 |
|
$ |
1,177.7 |
|
$ |
981.6 |
|
$ |
594.5 |
|
$ |
569.2 |
|
Other North America |
|
80.5 |
|
38.7 |
|
36.4 |
|
|
|
|
|
|||||
Europe |
|
817.0 |
|
679.4 |
|
576.8 |
|
424.3 |
|
387.0 |
|
|||||
Asia |
|
170.4 |
|
118.2 |
|
106.1 |
|
43.7 |
|
38.9 |
|
|||||
Middle East |
|
167.8 |
|
112.9 |
|
71.0 |
|
1.3 |
|
0.5 |
|
|||||
Central and South America |
|
54.0 |
|
34.8 |
|
24.2 |
|
|
|
|
|
|||||
Africa |
|
50.6 |
|
37.3 |
|
15.8 |
|
|
|
|
|
|||||
South Pacific and Caribbean |
|
5.0 |
|
8.0 |
|
4.8 |
|
5.8 |
|
6.0 |
|
|||||
Australia |
|
52.9 |
|
47.1 |
|
28.2 |
|
7.2 |
|
6.8 |
|
|||||
Total |
|
$ |
2,933.3 |
|
$ |
2,254.1 |
|
$ |
1,844.9 |
|
$ |
1,076.8 |
|
$ |
1,008.4 |
|
The following are risk factors identified by management that if any events contemplated by the following risks actually occur, then our business, financial condition or results of operations could be materially adversely affected.
Some of our business segments are cyclical or are otherwise sensitive to volatile or variable factors. A downturn or weakness in overall economic activity or fluctuations in those other factors can have a material adverse effect on us.
Historically, sales of products that we manufacture and sell have been subject to cyclical variations caused by changes in general economic conditions and other factors. In particular, the demand for our crane products is 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 on an international, national or regional basis. 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. In addition, the strength of the economy generally may affect the rates of expansion, consolidation, renovation and equipment replacement within the restaurant, lodging, convenience store and healthcare industries, which may affect the performance of our Foodservice segment. Furthermore, an economic recession may impact leveraged companies, as Manitowoc has been at times, more than competing companies with less leverage and may have a material adverse effect on our financial condition, results of operations and cash flows.
8 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Products in our Crane and Marine segments depend in part on federal, state, local and foreign governmental spending and appropriations, including infrastructure, security and defense outlays. Reductions in governmental spending can affect demand for our products, which in turn can affect our performance.
Weather conditions can substantially affect our Foodservice segment, as relatively cool summer weather and cooler-than-normal weather in hot climates tend to decrease sales of ice and beverage dispensers. In addition, weather conditions can affect our Marine segment. A mild winter can keep the fleet sailing longer through the winter repair season thus deferring repair activity for Marine.
Our sales depend in part upon our customers replacement or repair cycles. Adverse economic conditions may cause customers to forego or postpone new purchases in favor of repairing existing machinery.
A substantial portion of our growth has come through acquisitions. We may not be able to identify or complete future acquisitions, which could adversely affect our future growth.
Our growth strategy historically has been based in part upon acquisitions. Our successful growth through acquisitions depends upon our ability to identify and successfully negotiate suitable acquisitions, obtain financing for future acquisitions on satisfactory terms or otherwise complete acquisitions in the future. In addition, our level of indebtedness may increase in the future if we finance other acquisitions with debt. This 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 that future acquisitions will not have a material adverse effect on our financial condition, results of operations and cash flows.
Our future success depends on our ability to effectively integrate acquired companies and manage growth.
Our growth has placed, and will continue to place, significant demands on our management and operational and financial resources. We have made three significant acquisitions since November 2000. Future acquisitions will require integration of the acquired companies sales and marketing, distribution, manufacturing, engineering, purchasing, finance and administrative organizations. Experience has taught us that the successful integration of acquired businesses requires substantial attention from our senior management and the management of the acquired companies, which tends to reduce the time that they have to manage the ongoing business. While we believe we have successfully integrated our acquisitions to date, we cannot assure you that we will be able to integrate any future acquisitions successfully, that these acquired companies will operate profitably or that the intended beneficial effect from these acquisitions will be realized. Our financial condition, results of operations and cash flows could be materially and adversely affected if we do not successfully integrate any future companies that we may acquire or if we do not manage our growth effectively.
Because we participate in industries that are intensely competitive, our net sales and profits could decline as we respond to competition.
We sell most of our products in highly competitive industries. We compete in each of those industries based on product design, quality of products, quality and responsiveness of product support services, product performance, maintenance costs and price. Some of our competitors may have greater financial, marketing, manufacturing and distribution resources than we do. We cannot be certain 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 cash flows.
If we fail to develop new and innovative products or if customers in our markets do not accept them, our results would be negatively affected.
Our products, especially those in the Crane and Foodservice segments, must be kept current to meet our customers needs. To remain competitive, we therefore must develop new and innovative products on an on-going basis. If we fail to make innovations, or the market does not accept our new products, our sales and results would suffer.
We invest significantly in the research and development of new products. These expenditures do not always result in products that will be accepted by the market. To the extent they do not, whether as a function of the product or the business cycle, we will have increased expenses without significant sales to benefit us. Failure to develop successful new products may also cause potential customers to choose to purchase used cranes or other equipment, or competitors products, rather than invest in new products manufactured by us. In our Marine segment, we must sometimes perform engineering services either at no cost or for limited margins, or build prototypes for little or no margin, in competing for contracts without any assurance that we will be awarded a contract for production models which would allow us to achieve an appropriate return on our investment.
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 among other items in the manufacture of our products. Recently, market prices of some of our key raw materials have increased significantly. In particular, we have experienced significant increases in steel, aluminum, foam, and copper prices in recent periods, which have increased our expenses. If we are not able to reduce product cost in other areas or pass future raw material price increases on to our customers, our margins
|
The Manitowoc Company, Inc. 2006 Form 10-K |
9 |
could be adversely affected. In addition, because we maintain limited raw material and component inventories, even brief unanticipated delays in delivery by suppliers including those due to capacity constraints, labor disputes, impaired financial condition of suppliers, weather emergencies or other natural disasters may impair our ability to satisfy our customers and could adversely affect our financial performance.
We increasingly manufacture and sell our products outside of the United States, which may present additional risks to our business.
For the years ended December 31, 2006, 2005, and 2004, approximately 47.7%, 47.8% and 46.8%, respectively, of our net sales were attributable to products sold outside of the United States. Expanding international sales is part of our growth strategy. We have several manufacturing facilities located in Europe and Asia and during 2005 constructed two new facilities in Asia. International operations generally are subject to various risks, including political, military, religious and economic instability, local labor market conditions, the imposition of foreign tariffs, the impact of foreign government regulations, 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 the transfer to the new facilities and sales that could cause loss of revenue. Unfavorable changes in the political, regulatory and business climate and currency devaluations of various foreign jurisdictions could have a material adverse effect on our financial condition, results of operations and cash flows.
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 large extent upon the continued services of our key executives, managers and skilled personnel. Generally, these employees are not bound by employment or non-competition agreements, and we cannot assure you that we will be able to retain our key officers and employees. We could be seriously harmed by the loss of key personnel if it were to occur in the future.
Our operations and profitability could suffer if we experience labor relations problems.
We employ approximately 9,500 people and have labor agreements with 12 union locals in North America. In addition, a large majority of our European employees belong to European trade unions. These collective bargaining or similar agreements expire at various times in each of the next several years. We believe that we have satisfactory relations with our unions and, therefore, anticipate reaching new agreements on satisfactory terms as the existing agreements expire. However, we may not be able to reach new agreements without a work stoppage or strike and any new agreements that are reached may not be reached on terms satisfactory to us. A prolonged work stoppage or strike at any one of our manufacturing facilities could have a material adverse effect on our financial condition, results of operations and cash flows.
If we fail to protect our intellectual property rights or maintain our rights to use licensed intellectual property, our business could be adversely affected.
Our patents, trademarks and licenses are important in the operation of our businesses. Although we intend to protect our intellectual property rights vigorously, we cannot be certain that we will be successful in doing so. Third parties may assert or prosecute infringement claims against us in connection with the services and products that 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 against claimed infringement of the rights of others, could result in substantial costs and in a diversion of our resources. In addition, if a third party would prevail in an infringement claim against us, 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 cash flows.
Our results of operations may be negatively impacted by product liability lawsuits.
Our business exposes us to potential product liability risks that are inherent in the design, manufacture, sales and use of our products, especially our crane products. Certain of our businesses also have experienced claims relating to past asbestos exposure. Neither we nor our affiliates have to date incurred material costs related to these asbestos claims. We vigorously defend ourselves, however, a substantial increase in the number of claims that are made against us or the amounts of any judgments or settlements could, however, materially and adversely affect our reputation and our financial condition, results of operations and cash flows.
Some of our products are built under fixed-price agreements; cost overruns therefore can hurt our results.
Some of our work, particularly in the Marine segment, is done under agreements on a fixed-price basis. If we do not accurately estimate our costs, we may incur a loss under these contracts. Even if the agreements have provisions which allow reimbursement for cost overruns, we may not be able to recoup excess expenses.
Strategic divestitures could negatively affect our results.
We regularly review our business units and evaluate them against our core business strategies. As part of that process, we regularly consider the divestiture of non-core and non-strategic operations or facilities. Depending upon the circumstances and terms, the divestiture of a profitable operation or facility could negatively affect our earnings.
10 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Environmental liabilities that may arise in the future could be material to us.
Our operations, facilities and properties are subject to extensive and evolving laws and regulations pertaining to air emissions, wastewater discharges, the handling and disposal of solid and hazardous materials and wastes, the remediation of contamination, and otherwise relating to health, safety and the protection of the environment. As a result, we are involved from time to time in administrative or legal proceedings relating to environmental and health and safety matters, and have in the past and will continue to incur capital costs and other expenditures relating to such matters.
Based on current information, we believe that any costs we may incur relating to environmental matters will not be material, although we can give no assurances. We also cannot be certain that identification of presently unidentified environmental conditions, more vigorous enforcement by regulatory authorities, or other unanticipated events will not arise in the future and give rise to additional environmental liabilities, compliance costs or penalties which could be material. Further, environmental laws and regulations are constantly evolving and it is impossible to predict accurately the effect they may have upon our financial condition, results of operations or cash flows.
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 US dollars at the applicable exchange rates for inclusion in our consolidated financial statements, which are stated in US dollars. The exchange rates between many of these currencies and the US 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 incur currency transaction risk whenever one of our operating subsidiaries enters into a transaction using a different currency than its functional currency. We attempt to reduce currency transaction risk whenever one of our operating subsidiaries enters into a transaction using a different currency than its functional currency by:
· matching cash flows and payments in the same currency;
· direct foreign currency borrowing; and
· entering into foreign exchange contracts for hedging purposes.
However, we may not be able to hedge this risk completely or at an acceptable cost, which may adversely affect our results of operations, financial condition and cash flows in future periods.
Increased or unexpected product warranty claims could adversely affect us.
We provide our customers a warranty covering workmanship, and in some cases materials, on products we manufacture. Our warranty generally provides that products will be free from defects for periods ranging from 12 months to 60 months. If a product fails to comply with the warranty, we may be obligated, at our expense, to correct any defect by repairing or replacing the defective product. Although we maintain warranty reserves in an amount based primarily on the number of units shipped and on historical and anticipated warranty claims, there can be no assurance that future warranty claims will follow historical patterns or that we can accurately anticipate the level of future warranty claims. An increase in the rate of warranty claims or the occurrence of unexpected warranty claims could materially and adversely affect our financial condition, results of operations and cash flows.
Some of our customers rely on financing with third parties to purchase our products, and we may incur expenses associated with our assistance to customers in securing third party financing.
We rely principally on sales of our products to generate cash from operations. A portion of our sales is financed by third-party finance companies on behalf of our customers. The availability of financing by third parties is affected by general economic conditions, the credit worthiness of our customers and the estimated residual value of our equipment. In certain transactions we provide residual value guarantees and buyback commitments to our customers or the third party financial institutions. Deterioration in the credit quality of our customers could negatively impact their ability to obtain the resources needed to make purchases of our equipment or their ability to obtain third-party financing. In addition, if the actual value of the equipment for which we have provided a residual value guaranty declines below the amount of our guaranty, we may incur additional costs, which may negatively impact our financial condition, results of operations and cash flows.
Our leverage may impair our operations and financial condition.
As of December 31, 2006, our total consolidated debt was $268.4 million. Although this level is significantly down from previous peaks, our debt could have important consequences, including increasing our vulnerability to general adverse economic and industry conditions; requiring a substantial portion of our cash flows from operations be used for the payment of interest rather than to fund working capital, capital expenditures, acquisitions and general corporate requirements; limiting our ability to obtain additional financing; and limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate.
The agreements governing our debt include covenants that restrict, among other things, our ability to incur additional debt; pay dividends on or repurchase our equity;
|
The Manitowoc Company, Inc. 2006 Form 10-K |
11 |
make investments; and consolidate, merge or transfer all or substantially all of our assets. In addition, our senior credit facility requires us to maintain specified financial ratios and satisfy certain financial condition tests. Our ability to comply with these covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. These covenants may also require that we take action to reduce our debt or to act in a manner contrary to our business objectives. We cannot be certain that we will meet any future financial tests or that the lenders will waive any failure to meet those tests.
If we default under our debt agreements, our lenders could elect to declare all amounts outstanding under our debt agreements to be immediately due and payable and could proceed against any collateral securing the debt. Under those circumstances, in the absence of readily-available refinancing on favorable terms, we might elect or be compelled to enter bankruptcy proceedings, in which case our shareholders could lose the entire value of their investment in our common stock.
The company is in the process of implementing a global ERP system in its Foodservice segment.
The company is in the process of implementing a new global ERP system in its Foodservice segment. This system will replace many of the companys existing operating and financial systems. Such an implementation is a major undertaking both financially and from a management and personnel perspective. Should the system not be implemented successfully and within budget or if the system does not perform in a satisfactory manner, it could be disruptive and or adversely affect the operations and results of operations of the company, including the ability of the company to report accurate and timely financial results.
Item 1B. UNRESOLVED STAFF COMMENTS
None
The following table outlines the principal facilities we own or lease as of December 31, 2006:
Facility Location |
|
Type of Facility |
|
Approximate
|
|
Owned/Leased |
Cranes and Related Products |
|
|
|
|
|
|
Europe/Asia |
|
|
|
|
|
|
Wilhelmshaven, Germany |
|
Manufacturing/Office and Storage |
|
410,000 |
|
Owned/Leased |
Moulins, France |
|
Manufacturing/Office |
|
355,000 |
|
Owned/Leased |
Charlieu, France |
|
Manufacturing/Office |
|
323,000 |
|
Owned/Leased |
Zhangjiagang, China |
|
Manufacturing |
|
245,500 |
|
Owned/Leased |
Walldorf, Germany |
|
Office |
|
184,000 |
|
Owned |
Fanzeres, Portugal |
|
Manufacturing |
|
183,000 |
|
Leased |
La Clayette, France |
|
Manufacturing/Office |
|
161,000 |
|
Owned/Leased |
Niella Tanaro, Italy |
|
Manufacturing |
|
105,500 |
|
Owned |
Ecully, France |
|
Office |
|
85,000 |
|
Owned |
Alfena, Portugal |
|
Office |
|
84,000 |
|
Owned |
Langenfeld, Germany |
|
Office/Storage and Field Testing |
|
80,300 |
|
Leased |
Osny, France |
|
Office/Storage/Repair |
|
43,000 |
|
Owned |
Decines, France |
|
Logistics |
|
47,500 |
|
Leased |
Vaux-en-Velin, France |
|
Office/Workshop |
|
17,000 |
|
Owned |
Naia, Portugal |
|
Manufacturing |
|
17,000 |
|
Owned |
Vitrolles, France |
|
Office |
|
16,000 |
|
Owned |
Sunderland, United Kingdom |
|
Office/Storage |
|
14,000 |
|
Leased |
Lusigny, France |
|
Crane Testing Site |
|
10,000 |
|
Owned |
Baudemont, France |
|
Office |
|
8,000 |
|
Owned |
Singapore |
|
Office |
|
7,000 |
|
Leased |
Lisbonne, Portugal |
|
Office |
|
6,500 |
|
Owned |
United States |
|
|
|
|
|
|
Shady Grove, Pennsylvania |
|
Manufacturing/Office |
|
1,182,300 |
|
Owned |
Manitowoc, Wisconsin |
|
Manufacturing/Office |
|
278,000 |
|
Owned |
Quincy, Pennsylvania |
|
Manufacturing |
|
36,000 |
|
Owned |
Bauxite, Arkansas |
|
Manufacturing/Office |
|
22,000 |
|
Owned |
Port Washington, Wisconsin |
|
Manufacturing |
|
51,000 |
|
Owned |
12 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Foodservice Equipment |
|
|
|
|
|
|
Europe/Asia |
|
|
|
|
|
|
Hangzhou, China |
|
Manufacturing/Office |
|
260,000 |
|
Owned/Leased |
United States and Mexico |
|
|
|
|
|
|
Manitowoc, Wisconsin |
|
Manufacturing/Office |
|
376,000 |
|
Owned |
Parsons, Tennessee (1) |
|
Manufacturing |
|
214,000 |
|
Owned |
Sparks, Nevada |
|
Manufacturing/Office |
|
150,000 |
|
Leased |
Sellersburg, Indiana |
|
Manufacturing/Office |
|
140,000 |
|
Owned |
River Falls, Wisconsin |
|
Manufacturing |
|
133,000 |
|
Owned |
La Mirada, California |
|
Manufacturing/Office |
|
77,000 |
|
Leased |
Aberdeen, Maryland |
|
Manufacturing/Office |
|
67,000 |
|
Owned |
Los Angeles, California |
|
Manufacturing/Office |
|
90,000 |
|
Leased |
Los Angeles, California |
|
Manufacturing |
|
29,000 |
|
Leased |
Manitowoc, Wisconsin |
|
Office |
|
13,000 |
|
Leased |
Tijuana, Mexico |
|
Manufacturing |
|
30,000 |
|
Leased |
Marine |
|
|
|
|
|
|
Marinette, Wisconsin |
|
Shipyard |
|
450,000 |
|
Owned |
Sturgeon Bay, Wisconsin |
|
Shipyard |
|
220,000 |
|
Owned/Leased |
Cleveland, Ohio |
|
Marine Repair and Storage |
|
8,000 |
|
Leased |
Corporate |
|
|
|
|
|
|
Manitowoc, Wisconsin |
|
Office |
|
34,000 |
|
Owned |
Manitowoc, Wisconsin |
|
Hanger Ground Lease |
|
31,320 |
|
Leased |
(1) There are three separate locations within Parsons, Tennessee.
In addition, we lease sales office and warehouse space for our Crane segment in Begles, France; Lille, France; Nantes, France; Rouen, France; Toulouse, France; Nice, France; Orleans, France; Sainte Lauent de Mure, France; Persans, France; Vitry sur Seine, France; Parabiago, Italy; Meath Ireland; Munich, Germany; Budapest, Hungary; Warsaw, Poland; Sydney, Australia; Beijing, China; Dubai, UAE; Makati City, Philippines; Moscow, Russia; the Czech Republic; Manitowoc, Wisconsin; Shanghai, China; Monterrey, Mexico; Sao Paulo, Brazil; and Reno, Nevada. We lease office and warehouse space for our Foodservice segment in Franklin, Tennessee; Salem, Virginia; Irwindale, California; Holland, Ohio; Decaturville, Tennessee; Sparks, Nevada; and Clackames, Oregon and Ecully, France. We also own sales offices and warehouse facilities for our Crane segment in Northhampton, England and Dole, France.
See Note 19 Leases to the Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information regarding leases.
Our global operations are governed by laws addressing the protection of the environment and employee safety and health. Under various circumstances, these laws impose civil and criminal penalties and fines, as well as injunctive and remedial relief, for noncompliance. They also may require remediation at sites where company related substances have been released into the environment.
We have expended substantial resources globally, both financial and managerial, to comply with the applicable laws and regulations, and to protect the environment and our workers. We believe we are in substantial compliance with such laws and regulations and we maintain procedures designed to foster and ensure compliance. However, we have been and may in the future be subject to formal or informal enforcement actions or proceedings regarding noncompliance with such laws or regulations, whether or not determined to be ultimately responsible in the normal course of business. Historically, these actions have been resolved in various ways with the regulatory authorities without material commitments or penalties to the company.
For information concerning other contingencies and uncertainties, see Note 15, Contingencies and Significant Estimates to the Consolidated Financial Statements included in Item 8 of this Form 10-K.
|
The Manitowoc Company, Inc. 2006 Form 10-K |
13 |
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to security holders for a vote during the fourth quarter of our fiscal year ended December 31, 2006.
Executive Officers of the Registrant
Each of the following officers of the company has been elected by the Board of Directors. The information presented is as of February 25, 2007.
Name |
|
Age |
|
Position With The Registrant |
|
Principal
|
Terry D. Growcock |
|
61 |
|
Chairman & Chief Executive Officer |
|
1998 |
Carl J. Laurino |
|
45 |
|
Senior Vice President and Chief Financial Officer |
|
2004 |
Thomas G. Musial |
|
55 |
|
Senior Vice President of Human Resources and Administration |
|
2000 |
Maurice D. Jones |
|
47 |
|
Senior Vice President, General Counsel and Secretary |
|
2004 |
Dean J. Nolden |
|
38 |
|
Vice President of Finance and Assistant Treasurer |
|
2005 |
Mary Ellen Bowers |
|
50 |
|
Vice President Corporate Development |
|
2004 |
Glen E. Tellock |
|
46 |
|
Senior Vice President President Crane Segment |
|
2002 |
Robert P. Herre |
|
54 |
|
Senior Vice President President Marine Segment |
|
2005 |
Terry D. Growcock has been the companys president and chief executive officer since 1998 and has served as chairman of the board since October 2002. He has also been a director since 1998. Mr. Growcock joined the company in 1994 as executive vice president and general manager of Manitowoc Ice. In March 1995, he was appointed president of Manitowoc Foodservice Group and served in that capacity until his promotion to president and chief executive officer in 1998. Prior to joining the company, Mr. Growcock served in numerous management and executive positions with Siebe plc and United Technologies Corporation. Currently, Mr. Growcock also serves as a director of Harris Corporation and Bemis Manufacturing Company, Chairman of Wisconsin Manufactures and Commerce, and director of the National Association of Manufacturers.
Carl J. Laurino was named senior vice president and chief financial officer in May 2004. He had served as Treasurer since May 2001. Mr. Laurino joined the company in January 2000 as assistant treasurer and served in that capacity until his promotion to treasurer. Previously, Mr. Laurino spent 15 years in the commercial banking industry with Firstar Bank (n/k/a US Bank), Norwest Bank (n/k/a Wells Fargo), and Associated Bank. During that period, Mr. Laurino held numerous positions of increasing responsibility including commercial loan officer with Norwest Bank, Vice PresidentBusiness Banking with Associated Bank and Vice President and Commercial Banking Manager with Firstar.
Thomas G. Musial has been senior vice president of human resources and administration since 2000. Previously, he was vice president of human resources and administration (1995 to 2000), manager of human resources (1987to 1995), and personnel/industrial relations specialist (1976 to 1987).
Maurice D. Jones has been general counsel and secretary since 1999 and was elected vice president in 2002 and a senior vice president in 2004. Prior to joining the company, Mr. Jones was a partner in the law firm of Davis and Kuelthau, S.C., and served as legal counsel for Banta Corporation.
Dean J. Nolden was named vice president of finance and assistant treasurer in May 2005. Mr. Nolden joined the company in November 1998 as corporate controller and served in that capacity until his promotion to Vice President Finance and Controller in May 2004. Prior to joining the company, Mr. Nolden spent eight years in public accounting in the audit practice of PricewaterhouseCoopers LLP. He left that firm in 1998 as an audit manager.
Mary Ellen Bowers joined the company in November of 2004 as vice president of corporate development. Prior to joining the company, Ms. Bowers spent 23 years with Alcoa Inc. During that period Ms. Bowers held numerous positions of increasing responsibility including vice president and general manager, Aerospace and Industrial Products forging group, director Alcoa global business design, vice president and director, strategic planning and information technology, and manager strategic planning.
Glen E. Tellock has been senior vice president of The Manitowoc Company, Inc. and president of Manitowoc Crane Group since 2002. Previously, he served as our senior vice president and chief financial officer (1999 to 2002), vice president of finance and treasurer (1998 to 1999), corporate controller (1992 to 1998) and director of accounting (1991 to
14 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
1992). Prior to joining the company, Mr. Tellock served as financial planning manager with the Denver Post Corporation, and as audit manager for Ernst & Whinney.
Robert P. Herre joined the company in February of 2005 as senior vice president of The Manitowoc Company, Inc. and president of Manitowoc Marine Group. Prior to joining the company, Mr. Herre served as executive vice president and head of operations for Trinity Marine Group, joining that company in 2003. From 1991 to 2003 Mr. Herre held numerous positions within American Commercial Lines, LLC, including president and chief operating officer Jeffboat, vice president maintenance and vessel management American Commercial Barge Line, vice president and general manager American Commercial Terminals, vice president, employee relations Jeffboat and vice president, engineering.
Effective December 31, 2006, Timothy J. Kraus, President of Manitowoc Foodservice Group and Senior Vice President of The Manitowoc Company, Inc., retired from the company. Mr. Kraus, 53, had been senior vice president of The Manitowoc Company since 2004, and president and general manager of Manitowocs Foodservice Group since 2000. He served as executive vice president and general manager of Manitowoc Ice, Inc. having joined the company as its national sales manager. His retirement from Manitowoc culminates a 32-year career in the foodservice industry.
Item 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Companys common stock is traded on the New York Stock Exchange under the symbol MTW. At December 31, 2006, the approximate number of record shareholders of common stock was 2,531. The amount and timing of the annual dividend is determined by the board of directors at regular times each year. In December 2004 the company paid a cash dividend to share holders totaling $0.14 per share of common stock. At its February 2005 meeting, the board of directors approved the return to a quarterly dividend payment beginning with the first quarter of 2005. Quarterly dividends in the amount of $0.035 per share were paid in March, June, September and December of 2006 and 2005.
On February 24, 2006, the board of directors authorized a two-for-one stock split of the companys common stock. Record holders of Manitowocs common stock at the close of business on March 31, 2006, received on April 10, 2006 one additional share of common stock for every share of Manitowoc common stock they owned. Manitowoc shares outstanding at the close of business on March 31, 2006 totaled 30,605,986 (pre-split). The companys common stock began trading at its post-split price at the beginning of trading on April 11, 2006.
The high and low sales prices of the common stock were as follows for 2006, 2005 and 2004 (amounts have been adjusted for the two-for-one stock split discussed above):
Year Ended |
|
2006 |
|
2005 |
|
2004 |
|
||||||||||||||||||||
December 31 |
|
High |
|
Low |
|
Close |
|
High |
|
Low |
|
Close |
|
High |
|
Low |
|
Close |
|
||||||||
1 st Quarter |
|
$ |
47.70 |
|
$ |
24.82 |
|
$ |
45.58 |
|
$ |
21.30 |
|
$ |
17.15 |
|
$ |
20.20 |
|
$ |
16.88 |
|
13.80 |
|
$ |
14.79 |
|
2 nd Quarter |
|
56.03 |
|
34.00 |
|
44.50 |
|
21.32 |
|
17.97 |
|
20.51 |
|
16.93 |
|
14.68 |
|
16.93 |
|
||||||||
3 rd Quarter |
|
47.16 |
|
34.65 |
|
44.79 |
|
25.40 |
|
20.58 |
|
25.13 |
|
17.81 |
|
14.93 |
|
17.73 |
|
||||||||
4 th Quarter |
|
62.66 |
|
44.61 |
|
59.43 |
|
27.00 |
|
22.75 |
|
25.11 |
|
19.93 |
|
16.25 |
|
18.83 |
|
||||||||
Under our current bank credit agreement, we are limited on the amount of dividends we may payout in any one year. The amount of dividend payments is restricted based on our consolidated senior leverage ratio as defined in the credit agreement. If the consolidated senior leverage ratio is less than 2.00 to 1.00, dividend payments cannot exceed $50.0 million. If the consolidated senior leverage ratio is greater than 2.00 to 1.00, but less than 3.00 to 1.00, dividend payments cannot exceed $25.0 million.
|
The Manitowoc Company, Inc. 2006 Form 10-K |
15 |
The following graph sets forth the cumulative total shareholder return, including reinvestment of dividends on a quarterly basis, on Common Stock during the preceding five fiscal years, as compared to the cumulative total returns of the Standard and Poors (S&P) 500 Composite Stock Index and the S&P 600 Industrial Machinery Index. The graph assumes $100 was invested on December 31, 2001, in Common Stock, the S&P 500 Composite Stock Index, and the S&P 600 Industrial Machinery Index.
Comparison of cumulative five-year total return
Total Return To
Shareholders
(Includes reinvestment of dividends)
|
|
Annual Return Percentages |
|
||||||||
|
|
Years Ending December 31, |
|
||||||||
|
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
|
The Manitowoc Company, Inc. |
|
- 17.15% |
|
23.62 |
% |
21.58 |
% |
34.24 |
% |
137.42 |
% |
S&P 500 Index |
|
- 22.10% |
|
28.68 |
% |
10.88 |
% |
4.91 |
% |
15.79 |
% |
S&P 600 Industrial Machinery |
|
- 4.25% |
|
36.18 |
% |
28.39 |
% |
9.20 |
% |
20.77 |
% |
|
|
Indexed Returns |
|
||||||||||
|
|
Years Ending December 31, |
|
||||||||||
|
|
2001 |
|
2002 |
|
2003 |
|
2004 |
|
2005 |
|
2006 |
|
The Manitowoc Company, Inc. |
|
100.00 |
|
82.85 |
|
102.42 |
|
124.52 |
|
167.16 |
|
396.86 |
|
S&P 500 Index |
|
100.00 |
|
77.90 |
|
100.24 |
|
111.15 |
|
116.61 |
|
135.02 |
|
S&P 600 Industrial Machinery |
|
100.00 |
|
95.75 |
|
130.39 |
|
167.41 |
|
182.81 |
|
220.78 |
|
16 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Item 6. SELECTED FINANCIAL DATA
The following selected historical financial data have been derived from the Consolidated Financial Statements of The Manitowoc Company, Inc. The data should be read in conjunction with these financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations. The information presented reflects all business units other than Diversified Refrigeration
LLC, (DRI), Toledo Ship Repair, Manitowoc Boom Trucks, Inc., Femco Machine Company, Inc., North Central Crane & Excavator Sales Corporation, and the Aerial Work Platform businesses, which were either sold or closed during 2005, 2004, 2003 or 2002 and are reported in discontinued operations in the accompanying Consolidated Financial Statements. For businesses acquired during the time periods presented, results are included in the table from their acquisition date. Amounts in millions except share and per share data.
|
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
||||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cranes and Related Products |
|
$ |
2,235.4 |
|
$ |
1,628.7 |
|
$ |
1,248.5 |
|
$ |
962.8 |
|
$ |
674.1 |
|
$ |
391.1 |
|
Foodservice Equipment |
|
415.4 |
|
399.6 |
|
377.2 |
|
368.6 |
|
374.8 |
|
354.1 |
|
||||||
Marine |
|
282.5 |
|
225.8 |
|
219.2 |
|
136.7 |
|
204.2 |
|
158.8 |
|
||||||
Total |
|
2,933.3 |
|
2,254.1 |
|
1,844.9 |
|
1,468.1 |
|
1,253.1 |
|
904.0 |
|
||||||
Gross Profit |
|
647.3 |
|
421.9 |
|
375.7 |
|
316.7 |
|
311.4 |
|
258.3 |
|
||||||
Earnings (Loss) from Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cranes and Related Products |
|
280.6 |
|
115.5 |
|
57.0 |
|
24.4 |
|
55.6 |
|
62.7 |
|
||||||
Foodservice Equipment |
|
56.2 |
|
54.9 |
|
55.7 |
|
53.3 |
|
50.3 |
|
50.2 |
|
||||||
Marine |
|
11.3 |
|
(9.2 |
) |
16.5 |
|
4.5 |
|
20.8 |
|
18.0 |
|
||||||
Corporate |
|
(42.4 |
) |
(24.8 |
) |
(21.2 |
) |
(19.2 |
) |
(15.1 |
) |
(12.0 |
) |
||||||
Amortization expense |
|
(3.3 |
) |
(3.1 |
) |
(3.1 |
) |
(2.9 |
) |
(2.0 |
) |
(11.1 |
) |
||||||
Curtailment gain |
|
|
|
|
|
|
|
12.9 |
|
|
|
|
|
||||||
Total |
|
302.4 |
|
133.3 |
|
104.9 |
|
73.0 |
|
109.6 |
|
107.8 |
|
||||||
Interest Expense |
|
(46.3 |
) |
(53.8 |
) |
(56.0 |
) |
(55.7 |
) |
(50.6 |
) |
(36.6 |
) |
||||||
Loss on debt extinguishment |
|
(14.4 |
) |
(9.1 |
) |
(1.0 |
) |
(7.3 |
) |
|
|
(5.5 |
) |
||||||
Other income (expense) net |
|
3.2 |
|
3.5 |
|
(0.9 |
) |
0.5 |
|
1.9 |
|
(1.3 |
) |
||||||
Earnings from continuing operations before income taxes |
|
244.9 |
|
73.9 |
|
47.0 |
|
10.5 |
|
60.9 |
|
64.4 |
|
||||||
Provision for taxes on income |
|
78.4 |
|
14.8 |
|
8.9 |
|
1.9 |
|
21.9 |
|
24.8 |
|
||||||
Earnings from continuing operations |
|
166.5 |
|
59.1 |
|
38.1 |
|
8.6 |
|
39.0 |
|
39.6 |
|
||||||
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earnings (loss) from discontinued operations, net of income taxes (2) |
|
(0.3 |
) |
0.9 |
|
(0.2 |
) |
7.0 |
|
2.8 |
|
6.0 |
|
||||||
Gain (loss) on sale or closure of discontinued operations, net of income taxes (2) |
|
|
|
5.8 |
|
1.2 |
|
(12.0 |
) |
(25.5 |
) |
|
|
||||||
Cumulative effect of accounting change, net of income taxes (1) |
|
|
|
|
|
|
|
|
|
(36.8 |
) |
|
|
||||||
Net earnings (loss) |
|
$ |
166.2 |
|
$ |
65.8 |
|
$ |
39.1 |
|
$ |
3.6 |
|
$ |
(20.5 |
) |
$ |
45.6 |
|
Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash flow from operations |
|
$ |
294.1 |
|
$ |
106.7 |
|
$ |
57.0 |
|
$ |
150.9 |
|
$ |
94.5 |
|
$ |
106.6 |
|
Identifiable Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cranes and Related Products |
|
$ |
1,572.4 |
|
$ |
1,224.7 |
|
$ |
1,279.7 |
|
$ |
1,151.8 |
|
$ |
1,046.3 |
|
$ |
577.5 |
|
Foodservice Equipment |
|
340.1 |
|
313.2 |
|
302.9 |
|
290.6 |
|
320.8 |
|
368.4 |
|
||||||
Marine |
|
120.9 |
|
123.3 |
|
110.3 |
|
91.5 |
|
94.0 |
|
77.3 |
|
||||||
Corporate |
|
186.1 |
|
300.6 |
|
235.2 |
|
126.3 |
|
139.5 |
|
57.2 |
|
||||||
Total |
|
$ |
2,219.5 |
|
$ |
1,961.8 |
|
$ |
1,928.1 |
|
$ |
1,660.2 |
|
$ |
1,600.6 |
|
$ |
1,080.4 |
|
Long-term Obligations |
|
$ |
264.3 |
|
$ |
474.0 |
|
$ |
512.2 |
|
$ |
567.1 |
|
$ |
623.5 |
|
$ |
446.5 |
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cranes and Related Products |
|
$ |
58.4 |
|
$ |
51.8 |
|
$ |
42.9 |
|
$ |
36.8 |
|
$ |
24.2 |
|
$ |
10.9 |
|
Foodservice Equipment |
|
7.2 |
|
6.1 |
|
4.9 |
|
5.9 |
|
6.5 |
|
6.6 |
|
||||||
Marine |
|
1.6 |
|
1.0 |
|
0.9 |
|
0.9 |
|
1.0 |
|
0.8 |
|
||||||
Corporate |
|
1.8 |
|
1.5 |
|
1.4 |
|
1.1 |
|
0.7 |
|
0.7 |
|
||||||
Total |
|
$ |
69.0 |
|
$ |
60.4 |
|
$ |
50.1 |
|
$ |
44.7 |
|
$ |
32.4 |
|
$ |
19.0 |
|
Capital Expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cranes and Related Products |
|
51.3 |
|
32.9 |
|
24.2 |
|
25.0 |
|
19.1 |
|
17.0 |
|
||||||
Foodservice Equipment |
|
10.9 |
|
16.9 |
|
11.8 |
|
4.7 |
|
3.5 |
|
6.5 |
|
||||||
Marine |
|
3.1 |
|
4.1 |
|
4.3 |
|
0.7 |
|
1.4 |
|
2.2 |
|
||||||
Corporate |
|
2.3 |
|
1.0 |
|
2.9 |
|
1.3 |
|
8.3 |
|
1.9 |
|
||||||
Total |
|
$ |
67.6 |
|
$ |
54.9 |
|
$ |
43.2 |
|
$ |
31.7 |
|
$ |
32.3 |
|
$ |
27.6 |
|
Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earnings from continuing operations |
|
$ |
2.72 |
|
$ |
0.98 |
|
$ |
0.71 |
|
$ |
0.17 |
|
$ |
0.78 |
|
$ |
0.82 |
|
Earnings (loss) from discontinued operations, net of income taxes |
|
(0.01 |
) |
0.02 |
|
(0.01 |
) |
0.13 |
|
0.06 |
|
0.13 |
|
||||||
Gain (loss) on sale or closure of discontinued operations, net of income taxes |
|
|
|
0.10 |
|
0.02 |
|
(0.23 |
) |
(0.51 |
) |
|
|
||||||
Cumulative effect of accounting change, net of income taxes |
|
|
|
|
|
|
|
|
|
(0.73 |
) |
|
|
||||||
Net earnings (loss) |
|
$ |
2.71 |
|
$ |
1.09 |
|
$ |
0.73 |
|
$ |
0.07 |
|
$ |
(0.41 |
) |
$ |
0.94 |
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
17 |
|
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
||||||
Diluted earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earnings from continuing operations |
|
$ |
2.65 |
|
$ |
0.96 |
|
$ |
0.70 |
|
$ |
0.16 |
|
$ |
0.76 |
|
$ |
0.81 |
|
Earnings (loss) from discontinued operations, net of income taxes |
|
(0.01 |
) |
0.02 |
|
(0.01 |
) |
0.13 |
|
0.06 |
|
0.12 |
|
||||||
Gain (loss) on sale or closure of discontinued operations, net of income taxes |
|
|
|
0.10 |
|
0.02 |
|
(0.23 |
) |
(0.50 |
) |
|
|
||||||
Cumulative effect of accounting change, net of income taxes |
|
|
|
|
|
|
|
|
|
(0.72 |
) |
|
|
||||||
Net earnings (loss) |
|
$ |
2.65 |
|
$ |
1.07 |
|
$ |
0.72 |
|
$ |
0.07 |
|
$ |
(0.40 |
) |
$ |
0.93 |
|
Avg Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic |
|
61,224,574 |
|
60,293,210 |
|
53,801,260 |
|
53,150,900 |
|
50,385,124 |
|
48,539,614 |
|
||||||
Diluted |
|
62,785,766 |
|
61,526,034 |
|
54,754,360 |
|
53,405,704 |
|
51,563,602 |
|
49,096,926 |
|
(1) Effective January 1, 2002, we adopted Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets. As a result, the company no longer amortizes its goodwill and certain other intangible assets with indefinite lives. In addition, the company recorded a $36.8 million charge related to impairment of goodwill upon the adoption of SFAS No. 142.
(2) Discontinued operations represent the results of operations and gain or loss on sale or closure of DRI, Toledo Ship Repair, Manitowoc Boom Trucks, Inc., Femco Machine Company, Inc., North Central Crane & Excavator Sales Corporation, and the Aerial Work Platform businesses, which were either sold or closed during 2005, 2004, 2003 or 2002.
(3) On February 24, 2006, the board of directors authorized a two-for-one stock split of the companys common stock. Record holders of Manitowocs common stock at the close of business on March 31, 2006, received on April 10, 2006 one additional share of common stock for every share of Manitowoc common stock they owned. Manitowoc shares outstanding at the close of business on March 31, 2006 totaled 30,605,986 (pre-split). The companys common stock began trading at its post-split price at the beginning of trading on April 11, 2006. Per share and average share outstanding amounts within the table above have been adjusted to reflect the stock split.
(4) We acquired two businesses during 2006, two businesses during 2002, and one business during 2001.
(5) Cash dividends per share for 2001 through 2006 were as follows: $0.15 (2001) and $0.14 (2002 through 2006).
18 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes appearing in Item 8 of the Annual Report on Form 10-K.
Overview The Manitowoc Company, Inc. (referred to as the company, MTW, we, our, and us) is a leading, diversified, multi-industry manufacturer of engineered capital goods and support services for selected market segments, which today include Cranes and Related Products (Crane), Foodservice Equipment (Foodservice), and Marine. The centerpiece of our effort is and will continue to be to provide customer-focused, quality products and services to the markets we serve, with the goal to continuously improve economic value for our shareholders.
The following discussion and analysis covers key drivers behind our results for 2004 through 2006 and is broken down into three major sections. First, we provide an overview of our results of operations for the years 2004 through 2006 on a consolidated basis and by business segment. Next we discuss our market conditions, liquidity and capital resources, off balance sheet arrangements, and obligations and commitments. Finally, we provide a discussion of risk management techniques, contingent liability issues, critical accounting policies, impacts of future accounting changes, and cautionary statements.
All dollar amounts, except per share amounts, are in millions of dollars throughout the tables included in this Management Discussion and Analysis of Financial Conditions and Results of Operations unless otherwise indicated.
Results of Consolidated Operations
|
|
2006 |
|
2005 |
|
2004 |
|
|||
Net sales |
|
$ |
2,933.3 |
|
$ |
2,254.1 |
|
$ |
1,844.9 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|||
Cost of sales |
|
2,286.0 |
|
1,832.2 |
|
1,469.2 |
|
|||
Engineering, selling and administrative expenses |
|
341.6 |
|
282.3 |
|
266.4 |
|
|||
Amortization expenses |
|
3.3 |
|
3.1 |
|
3.1 |
|
|||
Plant consolidation and restructuring costs |
|
|
|
3.2 |
|
1.3 |
|
|||
Total costs and expenses |
|
2,630.9 |
|
2,120.8 |
|
1,740.0 |
|
|||
Operating earnings from continuing operations |
|
302.4 |
|
133.3 |
|
104.9 |
|
|||
Other expenses: |
|
|
|
|
|
|
|
|||
Interest expense |
|
(46.3 |
) |
(53.8 |
) |
(56.0 |
) |
|||
Loss on debt extinguishment |
|
(14.4 |
) |
(9.1 |
) |
(1.0 |
) |
|||
Other income (expense), net |
|
3.2 |
|
3.5 |
|
(0.9 |
) |
|||
Total other expenses |
|
(57.5 |
) |
(59.4 |
) |
(57.9 |
) |
|||
Earnings from continuing operations before taxes on income |
|
244.9 |
|
73.9 |
|
47.0 |
|
|||
Provision for taxes on income |
|
78.4 |
|
14.8 |
|
8.9 |
|
|||
Earnings from continuing operations |
|
166.5 |
|
59.1 |
|
38.1 |
|
|||
Discontinued operations |
|
|
|
|
|
|
|
|||
Earnings (loss) from discontinued operations, net of income taxes |
|
(0.3 |
) |
0.9 |
|
(0.2 |
) |
|||
Gain on sale or closure of discontinued operations, net of income taxes |
|
|
|
5.8 |
|
1.2 |
|
|||
Net earnings |
|
$ |
166.2 |
|
$ |
65.8 |
|
$ |
39.1 |
|
During the third quarter of 2005, we decided to close Toledo Ship Repair Company (Toledo Ship Repair), a division of the companys wholly-owned subsidiary, Manitowoc Marine Group, LLC. Located in Toledo, Ohio, Toledo Ship Repair performed ship repair and industrial repair services. In addition, during the third quarter of 2005, we decided we would divest of our wholly-owned subsidiary, Diversified Refrigeration LLC (f/k/a Diversified Refrigeration, Inc.) (DRI). DRI was our private-label Foodservice contract manufacturing operation. On December 30, 2005, we completed the sale of DRI to Monogram Refrigeration, LLC, a wholly-owned subsidiary of the General Electric Company. During the second quarter of 2004, we completed the sale of our wholly-owned subsidiary, Delta Manlift SAS (Delta). We have reported the results of these operations as discontinued and have restated prior year amounts in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment of Long-Lived Assets. Prior year amounts throughout this Management Discussion and Analysis of Financial Condition and Results of Operations have been restated to reflect the reporting of these operations as discontinued.
|
The Manitowoc Company, Inc. 2006 Form 10-K |
19 |
Year Ended December 31, 2006 Compared to 2005
Consolidated net sales increased 30.1% in 2006 to $2.9 billion from $2.3 billion in 2005. This increase was the result of higher year-over-year sales in all three of our business segments. Sales in our Crane, Foodservice and Marine segments increased 37.2%, 4.0% and 25.1%, respectively, for the year ended December 31, 2006 compared to the same period in 2005. Changes in currency exchange rates resulted in an increase in sales of $7.3 million or 0.2% for the year ended December 31, 2006 compared to the year ended December 31, 2005. Further analysis of the increases in sales by segment is presented in the Sales and Operating Earnings by Segment section below.
Gross profit increased significantly for the year ended December 31, 2006 to $647.3 million compared to $421.9 million for the year ended December 31, 2005, an increase of 53.4%. Gross margin increased in 2006 to 22.1% from 18.7% in 2005. The increase in consolidated gross profit and margin was driven by significantly higher gross margin in the Crane segment due to increased volume and productivity gains. In addition, the Marine segment achieved gross profit of $36.0 million for the year ended December 31, 2006 versus $8.6 million for the year ended December 31, 2005. The increase was driven by profitability on new construction contracts and a strong repair year. Also, 2005 gross profit was adversely affected by a $10.2 million contract reserve recorded during the fourth quarter. For a more detailed discussion of this reserve, please see the Marine segment analysis below. The improved results in the Crane and Marine Segments were countered to a small extent by a decrease in the Foodservice segments gross profit from 30.7% in 2005 to 29.5% in 2006. This decrease was primarily the result of lower sales volumes in our Beverage division, higher material costs and costs related to the ERP implementation.
Engineering, selling and administrative (ES&A) expenses for the year ended December 31, 2006 increased approximately $59.3 million to $341.6 million compared to $282.3 million for the year ended December 31, 2005. This increase was primarily driven by increases in the Crane and Marine segments and increased corporate expenses. Crane segment increases were due to higher selling expense, increased employee related costs, and increased research and development expenses. Marine segment increases were due to higher engineering costs, bidding costs related to potential new contracts and increased employee related costs. Corporate expenses increased primarily due to expensing of stock options, costs related to the companys offer to acquire Enodis, PLC and employee related costs. ES&A expenses of the Foodservice segment increased slightly, primarily as a result of ES&A associated with the McCanns Engineering & Mfg. Co. (McCanns) operations acquisition in 2006.
Interest expense for the year ended December 31, 2006 was $46.3 million compared to $53.8 million for the year ended December 31, 2005. The decrease resulted from the companys redemption of the 10 3/8% senior subordinated notes due 2011 during May of 2006. This decrease was slightly offset by an increase in the interest rate of our variable interest rate outstanding debt balances.
During May 2006, we redeemed our 10 3/8% senior subordinated notes due 2011. Pursuant to the terms of the indenture, we paid the note holders 105.188 percent of the principal amount of the notes redeemed plus accrued and unpaid interest up to the redemption date. As a result of this redemption, we incurred a charge of $14.4 million ($9.4 million, net of income taxes) related to the call premium ($11.2 million), write-off of unamortized debt issuance costs ($3.1 million) and other expenses ($0.1 million). The charge was recorded in loss on debt extinguishment in the Consolidated Statements of Operations.
The effective tax rate for the year ended December 31, 2006 was 32.0% compared to 20.0% for the year ended December 31, 2005. Both periods were favorably affected, as compared to the statutory rate, by certain global tax planning initiatives. The lower effective tax rate in 2005 was the result of lower earnings, a research and development tax credit, and the realization of certain tax benefits that were previously reserved against due to their uncertainty.
The loss from discontinued operations, net of income taxes, for the year ended December 31, 2006 reflects the operating results of our discontinued Toledo Ship Repair operation. The closure of Toledo Ship Repair was completed during the first quarter of 2006 and no further operating results were realized from this operation.
Year Ended December 31, 2005 Compared to 2004
Consolidated net sales increased 22.2% in 2005 to $2.3 billion from $1.8 billion in 2004. All three of our business segments reported increased sales in 2005 compared to 2004. Sales in our Crane, Foodservice, and Marine segments increased 30.5%, 5.9% and 3.0%, respectively, for the year ended December 31, 2005 compared to the same period in 2004. Changes in currency exchange rates resulted in an increase in sales of less than one percent for the year ended December 31, 2005 compared to the year ended December 31, 2004. Further analysis of the increases in sales by segment is presented in the Sales and Operating Earnings by Segment section of this Management Discussion and Analysis of Financial Condition and Results of Operations below.
Gross margin decreased in 2005 to 18.7% from 20.4% in 2004. Gross margin was negatively affected by a $10.2 million reserve recorded in the Marine segment during the fourth quarter of 2005. For a more detailed discussion of this reserve, please see the Marine segment analysis below. Consolidated gross profit for the year ended December 31, 2005 was $421.9 million, an increase of 12.3% over the consolidated gross profit for the same period in 2004 of $375.7 million. In addition to the impact of the Marine segment reserve, comparative consolidated gross profit for the years ended December 31, 2005 and 2004 was affected by the following items: (i) increased volumes in the Crane and Foodservice segments; (ii) favorable product mix and cost reductions implemented in recent years in the Crane and Foodservice segments; and (iii) production inefficiencies in
20 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
the Marine segment experienced during the completion of three specific new construction contracts during 2005. In addition, a significant amount of revenue in the Marine segment for the third and fourth quarters of 2005 was from a first-run prototype military vessel that is structured as a low margin cost plus contract.
ES&A increased to $282.3 million in 2005 compared to $266.4 million in 2004, which is a $15.9 million increase. As a percentage of sales, ES&A declined to 12.5% in 2005, compared to 14.4% in 2004. Approximately $0.4 million of this increase is the result of the exchange rate between the U.S. Dollar and the Euro during 2005 as compared to 2004. The remaining increase in ES&A in 2005 compared to 2004 is a result of the following: (i) increase in research and development costs in the Crane and Foodservice segments for product development; (ii) increases in Enterprise Resource Planning (ERP) costs and costs related to the creation of a domestic shared service function within the Foodservice segment; and (iii) higher employee benefit costs in 2005 across all three segments and at the corporate office.
During the third quarter of 2005, we recorded a pre-tax restructuring charge within the Foodservice segment of $3.2 million in connection with the consolidation of our Kolpak operation located in Wisconsin with our Kolpak operation located in Tennessee. This action was taken in an effort to streamline our cost structure and utilize available capacity. This charge included $1.5 million to write-down the Wisconsin facility and land, which are held for sale, to estimated fair market value less cost to sell; $0.7 million related to the write-down of certain equipment to its estimated fair market value; $0.1 million to write-off excess inventory which was not transferred to Tennessee; $0.5 million related to severance and other employee related costs; and $0.5 million for other related closing costs. This charge has been included in restructuring and plant consolidation costs in the Consolidated Statements of Operations for the year ended December 31, 2005.
Interest expense for the year ended December 31, 2005 decreased $2.2 million compared to the year ended December 31, 2004. This decrease is the result of lower average debt levels and a lower Euro versus U.S. Dollar exchange rate in 2005, partially offset by an increase during 2005 in the variable interest rate portion of outstanding debt balances.
During June 2005, we recorded a charge of $0.8 million ($0.6 million net of income taxes) to write-off deferred financing costs related to the termination of our previous $125 million revolving credit facility. In addition, on January 10, 2005, we redeemed $61.3 million of our 10½% senior subordinated notes due 2012. As a result of this redemption, we incurred a charge of approximately $8.3 million ($5.4 million net of income taxes). This charge related to the prepayment premium of $6.4 million paid to the note holders and the partial write-off of debt issuance costs of $1.9 million. Both of these charges were recorded in loss on debt extinguishment in the Consolidated Statements of Operations.
For the year ended December 31, 2005, the effective tax rate from continuing operations was 20.0% compared to 19.0% for the year ended December 31, 2004. The tax rate for 2005 was favorably affected compared to the statutory rate by a research and development credit recorded during the second half of 2005 and certain global tax planning initiatives.
For the year ended December 31, 2005, earnings from discontinued operations represented the operating losses of Toledo Ship Repair and the operating earnings of DRI. The gain on sale or closure of discontinued operations represented a $17.6 million pre-tax ($9.6 million after tax) gain on the sale of DRI and a $5.2 million pre-tax loss ($3.8 million after tax) loss on the closure of Toledo Ship Repair.
Sales and Operating Earnings by Segment
Operating earnings reported below by segment include the impact of reductions due to restructurings and plant consolidation costs, whereas these expenses were separately identified in the Results of Consolidated Operations table above.
Year Ended December 31, 2006 Compared to 2005
Net sales from the Crane segment for the year ended December 31, 2006 increased 37.3% to $2.2 billion compared to $1.6 billion for the year ended December 31, 2005. Net sales for the year ended December 31, 2006 increased over the prior year in all of the Crane segments major geographic regions. The Crane segment continues to benefit from strong crane end-market demand. From a product line standpoint, the sales increase was driven by increased volume of crawler, tower and mobile hydraulic cranes worldwide, increases in our aftermarket sales and service business, and increases in boom truck sales in North America. As of December 31, 2006, total Crane segment backlog was $1.5 billion, a 77% increase over the December 31, 2005 backlog of $866.1 million, and a 10.4% increase over the September 30, 2006 backlog of $1.4 billion.
For the year ended December 31, 2006, the Crane segment reported
operating earnings of $280.6 million compared to $115.5 million for the year
ended
|
The Manitowoc Company, Inc. 2006 Form 10-K |
21 |
December 31, 2005. Operating earnings of the Crane segment were favorably affected by increased volume across all regions and products, productivity gains as a result of consolidation efforts over the past several years, product mix, and effective leveraging of engineering, selling and administrative expenses on higher sales volume. Operating margin for the year ended December 31, 2006 was 12.6% compared to 7.1% for the year ended December 31, 2005. Strong factory performance, leveraging of fixed costs, and favorable pricing levels in all our regions contributed to the margin improvement.
Year Ended December 31, 2005 Compared to 2004
Net sales from the Crane segment for the year ended December 31, 2005 increased 30.5% to $1.6 billion compared to $1.2 billion for the year ended December 31, 2004. The increase occurred in all major geographic regions as well as in the segments aftermarket sales and service business. From a product line standpoint this sales increase was driven by increased volumes of tower and mobile hydraulic cranes worldwide, increased sales in the segments aftermarket sales and service business, increased crawler crane sales in Europe and Asia, and increased boom truck sales in North America. The stronger average Euro currency over the U.S. Dollar in 2005 compared to 2004 had a less than one percent favorable impact on sales. As of December 31, 2005, total Crane segment backlog was $866.1 million, a 154.7% increase over the December 31, 2004 backlog of $340.0 million.
For the year ended December 31, 2005, the Crane segment reported operating earnings of $115.5 million compared to $57.0 million for the year ended December 31, 2004. Crane segment operating earnings for the year ended December 31, 2004 was affected by a charge of $0.8 million related to restructuring activities. The restructuring charge related to costs incurred during the second and third quarter of 2004 for the consolidation of certain of our European crane facilities. This charge has been included in restructuring and plant consolidation costs in the Consolidated Statements of Operations for the year ended December 31, 2004. Operating earnings of the Crane segment for the year ended December 31, 2005 were favorably affected by increased volume across all regions and products, productivity gains as a result of consolidation efforts during the past several years, and effective leveraging of engineering, selling and administrative expenses on higher sales volumes. For the year ended December 31, 2005, operating earnings were not significantly affected by changes in foreign currency exchanges rates.
Foodservice Equipment Segment
|
|
2006 |
|
2005 |
|
2004 |
|
|||
Net sales |
|
$ |
415.4 |
|
$ |
399.6 |
|
$ |
377.2 |
|
Operating earnings |
|
$ |
56.2 |
|
$ |
54.9 |
|
$ |
55.7 |
|
Operating margin |
|
13.5 |
% |
13.7 |
% |
14.8 |
% |
Year Ended December 31, 2006 Compared to 2005
Net sales from the Foodservice segment increased 4.0% to $415.4 million for the year ended December 31, 2006 compared to $399.6 million for the year ended December 31, 2005. The sales increase during 2006 was driven by our ice and refrigeration divisions and the acquisition of McCanns. The increases in our ice and refrigeration divisions were a result of both volume and pricing increases versus the prior year. Our beverage division benefited in 2006 from approximately $11.4 million in revenue from McCanns which was acquired on May 26, 2006. The benefit of the McCanns acquisition was offset by reduced sales in our historical beverage businesses. The decline in the historical business was primarily attributed to two major customer equipment refresh programs which benefited net sales in 2005 but did not recur in 2006.
For the year ended December 31, 2006, the Foodservice segment reported operating earnings of $56.2 million compared to $54.9 million for the year ended December 31, 2005. Results for the year ended December 31, 2005 was impacted by a $3.2 million restructuring charge in connection with the consolidation of the segments Kolpak operation located in Wisconsin into the segments Kolpak operation located in Tennessee. This action was taken in an effort to streamline our cost structure. The charge included $1.5 million to write-down the value of the facility and land, which are now held for sale, to the estimated fair market value less the cost to sell; $0.7 million related to the write-down of certain equipment; $0.1 million to write-off excess inventory which was not transferred to Tennessee; $0.5 million related to severance and other employee related costs; and $0.4 million for other related closing costs. Operating results for 2006 were adversely affected by approximately $2.8 million due to increased commodity costs, specifically copper and aluminum. The operating results of the Foodservice segment for the year ended December 31, 2006 were also adversely affected by lower sales in our beverage division. The McCanns acquisition benefited 2006 operating earnings by approximately $1.4 million.
Year Ended December 31, 2005 Compared to 2004
Foodservice segment net sales increased 5.9% to $399.6 million in 2005 compared to $377.2 million in 2004. The increase was driven by higher sales in the ice and beverage divisions offset by slightly lower sales in the refrigeration division. The increase occurred in both unit volume and higher prices. The increase in pricing was in response to higher commodity costs experienced during 2005. The higher volumes in the ice and beverage divisions were driven by hotter-than-normal temperatures throughout much
22 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
of the United States during the summer of 2005. The decrease in sales of the refrigeration division reflects a slowing in the rate of new restaurant construction in the United States and the timing of larger equipment replacement projects.
Foodservice segment operating earnings of $54.9 million for 2005 were down $0.8 million from operating earnings of $55.7 million in 2004. The decrease in operating earnings in 2005 is the result of a $3.2 million restructuring charge for the consolidation of the Kolpak facility located in River Falls, Wisconsin with the Kolpak facility located in Parsons, Tennessee. On a comparative basis, restructuring costs included in operating earnings of the Foodservice segment for the year ended December 31, 2004 were $0.5 million. The 2004 restructuring charge relates to the closure of the European ice machine manufacturing business. Offsetting the 2005 restructuring charge were increases in operating earnings of both the ice and beverage divisions. Operating earnings for the year ended 2005 were positively impacted by increased sales volume. The increased pricing discussed above was entirely offset by increases in commodity costs and did not have a favorable impact on operating earnings for the year ended December 31, 2005. Operating earnings for the year ended December 31, 2005 were also negatively affected by the costs of the ongoing investment in a segment-wide ERP project within the Foodservice segment and the creation of the domestic Foodservice shared service function.
Marine Segment
Prior year sales and operating earnings of the Marine segment have been restated for the discontinued operation of Toledo Ship Repair.
|
|
2006 |
|
2005 |
|
2004 |
|
|||
Net sales |
|
$ |
282.5 |
|
$ |
225.8 |
|
$ |
219.2 |
|
Operating earnings (loss) |
|
$ |
11.3 |
|
$ |
(9.2 |
) |
$ |
16.5 |
|
Operating margin |
|
4.0 |
% |
(4.1 |
)% |
7.5 |
% |
Year Ended December 31, 2006 Compared to 2005
Net sales from our Marine segment increased 25.1% to $282.5 million for the year ended December 31, 2006 compared to the year ended December 31, 2005. The increase in sales was primarily the result of revenue generated from construction of the first option of the Improved Navy Lighterage System (INLS), construction of several commercial articulated tug and barge combination projects and construction of the Littoral Combat Ship (LCS). Sales for 2006 also benefited from a very strong winter repair season.
For 2006, the Marine segment achieved operating earnings of $11.3 million compared to a loss of $9.2 million for 2005. The loss in 2005 was primarily the result of a $10.2 million reserve recorded during the fourth quarter of 2005. We have been in negotiations with one of our Marine segment customers to recover certain cost overruns that resulted primarily from specification inadequacies, change orders, cumulative disruption and constructive acceleration associated with a particular contract. During the third quarter of 2005, due to the fact that these negotiations were not successful within a timeframe satisfactory to us, we filed a lawsuit seeking recovery of these cost overruns from the customer. The customer filed a counter claim against us in the fourth quarter of 2005. During the fourth quarter of 2005, we established a reserve of $10.2 million to reflect the inherent uncertainties in litigation of this type. The $10.2 million reserve is recorded in cost of sales of the Marine segment in the Consolidated Statements of Operations for the year ended December 31, 2005. If we are successful in our recovery of costs as a result of this lawsuit or negotiations, the favorable impact on our Consolidated Statements of Operations and Cash Flows in a future period could be material.
The 2006 operating results benefited from the completion of certain fixed price contracts in 2005, which were bid and awarded prior to the unprecedented rise in the costs of steel and other commodities during 2004. Labor inefficiencies also impacted these projects in prior years. The current Marine segments contracts have better protections against commodity cost increases. In addition, 2006 results were also favorably impacted by increased demand for certain commercial vessels with higher margins. For 2006, operating margins were adversely impacted by the fact that a significant percentage of the Marine segment results were from a relatively low margin LCS contract which is a first-run military prototype vessel that is structured as a cost plus contract.
Year Ended December 31, 2005 Compared to 2004
Marine segment net sales increased 3.0% to $225.8 million in 2005 compared to $219.2 million in 2004. The increase in sales was primarily driven by several new construction vessels, as well as revenue from the Navy prototype vessel. During 2005 we completed the third Staten Island Ferry for the City of New York, the initial production of the Navys INLS lighterage system, a Great Lakes ice breaker, and four double hull tank barges. Also contributing to the increase in revenue in 2005 was the 2005 winter repair season revenue, which increased by approximately $3.2 million compared to 2004.
For 2005, the Marine segment reported a loss from operations of approximately $9.2 million. This loss is primarily the result of a $10.2 million reserve recorded during the fourth quarter of 2005 in connection with the contract law suit mentioned above.
In addition to the $10.2 million reserve, 2005 operating results were negatively affected by cost increases in material and production inefficiencies experienced on
|
The Manitowoc Company, Inc. 2006 Form 10-K |
23 |
certain specific construction contracts. Labor inefficiencies were incurred due to delays and disruption caused by customer change orders and a larger mix of first-time or limited vessel construction projects. In addition, the large number of projects in process at the same time in our shipyards, a shortage of available specific skilled labor, and project rework requirements all resulted in greater than normal utilization of costlier subcontract labor on certain contracts. Finally, the majority of the Marine segment revenues during the second half of the year were from a relatively low margin first-run military prototype vessel that is structured as a cost plus contract.
At December 31, 2005, the Marine segment had a growing backlog of projects that matched the capabilities of our two shipyards and a build schedule that allowed for a more efficient use of our resources. In addition, all current contracts have terms that help shield Manitowoc from future commodity price escalation.
General Corporate Expenses
|
|
2006 |
|
2005 |
|
2004 |
|
|||
Net sales |
|
$ |
2,933.3 |
|
$ |
2,254.1 |
|
$ |
1,844.9 |
|
Corporate expenses |
|
$ |
42.4 |
|
$ |
24.8 |
|
$ |
21.2 |
|
% of Net sales |
|
1.4 |
% |
1.1 |
% |
1.2 |
% |
Year Ended December 31, 2006 Compared to 2005
Corporate expenses increased $17.6 million to $42.4 million in 2006 compared to $24.8 million in 2005. Expensing of stock options, which began during the first quarter of 2006, increased corporate expenses by $5.7 million in 2006 compared to 2005. Also contributing to the increase in corporate expenses during 2006 was approximately $2.1 million of legal and accounting expenses related to the companys unsuccessful efforts to acquire Enodis, PLC. Finally, corporate expenses during 2006 were impacted by higher employee related costs and other professional expenses.
Year Ended December 31, 2005 Compared to 2004
Corporate expenses increased $3.6 million to $24.8 million in 2005 compared to $21.2 million in 2004. This 16.7% increase was primarily the result of the following: (i) costs incurred in setting up the accounts receivable securitization facility; (ii) costs incurred in the pursuit of potential acquisition targets; (iii) increased employee related costs; and (iv) higher depreciation costs on technical infrastructure investments.
During 2007, we will strive to protect our market shares, improve our cost structures, and continue to invest in new product development. With our increased global presence in our crane business and our continued focus to become more global in our Foodservice businesses, we are affected now more than ever by non-U.S. world economies. The economies of Europe and Asia, in particular, increasingly affect our performance.
We believe that our diversified business model, our increased global presence, our broad product offerings and our product line and geographic diversification within our segments proved beneficial to us in 2006 and will continue to provide stability to our company into the future.
Cranes and Related Products The global Crane market continued to strengthen in 2006, which benefited most of our regional and product end-markets, including our rough terrain, all-terrain and crawler crane products. Price increases to recover material cost increases, improved manufacturing efficiency as a result of the higher crane volumes and other manufacturing cost reductions have contributed to the improved gross margins in the Crane segment. In 2007, we expect to see some additional escalation in material costs, which we anticipate will again offset across the industry with pricing actions and we will look to mitigate through other cost reduction efforts.
During 2006, we grew market share modestly within several product categories globally. We responded to significant increases in demand in Asia by opening a new crane manufacturing facility in China. The Crane segment continues to invest in all of its manufacturing facilities in an effort to increase production volumes to meet market demand. The improvement in overall market share is partially a reflection of continued significant investment in new products, which is reflected by the introduction of 15 new products in 2006. We will continue to invest in new products and product support in 2007.
Looking ahead, we expect volumes to increase significantly in North America in 2007 for all products due to continued growth in the cyclical crane industry, the impact of market share increases and overall market conditions. We believe the North American construction equipment market (as it relates to lifting equipment) is in a growth phase of the cycle, which can last several years in duration. Further, the domestic crawler market, which tends to lag the overall crane market, continues a strong recovery with additional growth expected . We expect Asia will continue to grow significantly, driven by the China expansion and general recovery of Asian economies. On the other hand, we expect to see commodity costs rise in 2007. We have developed strategies to help us adapt to these conditions. In this environment we plan to protect our market share by providing our customers with what we believe is the best value in the industry. We will work to grow our market share globally by leveraging the strength of our brand names, product service and support, and expanded product offerings.
24 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
In 2007, we plan to introduce 17 new crane models. We will continue to expand our global reach. One way to achieve this expansion is through the continued expansion and strategic positioning of our service and product support infrastructure in Asia. In addition, our global sales force is cross-selling our entire product lines. Our past acquisitions have given us a broad product offering and worldwide distribution and product support. We believe these factors along with new product introductions will help us continue to grow market share in 2007. We believe that our growth strategy is solid and supported by the diversification of our global manufacturing and distribution presence. We will continue to attack our markets geographically, rather than by product line.
Foodservice Equipment The domestic foodservice industry got off to a strong start in 2006, stabilizing later in the year and resulting in a full year industry growth rate of 2½ to 3%. For 2006, the Foodservice segment introduced more than 25 new products for the fifth consecutive year. These new product introductions contributed to a continued market share gain in ice machines and steady sales in our other product categories.
Dramatically rising commodity costs combined with supply availability throughout 2006 presented challenges in maintaining profit margins. We reacted to these challenges by implementing selected price increases throughout our product lines, continuing to focus on cost reductions throughout our operations and by emphasizing the need of low cost country sourcing. We are doing this in conjunction with company-wide effort to coordinate and leverage the purchasing power of our three segments.
We expect that the same factors that drove our operating performance in 2006 will continue to drive our business in 2007. We expect that the market will grow in 2007 at a rate of approximately 2 to 2½% and we believe we are positioned to outperform the industry due to the wide range of new products that we introduced in the past 5 years and the new products scheduled for introduction.
We are also continuing to invest in foreign markets. Our new manufacturing and engineering center in Hangzhou, China is complete, and we are expanding our capabilities in the Asia-Pacific region. We continue to increase our production capacity in beverage equipment and ice machines, and we will expand manufacturing to other foodservice products for the Asia-Pacific region as the needs arise. This increased presence will leverage our brand strength in the fastest growing foodservice equipment market in the world.
Marine The Marine segment benefited from the continued effects of the Oil Pollution Act of 1990 (OPA 90) which mandated retirement of all petroleum-hauling single-hull vessels by 2015. In 2006, we delivered one articulating tug and double-hull barge unit (AT/B) and one double-hulled petroleum barge. Recent activity in response to the OPA 90 mandates has caused a production bottlenecks in US shipyards, which emphasizes the current lack of new construction building capacity in U.S. shipyards. Our multi-year backlog at Bay Shipbuilding is evidence of the increase demand for OPA 90 compliant vessels. For 2007, we will be completing construction of one AT/B and one double-hull tank barge, and we will commence construction on three additional double-hull tank barge units of various sizes.
Government Programs are also a staple for Marine, as evidenced by the award of the US Coast Guards Response Boat-Medium (RB-M) program, and the US Navys award of Options 1 & 2 for the Improved Navy Lighterage System. Work began on both of these programs in 2006, and will continue through 2007 and beyond. We will also be delivering the first Littoral Combat Ship (LCS) Freedom in 2007, which is being constructed at our Marinette Marine yard. Future new construction work is also a possibility as we anticipate submitting bid proposals to both the US Coast Guard and US Navy for upcoming programs in the months to follow.
Another arena that the Marine segment is exploring for future work is the reemerging activity for the US Oil Patch, Alaskan North Slope, and North Sea. The US Oil Patch has been looking for the replacement of older vessels operating in the Gulf of Mexico (GOM), but does not reflect the recently awarded US GOM deepwater oil leases to major oil companies that will require new construction of large Platform Supply Vessels (PSV) and Anchor Handling Towing Supply (AHTS) Vessels to meet the new demand. With recently awarded new exploration and drilling contracts in the Alaskan North Slope, near-term demands exist for large Polar Ice-Breaking AHTS Vessels. Finally, with North Sea drilling and production in full swing, strong market demands for large quantities of AHTS Vessels and PSVs provide new construction opportunities for the Marine segment.
Great Lakes repair and refurbishment exceeded our expectations for 2006. Strong demand for our customers services filtered down to us to keep their vessels operating efficiently and effectively with minimal down-time. For 2006, we managed 17 major drydockings. Bay Shipbuilding also executed on a ship re-powering contract converting it from steam to heavy-fuel diesel, the first of its kind on the Great Lakes. Continued strong demand for tonnage in the Great Lakes for 2007 should also yield favorable results for the new year.
Liquidity and Capital Resources
Cash flow from operations during 2006 was $294.1 million compared to $106.7 million in 2005. We applied a portion of this cash flow to capital spending, dividends and payment of outstanding debt. We had $176.1 million in cash and cash equivalents on-hand at December 31, 2006, a decrease of $55.7 million versus 2005. This overall decrease in cash is primarily the result of significant debt payments and capital expenditures made during 2006. In addition, we had $278.9 million of unused availability under our secured revolving credit facility (Revolving Credit Facility) at December 31, 2006. The availability under the Revolving Credit Facility is reduced for outstanding letters of credit of $21.1 million as of December 31, 2006.
|
The Manitowoc Company, Inc. 2006 Form 10-K |
25 |
Cash flow provided by operating activities of continuing operations for the year ended December 31, 2006 totaled $294.4 million compared to $120.5 million for the year ended December 31, 2005. Cash flow during 2006 was driven by $166.2 million of net earnings, an increase of $100.4 million over net earnings for 2005. Accounts payable, accrued expenses and other liabilities positively impacted cash flow from operations with an increase of $211.0 million. The increase was driven primarily by increased payables related to the increase in inventory in the Crane segment required to support the increase in production, and by down payments received from customers on commercial ships ordered during the year for which construction did not yet begin. During 2006, inventory increased by $160.6 million, which was driven by higher backlog and product demand in the Crane segment. Increased accounts receivable reduced cash flows from operations by $7.5 million. This increase was driven by the increase in sales, offset by a sale of receivables through our securitization facility discussed below.
The company is party to an accounts receivable securitization program whereby it sells certain of its domestic trade accounts receivable to a wholly owned, bankruptcy-remote, special purpose subsidiary which, in turn, sells participating interests in its pool of receivables to a third-party financial institution (Purchaser). The Purchaser receives an ownership and security interest in the pool of receivables. New receivables are purchased by the special purpose subsidiary and participation interests are resold to the Purchaser as collections reduce previously sold participation interests. The company has retained collection and administrative responsibilities on the participation interests sold. The Purchaser has no recourse against the company for uncollectible receivables; however, the companys retained interest in the receivable pool is subordinate to the Purchasers interest and is recorded at fair value. Due to a short average collection cycle of less than 60 days for such accounts receivable and the companys collection history, the fair value of the companys retained interest approximates book value. The retained interest recorded at December 31, 2006 is $82.5 million, and is included in accounts receivable in the accompanying Consolidated Balance Sheets.
The securitization programs capacity is $90 million, and includes trade accounts receivable from its domestic Crane and Foodservice businesses. Trade accounts receivables sold to the Purchaser and being serviced by the company totaled $90.0 million at December 31, 2006, an increase of $61.3 million from the balance sold to the Purchaser at December 31, 2005.
We spent a total of $67.6 million during 2006 for capital expenditures. We continue to fund capital expenditures to improve the cost structure of our business, to invest in new processes, products and technology, and to maintain high-quality production standards. The following table summarizes 2006 capital expenditures and depreciation by segment.
|
|
Capital
|
|
Depreciation |
|
||||||
Cranes and Related Products |
|
|
$ |
51.3 |
|
|
|
$ |
58.4 |
|
|
Foodservice Equipment |
|
|
10.9 |
|
|
|
7.2 |
|
|
||
Marine |
|
|
3.1 |
|
|
|
1.6 |
|
|
||
Corporate |
|
|
2.3 |
|
|
|
1.8 |
|
|
||
Total |
|
|
$ |
67.6 |
|
|
|
$ |
69.0 |
|
|
The significant capital expenditures in 2006 include the continued investment in the Foodservice segments ERP system, the new China manufacturing facilities in the Crane and Foodservice segments, production machinery and equipment, and new product tooling.
On May 26, 2006, the company acquired substantially all of the assets and business operated by McCanns. Headquartered in Los Angeles, California with operations in Tijuana, Mexico , McCanns is engaged in the design, manufacture and sale of beverage dispensing equipment primarily used in fast food restaurants, stadiums, cafeterias and convenience stores. McCanns primary products are backroom beverage equipment such as carbonators, water boosters and racks. McCanns also produces accessory components for beverage dispensers including specialty valves, stands and other stainless steel components. The cash flow impact of this acquisition is included in business acquisitions, net of cash acquired within the cash flow from investing section of the Consolidated Statements of Cash Flows.
On January 3, 2006, we acquired certain assets, rights and properties of ExacTech, Inc., a supplier of fabrication, machining, welding and other services to various parties. Located in Port Washington, Wisconsin, the operation now provides these services to the U.S. based crane manufacturing facilities. The cash flow impact of this acquisition is included in business acquisitions, net of cash acquired within the cash flow from investing section of the Consolidated Statement of Cash Flows.
Restricted cash represents cash in escrow which replaced outstanding letters of credit related to performance under a certain Marine contract and security for the indemnity agreement for a casualty insurance provider.
During May 2006, we redeemed our 175 million Euro ($216.9 million based on May 15, 2006 exchange rates) 10 3/8% senior subordinated notes due 2011. Pursuant to the terms of the indenture, we paid the note holders 105.188 percent of the principal amount of the redeemed
26 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
notes which included a call premium ($11.2 million) plus accrued and unpaid interest up to the redemption date. We utilized cash on hand and availability under our revolving credit facility to fund this redemption. The borrowings drawn on the revolving credit facility to complete this transaction were fully paid off during 2006 and no amount remains outstanding.
During 2005 and 2004, we sold two businesses. During 2005, we sold our DRI business and received proceeds of approximately $28.4 million, and in 2004, we sold Delta and received approximately $9.0 million in proceeds. This cash is reported in the discontinued operations section of the cash flow from investing activities.
In December 2004, we sold, pursuant to an underwritten public offering, approximately 3.0 million shares of our common stock (not adjusted for the 2006 2-for-1 stock split) at a price of $36.25 per share (not adjusted for the 2006 2-for-1 stock split). Net cash proceeds from this offering, after deducting underwriting discounts and commissions, were $104.9 million. In addition to underwriting discounts and commissions, we incurred approximately $0.8 million of additional accounting, legal and other expenses related to the offering that were charged to additional paid-in capital. We used a portion of the proceeds to redeem $61.3 million of our Senior Subordinated Notes due 2012 and to pay the required premium to the note holders of $6.4 million. We used the balance for general corporate purposes. The redemption of the Senior Subordinated Notes due 2012 was completed on January 10, 2005.
During the years ended December 31, 2006, 2005 and 2004, we sold $14.8 million, $20.5 million and $25.8 million, respectively, of our long term notes receivable to third party financing companies. We guaranty varying percentages, up to 100%, of collection of the notes to the financing companies. We have accounted for the sales of the notes as a financing of receivables. The receivables remain on our Consolidated Balance Sheets, net of payments made, in other current and non-current assets, and we have recognized an obligation equal to the net outstanding balance of the notes in other current and non-current liabilities in the Consolidated Balance Sheets. The cash flow benefit of these transactions, net of payments made by the customer, is reflected as financing activity in the Consolidated Statements of Cash Flows. During the years ended December 31, 2006, 2005 and 2004 the customers paid $30.2 million, $6.3 million and $2.6 million, respectively, of the notes to the third party financing companies. As of December 31, 2006, 2005 and 2004, the outstanding balance of the notes receivables guaranteed by us was $22.3 million, $37.4 million and $23.2 million, respectively.
Our outstanding debt at December 31, 2006 consisted of $150.0 million of 7 1/8% senior notes due 2013 (Senior Notes due 2013), $113.8 million of 10 1/2% senior subordinated notes due 2012 (Senior Subordinated Notes due 2012) , as well as outstanding amounts under foreign working capital lines of credits and capital leases. During May 2006, we redeemed our 175 million Euro ($216.9 million based on May 15, 2006 exchange rates) 10 3/8% senior subordinated notes due 2011. As set forth in the note indenture, we paid the note holders 105.188 percent of the principal amount including a call premium ($11.2 million) plus accrued and unpaid interest up to the redemption date. We utilized cash on hand and availability under our Revolving Credit Facility to fund this redemption.
Our Revolving Credit Facility, has $300 million of initial borrowing capacity and provides us the ability to access to an additional $250 million of borrowing capacity during the life of the facility under the same terms. Borrowings under the Revolving Credit Facility bear interest at a rate equal to the sum of a base rate or a Eurodollar rate plus an applicable margin, which is based on our consolidated total leverage ratio as defined by the credit agreement. The annual commitment fee in effect at December 31, 2006 on the unused portion of the secured revolving credit facility was 0.15%. As of December 31, 2006, we had no amounts outstanding under the Revolving Credit Facility.
The Senior Notes due 2013 are unsecured senior obligations ranking prior to our Senior Subordinated Notes due 2012. Indebtedness under our Revolving Credit Facility ranks equally with the Senior Notes due 2013, except that it is secured by substantially all domestic tangible and intangible assets of the company and its subsidiaries. Interest on the Senior Notes due 2013 is payable semiannually in May and November each year, The Senior Notes due 2013 can be redeemed by us in whole or in part for a premium on or after November 1, 2008.
The Senior Subordinated Notes due 2012 are unsecured obligations of the company ranking subordinate in right of payment to all of our senior debt and are fully and unconditionally, jointly and severally guaranteed by substantially all of the companys domestic subsidiaries. Interest on the Senior Subordinated Notes due 2012 is payable semiannually in February and August each year. These notes can be redeemed by us in whole or in part for a premium on or after August 1, 2007.
As of December 31, 2006, we also had outstanding $9.2 million of other indebtedness with a weighted-average interest rate of 4.8%. This debt includes outstanding bank overdrafts in Asia and Europe, and various capital leases.
As of December 31, 2006, we had four fixed-to-floating rate swap contracts which effectively converted $163.8 million of our fixed rate Senior Notes due 2013 and Senior Subordinated Notes due 2012 to variable rate debt. These contracts are considered to be hedges against changes in the fair value of the fixed rate debt obligation. Accordingly, the interest rate swap contracts are reflected at fair value in our Consolidated Balance Sheet as a liability of $4.5 million as of December 31, 2006. Debt is reflected at an amount equal to the sum of its carrying value plus an adjustment representing the change in fair value of the debt obligation attributable to the interest rate risk being hedged. Changes during any accounting period in the fair value of the interest rate swap contracts, as well as offsetting changes in the adjusted carrying value of the related portion of fixed-rate debt being hedged, are recognized as an ad
|
The Manitowoc Company, Inc. 2006 Form 10-K |
27 |
justment to interest expense in the Consolidated Statements of Operations. The change in fair value of the swaps exactly offsets the change in fair value of the hedged fixed-rate debt; therefore, there was no net impact on earnings for the year ended December 31, 2006. The fair value of these contracts, which represents the cost to settle these contracts, approximated a loss of $4.5 million at December 31, 2006.
Our Revolving Credit Facility, Senior Notes due 2013, and Senior Subordinated Notes due 2012 contain customary affirmative and negative covenants. In general, the covenants contained in the Revolving Credit Facility are more restrictive than those of the Senior Notes due 2013 and the Senior Subordinated Notes due 2012. Among other restrictions, these covenants require us to meet specified financial tests, which include the following: consolidated interest coverage ratio; consolidated total leverage ratio; and consolidated senior leverage ratio. These covenants also limit, among other things, our ability to redeem or repurchase our debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, repurchase capital stock, and create or become subject to liens. The Revolving Credit Facility also contains cross-default provisions whereby certain defaults under any other debt agreements would result in default under the Revolving Credit Facility. We were in compliance with all covenants as of December 31, 2006, and based upon our current plans and outlook, we believe we will be able to comply with these covenants during the subsequent 12 months.
Our debt position increases our vulnerability to general adverse industry and economic conditions and results in a portion of our cash flow from operations being used for payment of interest on our debt. This could potentially limit our ability to respond to market conditions or take advantage of future business opportunities. Our ability to service our debt is dependent upon many factors, some of which are not subject to our control, such as general economic, financial, competitive, legislative, and regulatory factors. In addition, our ability to borrow additional funds under the Revolving Credit Facility in the future will depend on our meeting the financial covenants contained in the credit agreement, even after taking into account such new borrowings.
The Revolving Credit Facility or other future facilities may be used for funding future acquisitions, seasonal working capital requirements, capital expenditures, and other investing and financing needs. We believe that our available cash, funds available under the Revolving Credit Facility, cash generated from future operations, and access to public debt and equity markets will be adequate to fund our capital and debt financing requirements for the foreseeable future.
Management also considers the following regarding liquidity and capital resources to identify trends, demands, commitments, events and uncertainties that require disclosure:
A. Our Revolving Credit Facility requires us to comply with certain financial ratios and tests to comply with the terms of the agreement. We were in compliance with these covenants as of December 31, 2006, the latest measurement date. The occurrence of any default of these covenants could result in acceleration of any outstanding balances under the Revolving Credit Facility (no amount outstanding as of December 31, 2006). Further, such acceleration would constitute an event of default under the indentures governing our Senior Subordinated Notes due 2012 and our Senior Notes due 2013.
B. Circumstances that could impair our ability to continue to engage in transactions that have been integral to historical operations or are financially or operationally essential, or that could render that activity commercially impracticable, such as the inability to maintain a specified credit rating, level of earnings, earnings per share, financial ratios, or collateral. We do not believe that the risk factors applicable to our business are reasonably likely to impair our ability to continue to engage in our historical activities at this time.
C. Factors specific to us and our markets that we expect to be given significant weight in the determination of our credit rating or will otherwise affect our ability to raise short-term and long-term financing. We do not presently believe that the risk factors applicable to our business are reasonably likely to materially affect our credit ratings or would otherwise adversely affect our ability to raise short-term or long-term financing.
D. We have disclosed information related to guarantees in Note 16 to our Consolidated Financial Statements.
E. Written options on non-financial assets (for example, real estate puts). We do not have any written options on non-financial assets.
OFF-BALANCE SHEET ARRANGEMENTS
Our disclosures concerning transactions, arrangements and other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity or the availability of or requirements for capital resources are as follows:
· We have disclosed in Note 16 to the Consolidated Financial Statements our buyback and residual value guaranty commitments.
· We also lease various assets under operating leases. The future estimated payments under these arrangements are also disclosed in Note 19 to the Consolidated Financial Statements.
· We have disclosed our accounts receivable securitization arrangement in Note 10 to the Consolidated Financial Statements.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
A summary of our significant contractual obligations as of December 31, 2006 is as follows:
28 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
|
|
Total
|
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
Thereafter |
|
|||||||||||||||
Debt |
|
|
$ |
262.4 |
|
|
$ |
3.1 |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
259.3 |
|
|
Capital leases |
|
|
6.0 |
|
|
1.0 |
|
1.1 |
|
1.1 |
|
|
0.9 |
|
|
|
0.7 |
|
|
|
1.2 |
|
|
|||||||
Operating leases |
|
|
73.3 |
|
|
22.3 |
|
15.5 |
|
9.8 |
|
|
7.4 |
|
|
|
4.4 |
|
|
|
13.9 |
|
|
|||||||
Purchase obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total committed |
|
|
$ |
341.7 |
|
|
$ |
26.4 |
|
$ |
16.6 |
|
$ |
10.9 |
|
|
$ |
8.3 |
|
|
|
$ |
5.1 |
|
|
|
$ |
274.4 |
|
|
* - There were no significant purchase obligation commitments at December 31, 2006
* - Table above does not include interest payments
Additionally, at December 31, 2006, we had outstanding letters of credit that totaled $21.1 million. We also had buyback commitments and residual value guarantees outstanding, that if all were satisfied in full at December 31, 2006, the total cash cost to us would be $157.1 million, this amount is not reduced for amounts the company would recover from repossessing and subsequent resale of collateral.
We maintain defined benefit pension plans for some of our operations in the United States and Europe. The company has established the Retirement Plan Committee (the Committee) to manage the operations and administration of all benefit plans and related trusts. Our three U.S. pension plans had benefit accruals frozen several years ago. Effective January 1, 2007, we merged all U.S. pension plans together. We are also making a contribution of approximately $27.2 million during the first quarter of 2007 that will fully fund the ongoing U.S. pension liability. We will also change our investment policy to more closely align the interest rate sensitivity of our pension assets with the corresponding liabilities. The resulting asset allocation will be approximately 10% equity and 90% fixed income. This decision will remove a significant portion of the U.S. pensions volatility due to unpredictable changes in interest rates and equity markets. This decision will protect our balance sheet as well as support our goal of minimizing unexpected future pension cash contributions based upon the new provisions of the Pension Protection Act and protect our employees benefits. In 2006, cash contributions to all pension plans by us were $13.9 million, and we estimate that our pension plan contributions will be approximately $31.6 million in 2007.
We are exposed to market risks from changes in interest rates, commodities, and changes in foreign currency exchange. To reduce these risks, we selectively use financial instruments and other proactive management techniques. We have written policies and procedures that place financial instruments under the direction of corporate finance and restrict all derivative transactions to those intended for hedging purposes. The use of financial instruments for trading purposes or speculation is strictly prohibited.
For a more detailed discussion of our accounting policies and the financial instruments that we use, please refer to Note 2, Summary of Significant Accounting Policies, and Note 9, Debt, of the Notes to the Consolidated Financial Statements.
Interest Rate Risk
In 2006, we used interest rate swaps entered into with third party financial institutions such that approximately 39.5% of our debt is fixed and 60.5% is floating at December 31, 2006. At December 31, 2006, we had four fixed-to-floating interest rate swaps outstanding. These swap contracts effectively convert $163.8 million of our fixed rate Senior Subordinated and Senior Notes to variable rate debt. Under these swap agreements, we contract with a counter-party to exchange the difference between a floating rate and the fixed rate applied to $163.8 million of our Senior Subordinated Notes and Senior Notes. These contracts are considered to be a hedge against changes in the fair value of the fixed-rate obligations. Accordingly, these interest rate swap contracts are reflected at fair value in our Consolidated Balance Sheet at December 31, 2006 as a liability of $4.5 million, and the related debt is reflected at an amount equal to the sum of its carrying value plus an adjustment representing the change in fair value of the debt obligation attributable to the interest rate risk being hedged. Changes during any accounting period in the fair value of the interest rate swap contract, as well as the offsetting changes in the adjusted carrying value of the related portion of fixed-rate debt being hedged, are recognized as an adjustment to interest expense in the Consolidated Statements of Operations. The change in the fair value of the swaps exactly offsets the change in fair value of the hedged fixed-rate debt; therefore, there was no net impact on earnings from these swaps for the year ended December 31, 2006. A 10% increase or decrease in the floating rate we pay under these swap agreements would result in a change in pre-tax interest expense of approximately $1.7 million. This amount was calculated assuming the year-end weighted-average rate of the swaps was constant throughout the year.
Interest swaps expose us to the risk that the counter-party may be unable to pay amounts it owes us under the swap agreements. To manage this risk we enter into swap agreements only with financial institutions that have high credit ratings.
Commodity Price s
We are exposed to fluctuating market prices for commodities, including steel, copper, foam, and aluminum. Each of our business segments is subject to the effect 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
|
The Manitowoc Company, Inc. 2006 Form 10-K |
29 |
programs are centralized across business segments, and others are specific to a business segment or business unit. During 2006, we entered into certain commodity hedges which become effective starting January 1, 2007 and began a program to systematically hedge these commodities going forward. These hedges fix the price of certain of our key commodities utilized in the production of our Foodservice product offerings.
Currency Risk
We have manufacturing, sales and distribution facilities around the world and thus make investments and enter into transactions denominated in various foreign currencies. International sales, including those sales that originated outside of the United States, were approximately 47.7% of our total sales for 2006, with the largest percentage (27.9%) being sales into various European countries.
Regarding transactional foreign exchange risk, we enter into limited forward exchange contracts to reduce earnings and cash flow impact on nonfunctional currency denominated receivables and payables, predominantly between our Euro-denominated operations and their customers outside the Euro zone. Gains and losses resulting from hedging instruments offset the foreign exchange gains and losses on the underlying assets and liabilities being hedged. The maturities of these forward exchange contracts generally coincide with the settlement date of the related transactions. We also periodically hedge anticipated transactions, primarily at firm order date for orders to be sold into non-Euro-denominated locations, with forward exchange contracts. These forward exchange contracts are designated as cash flow hedges in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. At December 31, 2006, we had outstanding forward exchange contracts hedging underlying accounts receivable with a fair market value of $1.3 million and forward exchange contracts hedging outstanding firm orders with a fair market value of $3.7 million. A 10% appreciation or depreciation of the underlying functional currency at December 31, 2006, would not have a significant impact on our Consolidated Statement of Earnings as any gains or losses under the foreign exchange contracts hedging accounts receivable balances would be offset by equal gains or losses on the underlying receivables. Any gains or losses under the foreign exchange contracts hedging outstanding firm orders would not have a significant impact due to the relatively immaterial amount of contracts outstanding being hedged.
At December 31, 2006, there was also a significant portion of our foreign currency translation exposure that was not hedged due to the company paying off the senior subordinated notes due 2011 during 2006. Amounts invested in non-U.S. based subsidiaries are translated into U.S. Dollars at the exchange rate in effect at year-end. The resulting translation adjustments are recorded in stockholders equity as cumulative translation adjustments. The translation adjustment recorded in accumulated other comprehensive income at December 31, 2006, is $35.2 million.
Environmental, Health, Safety, and Other Matters
Please refer to Item 8, Financial Statements and Supplementary Data, and Note 15 to the Consolidated Financial Statements where we have disclosed our Environmental, Health, Safety, Contingencies and other Matters.
The Consolidated Financial Statements include accounts of the company and all its subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements and related footnotes. In preparing these Consolidated Financial Statements, we have made our best estimates and judgments of certain amounts included in the Consolidated Financial Statements giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below. However, application of these accounting policies involve the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Although we have listed a number of accounting policies below which we believe to be most critical, we also believe that all of our accounting policies are important to the reader. Therefore, please refer also to the Notes to the Consolidated Financial Statements for more detailed description of these and other accounting policies of the company.
Revenue Recognition Revenue is recognized and earned when all the following criteria are satisfied with regard to a specific transaction: persuasive evidence of an arrangement exists, the price is fixed and determinable, collectibility of cash is reasonably assured, and delivery has occurred or services have been rendered. We periodically enter into transactions with customers that provide for residual value guarantees and buyback commitments. These transactions are recorded as operating leases for all significant residual value guarantees and for all buyback commitments. These initial transactions are recorded as deferred revenue and are amortized to income on a straight-line basis over a period equal to that of the customers third-party financing agreement. In addition, we lease cranes to customers under operating lease terms. Proceeds received in connection with these transactions are recognized as revenue over the term of the lease, and leased cranes are depreciated over their estimated useful lives.
Revenue Recognition under Percentage-of-completion Accounting Revenue under long-term contracts within the Marine segment is recognized using the percentage-of-completion (POC) method of accounting. Under this method, sales and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at the completion of the contract. Recognized revenues that will not be billed under the terms of the contract until a later date are recorded as recoverable costs and accrued profit on progress com
30 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
pleted not billed, which are included in other current assets in the Consolidated Balance Sheet. Likewise, contracts where billings to date have exceeded recognized revenues are recorded as amounts billed in excess of sales, which are included in accounts payable and accrued expenses in the Consolidated Balance Sheet. Changes to the original estimates may be required during the life of the contract and such estimates are reviewed when customer change orders are placed and on a regular basis. Sales and gross profit are adjusted when known for revisions in estimated total contract costs and contract values. Claims against customers are recognized as revenue when it is probable that the claim will result in additional contract revenue and the amount can be reliably estimated. Estimated losses are recorded when identified. The use of the POC method of accounting involves considerable use of estimates in determining revenues, costs and profits and in assigning the amounts to accounting periods. The Company continually evaluates all of the issues related to the assumptions, risks and uncertainties inherent with the application of the POC method of accounting.
Allowance for Doubtful Accounts Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. Our estimate for the allowance for doubtful accounts related to trade receivables includes evaluation of specific accounts where we have information that the customer may have an inability to meet its financial obligations together with a general provision for unknown but existing doubtful accounts based on pre-established percentages to specific aging categories which are subject to change if experience improves or deteriorates.
Inventories and Related Reserve for Obsolete and Excess Inventory Inventories are valued at the lower of cost or market using both the first-in, first-out (FIFO) method and the last-in, first-out (LIFO) method and are reduced by a reserve for excess and obsolete inventories. The estimated reserve is based upon specific identification of excess or obsolete inventories together with a general provision based on pre-established percentages applied to specific aging categories of inventory. These categories are evaluated based upon historical usage, estimated future usage, and sales requiring the inventory. These percentages were established based upon historical write-off experience.
Goodwill and Other Intangible Assets We account for goodwill and other intangible assets under the guidance of SFAS No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, goodwill is no longer amortized; however, it is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company performs impairment reviews for its reporting units, which have been determined to be: Cranes Americas; Cranes Europe, Middle East, and Africa; Cranes Asia; Ice Group; Refrigeration Group; Beverage Group; and Marine Group, using a fair-value method based on the present value of future cash flows, which involves managements judgments and assumptions. The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill. The Company is subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value. The impairment testing performed by the Company at June 30, 2006, indicated that the estimated fair value of each reporting unit exceeded its corresponding carrying amount, including recorded goodwill and, as such, no impairment existed at that time. Other intangible assets with definite lives continue to be amortized over their estimated useful lives. Indefinite and definite lived intangible assets are also subject to impairment testing. A considerable amount of management judgment and assumptions are required in performing the impairment tests, principally in determining the fair value of each reporting unit. While the company believes its judgments and assumptions were reasonable, different assumptions could change the estimated fair values and, therefore, impairment charges could be required.
Employee Benefit Plans We provide a range of benefits to our employees and retired employees, including pensions and postretirement health care coverage. Plan assets and obligations are recorded annually based on the companys measurement date utilizing various actuarial assumptions such as discount rates, expected return on plan assets, compensation increases, retirement and mortality rates, and health care cost trend rates as of that date. The approach we use to determine the annual assumptions are as follows:
· Discount Rate Our discount rate assumptions are based on the interest rate of noncallable high-quality corporate bonds, with appropriate consideration of our pension plans participants demographics and benefit payment terms.
· Expected Return on Plan Assets Our expected return on plan assets assumptions are based on our expectation of the long-term average rate of return on assets in the pension funds, which is reflective of the current and projected asset mix of the funds and considers the historical returns earned on the funds
· Compensation increase Our compensation increase assumptions reflect our long-term actual experience, the near-term outlook and assumed inflation.
· Retirement and Mortality Rates Our retirement and mortality rate assumptions are based primarily on actual plan experience.
· Health Care Cost Trend Rates Our health care cost trend rate assumptions are developed based on historical cost data, near-term outlook and an assessment of likely long-term trends.
Measurements of net periodic benefit cost are based on the assumptions used for the previous year-end measurements of assets and obligations. The Company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions when appropriate. As required by U.S. GAAP, the effects of the modifications are recorded currently or amortized over future periods. Based on information provided by its independent actuaries and other relevant sources, we believe that our assumptions used are reasonable; however, changes in these assumptions could impact the Companys financial position, results of operations or cash flows.
|
The Manitowoc Company, Inc. 2006 Form 10-K |
31 |
Product Liability We are subject in the normal course of business to product liability lawsuits. To the extent permitted under applicable laws, our exposure to losses from these lawsuits is mitigated by insurance with self-insurance retention limits. We record product liability reserves for our self-insured portion of any pending or threatened product liability actions. Our reserve is based upon two estimates. First, we track the population of all outstanding pending and threatened product liability cases to determine an appropriate case reserve for each based upon our best judgment and the advice of legal counsel. These estimates are continually evaluated and adjusted based upon changes to the facts and circumstances surrounding the case. Second, we obtain a third-party actuarial analysis to determine the amount of additional reserve required to cover incurred but not reported product liability issues and to account for possible adverse development of the established case reserve (collectively referred to as IBNR). This actuarial analysis is performed at least twice annually and our IBNR reserve for product liability is adjusted based upon the results of these analyses. We have established a position within the actuarially determined range, which we believe is the best estimate of the IBNR liability.
Income Taxes We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We record a valuation allowance that represents a reserve on deferred tax assets for which utilization is uncertain. Management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities, and the valuation allowance recorded against our net deferred tax assets. The valuation allowance would need to be adjusted in the event future taxable income is materially different than amounts estimated. Our policy is to remit earnings from foreign subsidiaries only to the extent any resultant foreign taxes are creditable in the United States. Accordingly, we do not currently provide for additional United States and foreign income taxes which would become payable upon repatriation of undistributed earnings of foreign subsidiaries.
Stock Options The computation of the expense associated with stock-based compensation requires the use of a valuation model. We currently use a Black-Scholes option pricing model to calculate the fair value of our stock options and stock appreciation rights. The Black-Scholes model requires assumptions regarding the volatility of the companys stock, the expected life of the stock award and the companys dividend ratio. We primarily use historical data to determine the assumptions to be used in the Black-Scholes model and have no reason to believe that future data is likely to differ materially from historical data. However, changes in the assumptions to reflect future stock price volatility, future dividend payments and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards.
Warranties I n the normal course of business we provide our customers warranties covering workmanship, and in some cases materials, on products manufactured by us. Such warranties generally provide that products will be free from defects for periods ranging from 12 months to 60 months. If a product fails to comply with our warranty, we may be obligated, at our expense to correct any defect by repairing or replacing such defective product. We provide for an estimate of costs that may be incurred under our warranty at the time product revenue is recognized based on historical warranty experience for the related product or estimates of projected losses due to specific warranty issues on new products. These costs primarily include labor and materials, as necessary associated with repair or replacement. The primary factors that affect our warranty liability include the number of shipped units and historical and anticipated rates or warranty claims. As these factors are impacted by actual experience and future expectations, we assess the adequacy of our recorded warranty liability and adjust the amounts as necessary.
Recent Accounting Changes and Pronouncements
In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments an Amendment of FASB Statement No. 133 and 140. SFAS No. 155 amends certain aspects of SFAS No. 133, primarily related to hybrid financial instruments and beneficial interests in securitized financial assets, as well as amends SFAS No. 140, related to eliminating a restriction on the passive derivative instruments that a qualifying special-purpose entity (SPE) may hold. SFAS No. 155 is effective for us on January 1, 2007. The adoption of SFAS No. 155 did not have an impact on our Consolidated Financial Statements.
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets an amendment of FASB Statement No. 140. SFAS No. 156 amends certain aspects of SFAS No. 140 by requiring that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. SFAS No. 156 is effective for us on January 1, 2007. The adoption of SFAS No. 156 did not have an impact on our Consolidated Financial Statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities. The standard also responds to investors requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is
32 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
effective for us on January 1, 2008. We are currently evaluating the impact, if any, the adoption of SFAS No. 157 will have on our Consolidated Financial Statements.
In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R). Under SFAS No. 158, companies must recognize a net liability or asset to report the funded status of their defined benefit pension and other postretirement benefit plans on their balance sheets. SFAS No. 158 was effective for us as of December 31, 2006. See Note 18, Employee Benefit Plans for detail regarding the adoption of SFAS 158.
In June 2006, the FASB issued FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109 . This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. It prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. FIN No. 48 is effective for the company on January 1, 2007. We estimate the impact on our Consolidated Financial Statements upon the adoption of FIN No. 48 will be in the range of $5.0 million to $15.0 million and will be recorded as cumulative effect of accounting change in the Consolidated Statement of Operations in the first quarter of 2007.
In September 2006, the SEC Office of the Chief Accountant and Divisions of Corporation Finance and Investment Management released Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB No. 108) that provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff believes that registrants should quantify errors using both a balance sheet and an income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. This pronouncement is effective for fiscal years ending after November 15, 2006. The adoption of SAB No. 108 had no impact on our financial position, results of operations, or cash flows.
Cautionary Statements about Forward-Looking Information
Statements in this report and in other company communications that are not historical facts are forward-looking statements, which are based upon our current expectations. These statements involve risks and uncertainties that could cause actual results to differ materially from what appears within this annual report.
Forward-looking statements include descriptions of plans and objectives for future operations, and the assumptions behind those plans. The words anticipates, believes, intends, estimates, and expects, or similar expressions, usually identify forward-looking statements. Any and all projections of future performance are forward-looking statements.
In addition to the assumptions, uncertainties, and other information referred to specifically in the forward-looking statements, a number of factors relating to each business segment could cause actual results to be significantly different from what is presented in this annual report. Those factors include, without limitation, the following:
Crane market acceptance of new and innovative products; cyclicality of the construction industry; the effects of government spending on construction-related projects throughout the world; changes in world demand for our crane product offering; the replacement cycle of technologically obsolete cranes; demand for used equipment; actions of competitors; and foreign exchange rate risk.
Foodservice market acceptance of new and innovative products; weather; consolidations within the restaurant and foodservice equipment industries; global expansion of customers; actions of competitors; the commercial ice-cube machine replacement cycle in the United States; specialty foodservice market growth; future strength of the beverage industry; and the demand for quickservice restaurant and kiosks.
Marine shipping volume fluctuations based on performance of the steel industry; weather and water levels on the Great Lakes; trends in government spending on new vessels; five-year survey schedule; the replacement cycle of older marine vessels; growth of existing marine fleets; consolidation of the Great Lakes marine industry; frequency of casualties on the Great Lakes; the level of construction and industrial maintenance, and ability of our customers to obtain financing.
Corporate (including factors that may affect all three segments) changes in laws and regulations throughout the world; the ability to finance, complete and/or successfully integrate, restructure and consolidate acquisitions, divestitures, strategic alliances and joint ventures; successful and timely completion of new facilities and facility expansions; competitive pricing; availability of certain raw materials; changes in raw materials and commodity prices; changes in domestic and international economic and industry conditions, including steel industry conditions; changes in the interest rate environment; risks associated with growth; foreign currency fluctuations; world-wide political risk; health epidemics; pressure of additional financing leverage resulting from acquisitions; success in increasing manufacturing efficiencies; changes in revenue, margins and costs; work stoppages and labor negotiations; actions of company competitors and the ability of our customers to obtain financing.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Liquidity and Capital Resources, and Risk Management in Managements Discussion and Analysis of Financial Condition and Results of Operations for a description of the quantitative and qualitative disclosure about market risk.
|
The Manitowoc Company, Inc. 2006 Form 10-K |
33 |
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements and Financial Statement Schedule:
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
34 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Report of Independent Registered Public Accounting Firm
To
the Stockholders and
Board of Directors of
The Manitowoc Company, Inc.:
We have completed integrated audits of The Manitowoc Company, Inc.s consolidated financial statements and of its internal control over financial reporting as of December 31, 2006 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement schedule
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of The Manitowoc Company, Inc. and its subsidiaries at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (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 of financial statements 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 our opinion.
As discussed in Notes 1 and 14 to the consolidated financial statements, the Company changed its method of accounting for stock-based compensation in 2006.
Internal control over financial reporting
Also, in our opinion, managements assessment, included in Managements Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control Integrated Framework issued by the COSO. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on managements assessment and on the effectiveness of the Companys internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP |
|
Milwaukee, Wisconsin |
|
March 1, 2007 |
|
The Manitowoc Company, Inc. 2006 Form 10-K |
35 |
The Manitowoc Company, Inc.
Consolidated Statements of Operations
For the years ended December 31, 2006, 2005 and 2004
Millions of dollars, except per share data |
|
2006 |
|
2005 |
|
2004 |
|
|||
Operations |
|
|
|
|
|
|
|
|||
Net sales |
|
$ |
2,933.3 |
|
$ |
2,254.1 |
|
$ |
1,844.9 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|||
Cost of sales |
|
2,286.0 |
|
1,832.2 |
|
1,469.2 |
|
|||
Engineering, selling and administrative expenses |
|
341.6 |
|
282.3 |
|
266.4 |
|
|||
Amortization expense |
|
3.3 |
|
3.1 |
|
3.1 |
|
|||
Plant consolidation and restructuring costs |
|
|
|
3.2 |
|
1.3 |
|
|||
Total costs and expenses |
|
2,630.9 |
|
2,120.8 |
|
1,740.0 |
|
|||
Operating earnings from continuing operations |
|
302.4 |
|
133.3 |
|
104.9 |
|
|||
Other expenses: |
|
|
|
|
|
|
|
|||
Interest expense |
|
(46.3 |
) |
(53.8 |
) |
(56.0 |
) |
|||
Loss on debt extinguishment |
|
(14.4 |
) |
(9.1 |
) |
(1.0 |
) |
|||
Other income (expense) net |
|
3.2 |
|
3.5 |
|
(0.9 |
) |
|||
Total other expenses |
|
(57.5 |
) |
(59.4 |
) |
(57.9 |
) |
|||
Earnings from continuing operations before taxes on income |
|
244.9 |
|
73.9 |
|
47.0 |
|
|||
Provision for taxes on earnings |
|
78.4 |
|
14.8 |
|
8.9 |
|
|||
Earnings from continuing operations |
|
166.5 |
|
59.1 |
|
38.1 |
|
|||
Discontinued operations: |
|
|
|
|
|
|
|
|||
Earnings (loss) from discontinued operations, net of income taxes of $0.2, $(1.2) and $(0.8), respectively |
|
(0.3 |
) |
0.9 |
|
(0.2 |
) |
|||
Gain on sale or closure of discontinued operations, net of income taxes of $6.4 and $0.3, respectively |
|
|
|
5.8 |
|
1.2 |
|
|||
Net earnings |
|
$ |
166.2 |
|
$ |
65.8 |
|
$ |
39.1 |
|
Per Share Data |
|
|
|
|
|
|
|
|||
Basic earnings per share: |
|
|
|
|
|
|
|
|||
Earnings from continuing operations |
|
$ |
2.72 |
|
$ |
0.98 |
|
$ |
0.71 |
|
Earnings (loss) from discontinued operations, net of income taxes |
|
(0.01 |
) |
0.02 |
|
(0.01 |
) |
|||
Gain on sale or closure of discontinued operations, net of income taxes |
|
|
|
0.10 |
|
0.02 |
|
|||
Net earnings |
|
$ |
2.71 |
|
$ |
1.09 |
|
$ |
0.73 |
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|||
Earnings from continuing operations |
|
$ |
2.65 |
|
$ |
0.96 |
|
$ |
0.70 |
|
Earnings (loss) from discontinued operations, net of income taxes |
|
(0.01 |
) |
0.02 |
|
(0.01 |
) |
|||
Gain on sale or closure of discontinued operations, net of income taxes |
|
|
|
0.10 |
|
0.02 |
|
|||
Net earnings |
|
$ |
2.65 |
|
$ |
1.07 |
|
$ |
0.72 |
|
The accompanying notes are an integral part of these financial statements.
36 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
The Manitowoc Company, Inc.
Consolidated Balance Sheets
As of December 31, 2006 and 2005
Millions of dollars, except share data |
|
2006 |
|
2005 |
|
||
Assets |
|
|
|
|
|
||
Current Assets: |
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
173.7 |
|
$ |
229.5 |
|
Marketable securities |
|
2.4 |
|
2.3 |
|
||
Restricted cash |
|
15.1 |
|
|
|
||
Accounts receivable, less allowances of $27.6 and $23.8, respectively |
|
285.2 |
|
243.2 |
|
||
Inventories net |
|
492.4 |
|
331.5 |
|
||
Deferred income taxes |
|
97.7 |
|
74.4 |
|
||
Other current assets |
|
76.2 |
|
72.5 |
|
||
Total current assets |
|
1,142.7 |
|
953.4 |
|
||
Property, plant and equipment net |
|
398.9 |
|
353.9 |
|
||
Goodwill |
|
462.1 |
|
429.6 |
|
||
Other intangible assets net |
|
160.0 |
|
139.9 |
|
||
Deferred income taxes |
|
14.3 |
|
26.7 |
|
||
Other non-current assets |
|
41.5 |
|
58.3 |
|
||
Total assets |
|
$ |
2,219.5 |
|
$ |
1,961.8 |
|
Liabilities and Stockholders Equity |
|
|
|
|
|
||
Current Liabilities: |
|
|
|
|
|
||
Accounts payable and accrued expenses |
|
$ |
839.6 |
|
$ |
591.8 |
|
Short-term borrowings |
|
4.1 |
|
19.4 |
|
||
Product warranties |
|
59.6 |
|
47.3 |
|
||
Product liabilities |
|
32.1 |
|
31.8 |
|
||
Total current liabilities |
|
935.4 |
|
690.3 |
|
||
Non-Current Liabilities: |
|
|
|
|
|
||
Long-term debt, less current portion |
|
264.3 |
|
474.0 |
|
||
Pension obligations |
|
64.5 |
|
71.6 |
|
||
Postretirement health and other benefit obligations |
|
59.9 |
|
52.4 |
|
||
Long-term deferred revenue |
|
71.6 |
|
81.7 |
|
||
Other non-current liabilities |
|
49.3 |
|
48.5 |
|
||
Total non-current liabilities |
|
509.6 |
|
728.2 |
|
||
Commitments and contingencies (Note 15) |
|
|
|
|
|
||
Stockholders Equity: |
|
|
|
|
|
||
Common stock (150,000,000 and 75,000,000 shares authorized, respectively 79,587,964 and 39,793,982 shares issued, 62,121,862, and 30,362,501 shares outstanding, respectively) |
|
0.7 |
|
0.4 |
|
||
Additional paid-in capital |
|
231.8 |
|
195.9 |
|
||
Accumulated other comprehensive income |
|
48.0 |
|
16.6 |
|
||
Retained earnings |
|
587.4 |
|
429.8 |
|
||
Treasury stock, at cost (17,466,102 and 9,431,481 shares, respectively) |
|
(93.4 |
) |
(99.4 |
) |
||
Total stockholders equity |
|
774.5 |
|
543.3 |
|
||
Total liabilities and stockholders equity |
|
$ |
2,219.5 |
|
$ |
1,961.8 |
|
See accompanying notes which are an integral part of these statements.
|
The Manitowoc Company, Inc. 2006 Form 10-K |
37 |
The Manitowoc Company, Inc.
Consolidated
Statements of Cash Flows
For the years ended December 31, 2006, 2005 and 2004
Millions of dollars |
|
2006 |
|
2005 |
|
2004 |
|
|||
Cash Flows From Operations |
|
|
|
|
|
|
|
|||
Net earnings |
|
$ |
166.2 |
|
$ |
65.8 |
|
$ |
39.1 |
|
Adjustments to reconcile net earnings to cash provided by operating activities of continuing operations: |
|
|
|
|
|
|
|
|||
Discontinued operations, net of income taxes |
|
0.3 |
|
(6.7 |
) |
(1.0 |
) |
|||
Depreciation |
|
69.0 |
|
60.4 |
|
50.1 |
|
|||
Amortization of intangible assets |
|
3.3 |
|
3.1 |
|
3.1 |
|
|||
Amortization of deferred financing fees |
|
1.4 |
|
2.1 |
|
3.3 |
|
|||
Deferred income taxes |
|
(3.8 |
) |
14.0 |
|
(5.2 |
) |
|||
Plant relocation and restructuring costs |
|
|
|
3.2 |
|
1.3 |
|
|||
Loss on early extinguishment of debt |
|
3.1 |
|
2.6 |
|
1.0 |
|
|||
Gain on sale of property, plant and equipment |
|
(2.4 |
) |
(5.0 |
) |
(2.1 |
) |
|||
Changes in operating assets and liabilities, excluding the effects of business acquisitions and dispositions: |
|
|
|
|
|
|
|
|||
Accounts receivable |
|
(7.5 |
) |
(24.7 |
) |
6.1 |
|
|||
Inventories |
|
(160.6 |
) |
(113.5 |
) |
(84.4 |
) |
|||
Other assets |
|
14.4 |
|
(12.2 |
) |
(23.2 |
) |
|||
Accounts payable and accrued expenses |
|
106.7 |
|
73.2 |
|
46.4 |
|
|||
Other liabilities |
|
104.3 |
|
58.2 |
|
23.2 |
|
|||
Net cash provided by operating activities of continuing operations |
|
294.4 |
|
120.5 |
|
57.7 |
|
|||
Net cash used for operating activities of discontinued operations |
|
(0.3 |
) |
(13.8 |
) |
(0.7 |
) |
|||
Net cash provided by operating activities |
|
294.1 |
|
106.7 |
|
57.0 |
|
|||
Cash Flows From Investing |
|
|
|
|
|
|
|
|||
Capital expenditures |
|
(67.6 |
) |
(54.9 |
) |
(43.2 |
) |
|||
Proceeds from sale of property, plant and equipment |
|
10.3 |
|
15.1 |
|
15.4 |
|
|||
Restricted cash |
|
(15.1 |
) |
|
|
|
|
|||
Business acquisitions, net of cash acquired |
|
(48.1 |
) |
|
|
|
|
|||
Purchase of marketable securities |
|
(0.1 |
) |
(0.1 |
) |
|
|
|||
Net cash used for investing activities of continuing operations |
|
(120.6 |
) |
(39.9 |
) |
(27.8 |
) |
|||
Net cash provided by investing activities of discontinued operations |
|
|
|
28.3 |
|
7.8 |
|
|||
Net cash used for investing activities |
|
(120.6 |
) |
(11.6 |
) |
(20.0 |
) |
|||
Cash Flows From Financing |
|
|
|
|
|
|
|
|||
Net proceeds from issuance of common stock |
|
|
|
|
|
104.9 |
|
|||
Payments on long-term debt |
|
(223.5 |
) |
(77.1 |
) |
(43.0 |
) |
|||
Proceeds from (payments) on short-term borrowings-net |
|
(13.6 |
) |
19.9 |
|
8.3 |
|
|||
Proceeds from (payments) on revolving credit facility |
|
(4.3 |
) |
4.3 |
|
|
|
|||
Proceeds from (payments) on from notes financing net |
|
(15.4 |
) |
14.2 |
|
23.2 |
|
|||
Debt issue costs |
|
(0.2 |
) |
(1.8 |
) |
|
|
|||
Dividends paid |
|
(8.6 |
) |
(8.4 |
) |
(7.5 |
) |
|||
Exercises of stock options, including windfall tax benefits |
|
30.2 |
|
10.8 |
|
6.7 |
|
|||
Net cash provided by (used for) financing activities |
|
(235.4 |
) |
(38.1 |
) |
92.6 |
|
|||
Effect of exchange rate changes on cash |
|
6.1 |
|
(3.9 |
) |
1.8 |
|
|||
Net increase (decrease) in cash and cash equivalents |
|
(55.8 |
) |
53.1 |
|
131.4 |
|
|||
Balance at beginning of year |
|
229.5 |
|
176.4 |
|
45.0 |
|
|||
Balance at end of year |
|
$ |
173.7 |
|
$ |
229.5 |
|
$ |
176.4 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|||
Interest paid |
|
$ |
48.3 |
|
$ |
50.3 |
|
$ |
51.8 |
|
Income taxes paid |
|
$ |
23.7 |
|
$ |
12.2 |
|
$ |
7.0 |
|
The accompanying notes are an integral part of these financial statements.
38 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
The Manitowoc Company, Inc.
Consolidated
Statements of Stockholders Equity and Comprehensive Income
For the years ended December 31, 2006, 2005 and 2004
Millions of dollars, except shares data |
|
2006 |
|
2005 |
|
2004 |
|
|||
Common Stock Shares Outstanding |
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
30,362,501 |
|
29,949,715 |
|
26,572,024 |
|
|||
Stock options exercised |
|
1,065,668 |
|
432,590 |
|
334,925 |
|
|||
Two-for-one stock split |
|
30,605,986 |
|
|
|
|
|
|||
Stock swap for stock options exercised |
|
(10,593 |
) |
(19,804 |
) |
(3,189 |
) |
|||
Restricted stock |
|
98,300 |
|
|
|
(1,545 |
) |
|||
Issuance of common stock |
|
|
|
|
|
3,047,500 |
|
|||
Balance at end of year |
|
62,121,862 |
|
30,362,501 |
|
29,949,715 |
|
|||
Common Stock Par Value |
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
$ |
0.4 |
|
$ |
0.4 |
|
$ |
0.3 |
|
Issuance of common stock |
|
|
|
|
|
0.1 |
|
|||
Two-for-one stock split |
|
0.3 |
|
|
|
|
|
|||
Balance at end of year |
|
$ |
0.7 |
|
$ |
0.4 |
|
$ |
0.4 |
|
Additional Paid-in Capital |
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
$ |
195.9 |
|
$ |
188.6 |
|
$ |
81.0 |
|
Issuance of common stock |
|
|
|
0.2 |
|
104.1 |
|
|||
Two-for-one stock split |
|
(0.3 |
) |
|
|
|
|
|||
Stock options exercised |
|
9.1 |
|
7.1 |
|
3.3 |
|
|||
Restricted stock expense |
|
1.2 |
|
|
|
0.2 |
|
|||
Windfall tax benefit on stock options exercised |
|
20.2 |
|
|
|
|
|
|||
Stock option expense |
|
5.7 |
|
|
|
|
|
|||
Balance at end of year |
|
$ |
231.8 |
|
$ |
195.9 |
|
$ |
188.6 |
|
Accumulated Other Comprehensive Income |
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
$ |
16.6 |
|
$ |
61.0 |
|
$ |
40.8 |
|
Foreign currency translation adjustments |
|
35.2 |
|
(34.4 |
) |
22.9 |
|
|||
Derivative instrument fair market adjustment, net of income taxes of $0.9, $(1.4) and $1.3 |
|
1.6 |
|
(3.5 |
) |
3.2 |
|
|||
Unrecognized pension and postretirement obligation, net of income taxes of $(3.9) |
|
(7.3 |
) |
|
|
|
|
|||
Additional minimum pension liability, net of income taxes of $0.9, $(3.5) and $(1.1) |
|
1.9 |
|
(6.5 |
) |
(5.9 |
) |
|||
Balance at end of year |
|
$ |
48.0 |
|
$ |
16.6 |
|
$ |
61.0 |
|
Retained Earnings |
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
$ |
429.8 |
|
$ |
372.4 |
|
$ |
340.8 |
|
Net earnings |
|
166.2 |
|
65.8 |
|
39.1 |
|
|||
Cash dividends |
|
(8.6 |
) |
(8.4 |
) |
(7.5 |
) |
|||
Balance at end of year |
|
$ |
587.4 |
|
$ |
429.8 |
|
$ |
372.4 |
|
Treasury Stock |
|
|
|
|
|
|
|
|||
Balance at beginning of year |
|
$ |
(99.4 |
) |
$ |
(103.6 |
) |
$ |
(106.9 |
) |
Stock options exercised |
|
6.0 |
|
3.7 |
|
3.3 |
|
|||
Restricted stock issued |
|
|
|
0.5 |
|
|
|
|||
Balance at end of year |
|
$ |
(93.4 |
) |
$ |
(99.4 |
) |
$ |
(103.6 |
) |
Comprehensive Income |
|
|
|
|
|
|
|
|||
Net earnings |
|
$ |
166.2 |
|
$ |
65.8 |
|
$ |
39.1 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|||
Foreign currency translation adjustments |
|
35.2 |
|
(34.4 |
) |
22.9 |
|
|||
Derivative instrument fair market adjustment, net of income taxes |
|
1.6 |
|
(3.5 |
) |
3.2 |
|
|||
Additional minimum pension liability, net of income taxes |
|
1.9 |
|
(6.5 |
) |
(5.9 |
) |
|||
Comprehensive income |
|
$ |
204.9 |
|
$ |
21.4 |
|
$ |
59.3 |
|
The accompanying notes are an integral part of these financial statements.
|
The Manitowoc Company, Inc. 2006 Form 10-K |
39 |
Notes to Consolidated Financial Statements
1. Company and Basis of Presentation
Company The Manitowoc Company, Inc. and its subsidiaries (collectively referred to as the company) is a diversified industrial manufacturer of cranes, foodservice equipment and mid-size commercial, research and military ships. The company was founded in 1902 and operates in three business segments: Cranes and Related Products (Crane); Foodservice Equipment (Foodservice); and Marine.
The Crane business is a global provider of engineered lift solutions which designs, manufactures and markets a comprehensive line of lattice-boom crawler cranes, mobile telescopic cranes, tower cranes, and boom trucks. The Crane products are marketed under the Manitowoc, Grove, Potain, and National brand names and 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. Our crane-related product support services are marketed under the Crane CARE brand name and include maintenance and repair services and parts supply.
The Foodservice business is a broad-line manufacturer of cold side commercial foodservice products. Foodservice designs, manufactures and markets full product lines of ice making machines, walk-in and reach-in refrigerators and freezers, fountain beverage delivery systems and other foodservice refrigeration products for the lodging, restaurant, healthcare, convenience store, soft-drink bottling, and institutional foodservice markets. Foodservice products are marketed under the Manitowoc, SerVend, Multiplex, Kolpak, Harford-Duracool, McCall, McCanns, Koolaire, Flomatic, Kyees, RDI, and other brand names.
The Marine business provides new construction, ship repair and maintenance services for freshwater and saltwater vessels and oceangoing mid-size commercial, research, and military vessels from three shipyards on the Great Lakes. Marine serves the Great Lakes maritime market consisting of US and Canadian fleets, inland waterway operations and ocean going vessels that transit the Great Lakes and St. Lawrence Seaway.
Basis of Presentation The consolidated financial statements include the accounts of The Manitowoc Company, Inc. and its wholly and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Certain prior year amounts have been reclassified to conform to current years presentation (see Note 13, Stockholders Equity for more information regarding reclassifications). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
2. Summary of Significant Accounting Policies
Cash Equivalents, Restricted Cash and Marketable Securities All short-term investments purchased with an original maturity of three months or less are considered cash equivalents. Marketable securities at December 31, 2006 and 2005, include securities which are considered available for sale. The difference between fair market value and cost of these investments was not significant for either year. Restricted cash represents cash in escrow funds which replaced outstanding letters of credit related to performance under a certain Marine contract and security for the indemnity agreement for a casualty insurance provider.
Inventories Inventories are valued at the lower of cost or market value. Approximately 85% of the companys inventories at both December 31, 2006 and 2005, were computed using the first-in, first-out (FIFO) method. The remaining inventories were computed using the last-in, first-out (LIFO) method. If the FIFO inventory valuation method had been used exclusively, inventories would have increased by $22.9 million and $20.9 million at December 31, 2006 and 2005, respectively. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs.
Goodwill and Other Intangible Assets The company accounts for its goodwill and other intangible assets under Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, goodwill is not amortized, but it is tested for impairment at least annually. The companys other intangible assets with indefinite lives, including trademarks and tradenames, and in-place distributor networks, are not amortized, but are also tested for impairment at least annually. The companys other intangible assets subject to amortization are tested for impairment at least annually and are amortized over the following estimated useful lives:
|
|
Useful lives |
|
Patents |
|
10-15 years |
|
Engineering drawings |
|
15 years |
|
Customer relationships |
|
13 years |
|
Property, Plant and Equipment Property, plant and equipment is stated at cost. Expenditures for maintenance, repairs and minor renewals are charged against earnings as incurred. Expenditures for major renewals and improve
40 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
ments that substantially extend the capacity or useful life of an asset are capitalized and amortized by depreciation charges. 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 earnings. Property, plant and equipment is depreciated over the estimated useful lives of the assets using the straight-line depreciation method for financial reporting and on accelerated methods for income tax purposes.
Property, plant and equipment is depreciated over the following estimated useful lives:
|
|
Years |
|
Building and improvements |
|
2-40 |
|
Drydocks and dock fronts |
|
15-25 |
|
Machinery, equipment and tooling |
|
2-20 |
|
Furniture and fixtures |
|
5-20 |
|
Computer hardware and software |
|
2-7 |
|
Property, plant and equipment also include cranes accounted for as leases. Equipment accounted for as leases includes equipment leased directly to the customer and equipment for which the company has assisted in the financing arrangement such as guaranteed more than insignificant residual value or made a buyback commitment. Equipment that is leased directly to the customer is accounted for as operating leases with the related assets capitalized and depreciated over their estimated economic life. Equipment involved in financing arrangements is depreciated over the life of the underlying arrangement so that the net book value at the end of the period equals the buyback amount or the residual value amount. The amount of rental equipment included in property, plant and equipment amounted to $120.0 million and $118.6 million, net of accumulated depreciation, at December 31, 2006 and 2005, respectively.
Impairment of Long-Lived Assets The company reviews long-lived assets, including goodwill and other intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.
Each year the company tests for impairment of goodwill according to a two-step approach. In the first step, the company estimates the fair values of its reporting units using the present value of future cash flows approach, subject to a comparison for reasonableness to its market capitalization at the date of valuation. If the carrying amount exceeds the fair value, the second step of the goodwill impairment test is performed to measure the amount of the impairment loss, if any. In the second step the implied fair value of the goodwill is estimated as the fair value of the reporting unit used in the first step less the fair values of all other net tangible and intangible assets of the reporting unit. If the carrying amount of the goodwill exceeds its implied fair market value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill. In addition, goodwill of a reporting unit is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. For other intangible assets, the impairment test consists of a comparison of the fair value of the intangible assets to their carrying amount.
For property, plant and equipment and other long-lived assets, other than goodwill and other intangible assets, the company performs undiscounted operating cash flow analyses to determine impairments. If an impairment is determined to exist, any related impairment loss is calculated based upon comparison of the fair value to the net book value of the assets. Impairment losses on assets held for sale are based on the estimated proceeds to be received, less costs to sell.
Financial Instruments The carrying amounts reported in the Consolidated Balance Sheet for cash and cash equivalents, accounts receivable, accounts payable, and short-term variable rate debt approximated fair value at December 31, 2006 and 2005. The fair value of the companys 10 1/2% Senior Subordinated Notes due 2012 was approximately $121.9 million and $126.3 million at December 31, 2006 and 2005, respectively. The fair value of the companys 7 1/8% Senior Notes due 2013 was approximately $151.2 million and $154.1 million at December 31, 2006 and 2005, respectively. See Note 9, Debt for the related book values of these debt instruments. The aggregate fair values of interest rate swaps, commodity contracts and foreign currency exchange contracts at December 31, 2006 and 2005 were ($1.1) million and ($1.9) million, respectively. These fair values are the amounts at which they could be settled, based on estimates obtained from financial institutions.
Warranties Estimated warranty costs are recorded in cost of sales at the time of sale of the warranted products based on historical warranty experience for the related product or estimates of projected costs due to specific warranty issues on new products. These estimates are reviewed periodically and are adjusted based on changes in facts, circumstances or actual experience.
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 discounted to their present value when the timing of cash flows are estimable.
|
The Manitowoc Company, Inc. 2006 Form 10-K |
41 |
Product Liabilities The company records product liability reserves for its self-insured portion of any pending or threatened product liability actions. The reserve is based upon two estimates. First, the company tracks the population of all outstanding pending and threatened product liability cases to determine an appropriate case reserve for each based upon the companys best judgment and the advice of legal counsel. These estimates are continually evaluated and adjusted based upon changes to facts and circumstances surrounding the case. Second, the company obtains a third-party actuarial analysis to determine the amount of additional reserve required to cover incurred but not reported product liability issues and to account for possible adverse development of the established case reserves (collectively referred to as IBNR). This actuarial analysis is performed at least twice annually.
Foreign Currency Translation The financial statements of the companys non-U.S. subsidiaries are translated using the current exchange rate for assets and liabilities and the weighted-average exchange rate for the year for income and expense items. Resulting translation adjustments are recorded to Accumulated Other Comprehensive Income (OCI) as a component of stockholders equity.
Derivative Financial Instruments and Hedging Activities The company has written policies and procedures that place all financial instruments under the direction of corporate treasury and restrict all derivative transactions to those intended for hedging purposes. The use of financial instruments for trading purposes is strictly prohibited. The company uses financial instruments to manage the market risk from changes in foreign exchange rates and interest rates. The company follows the guidance of Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, No. 138, and No. 149. The fair values of all derivatives are recorded in the Consolidated Balance Sheets. The change in a derivatives fair value is recorded each period in current earnings or accumulated OCI depending on whether the derivative is designated and qualifies as part of a hedge transaction and if so, the type of hedge transaction.
Cash Flow Hedge The company selectively hedges anticipated transactions that are subject to foreign exchange exposure, primarily using foreign currency exchange contracts. These instruments are designated as cash flow hedges in accordance with SFAS No. 133 and are recorded in the Consolidated Balance Sheets at fair value. The effective portion of the contracts gains or losses due to changes in fair value are initially recorded as a component of accumulated OCI and are subsequently reclassified into earnings when the hedge transactions, typically sales and costs related to sales, occur and affect earnings. These contracts are highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates.
For the years ended December 31, 2006, 2005 and 2004, no amount was recognized in earnings due to ineffectiveness of a hedge transaction; however, in December 2004 $0.4 million was recognized as a charge to earnings due to the company unwinding its floating-to-fixed interest rate swap contract. This charge is included in loss on debt extinguishment in the Consolidated Statements of Operations for the year ended December 31, 2004. As of December 31, 2006, the company has no floating-to-fixed interest rate swap contracts outstanding. The amount reported as derivative instrument fair market value adjustment in the accumulated OCI account within stockholders equity represents the net gain (loss) on foreign exchange currency exchange contracts designated as cash flow hedges, net of income taxes.
Fair Value Hedges The company periodically enters into interest rate swaps designated as a hedge of the fair value of a portion of its fixed rate debt. These hedges effectively result in changing a portion of its fixed rate debt to variable interest rate debt. Both the swaps and the hedged portion of the debt are recorded in the Consolidated Balance Sheet at fair value. The change in fair value of the swaps exactly offsets the change in fair value of the hedged debt, with no net impact to earnings. Interest expense of the hedged debt is recorded at the variable rate in earnings. See Note 9, Debt for additional information related to these hedges.
Stock-Based Compensation At December 31, 2006, the company has five stock-based compensation plans, which are described more fully in Note 14, Stock Options. Effective January 1, 2006, the company adopted SFAS No. 123 (R), Share-Based Payment: An Amendment of Financial Accounting Standards Board Statements No. 123 (SFAS No. 123(R)), which revised SFAS No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be measured at fair value and expensed in the consolidated statement of operations over the service period (generally the vesting period) of the grant. Upon adoption, the company transitioned to SFAS No. 123(R) using the modified prospective application, under which compensation expense is only recognized in the consolidated statements of operations beginning with the first period that SFAS No. 123(R) is effective and continuing to be expensed thereafter. Prior periods stock-based compensation expense is still presented on a pro-forma basis. The following table illustrates the effect on net earnings and earnings per share if the company had applied the fair value recognition provisions of SFAS No. 123(R) to stock based employee compensation for the years ended December 31, 2005 and 2004.
42 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
|
|
2005 |
|
2004 |
|
||
Reported net earnings |
|
$ |
65.8 |
|
$ |
39.1 |
|
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes |
|
(4.4 |
) |
(4.8 |
) |
||
Proforma net earnings |
|
$ |
61.4 |
|
$ |
34.3 |
|
Earnings per share |
|
|
|
|
|
||
Basic as reported |
|
$ |
1.09 |
|
$ |
0.73 |
|
Basic pro forma |
|
$ |
1.02 |
|
$ |
0.64 |
|
Diluted as reported |
|
$ |
1.07 |
|
$ |
0.72 |
|
Diluted pro forma |
|
$ |
1.00 |
|
$ |
0.63 |
|
In addition to the compensation expense related to stock options, the company recognized $1.2 million, $0.5 million and $0.3 million of compensation expense related to restricted stock during the years ended December 31, 2006, 2005 and 2004, respectively.
Revenue Recognition and Long-Term Contracts Revenue is recognized and earned when all the following criteria are satisfied with regard to a specific transaction: persuasive evidence of a sales arrangement exists; the price is fixed or determinable; collectibility of cash is reasonably assured; and delivery has occurred or services have been rendered. Shipping and handling fees are reflected in net sales and shipping and handling costs are reflected in cost of sales in the Consolidated Statements of Operations. Revenues under long-term contracts within the Marine segment are recorded using the percentage-of-completion method of accounting. Revenue under these fixed-price long-term contracts are recorded based on the ratio of costs incurred to estimated total costs at completion, and costs are expensed as incurred. Amounts representing contract change orders, claims or other items are included in revenue only when they can be reliably estimated and realization is probable. When adjustments in contract value or estimated costs are determined, any changes from prior estimates are reflected in earnings in the current period. Anticipated losses on contracts or programs in progress are charged to earnings when identified.
Amounts related to long-term contracts accounted for according to the percentage-of-completion method included in the Consolidated Balance Sheet at December 31 were as follows:
|
|
2006 |
|
2005 |
|
||
Amounts billed, included in accounts receivable |
|
$ |
10.3 |
|
$ |
15.7 |
|
Recoverable costs and accrued profit on progress completed but not billed, included in other current assets |
|
$ |
33.8 |
|
$ |
29.8 |
|
Amounts billed in excess of sales, included in accounts payable and accrued expenses |
|
$ |
57.2 |
|
$ |
22.4 |
|
Recoverable costs and accrued profit on progress completed but not billed related to amounts not billable at the balance sheet date. It is anticipated that such amounts will be billed in the first quarter of the subsequent year. Amounts billed but not paid pursuant to retainage contract provisions, which are due upon completion of the contracts, were $2.4 million and $7.8 million as of December 31, 2006 and 2005, respectively, and are included in other current assets in the Consolidated Balance Sheets.
As discussed above, the company enters into transactions with customers that provide for residual value guarantees and buyback commitments on certain crane transactions. The company records transactions which it provides significant residual value guarantees and any buyback commitments as operating leases. Net revenues in connection with the initial transactions are recorded as deferred revenue and are amortized to income on a straight-line basis over a period equal to that of the customers third party financing agreement. See Note 16, Guarantees.
The company also leases cranes to customers under operating lease terms. Proceeds received in connection with these transactions are recognized as revenue over the term of the lease, and leased cranes are depreciated over their estimated useful lives.
Research and Development Research and development costs are charged to expense as incurred and amount to $31.2 million, $26.0 million and $21.2 million, for the years ended December 31, 2006, 2005 and 2004, respectively. Research and development costs include salaries, materials, contractor fees and other administrative costs.
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 companys financial statements. Under this method, deferred tax assets and liabilities are determined based on the temporary difference 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. Valuation allowances are provided for deferred tax assets where it is considered more likely than
|
The Manitowoc Company, Inc. 2006 Form 10-K |
43 |
not that the company will not realize the benefit of such assets.
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 or period. Diluted earnings per share is computed similar to basic earnings per share except that the weighted average shares outstanding is increased to include shares of restricted stock and 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 or period.
Comprehensive Income Comprehensive income includes, in addition to net earnings, other items that are reported as direct adjustments to stockholders equity. Currently, these items are foreign currency translation adjustments, additional minimum pension liability adjustments and the change in fair value of certain derivative instruments.
Concentration of Credit Risk Credit extended to customers through trade accounts receivable potentially subjects the company to risk. This risk is limited due to the large number of customers and their dispersion across various industries and many geographical areas. However, a significant amount of the companys receivables are with distributors and contractors in the construction industry, large companies in the foodservice and beverage industry, customers servicing the U.S. steel industry, and the U.S. Government. The company currently does not foresee a significant credit risk associated with these individual groups of receivables.
Recent accounting changes and pronouncements In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments an Amendment of FASB Statement No. 133 and 140. SFAS No. 155 amends certain aspects of SFAS No. 133, primarily related to hybrid financial instruments and beneficial interests in securitized financial assets, as well as amends SFAS No. 140, related to eliminating a restriction on the passive derivative instruments that a qualifying special-purpose entity (SPE) may hold. SFAS No. 155 is effective for the company on January 1, 2007. The adoption of SFAS No. 155 will not have an impact on the companys Consolidated Financial Statements.
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets an amendment of FASB Statement No. 140. SFAS No. 156, amends certain aspects of SFAS No. 140, by requiring that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. SFAS No. 156 is effective for the company on January 1, 2007. The adoption of SFAS No. 156 did not have an impact on the companys Consolidated Financial Statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities. The standard also responds to investors requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for the company on January 1, 2008. The company is currently evaluating the impact, if any, the adoption of SFAS No. 157 will have on its Consolidated Financial Statements.
In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R). Under SFAS No. 158, companies must recognize a net liability or asset to report the funded status of their defined benefit pension and other postretirement benefit plans on their balance sheets. SFAS No. 158 was effective for the company as of December 31, 2006. See Note 18, Employee Benefit Plans for detail regarding the adoption of SFAS 158.
In June 2006, the FASB issued FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109 . This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. It prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. FIN No. 48 is effective for the company on January 1, 2007. The company estimates the impact on its Consolidated Financial Statements upon the adoption of FIN No. 48 will be in the range of $5.0 million to $15.0 million and will be recorded as a cumulative effect of accounting change in the Consolidated Statements of Operations in the first quarter of 2007.
In September 2006, the SEC Office of the Chief Accountant and Divisions of Corporation Finance and Investment Management released Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB No. 108) that provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff believes that registrants should quantify errors using both a balance sheet and an income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. This pronouncement is effective for fiscal years ending after November 15, 2006. The adoption of SAB No. 108 had no impact on our financial position, results of operations, or cash flows.
44 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
3. Acquisition
On May 26, 2006, the company acquired substantially all of the assets and business operated by McCanns Engineering & Mfg. Co. and McCanns de Mexico S.A. de C.V. (McCanns). Headquartered in Los Angeles, California, and with operations in Tijuana, Mexico McCanns is engaged in the design, manufacture and sale of beverage dispensing equipment primarily used in fast food restaurants, stadiums, cafeterias and convenience stores. McCanns primary products are backroom beverage equipment such as carbonators, water boosters and racks. McCanns also produces accessory components for beverage dispensers including specialty valves, stands and other stainless steel components. The aggregate consideration paid for the McCanns acquisition was $37.1 million, including acquisition costs of approximately $0.7 million. The acquisition resulted in approximately $14.4 million of goodwill and $14.3 million of other intangible assets being recognized by the companys Foodservice segment. See further detail related to the goodwill and other intangible assets of the McCanns acquisition at Note 7, Goodwill and Other Intangible Assets.
On January 3, 2006, the company acquired certain assets, rights and properties of ExacTech, Inc., a supplier of fabrication, machining, welding, and other services to various parties. Located in Port Washington, Wisconsin, ExacTech, Inc. now provides these services to the companys U.S. based crane manufacturing facilities. The aggregate consideration paid for the acquisition resulted in approximately $6.5 million of goodwill being recognized by the companys Crane segment in the first quarter of 2006.
4. Discontinued Operations
During the third quarter of 2005, the company decided to close Toledo Ship Repair Company (Toledo Ship Repair), a division of the companys wholly-owned subsidiary, Manitowoc Marine Group, LLC. Located in Toledo, Ohio, Toledo Ship Repair performed ship repair and industrial repair services. The company recorded a $5.2 million pre-tax ($3.4 million after tax) charge for costs related to the closure of the business. This charge included $0.2 million related to severance agreements; $1.0 million for future lease payments; $0.3 million for the write-off of goodwill related to this business; $2.2 million for the write-down of certain assets (primarily property, plant and equipment and inventory) to estimated salvage value; and $1.5 million for closing and other related costs. This charge is recorded in gain on sale or closure of discontinued operations, net of income taxes in the Consolidated Statements of Operations. The closure of Toledo Ship Repair represents a discontinued operation under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Results of Toledo Ship Repair in current and prior periods have been classified as discontinued in the Consolidated Financial Statements to exclude the results from continuing operations.
The following selected financial data of Toledo Ship Repair for the years ended December 31, 2006, 2005 and 2004 is presented for informational purposes only and does not necessarily reflect what the results of operations would have been had the business operated as a stand-alone entity. There was no general corporate expense or interest expense allocated to discontinued operations for this business during the periods presented.
|
|
2006 |
|
2005 |
|
2004 |
|
|||
Net sales |
|
$ |
|
|
$ |
11.3 |
|
$ |
27.9 |
|
Pretax loss from discontinued operation |
|
$ |
(0.5 |
) |
$ |
(6.7 |
) |
$ |
(7.4 |
) |
Pretax loss on closure |
|
|
|
(5.2 |
) |
|
|
|||
Benefit for taxes on loss |
|
(0.2 |
) |
(4.5 |
) |
(1.4 |
) |
|||
Net loss from discontinued operation |
|
$ |
(0.3 |
) |
$ |
(7.4 |
) |
$ |
(6.0 |
) |
During the third quarter of 2005, the company decided that it would divest of its wholly-owned subsidiary Diversified Refrigeration, LLC, (f/k/a Diversified Refrigeration, Inc.) (DRI). DRI was the companys private-label Foodservice contract manufacturing operation. On December 30, 2005, the company completed the sale of DRI to Monogram Refrigeration, LLC, a wholly-owned subsidiary of the General Electric Company. Net proceeds from the sale of DRI were approximately $28.4 million and resulted in a pre-tax gain of $17.6 million ($9.6 million after tax). This gain is recorded in gain on sale or closure of discontinued operations, net of income taxes in the Consolidated Statements of Operations. The sale of DRI represents a discontinued operation under SFAS No. 144. Results of DRI in prior periods have been classified as discontinued in the Consolidated Financial Statements to exclude the results from continuing operations.
The following selected financial data of DRI for the years ended 2005 and 2004 is presented for informational purposes only and does not necessarily reflect what the results of operations would have been had the business operated as a stand-alone entity. There were no operating results from DRI for the year ended December 31, 2006. There was no general corporate expense or interest expense allocated to discontinued operations for this business during the periods presented.
During the second quarter of 2004, the company completed the sale of its wholly-owned subsidiary, Delta Manlift SAS (Delta), to JLG Industries, Inc. Headquartered in Tonneins, France, Delta manufactured the Toucan brand of vertical mast lifts, a line of aerial work platforms distributed throughout Europe for use principally in industrial and maintenance operations. The company received $9.0 million for the sale of Delta. As a result of the sale, the company recorded a $1.5 million pre-tax gain ($1.2 million net of taxes). This gain is recorded in gain on sale or closure of discontinued operations, net of income taxes in the Consolidated Statements of Operations. Delta was acquired in August 2002 as part of the Grove Investors, Inc. (Grove) acquisition. The sale of Delta represents a discontinued operation under SFAS No. 144. Results of Delta in prior periods have been classified as discontinued in the Consolidated Financial Statements to exclude the results from continuing operations.
The following selected financial data of Delta for the year ended December 31, 2004 is presented for informational purposes only and does not necessarily reflect what the results of operations would have been had the businesses operated as a stand-alone entity. There were no general corporate expense or interest expense allocated to discontinued operations during the year ended December 31, 2004. There were no operating activities related to Delta during the years ended December 31, 2006 or 2005.
|
|
2004 |
|
|
Net sales |
|
$ |
14.8 |
|
Pretax loss from discontinued operations |
|
$ |
(2.7 |
) |
Pretax gain on sale or closure |
|
1.5 |
|
|
Benefit for taxes on loss |
|
(0.8 |
) |
|
Net loss from discontinued operations |
|
$ |
(0.4 |
) |
During the fourth quarter of 2003, the company terminated its distributor agreement with North Central Crane & Excavator Sales Corporation (North Central Crane), the companys wholly-owned crane distributor. The company entered into a new distributor agreement with an independent third party for the area previously covered by North Central Crane. The termination of the North Central Crane represents a discontinued operation under SFAS No. 144 as this was the companys only wholly-owned domestic crane distributor. Results of this company have been classified as discontinued to exclude the results from continuing operations.
The following selected financial data of North Central Crane for the year ended December 31, 2004 is presented for informational purposes only and does not necessarily reflect what the results of operations would have been had the business operated as a stand-alone entity. There were no general corporate expense or interest expense allocated to discontinued operations during the year ended December 31, 2004. There were no operating activities related to North Central Crane during the years ended December 31, 2006 or 2005.
|
|
2004 |
|
|
Net sales |
|
$ |
3.1 |
|
Pretax loss from discontinued operation |
|
$ |
(0.4 |
) |
Benefit for taxes on loss |
|
(0.1 |
) |
|
Net loss from discontinued operations |
|
$ |
(0.3 |
) |
46 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
5. Inventories
The components of inventories at December 31 are summarized as follows:
|
|
2006 |
|
2005 |
|
||
Inventories gross: |
|
|
|
|
|
||
Raw materials |
|
$ |
198.3 |
|
$ |
131.6 |
|
Work-in-process |
|
174.2 |
|
113.9 |
|
||
Finished goods |
|
187.2 |
|
143.2 |
|
||
Total |
|
559.7 |
|
388.7 |
|
||
Less excess and obsolete inventory reserve |
|
(44.4 |
) |
(36.3 |
) |
||
Net inventories at FIFO cost |
|
515.3 |
|
352.4 |
|
||
Less excess of FIFO costs over LIFO value |
|
(22.9 |
) |
(20.9 |
) |
||
Inventories net |
|
$ |
492.4 |
|
$ |
331.5 |
|
6. Property, Plant and Equipment
The components of property, plant and equipment at December 31 are summarized as follows:
|
|
2006 |
|
2005 |
|
||
Land |
|
$ |
44.5 |
|
$ |
33.9 |
|
Building and improvements |
|
188.5 |
|
171.0 |
|
||
Drydocks and dock fronts |
|
19.9 |
|
20.0 |
|
||
Machinery, equipment and tooling |
|
256.0 |
|
224.1 |
|
||
Furniture and fixtures |
|
27.0 |
|
24.1 |
|
||
Computer hardware and software |
|
42.1 |
|
35.9 |
|
||
Rental cranes |
|
193.1 |
|
179.3 |
|
||
Construction in progress |
|
32.5 |
|
28.0 |
|
||
Total cost |
|
803.6 |
|
716.3 |
|
||
Less accumulated depreciation |
|
(404.7 |
) |
(362.4 |
) |
||
Property, plant and equipment-net |
|
$ |
398.9 |
|
$ |
353.9 |
|
7. Goodwill and Other Intangible Assets
The changes in carrying amount of goodwill by reportable segment for the years ended December 31, 2006 and 2005, were as follows:
|
|
Crane |
|
Foodservice |
|
Marine |
|
Total |
|
||||||||
Balance as of January 1, 2005 |
|
$ |
218.3 |
|
|
$ |
186.1 |
|
|
|
$ |
47.4 |
|
|
$ |
451.8 |
|
Write-off of discontinued operations goodwill |
|
|
|
|
(0.4 |
) |
|
|
(0.2 |
) |
|
(0.6 |
) |
||||
Tax adjustment related to purchase accounting |
|
(2.4 |
) |
|
|
|
|
|
|
|
|
(2.4 |
) |
||||
Foreign currency impact |
|
(19.2 |
) |
|
|
|
|
|
|
|
|
(19.2 |
) |
||||
Balance as of December 31, 2005 |
|
196.7 |
|
|
185.7 |
|
|
|
47.2 |
|
|
429.6 |
|
||||
ExacTech, Inc. acquisition |
|
6.5 |
|
|
|
|
|
|
|
|
|
6.5 |
|
||||
McCanns acquisition |
|
|
|
|
14.4 |
|
|
|
|
|
|
14.4 |
|
||||
Foreign currency impact |
|
11.6 |
|
|
|
|
|
|
|
|
|
11.6 |
|
||||
Balance as of December 31, 2006 |
|
$ |
214.8 |
|
|
$ |
200.1 |
|
|
|
$ |
47.2 |
|
|
$ |
462.1 |
|
As discussed in Note 3, Acquisition, during 2006, the company completed the acquisitions of McCanns and ExacTech, Inc. The acquisition of ExacTech, Inc. resulted in an increase of $6.5 million of goodwill and no other intangible assets. The acquisition of McCanns resulted in an increase of $14.4 million of goodwill and $14.3 million of other intangible assets. The other intangible assets consist of trademarks totaling $7.0 million which have an indefinite life, customer relationships of $5.8 million which have been assigned a 13 year life, and patents of $1.5 million which have been assigned a 10 year life.
As discussed in Note 4, Discontinued Operations, during 2005 the company closed its Toledo Ship Repair
|
The Manitowoc Company, Inc. 2006 Form 10-K |
47 |
business and divested of DRI. As a result, the company wrote-off the entire goodwill balances related to these businesses.
During 2005, the company reversed approximately $2.4 million of a tax reserve related to a German tax issue. This reserve was established by the company during purchase accounting for the acquisition of Grove Investors, Inc. (Grove) as the tax issue related to a period prior to the company acquiring Grove. During 2005, the German tax audit was settled and the excess reserve was reversed through goodwill.
The gross carrying amount and accumulated amortization of the companys intangible assets other than goodwill were as follows as of December 31, 2006 and 2005.
|
|
December 31, 2006 |
|
December 31, 2005 |
|
||||||||||||||||||||||
|
|
Gross
|
|
Accumulated
|
|
Net
|
|
Gross
|
|
Accumulated
|
|
Net
|
|
||||||||||||||
Trademarks and tradenames |
|
|
$ |
105.1 |
|
|
|
$ |
|
|
|
$ |
105.1 |
|
|
$ |
92.0 |
|
|
|
$ |
|
|
|
$ |
92.0 |
|
Customer relationships |
|
|
5.8 |
|
|
|
(0.3 |
) |
|
5.5 |
|
|
|
|
|
|
|
|
|
|
|
||||||
Patents |
|
|
31.1 |
|
|
|
(9.8 |
) |
|
21.3 |
|
|
28.5 |
|
|
|
(7.6 |
) |
|
20.9 |
|
||||||
Engineering drawings |
|
|
12.0 |
|
|
|
(4.4 |
) |
|
7.6 |
|
|
11.2 |
|
|
|
(3.5 |
) |
|
7.7 |
|
||||||
Distribution network |
|
|
20.5 |
|
|
|
|
|
|
20.5 |
|
|
19.3 |
|
|
|
|
|
|
19.3 |
|
||||||
|
|
|
$ |
174.5 |
|
|
|
$ |
(14.5 |
) |
|
$ |
160.0 |
|
|
$ |
151.0 |
|
|
|
$ |
(11.1 |
) |
|
$ |
139.9 |
|
Amortization expense recorded for the other intangible assets for the years ended December 31, 2006, 2005 and 2004 was $3.3 million, $3.1 million and $3.1 million, respectively. Estimated amortization expense for the five years beginning in 2007 is estimated to be approximately $3.6 million per year.
8. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31 are summarized as follows:
|
|
2006 |
|
2005 |
|
||
Trade accounts and interest payable |
|
$ |
439.7 |
|
$ |
316.6 |
|
Employee related expenses |
|
76.3 |
|
61.5 |
|
||
Income taxes payable |
|
62.9 |
|
23.2 |
|
||
Profit sharing and incentives |
|
54.8 |
|
37.3 |
|
||
Unremitted cash liability |
|
11.7 |
|
13.1 |
|
||
Deferred revenue current |
|
48.1 |
|
46.8 |
|
||
Amounts billed in excess of sales |
|
57.2 |
|
22.4 |
|
||
Miscellaneous accrued expenses |
|
88.9 |
|
70.9 |
|
||
|
|
$ |
839.6 |
|
$ |
591.8 |
|
9. Debt
Debt at December 31 is summarized as follows:
|
|
2006 |
|
2005 |
|
||
Revolving credit facility |
|
$ |
|
|
$ |
4.3 |
|
Senior subordinated notes due 2011 (175 million Euro) |
|
|
|
207.5 |
|
||
Senior subordinated notes due 2012 |
|
113.8 |
|
113.8 |
|
||
Senior notes due 2013 |
|
150.0 |
|
150.0 |
|
||
Fair value of interest rate swaps |
|
(4.5 |
) |
(2.7 |
) |
||
Other |
|
9.1 |
|
20.5 |
|
||
Total debt |
|
268.4 |
|
493.4 |
|
||
Less current portion and short-term borrowings |
|
(4.1 |
) |
(19.4 |
) |
||
Long-term debt |
|
$ |
264.3 |
|
$ |
474.0 |
|
48 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
In June 2005, the company entered into a five-year, $300 million, secured revolving credit facility (Revolving Credit Facility), which replaced the companys $125 million revolving credit facility that was due to expire in May 2006.
Borrowings under the five year, $300 million, Revolving Credit Facility bear interest at a rate equal to the sum of a base rate or a Eurodollar rate plus an applicable margin, which is based on the companys consolidated total leverage ratio as defined by the credit agreement. The annual commitment fee in effect at December 31, 2006 on the unused portion of the Revolving Credit Facility was 0.15%. As of December 31, 2006, there were no amounts outstanding under the Revolving Credit Facility. As of December 31, 2006, the company had $21.1 million of outstanding letters of credit secured by the Revolving Credit Facility. The company had $278.9 million of unused availability under the terms of the Revolving Credit Facility as of December 31, 2006. During June 2005, the company recorded a charge of $0.8 million ($0.6 million net of income taxes) for deferred financing costs related to the termination of the previous $125 million revolving credit facility.
On May 15, 2006, the company redeemed its 175 million Euro, 10 3 ¤ 8 % senior subordinated notes due 2011 for $216.9 million (based on May 15, 2006 exchange rates). Pursuant to the terms of the indenture, the company paid the note holders 105.188 percent of the principal amount of the notes plus accrued and unpaid interest up to the redemption date. As a result of this redemption, the company incurred a charge of $14.4 million ($9.4 million net of income taxes) related to the call premium ($11.2 million), write-off of unamortized debt issuance costs ($3.1 million) and other expenses ($0.1 million). The charge was recorded in loss on debt extinguishment in the Consolidated Statements of Operations.
As part of the acquisition of Grove Investors, Inc. (Grove) in August 2002, the company issued $175 million of 10 1 ¤ 2 % Senior Subordinated Notes due August 2012 (Senior Subordinated Notes due 2012). The Senior Subordinated Notes due 2012 are unsecured obligations of the company ranking subordinate in right of payment to all senior debt of the company and are fully and unconditionally, jointly and severally guaranteed by substantially all of the companys domestic subsidiaries (see Note 21, Subsidiary Guarantors). Interest on the Senior Subordinated Notes due 2012 is payable semiannually in February and August each year. The Senior Subordinated Notes due 2012 can be redeemed by the company in whole or in part for a premium on or after August 1, 2007. The following is the premium paid by the company, expressed as a percentage of the principal amount, if it redeems the Senior Subordinated Notes due 2012 during the 12-month period commencing on August 1 of the year set forth below:
Year |
|
Percentage |
|
||
2007 |
|
|
105.250 |
% |
|
2008 |
|
|
103.500 |
% |
|
2009 |
|
|
101.750 |
% |
|
2010 and thereafter |
|
|
100.000 |
% |
|
In December 2004, the company sold, pursuant to an underwritten public offering, approximately 3.0 million shares (not adjusted for the 2006 2-for-1 stock split) of its common stock at a price of $36.25 per share (not adjusted for the 2006 2-for-1 stock split). The company used a portion of the proceeds to redeem approximately $61.3 million of the 10 1 ¤ 2 % Senior Subordinated Notes due 2012 and to pay the prepayment premium to the note holders of $6.4 million. The redemption of $61.3 million of the 10 1 ¤ 2 % Senior Subordinated Notes due 2012 was completed on January 10, 2005. As a result of this redemption, the company incurred a charge of approximately $8.3 million ($5.4 million net of income taxes) for the early extinguishment of debt related to the prepayment premium paid to the note holders of $6.4 million, and the partial write-off of debt issuance costs of $1.9 million. The charge was recorded in loss on debt extinguishment in the Consolidated Statements of Operations.
On November 6, 2003, the company completed the sale of $150.0 million of 7 1 ¤ 8 % Senior Notes due 2013 (Senior Notes due 2013). The Senior Notes due 2013 are unsecured senior obligations ranking prior to the companys Senior Subordinated Notes due 2012. Our Revolving Credit Facility ranks equally with the Senior Notes due 2013, except that it is secured by substantially all domestic tangible and intangible assets of the company and its subsidiaries. The Senior Notes due 2013 are fully and unconditionally jointly and severally guaranteed by substantially all of the companys domestic subsidiaries (see Note 21, Subsidiary Guarantors). Interest on the Senior Notes due 2013 is payable semiannually in May and November each year. The Senior Notes due 2013 can be redeemed by the company in whole or in part for a premium on or after November 1, 2008. The following is the premium paid by the company, expressed as a percentage of the principal amount, if it redeems the Senior Notes due 2013 during the 12-month period commencing on November 1 of the year set forth below:
During the year ended December 31, 2004, the company recorded a charge of $1.0 million ($0.8 million net of income taxes) related to the prepayment of the term loan B portion of its senior credit facility. The charge relates to the write-off of unamortized financing fees and unwinding of the companys floating-to-fixed interest rate swap. This charge is recorded in loss on debt extinguishment in the Consolidated Statement of Operations for the year ended December 31, 2004
Our Revolving Credit Facility, Senior Notes due 2013, and Senior Subordinated Notes due 2012 contain customary affirmative and negative covenants. In general, the covenants contained in the Revolving Credit Facility are more restrictive than those of the Senior Notes due 2013 and the Senior Subordinated Notes due 2012. Among other restrictions, these covenants require us to meet specified financial tests, which include the following: consolidated interest coverage ratio; consolidated total leverage ratio; and consolidated senior leverage ratio. These covenants also limit, among other things, our ability to redeem or repurchase our debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, repurchase capital stock, and create or become subject to liens. The Revolving Credit Facility also contains cross-default provisions whereby certain defaults under any other debt agreements would result in default under the secured revolving credit facility. We were in compliance with all covenants as of December 31, 2006, and based upon our current plans and outlook, we believe we will be able to comply with these covenants during the subsequent 12 months.
As of December 31, 2006, the company also had outstanding $9.1 million of other indebtedness with a weighted-average interest rate of 4.8%. This debt includes $2.7 million of outstanding working capital lines of credit in China, $0.5 million in Europe, and $5.9 million of capital lease obligations in Europe.
As of December 31, 2006, the company had four fixed-to-floating rate swap contracts which effectively converted $163.8 million of its fixed rate Senior Notes due 2013 and Senior Subordinated Notes due 2012 to variable rate debt. These contracts are considered to be hedges against changes in the fair value of the fixed rate debt obligation. Accordingly, the interest rate swap contracts are reflected at fair value in its Consolidated Balance Sheet as a liability of $4.5 million as of December 31, 2006. Debt is reflected at an amount equal to the sum of its carrying value plus an adjustment representing the change in fair value of the debt obligation attributable to the interest rate risk being hedged. Changes during any accounting period in the fair value of the interest rate swap contract, as well as offsetting changes in the adjusted carrying value of the related portion of fixed-rate debt being hedged, are recognized as an adjustment to interest expense in the Consolidated Statement of Operations. The change in fair value of the swaps exactly offsets the change in fair value of the hedged fixed-rate debt; therefore, there was no net impact on earnings for the year ended December 31, 2006. The fair value of these contracts, which represents the cost to settle these contracts, approximated a loss of $4.5 million at December 31, 2006.
The aggregate scheduled maturities of outstanding debt obligations in subsequent years are as follows:
2007 |
|
$ |
4.1 |
|
2008 |
|
1.1 |
|
|
2009 |
|
1.1 |
|
|
2010 |
|
1.0 |
|
|
2011 |
|
0.7 |
|
|
Thereafter |
|
260.4 |
|
|
|
|
$ |
268.4 |
|
10. Accounts Receivable Securitization
The Company is party to an accounts receivable securitization program whereby it sells certain of its domestic trade accounts receivable to a wholly owned, bankruptcy-remote special purpose subsidiary which, in turn, sells participating interests in its pool of receivables to a third-party financial institution (Purchaser). The Purchaser receives an ownership and security interest in the pool of receivables. New receivables are purchased by the special purpose subsidiary and participation interests are resold to the Purchaser as collections reduce previously sold participation interests. The company has retained collection and administrative responsibilities on the participation
50 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
interests sold. The Purchaser has no recourse against the company for uncollectible receivables; however, the companys retained interest in the receivable pool is subordinate to the Purchaser and is recorded at fair value. Due to a short average collection cycle of less than 60 days for such accounts receivable and due to the companys collection history, the fair value of the companys retained interest approximates book value. The retained interest recorded at December 31, 2006 is $82.5 million and is included in accounts receivable in the accompanying Consolidated Balance Sheets.
Effective on December 22, 2006, the company entered into an amendment to its accounts receivable securitization program. The amendment expanded the scope of the program to include certain of the companys domestic Foodservice segments businesses in addition to its Crane segment businesses and increased the capacity of the program to $90 million from $60 million. Trade accounts receivables sold to the Purchaser and being serviced by the company totaled $90.0 million at December 31, 2006.
Sales of trade receivables from the special purpose subsidiary to the Purchaser totaled $186.9 million, for the year ended December 31, 2006. Cash collections of trade accounts receivable balances in the total receivable pool totaled $590.0 million for the year ended December 31, 2006.
The accounts receivables securitization program is accounted for as a sale in accordance with FASB Statement No. 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities a Replacement of FASB Statement No. 125. Sales of trade receivables to the Purchaser are reflected as a reduction of accounts receivable in the accompanying Consolidated Balance Sheets and the proceeds received are included in cash flows from operating activities in the accompanying Consolidated Statements of Cash Flows.
The table below provides additional information about delinquencies and net credit losses for trade accounts receivable subject to the accounts receivable securitization program.
|
|
Balance outstanding
|
|
Balance Outstanding
|
|
Net Credit Losses
|
|
|||||||||
Trade accounts receivable subject to securitization program |
|
|
$ |
172.5 |
|
|
|
$ |
2.1 |
|
|
|
$ |
|
|
|
Trade accounts receivable balance sold |
|
|
90.0 |
|
|
|
|
|
|
|
|
|
|
|||
Retained interest |
|
|
$ |
82.5 |
|
|
|
|
|
|
|
|
|
|
11. Income Taxes
Income tax expense for continuing operations is summarized below:
|
|
2006 |
|
2005 |
|
2004 |
|
|||
Earnings from continuing operations before income taxes: |
|
|
|
|
|
|
|
|||
Domestic |
|
$ |
100.2 |
|
$ |
2.9 |
|
$ |
20.7 |
|
Foreign |
|
144.7 |
|
71.0 |
|
26.3 |
|
|||
Total |
|
$ |
244.9 |
|
$ |
73.9 |
|
$ |
47.0 |
|
The provision for taxes on earnings (loss) from continuing operations for the years ended December 31, 2006, 2005 and 2004 are as follows:
|
|
2006 |
|
2005 |
|
2004 |
|
|||
Current: |
|
|
|
|
|
|
|
|||
Federal |
|
$ |
46.7 |
|
$ |
(5.4 |
) |
$ |
0.2 |
|
State |
|
3.7 |
|
(1.9 |
) |
(4.4 |
) |
|||
Foreign |
|
31.8 |
|
42.8 |
|
(0.5 |
) |
|||
Total current |
|
82.2 |
|
35.5 |
|
(4.7 |
) |
|||
Deferred: |
|
|
|
|
|
|
|
|||
Federal and state |
|
(5.5 |
) |
0.2 |
|
9.5 |
|
|||
Foreign |
|
1.7 |
|
(20.9 |
) |
4.1 |
|
|||
Total deferred |
|
(3.8 |
) |
(20.7 |
) |
13.6 |
|
|||
Provision for taxes on earnings |
|
$ |
78.4 |
|
$ |
14.8 |
|
$ |
8.9 |
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
51 |
The federal statutory income tax rate is reconciled to the companys effective income tax rate for continuing operations for the years ended December 31, 2006, 2005 and 2004 as follows:
|
|
2006 |
|
2005 |
|
2004 |
|
||||
Federal income tax at statutory rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
35.0 |
% |
State income provision (benefit) |
|
|
1.7 |
|
|
|
(4.6 |
) |
|
(5.6 |
) |
Non-deductible book intangible asset amortization |
|
|
0.2 |
|
|
|
0.4 |
|
|
0.5 |
|
Tax exempt export income |
|
|
(0.5 |
) |
|
|
(1.5 |
) |
|
(1.9 |
) |
Federal tax credits |
|
|
|
|
|
|
(3.8 |
) |
|
|
|
Taxes on foreign income which differ from the U.S. statutory rate |
|
|
(5.5 |
) |
|
|
(4.3 |
) |
|
(10.0 |
) |
Accrual adjustment |
|
|
1.2 |
|
|
|
(1.7 |
) |
|
1.2 |
|
Other items |
|
|
(0.1 |
) |
|
|
0.5 |
|
|
(0.2 |
) |
Provision for taxes on earnings |
|
|
32.0 |
% |
|
|
20.0 |
% |
|
19.0 |
% |
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:
|
|
2006 |
|
2005 |
|
||
Current deferred assets: |
|
|
|
|
|
||
Inventories |
|
$ |
13.2 |
|
$ |
6.1 |
|
Accounts receivable |
|
11.4 |
|
14.6 |
|
||
Product warranty reserves |
|
13.6 |
|
10.6 |
|
||
Product liability reserves |
|
11.9 |
|
18.4 |
|
||
Other employee-related benefits and allowances |
|
23.2 |
|
12.5 |
|
||
Net operating losses carryforwards, current portion |
|
2.1 |
|
0.1 |
|
||
Deferred revenue, current portion |
|
12.2 |
|
6.2 |
|
||
Other reserves and allowances |
|
10.1 |
|
5.9 |
|
||
Future income tax benefits, current |
|
$ |
97.7 |
|
$ |
74.4 |
|
Non-current deferred assets (liabilities): |
|
|
|
|
|
||
Property, plant and equipment |
|
$ |
(38.9 |
) |
$ |
(25.5 |
) |
Intangible assets |
|
(1.3 |
) |
(6.7 |
) |
||
Post retirement benefits other than pensions |
|
20.0 |
|
20.3 |
|
||
Deferred employee benefits |
|
1.1 |
|
9.9 |
|
||
Severance benefits |
|
2.2 |
|
1.4 |
|
||
Product warranty reserves |
|
1.3 |
|
1.3 |
|
||
Tax Credits |
|
6.7 |
|
5.8 |
|
||
Net operating loss carryforwards |
|
22.8 |
|
26.4 |
|
||
Deferred revenue |
|
8.5 |
|
|
|
||
Other |
|
1.6 |
|
1.2 |
|
||
Total non-current deferred asset |
|
24.0 |
|
34.1 |
|
||
Less valuation allowance |
|
(9.7 |
) |
(7.4 |
) |
||
Net future tax benefits, non-current |
|
$ |
14.3 |
|
$ |
26.7 |
|
The companys policy is to remit earnings from foreign subsidiaries only to the extent any underlying foreign taxes are creditable in the United States. Accordingly, the company does not currently provide for additional United States and foreign income taxes which would become payable upon repatriation of undistributed earnings of foreign subsidiaries. Undistributable earnings from continuing operations on which additional income taxes have not been provided amounted to approximately $161.3 million at December 31, 2006. If all such undistributed earnings were remitted, an additional provision for income taxes of approximately $56.5 million would have been necessary as of December 31, 2006.
As of December 31, 2006, the company has approximately $256.2 million of state net operating loss carryforwards, which are available to reduce future state tax liabilities. These state net operating loss carryforwards expire beginning 2007 through 2026. The company also has approximately $50.9 million of foreign loss carryforwards, which are available to reduce future foreign tax liabilities. These foreign loss carryforwards generally have no expiration under current foreign law. The valuation allowance represents a reserve for certain foreign loss carryforwards for which realization is not more likely than not.
52 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
12. Earnings Per Share
The following is a reconciliation of the weighted average shares outstanding used to compute basic and diluted earnings per share.
|
|
2006 |
|
2005 |
|
2004 |
|
Basic weighted average common shares outstanding |
|
61,224,574 |
|
60,293,210 |
|
53,801,260 |
|
Effect of dilutive securities stock options and restricted stock |
|
1,561,192 |
|
1,232,824 |
|
953,100 |
|
Diluted weighted average common shares outstanding |
|
62,785,766 |
|
61,526,034 |
|
54,754,360 |
|
For the year ended December 31, 2006, 2005 and 2004, 0.3 million, 0.2 million, and 0.4 million, respectively, common shares issuable upon the exercise of stock options were anti-dilutive and were excluded from the calculation of diluted earnings per share.
Authorized capitalization consists of 150 million shares of $0.01 par value common stock and 3.5 million shares of $0.01 par value preferred stock. None of the preferred shares have been issued.
On February 24, 2006, the board of directors authorized a two-for-one stock split of the companys common stock. Record holders of Manitowocs common stock at the close of business on March 31, 2006, received on April 10, 2006 one additional share of common stock for every share of Manitowoc common stock they owned. Manitowoc shares outstanding at the close of business on March 31, 2006 totaled 30,605,986 (pre-split). The companys common stock began trading at its post-split price at the beginning of trading on April 11, 2006. Per share, share and stock option amounts within this Annual Report on Form 10-K for all periods presented have been adjusted to reflect the stock split, except as expressly noted otherwise in this report.
The amount and timing of the annual dividend is determined by the board of directors at its regular meetings each year. In December 2004, the company paid a cash dividend to shareholders of $0.14 per share of common stock. At its February 2005 meeting, the board of directors approved changing to a quarterly dividend beginning in the first quarter of 2005. For the years ended December 31, 2006 and 2005, the company paid four quarterly dividends of $0.035 per share of common stock.
Currently, the company has authorization to purchase up to 2.5 million shares (not adjusted for the 2006 2-for-1 stock split) of common stock at managements discretion. As of December 31, 2006, the company had purchased approximately 1.9 million shares (not adjusted for the 2006 2-for-1 stock split) at a cost of $49.8 million pursuant to this authorization. The company did not purchase any shares of its common stock during 2006, 2005 or 2004.
As discussed in Note 9, Debt, in December 2004, the company sold, pursuant to an underwritten public offering, approximately 3.0 million shares (not adjusted for the 2006 2-for-1 stock split) of its common stock at a price of $36.25 per share (not adjusted for the 2006 2-for-1 stock split). Net cash proceeds from this offering, after deducting underwriting discounts and commissions, were $104.9 million. In addition to underwriting discounts and commissions, the company incurred approximately $0.8 million of additional accounting, legal and other expenses related to the offering that were charged to additional paid-in capital. The company used a portion of the proceeds to redeem approximately $61.3 million of the Senior Subordinated Notes due 2012 and to pay the premium to the note holders of $6.4 million. The company used the balance of the proceeds for general corporate purposes. On January 10, 2005, the company completed the redemption of $61.3 million of the Senior Subordinated Notes due 2012.
The components of accumulated other comprehensive income as of December 31, 2006 and 2005 are as follows:
|
|
2006 |
|
2005 |
|
||
Foreign currency translation |
|
$ |
69.2 |
|
$ |
34.0 |
|
Derivative instrument fair market, net of income taxes |
|
2.1 |
|
0.5 |
|
||
Additional minimum pension liability, net of income taxes |
|
|
|
(17.9 |
) |
||
Unrecognized pension and postretirement obligation |
|
(23.3 |
) |
|
|
||
|
|
$ |
48.0 |
|
$ |
16.6 |
|
14. Stock Based Compensation
Effective January 1, 2006, the company adopted SFAS No. 123 (R), Share-Based Payment: An Amendment of Financial Accounting Standards Board Statements No. 123 (SFAS No. 123(R)), which revised SFAS No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be measured at fair value and expensed in the Consolidated Statement of Operations over the service
|
The Manitowoc Company, Inc. 2006 Form 10-K |
53 |
period (generally the vesting period) of the grant. Upon adoption, the company transitioned to SFAS No. 123(R) using the modified prospective application, under which compensation expense is only recognized in the Consolidated Statements of Operations beginning with the first period that SFAS No. 123(R) is effective and continuing to be expensed thereafter. Prior periods stock-based compensation expense is still presented on a pro-forma basis.
The company maintains the following stock plans:
The Manitowoc Company, Inc. 1995 Stock Plan provides for the granting of stock options, restricted stock and limited stock appreciation rights as an incentive to certain employees. Under this plan, stock options to acquire up to 5.0 million shares of common stock, in the aggregate, may be granted under the time-vesting formula at an exercise price equal to the market price of the common stock at the close of business or the business day immediately preceding the date of grant. The options become exercisable in 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. The restrictions on any restricted shares granted under the plan lapse in one-third increments on each anniversary of the grant date. Awards are no longer granted under this plan. Awards surrendered under this plan become available for granting under the 2003 Incentive Stock and Awards Plan.
The Manitowoc Company, Inc. 2003 Incentive Stock and Awards Plan (2003 Stock Plan) provides for both short-term and long-term incentive awards for employees. Stock-based awards may take the form of stock options, stock appreciation rights, restricted stock, performance share or performance unit awards. The total number of shares of the companys common stock originally available for awards under the 2003 Stock Plan was 3.0 million prior to the split in 2006 and 6.0 million shares post-split, subject to further adjustments for stock splits, stock dividends and certain other transactions or events. Options under this plan are exercisable at such times and subject to such conditions as the compensation committee should determine. Options granted under the plan to date become exercisable annually 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. Restrictions on restricted stock awarded under this plan lapse 100% on the third anniversary of the grant date. There have been no awards of stock appreciation rights, performance shares or performance units.
The Manitowoc Company, Inc. 1999 Non-Employee Director Stock Option Plan (1995 Stock Plan) provides for the granting of stock options to non-employee members of the board of directors. Under this plan, stock options to acquire up to 0.4 million shares (0.2 million prior to the stock split in 2006) of common stock, in the aggregate, may be granted under a time-vesting formula and at an exercise price equal to the market price of the common stock at the date of grant. For the 1999 Stock Plan, the options are exercisable annually in 25% increments beginning on the first anniversary of the grant date over a four-year period and expire ten years subsequent to the grant date. During 2004, this plan was frozen and replaced with the 2004 Director Stock Plan.
The 2004 Non-Employee Director Stock and Awards Plan (2004 Stock Plan) was approved by the shareholders of the company during the 2004 annual meeting and it replaces The Manitowoc Company, Inc. 1999 Non-Employee Director Stock Option Plan. Stock-based awards may take the form of stock options, restricted stock, or restricted stock units. The total number of shares of the companys common stock originally available for awards under the 2004 Stock Plan was 0.5 million (0.225 million prior to the stock split in 2006), subject to adjustments for stock splits, stock dividends, and certain other transactions and events. Stock options awarded under the plan vest immediately and expire ten years subsequent to the grant date. Restrictions on restricted stock awarded to date under the plan lapse on the third anniversary of the award date.
With the acquisition of Grove, the company inherited the Grove Investors, Inc. 2001 Stock Incentive Plan. Outstanding Grove stock options under the Grove Investors, Inc. 2001 Stock Incentive Plan were converted into options to acquire common stock of the company at the date of acquisition. Under this plan, after the conversion of Grove stock options to Manitowoc stock options, stock options to acquire 0.1 million shares of common stock of the company were outstanding. These options are fully vested and expire on September 25, 2011. No additional options may be granted under the Grove Investors, Inc. 2001 Stock Incentive Plan.
As a result of the adoption of SFAS No. 123(R), the company recognized $5.7 million of pre tax compensation expense ($3.9 million after taxes) associated with stock options for the year ended December 31, 2006.
54 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
A summary of the companys stock option activity is as follows (in millions, except weighted average exercise price):
|
|
|
|
Weighted |
|
|
|
||||||||
|
|
|
|
Average |
|
Aggregate |
|
||||||||
|
|
Shares |
|
Exercise Price |
|
Intrinsic Value |
|
||||||||
Options outstanding as of January 1, 2005 |
|
|
4.0 |
|
|
|
$ |
12.76 |
|
|
|
|
|
|
|
Granted |
|
|
0.7 |
|
|
|
20.41 |
|
|
|
|
|
|
||
Exercised |
|
|
(0.9 |
) |
|
|
12.08 |
|
|
|
|
|
|
||
Cancelled |
|
|
(0.3 |
) |
|
|
15.60 |
|
|
|
|
|
|
||
Options outstanding as of December 31, 2005 |
|
|
3.5 |
|
|
|
$ |
14.49 |
|
|
|
|
|
|
|
Granted |
|
|
0.6 |
|
|
|
44.83 |
|
|
|
|
|
|
||
Exercised |
|
|
(1.1 |
) |
|
|
12.41 |
|
|
|
|
|
|
||
Cancelled |
|
|
(0.2 |
) |
|
|
21.50 |
|
|
|
|
|
|
||
Options outstanding as of December 31, 2006 |
|
|
2.8 |
|
|
|
$ |
22.09 |
|
|
|
$ |
44.3 |
|
|
Options exerciseable as of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
January 1, 2005 |
|
|
1.6 |
|
|
|
$ |
12.30 |
|
|
|
|
|
|
|
December 31, 2005 |
|
|
1.5 |
|
|
|
$ |
12.64 |
|
|
|
|
|
|
|
December 31, 2006 |
|
|
0.8 |
|
|
|
$ |
13.42 |
|
|
|
$ |
23.5 |
|
|
The outstanding stock options at December 31, 2006 have a range of exercise prices of $8.47 to $54.05 per option. The following table shows the options outstanding and exercisable by range of exercise prices at December 31, 2006 (in millions, except weight average remaining contractual life and weighted average exercise price).
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
Remaining |
|
|
|
|
|
|
|
||||||||||||
|
|
Outstanding |
|
Contractual |
|
Weighted Average |
|
Exercisable |
|
Weighted Average |
|
||||||||||||
Range of Exercise Price |
|
Options |
|
Life (Years) |
|
Exercise Price |
|
Options |
|
Exercise Price |
|
||||||||||||
$8.47$11.00 |
|
|
0.2 |
|
|
|
5.7 |
|
|
|
$ |
9.51 |
|
|
|
0.1 |
|
|
|
$ |
9.51 |
|
|
$11.01$13.50 |
|
|
0.7 |
|
|
|
5.5 |
|
|
|
12.62 |
|
|
|
0.4 |
|
|
|
12.63 |
|
|
||
$13.51$16.00 |
|
|
0.3 |
|
|
|
6.5 |
|
|
|
15.00 |
|
|
|
0.1 |
|
|
|
14.90 |
|
|
||
$16.01$18.50 |
|
|
0.2 |
|
|
|
5.4 |
|
|
|
17.24 |
|
|
|
0.1 |
|
|
|
17.25 |
|
|
||
$18.51$21.00 |
|
|
0.7 |
|
|
|
8.2 |
|
|
|
20.28 |
|
|
|
|
|
|
|
|
|
|
||
$21.01$28.51 |
|
|
0.1 |
|
|
|
9.0 |
|
|
|
25.62 |
|
|
|
|
|
|
|
|
|
|
||
$36.00$38.11 |
|
|
0.3 |
|
|
|
9.2 |
|
|
|
37.42 |
|
|
|
|
|
|
|
|
|
|
||
$38.12$54.05 |
|
|
0.3 |
|
|
|
9.3 |
|
|
|
52.02 |
|
|
|
0.1 |
|
|
|
45.85 |
|
|
||
|
|
|
2.8 |
|
|
|
7.2 |
|
|
|
$ |
22.09 |
|
|
|
0.8 |
|
|
|
$ |
13.42 |
|
|
The company continues to use the Black-Scholes valuation model to value stock options. The company used its historical stock prices as the basis for its volatility assumption. The assumed risk-free rates were based on ten-year U.S. Treasury rates in effect at the time of grant. The expected option life represents the period of time that the options granted are expected to be outstanding and are based on historical experience.
As of December 31, 2006, the company has $8.2 million of unrecognized compensation expense which will be recognized over the next five years.
The weighted average fair value of options granted per share during the years ended December 31, 2006, 2005 and 2004 was $19.20 and $7.57 and $6.35, respectively. The fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing method with the following assumptions:
|
|
2006 |
|
2005 |
|
2004 |
|
||||||
Expected life (years) |
|
|
7.0 |
|
|
|
7.3 |
|
|
|
7.0 |
|
|
Risk-free interest rate |
|
|
4.8 |
% |
|
|
3.8 |
% |
|
|
4.5 |
% |
|
Expected volatility |
|
|
34.0 |
% |
|
|
32.0 |
% |
|
|
39.0 |
% |
|
Expected dividend yield |
|
|
0.6 |
% |
|
|
0.8 |
|
|
|
1.1 |
% |
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
55 |
For the years ended December 31, 2006, 2005 and 2004 the total intrinsic value of stock options exercised was $46.5 million $8.9 million and $4.4 million, respectively.
15. Contingencies and Significant Estimates
The company has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act (CERLA) in connection with the Lemberger Landfill Superfund Site near Manitowoc, Wisconsin. Approximately 150 potentially responsible parties have been identified as having shipped hazardous materials to this site. Eleven of those, including the company, 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 fund the cleanup and settle their potential liability at this site. The estimated remaining cost to complete the clean up of this site is approximately $8.1 million. Although liability is joint and several, the companys share of the liability is estimated to be 11% of the remaining cost. Remediation work at the site has been substantially completed, with only long-term pumping and treating of groundwater and site maintenance remaining. The companys remaining estimated liability for this matter, included in accounts payable and accrued expenses in the Consolidated Balance Sheet at December 31, 2006 is $0.9 million. Based on the size of the companys current allocation of liabilities at this site, the existence of other viable potential responsible parties and current reserve, the company does not believe that any liability imposed in connection with this site will have a material adverse effect on its financial condition, results of operations, or cash flows.
During the due diligence process for the sale of DRI, certain contaminants in the soil and ground water associated with the facility were identified. As part of the sale agreement, the company agreed to be responsible for costs associated with further investigation and remediation of the issues identified. Estimates indicate that the costs to remediate this site are approximately $2.0 million. During December 2005, the company recorded a $2.0 million reserve for these estimated costs. This charge was recorded in discontinued operations in the Consolidated Statements of Operations for the year ended December 31, 2005. The companys remaining estimated liability for this matter, included in other accounts payable and accrued expenses in the Consolidated Balance Sheet at December 31, 2006 is $1.8 million. Based upon available information, the company does not expect the ultimate costs will have a material adverse effect on its financial condition, results of operations, or cash flows.
At certain of the companys other facilities, the company has identified potential contaminants in soil and groundwater. The ultimate cost of any remediation required will depend upon the results of future investigation. Based upon available information, the company does not expect the ultimate costs will have a material adverse effect on its financial condition, results of operations, or cash flows.
The company believes that it has obtained and is in substantial compliance with those material environmental permits and approvals necessary to conduct its various businesses. Based on the facts presently known, the company does not expect environmental compliance costs to have a material adverse effect on its financial condition, results of operations, or cash flows.
As of December 31, 2006, various product-related lawsuits were pending. To the extent permitted under applicable law, all of these are insured with self-insurance retention levels. The companys self-insurance retention levels vary by business, and have fluctuated over the last five years. The range of the companys self-insured retention levels is $0.1 million to $3.0 million per occurrence. The high-end of the companys self-insurance retention level is a legacy product liability insurance program inherited in the Grove acquisition for cranes manufactured in the United States for occurrences from January 2000 through October 2002. As of December 31, 2006, the largest self-insured retention level currently maintained by the company is $2.0 million per occurrence and applies to product liability claims for cranes manufactured in the United States.
Product liability reserves in the Consolidated Balance Sheet at December 31, 2006, were $32.1 million; $11.3 million was reserved specifically for actual cases and $20.8 million for claims incurred but not reported which were estimated using actuarial methods. Based on the companys experience in defending product liability claims, management believes the current reserves are adequate for estimated case resolutions on aggregate self-insured claims and insured claims. Any recoveries from insurance carriers are dependent upon the legal sufficiency of claims and solvency of insurance carriers.
At December 31, 2006 and 2005, the company had reserved $69.4 million and $55.4 million, respectively, for warranty claims included in product warranties and other non-current liabilities in the Consolidated Balance Sheets. Certain of these warranties and other related claims involve matters in dispute that ultimately are resolved by negotiations, arbitration, or litigation.
It is reasonably possible that the estimates for environmental remediation, product liability and warranty costs may change in the near future based upon new information that may arise or matters that are beyond the scope of the companys historical experience. Presently, there are no reliable methods to estimate the amount of any such potential changes.
The company is involved in numerous lawsuits involving asbestos-related claims in which the company is one of numerous defendants. After taking into consideration legal counsels evaluation of such actions, the current political environment with respect to asbestos related claims, and the liabilities accrued with respect to such matters, in the opinion of management, ultimate resolution is not expected to have a material adverse effect on the financial condition, results of operations, or cash flows of the company.
56 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
The company is also involved in various legal actions arising out of the normal course of business, which, taking into account the liabilities accrued and legal counsels evaluation of such actions, in the opinion of management, the ultimate resolution is not expected to have a material adverse effect on the companys financial condition, results of operations, or cash flows.
The company has been in negotiations with one of its Marine segment customers to recover certain cost overruns that resulted primarily from specification inadequacies, change orders, cumulative disruption and constructive acceleration associated with a particular contract. During the third quarter of 2005, due to the fact that these negotiations were not successful within a timeframe satisfactory to the company, the company filed a lawsuit seeking recovery of these cost overruns from the customer. The customer filed a counter claim against the company in the fourth quarter of 2005. During the fourth quarter of 2005, the company established a reserve of $10.2 million to reflect the inherent uncertainties in litigation of this type. The $10.2 million reserve is recorded in cost of sales of the Marine segment in the Consolidated Statements of Operations for the year ended December 31, 2005. If the company is successful in its recovery of costs as a result of this lawsuit or negotiations, the favorable impact on its Consolidated Statements of Operations and Cash Flows in a future period could be material.
16. Guarantees
The company periodically enters into transactions with customers that provide for residual value guarantees and buyback commitments. These transactions are recorded as operating leases for all significant residual value guarantees and for all buyback commitments. These initial transactions are recorded as deferred revenue and are amortized to income on a straight-line basis over a period equal to that of the customers third party financing agreement. The deferred revenue included in other current and non-current liabilities at December 31, 2006 and 2005 was $118.5 million and $128.5 million, respectively. The total amount of residual value guarantees and buyback commitments given by the company and outstanding at December 31, 2006 was $157.1 million. This amount is not reduced for amounts the company would recover from repossessing and subsequent resale of the units. The residual value guarantees and buyback commitments expire at various times through 2012.
During the years ended December 31, 2006 and 2005, the company sold $14.9 million and $20.5 million, respectively, of its long term notes receivable to third party financing companies. The company guarantees some percentage, up to 100%, of collection of the notes to the financing companies. The company has accounted for the sales of the notes as a financing of receivables. The receivables remain on the companys Consolidated Balance Sheet, net of payments made, in other current and non-current assets, and the company has recognized an obligation equal to the net outstanding balance of the notes in other current and non-current liabilities in the Consolidated Balance Sheet. The cash flow benefit of these transactions, net of payments made by the customer, are reflected as financing activities in the Consolidated Statements of Cash Flows. During the years ended December 31, 2006 and 2005 the customers have paid $30.2 million and $6.3 million, respectively, of the notes to the third party financing companies. As of December 31, 2006 and 2005, the outstanding balance of the notes receivables guaranteed by the company was $22.3 million and $37.4 million, respectively.
In the normal course of business, the company provides its customers a warranty covering workmanship, and in some cases materials, on products manufactured by the company. Such warranty generally provides that products will be free from defects for periods ranging from 12 months to 60 months. If a product fails to comply with the companys warranty, the company may be obligated, at its expense, to correct any defect by repairing or replacing such defective products. The company provides for an estimate of costs that may be incurred under its warranty at the time product revenue is recognized. These costs primarily include labor and materials, as necessary, associated with repair or replacement. The primary factors that affect the companys warranty liability include the number of units shipped and historical and anticipated warranty claims. As these factors are impacted by actual experience and future expectations, the company assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary. Below is a table summarizing the warranty activity for the years ended December 31, 2006 and 2005.
|
|
2006 |
|
2005 |
|
||
Balance at beginning of period |
|
$ |
55.4 |
|
$ |
46.5 |
|
Accruals for warranties issued during the period |
|
50.2 |
|
48.2 |
|
||
Acquisitions |
|
0.2 |
|
|
|
||
Settlements made (in cash or in kind) during the period |
|
(39.2 |
) |
(36.4 |
) |
||
Currency translation |
|
2.8 |
|
(2.9 |
) |
||
Balance at end of period |
|
$ |
69.4 |
|
$ |
55.4 |
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
57 |
17. Restructuring and Plant Consolidation
During the third quarter of 2005, the company recorded a pre-tax restructuring charge of $3.2 million in connection with the consolidation of its Kolpak operation located in Wisconsin with its Kolpak operation located in Tennessee. This action was taken in an effort to streamline the companys cost structure and utilize available capacity. The charge included $1.5 million to write-down the facility and land, which are held for sale, to estimated fair market value less cost to sell; $0.7 million related to the write-down of certain equipment; $0.1 million to write-off excess inventory which will not be transferred to Tennessee; $0.5 million related to severance and other employee related costs; and $0.4 million for other related closing costs. This charge has been included in restructuring and plant consolidation costs in the Consolidated Statements of Operations for the year ended December 31, 2005. All of the restructuring reserves have been utilized by the company.
During 2004, the company incurred approximately $1.3 million of restructuring costs related primarily to the consolidation of its European crane facilities under programs implemented in 2003 (Crane segment) and the closure of its European ice machine business (Foodservice segment). As of December 31, 2005, no reserves remained related to these particular restructuring activities. These charges have been included in plant consolidation and restructuring costs in the Consolidated Statement of Operations for the year ended December 31, 2004.
Savings and Investment Plans The company sponsors a defined contribution savings plan that allows substantially all domestic employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan-specific guidelines. The plan requires the company to match 100% of the participants contributions up to 3% and match an additional 50% of the participants contributions between 3% to a maximum of 6% of the participants compensation. The company also provides retirement benefits through noncontributory deferred profit sharing plans covering substantially all employees. Company contributions to the plans are based upon formulas contained in the plans. Total costs incurred under these plans were $30.0 million, $21.0 million and $13.8 million for the years ended December 31, 2006, 2005 and 2004, respectively.
Pension, Postretirement Health and Other Benefit Plans The company provides certain pension, health care and death benefits for eligible retirees and their dependents. The pension benefits are funded, while the health care and death 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 components of period benefit costs for the years ended December 31, 2006, 2005 and 2004 are as follows:
|
|
U.S. Pension Plans |
|
Non-U.S. Pension Plans |
|
Postretirement Health
|
|
|||||||||||||||||||||
|
|
2006 |
|
2005 |
|
2004 |
|
2006 |
|
2005 |
|
2004 |
|
2006 |
|
2005 |
|
2004 |
|
|||||||||
Service cost benefits earned during the year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
2.1 |
|
$ |
1.3 |
|
$ |
1.3 |
|
$ |
0.9 |
|
$ |
0.9 |
|
$ |
0.7 |
|
Interest cost of projected benefit obligation |
|
6.4 |
|
6.4 |
|
6.3 |
|
4.4 |
|
3.9 |
|
4.0 |
|
3.2 |
|
3.3 |
|
3.0 |
|
|||||||||
Expected return on assets |
|
(6.4 |
) |
(6.4 |
) |
(6.1 |
) |
(3.5 |
) |
(2.9 |
) |
(2.9 |
) |
|
|
|
|
|
|
|||||||||
Amortization of prior service cost |
|
|
|
|
|
|
|
|
|
(0.1 |
) |
(0.1 |
) |
|
|
|
|
|
|
|||||||||
Amortization of actuarial net (gain) loss |
|
0.8 |
|
0.4 |
|
0.1 |
|
0.1 |
|
|
|
|
|
0.1 |
|
0.1 |
|
0.1 |
|
|||||||||
Settlement gain recognized |
|
|
|
|
|
|
|
|
|
0.1 |
|
(0.1 |
) |
|
|
|
|
|
|
|||||||||
Net periodic benefit cost |
|
$ |
0.8 |
|
$ |
0.4 |
|
$ |
0.3 |
|
$ |
3.1 |
|
$ |
2.3 |
|
$ |
2.2 |
|
$ |
4.2 |
|
$ |
4.3 |
|
$ |
3.8 |
|
Weighted average assumptions:- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Discount rate |
|
5.50 |
% |
5.75 |
% |
6.25 |
% |
4.53 |
% |
4.75 |
% |
5.25 |
% |
5.50 |
% |
5.75 |
% |
6.25 |
% |
|||||||||
Expected return on plan assets |
|
8.25 |
% |
8.25 |
% |
8.50 |
% |
6.37 |
% |
5.25 |
% |
5.25 |
% |
N/A |
|
N/A |
|
N/A |
|
|||||||||
Rate of compensation increase |
|
N/A |
|
N/A |
|
N/A |
|
3.53 |
% |
3.50 |
% |
3.50 |
% |
N/A |
|
N/A |
|
N/A |
|
The prior service costs are amortized on a straight-line basis over the average remaining service period of active participants. Gains and losses in excess of 10% of the greater of the benefit obligation and the market-related value of assets are amortized over the average remaining service period of active participants.
58 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
The following is a reconciliation of the changes in benefit obligation, the changes in plan assets, and the funded status as of December 31, 2006 and 2005.
|
|
U.S. Pension Plans |
|
Non-U.S. Pension
|
|
Postretirement Health
|
|
||||||||||||||||
|
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
||||||||||
Change in Benefit Obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Benefit obligation, beginning of year |
|
$ |
119.2 |
|
$ |
113.4 |
|
$ |
88.5 |
|
$ |
84.3 |
|
|
$ |
60.2 |
|
|
|
$ |
60.3 |
|
|
Service cost |
|
|
|
|
|
2.1 |
|
1.3 |
|
|
0.9 |
|
|
|
0.9 |
|
|
||||||
Interest cost |
|
6.4 |
|
6.4 |
|
4.4 |
|
3.9 |
|
|
3.2 |
|
|
|
3.3 |
|
|
||||||
Participant contributions |
|
|
|
|
|
0.1 |
|
0.1 |
|
|
1.7 |
|
|
|
1.9 |
|
|
||||||
Actuarial loss (gain) |
|
3.2 |
|
3.9 |
|
(2.1 |
) |
10.7 |
|
|
1.0 |
|
|
|
1.7 |
|
|
||||||
Currency translation adjustment |
|
|
|
|
|
11.0 |
|
(9.6 |
) |
|
|
|
|
|
|
|
|
||||||
Benefits paid |
|
(4.7 |
) |
(4.5 |
) |
(3.3 |
) |
(2.2 |
) |
|
(7.1 |
) |
|
|
(7.9 |
) |
|
||||||
Benefit obligation, end of year |
|
124.1 |
|
119.2 |
|
100.7 |
|
88.5 |
|
|
59.9 |
|
|
|
60.2 |
|
|
||||||
Change in Plan Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fair value of plan assets, beginning of year |
|
79.9 |
|
79.6 |
|
54.3 |
|
49.8 |
|
|
|
|
|
|
|
|
|
||||||
Actual return on plan assets |
|
8.5 |
|
3.6 |
|
4.9 |
|
7.6 |
|
|
|
|
|
|
|
|
|
||||||
Employer contributions |
|
4.3 |
|
1.2 |
|
9.6 |
|
4.5 |
|
|
5.4 |
|
|
|
6.0 |
|
|
||||||
Participant contributions |
|
|
|
|
|
0.1 |
|
0.1 |
|
|
1.7 |
|
|
|
1.9 |
|
|
||||||
Currency translation adjustment |
|
|
|
|
|
6.8 |
|
(5.5 |
) |
|
|
|
|
|
|
|
|
||||||
Benefits paid |
|
(4.7 |
) |
(4.5 |
) |
(3.3 |
) |
(2.2 |
) |
|
(7.1 |
) |
|
|
(7.9 |
) |
|
||||||
Fair value of plan assets, end of year |
|
88.0 |
|
79.9 |
|
72.4 |
|
54.3 |
|
|
|
|
|
|
|
|
|
||||||
Funded status |
|
$ |
(36.1 |
) |
(39.3 |
) |
$ |
(28.3 |
) |
(34.2 |
) |
|
$ |
(59.9 |
) |
|
|
(60.2 |
) |
|
|||
Unrecognized loss |
|
|
|
21.3 |
|
|
|
7.1 |
|
|
|
|
|
|
7.8 |
|
|
||||||
Unrecognized prior service cost |
|
|
|
|
|
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
||||||
Unrecognized transition obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Accrued benefit cost |
|
|
|
$ |
(18.0 |
) |
|
|
$ |
(27.4 |
) |
|
|
|
|
|
$ |
(52.4 |
) |
|
|||
Amounts recognized in the Consolidated Balance sheet at December 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Prepaid benefit cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
0.1 |
|
|
$ |
|
|
|
|
$ |
|
|
|
Pension obligation |
|
(36.1 |
) |
(39.3 |
) |
(28.3 |
) |
(32.3 |
) |
|
|
|
|
|
|
|
|
||||||
Postretirement health and other benefit obligations |
|
|
|
|
|
|
|
|
|
|
(59.9 |
) |
|
|
(52.4 |
) |
|
||||||
Accumulated other comprehensive income |
|
|
|
21.3 |
|
|
|
4.8 |
|
|
|
|
|
|
|
|
|
||||||
Net amount recognized |
|
$ |
(36.1 |
) |
$ |
(18.0 |
) |
$ |
(28.3 |
) |
$ |
(27.4 |
) |
|
$ |
(59.9 |
) |
|
|
$ |
(52.4 |
) |
|
Weighted-Average Assumptions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Discount rate |
|
5.75 |
% |
5.50 |
% |
4.81 |
% |
4.53 |
% |
|
5.75 |
% |
|
|
5.50 |
% |
|
||||||
Expected return on plan assets |
|
5.75 |
% |
8.25 |
% |
5.74 |
% |
6.37 |
% |
|
N/A |
|
|
|
N/A |
|
|
||||||
Rate of compensation increase |
|
N/A |
|
N/A |
|
3.66 |
% |
3.47 |
% |
|
N/A |
|
|
|
N/A |
|
|
In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R). SFAS No. 158 requires, among other things, the recognition of the funded status of each defined pension benefit plan, retiree health care and other postretirement benefit plans and post employment benefit plans on the balance sheet. Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a liability. The initial impact of the standard due to unrecognized prior service costs or credits and net actuarial gains or losses as well as subsequent changes in the funded status is recognized as a component of accumulated comprehensive income in shareholders equity. Additional minimum pension liabilities (AML) and related intangible assets are also derecognized upon adoption of the new standard. The company has adopted SFAS No. 158 as of December 31, 2006. The following table summarizes the effect of required changes in the AML as of December 31, 2006 prior to the adoption of SFAS No. 158 as well as the impact of the initial adoption of SFAS No. 158.
|
The Manitowoc Company, Inc. 2006 Form 10-K |
59 |
|
|
December 31, 2006
|
|
AML
|
|
December 31, 2006
|
|
Adjustment
|
|
December 31, 2006
|
|
|||||||||||||||
Accrued pension liability |
|
|
$ |
(38.6 |
) |
|
|
$ |
(23.3 |
) |
|
|
$ |
(61.9 |
) |
|
|
$ |
(2.5 |
) |
|
|
$ |
(64.4 |
) |
|
Postretirement health and other benefit obligations |
|
|
$ |
(51.2 |
) |
|
|
$ |
|
|
|
|
$ |
(51.2 |
) |
|
|
$ |
(8.7 |
) |
|
|
$ |
(59.9 |
) |
|
Total non-current liabilities |
|
|
$ |
(475.1 |
) |
|
|
$ |
(23.3 |
) |
|
|
$ |
(498.4 |
) |
|
|
$ |
(11.2 |
) |
|
|
$ |
(509.6 |
) |
|
Deferred taxes long term |
|
|
$ |
2.2 |
|
|
|
$ |
8.2 |
|
|
|
$ |
10.4 |
|
|
|
$ |
3.9 |
|
|
|
$ |
14.3 |
|
|
Total assets |
|
|
$ |
2,207.4 |
|
|
|
$ |
8.2 |
|
|
|
$ |
2,215.6 |
|
|
|
$ |
3.9 |
|
|
|
$ |
2,219.5 |
|
|
Accumulated other comprehensive income, net of tax |
|
|
$ |
(70.4 |
) |
|
|
$ |
15.1 |
|
|
|
$ |
(55.3 |
) |
|
|
$ |
7.3 |
|
|
|
$ |
(48.0 |
) |
|
Total stockholdersequity |
|
|
$ |
(796.9 |
) |
|
|
$ |
15.1 |
|
|
|
$ |
(781.8 |
) |
|
|
$ |
7.3 |
|
|
|
$ |
(774.5 |
) |
|
Total liabilities and stockholders equity |
|
|
$ |
(2,207.4 |
) |
|
|
$ |
(8.2 |
) |
|
|
$ |
(2,215.6 |
) |
|
|
$ |
(3.9 |
) |
|
|
$ |
(2,219.5 |
) |
|
The amounts in accumulated other comprehensive income that are expected to be recognized as components of net periodic benefit cost during the next fiscal year are as follows:
|
|
|
|
Postretirement health |
|
||||||
|
|
Pensions |
|
and other |
|
||||||
Net loss |
|
|
$ |
0.8 |
|
|
|
$ |
0.2 |
|
|
Amounts recognized in accumulated other comprehensive income as of December 31, 2006 consist of the following:
|
|
|
|
Postretirement health |
|
||||||
|
|
Pensions |
|
and other |
|
||||||
Net Loss |
|
|
$ |
(26.1 |
) |
|
|
$ |
(8.7 |
) |
|
Prior service credit |
|
|
0.3 |
|
|
|
0 |
|
|
||
Total amount recognized |
|
|
$ |
(25.8 |
) |
|
|
$ |
(8.7 |
) |
|
For measurement purposes, a 7.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2007. The rate was assumed to decrease gradually to 5.0% for 2013 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1% change in assumed health care cost trend rates would have the following effects:
|
|
1% Increase |
|
1% Decrease |
|
||||||
Effect on total service and interest cost components of net periodic postretirement health care benefit cost |
|
|
$ |
0.5 |
|
|
|
$ |
(0.4 |
) |
|
Effect on the health care component of the accumulated postretirement benefit obligation |
|
|
$ |
6.2 |
|
|
|
$ |
(5.3 |
) |
|
It is reasonably possible that the estimate for future retirement and health costs may change in the near future due to changes in the health care environment or changes in interest rates that may arise. Presently, there is no reliable means to estimate the amount of any such potential changes.
The weighted-average asset allocations of the U.S. pension plans at December 31, 2006 and 2005, by asset category are as follows:
60 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
The weighted-average asset allocations of the Non U.S. pension plans at December 31, 2006 and 2005, by asset category are as follows:
|
|
2006 |
|
2005 |
|
Equity |
|
58.6 |
% |
59.9 |
% |
Fixed income |
|
39.2 |
|
39.5 |
|
Real estate |
|
0.5 |
|
0.1 |
|
Other |
|
1.7 |
|
0.5 |
|
|
|
100.0 |
% |
100.0 |
% |
The board of directors has established the Retirement Plan Committee (the Committee) to manage the operations and administration of all benefit plans and related trusts. As of December 31, 2006, the Committee had an investment policy for the pension plan assets that establishes target asset allocations for the above listed asset classes as follows: Small Cap Stocks 10%; Mid Cap Stocks 15%; Large Cap Stocks 25%; International Stock 10% Intermediate Bonds 40% and cash 0%. The Committee is committed to diversification to reduce the risk of large losses. To that end, the Committee has adopted polices requiring that each asset class will be diversified, multiple managers with differing styles of management will be employed and equity exposure will be limited to 60% of the total portfolio value. On a quarterly basis, the Committee reviews progress towards achieving the pension plans and individual managers performance objectives.
The three U.S. pension plans had benefit accruals frozen during 2003. Effective January 1, 2007, the company has merged all U.S. pension plans together and will be making a contribution of approximately $27.2 million in the first quarter of 2007 that is expected to fully fund the ongoing pension liability. The company will also change its investment policy to more closely align the interest rate sensitivity of its pension assets with the corresponding liabilities. The resulting asset allocation will be approximately 10% equities and 90% fixed income securities. This funding and change in allocation will remove a significant portion of the U.S. pensions volatility arising from unpredictable changes in interest rates and the equity markets. This decision will shore up the funded status of these plans, and minimize unexpected future pension cash contributions that would result from implementation of the provisions of the Pension Protection Act.
To develop the expected long-term rate of return on assets assumptions, the company considered the historical returns and future expectations for returns in each asset class, as well as targeted asset allocation percentages within the pension portfolio. As a result of the change in the mix of investments, the expected return on plan assets has been reduced to 5.75%.
The expected 2007 contributions for the U.S. pension plans are as follows: minimum contribution for 2007 is $0.8 million; discretionary contribution is $27.2 million; and non-cash contribution is $0. The expected 2007 contributions for the non-U.S. pension plans are as follows: minimum contribution for 2007 is $3.6 million; discretionary contribution is $0; and non-cash contribution is $0. Company paid claims for the postretirement health and life plans are expected to be $4.8 million for 2007. Projected benefit payments from the plans as of December 31, 2006 are estimated as follows:
|
|
U.S. Pension
|
|
Non-U.S.
|
|
Postretirement
|
|
|||||||||
2007 |
|
|
$ |
4.8 |
|
|
|
$ |
2.5 |
|
|
|
$ |
4.8 |
|
|
2008 |
|
|
5.0 |
|
|
|
2.8 |
|
|
|
4.8 |
|
|
|||
2009 |
|
|
5.3 |
|
|
|
3.3 |
|
|
|
5.0 |
|
|
|||
2010 |
|
|
5.6 |
|
|
|
3.2 |
|
|
|
5.2 |
|
|
|||
2011 |
|
|
6.0 |
|
|
|
2.6 |
|
|
|
5.3 |
|
|
|||
20122016 |
|
|
36.8 |
|
|
|
18.8 |
|
|
|
28.4 |
|
|
The fair value of plan assets for which the accumulated benefit obligation is in excess of the plan assets as of December 31, 2006 and 2005 is as follows:
|
|
U.S Pension Plans |
|
Non U.S. Pension Plans |
|
||||||||||||
|
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
||||||||
Projected benefit obligation |
|
$ |
124.1 |
|
$ |
119.2 |
|
|
$ |
91.1 |
|
|
|
$ |
79.6 |
|
|
Accumulated benefit obligation |
|
124.1 |
|
119.2 |
|
|
87.0 |
|
|
|
76.5 |
|
|
||||
Fair value of plan assets |
|
88.0 |
|
79.9 |
|
|
62.3 |
|
|
|
45.1 |
|
|
||||
|
The Manitowoc Company, Inc. 2006 Form 10-K |
61 |
The accumulated benefit obligation for all U.S. pension plans as of December 31, 2006 and 2005 was $124.1 million and $119.2 million, respectively. The accumulated benefit obligation for all Non U.S. pension plans as of December 31, 2006 and 2005 was $98.2 million and $86.2 million, respectively.
The measurement date for all plans is December 31, 2006.
The company maintains a target benefit plan for certain executive officers of the company and its subsidiaries that is unfunded. Expenses related to the plan in the amount of $1.9 million, $1.4 million and $1.1 million were recorded in 2006, 2005 and 2004, respectively. Amounts accrued as of December 31, 2006 and 2005 related to this plan were $9.1 million and $7.2 million, respectively.
The company has a deferred compensation plan that enables certain key employees and non-employee directors to defer a portion of their compensation or fees on a pre-tax basis. Effective January 1, 2002, the company amended its deferred compensation plan to provide plan participants the ability to direct deferrals and company matching contributions into two separate investment programs, Program A and Program B.
The invested assets in Program A and B are maintained under two separate rabbi trusts, which restrict the companys use and access to the funds but which are also subject to the claims of the companys general creditors. Program A invests solely in the companys stock; dividends paid on the companys stock are automatically reinvested; and all distributions must be made in company stock. Program B offers a variety of investment options but does not include company stock as an investment option. All distributions from Program B must be made in cash. Participants cannot transfer assets between programs.
Program A is accounted for as a plan which does not permit diversification. As a result, the company stock held by Program A is classified in equity in a manner similar to accounting for treasury stock. The deferred compensation obligation is classified as an equity instrument. Changes in the fair value of the companys stock and the compensation obligation are not recognized. The asset and obligation for Program A were both $0.5 million at December 31, 2006 and $0.4 million at December 31, 2005. These amounts are offset in the Consolidated Statements of Stockholders Equity and Comprehensive Income.
Program B is accounted for as a plan which permits diversification. As a result, the funds held by Program B are classified as an asset in the Consolidated Balance Sheets and changes in the fair value of the assets are recognized in earnings. The deferred compensation obligation is classified as a liability in the Consolidated Balance Sheets and adjusted, with a charge or credit to compensation cost, to reflect changes in the fair value of the obligation. The assets, included in other non-current assets, and obligations, included in other non-current liabilities, were both $11.2 million at December 31, 2006 and $10.0 million at December 31, 2005. There was no net impact on the Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004.
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 attributed to operating leases was $23.6 million, $21.7 million and $20.6 million in 2006, 2005 and 2004, respectively. Future minimum rental obligations under non-cancelable operating leases, as of December 31, 2006, are payable as follows:
2007 |
|
$ |
22.3 |
|
2008 |
|
15.5 |
|
|
2009 |
|
9.8 |
|
|
2010 |
|
7.4 |
|
|
2011 |
|
4.4 |
|
|
Thereafter |
|
13.9 |
|
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 companys reportable segments. The company has three reportable segments: Crane; Foodservice and Marine. The company has not aggregated individual operating segments within these reportable segments.
The Crane business is a global provider of engineered lift solutions which designs, manufactures and markets a comprehensive line of lattice-boom crawler cranes, mobile telescopic cranes, tower cranes, and boom trucks. The Crane products are marketed under the Manitowoc, Grove, Potain, and National brand names and 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. Our crane-related product support services are marketed under the CraneCARE brand name and include maintenance and repair services and parts supply.
62 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
The Foodservice business is a broad-line manufacturer of cold side commercial foodservice products. Foodservice designs, manufactures and markets full product lines of ice making machines, walk-in and reach-in refrigerators and freezers, fountain beverage delivery systems and other foodservice refrigeration products for the lodging, restaurant, healthcare, convenience store, soft-drink bottling, and institutional foodservice markets. Foodservice products are marketed under the Manitowoc, SerVend, Multiplex, Kolpak, Harford-Duracool, McCall, McCanns, Koolaire, Flomatic, Kyees, RDI, and other brand names.
The Marine business provides new construction, ship repair and maintenance services for freshwater and saltwater vessels and oceangoing mid-size commercial, research, and military vessels from three shipyards on the Great Lakes. Marine serves the Great Lakes maritime market consisting of U.S. and Canadian fleets, inland waterway operations and ocean going 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, amortization expense of intangible assets with definite lives, interest expense and income tax expense. The company evaluates segment performance based upon profit and loss before the aforementioned expenses. Financial information relating to the companys reportable segments for the years ended December 31, 2006, 2005 and 2004 is as follows. Restructuring costs separately identified in the Consolidated Statements of Operations are included as reductions to the respective segments operating earnings for each year below.
|
|
2006 |
|
2005 |
|
2004 |
|
|||
Net sales from continuing operations: |
|
|
|
|
|
|
|
|||
Cranes and Related Products |
|
$ |
2,235.4 |
|
$ |
1,628.7 |
|
$ |
1,248.5 |
|
Foodservice Equipment |
|
415.4 |
|
399.6 |
|
377.2 |
|
|||
Marine |
|
282.5 |
|
225.8 |
|
219.2 |
|
|||
Total |
|
$ |
2,933.3 |
|
$ |
2,254.1 |
|
$ |
1,844.9 |
|
Operating earnings (loss) from continuing operations: |
|
|
|
|
|
|
|
|||
Cranes and Related Products |
|
$ |
280.6 |
|
$ |
115.5 |
|
$ |
57.0 |
|
Foodservice Equipment |
|
56.2 |
|
54.9 |
|
55.7 |
|
|||
Marine |
|
11.3 |
|
(9.2 |
) |
16.5 |
|
|||
Corporate |
|
(42.4 |
) |
(24.8 |
) |
(21.2 |
) |
|||
Amortization expense |
|
(3.3 |
) |
(3.1 |
) |
(3.1 |
) |
|||
Operating earnings from continuing operations |
|
$ |
302.4 |
|
$ |
133.3 |
|
$ |
104.9 |
|
Capital expenditures: |
|
|
|
|
|
|
|
|||
Cranes and Related Products |
|
$ |
51.3 |
|
$ |
32.9 |
|
$ |
24.2 |
|
Foodservice Equipment |
|
10.9 |
|
16.9 |
|
11.8 |
|
|||
Marine |
|
3.1 |
|
4.1 |
|
4.3 |
|
|||
Corporate |
|
2.3 |
|
1.0 |
|
2.9 |
|
|||
Total |
|
$ |
67.6 |
|
$ |
54.9 |
|
$ |
43.2 |
|
Total assets: |
|
|
|
|
|
|
|
|||
Cranes and Related Products |
|
$ |
1,572.4 |
|
$ |
1,224.7 |
|
$ |
1,279.7 |
|
Foodservice Equipment |
|
340.1 |
|
313.2 |
|
302.9 |
|
|||
Marine |
|
120.9 |
|
123.3 |
|
110.3 |
|
|||
Corporate |
|
186.1 |
|
300.6 |
|
235.2 |
|
|||
Total |
|
$ |
2,219.5 |
|
$ |
1,961.8 |
|
$ |
1,928.1 |
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
63 |
Net sales from continuing operations and long-lived asset information by geographic area as of and for the years ended December 31 are as follows:
|
|
Net Sales |
|
Long-Lived Assets |
|
|||||||||||
|
|
2006 |
|
2005 |
|
2004 |
|
2006 |
|
2005 |
|
|||||
United States |
|
$ |
1,535.1 |
|
$ |
1,177.7 |
|
$ |
981.6 |
|
$ |
594.5 |
|
$ |
569.2 |
|
Other North America |
|
80.5 |
|
38.7 |
|
36.4 |
|
|
|
|
|
|||||
Europe |
|
817.0 |
|
679.4 |
|
576.8 |
|
424.3 |
|
387.0 |
|
|||||
Asia |
|
170.4 |
|
118.2 |
|
106.1 |
|
43.7 |
|
38.9 |
|
|||||
Middle East |
|
167.8 |
|
112.9 |
|
71.0 |
|
1.3 |
|
0.5 |
|
|||||
Central and South America |
|
54.0 |
|
34.8 |
|
24.2 |
|
|
|
|
|
|||||
Africa |
|
50.6 |
|
37.3 |
|
15.8 |
|
|
|
|
|
|||||
South Pacific and Caribbean |
|
5.0 |
|
8.0 |
|
4.8 |
|
5.8 |
|
6.0 |
|
|||||
Australia |
|
52.9 |
|
47.1 |
|
28.2 |
|
7.2 |
|
6.8 |
|
|||||
Total |
|
$ |
2,933.3 |
|
$ |
2,254.1 |
|
$ |
1,844.9 |
|
$ |
1,076.8 |
|
$ |
1,008.4 |
|
Net sales from continuing operations and long-lived asset information for Europe primarily relates to France, Germany and the United Kingdom.
21. Subsidiary Guarantors of Senior Subordinated Notes 2012 and Senior Notes due 2013
The following tables present condensed consolidating financial information for (a) the parent company, The Manitowoc Company, Inc. (Parent); (b) on a combined basis, the guarantors of the Senior Subordinated Notes due 2012 and Senior Notes due 2013, which include substantially all of the domestic wholly owned subsidiaries of the company (Subsidiary Guarantors); and (c) on a combined basis, the wholly and partially owned foreign subsidiaries of the company, which do not guarantee the Senior Subordinated Notes 2012 and Senior Notes due 2013 (Non-Guarantor Subsidiaries). Separate financial statements of the Subsidiary Guarantors are not presented because the guarantors are fully and unconditionally, jointly and severally liable under the guarantees, and 100% owned by the company.
64 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Condensed Consolidating Statement of Operations
For the year ended December 31, 2006
|
|
Parent |
|
Guarantor |
|
Non-
|
|
Eliminations |
|
Total |
|
|||||||||||
Net sales |
|
$ |
|
|
|
$ |
1,879.4 |
|
|
|
$ |
1,366.2 |
|
|
|
$ |
(312.3 |
) |
|
$ |
2,933.3 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales |
|
|
|
|
1,514.2 |
|
|
|
1,084.1 |
|
|
|
(312.3 |
) |
|
2,286.0 |
|
|||||
Engineering, selling and administrative expenses |
|
41.4 |
|
|
166.1 |
|
|
|
134.1 |
|
|
|
|
|
|
341.6 |
|
|||||
Amortization expense |
|
|
|
|
1.5 |
|
|
|
1.8 |
|
|
|
|
|
|
3.3 |
|
|||||
Total costs and expenses |
|
41.4 |
|
|
1,681.8 |
|
|
|
1,220.0 |
|
|
|
(312.3 |
) |
|
2,630.9 |
|
|||||
Operating earnings (loss) from continuing operations |
|
(41.4 |
) |
|
197.6 |
|
|
|
146.2 |
|
|
|
|
|
|
302.4 |
|
|||||
Interest expense |
|
(34.0 |
) |
|
(1.3 |
) |
|
|
(11.0 |
) |
|
|
|
|
|
(46.3 |
) |
|||||
Management fees |
|
39.8 |
|
|
(39.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss on debt extinguishment |
|
(14.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(14.4 |
) |
|||||
Other income (expense) net |
|
33.6 |
|
|
(21.0 |
) |
|
|
(9.4 |
) |
|
|
|
|
|
3.2 |
|
|||||
Total other income (expenses) net |
|
25.0 |
|
|
(62.1 |
) |
|
|
(20.4 |
) |
|
|
|
|
|
(57.5 |
) |
|||||
Earnings (loss) from continuing operations before taxes on income (loss) |
|
(16.4 |
) |
|
135.5 |
|
|
|
125.8 |
|
|
|
|
|
|
244.9 |
|
|||||
Provision (benefit) for taxable income (loss) |
|
(2.0 |
) |
|
43.7 |
|
|
|
36.7 |
|
|
|
|
|
|
78.4 |
|
|||||
Earnings (loss) before equity in earnings of subsidiaries |
|
(14.4 |
) |
|
91.8 |
|
|
|
89.1 |
|
|
|
|
|
|
166.5 |
|
|||||
Equity in earnings of subsidiaries |
|
180.6 |
|
|
|
|
|
|
|
|
|
|
(180.6 |
) |
|
|
|
|||||
Earnings from continuing operations |
|
166.2 |
|
|
91.8 |
|
|
|
89.1 |
|
|
|
(180.6 |
) |
|
166.5 |
|
|||||
Loss from discontinued operations, net of income taxes |
|
|
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
(0.3 |
) |
|||||
Net earnings |
|
$ |
166.2 |
|
|
$ |
91.5 |
|
|
|
$ |
89.1 |
|
|
|
$ |
(180.6 |
) |
|
$ |
166.2 |
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
65 |
Condensed Consolidating
Statement of Operations
For the year ended December 31, 2005
|
|
Parent |
|
Guarantor |
|
Non-
|
|
Eliminations |
|
Total |
|
|||||||||||
Net sales |
|
$ |
|
|
|
$ |
1,419.9 |
|
|
|
$ |
1,083.7 |
|
|
|
$ |
(249.5 |
) |
|
$ |
2,254.1 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales |
|
|
|
|
1,192.0 |
|
|
|
889.7 |
|
|
|
(249.5 |
) |
|
1,832.2 |
|
|||||
Engineering, selling and administrative expenses |
|
24.7 |
|
|
141.3 |
|
|
|
116.3 |
|
|
|
|
|
|
282.3 |
|
|||||
Amortization expense |
|
|
|
|
1.0 |
|
|
|
2.1 |
|
|
|
|
|
|
3.1 |
|
|||||
Plant consolidation and restructuring costs |
|
|
|
|
3.2 |
|
|
|
|
|
|
|
|
|
|
3.2 |
|
|||||
Total costs and expenses |
|
24.7 |
|
|
1,337.5 |
|
|
|
1,008.1 |
|
|
|
(249.5 |
) |
|
2,120.8 |
|
|||||
Operating earnings (loss) from continuing operations |
|
(24.7 |
) |
|
82.4 |
|
|
|
75.6 |
|
|
|
|
|
|
133.3 |
|
|||||
Interest expense |
|
(47.5 |
) |
|
(2.0 |
) |
|
|
(4.3 |
) |
|
|
|
|
|
(53.8 |
) |
|||||
Management fees |
|
26.7 |
|
|
(26.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss on debt extinguishment |
|
(9.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(9.1 |
) |
|||||
Other net income (expense) net |
|
39.5 |
|
|
(23.7 |
) |
|
|
(12.3 |
) |
|
|
|
|
|
3.5 |
|
|||||
Total other income (expense) net |
|
9.6 |
|
|
(52.4 |
) |
|
|
(16.6 |
) |
|
|
|
|
|
(59.4 |
) |
|||||
Earnings (loss) from continuing operations before taxes on income (loss) |
|
(15.1 |
) |
|
30.0 |
|
|
|
59.0 |
|
|
|
|
|
|
73.9 |
|
|||||
Provision (benefit) for taxes on income (loss) |
|
(2.7 |
) |
|
(1.3 |
) |
|
|
18.8 |
|
|
|
|
|
|
14.8 |
|
|||||
Earnings (loss) before equity in earnings of subsidiaries |
|
(12.4 |
) |
|
31.3 |
|
|
|
40.2 |
|
|
|
|
|
|
59.1 |
|
|||||
Equity in earnings of subsidiaries |
|
78.2 |
|
|
|
|
|
|
|
|
|
|
(78.2 |
) |
|
|
|
|||||
Earnings from continuing operations |
|
65.8 |
|
|
31.3 |
|
|
|
40.2 |
|
|
|
(78.2 |
) |
|
59.1 |
|
|||||
Earnings from discontinued operations, net of income taxes |
|
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
0.9 |
|
|||||
Gain on sale or closure of discontinued operations, net of income taxes |
|
|
|
|
5.8 |
|
|
|
|
|
|
|
|
|
|
5.8 |
|
|||||
Net earnings |
|
$ |
65.8 |
|
|
$ |
38.0 |
|
|
|
$ |
40.2 |
|
|
|
$ |
(78.2 |
) |
|
$ |
65.8 |
|
66 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Condensed
Consolidating Statement of Operations
For the year ended December 31, 2004
|
|
Parent |
|
Guarantor |
|
Non-
|
|
Eliminations |
|
Total |
|
|||||||||||
Net sales |
|
$ |
|
|
|
$ |
1,153.2 |
|
|
|
$ |
868.4 |
|
|
|
$ |
(176.7 |
) |
|
$ |
1,844.9 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales |
|
|
|
|
925.3 |
|
|
|
720.6 |
|
|
|
(176.7 |
) |
|
1,469.2 |
|
|||||
Engineering, selling and administrative expenses |
|
21.3 |
|
|
139.3 |
|
|
|
105.8 |
|
|
|
|
|
|
266.4 |
|
|||||
Amortization expense |
|
|
|
|
0.6 |
|
|
|
2.5 |
|
|
|
|
|
|
3.1 |
|
|||||
Plant consolidation and restructuring costs |
|
|
|
|
0.1 |
|
|
|
1.2 |
|
|
|
|
|
|
1.3 |
|
|||||
Total costs and expenses |
|
21.3 |
|
|
1,065.3 |
|
|
|
830.1 |
|
|
|
(176.7 |
) |
|
1,740.0 |
|
|||||
Operating earnings (loss) from continuing operations |
|
(21.3 |
) |
|
87.9 |
|
|
|
38.3 |
|
|
|
|
|
|
104.9 |
|
|||||
Interest expense |
|
(50.3 |
) |
|
(1.1 |
) |
|
|
(4.6 |
) |
|
|
|
|
|
(56.0 |
) |
|||||
Management fees |
|
28.2 |
|
|
(28.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss on debt extinguishment |
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(1.0 |
) |
|||||
Other net income (expense) net |
|
39.1 |
|
|
(20.4 |
) |
|
|
(19.6 |
) |
|
|
|
|
|
(0.9 |
) |
|||||
Total other income (expense) net |
|
16.0 |
|
|
(49.7 |
) |
|
|
(24.2 |
) |
|
|
|
|
|
(57.9 |
) |
|||||
Earnings (loss) from continuing operations before taxes on income (loss) |
|
(5.3 |
) |
|
38.2 |
|
|
|
14.1 |
|
|
|
|
|
|
47.0 |
|
|||||
Provision (benefit) for taxes on income (loss) |
|
(0.9 |
) |
|
6.7 |
|
|
|
3.1 |
|
|
|
|
|
|
8.9 |
|
|||||
Earnings (loss) before equity in earnings of subsidiaries |
|
(4.4 |
) |
|
31.5 |
|
|
|
11.0 |
|
|
|
|
|
|
38.1 |
|
|||||
Equity in earnings of subsidiaries |
|
43.5 |
|
|
|
|
|
|
|
|
|
|
(43.5 |
) |
|
|
|
|||||
Earnings from continuing operations |
|
39.1 |
|
|
31.5 |
|
|
|
11.0 |
|
|
|
(43.5 |
) |
|
38.1 |
|
|||||
Earnings (loss) from discontinued operations, net of income taxes |
|
|
|
|
0.6 |
|
|
|
(0.8 |
) |
|
|
|
|
|
(0.2 |
) |
|||||
Gain on sale or closure of discontinued operations, net of income taxes |
|
|
|
|
|
|
|
|
1.2 |
|
|
|
|
|
|
1.2 |
|
|||||
Net earnings |
|
$ |
39.1 |
|
|
$ |
32.1 |
|
|
|
$ |
11.4 |
|
|
|
$ |
(43.5 |
) |
|
$ |
39.1 |
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
67 |
Condensed Consolidating
Balance Sheet
As of December 31, 2006
|
|
Parent |
|
Guarantor |
|
Non-
|
|
Eliminations |
|
Total |
|
|||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
20.4 |
|
|
$ |
22.9 |
|
|
|
$ |
130.4 |
|
|
|
$ |
|
|
|
$ |
173.7 |
|
Marketable securities |
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2.4 |
|
|||||
Restricted cash |
|
15.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
15.1 |
|
|||||
Account receivable net |
|
0.3 |
|
|
92.3 |
|
|
|
192.6 |
|
|
|
|
|
|
285.2 |
|
|||||
Inventories net |
|
|
|
|
203.7 |
|
|
|
288.7 |
|
|
|
|
|
|
492.4 |
|
|||||
Deferred income taxes |
|
61.3 |
|
|
|
|
|
|
36.4 |
|
|
|
|
|
|
97.7 |
|
|||||
Other current assets |
|
0.6 |
|
|
44.8 |
|
|
|
30.8 |
|
|
|
|
|
|
76.2 |
|
|||||
Total current assets |
|
100.1 |
|
|
363.7 |
|
|
|
678.9 |
|
|
|
|
|
|
1,142.7 |
|
|||||
Property, plant and equipment net |
|
9.2 |
|
|
162.1 |
|
|
|
227.6 |
|
|
|
|
|
|
398.9 |
|
|||||
Goodwill net |
|
|
|
|
311.9 |
|
|
|
150.2 |
|
|
|
|
|
|
462.1 |
|
|||||
Other intangible assets |
|
|
|
|
67.0 |
|
|
|
93.0 |
|
|
|
|
|
|
160.0 |
|
|||||
Deferred income taxes |
|
15.2 |
|
|
|
|
|
|
(0.9 |
) |
|
|
|
|
|
14.3 |
|
|||||
Other non-current assets |
|
23.4 |
|
|
11.7 |
|
|
|
6.4 |
|
|
|
|
|
|
41.5 |
|
|||||
Investments in affiliates |
|
671.0 |
|
|
18.8 |
|
|
|
203.1 |
|
|
|
(892.9 |
) |
|
|
|
|||||
Total assets |
|
$ |
818.9 |
|
|
$ |
935.2 |
|
|
|
$ |
1,358.3 |
|
|
|
$ |
(892.9 |
) |
|
$ |
2,219.5 |
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable and accrued expenses |
|
$ |
65.4 |
|
|
$ |
335.1 |
|
|
|
$ |
439.1 |
|
|
|
$ |
|
|
|
$ |
839.6 |
|
Short-term borrowings |
|
|
|
|
|
|
|
|
4.1 |
|
|
|
|
|
|
4.1 |
|
|||||
Product warranties |
|
|
|
|
33.1 |
|
|
|
26.5 |
|
|
|
|
|
|
59.6 |
|
|||||
Product liabilities |
|
|
|
|
30.1 |
|
|
|
2.0 |
|
|
|
|
|
|
32.1 |
|
|||||
Total current liabilities |
|
65.4 |
|
|
398.3 |
|
|
|
471.7 |
|
|
|
|
|
|
935.4 |
|
|||||
Long-term debt |
|
259.3 |
|
|
|
|
|
|
5.0 |
|
|
|
|
|
|
264.3 |
|
|||||
Pension obligations |
|
29.3 |
|
|
10.9 |
|
|
|
24.3 |
|
|
|
|
|
|
64.5 |
|
|||||
Postretirement health and other benefit obligations |
|
59.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
59.9 |
|
|||||
Long-term deferred revenue |
|
|
|
|
9.7 |
|
|
|
61.9 |
|
|
|
|
|
|
71.6 |
|
|||||
Intercompany |
|
(394.4 |
) |
|
(57.9 |
) |
|
|
721.4 |
|
|
|
(269.1 |
) |
|
|
|
|||||
Other non-current liabilities |
|
24.8 |
|
|
15.3 |
|
|
|
9.2 |
|
|
|
|
|
|
49.3 |
|
|||||
Total non-current liabilities |
|
(21.1 |
) |
|
(22.0 |
) |
|
|
821.8 |
|
|
|
(269.1 |
) |
|
509.6 |
|
|||||
Stockholders equity |
|
774.6 |
|
|
558.9 |
|
|
|
64.8 |
|
|
|
(623.8 |
) |
|
774.5 |
|
|||||
Total liabilities and stockholders equity |
|
$ |
818.9 |
|
|
$ |
935.2 |
|
|
|
$ |
1,358.3 |
|
|
|
$ |
(892.9 |
) |
|
$ |
2,219.5 |
|
68 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Condensed
Consolidating Balance Sheet
As of December 31, 2005
|
|
|
|
|
|
Non- |
|
|
|
|
|
|||||||||||||
|
|
|
|
Guarantor |
|
Guarantor |
|
|
|
|
|
|||||||||||||
|
|
Parent |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
|||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
146.4 |
|
|
$ |
9.7 |
|
|
|
$ |
73.4 |
|
|
|
$ |
|
|
|
|
$ |
229.5 |
|
|
Marketable securities |
|
2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.3 |
|
|
|||||
Accounts receivable net |
|
0.2 |
|
|
85.0 |
|
|
|
158.0 |
|
|
|
|
|
|
|
243.2 |
|
|
|||||
Inventories net |
|
|
|
|
141.8 |
|
|
|
189.7 |
|
|
|
|
|
|
|
331.5 |
|
|
|||||
Deferred income taxes |
|
36.8 |
|
|
|
|
|
|
37.6 |
|
|
|
|
|
|
|
74.4 |
|
|
|||||
Other current assets |
|
0.5 |
|
|
52.2 |
|
|
|
19.8 |
|
|
|
|
|
|
|
72.5 |
|
|
|||||
Total current assets |
|
186.2 |
|
|
288.7 |
|
|
|
478.5 |
|
|
|
|
|
|
|
953.4 |
|
|
|||||
Property, plant and equipment net |
|
11.1 |
|
|
146.4 |
|
|
|
196.4 |
|
|
|
|
|
|
|
353.9 |
|
|
|||||
Goodwill |
|
1.0 |
|
|
291.0 |
|
|
|
137.6 |
|
|
|
|
|
|
|
429.6 |
|
|
|||||
Other intangible assets net |
|
|
|
|
54.1 |
|
|
|
85.8 |
|
|
|
|
|
|
|
139.9 |
|
|
|||||
Deferred income taxes |
|
26.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26.7 |
|
|
|||||
Other non-current assets |
|
27.6 |
|
|
17.4 |
|
|
|
13.3 |
|
|
|
|
|
|
|
58.3 |
|
|
|||||
Investment in affiliates |
|
459.6 |
|
|
18.8 |
|
|
|
203.1 |
|
|
|
(681.5 |
) |
|
|
|
|
|
|||||
Total assets |
|
$ |
712.2 |
|
|
$ |
816.4 |
|
|
|
$ |
1,114.7 |
|
|
|
$ |
(681.5 |
) |
|
|
$ |
1,961.8 |
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable and accrued expenses |
|
$ |
47.5 |
|
|
$ |
257.8 |
|
|
|
$ |
286.5 |
|
|
|
$ |
|
|
|
|
$ |
591.8 |
|
|
Short-term borrowings |
|
4.3 |
|
|
|
|
|
|
15.1 |
|
|
|
|
|
|
|
19.4 |
|
|
|||||
Product warranties |
|
|
|
|
24.0 |
|
|
|
23.3 |
|
|
|
|
|
|
|
47.3 |
|
|
|||||
Product liabilities |
|
|
|
|
28.8 |
|
|
|
3.0 |
|
|
|
|
|
|
|
31.8 |
|
|
|||||
Total current liabilities |
|
51.8 |
|
|
310.6 |
|
|
|
327.9 |
|
|
|
|
|
|
|
690.3 |
|
|
|||||
Non-Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term debt, less current portion |
|
468.6 |
|
|
|
|
|
|
5.4 |
|
|
|
|
|
|
|
474.0 |
|
|
|||||
Pension obligations |
|
29.7 |
|
|
14.3 |
|
|
|
27.6 |
|
|
|
|
|
|
|
71.6 |
|
|
|||||
Postretirement health and other benefit obligations |
|
52.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52.4 |
|
|
|||||
Long-term deferred revenue |
|
|
|
|
23.6 |
|
|
|
58.1 |
|
|
|
|
|
|
|
81.7 |
|
|
|||||
Intercompany |
|
(443.6 |
) |
|
(108.0 |
) |
|
|
167.2 |
|
|
|
384.4 |
|
|
|
|
|
|
|||||
Other non-current liabilities |
|
10.1 |
|
|
16.8 |
|
|
|
21.6 |
|
|
|
|
|
|
|
48.5 |
|
|
|||||
Total non-current liabilities |
|
117.2 |
|
|
(53.3 |
) |
|
|
279.9 |
|
|
|
384.4 |
|
|
|
728.2 |
|
|
|||||
Stockholders equity |
|
543.2 |
|
|
559.1 |
|
|
|
506.9 |
|
|
|
(1,065.9 |
) |
|
|
543.3 |
|
|
|||||
Total liabilities and stockholders equity |
|
$ |
712.2 |
|
|
$ |
816.4 |
|
|
|
$ |
1,114.7 |
|
|
|
$ |
(681.5 |
) |
|
|
$ |
1,961.8 |
|
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
69 |
Condensed Consolidating
Statement of Cash Flows
For the year ended December 31, 2006
|
|
Parent |
|
Guarantor |
|
Non-guarantor |
|
Total |
|
||||||||
Net cash provided by operating activities |
|
$ |
26.0 |
|
|
$ |
143.1 |
|
|
|
$ |
125.0 |
|
|
$ |
294.1 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Capital expenditures |
|
(1.8 |
) |
|
(27.3 |
) |
|
|
(38.5 |
) |
|
(67.6 |
) |
||||
Business acquisitions, net of cash acquired |
|
|
|
|
(48.1 |
) |
|
|
|
|
|
(48.1 |
) |
||||
Restricted cash |
|
(15.1 |
) |
|
|
|
|
|
|
|
|
(15.1 |
) |
||||
Proceeds from sale of property, plant and equipment |
|
|
|
|
0.7 |
|
|
|
9.6 |
|
|
10.3 |
|
||||
Purchase of marketable securities |
|
(0.1 |
) |
|
|
|
|
|
|
|
|
(0.1 |
) |
||||
Intercompany investing |
|
71.7 |
|
|
(48.7 |
) |
|
|
(23.0 |
) |
|
|
|
||||
Net cash provided by (used for) investing activities |
|
54.7 |
|
|
(123.4 |
) |
|
|
(51.9 |
) |
|
(120.6 |
) |
||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Payments on long-term debt |
|
(223.5 |
) |
|
|
|
|
|
|
|
|
(223.5 |
) |
||||
Proceeds on short-term borrowings net |
|
|
|
|
|
|
|
|
(13.6 |
) |
|
(13.6 |
) |
||||
Proceeds from (payments) on revolving credit facility |
|
(4.3 |
) |
|
|
|
|
|
|
|
|
(4.3 |
) |
||||
Proceeds from notes financing net |
|
|
|
|
(6.3 |
) |
|
|
(9.1 |
) |
|
(15.4 |
) |
||||
Debt issue costs |
|
(0.2 |
) |
|
|
|
|
|
|
|
|
(0.2 |
) |
||||
Dividends paid |
|
(8.6 |
) |
|
|
|
|
|
|
|
|
(8.6 |
) |
||||
Exercise of stock options |
|
30.2 |
|
|
|
|
|
|
|
|
|
30.2 |
|
||||
Net cash used for financing activities |
|
(206.4 |
) |
|
(6.3 |
) |
|
|
(22.7 |
) |
|
(235.4 |
) |
||||
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
6.1 |
|
|
6.1 |
|
||||
Net increase in cash and cash equivalents |
|
(125.7 |
) |
|
13.4 |
|
|
|
56.5 |
|
|
(55.8 |
) |
||||
Balance at beginning of year |
|
146.4 |
|
|
9.7 |
|
|
|
73.4 |
|
|
229.5 |
|
||||
Balance at end of year |
|
$ |
20.7 |
|
|
$ |
23.1 |
|
|
|
$ |
129.9 |
|
|
$ |
173.7 |
|
70 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2005
|
|
Parent |
|
Guarantor |
|
Non-guarantor |
|
Total |
|
||||||||
Net cash provided by operating activities |
|
$ |
2.1 |
|
|
$ |
20.0 |
|
|
|
$ |
84.6 |
|
|
$ |
106.7 |
|
Cash flows From investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Capital expenditures |
|
(1.0 |
) |
|
(18.6 |
) |
|
|
(35.3 |
) |
|
(54.9 |
) |
||||
Proceeds from sale of property, plant and equipment |
|
|
|
|
2.3 |
|
|
|
12.8 |
|
|
15.1 |
|
||||
Purchase of marketable securities |
|
(0.1 |
) |
|
|
|
|
|
|
|
|
(0.1 |
) |
||||
Intercompany investing |
|
66.0 |
|
|
(31.7 |
) |
|
|
(34.3 |
) |
|
|
|
||||
Net cash provided by (used for) investing activities of continuing operations |
|
64.9 |
|
|
(48.0 |
) |
|
|
(56.8 |
) |
|
(39.9 |
) |
||||
Net cash provided by investing activities of discontinued operations |
|
|
|
|
28.3 |
|
|
|
|
|
|
28.3 |
|
||||
Net cash provided by (used for) investing activities |
|
64.9 |
|
|
(19.7 |
) |
|
|
(56.8 |
) |
|
(11.6 |
) |
||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Payments on long-term debt |
|
(61.3 |
) |
|
|
|
|
|
(15.8 |
) |
|
(77.1 |
) |
||||
Proceeds from short-term borrowings net |
|
|
|
|
|
|
|
|
19.9 |
|
|
19.9 |
|
||||
Proceeds from revolving credit facility |
|
4.3 |
|
|
|
|
|
|
|
|
|
4.3 |
|
||||
Proceeds from notes financing net |
|
|
|
|
13.9 |
|
|
|
0.3 |
|
|
14.2 |
|
||||
Debt issue costs |
|
(1.8 |
) |
|
|
|
|
|
|
|
|
(1.8 |
) |
||||
Dividends paid |
|
(8.4 |
) |
|
|
|
|
|
|
|
|
(8.4 |
) |
||||
Exercises of stock options |
|
10.8 |
|
|
|
|
|
|
|
|
|
10.8 |
|
||||
Cash provided by (used for) financing activities |
|
(56.4 |
) |
|
13.9 |
|
|
|
4.4 |
|
|
(38.1 |
) |
||||
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
(3.9 |
) |
|
(3.9 |
) |
||||
Net increase in cash and cash equivalents |
|
10.6 |
|
|
14.2 |
|
|
|
28.3 |
|
|
53.1 |
|
||||
Balance at beginning of year |
|
135.8 |
|
|
(4.5 |
) |
|
|
45.1 |
|
|
176.4 |
|
||||
Balance at end of year |
|
$ |
146.4 |
|
|
$ |
9.7 |
|
|
|
$ |
73.4 |
|
|
$ |
229.5 |
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
71 |
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2004
|
|
Parent |
|
Guarantor |
|
Non-guarantor |
|
Total |
|
||||||||
Net cash provided by operating activities |
|
$ |
36.4 |
|
|
$ |
12.3 |
|
|
|
$ |
8.3 |
|
|
$ |
57.0 |
|
Cash flows From investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Capital expenditures |
|
(2.9 |
) |
|
(19.0 |
) |
|
|
(21.3 |
) |
|
(43.2 |
) |
||||
Proceeds from sale of property, plant and equipment |
|
|
|
|
1.9 |
|
|
|
13.5 |
|
|
15.4 |
|
||||
Purchase of marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Intercompany investing |
|
7.0 |
|
|
(21.7 |
) |
|
|
14.7 |
|
|
|
|
||||
Net cash provided by (used for) investing activities of continuing operations |
|
4.1 |
|
|
(38.8 |
) |
|
|
6.9 |
|
|
(27.8 |
) |
||||
Net cash provided by (used for) investing activities of discontinued operations |
|
|
|
|
(1.2 |
) |
|
|
9.0 |
|
|
7.8 |
|
||||
Net cash provided by (used for) investing activities |
|
4.1 |
|
|
(40.0 |
) |
|
|
15.9 |
|
|
(20.0 |
) |
||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net proceeds from issuance of common stock |
|
104.9 |
|
|
|
|
|
|
|
|
|
104.9 |
|
||||
Payments on long-term debt |
|
(20.6 |
) |
|
|
|
|
|
(22.4 |
) |
|
(43.0 |
) |
||||
Proceeds from short-term borrowings net |
|
|
|
|
|
|
|
|
8.3 |
|
|
8.3 |
|
||||
Proceeds from notes financing net |
|
|
|
|
23.2 |
|
|
|
|
|
|
23.2 |
|
||||
Dividends paid |
|
(7.5 |
) |
|
|
|
|
|
|
|
|
(7.5 |
) |
||||
Exercises of stock options |
|
6.7 |
|
|
|
|
|
|
|
|
|
6.7 |
|
||||
Cash provided by (used for) financing activities |
|
83.5 |
|
|
23.2 |
|
|
|
(14.1 |
) |
|
92.6 |
|
||||
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
1.8 |
|
|
1.8 |
|
||||
Net increase (decrease) in cash and cash equivalents |
|
124.0 |
|
|
(4.5 |
) |
|
|
11.9 |
|
|
131.4 |
|
||||
Balance at beginning of year |
|
11.8 |
|
|
|
|
|
|
33.2 |
|
|
45.0 |
|
||||
Balance at end of year |
|
$ |
135.8 |
|
|
$ |
(4.5 |
) |
|
|
$ |
45.1 |
|
|
$ |
176.4 |
|
72 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
22. Quarterly Financial Data (Unaudited)
Quarterly financial data for 2006 and 2005 is as follows:
|
|
2006 |
|
2005 |
|
||||||||||||||||||||||||
|
|
First |
|
Second |
|
Third |
|
Fourth |
|
First |
|
Second |
|
Third |
|
Fourth |
|
||||||||||||
Net sales |
|
$ |
633.0 |
|
|
$ |
746.2 |
|
|
$ |
779.0 |
|
$ |
775.2 |
|
$ |
510.3 |
|
|
$ |
589.6 |
|
|
$ |
564.9 |
|
$ |
589.3 |
|
Gross profit |
|
135.2 |
|
|
172.0 |
|
|
169.3 |
|
170.8 |
|
96.8 |
|
|
114.3 |
|
|
110.4 |
|
100.3 |
|
||||||||
Earnings from continuing operations |
|
30.0 |
|
|
42.2 |
|
|
50.4 |
|
43.9 |
|
5.9 |
|
|
24.5 |
|
|
20.9 |
|
7.9 |
|
||||||||
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings (loss) from discontinued operations, net of income taxes |
|
(0.3 |
) |
|
|
|
|
|
|
|
|
0.6 |
|
|
(0.4 |
) |
|
(0.4 |
) |
0.7 |
|
||||||||
Gain (loss) on sale or closure of discontinued operations, net of income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.4 |
) |
9.6 |
|
||||||||
Net earnings (loss) |
|
$ |
29.7 |
|
|
$ |
42.2 |
|
|
$ |
50.4 |
|
$ |
43.9 |
|
$ |
6.5 |
|
|
$ |
24.1 |
|
|
$ |
17.1 |
|
$ |
18.2 |
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings from continuing operations |
|
$ |
0.49 |
|
|
$ |
0.69 |
|
|
$ |
0.82 |
|
$ |
0.71 |
|
$ |
0.10 |
|
|
$ |
0.41 |
|
|
$ |
0.35 |
|
$ |
0.13 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings (loss) from discontinued operations, net of income taxes |
|
(0.01 |
) |
|
|
|
|
|
|
|
|
0.01 |
|
|
(0.01 |
) |
|
(0.01 |
) |
0.01 |
|
||||||||
Gain (loss) on sale or closure of discontinued operations, net of income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.06 |
) |
0.16 |
|
||||||||
Net earnings |
|
$ |
0.49 |
|
|
$ |
0.69 |
|
|
$ |
0.82 |
|
$ |
0.71 |
|
$ |
0.11 |
|
|
$ |
0.40 |
|
|
$ |
0.28 |
|
$ |
0.30 |
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings from continuing operations |
|
$ |
0.48 |
|
|
$ |
0.67 |
|
|
$ |
0.80 |
|
$ |
0.69 |
|
$ |
0.10 |
|
|
$ |
0.40 |
|
|
$ |
0.34 |
|
$ |
0.13 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings (loss) from discontinued operations, net of income taxes |
|
(0.01 |
) |
|
|
|
|
|
|
|
|
0.01 |
|
|
(0.01 |
) |
|
(0.01 |
) |
0.01 |
|
||||||||
Gain (loss) on sale or closure of discontinued operations, net of income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.05 |
) |
0.16 |
|
||||||||
Net earnings |
|
$ |
0.48 |
|
|
$ |
0.67 |
|
|
$ |
0.80 |
|
$ |
0.69 |
|
$ |
0.11 |
|
|
$ |
0.39 |
|
|
$ |
0.28 |
|
$ |
0.30 |
|
Dividends per common share |
|
$ |
0.035 |
|
|
$ |
0.035 |
|
|
$ |
0.035 |
|
$ |
0.035 |
|
$ |
0.035 |
|
|
$ |
0.035 |
|
|
$ |
0.035 |
|
$ |
0.035 |
|
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
The companys management, with the participation of the companys Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, the companys Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the companys disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the company in the reports that it files or submits under the Exchange Act, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.
Managements Report on Internal Control Over Financial Reporting
The companys management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The companys management, with the participation of the companys Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the companys internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the companys management has concluded that, as of December 31, 2006, the companys internal control over financial reporting was effective.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
|
The Manitowoc Company, Inc. 2006 Form 10-K |
73 |
periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Managements assessment of the effectiveness of the companys internal control over financial reporting as of December 31, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control Over Financial Reporting
We made no change in our internal control over financial reporting during the last fiscal quarter of 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from the sections of the 2007 Proxy Statement captioned Section 16(a) Beneficial Ownership Reporting Compliance, Audit Committee and Election of Directors. See also Executive Officers of the Registrant in Part I hereof, which is incorporated herein by reference.
The company has a Global Ethics Policy and other policies relating to business conduct, that pertain to all employees, which can be viewed at the companys website www.manitowoc.com. The company has adopted a code of ethics that applies to the companys principal executive officer, principal financial officer, and controller, which is part of the companys Global Ethics Policy and other policies related to business conduct.
Item 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the sections of the 2007 Proxy Statement captioned Non-employee Director Compensation, Compensation Disclosure and Analysis, and Executive Compensation.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the sections of the 2007 Proxy Statement captioned Equity Compensation Plans and Ownership of Securities
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporate by reference from the section of the 2007 Proxy Statement captioned Governance of the Board and Its Committees.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference from the section of the 2007 Proxy Statement captioned Audit Committee Report.
74 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this Report.
(1) Financial Statements:
The following Consolidated Financial Statements are filed as part of this report under Item 8, Financial Statements and Supplementary Date.
(2) Financial Statement Schedules:
Financial Statement Schedule for the years ended December 31, 2006, 2005, and 2004
Schedule |
|
Description |
|
Filed Herewith |
II |
|
Valuation and Qualifying Accounts |
|
X |
All other financial statement schedules not listed have been omitted since the required information is included in the Consolidated Financial Statements or the Notes thereto, or is not applicable or required under rules of Regulation S-X.
(b) Exhibits:
See Index to Exhibits immediately following the signature page of this report, which is incorporated herein by reference.
Schedule II: Valuation and Qualifying Accounts
For The Years Ended December 31, 2004, 2005 and 2006
|
|
Balance at
|
|
Acquisition
|
|
Charge to
|
|
Utilization
|
|
Impact of
|
|
Balance at
|
|
||||||||||||||||||
Year End December 31, 2004 |
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|
|
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|
|
|
|
|
|
|
|
||||||
Allowance for doubtful accounts |
|
|
$ |
24.4 |
|
|
|
$ |
|
|
|
|
$ |
6.2 |
|
|
|
$ |
(6.1 |
) |
|
|
$ |
1.8 |
|
|
|
$ |
26.3 |
|
|
Inventory obsolescence reserve |
|
|
$ |
40.3 |
|
|
|
$ |
|
|
|
|
$ |
5.3 |
|
|
|
$ |
(9.4 |
) |
|
|
$ |
1.9 |
|
|
|
$ |
38.1 |
|
|
Year End December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Allowance for doubtful accounts |
|
|
$ |
26.3 |
|
|
|
$ |
|
|
|
|
$ |
4.2 |
|
|
|
$ |
(5.0 |
) |
|
|
$ |
(1.7 |
) |
|
|
$ |
23.8 |
|
|
Inventory obsolescence reserve |
|
|
$ |
38.1 |
|
|
|
$ |
|
|
|
|
$ |
7.2 |
|
|
|
$ |
(6.3 |
) |
|
|
$ |
(2.7 |
) |
|
|
$ |
36.3 |
|
|
Year End December 31, 2006 |
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Allowance for doubtful accounts |
|
|
$ |
23.8 |
|
|
|
$ |
0.2 |
|
|
|
$ |
6.3 |
|
|
|
$ |
(4.0 |
) |
|
|
$ |
1.3 |
|
|
|
$ |
27.6 |
|
|
Inventory obsolescence reserve |
|
|
$ |
36.3 |
|
|
|
$ |
0.6 |
|
|
|
$ |
16.8 |
|
|
|
$ |
(11.3 |
) |
|
|
$ |
2.0 |
|
|
|
$ |
44.4 |
|
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
75 |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized:
Date: March 1, 2007
|
|
The Manitowoc Company, Inc |
|
|
(Registrant) |
|
/s/ TERRY D. GROWCOCK |
|
|
Terry D. Growcock |
|
|
Chairman and Chief Executive Officer |
|
|
/s/ CARL J. LAURINO |
|
|
Carl J. Laurino |
|
|
Senior Vice President and Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons constituting a majority of the Board of Directors on behalf of the registrant and in the capacities and on the dates indicated:
|
/s/ TERRY D. GROWCOCK |
|
|
|
Terry D. Growcock, Chairman and Chief Executive Officer, Director |
|
March 1, 2007 |
|
/s/ CARL J. LAURINO |
|
|
|
Carl J. Laurino, Senior Vice President and Chief Financial Officer |
|
March 1, 2007 |
|
/s/ KEITH D. NOSBUSCH |
|
|
|
Keith D. Nosbusch, Director |
|
March 1, 2007 |
|
/s/ DEAN H. ANDERSON |
|
|
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Dean H. Anderson, Director |
|
March 1, 2007 |
|
/s/ ROBERT S. THROOP |
|
|
|
Robert S. Throop, Director |
|
March 1, 2007 |
|
/s/ ROBERT C. STIFT |
|
|
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Robert C. Stift, Director |
|
March 1, 2007 |
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/s/ JAMES L. PACKARD |
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|
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James L. Packard, Director |
|
March 1, 2007 |
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/s/ DANIEL W. DUVAL |
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|
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Daniel W. Duval, Director |
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March 1, 2007 |
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/s/ VIRGIS W. COLBERT |
|
|
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Virgis W. Colbert, Director |
|
March 1, 2007 |
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/s/ KENNETH W. KRUEGER |
|
|
|
Kenneth W. Krueger, Director |
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March 1, 2007 |
76 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
FOR THE YEAR ENDED DECEMBER 31, 2006
Exhibit No. |
|
Description |
|
Filed/Furnished
|
3.1 |
|
Amended and Restated Articles of Incorporation, as amended on November 5, 1984, May 5, 1998, and March 31, 2006 filed as Exhibit 3.1 to the companys Annual Report on Form 10-K for the year ended December 31, 2006 |
|
X (1) |
3.2 |
|
Restated By-Laws (as amended through May 3, 2005) (filed as Exhibit 3. (ii) to the companys current report on Form 8-K dated May 3, 2005 and incorporated herein by reference). |
|
|
4.2(a)* |
|
Indenture, dated August 8, 2002, by and among The Manitowoc Company, Inc., the Guarantors named therein, and BNY Midwest Trust Company, as Trustee (filed as Exhibit 4.1 to the companys current Report on Form 8-K dated as of August 8, 2002 and incorporated herein by reference). |
|
|
4.2(b) |
|
Indenture, dated as of November 6, 2003, by and between The Manitowoc Company, Inc., the Guarantors named therein, and BNY Midwest Trust Company, as Trustee (filed as Exhibit 4.1 to the companys current Report on Form 8-K dated as of November 6, 2003 and incorporated herein by reference). |
|
|
4.4 |
|
Articles III, V, and VIII of the Amended and Restated Articles of Incorporation (see Exhibit 3.1 above) |
|
|
4.5 |
|
Amended and Restated Credit Agreement dated as of December 14, 2006 by and among The Manitowoc Company, Inc., as Borrower, the lenders party thereto, and JP Morgan Chase Bank, N.A., as Agent (filed as Exhibit 4.5 to the companys Annual Report on Form 10-L for the year ended December 31, 2006. |
|
X (1) |
10.1** |
|
The Manitowoc Company, Inc. Deferred Compensation Plan effective August 20, 1993, as amended (filed as Exhibit 10.1 to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference). |
|
|
10.2** |
|
The Manitowoc Company, Inc. Management Incentive Compensation Plan (Economic Value Added (EVA) Bonus Plan Effective July 4, 1993, as amended (filed as Exhibit 10.2 to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference). |
|
|
10.2(a)** |
|
Short-Term Incentive Plan, Effective January 1, 2005, as amended on February 27, 2007, effective January 1, 2007 (filed as Exhibit 10.2(a) to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006). |
|
X (1) |
10.3(a)** |
|
Form of Contingent Employment Agreement between the company and the following executive officers of the Company: Terry D. Growcock, Carl J. Laurino, Maurice D. Jones, Thomas G. Musial, Dean J. Nolden, and Mary. |
|
|
|
|
Ellen Bowers (filed as Exhibit 10(a) to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and incorporated herein by reference) |
|
|
10.3(b)** |
|
Form of Contingent Employment Agreement between the company and the following executive officers of the company and certain other employees of the company: Glen E. Tellock, Robert P. Herre, and Dennis E. McCloskey (filed as Exhibit 10(b) to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and incorporated herein by reference). |
|
|
10.4** |
|
Form of Indemnity Agreement between the company and each of the directors, executive officers and certain other employees of the company (filed as Exhibit 10(b) to the companys Annual Report on Form 10-K for the fiscal year ended July 1, 1989 and incorporated herein by reference). |
|
|
10.5** |
|
Supplemental Retirement Agreement between Fred M. Butler and the company dated March 15, 1993 (filed as Exhibit 10(e) to the companys Annual Report on Form 10-K for the fiscal year ended July 3, 1993 and incorporated herein by reference). |
|
|
10.6(a)** |
|
Supplemental Retirement Agreement between Robert K. Silva and the company dated January 2, 1995 (filed as Exhibit 10 to the companys Report on Form 10-Q for the transition period ended December 31, 1994 and incorporated herein by reference). |
|
|
10.6(b)** |
|
Restatement to clarify Mr. Silvas Supplemental Retirement Agreement dated March 31, 1997 (filed as Exhibit 10.6(b) to the companys Report on Form 10-K for the fiscal year ended December 31, 1996 and incorporated herein by reference). |
|
|
10.6(c)** |
|
Supplemental Retirement Agreement between Terry D. Growcock, Glen E. Tellock, Tom G. Musial, and Maurice D. Jones and the company dated May 2000, as amended (filed as Exhibit 10.6(c) to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2005 and incorporated herein by reference). |
|
|
|
The Manitowoc Company, Inc. 2006 Form 10-K |
77 |
10.7(a)** |
|
The Manitowoc Company, Inc. 1995 Stock Plan, as amended (filed as Exhibit 10.7(a) to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference). |
|
|
10.7(b)** |
|
The Manitowoc Company, Inc. 1999 Non-Employee Director Stock Option Plan, as amended (filed as Exhibit 10.7(b) to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and incorporated herein by reference). |
|
|
10.7(c)** |
|
The Manitowoc Company, Inc. 2003 Incentive Stock and Awards Plan, as amended on February 27, 2007 (filed as Exhibit 10.7(c) to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006). |
|
X (1) |
10.7(d)** |
|
Grove Investors, Inc. 2001 Stock Incentive Plan (filed as Exhibit 99.1 to the companys Registration Statement on Form S-8, filed on September 13, 2002 (Registration No. 333-99513) and incorporated herein by reference). |
|
|
10.7(e)** |
|
The Manitowoc Company, Inc. 2004 Non-Employee Director Stock and Award Plan, as amended effective May 3, 2006 and February 27, 2007 (filed as Exhibit 10.7(e) to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006) |
|
X (1) |
10.8** |
|
The Manitowoc Company, Inc. Incentive Stock Option Agreement with Vesting Provisions (filed as Exhibit 10.1 to the companys Report on Form 8-K dated as of February 25, 2005 and incorporated herein by reference). |
|
|
10.9** |
|
The Manitowoc Company, Inc. Non-Qualified Stock Option Agreement with Vesting Provisions (filed as Exhibit 10.2 to the companys Report on Form 8-K dated as of February 25, 2005 and incorporated herein by reference). |
|
|
10.10** |
|
The Manitowoc Company, Inc. Award Agreement for Restricted Stock Awards under The Manitowoc Company, Inc. 2003 Incentive Stock and Awards Plan (filed as Exhibit 10.10 to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and incorporated herein by reference). |
|
|
10.11** |
|
The Manitowoc Company, Inc. Award Agreement for the 2004 Non-employee Director Stock and Awards Plan, as amended effective May 3, 2006 (filed as Exhibit 10.11 to the companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006). |
|
X (1) |
10.12 |
|
Amended and Restated Receivable Purchase Agreement among Manitowoc Funding , LLC, as Seller, The Manitowoc Company, Inc., as Servicer, Hannover Funding Company LLC, as Purchaser, and Norddeutsche Landesbank Girozentrale, as Agent, dated as of December 21, 2006 (filed as Exhibit 10.1 on the companys Current Report on Form 8-k dated as of December 22, 2006 and incorporated herein by reference). |
|
|
11 |
|
Statement regarding computation of basic and diluted earnings per share (see Note 12 to the 2006 Consolidated Financial Statements included herein). |
|
|
12.1 |
|
Statement of Computation of Ratio of Earnings to Fixed Charges |
|
X (1) |
21 |
|
Subsidiaries of The Manitowoc Company, Inc. |
|
X (1) |
23.1 |
|
Consent of PricewaterhouseCoopers LLP, the companys Independent Registered Public Accounting Firm |
|
X (1) |
31 |
|
Rule 13a - 14(a)/15d - 14(a) Certifications |
|
X (1) |
32.1 |
|
Certification of CEO pursuant to 18 U.S.C. Section 1350 |
|
X (2) |
32.2 |
|
Certification of CFO pursuant to 18 U.S.C. Section 1350 |
|
X (2) |
(1) Filed Herewith
(2) Furnished Herewith
* Pursuant to Item 601(b)(2) of Regulation S-K, the Registrant agrees to furnish to the Securities and Exchange Commission upon request a copy of any unfiled exhibits or schedules to such documents.
** Management contracts and executive compensation plans and arrangements required to be filed as exhibits pursuant to Item 15(c) of Form 10-K.
78 |
The Manitowoc Company, Inc. 2006 Form 10-K |
|
Exhibit 3.1
DFI/CORP/38 |
United States of America |
|
Record 2/00 |
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State of Wisconsin |
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DEPARTMENT OF FINANCIAL INSTITUTIONS |
To All to Whom These Presents Shall Come, Greetings:
I, RAY ALLEN, Deputy Administrator, Division of Corporate & Consumer Services, Department of Financial Institutions, do hereby certify that the annexed copy has been compared by me with the record on file in the Corporation Section of the Division of Corporate & Consumer Services of this department and that the same is a true copy thereof and the whole of such record; and that I am the Legal custodian of said record, and that this certification is in due form.
|
IN TESTIMONY WHEREOF, I
have
|
|
|
|
|
||
|
|
||
|
RAY ALLEN, Deputy Administrator |
|
|
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Division of Corporate & Consumer Services |
|
|
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Department of Financial Institutions |
|
|
|
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|
|
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|
DATE: November 16 2005 |
BY: |
||
Effective July 1, 1996, the Department of Financial Institutions assumed the functions previously performed by the Corporations Division of the Secretary of State and is the successor custodian of corporate records formerly held by the Secretary of State.
ARTICLES OF
AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
THE MANITOWOC COMPANY, INC.
Articles of Amendment to the Articles of Incorporation of the Manitowoc Company, Inc. are hereby executed in duplicate by the undersigned President and Secretary of such corporation:
1. The name of the corporation is THE MANITOWOC COMPANY, INC. Its registered office is located in Manitowoc County, Wisconsin.
2. Amended and Restated Articles of Incorporation, in the form attached hereto as Exhibit A, were adopted by the shareholders of the corporation on November 5, 1984, in the manner prescribed by the Wisconsin Business Corporation Law.
3. The number of shares of the corporation outstanding at the time of the adoption of the Amended and Restated Articles of Incorporation, and entitled to vote theron, was 10,855,185 shares of Common Stock.
4. The number of shares voted in favor of the adoption of the Amended and Restated Articles of Incorporation was 8,004,151 shares. The number of shares voted against such adoption was 726,348 shares. The number of affirmative votes requisite for adoption was 7,236,790.
5. Adoption of the Amended and Restated Articles of Incorporation does not provide for any exchange, reclassification or cancellation of issued shares. Such adoption reduces the amount of stated capital of the corporation from $27,137,963 to $108,552, by reason of the reduction of the par value of each outstanding share of Common Stock from $2.50 to $.01.
IN WITNESS WHEREOF, these Articles of Amendment are executed on behalf of The Manitowoc Company, Inc. and its corporate seal is hereunto affixed by its undersigned officers as of the 12th day of November, 1984.
|
|
/s/ Wesley D. Kuether |
|
|
Wesley D. Kuether, Exec. Vice President |
|
|
|
[Corporate Seal] |
|
/s/ Charles C. West |
|
|
Charles C. West, Secretary |
This instrument was drafted by, and should be returned to John M. Olson, 2100 Marine Plaza, Milwaukee, Wisconsin 53202.
MANITOWOC COUNTY
Exhibit A
THE MANITOWOC COMPANY, INC.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
These Amended and Restated Articles on incorporation supersede and take the place of the heretofore existing Articles of Incorporation and all amendments thereto.
ARTICLE I.
Name.
Section 1.1. Name.
The name of the corporation is THE MANITOWOC COMPANY, INC.
ARTICLE II.
Purposes.
Section 2.1. Purposes.
The purposes for which the corporation is organized are to engage in any lawful activity within the purposes for which corporations may be organized under the Wisconsin Business Corporation Law.
ARTICLE III.
Pre-emptive Rights.
Section 3.1. Pre-emptive Rights.
No shareholder of the corporation shall have any pre-emptive right to subscribe for or purchase stock issued time by time by the corporation.
ARTICLE IV.
Directors.
Section 4.1. Directors.
The number of directors shall be fixed from time to time by the By-Laws of the corporation, but shall not be less than five (5). The By-Laws of the corporation may provide that, in lieu of electing the whole number of directors annually, the directors may be divided into either two (2) or three (3) classes, the terms of office of such directors to be as provided in Section 180.33, Wisconsin Statues.
Section 4.2. Removal of Directors
The director may be removed from office by affirmative vote of two-thirds (2/3) of the outstanding shares entitled to vote for the election of such director, taken at a meeting of shareholders called for that purpose, and any vacancy so created may be filled by such shareholders.
Section 4.3. Committees of Directors.
The Board of Directors may, by majority vote of all its members, designate one or more committees, each to consist of three (3) or more directors elected to the committee by the Board, which may exercise the powers of the corporation or any of its divisions, but not as to declaration of dividends, election of officers or the filling of vacancies on the Board or on any such committees.
11
Section 4.4. Indemnification.
The corporation may indemnify any of its directors and officers, or any persons serving at its request as directors of another corporation in which it owns capital stock or of which it is a creditor, within the eliminations prescribed by law.
ARTICLE V.
Acquisition and Transfer of Shares.
Section 5.1. Acquisition of Shares by the Corporation.
The corporation is authorized by action of the Board of Directors without consent of shareholders to purchase, take, receive or otherwise acquire shares of the corporation subject to the provisions of Section 180.385(1)(a) and (b), Wisconsin Statues
Section 5.2. Acquistions and Transfer of Shares by
Certain Shareholders
The Board of Directors shall have the authority, in its discretion, to deny transfer of any shares presented to the corporation or any transfer agent for transfer until the corporation shall have received evidence satisfactory to the Board of Directors that such transfer is not in violation of any applicable law regulating the transfer or acquisition of shares, including, without limitation, Section180.69 of the Wisconsin Statues as the same may be amended or succeeded from time to time hereafter. If at any time within two years after the date of any transfer of shares which has been recorded of the stock records of the corporation or shall reasonably appear to the Board of Directors that such transfer has taken place in violation of Section 180.69 of the Wisconsin Statues, and that the acquiring person is still the beneficial owner of such shares. The Secretary shall provide written notice of such fact to such acquiring person, and thenceforward such shares shall not be entitled to vote on any matter presented to the shareholders and shall not be treated as outstanding for purposes of determining the existence of a quorum at any annual special meeting of shareholders, nor shall any dividends or other distributions of cash , property, or securities be paid with respects to such shares, until one of the following has occurred:
(a) The Secretary shall have received evidence satisfactory to the Board of Directors that such transfer did not violate Section 180.69 of the Wisconsin Statues: or
(b) Such shares shall have been transferred to another person in a transaction which is not in violation of section 180.69 of
the Wisconsin Statutes. Any dividends which may be withheld from any shareholder of record by reason of this Section 5.2 shall be paid (without interest) to the record holder of such shares immediately after the occurrence of (a) or (b), above.
ARTICLE VI.
Distributions.
Section 6.1 Distributions.
The Board of Directors may from time to time distribute to shareholders in partial liquidation out of stated capital or net
capital surplus of the corporation, a portion of its assets, in cash or property.
12
ARTICLE VII.
Registered Office : Registered Agent.
Section 7.1. Registered Office: Registered Agent.
The address of the registered office of the corporation is 500 South 16th Street, Mantowoc, Wisconsin 54220, and the
registered agent at the registered office of the corporation is John D. West.
ARTICLE VIII.
Capital Stock
Section 8.1. Number of Shares and Classes.
The aggregate number of shares which the corporation has authority to issue is 38.500.000 divided into the following
classes:
8.1.1. 35.000.000 shares of Common Stock of the par value of $0.01 per share.
8.1.2. 3.500.000 shares of Preferred Stock of the par value of $0.01 per share.
Section 8.2. Directors Authority to Establish Series of Preferred Stock.
The Board of Directors is authorized to divide the Preferred Stock into series and to fix and determine the relative rights and preferences of each series. Each series shall be so designated by the Board of Directors as to distinguish the shares thereof from the shares of all other series. All shares of Preferred Stock shall be identical except as to the following relative rights and preferences. As to which the Board of Directors may establish variations between different series not inconsistent with the provisions of these articles:
(a) The rate of dividend:
(b) The price at and the terms and conditions on which shares can be redeemed.
(c) The amount payable upon shares in the event of voluntary or involuntary liquidation:
(d) Sinking fund provisions for the redemption or purchase of shares:
(e) The terms and conditions on which shares may be converted into Common Stock, if the shares of any series are issued with the privilege of conversion.
(f) Voting rights, if any
Section 8.3. Dividends and Distributions.
The holders of Preferred Stock of all series shall be entitled to receive dividends at such rates upon such conditions and at
such times as shall be stated in the resolution or resolutions of the board of Directors providing for the issuance thereof. All dividends on Preferred Stock shall be without priority as between series, shall be paid out of net earnings or any surplus properly applicable to the payment of dividends, and shall be paid or set apart before any dividends or other distributions shall be paid or set apart for Common Stock; provided, however, that dividends may be declared and paid or set apart for Common Stock; provided, however, that dividends may be declared and paid on Common Stock in Common Stock prior to dividends on the Preferred Stock in an amount paid or set apart. Any dividends paid upon Preferred Stock in an amount less than full cumulative dividends accrued and in arrears upon all Preferred Stock outstanding shall, if more than one series be outstanding, be distributed
13
among the different series in proportion to the aggregate amounts which would be distributable to the Preferred Stock of each series if full cumulative dividends were declared and paid thereon. The dividends on the Preferred Stock shall be cumulative, so that if at any time the full amount of dividends accrued and in arrears on the Preferred Stock shall not be paid, the deficiency shall be payable before any dividends or other distributions shall be paid or set apart on Common Stock (other than a distribution payable in shares of Common Stock), and before any sums shall be paid or set apart for the redemption of less than all of the Preferred Stock then outstanding. Dividends on Preferred Stock shall accrue from date of issue. Whenever all dividends accrued and in arrears on Preferred Stock shall have been declared and shall have been paid or set apart, the board of Directors may declare dividends on Common Stock out of the remaining net profits of the corporation, or out of surplus applicable [UNREADABLE] payment of such dividends.
Section 8.4. Liquidation Rights.
In the event of the voluntary liquidation or winding up of the corporation, the holders of Preferred Stock shall be entitled to receive out of the assets of the corporation in full the fixed voluntary liquidation amount thereof, plus accrued dividends thereon, all as provided in the resolution or resolutions providing for the issuance thereof, before any amount shall be paid to the holders of Common Stock. In the event of the involuntary liquidation of the corporation, the holders of the Preferred Stock shall be entitled to receive out of the assets of the corporation in full the fixed involuntary liquidation amount thereof, plus accrued dividends thereon, all as provided in the resolution or resolutions providing for the issuance thereof, before any amount shall be paid to the holders of Common Stock. If, upon the voluntary or involuntary liquidation or winding up of the corporation, the assets of the corporation shall be insufficient to pay the holders of all of the Preferred Stock the entire amounts to which they may be entitled, the assets of the corporation shall, if more than one series be outstanding, be distributed among the different series in proportion to each series if sufficient assets were available. The holders of Preferred Stock shall not otherwise be entitled to participate in any distribution of assets of the corporation, which shall be divided or distributed among the holders of Common Stock. No consolidation or merger of the corporation with or into another corporation or corporations and no sale by the corporation of all or substantially all of its assets shall be deemed a liquidation or winding up of the corporation.
Section 8.5. Voting Rights of Preferred Stock.
The holders of Preferred Stock shall have only such voting rights as shall be stated in the resolution or resolutions of the Board of Directors providing for the issuance thereof, except to the extent that such limitation may be inconsistent with the provisions of the Wisconsin Business Corporation Law.
ARTICLE IX.
Amendments.
Section 9.1. Amendments.
These Amended and Restated Articles of Incorporation may be amended in the manner authorized by law at the time of the amendment.
THIS INSTRUMENT DRAFTED BY
ATTORNEY JOHN. M. OLSON
MILWAUKEE, WISCONSIN
14
Restated Art. Of Inc.
LAW OFFICES
WHYTE & HIRSCHBOECK
2100 MARINE PLAZA
MILWAUKEE, WISCONSIN 53202-4004
STATE OF WISCONSIN
FILED
NOV 16 84
DOUGLAS LA FOLLETTE
SECRETARY OF STATE
ARTICLES OF MERGER OF MANITOWOC SHIPBUILDING, INC. 01 1M08591
INTO THE MANITOWOC COMPANY, INC. 01 1M03408
On behalf of the corporations named herein, and pursuant to Section 180.685 of the Wisconsin Business Corporation Law, the undersigned hereby make and execute these Articles of Merger and state as follows:
A. Plan of Merger. A true and correct copy of the Plan of Merger is attached hereto as Exhibit A and is incorporated herein by reference.
B. Shares of Subsidiary Corporation. Manitowoc Shipbuilding, Inc., a Wisconsin corporation (the Subsidiary Corporation) has issued and outstanding 100,000 shares of its common stock, such common stock being its only class of stock outstanding. One hundred percent (100%) of such issued and outstanding shares is held by The Manitowoc Company, Inc., a Wisconsin corporation (the Surviving Corporation).
C. Other Shareholders of Subsidiary. There are no shareholders of the Subsidiary Corporation other than the Surviving Corporation.
D. Effective Date. The effective time and date of the merger is 5:00 P.M. on March 27, 1988.
E. Registered Offices. The registered office of The Manitowoc Company, Inc. is located in Manitowoc County, Wisconsin. The registered office of Manitowoc Shipbuilding, Inc. is located in Manitowoc County, Wisconsin.
IN WITNESS WHEREOF, the undersigned officers of the Surviving Corporation and the Subsidiary Corporation have executed these Articles of Merger in duplicate as of the 27 th day of March, 1988.
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THE MANITOWOC COMPANY, INC. |
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By: |
/s/ Ralph Helm |
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President |
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(CORPORATE SEAL) |
Attest: |
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(if none, so state) |
/s/ Frank E. Stevens |
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Secretary |
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MANITOWOC SHIPBULDING, INC. |
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(CORPORATE SEAL) |
By: |
/s/ [ILLEGIBLE] |
(if none, so state) |
President |
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Attest: |
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/s/ Frank E. Stevens |
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Secretary |
This instrument was drafted by Attorney Thomas A. Simonis, Whyte & Hirschboeck S.C., 111 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
These Articles of Merger are to be recorded in Manitowoc County, Wisconsin.
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Please return to: |
Mr. Frank E. Stevens |
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Secretary |
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The Manitowoc Company |
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P. O. Box 66 |
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Manitowoc, Wisconsin 54220 |
EXHIBIT A
PLAN OF MERGER OF
MANITOWOC SHIPBUILDING, INC.
a Wisconsin corporation
into
THE MANITOWOC COMPANY, INC.
a Wisconsin corporation
This is a Plan of Merger pursuant of Section 180.685 of the Wisconsin Business Corporation Law.
A. The name of the subsidiary corporation is Manitowoc Shipbuilding, Inc. (hereinafter designated as the Subsidiary Corporation); the name of its parent corporation is The Manitowoc Company, Inc. (hereinafter designated as the Surviving Corporation) which owns 100% of the issued and outstanding capital stock of the Subsidiary Corporation. The Surviving Corporation and the Subsidiary Corporation are referred to herein as the Merging Corporations.
B. Upon the Effective Date (as hereinafter defined), the separate existence of the Subsidiary Corporation shall cease and, upon such Effective Date, the Surviving Corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises, of a public nature as well as a private nature, of each of the Merging Corporations; and all property (real, personal and mixed),
and all debts due on whatever account, including subscription to shares and all other choses in action, and all and every other interest of or belonging to or due to the Subsidiary Corporation shall be taken and deemed to be transferred to and vested in the Surviving Corporation without further act or deed; and the title to any real estate, or any interest therein, vested in either of the Merging Corporations shall not revert or be in any way impaired by reason of the merger. The Surviving Corporation shall, as of the Effective Date, henceforth be responsible and liable for all of the liabilities and obligations of the Subsidiary Corporation; and any claim existing or action or proceeding pending by or against the Subsidiary Corporation may be prosecuted to judgment as if the merger had not taken place, or the Surviving Corporation may be substituted in its place. Neither the rights of creditors nor any liens upon the property of the Subsidiary Corporation shall be impaired by the merger.
C. The Articles of Incorporation of the Surviving Corporation as in effect on the Effective Date shall continue to be the Articles of Incorporation of the Surviving Corporation and the directors and officers of the Surviving Corporation shall continue to be the officers and directors of the Surviving Corporation until their successors have been duly elected or appointed, as the case may be.
2
D. The By-Laws of the Surviving Corporation as in effect of the Effective Date shall continue to be the By-Laws of the Surviving Corporation.
E. The issued and outstanding shares of the Subsidiary Corporation shall be cancelled as of the Effective Date and the issued and outstanding shares of the Surviving Corporation as of the Effective Date shall continue to be the issued and outstanding shares of the Surviving Corporation as of such date.
F. The merger shall be effective as of 5:00 p.m. on March 27, 1988 (the Effective Date).
3
Merger
Merger: Manitowoc Shipbuilding, Inc. (Domestic)
Into: The Manitowoc Company, Inc. (Domestic) (Survivor)
[ILLEGIBLE]
Manitowoc
State of Wisconsin
Filed
MAR 25 1988
DOUGLAS LA FOLLETTE
SECRETARY OF STATE
$30.00 ph, $75.00 Exp. Fee
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Atty. Thomas A. Simonis |
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Whyte & Hirschboeck, S.C. |
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111 East Wisconsin Ave. |
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Milwaukee, WI. 53202 |
A. |
Name of Corporation: |
THE MANITOWOC COMPANY, INC. |
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( Prior to any change affected by this amendment) |
Text of Amendment (Refer to the existing articles of incorporation and Instruction A. Determine those terms to be changed and set forth below the number identifying the paragraph being changed and how the amended paragraph is to read.)
RESOLVED, THAT, the articles of incorporation be amended as follows:
Section 8.1 Number of Shares and Classes.
The number of shares which the corporation has authority to issue is 78,500,000, divided into the following classes:
8.1.1 75,000,000 shares of Common Stock of par value $0.01 per share.
8.1.2 3,500,000 shares of Preferred Stock of the par value of $0.01 per share.
B. |
Amendment(s) adopted on |
May 5, 1998 |
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(date) |
Indicate the method of adoption by checking the appropriate choice below:
o In accordance with sec. 180.1002, Wis. Stats. (By the Board of Directors)
OR
x In accordance with sec. 180.1003, Wis. Stats. (By the Board of Directors and Shareholders)
OR
o In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or Board of Directors, before issuance of shares)
C. |
Executed on behalf of the corporation on |
May 21, 1998 |
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(date) |
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/s/ Philip D. Keener |
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(signature) |
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Philip D. Keener |
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(printed name) |
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Treasurer |
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(officers title) |
D. |
This document was drafted by |
Philip D. Keener |
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(name of individual required by law) |
FILING FEE - $40.00 OR MORE
SEE REVERSE for Instructions, Suggestions, Filing Fees and Procedures
$10,000.00 fee AP
CHAPTER 180
STATE OF WISCONSIN
FILED
JUNE-2 1998
DEPARTMENT OF
FINANCIAL INSTITUTIONS
Amends Article B
to increase
authorized shares
from: 35,000,000
shares common @ $.01 par value
and 3,500,00 shares preferred @ $.01 par value
to: 75,000,000
shares common @ $.01 par value
and 3,500,000 shares preferred @ $.01 par value
Philip Keener
The Manitowoc Company
P.O. Box 66
Manitowoc, WI 54221-0066
RECEIVED |
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STATE OF WISCONSIN |
MAR 16 2006 |
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FILED |
WISCONSIN |
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MAR 17 2006 |
DFI |
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DEPARTMENT OF |
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FINANCIAL INSTITUTIONS |
State of Wisconsin
DEPARTMENT OF FINANCIAL INSTITUTIONS
Division of Corporate & Consumer Services
ARTICLES OF AMENDMENTSTOCK, FOR-PROFIT CORPORATION
A. The present corporate name (prior to any change affected by this amendment) is:
The Manitowoc Company, Inc.
Text of Amendment ( Refer to the existing articles of incorporation and the instructions on the reverse of this form. Determine those items to be changed and set forth the number identifying the paragraph in the articles of incorporation being changed and how the amended paragraph is to read.)
RESOLVED, that Article VIII, Section 8.1, of the Articles of Incorporation be and the same is hereby amended in its entirety to read as follows:
Section 8.1 Number of Shares and Classes.
The aggregate number of shares which the corporation has authority to issue is 153,500,000, divided into the following classes:
8.1.1. 150,000,000 shares of Common Stock of the par value of $0.01 per share.
8.1.2. 3,500,000 shares of Preferred Stock of the par value of $0.01 per share.
FURTHER RESOLVED, that the effective date of this Amendment to the Articles of Incorporation shall be March 31, 2006.
FILING FEE - $40.00 See instructions, suggestions and procedures on following pages.
1
This Amendment shall have a delayed effective date of March 31, 2006.
B. Amendment(s) adopted on February 24, 2006
(Indicate the method of adoption by checking (X) the appropriate choice below.)
x In accordance with sec. 180.1002, Wis. Stats. (By the Board of Directors) 180.1002(5)
OR
o In accordance with sec. 180.1003, Wis. Stats. (By the Board of Directors and Shareholders)
OR
o In accordance with sec. 180.1005, Wis. Stats. (By Incorporators or Board of Directors, before issuance of shares)
C. Executed on March 16, 2006 |
/s/ Maurice D. Jones |
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(Date) |
(Signature) |
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Title: o President o Secretary
Or other officer title |
Senior Vice President, |
Maurice D. Jones |
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General Counsel and Secretary |
(Printed name) |
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This document was drafted by
Fredrick G. Lantz, Esq.
(Name the individual who drafted the document)
INSTRUCTIONS (Ref. sec. 180.1006 Wis. Stats. for document content)
Submit one original and one exact copy to Dept. of Financial Institutions, P.O. Box 7846, Madison WI, 53707-7846, together with a FILING FEE of $40.00 payable to the department. Filing fee is non-refundable. (If sent by Express or Priority U.S. mail, address to 345 W. Washington Ave., 3 rd Floor, Madison WI, 53703). The original must include an original manual signature, per sec. 180.0120(3)(c), Wis. Stats. NOTICE: This form may be used to accomplish a filing required or permitted by statute to be made with the department. Information requested may be used for secondary purposes. If you have any questions, please contact the Division of Corporate & Consumer Services at 608-261-7577. Hearing-impaired may call 608-266-8818 for TDY.
2
ARTICLES OF AMENDMENTStock, For-Profit Corporation
CYNTHIA Z. JORGENSEN
QUARLES & BRADY LLP
411 EAST WISCONSIN AVENUE, ST. 2040
MILWAUKEE, WI 53202-4497
Your return address and phone number during the day: (414) 277-5191
INSTRUCTIONS (Continued)
A. State the name of the corporation (before any change affected by this amendment) and the text of the amendment(s). The text should recite the resolution adopted (e.g., Resolved, that Article 1 of the articles of incorporation be amended to read: (enter the amended article). If an amendment provides for an exchange, reclassification or cancellation of issued shares, state the provisions for implementing the amendment if not contained in the amendment itself.
B. Enter the date of adoption of the amendment(s). If there is more than one amendment, identify the date of adoption of each. Mark (X) one of the three choices to indicate the method of adoption of the amendment(s).
By Board of DirectorsRefer to sec. 180.1002 for specific information on the character of amendments that may be adopted by the Board of Directors without shareholder action.
By Board of Directors and ShareholdersAmendments proposed by the Board of Directors and adopted by shareholder approval. Voting requirements differ with circumstances and provisions in the articles of incorporation. See sec. 180.1003, Wis. Stats., for specific information.
By Incorporators or Board of DirectorsBefore issuance of sharesSee sec. 180.1005, Wis. Stats., for conditions attached to the adoption of an amendment approved by a vote or consent of less than 2/3rds of the shares subscribed for.
C. Enter the date of execution and the name and title of the person signing the document. The document must be signed by one of the following: An officer of the corporation (or incorporator if directors have not been elected), or a court-appointed receiver, trustee or fiduciary. A director is not empowered to sign.
If the document is executed in Wisconsin, sec. 182.01(3) provides that it shall not be filed unless the name of the person (individual) who drafted it is printed, typewritten or stamped thereon in a legible manner. If the document is not executed in Wisconsin, enter that remark.
FILING FEE - $40.00
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Exhibit 4.5
EXECUTION COPY
$300,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
December 14, 2006
among
THE MANITOWOC COMPANY, INC.
The Subsidiary Borrowers Party Hereto
The Lenders Party Hereto
BANK OF AMERICA, N.A.,
as Syndication Agent
DEUTSCHE BANK AG NEW YORK BRANCH,
BNP PARIBAS
and
U.S. BANK, NATIONAL ASSOCIATION,
as Documentation Agents
and
JPMORGAN CHASE BANK,
N.A.,
as Administrative Agent
J.P. MORGAN SECURITIES
INC.,
Sole Bookrunner and Sole Lead Arranger
TABLE OF CONTENTS
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Page |
ARTICLE I |
Definitions |
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1 |
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SECTION 1.01. |
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Defined Terms |
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1 |
SECTION 1.02. |
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Classification of Loans and Borrowings |
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25 |
SECTION 1.03. |
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Terms Generally |
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25 |
SECTION 1.04. |
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Accounting Terms; GAAP |
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25 |
SECTION 1.05. |
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Foreign Currency Calculations |
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26 |
SECTION 1.06. |
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Redenomination of Certain Foreign Currencies |
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26 |
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ARTICLE II |
The Credits |
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27 |
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SECTION 2.01. |
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Commitments |
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27 |
SECTION 2.02. |
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Loans and Borrowings |
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27 |
SECTION 2.03. |
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Requests for Revolving Borrowings |
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28 |
SECTION 2.04. |
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Alternate Currency Loans |
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29 |
SECTION 2.05. |
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Swingline Loans |
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32 |
SECTION 2.06. |
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Letters of Credit |
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34 |
SECTION 2.07. |
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Funding of Borrowings |
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38 |
SECTION 2.08. |
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Interest Elections |
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39 |
SECTION 2.09. |
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Termination and Reduction of Commitments; Increase of Commitments |
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40 |
SECTION 2.10. |
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Repayment of Loans; Evidence of Debt |
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41 |
SECTION 2.11. |
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Prepayment of Loans |
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42 |
SECTION 2.12. |
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Fees |
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43 |
SECTION 2.13. |
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Interest |
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44 |
SECTION 2.14. |
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Alternate Rate of Interest |
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45 |
SECTION 2.15. |
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Increased Costs |
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45 |
SECTION 2.16. |
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Break Funding Payments |
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47 |
SECTION 2.17. |
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Taxes |
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47 |
SECTION 2.18. |
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Payments Generally; Pro Rata Treatment; Sharing of Set-offs |
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48 |
SECTION 2.19. |
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Mitigation Obligations; Replacement of Lenders |
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50 |
SECTION 2.20. |
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Subsidiary Borrowers |
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51 |
SECTION 2.21. |
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Additional Reserve Costs |
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52 |
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ARTICLE III |
Representations and Warranties |
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52 |
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SECTION 3.01. |
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Organization; Powers |
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52 |
SECTION 3.02. |
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Authorization; Enforceability |
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53 |
SECTION 3.03. |
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Governmental Approvals; No Conflicts |
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53 |
SECTION 3.04. |
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Financial Condition; No Material Adverse Change |
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53 |
SECTION 3.05. |
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Properties |
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53 |
SECTION 3.06. |
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Litigation and Environmental Matters |
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54 |
SECTION 3.07. |
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Compliance with Laws and Agreements |
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54 |
SECTION 3.08. |
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Investment Company Status |
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54 |
SECTION 3.09. |
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Taxes |
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55 |
SECTION 3.10. |
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ERISA |
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55 |
i
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SECTION 3.11. |
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Disclosure |
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55 |
SECTION 3.12. |
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The Security Documents |
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56 |
SECTION 3.13. |
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Subsidiaries |
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56 |
SECTION 3.14. |
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Indebtedness |
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56 |
SECTION 3.15. |
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Insurance |
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56 |
SECTION 3.16. |
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Subordination |
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57 |
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ARTICLE IV |
Conditions |
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57 |
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SECTION 4.01. |
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Effectiveness and Initial Advance |
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57 |
SECTION 4.02. |
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Each Credit Event |
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58 |
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ARTICLE V |
Affirmative Covenants |
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58 |
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SECTION 5.01. |
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Financial Statements and Other Information |
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58 |
SECTION 5.02. |
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Notices of Material Events |
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60 |
SECTION 5.03. |
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Existence; Conduct of Business |
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61 |
SECTION 5.04. |
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Payment of Obligations |
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61 |
SECTION 5.05. |
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Maintenance of Properties; Insurance |
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61 |
SECTION 5.06. |
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Books and Records; Inspection Rights |
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61 |
SECTION 5.07. |
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Compliance with Laws |
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61 |
SECTION 5.08. |
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Use of Proceeds and Letters of Credit |
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62 |
SECTION 5.09. |
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Compliance with Environmental Laws |
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62 |
SECTION 5.10. |
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Further Assurances; etc. |
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63 |
SECTION 5.11. |
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Ownership of Subsidiaries; etc. |
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64 |
SECTION 5.12. |
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Margin Regulations |
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64 |
SECTION 5.13. |
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Additional Guarantors and Collateral |
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64 |
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ARTICLE VI |
Negative Covenants |
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65 |
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SECTION 6.01. |
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Indebtedness |
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65 |
SECTION 6.02. |
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Liens |
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67 |
SECTION 6.03. |
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Merger, Purchase or Sale of Assets, Change in Business |
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69 |
SECTION 6.04. |
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Restricted Payments |
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72 |
SECTION 6.05. |
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Advances, Investments and Loans |
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72 |
SECTION 6.06. |
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Transactions with Affiliates |
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75 |
SECTION 6.07. |
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Minimum Consolidated Interest Coverage Ratio |
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76 |
SECTION 6.08. |
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Maximum Consolidated Senior Leverage Ratio |
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76 |
SECTION 6.09. |
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Maximum Consolidated Total Leverage Ratio |
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76 |
SECTION 6.10. |
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Limitations on Prepayments of Certain Indebtedness; Modifications of Certain Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements, etc. |
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77 |
SECTION 6.11. |
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Restrictive Agreements |
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77 |
SECTION 6.12. |
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End of Fiscal Years; Fiscal Quarters |
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78 |
SECTION 6.13. |
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Limitation on Issuance of Capital Stock |
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78 |
SECTION 6.14. |
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Limitation on Creation of Subsidiaries |
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78 |
SECTION 6.15. |
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Rental Fleet |
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79 |
SECTION 6.16. |
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Sale-Leaseback Restriction |
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79 |
SECTION 6.17. |
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Buy-Back Limitation |
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79 |
ii
iii
AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 14, 2006, among THE MANITOWOC COMPANY, INC., the Subsidiary Borrowers party hereto, the LENDERS party hereto, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
R E C I T A L S
A. The Borrower, the Subsidiary Borrowers party thereto, the Administrative Agent and the Lenders are party to that certain Credit Agreement, dated as of June 10, 2005 (as amended up to but not including the date hereof, the Existing Credit Agreement).
B. The Borrower, the Subsidiary Borrowers party thereto, the Administrative Agent and the Lenders wish to amend and restate the Existing Credit Agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements made herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Existing Credit Agreement is amended and restated in its entirety as follows:
ABR , when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.
Acquired Entity or Business means either (a) the assets constituting a business, division or product line of any Person not already a Subsidiary of the Borrower or (b) 100% of the capital stock of any such Person, which Person shall, as a result of such stock acquisition, become a Wholly-Owned Subsidiary of the Borrower (or shall be merged with and into the Borrower or a Subsidiary Guarantor, with the Borrower or such Subsidiary Guarantor being the surviving Person).
Additional Security Documents means security documents executed by a Credit Party pursuant to Section 2.20(a) or Section 5.10.
Adjusted LIBO Rate means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate; provided that, with respect to any Eurocurrency Borrowing denominated in a Foreign Currency, the Adjusted LIBO Rate shall mean the LIBO Rate.
1
Administrative Agent means, collectively, JPMorgan, in its capacity as administrative agent for the Lenders hereunder, and, solely relative to such Loans, J. P. Morgan Europe Limited, in its capacity as administrative agent with respect to Loans denominated in a Foreign Currency.
Administrative Questionnaire means an Administrative Questionnaire in a form supplied by the Administrative Agent.
Advance means any Loan or any Letter of Credit.
Affiliate means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power (a) to vote 10% or more of the securities having ordinary voting power for the election of directors (or equivalent governing body) of such Person or (b) to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise; provided, however, that neither the Administrative Agent nor any Lender (nor any Affiliate thereof) shall be considered an Affiliate of the Borrower or any Subsidiary thereof.
Affirmation means that certain Affirmation of Guaranties and Security Documents dated as of the date hereof executed by the Borrower and each Subsidiary Guarantor in favor of the Administrative Agent, for the benefit of the Administrative Agent, the Collateral Agent and the Lenders, as it may be amended or modified and in effect from time to time.
Agreement means this Amended and Restated Credit Agreement as the same may be amended, restated, modified or supplemented from time to time.
Agreement Currency shall have the meaning assigned to such term in Section 9.15(b).
Alternate Base Rate means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus ½ of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
Alternate Currency Exposure means at any time, the aggregate principal amount of all Alternate Currency Loans outstanding at such time. The Alternate Currency Exposure of any Lender at any time shall be its Applicable Percentage of the total Alternate Currency Exposure at such time.
Alternate Currency Fronting Lender means JPMorgan.
Alternate Currency Lenders means (a) the Alternate Currency Fronting Lender and (b) solely with respect to Alternate Currency Loans as to which any other Lender is deemed to be an Alternate Currency Lender pursuant to Section 2.04(l), each such other Lender.
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Alternate Currency Loan means a loan made pursuant to Section 2.04.
Applicable Borrower means, with respect to any Loan or other amount owing hereunder or any matter pertaining to such Loan or other amount, whichever of the Borrowers is the primary obligor on such Loan or other amount.
Applicable Creditor shall have the meaning assigned to such term in Section 9.15(b).
Applicable Lending Installation is defined in Section 2.02(e).
Applicable Participation Percentage means, as to any Participating Lender with respect to any Alternate Currency Loan made by the Alternate Currency Fronting Lender, the percentage determined by dividing such Participating Lenders Commitment by the sum of the Commitments of the Alternate Currency Fronting Lender and each Lender which is a Participating Lender relative to such Loan.
Applicable Percentage means, with respect to any Lender, the percentage of the total Commitments represented by such Lenders Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.
Applicable Rate means, for any day, with respect to any ABR Loan or Eurocurrency Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth in Schedule 1.01 under the caption ABR Spread, Eurocurrency Spread or Commitment Fee Rate, as the case may be, based upon the Consolidated Total Leverage Ratio.
Approved Fund has the meaning assigned to such term in Section 9.04.
Assessment Rate means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as well capitalized and within supervisory subgroup B (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in Dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders.
Assignment and Assumption means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.
Availability Period means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments.
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Base CD Rate means the sum of (a) the Three Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
Board means the Board of Governors of the Federal Reserve System of the United States.
Borrower means The Manitowoc Company, Inc., a Wisconsin corporation.
Borrowers means the Borrower and each Subsidiary Borrower.
Borrowing (a) Revolving Loans of the same Type, made, converted or continued on the same date to the same Applicable Borrower and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, (b) a Swingline Loan or (c) Alternate Currency Loans made or continued on the same date to the same Applicable Borrower in the same Foreign Currency as to which a single Interest Period is in effect.
Borrowing Request means a request by the Borrower for a Revolving Borrowing in accordance with Section 2.03.
BPGR means Manitowoc EMEA Holding Sarl (formerly known as BPGR Sarl), a French société à responsabilité limitée and Wholly-Owned Subsidiary of the Borrower.
Business Day means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurocurrency Loan, the term Business Day shall also exclude any day on which banks are not open for dealings in deposits in the currency in which such Eurocurrency Loan is denominated in the London interbank market.
Buy-Back Arrangements means arrangements whereby the Borrower or a Subsidiary of the Borrower in the ordinary course of business enters into an agreement with a customer or third party financing company (a) to guarantee to repurchase crane products at a later date at an agreed upon price or (b) to guarantee a minimum crane product residual value at the end of an underlying finance term for same including, without limitation, guarantees of minimum crane product residual value in connection with Sale-Leaseback Transactions.
Buy-Back Obligations means repurchase or guarantee obligations of the Borrower or its Subsidiaries arising out of Buy-Back Arrangements. Guarantees by the Borrower or its Subsidiaries of customer payment obligations shall not constitute Buy-Back Obligations.
Canadian Dollar means the lawful currency of Canada.
Capital Lease Obligations of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the recorded capitalized amount thereof determined in accordance with GAAP.
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Cash Equivalents means:
Change in Control means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of Interests representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated, (c) the acquisition of direct or indirect Control of the Borrower by any Person or group or (d) a Change of Control as defined in the Senior Note Documents or the Subordinated Note Documents.
Change in Law means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lenders or the Issuing Banks holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.
Class , when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Alternate Currency Loans or Swingline Loans.
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Code means the Internal Revenue Code of 1986, as amended from time to time.
Collateral means all property with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document, including, without limitation, all Pledge Agreement Collateral, all Security Agreement Collateral and all cash and Cash Equivalents delivered as collateral pursuant to Section 2.06(j).
Collateral Agent means the Administrative Agent acting as collateral agent for the Secured Creditors pursuant to the Security Documents.
Commitment means, with respect to each Lender, the commitment of such Lender to make Revolving Loans and to acquire participations in Letters of Credit, Swingline Loans and Alternate Currency Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lenders Revolving Credit Exposure hereunder, as such commitment may be (a) reduced or increased from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lenders Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders Commitments is $300,000,000.
Consolidated EBIT means, for any period, Consolidated Net Income from continuing operations for such period before deducting therefrom Consolidated Interest Expense for such period (to the extent deducted in arriving at Consolidated Net Income for such period) and provision for taxes based on income (including foreign withholding taxes imposed on interest or dividend payments and state single business, unitary or similar taxes imposed on net income) that were included in arriving at Consolidated Net Income for such period and without giving effect, without duplication, to (a) any extraordinary gains, extraordinary losses or other extraordinary non-cash charges or benefits, (b) any charges arising out of prepayments of the Senior Notes or the Subordinated Notes or (c) any gains or losses from sales of assets other than from sales of inventory in the ordinary course of business.
Consolidated EBITDA means, for any period, Consolidated EBIT for such period, adjusted by adding thereto the amount of all amortization and depreciation that was deducted in arriving at Consolidated Net Income for such period; it being understood that in determining the Consolidated Senior Leverage Ratio and the Consolidated Total Leverage Ratio only, Consolidated EBITDA for any period shall be calculated on a Pro Forma Basis to give effect to any Acquired Entity or Business acquired during such period pursuant to a Permitted Acquisition and not subsequently sold or otherwise disposed of by the Borrower or any of its Subsidiaries during such period.
Consolidated Indebtedness means, at any time, an amount equal to (a) the sum of (without duplication) (i) the aggregate stated balance sheet amount of all Indebtedness of the Borrower and its Subsidiaries as would be required to be reflected on the liability side of a balance sheet of such Person at such time in accordance with GAAP as determined on a consolidated basis, (ii) all Indebtedness of the Borrower and its Subsidiaries of the type described in clauses (b) and (g) of the definition of Indebtedness contained herein, (iii) the
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aggregate amount of all Receivables Indebtedness of the Borrower and its Subsidiaries or any SPC outstanding at such time and (iv) all Guarantees by the Borrower and its Subsidiaries in respect of Indebtedness of any third Person of the type referred to in preceding clauses (i), (ii) and (iii) of this definition (including, without limitation, all Indebtedness of the Borrower and its Subsidiaries described in Section 6.01(n)), minus (b) the Offsetting Cash Amount; provided that in making any determination of Consolidated Indebtedness pursuant to this definition, there shall be excluded therefrom any Indebtedness of the type described in clause (b) of the definition of Indebtedness contained herein, in each case to the extent (and only to the extent) that such Indebtedness (x) is evidenced by letters of credit issued to support performance bonds of the Borrower or its Subsidiaries (but exclusive of unpaid drawings thereunder) and (y) would otherwise be included in the determination of Consolidated Indebtedness. Buy-Back Obligations of the Borrower and its Subsidiaries shall not constitute Consolidated Indebtedness.
Consolidated Interest Coverage Ratio means, as of the end of any fiscal quarter of the Borrower, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense, in each case for the period of four fiscal quarters of the Borrower then ended.
Consolidated Interest Expense means, for any period, the total consolidated interest expense of the Borrower and its Subsidiaries for such period (calculated without regard to any limitations on the payment thereof, but net of any interest income of the Borrower and its Subsidiaries for such period) plus, without duplication, that portion of Capital Lease Obligations of the Borrower and its Subsidiaries representing the interest factor for such period; provided that Consolidated Interest Expense shall be deemed to include any discount and/or interest component in respect of any sale of accounts receivable or related rights by the Borrower or a Subsidiary regardless of whether such discount or interest would constitute interest under GAAP, in each case, on a consolidated basis.
Consolidated Net Income means, for any period, the net income (or loss) from continuing operations of the Borrower and its Subsidiaries for such period, determined on a consolidated basis (after any deduction for minority interests), provided that in determining Consolidated Net Income, (a) the net income of any other Person which is not a Subsidiary of the Borrower or is accounted for by the Borrower by the equity method of accounting shall be included only to the extent of the payment of cash dividends or cash distributions by such other Person to the Borrower or a Subsidiary thereof during such period, (b) the net income of any Subsidiary of the Borrower shall be excluded to the extent that the declaration or payment of cash dividends or similar cash distributions by that Subsidiary of that net income is not at the date of determination permitted by operation of its charter or any agreement, instrument or law applicable to such Subsidiary and (c) for any period, any interest income of the Borrower and its Subsidiaries for such period shall be excluded.
Consolidated Senior Indebtedness means, at any time, the amount of all Consolidated Indebtedness at such time, less the aggregate principal amount of all Subordinated Notes outstanding at such time.
Consolidated Senior Leverage Ratio means, at any time, the ratio of (a) Consolidated Senior Indebtedness at such time to (b) Consolidated EBITDA for the four fiscal quarters of the Borrower then most recently ended.
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Consolidated Tangible Net Assets means, at any time, the amount, without duplication, of the net book value of the consolidated assets of the Borrower and its Subsidiaries excluding the net book value of all such assets which would be treated as intangibles under GAAP, including without limitation deferred charges, leasehold conversion costs, franchise rights, non-compete agreements, research and development costs, goodwill, unamortized debt discounts, patents, patent applications, trademarks, trade names, copyrights and licenses.
Consolidated Total Leverage Ratio means, at any time, the ratio of (a) Consolidated Indebtedness at such time to (b) Consolidated EBITDA for the four fiscal quarters of the Borrower then most recently ended.
Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto.
Credit Documents means this Agreement, the Affirmation and, after the execution and delivery thereof pursuant to the terms of the Existing Credit Agreement or this Agreement, each Note, the Subsidiary Guaranty, the Parent Guaranty and each Security Document.
Credit Party means the Borrower, each Subsidiary Guarantor and each Subsidiary Borrower.
Customer Financing means third party financing provided to customers of the Borrower or any of its Subsidiaries to finance such customers purchase of equipment and related products and services from the Borrower or a Subsidiary thereof.
Default means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
Designation Letter means a letter in substantially the form of Exhibit B hereto.
Disclosed Matters means the actions, suits and proceedings and the environmental matters disclosed in Schedule 3.06.
Documentation Agents means, collectively, Deutsche Bank AG New York Branch, BNP Paribas and U.S. Bank, National Association, in their capacities as documentation agents.
Dollars or $ means the lawful currency of the United States.
Dollar Equivalent means, on any date of determination (a) with respect to any amount in Dollars, such amount, and (b) with respect to any amount in any Foreign Currency, the equivalent in Dollars of such amount, determined by the Administrative Agent pursuant to Section 1.05 using the Exchange Rate with respect to such Foreign Currency at the time in effect under the provisions of such Section.
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Domestic Subsidiary means, as to any Person, each subsidiary of such Person that is incorporated under the laws of the United States, any State thereof or the District of Columbia.
Effective Date means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
EMU Legislation means the legislative measures of the European Union for the introduction of, changeover to or operation of the Euro in one or more member states of the European Union.
Environmental Laws means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters.
Environmental Liability means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
Equity Interests means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time.
ERISA Affiliate means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
ERISA Event means (a) any reportable event, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30 day notice period is waived), (b) the existence with respect to any Plan of an accumulated funding deficiency (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan, (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention
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to terminate any Plan or Plans or to appoint a trustee to administer any Plan, (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
Euro or means the single lawful currency of the European Union as constituted by the treaty establishing the European Community being the Treaty of Rome, as amended from time to time and as referred to in the EMU Legislation.
Eurocurrency , when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.
Event of Default has the meaning assigned to such term in Article VII.
Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars at the time of determination on such day on the Reuters Currency pages, if available, for such currency. In the event that such rate does not appear on any Reuters Currency pages, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrowers, or, in the absence of such an agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about such time as the Administrative Agent shall elect after determining that such rates shall be the basis for determining the Exchange Rate, on such date for the purchase of Dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error.
Exchange Rate Date means, if on such date any outstanding Loan is (or any Loan that has been requested at such time would be) denominated in a currency other than Dollars, each of:
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Excluded Taxes means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrowers hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which any of the Borrowers is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.19(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lenders failure to comply with Section 2.17(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrowers with respect to such withholding tax pursuant to Section 2.17(a).
Excluded Transfers means Intercompany Loans, contributions, capitalizations and forgiveness made by Credit Parties to (or in respect of) External Subsidiaries the proceeds of which (or, in the case of debt forgiveness, the proceeds of the incurrence of debt so forgiven were initially) used to finance a Permitted Acquisition.
Existing Credit Agreement is defined in the preamble hereto.
External Subsidiary means a Wholly-Owned Subsidiary of the Borrower which is not a Credit Party.
Factoring Agreement means a factoring, receivables purchase or similar agreement which is not entered into in connection with or as part of a Permitted Securitization or Specified Transaction.
Federal Funds Effective Rate means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
FIN 46 Subsidiary means any variable interest entity which qualifies as a subsidiary of the Borrower only by virtue of being required by FASB Staff Position No. FIN 46(R)-6 Determining the Variability to be Considered in Applying FASB Interpretation No. 46(R) or any related subsequent accounting standard to be consolidated with the Borrower for financial accounting purposes.
Financial Officer means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower.
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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 Economic Community, whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moodys is at least P-1 or the equivalent thereof, in each case with maturities of not more than six months from the date of acquisition.
Foreign Currency means (a) with respect to any Alternate Currency Loan, any currency acceptable to the Administrative Agent that is freely available, freely transferable and freely convertible into Dollars, and agreed to by the applicable Alternate Currency Lenders, (b) with respect to any Revolving Loan, Euros, Sterling, Canadian Dollars and any other currency acceptable to the Administrative Agent and each of the Lenders that is freely available, freely transferable and freely convertible into Dollars and in which dealings in deposits are carried on in the London interbank market, (c) with respect to any Letter of Credit, any currency acceptable to the Administrative Agent that is freely available, freely transferable and freely convertible into Dollars, and agreed to by the Issuing Bank issuing such Letter of Credit and (d) with respect to any Swingline Foreign Currency Loan, any currency acceptable to the Administrative Agent that is freely available, freely transferable and freely convertible into Dollars, and agreed to by the Swingline Lender.
Foreign Lender means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
Foreign Pension Plan means any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States by the Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside the United States, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination or severance of employment, and which plan is not subject to ERISA or the Code.
Foreign Subsidiary means, as to any Person, each Subsidiary of such Person which is not a Domestic Subsidiary.
GAAP means generally accepted accounting principles in the United States.
Governmental Authority means the government of the United States, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
Guarantee of or by any Person (the guarantor ) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the primary obligor ) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct
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or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any property constituting direct or indirect security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor or to advance or supply funds for the foregoing so as to enable the primary obligor to pay such Indebtedness or other obligation, (d) as an account party in respect of any letter of credit or letter of guarantee issued to support such Indebtedness or obligation or (e) otherwise to assure or hold harmless the owner of such Indebtedness or other obligation against loss in respect thereof; provided , that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business or Buy-Back Obligations.
Hazardous Materials means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
Indebtedness means, as to any Person, without duplication, (a) all indebtedness (including principal, interest, fees and charges) of such Person for borrowed money or for the deferred purchase price of property or services, (b) the maximum amount available to be drawn under all letters of credit, bankers acceptances and similar obligations issued for the account of such Person and all unpaid drawings in respect of such letters of credit, bankers acceptances and similar obligations, (c) all indebtedness of the types described in clause (a), (b), (d), (e), (f), (g), (h) or (i) of this definition secured by any Lien (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by any Lien) on any property owned by such Person, whether or not such indebtedness has been assumed by such Person ( provided that, if the Person has not assumed or otherwise become liable in respect of such indebtedness, such indebtedness shall not be deemed to exceed an amount equal to the fair market value of the property to which such Lien relates as determined in good faith by such Person), (d) the aggregate amount of all Capital Lease Obligations of such Person, (e) all obligations of such Person to pay a specified purchase price for goods or services, whether or not delivered or accepted, i.e. , take-or-pay and similar obligations, (f) all Guarantees by such Person, (g) all obligations under any Swap Agreement or under any similar type of agreement, (h) all indebtedness of such Person evidenced by bonds, debentures, notes or similar interests, (i) all indebtedness of such Person under conditional sale or other title retention agreements relating to property acquired by such Person and (j) all Receivables Indebtedness. Notwithstanding the foregoing, Indebtedness shall not include trade payables, deferred compensation obligations, customer advances and other accrued expenses incurred by any Person in accordance with customary practices and in the ordinary course of business of such Person or Buy-Back Obligations. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Persons ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such person is not liable therefor.
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Indemnified Taxes means Taxes other than Excluded Taxes.
Information Memorandum means the Confidential Information Memorandum dated May, 2005 relating to the Borrower and the Transactions.
Intercompany Loan shall have the meaning provided in Section 6.05(i).
Intercompany Note means each of the existing intercompany notes listed on Schedule 1.02 and each promissory note issued on or after the Original Effective Date, in the form of Exhibit C, evidencing Intercompany Loans.
Interest Election Request means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.08.
Interest Payment Date means (a) with respect to any ABR Loan (other than a Swingline Loan), the last day of each March, June, September and December, (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months duration, each day prior to the last day of such Interest Period that occurs at intervals of three months duration after the first day of such Interest Period and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid.
Interest Period means (a) with respect to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months (or, with the consent of each Lender, nine or twelve months) thereafter, as the Borrower may elect, and (b) as to any Swingline Foreign Currency Loan, the period commencing on the date of such Loan and ending on the day that is designated in the notice delivered pursuant to Section 2.04 with respect to such Swingline Foreign Currency Loan, which shall not be later than thirty days thereafter; provided , that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurocurrency Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurocurrency Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
Investment has the meaning assigned to such term in Section 6.05.
Issuing Bank means JPMorgan, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.06(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term Issuing Bank shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.
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JPMorgan means JPMorgan Chase Bank, N.A., a national banking association, and its successors.
LC Disbursement means a payment made by the Issuing Bank pursuant to a Letter of Credit.
LC Exposure means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.
Lenders means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term Lenders includes the Swingline Lender and the Alternate Currency Lenders.
Letter of Credit means any letter of credit issued pursuant to this Agreement.
LIBO Rate means, with respect to any Eurocurrency Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period by reference to the British Bankers Association Interest Settlement Rates for deposits in the currency of such Borrowing (as reflected on the applicable Telerate screen page), for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the LIBO Rate shall be the rate at which JPMorgan offers to place deposits in the currency of such Borrowing for such Interest Period to first-class banks in the London interbank market at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period.
Lien means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
Loans means the loans made by the Lenders to the Borrowers pursuant to this Agreement.
Local Time means (a) with respect to a Loan or Borrowing denominated in Dollars, New York City time and (b) with respect to a Loan or Borrowing denominated in any Foreign Currency, London time.
Margin Stock shall have the meaning provided in Regulation U.
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Material Adverse Effect means a material adverse effect on (a) the business, assets, operations or financial condition of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower or of the Credit Parties taken as a whole to perform any of their repayment or other material obligations under the Credit Documents or (c) the rights or remedies of the Administrative Agent, the Collateral Agent or the Lenders under the Credit Documents.
Material Indebtedness means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $10,000,000. For purposes of determining Material Indebtedness, the principal amount of the obligations of the Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.
Material Subsidiary means a Subsidiary of the Borrower which has or acquires assets having a fair market value in excess of $1,000,000 or which generated in excess of $1,000,000 of net income over the four fiscal quarter period most recently ended prior to the time of computation, but excluding Grove Australia Pty. Ltd.
Maturity Date means June 10, 2010.
Moodys means Moodys Investors Service, Inc.
Multiemployer Plan means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
Obligations means all liabilities and obligations, whether actual or contingent, of any Credit Party to the Administrative Agent, the Collateral Agent, the Issuing Bank, the Swingline Lender, the Alternate Currency Lenders, any Lender or any indemnified party hereunder or under any other Credit Document, in each case arising under any Credit Document.
Offsetting Cash Amount means an amount equal to (a) the aggregate stated balance sheet amount of (i) all cash, Cash Equivalents and Foreign Cash Equivalents of the Borrower and its Wholly-Owned Domestic Subsidiaries and (ii) up to $75,000,000 of the Dollar Equivalent amount of cash, Cash Equivalents and Foreign Cash Equivalents of Wholly-Owned Foreign Subsidiaries minus (b) $10,000,000.
Original Effective Date means June 10, 2005.
Other Taxes means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.
Parent Guaranty means that certain guaranty dated as of the Original Effective Date made by the Borrower in favor of the Secured Creditors, as the same may be amended, restated, modified or supplemented from time to time.
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Participant has the meaning set forth in Section 9.04.
Participating Lender means, with respect to any Alternate Currency Borrowing, a Lender which is not an Alternate Currency Lender with respect to such Borrowing.
PBGC means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
Permitted Acquisition means the acquisition by the Borrower or a Wholly-Owned Subsidiary thereof of an Acquired Entity or Business (including by way of merger of such Acquired Entity or Business with and into the Borrower (so long as the Borrower is the surviving corporation) or a Wholly-Owned Subsidiary thereof (so long as the survivor of such merger is a Wholly-Owned Subsidiary)); provided that, in each case, (a) the consideration paid or to be paid by the Borrower or such Wholly-Owned Subsidiary consists solely of cash (including proceeds of Revolving Loans or Swingline Loans), the issuance or incurrence of Indebtedness otherwise permitted by Section 6.01, the issuance of common stock of the Borrower or Qualified Preferred Stock of the Borrower in each case to the extent no Default or Event of Default exists pursuant to clause (m) of Article VII or would result therefrom and the assumption/acquisition of any Indebtedness (calculated at face value) which is permitted to remain outstanding in accordance with the requirements of Section 6.01, (b) in the case of the acquisition of 100% of the capital stock of any Person (including by way of merger), such Person shall own no capital stock of any other Person (excluding de minimis amounts) unless either (i) such Person owns 100% of the capital stock of such other Person or (ii) (x) such Person and its Wholly-Owned Subsidiaries own at least 80% of the consolidated assets of such other Person and its Subsidiaries and (y) any non-Wholly-Owned Subsidiary of such Person was a non-Wholly-Owned Subsidiary prior to the date of such Permitted Acquisition of such Person, (c) the Acquired Entity or Business acquired pursuant to the respective Permitted Acquisition is in a business permitted by Section 6.03(b) and (d) all applicable requirements of Sections 6.03 and 6.05(m) applicable to Permitted Acquisitions are satisfied.
Permitted Liens has the meaning assigned to such term in Section 6.02.
Permitted Securitization means any receivables financing program providing for the sale of accounts receivable and related rights by the Borrower or its Subsidiaries to an SPC for cash in transactions purporting to be sales (and treated as sales for GAAP purposes), which SPC shall finance the purchase of such assets by the sale, transfer, conveyance, lien or pledge of such assets to one or more limited purpose financing companies, special purpose entities and/or other financial institutions, in each case pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent. Specified Transactions and related transfers of accounts receivable shall not constitute or be deemed part of a Permitted Securitization.
Person means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
Plan means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302
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of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of ERISA.
Pledge Agreement means the Pledge Agreement dated as of the Original Effective Date made by certain of the Credit Parties in favor of the Collateral Agent for the benefit of the Secured Creditors, as the same may be amended, restated, modified or supplemented from time to time.
Pledge Agreement Collateral means all Collateral as defined in the Pledge Agreement.
Prime Rate means the rate of interest per annum publicly announced from time to time by JPMorgan as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.
Pro Forma Basis means, in connection with any calculation of compliance with any financial covenant or financial term, the calculation thereof after giving effect on a pro forma basis to (a) the incurrence of any Indebtedness (other than revolving Indebtedness, except to the extent same is incurred to refinance other outstanding Indebtedness or to finance a Permitted Acquisition) after the first day of the relevant calculation period as if such Indebtedness had been incurred (and the proceeds thereof applied) on the first day of the relevant calculation period, (b) the permanent repayment of any Indebtedness (other than revolving Indebtedness) after the first day of the relevant calculation period as if such Indebtedness had been retired or redeemed on the first day of the relevant calculation period and (c) the Permitted Acquisition, if any, then being consummated as well as any other Permitted Acquisition consummated after the first day of the relevant calculation period and on or prior to the date of the respective Permitted Acquisition then being effected, as the case may be, with the following rules to apply in connection therewith:
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Qualified Preferred Stock means any preferred stock of the Borrower so long as the terms of any such preferred stock (a) do not contain any mandatory put, redemption, repayment, sinking fund or other similar provision, (b) do not require the cash payment of dividends or distributions, (c) do not contain any covenants, (d) do not grant the holders thereof any voting rights except for (i) voting rights required to be granted to such holders under applicable law and (ii) limited customary voting rights on fundamental matters such as mergers, consolidations, sales of all or substantially all of the assets of the Borrower, or liquidations involving the Borrower and (e) are otherwise reasonably satisfactory to the Administrative Agent.
Quotation Day means, with respect to any Eurocurrency Borrowing or Swingline Foreign Currency Borrowing and any Interest Period, the day on which it is market practice in the relevant interbank market for prime banks to give quotations for deposits in the currency of such Borrowing for delivery on the first day of such Interest Period. If such quotations would normally be given by prime banks on more than one day, the Quotation Day will be the last of such days.
Real Property of any Person means all the right, title and interest of such Person in and to land, improvements and fixtures.
Receivables Indebtedness means, at any time, sum of (a) the aggregate amount of uncollected accounts receivables of the Borrower and its Subsidiaries at such time which have been (or which are then being) sold pursuant to a Factoring Agreement plus (b) without duplication, the aggregate amount of outstanding obligations incurred by the Borrower and its Subsidiaries (including any SPC) in connection with a Permitted Securitization that would be characterized as principal if such Permitted Securitization in its entirety were structured as a secured lending transaction rather than a purchase (regardless, in either case, of whether any liability of the Borrower or any Subsidiary thereof in respect of related accounts receivable would be required to be reflected on a balance sheet of such Person in accordance with generally accepted accounting principles).
Register has the meaning set forth in Section 9.04.
Regulation T means Regulation T of the Board as from time to time in effect and any successor to all or a portion thereof.
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Regulation U means Regulation U of the Board as from time to time in effect and any successor to all or a portion thereof.
Regulation X means Regulation X of the Board as from time to time in effect and any successor to all or a portion thereof.
Related Parties means, with respect to any specified Person, such Persons Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Persons Affiliates.
Release means the active or passive disposing, discharging, injecting, spilling, pumping, leaking, leaching, dumping, emitting, escaping, emptying, pouring, seeping, migrating or the like, into or upon any land or water or air, or otherwise entering into the environment.
Rental Fleet means all crane products owned by the Borrower or its Subsidiaries which are (a) included in the consolidated balance sheet of the Borrower and (b) for which the current business purpose is to rent such crane products to customers under operating leases. GAAP restatement equipment and sale-leaseback equipment shall not be included in the Rental Fleet.
Required Lenders means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing at least 50.1% of the sum of the total Revolving Credit Exposures and unused Commitments at such time.
Restricted Payment means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the Borrower or any option, warrant or other right to acquire any such Equity Interests in the Borrower.
Restructuring Transactions means, collectively, the transactions described in the letter dated December 7, 2006 from the Borrowers Vice PresidentFinance on behalf of the Borrower addressed to the Administrative Agent and the Lenders regarding a proposed restructuring of various Foreign Subsidiaries of the Borrower.
Restructuring Transactions Loans means the Loan or Loans advanced on or before December 31, 2006 in connection with the Restructuring Transactions.
Revolving Credit Exposure means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lenders Revolving Loans, LC Exposure, Swingline Exposure and Alternate Currency Exposure at such time.
Revolving Loan means a loan made pursuant to Section 2.01.
S&P means Standard & Poors.
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Sale-Leaseback Differential means, with respect to any fiscal quarter end of the Borrower, the excess, if any, of (a) rent or other payments made by the Borrower or its Subsidiaries during the period of four fiscal quarters then ended to lessors pursuant to Sale-Leaseback Transactions over (b) the amount of rent or other payments received during such four fiscal quarter period by the Borrower or its Subsidiaries in their capacity as lessors of equipment which was the subject of a Sale-Leaseback Transaction.
Sale-Leaseback Transaction means a sale-leaseback transaction entered into by the Borrower or its Subsidiaries in the ordinary course of business and on a basis consistent with past practice with one or more financial institutions as lessor pursuant to which the Borrower or its Subsidiaries sells crane products to such lessor for cash and such lessor subsequently leases back such crane products to the Borrower or its Subsidiaries.
Sale Restructuring means, collectively, the transactions described in the letter dated December 7, 2006 from the Borrowers Vice PresidentFinance on behalf of the Borrower addressed to the Administrative Agent and the Lenders regarding a proposed restructuring of certain Domestic Subsidiaries of the Borrower in connection with the Sale Transaction.
Sale Transaction means the consummation of the sale by a Wholly-Owned Subsidiary of the Borrower of all of the stock of a Subsidiary previously disclosed in writing by the Borrower to the Administrative Agent.
Secured Creditors shall have the meaning assigned that term in the respective Security Documents.
Security Agreement means the Security Agreement dated as of the Original Effective Date made by the Credit Parties in favor of the Collateral Agent for the benefit of the Secured Creditors, as the same may be amended, restated, modified or supplemented from time to time.
Security Agreement Collateral means all Collateral as defined in the Security Agreement.
Security Documents means and includes each of the Security Agreement, the Pledge Agreement, the Pledge Agreement (Acte de Nantissement de Compte dInstruments Financiers) dated as of the Original Effective Date made by Manitowoc FP, Inc. in favor of the Collateral Agent for the benefit of the Secured Creditors, after the execution and delivery thereof, each Additional Security Document and each other document or instrument pursuant to which security is granted to the Collateral Agent for the benefit of the Secured Creditors pursuant hereto.
Senior Note Documents means the Senior Note Indenture and all other documents executed and delivered with respect to the Senior Notes or Senior Note Indenture as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.
Senior Note Indenture means the Indenture dated as of November 6, 2003, among the Borrower and the other parties thereto, as in effect on the Effective Date and as the
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same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.
Senior Notes means the Borrowers 7-1/8% Senior Notes due 2013, issued pursuant to the Senior Note Indenture, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.
SPC means a special purpose, bankruptcy-remote Person formed for the sole and exclusive purpose of engaging in activities in connection with the purchase, sale and financing of accounts receivable and related rights in connection with and pursuant to a Permitted Securitization.
Specified Transaction means a customer financing transaction which occurs in the ordinary course of business of the Borrower or its Subsidiaries, which involves a credit extension of more than ninety days and which involves an assignment of the applicable receivable by the Borrower or its Subsidiaries to a third party lender.
Statutory Reserve Rate means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in Dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as Eurocurrency Liabilities in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
Sterling or £ means the lawful currency of the United Kingdom of Great Britain and Northern Ireland.
Subordinated Note Documents means the Subordinated Notes, the Subordinated Note Indenture and all other documents executed and delivered with respect to the Subordinated Notes or Subordinated Note Indenture, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.
Subordinated Note Indenture means the Indenture, dated as of August 8, 2002, among the Borrower and the other parties thereto, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.
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Subordinated Notes means the Borrowers 10-1/2% Senior Subordinated Notes due 2012, issued pursuant to the Subordinated Note Indenture, each as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.
subsidiary means, with respect to any Person (the parent ) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parents consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
Subsidiary means any subsidiary of the Borrower other than a FIN 46 Subsidiary.
Subsidiary Borrower means each Wholly-Owned Foreign Subsidiary designated as such by the Borrower pursuant to Section 2.20.
Subsidiary Guarantor means each Subsidiary of the Borrower which is a party to the Subsidiary Guaranty.
Subsidiary Guaranty means the Subsidiary Guaranty dated as of the Original Effective Date made by the Subsidiaries party thereto in favor of the Secured Creditors, as the same may be amended, restated, modified or supplemented from time to time. The Subsidiary Guarantors initially party to the Subsidiary Guaranty are so designated on Schedule 3.13 hereto.
Swap Agreement means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.
Swingline Dollar Loan means a Swingline Loan denominated in Dollars.
Swingline Exposure means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time.
Swingline Foreign Currency Loan means a Swingline Loan denominated in a Foreign Currency.
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Swingline Lender means JPMorgan, in its capacity as lender of Swingline Loans hereunder.
Swingline Loan means a loan made pursuant to Section 2.05.
Syndication Agent means Bank of America, N.A. in its capacity as syndication agent.
Tax Sharing Agreements means all tax sharing, tax allocation and other similar agreements entered into by the Borrower or any of its Subsidiaries.
Taxes means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.
Termination Letter means a letter in substantially the form of Exhibit D hereto.
Three Month Secondary CD Rate means, for any day, the secondary market rate for three month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it.
Transactions means the execution, delivery and performance by the Credit Parties of the Credit Documents, the borrowing of Loans, the use of the proceeds thereof, and the issuance of Letters of Credit hereunder and the consummation of the other transactions contemplated by the Credit Documents.
Type , when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
UCC means the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction.
United States means the United States of America.
Wholly-Owned Domestic Subsidiary means each Domestic Subsidiary of the Borrower that is also a Wholly-Owned Subsidiary of the Borrower.
Wholly-Owned Foreign Subsidiary means each Foreign Subsidiary of the Borrower that is also a Wholly-Owned Subsidiary of the Borrower.
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Wholly-Owned Subsidiary means, as to any Person, (a) any corporation 100% of whose capital stock is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (b) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time (other than, in the case of a Foreign Subsidiary with respect to preceding clauses (a) and (b), directors qualifying shares and/or other nominal amount of shares required to be held by Persons other than the Borrower and its Subsidiaries under applicable law).
Withdrawal Liability means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
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If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing, unless such Revolving Borrowing is denominated in a Foreign Currency, in which case such Revolving Borrowing shall be a Eurocurrency Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one months duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lenders Loan to be made as part of the requested Borrowing.
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If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one months duration.
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then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurocurrency Borrowing denominated in such currency shall be ineffective and (ii) such Borrowing shall be converted to or continued as on the last day of the Interest Period applicable thereto (A) if such Borrowing is denominated in Dollars, an ABR Borrowing or (B) if such Borrowing is denominated in a Foreign Currency, as a Borrowing bearing interest at such rate as the Administrative Agent determines adequately reflects the costs to the Lenders of making or maintaining such Borrowing, and (ii) if any Borrowing Request requests a Eurocurrency Borrowing in such currency, such Borrowing shall be made as an ABR Borrowing (if such Borrowing is requested to be made in Dollars) or shall be made as a Borrowing bearing interest at such rate as the Administrative Agent determines adequately reflects the costs to the Lender of making or maintaining such Borrowing.
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and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.
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The Borrower represents and warrants to the Lenders that:
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The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on December 31, 2006 (and, in the event such conditions are not so satisfied or waived,) this Agreement shall be of no force and effect (but the Existing Credit Agreement will remain in full force and effect).
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.
Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:
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Any financial statement or other material required to be delivered pursuant to this Section 5.01 shall be deemed to have been furnished to the Lenders on the date that an electronic copy of such financial statement or other material is provided to the Administrative Agent; provided that the Borrower will furnish paper copies of such financial statements and other materials to any Lender that requests, by notice to the Borrower, that the Borrower do so, until the Borrower receives notice from such Lender to cease delivering such paper copies.
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Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
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Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:
65
66
67
provided that Liens described in clauses (a) through (e) of this Section 6.02 shall not include Liens securing Indebtedness;
68
69
70
71
72
73
74
75
Fiscal Quarter Ending |
|
Ratio |
|
June 30, 2005 |
|
2.00:1.00 |
|
September 30, 2005 |
|
2.00:1.00 |
|
December 31, 2005 |
|
2.00:1.00 |
|
March 31, 2006 |
|
2.00:1.00 |
|
June 30, 2006 |
|
2.00:1.00 |
|
September 30, 2006 |
|
2.00:1.00 |
|
|
|
|
|
December 31, 2006 |
|
2.25:1.00 |
|
March 31, 2007 |
|
2.25:1.00 |
|
June 30, 2007 |
|
2.25:1.00 |
|
September 30, 2007 |
|
|
|
|
|
|
|
December 31, 2007 |
|
2.50:1.00 |
|
March 31, 2008 |
|
2.50:1.00 |
|
June 30, 2008 |
|
2.50:1.00 |
|
September 30, 2008 |
|
2.50:1.00 |
|
|
|
|
|
December 31, 2008 |
|
2.75:1.00 |
|
March 31, 2009 |
|
2.75:1.00 |
|
June 30, 2009 |
|
2.75:1.00 |
|
September 30, 2009 |
|
2.75:1.00 |
|
|
|
|
|
Thereafter |
|
3.00:1.00 |
|
76
77
78
79
80
then, and in every such event (other than an event with respect to any of the Borrowers described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case
81
any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers; and in case of any event with respect to any of the Borrowers described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers.
Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the
82
covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agents resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this
83
Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder.
The Administrative Agent shall be permitted from time to time to designate one of its Affiliates to perform the duties to be performed by the Administrative Agent hereunder with respect to Loans and Borrowings denominated in Foreign Currencies. The provisions of this Article VIII shall apply to any such Affiliate mutatis mutandis . All provisions of this Article VIII relating to the Administrative Agent shall be equally applicable to the Collateral Agent mutatis mutandis .
Without limiting the foregoing, if any Collateral or any Subsidiary is sold in a transaction permitted hereunder (excluding sales to the Borrower or a Subsidiary thereof other than sales comprising part of a Permitted Securitization made to a Subsidiary which is an SPC), (a) such Collateral and the assets of such Subsidiary shall be sold free and clear of the Liens created by the Security Documents and (b) in the case of such a sale of a Subsidiary Guarantor, such Subsidiary Guarantor and its subsidiaries shall be released from the Subsidiary Guaranty and, in each case, the Administrative Agent and the Collateral Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing. Each of the Administrative Agent and the Collateral Agent shall also be authorized, on behalf of the Lenders, to enter into such amendments of the Security Documents and to enter into such agreements (including intercreditor agreements but excluding any releases of Collateral not otherwise authorized hereby) as, in either case, it deems necessary or appropriate in connection with a Permitted Securitization. Additionally, in connection with the granting of Liens of the type described in clauses (i), (j), (m) or (s) of Section 6.02 by the Borrower or any of its Subsidiaries, each of the Administrative Agent and the Collateral Agent is authorized to take any actions deemed appropriate by it in connection therewith (including, without limitation, the execution of appropriate lien releases or lien subordination agreements in favor of the holder or holders of such Liens, in either case solely with respect to the item or items of equipment or other assets subject to such Liens.
84
85
86
87
88
For the purposes of this Section 9.04(b), the term Approved Fund has the following meaning:
Approved Fund means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
89
(ii) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to
90
such Participant is made with the Borrowers prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.17(e) as though it were a Lender.
91
92
EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED ABOVE IN SECTION 9.12., FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING THE BORROWER AND ITS RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS
93
THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.
ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER AND ITS AFFILIATES, THE PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES) AND ITS SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS TO THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW.
94
95
96
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
|
THE MANITOWOC COMPANY, INC. |
|
|
|
|
|
By |
|
|
Name: |
|
|
Title: |
[Signature Page to Credit Agreement]
|
|
|
|
JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent |
|
|
|
|
|
By |
|
|
Name: |
|
|
Title: |
[Signature Page to Credit Agreement]
|
|
|
|
[OTHER BANKS] |
|
|
|
|
|
By |
|
|
Name: |
|
|
Title: |
[Signature Page to Credit Agreement]
Schedule 1.01
PRICING SCHEDULE
Applicable Rate |
|
Level I
|
|
Level II
|
|
Level III
|
|
Level IV
|
|
Level V
|
|
Eurocurrency Spread |
|
0.75 |
% |
1.00 |
% |
1.25 |
% |
1.50 |
% |
1.75 |
% |
ABR Spread |
|
0 |
% |
0 |
% |
0 |
% |
0.25 |
% |
0.50 |
% |
Commitment Fee Rate |
|
0.15 |
% |
0.20 |
% |
0.25 |
% |
0.30 |
% |
0.375 |
% |
For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule:
Financials means the annual or quarterly financial statements of the Borrower delivered pursuant to Section 5.01 of this Agreement.
Level I Status exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, the Consolidated Total Leverage Ratio is less than 2.0 to 1.00.
Level II Status exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status and (ii) the Consolidated Total Leverage Ratio is less than 2.50 to 1.00.
Level III Status exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status or Level II Status and (ii) the Consolidated Total Leverage Ratio is less than 3.0 to 1.00.
Level IV Status exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status, Level II Status or Level III Status and (ii) the Consolidated Total Leverage Ratio is less than 3.50 to 1.00.
Level V Status exists at any date if the Borrower has not qualified for Level I Status, Level II Status, Level III Status or Level IV Status.
Status means Level I Status, Level II Status, Level III Status, Level IV Status, or Level V Status.
The Applicable Rate shall be determined in accordance with the foregoing table based on the Borrowers Status as reflected in the then most recent Financials. Adjustments, if any, to the Applicable Rate shall be effective five Business Days after the Administrative Agent
has received the applicable Financials. If the Borrower fails to deliver the Financials to the Administrative Agent at the time required pursuant to the Credit Agreement, then the Applicable Rate shall be the highest Applicable Rate set forth in the foregoing table until five days after such Financials are so delivered. Until adjusted after the Effective Date, Level I Status shall be deemed to exist.
[Signature Page to Credit Agreement]
Schedule 1.02
EXISTING INTERCOMPANY NOTES
See Attached.
Schedule 2.01
COMMITMENTS
Lender |
|
Commitment |
|
|
JPMorgan Chase Bank, N.A. |
|
$ |
32,500,000 |
|
Bank of America, N.A. |
|
$ |
28,500,000 |
|
Deutsche Bank AG New York Branch |
|
$ |
28,500,000 |
|
BNP Paribas |
|
$ |
28,500,000 |
|
U.S. Bank, National Association |
|
$ |
28,500,000 |
|
Associated Bank, N.A. |
|
$ |
25,000,000 |
|
Natexis Banques Populaires |
|
$ |
25,000,000 |
|
LaSalle Bank National Association |
|
$ |
20,000,000 |
|
M&I Marshall & Ilsley Bank |
|
$ |
20,000,000 |
|
The Bank of New York |
|
$ |
20,000,000 |
|
UBS Loan Finance LLC |
|
$ |
20,000,000 |
|
The Northern Trust Company |
|
$ |
13,500,000 |
|
Lehman Commercial Paper Inc. |
|
$ |
10,000,000 |
|
Total |
|
$ |
300,000,000 |
|
Schedule 2.21
MANDATORY COST RATE
1. Definitions.
In this Schedule 2.21:
Act means the Bank of England Act of 1998.
The terms Eligible Liabilities and Special Deposits have the meanings ascribed to the them under or pursuant to the Act or by the Bank of England (as may be appropriate), on the day of the application of the formula set forth in this Schedule 2.21.
Fee Base has the meaning ascribed to it for the purposes of, and shall be calculated in accordance with, the Fees Regulations.
Fees Regulations means, as appropriate, either: (i) the Banking Supervision (Fees) Regulations 1998, or (ii) such regulations as from time to time may be in force, relating to the payment of fees for banking supervision in the United Kingdom.
FSA means the Financial Services Authority.
2. Calculation of the Mandatory Cost Rate.
The Mandatory Cost Rate is an incremental per annum addition to the interest rate charged with respect to each Eurocurrency Loan to compensate the Lenders for the cost attributable to such Eurocurrency Loan resulting from the imposition from time to time under or pursuant to the Act and/or by the Bank of England and/or the FSA (or other United Kingdom governmental authorities or agencies) of a requirement to place non-interest bearing or Special Deposits (whether interest bearing or not) with the Bank of England and/or pay fees to the FSA calculated by reference to the liabilities used to fund the relevant Eurocurrency Loan.
The Mandatory Cost Rate is the rate determined by the Administrative Agent to be equal to the rate (rounded upward, if necessary, to the next higher 1/100 of 1%) resulting from the application of the following formula:
For Sterling:
AB +C(B-D) + E x 0.01
100 - (A+C)
For other Foreign Currencies:
E x 0.01
300
where on the day of application of the formula,
A is the percentage of Eligible Liabilities (in excess of any stated minimum) which the Administrative Agent is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England.
B is the Adjusted LIBO Rate applicable to the related Eurocurrency Loan.
C is the level of interest-bearing Special Deposits, expressed as a percentage of Eligible Liabilities, which the Administrative Agent is required from time to time to maintain by the Bank of England (or other United Kingdom governmental authority or agency).
D is the percentage rate per annum payable by the Bank of England to the Administrative Agent on Special Deposits.
E is the rate payable by the Administrative Agent to the FSA pursuant to the Fees Regulations and expressed in pounds per 1,000,000 Sterling of the Fee Base of the Administrative Agent.
(A, B, C and D are to be expressed in the formula as numbers and not as percentages. A negative result obtained from subtracting D from B shall be counted as zero.)
The Mandatory Cost Rate attributable to a Eurocurrency Loan for any period shall be calculated at or about 11:00 a.m. (London time) on the first day of such period for the duration of such period.
The determination of the Mandatory Cost Rate by the Administrative Agent in relation to any period shall, in the absence of manifest error, be conclusive and binding on all parties hereto.
2
EXHIBIT A
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the Assignment and Assumption ) is dated as of the Effective Date set forth below and is entered into by and between [ Insert name of Assignor ] (the Assignor ) and [ Insert name of Assignee ] (the Assignee ). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the Credit Agreement ), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignors rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the Assigned Interest ). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.
1. |
Assignor: |
|
|
|
|
|
|
2. |
Assignee: |
|
|
|
|
[and is an Affiliate/Approved Fund of [identify Lender](2)] |
|
|
|
|
|
3. |
Borrower: |
The Manitowoc Company, Inc. |
|
|
|
|
|
4. |
Administrative Agent: |
JPMorgan Chase Bank, N.A., as the administrative agent under the Credit Agreement |
|
|
|
|
|
5. |
Credit Agreement: |
The $300,000,000 Amended and Restated Credit Agreement dated as of December , 2006 among The Manitowoc Company, Inc., the Lenders parties |
(2) Select as applicable
|
|
thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents parties thereto] |
6. |
Assigned Interest: |
The Manitowoc Company, Inc. |
Aggregate Amount of
|
|
Amount of
|
|
Percentage of
|
|
$ |
|
$ |
|
|
% |
$ |
|
$ |
|
|
% |
$ |
|
$ |
|
|
% |
Effective Date: , 20 [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
|
ASSIGNOR |
|
|
|
|
|
[NAME OF ASSIGNOR] |
|
|
|
|
|
By: |
|
|
Title: |
|
|
|
|
|
ASSIGNEE |
|
|
|
|
|
[NAME OF ASSIGNEE] |
|
|
|
|
|
By: |
|
|
Title: |
|
[Consented to and](4) Accepted: |
|
|
|
|
|
JPMORGAN CHASE BANK, N.A., as |
|
|
Administrative Agent |
|
|
|
|
(3) Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.
(4) To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.
2
By |
|
|
Title: |
|
|
|
|
|
[Consented to:](5) |
|
|
|
|
|
[NAME OF RELEVANT PARTY] |
|
|
|
|
|
By |
|
|
Title: |
|
(5) To be added only if the consent of the Borrower and/or other parties (e.g., Swingline Lender, Issuing Bank) is required by the terms of the Credit Agreement.
3
ANNEX 1
STANDARD TERMS AND
CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties .
1.1 Assignor . The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Credit Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Credit Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Credit Document.
1.2. Assignee . The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Documents are required to be performed by it as a Lender.
2. Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
3. General Provisions . This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the laws (without regard to conflict of law provisions) of the State of New York.
2
EXHIBIT B
FORM OF DESIGNATION LETTER
,
JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders
to the Credit Agreement referred to below,
and the Lenders
[ ]
[ ]
Attention: [ ]
Ladies and Gentlemen:
We refer to the Amended and Restated Credit Agreement (as amended, restated, supplemented or otherwise modified and in effect from time to time, the Credit Agreement) dated as of December , 2006 among The Manitowoc Company, Inc. (the Borrower), the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. Unless otherwise defined herein, capitalized terms used in this Designation Letter have the meanings ascribed thereto in the Credit Agreement.
The Borrower hereby designates [ ] (the Designated Subsidiary), a Wholly-Owned Subsidiary of the Company and a [corporation duly incorporated under the laws of [ ]], as a Subsidiary Borrower in accordance with Section 2.20 of the Credit Agreement until such designation is terminated in accordance with Section 2.20 of the Credit Agreement and sets forth on Schedule 1 hereto the contact information about such Designated Subsidiary specified on such schedule.
The Designated Subsidiary hereby accepts the above designation and hereby expressly and unconditionally accepts the obligations of a Subsidiary Borrower under the Credit Agreement and agrees and confirms that, upon your execution and return to the Borrower of the enclosed copy of this letter, the Designated Subsidiary shall be a Subsidiary Borrower for purposes of the Credit Agreement and agrees to be bound by and perform and comply with the terms and provisions of the Credit Agreement applicable to it as if it had originally executed the Credit Agreement as a Subsidiary Borrower. The Designated Subsidiary hereby authorizes and empowers the Borrower to act as its representative and attorney-in-fact for the purposes of signing documents and giving and receiving notices (including borrowing requests and interest elections under the Credit Agreement) and other communications in connection with the Credit Agreement and the transactions contemplated thereby and for the purposes of modifying or amending any provision of the Credit Agreement and further agrees that the Administrative Agent and each Lender may conclusively rely on the foregoing authorization.
The Borrower hereby represents and warrants to the Administrative Agent and each Lender that, before and after giving effect to this Designation Letter, (i) the representations and warranties set forth in Article III of the Credit Agreement are true and correct on the date hereof as if made on
and as of the date hereof, and (ii) no Default has occurred and is continuing. The Designated Subsidiary represents and warrants that, in so far as they relate to such Designated Subsidiary, each of the representations and warranties set forth in Article III of the Credit Agreement is true and correct on the date hereof as if made on and as of the date hereof. This Designation Letter shall be governed by, and construed in accordance with, the internal laws (without regard to the conflict of laws provisions) of the State of New York. Without limiting any other provisions hereof, the Designated Subsidiary hereby submits to jurisdiction and makes the waivers and otherwise in all aspects agrees to the terms of Sections 9.09(b), (c) and (d) of the Credit Agreement as if fully set forth herein.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS DESIGNATION LETTER, THE CREDIT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS DESIGNATION LETTER BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
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Very truly yours, |
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THE MANITOWOC COMPANY, INC. |
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By: |
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Title: |
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[NAME OF DESIGNATED SUBSIDIARY] |
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By: |
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Title: |
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2
Schedule 1
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Registered address: |
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Contact Person: |
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Telephone number |
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Facsimile number |
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Email address of contact person |
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3. |
Internet address, if any |
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4. |
Federal employer identification number, if any |
3
EXHIBIT C
FORM OF INTERCOMPANY NOTE
[Date]
FOR VALUE RECEIVED, [NAME OF PAYOR] (the Payor) hereby promises to pay on demand to the order of or its assigns (the Payee), in lawful money of the United States of America in immediately available funds, at such location in the United States of America as the Payee shall from time to time designate, the unpaid principal amount of all loans and advances made by the Payee to the Payor.
The Payor promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at such rate per annum as shall be agreed upon from time to time by the Payor and Payee.
Upon the commencement of any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar proceeding of any jurisdiction relating to the Payor, the unpaid principal amount hereof shall become immediately due and payable without presentment, demand, protest or notice of any kind in connection with this Note.
This Note evidences certain permitted intercompany indebtedness referred to in the Amended and Restated Credit Agreement, dated as of December , 2006 (as amended, modified, restated and/or supplemented from time to time, the Credit Agreement), among The Manitowoc Company, Inc., the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, and is subject to the terms thereof[, and shall be pledged by the Payee pursuant to the Pledge Agreement (as defined in the Credit Agreement). The Payor hereby acknowledges and agrees that the Pledgee pursuant to and as defined in the Pledge Agreement, as in effect from time to time, may exercise all rights provided therein with respect to this Note].
[This Note, and all of the Payors obligations hereunder, shall be subordinate and junior to all Senior Indebtedness (as defined in Section 1.07 of Annex A hereto) on the terms and conditions set forth in Annex A hereto, which Annex A is incorporated herein by reference and made a part hereof as if set forth herein in its entirety.](6)
(6) Insert in all Intercompany Notes in which the Payor is either the Borrower or a Subsidiary Guarantor and the Payee is neither the Borrower nor a Subsidiary Guarantor.
The Payee is hereby authorized to record all loans and advances made by it to the Payor (all of which shall be evidenced by this Note), and all repayments or prepayments thereof, in its books and records, such books and records constituting prima facie evidence of the accuracy of the information contained therein.
All payments under this Note shall be made without offset, counterclaim or deduction of any kind.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
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[NAME OF PAYOR] |
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By: |
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Name: |
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Title: |
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Pay to the order of |
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[NAME OF PAYEE] |
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By: |
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Annex A
SUBORDINATION PROVISIONS
Section 1.01. Subordination of Liabilities . [Name of Payor] (the Company), for itself, and its successors and assigns, covenants and agrees, and each holder of the Note to which this Annex A is attached (the Note) by its acceptance thereof likewise covenants and agrees, that the payment of the principal of, interest on, and all other amounts owing in respect of, the Note (the Subordinated Indebtedness) is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, to the prior payment in full in cash of all Senior Indebtedness (as defined in Section 1.07 of this Annex A). The provisions of this Annex A shall constitute a continuing offer to all persons or other entities who, in reliance upon such provisions, become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness, and such holders are hereby made obligees hereunder the same as if their names were written herein as such, and they and/or each of them may proceed to enforce such provisions.
Section 1.02. Company Not to Make Payments with Respect to Subordinated Indebtedness in Certain Circumstances . (a) Upon the maturity of any Senior Indebtedness (including interest thereon or fees or any other amounts owing in respect thereof), whether at stated maturity, by acceleration or otherwise, all Obligations (as defined in Section 1.07 of this Annex A) owing in respect thereof shall first be paid in full in cash, before any payment or distribution (whether in cash, property, securities or otherwise) is made on account of the Subordinated Indebtedness.
(b) The Company may not, directly or indirectly, make any payment of any Subordinated Indebtedness and may not acquire any Subordinated Indebtedness for cash or property until all Senior Indebtedness has been paid in full in cash if any default or event of default under the Credit Agreement referred to below or any other issue of Senior Indebtedness is then in existence or would result therefrom. Each holder of the Note hereby agrees that, so long as any such default or event of default exists, it will not ask, demand, sue for, or otherwise take, accept or receive, any amounts owing in respect of the Subordinated Indebtedness.
(c) In the event that, notwithstanding the provisions of the preceding subsections (a) and (b) of this Section 1.02, the Company shall make any payment on account of the Subordinated Indebtedness at a time when payment is not permitted by said subsection (a) or (b), such payment shall be held by the holder of the Note, in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Indebtedness or their representative or the trustee under the indenture or other agreement pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, for application pro rata to the payment of all Senior Indebtedness (after giving effect to the relative priorities of such Senior Indebtedness) remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in cash in accordance with the terms of such Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. Without in any way modifying the provisions of this Annex A or affecting the subordination effected hereby if the hereafter referenced notice is not given, the Company shall give the holder of the Note prompt written notice of any event which would prevent payments under Section 1.02(a) or (b) hereof.
Section 1.03. Subordination to Prior Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization of Company . Upon any distribution of assets of the Company upon dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise):
(a) the holders of all Senior Indebtedness shall first be entitled to receive payment in full in cash of all Senior Indebtedness (including, without limitation, post-petition interest at the rate provided in the documentation with respect to the Senior Indebtedness, whether or not such post-petition interest is an allowed claim against the debtor in any bankruptcy or similar proceeding) before the holder of the Note is entitled to receive any payment of any kind or character on account of the Subordinated Indebtedness;
(b) any payment or distributions of assets of the Company of any kind or character, whether in cash, property or securities to which the holder of the Note would be entitled except for the provisions of this Annex A, shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or other trustee or agent, directly to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture under which any instruments evidencing any such Senior Indebtedness may have been issued, to the extent necessary to make payment in full in cash of all Senior Indebtedness remaining unpaid (after giving effect to the relative priorities of such Senior Indebtedness), after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of this Section 1.03, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by the holder of the Note on account of Subordinated Indebtedness before all Senior Indebtedness is paid in full in cash, such payment or distribution shall be received and held in trust for and shall be paid over to the holders of the Senior Indebtedness (after giving effect to the relative priorities of such Senior Indebtedness) remaining unpaid or unprovided for or their representative or representatives, or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, for application to the payment of such Senior Indebtedness until all such Senior Indebtedness shall have been paid in full in cash, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness.
Without in any way modifying the provisions of this Annex A or affecting the subordination effected hereby if the hereafter referenced notice is not given, the Company shall give prompt written notice to the holder of the Note of any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon assignment for the benefit of creditors or otherwise).
Section 1.04. Subrogation . Subject to the prior payment in full in cash of all Senior Indebtedness, the holder of the Note shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of the Company applicable to the Senior Indebtedness until all amounts owing an the Note shall be paid in full, and for the
2
purpose of such subrogation no payments or distributions to the holders of the Senior Indebtedness by or on behalf of the Company or by or on behalf of the holder of the Note by virtue of this Annex A which otherwise would have been made to the holder of the Note shall, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holder of the Note, be deemed to be payment by the Company to or on account of the Senior Indebtedness, it being understood that the provisions of this Annex A are and are intended solely or the purpose of defining the relative rights of the holder of the Note, on the one hand, and the holders of the Senior Indebtedness, an the other hand.
Section 1.05. Obligation of the Company Unconditional . Nothing contained in this Annex A or in the Note is intended to or shall impair, as between the Company and the holder of the Note, the obligation of the Company, which is absolute and unconditional, to pay to the holder of the Note the principal of and interest on the Note as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holder of the Note and other creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the holder of the Note from exercising all remedies otherwise permitted by applicable law upon an event of default under the Note, subject to all of the restrictions set forth in this Annex A and the rights, if any, under this Annex A of the holders of Senior Indebtedness in respect of cash, property, or securities of the Company received upon the exercise of any such remedy.
Section 1.06. Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Indebtedness . No right of any present or future holders of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act in good faith by any such holder, or by any noncompliance by the Company with the terms and provisions of the Note, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. The holders of the Senior Indebtedness may, without in any way affecting the obligations of the holder of the Note with respect hereto, at any time or from time to time and in their absolute discretion, change the manner, place or terms of payment of, change or extend the time of payment of, or renew, increase or otherwise alter, any Senior Indebtedness or amend, modify or supplement any agreement or instrument governing or evidencing such Senior Indebtedness or any other document referred to therein, or exercise or refrain from exercising any other of their rights under the Senior Indebtedness including, without limitation, the waiver of default thereunder and the release of any collateral securing such Senior Indebtedness, all without notice to or assent from the holder of the Note.
Section 1.07. Senior Indebtedness . The term Senior Indebtedness shall mean all Obligations (i) of the Company under, or in respect of, the Credit Agreement (as amended, modified, supplemented, extended, restated, refinanced, replaced or refunded from time to time, the Credit Agreement), dated as of June 10, 2005, among The Manitowoc Company, Inc., the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, and each other Credit Document (as defined in the Credit Agreement) to which the Company is a party [, including the Subsidiary Guaranty (as defined in the Credit Agreement)], and any renewal, extension, restatement, refinancing or refunding of any thereof, (ii) of the Company under, or in respect of, any Swap Agreement (as defined in the Credit Agreement) [, including any guaranty thereof under the Subsidiary Guaranty], and (iii) of the Company under
3
the Senior Notes and the Subordinated Notes (each as defined in the Credit Agreement) or any other Senior Note Document or Subordinated Note Document (each as defined in the Credit Agreement). As used herein, the term Obligation shall mean all principal, interest, premium, reimbursement obligations, penalties, fees, expenses, indemnities and other liabilities and obligations (including any guaranties of the foregoing liabilities and obligations) payable under the documentation governing any indebtedness (including interest accruing after the commencement of any bankruptcy, insolvency, receivership or similar proceeding at the rate provided in the documentation with respect thereto, whether or not such interest is an allowed claim against the debtor in any such proceeding).
4
EXHIBIT D
FORM OF TERMINATION LETTER
,
JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders
to the Credit Agreement referred to below
[ ]
[ ]
Attention: [ ]
Ladies and Gentlemen:
We refer to the Amended and Restated Credit Agreement (as amended, restated, supplemented or otherwise modified and in effect from time to time, the Credit Agreement) dated as of December , 2006 among The Manitowoc Company, Inc. (the Borrower), the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. Unless otherwise defined herein, capitalized terms used in this Termination Letter have the meanings ascribed thereto in the Credit Agreement.
The Borrower hereby terminates the status as a Subsidiary Borrower of , a corporation incorporated under the laws of (the Designated Subsidiary), in accordance with Section 2.20 of the Credit Agreement, effective as of the date of receipt of this notice by the Administrative Agent. The undersigned hereby represent and warrant that all Loans made to the Designated Subsidiary and all related interest have been paid in full on or prior to the date hereof. Notwithstanding the foregoing, this Termination Letter shall not terminate (a) any Obligation of such Designated Subsidiary that remains unpaid on the date hereof (including, without limitation, any Obligation arising hereafter in respect of the Designated Subsidiary under Sections 2.15, 2.16 or 2.17 of the Credit Agreement) or (b) the obligations of the Borrower under the Parent Guaranty with respect to any such unpaid Obligations.
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Very truly yours, |
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THE MANITOWOC COMPANY, INC. |
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By: |
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Name: |
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Title: |
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[SUBSIDIARY BORROWER] |
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By: |
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Name: |
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Title: |
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2
Exhibit 10.2(a)
SHORT-TERM INCENTIVE PLAN
Effective January 1, 2005
As Revised Effective January 1, 2007
EVA = (Net Operating Profit After Tax - Capital Charge)
1
Unless the context provides a different meaning, the following terms shall have the following meanings.
For the purpose of this plan, the Participating Groups are listed on Exhibit C.
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Gross Accounts Receivable (including trade A/R from another Manitowoc unit See Notes 2 and 3) |
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Plus: |
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FIFO Inventory (See Note 3) |
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Plus: |
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Other Current Assets |
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Less: |
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Non-Interest Bearing Current Liabilities (NIBCLs - See Note 1) |
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Plus: |
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Net PP&E |
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Plus: |
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Other Operating Assets |
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Plus: |
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Capitalized Research & Development |
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Plus: |
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Goodwill acquired after July 3, 1993 |
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Plus: |
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Accumulated Amortization on Goodwill acquired after July 3, 1993 |
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Plus (Less): |
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Special Items |
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Equals: |
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Capital |
Notes:
2
The debt to capital ratio, BETA, and Market Risk Premium assumptions should be reviewed and updated if necessary at least every three years.
Capital Charge = Capital x Cost of Capital (C*)
NOPAT means the after tax cash earnings attributable to the capital employed in the Participating Group for the year in question. The components of NOPAT are as follows:
3
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Operating Earnings |
Plus: |
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Increase (Decrease) in Capitalized R & D (See Note 1) |
Plus: |
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Increase (Decrease) in Bad Debt Reserve |
Plus: |
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Increase (Decrease) in Inventory Reserves |
Plus: |
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Amortization of Goodwill (resulting from annual US GAAP impairment analyses) |
Less: |
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Other Expense (Excluding interest on debt and including interest on factored receivables) |
Plus: |
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Other Income (Excluding investment income) |
Equals: |
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Net Operating Profit Before Tax |
Less: |
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Taxes (See Note 2) |
Equals: |
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Net Operating Profit After Tax |
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NOPAT |
Less: |
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Capital Charge |
Equals: |
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EVA (which may be positive or negative) |
Formula A
Target EVA = Last Years Actual EVA+ Expected Improvement in EVA
Formula B
Target EVA = Last Years EVA paid (not to exceed the EVA necessary to achieve a Bonus Performance Value of 2.5) + 50% of the difference between Last Years Actual EVA and Last Years EVA paid + Expected Improvement in EVA
Maximum EVA Target = Last Years Actual EVA+ Expected Improvement in EVA
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(i) In order to achieve a Bonus Performance Value of 2.5 (the Maximum EVA Award), the Bonus Performance Value shall be determined as follows: the Actual EVA minus the Maximum EVA Target, divided by the Leverage Factor, plus 1.0 [((Actual EVA Maximum EVA Target)/Leverage Factor) + 1.0].
(ii) If the Actual EVA is greater than the Target EVA but less than the minimum amount of EVA necessary under subparaph (c)(i) above to achieve the Maximum EVA Award (the Maximum EVA), the Bonus Performance Value shall be calculated by straight line interpolation by determining the percentage by which the
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Actual EVA falls between the Target EVA and the Maximum EVA and applying the same percentage to the Bonus Performance Value between 1.0 and 2.5.
· Positive Bank Balances: one-third of the Bank Balance will be paid out each year in cash (paid at the same time the fiscal 2005 to 2007 incentive awards are paid).
· Negative Bank Balances: 50% of the amount (if any) by which the Actual Bonus Award earned (if any) exceeds the Target Bonus Award in each of fiscal 2005, 2006 and 2007, is used to pay down the negative Bank Balance. After three years (fiscal 2005 to 2007 incentive awards), any remaining negative Bank Balances will be forgiven.
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Cause shall mean:
(i) any act or acts of the Participant constituting a felony under the laws of the United States, any state thereof or any foreign jurisdiction;
(ii) any material breach by the Participant of any employment agreement with the Company or the policies of the Company or the willful and persistent (after written notice to the Participant) failure or refusal of the Participant to comply with any lawful directives of the Board;
(iii) a course of conduct amounting to gross neglect, willful misconduct or dishonesty; or
(iv) any misappropriation of material property of the Company by the Participant or any misappropriation of a corporate or business opportunity of the Company by the Participant.
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Exhibit A
Calculation of the Cost of Capital
Cost of Capital or C* means the weighted average of the after tax cost of debt and equity for the year in question. It is calculated as follows:
Inputs Variables: |
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Risk Free Rate = Average Daily closing yield on U.S. Government 30 Yr. Bonds (for the month of December preceding the Plan Year). |
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Market Risk Premium = 5.0% (Fixed) |
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Beta = One (Fixed) |
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Debt/Capital Ratio = 40% (Fixed) |
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b = Cost of Debt Capital (Projected & Weighted Average Yield on the Companys Long Term Debt Obligations). |
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Marginal Tax Rate = 39.0% (Historical Average). |
Calculations: |
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y |
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= Cost of Equity Capital |
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= Risk Free Rate + (Beta x Market Risk Premium) |
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Weighted Average Cost of Capital = [Cost of Equity Capital x (1 - Debt/Capital Ratio)] + [Cost of Debt x (Debt/Capital Ratio) x (1 - Marginal Tax Rate)] |
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C* = [y x (1 - Debt/Capital)] + [b x (Debt/Capital) x (1 - Marginal Tax Rate)] |
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Exhibit B
Target Bonus Percentages (as % of base salary)
Participant
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Target Bonus
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I |
80 |
% |
II |
55 |
% |
III |
50 |
% |
IV |
40 |
% |
V |
35 |
% |
VI |
30 |
% |
VII |
25 |
% |
VIII |
20 |
% |
IX |
15 |
% |
X |
10 |
% |
XI |
5 |
% |
14
Exhibit C
Expected Improvement and Leverage Factors
As of January 1, 2007:
Participation Groups |
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Expected Improvement
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Leverage Factor |
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Target EVA Formula |
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Foodservice Group |
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2,000,000 |
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6,200,000 |
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A |
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Cranes America |
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2,500,000 |
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7,500,000 |
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B |
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Cranes EMEA (in Euro) |
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2,500,000 |
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7,500,000 |
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B |
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Cranes Asia |
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700,000 |
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2,200,000 |
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B |
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Cranes Group |
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3,500,000 |
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12,500,000 |
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B |
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Marine Group |
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600,000 |
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2,400,000 |
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B |
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Corporate |
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4,350,000 |
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22,000,000 |
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B |
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15
Exhibit D
Adjustment Guidelines for Material and Unexpected Non-Recurring Items
· Potential material and unexpected non-recurring items which the Committee may consider excluding from the raw EVA calculation (i.e., impact net operating profit after-tax or the cost of capital), in order to ensure employees are assessed on the performance of continuing operations, based on our experience, include:
· Change in Accounting Principle or Practices (e.g., treatment of goodwill, FAS 123-revised 2004, etc.). Typically, the company may exclude the impact from both operating results and performance goals.
· Major acquisition (i.e., acquiring a business with total assets greater than 15% of the companys/operating units prior year-end total assets). In the event of a major acquisition, the company may exclude the performance of the acquired unit from both results and goals for an agreed upon period of time.
· Major disposition (e.g., disposition as defined by FAS 144). In the event a disposition is classified as discontinued under FAS 144, the company may exclude the performance of the disposed unit from both results and goals.
· Restructuring (i.e., reorganization of a specific business or operating unit). In the event of a restructuring, the company may exclude the cost of restructuring from NOPAT but must also exclude any benefits up to the amount of restructuring costs during the subsequent 12-month period. The restructuring liability should also be excluded from the calculation of capital for the same subsequent 12-month period.
· Recapitalization (i.e., significant altering of the companys current capital structure). In the event of a recapitalization, the company may exclude the impact from both results and goals.
· Other unusual or one-time gains/losses considered on a case-by-case basis relative to their impact on the companys/operating units financial results.
· Expenses related to significant ERP system implementations may be capitalized and amortized over the same period as the ERP asset.
Exhibit 10.7(c)
THE MANITOWOC COMPANY, INC.
2003 INCENTIVE STOCK AND AWARDS PLAN
Amended Effective February 27, 2007
1. Purpose and Construction .
2. Administration .
3. Eligibility . The Committee may designate from time to time the Participants to receive Awards under this Plan. The Committees designation of a Participant in any year will not require the Committee to designate such person to receive an Award in any other year. The Committee may consider such factors as it deems pertinent in selecting a Participant and in determining the types and amounts of Awards. In making such selection and determination, factors the Committee may consider include: (a) the Companys financial condition; (b) anticipated profits for the current or future years; (c) the Participants contributions to the profitability and development of the Company; and (d) other compensation provided to the Participant.
4. Discretionary Grants of Awards .
5. Shares Reserved under this Plan .
2
6. Options and Stock Appreciation Rights .
3
(d) Eligibility and Exercise Price for Stock Appreciation Rights . The Committee may grant Stock Appreciation Rights to any Participant it selects. Each Stock Appreciation Right may relate to all or a portion of a specific Option granted under the Plan and may be granted concurrently with the Option to which it relates or at any time prior to the exercise, termination or expiration of such Option (a Tandem SAR), or may be granted independently of any Option, as determined by the Committee. If the Stock Appreciation Right is granted independently of an Option, the exercise price of such Stock Appreciation Right shall be the Fair Market Value of a Share on the date of grant; provided, however, that the Committee may, in its discretion, fix an exercise price in excess of the Fair Market Value of a Share on such grant date.
(e) Upon Exercise of a Stock Appreciation Right . Upon exercise of a Stock Appreciation Right, the Participant shall be entitled to receive, without payment to the Company, either (A) that number of Shares determined by dividing (i) the total number of Shares subject to the Stock Appreciation Right being exercised by the Participant, multiplied by the amount by which the Fair Market Value of a Share on the day the right is exercised exceeds the exercise price (such amount being hereinafter referred to as the Spread), by (ii) the Fair Market Value of a Share on the exercise date; or (B) cash in an amount determined by multiplying (i) the total number of Shares subject to the Stock Appreciation Right being exercised by the Participant, by (ii) the amount of the Spread; or (C) a combination of Shares and cash, in amounts determined as set forth in clauses (A) and (B) above, as determined by the Committee in its sole discretion; provided, however, that, in the case of a Tandem SAR, the total number of Shares which may be received upon exercise of a Stock Appreciation Right for Common Stock shall not exceed the total number of Shares subject to the related Option or portion thereof, and the total amount of cash which may be received upon exercise of a Stock Appreciation Right for cash shall not exceed the Fair Market Value on the date of exercise of the total number of Shares subject to the related Option or portion thereof.
(f) Terms and Conditions of Stock Appreciation Rights . Subject to the terms of the Plan, a Stock Appreciation Right will be exercisable at such times and subject to such conditions as the Committee specifies; provided, however, that a Tandem SAR shall not be exercisable prior to or later than the time the related Option could be exercised; and provided, further, that in any event a Stock Appreciation Right shall terminate no later than ten (10) years after the date of grant.
(g) Tandem SARs and Options . With respect to Options issued with Tandem SARs, the right of a Participant to exercise the Tandem SAR shall be cancelled if and to the
4
extent the related Option is exercised, and the right of a Participant to exercise an Option shall be cancelled if and to the extent that Shares covered by such Option are used to calculate shares or cash received upon exercise of the Tandem SAR.
7. Restricted Stock, Performance Shares and Performance Units .
8. Transferability . Except as otherwise provided in this Section, or as the Committee otherwise provides, each Award granted under this Plan is not transferable by a Participant other than by will or the laws of descent and distribution, and during the lifetime of the Participant such Awards may be exercised only by the Participant or the Participants legal representative or by the permitted transferee of such Participant as hereinafter provided (or by the legal representative of such permitted transferee). A Participant may transfer Awards to (i) his or her spouse, children or grandchildren (Immediate Family Members); (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; or (iii) a partnership in which such Immediate Family Members are the only partners. The transfer will be effective only if the Participant receives no consideration for such transfer. Subsequent transfers of transferred Awards are prohibited except transfers to those persons or entities to which the Participant could have transferred such Awards, or transfers otherwise in accordance with this Section.
9. Termination and Amendment of Plan; Amendment, Modification or Cancellation of Awards .
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6
10. Taxes . The Company is entitled to withhold the amount of any tax attributable to any amount payable or Shares deliverable under this Plan after giving the person entitled to receive such amount or Shares notice as far in advance as practicable, and the Company may defer making payment or delivery if any such tax may be pending unless and until indemnified to its satisfaction. The Committee may permit a Participant to pay all or a portion of the federal, state and local withholding taxes arising in connection with (a) the exercise of a nonqualified stock option, (b) a disqualifying disposition of Shares received upon the exercise of an incentive stock option, or (c) the lapse of restrictions on Restricted Stock, by electing to (i) have the Company withhold Shares otherwise issuable under the Award, (ii) tender back Shares received in connection with such Award or (iii) deliver other previously owned Shares which have been beneficially owned by the Participant for at least six (6) months, in each case having a Fair Market Value equal to the amount to be withheld. However, the amount to be withheld may not exceed the total minimum federal, state and local tax withholding obligations associated with the transaction. The election must be made on or before the date as of which the amount of tax to be withheld is determined and otherwise as the Committee requires. The Fair Market Value of fractional Shares remaining after payment of the withholding taxes may be paid to the Participant in cash.
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11. Adjustment Provisions; Change of Control .
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For purposes of this Section 11, the value of a Performance Share shall be equal to, and the value of a Performance Unit for which the value is equal to the Fair Market Value of Shares shall be based on, the Change of Control Price.
12. Miscellaneous .
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11
13. Definitions . Capitalized terms used in this Plan have the following meanings:
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15
Exhibit 10.7(e)
THE MANITOWOC COMPANY, INC.
2004 NON-EMPLOYEE DIRECTOR STOCK AND AWARDS PLAN
Amended Effective February 27, 2007
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retirement
age established by the Board, or other than death or disability (as determined
by the Committee), as to Awards held by that Non-employee Director on the
effective date of such termination of Board membership, unless the Committee,
in its sole discretion, shall otherwise determine, all nonvested options and
all Restricted Stock as to which all restrictions have not lapsed, and all
Restricted Stock Units for which the Performance Goals have not been fully
satisfied shall be immediately forfeited.
Upon the retirement (due to reaching the mandatory retirement age
established by the Board), death or disability of a Non-employee Director, all
Options held by the Non-employee Director shall fully and immediately vest, all
restrictions with respect to Restricted Stock held by the Non-employee Director
shall immediately lapse, and all Performance Goals with respect to Restricted
Stock Units held by the Non-employee Director shall be deemed immediately
satisfied. In such event or if
If
the
Committee otherwise determines not to require immediate forfeiture upon the
occurrence of some other event where the Non-employee director ceases to be a
member of the Board, then the maximum exercise period which may be permitted
for Options following such termination of Board membership shall be the shorter
of one year or the scheduled expiration date of the Award.
Except as otherwise provided in this Section, or as the Committee otherwise provides, each Award granted under this Plan is not transferable by a Non-employee Director: (a) until such Option has been exercised and/or the limitations on the Restricted Stock or Restricted Stock Units have lapsed or been satisfied; or (b) by will or the laws of descent and distribution. During the lifetime of the Non-employee Director such Awards may be exercised only by the Non-employee Director or the Non-employee Directors legal representative or by the permitted transferee of such Non-employee Director as hereinafter provided (or by the legal representative of such permitted transferee). Unless otherwise prohibited by the Award Agreement, a Non-employee Director may transfer Awards to (i) his or her spouse, children or grandchildren (Immediate Family Members); (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; or (iii) a partnership in which such Immediate Family Members are the only partners. The transfer will be effective only if the Non-employee Director receives no consideration for such transfer. Subsequent transfers of transferred Awards are prohibited except transfers to those persons or entities to which the Non-employee Director could have transferred such Awards, or transfers otherwise in accordance with this Section.
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(a) Options . Each holder of an Option (a) shall have the right at any time thereafter to exercise the Option in full whether or not the Option was theretofore exercisable;
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and (b) shall have the right, exercisable by written notice to the Company within sixty (60) days after the change of Control, to receive, in exchange for the surrender of the Option, an amount of cash equal to the excess of the Change of Control Price of the Shares covered by the Option that is so surrendered over the exercise price of such Shares under the Award;
(b) Restricted Stock . Restricted Stock that is not then vested shall vest upon the date of the Change of Control and each holder of such Restricted Stock shall have the right, exercisable by written notice to the Company within sixty (60) days after the Change of Control, to receive, in exchange for the surrender of such Restricted Stock, an amount of cash equal to the Change of Control Price of such Restricted Stock;
(c) Restricted Stock Units . Each holder of a Restricted Stock Unit for which the performance period has not expired shall have the right, exercisable by written notice to the Company within sixty (60) days after the Change of Control, to receive, in exchange for the surrender of the Restricted Stock Unit, a number of Shares equal to the product of the number of Restricted Stock Units and a fraction the numerator of which is the number of whole months which have elapsed from the beginning of the performance period to the date of the Change of Control and the denominator of which is the number of whole months in the performance period. Each holder of a Restricted Stock Unit that has been earned but not yet paid shall receive the number of Shares equal to the number of such Restricted Stock Units.
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stock of the Company, is or becomes the Beneficial Owner (as that term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Companys then outstanding securities; or
(ii) The Company is merged or consolidated with any other corporation or other entity, other than: (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than eighty percent (80%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (B) the Company engages in a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person (as defined above) acquires more than thirty percent (30%) of the combined voting power of the Companys then outstanding securities. Notwithstanding the foregoing, a merger or consolidation involving the Company shall not be considered a Change of Control if the Company is the surviving corporation and shares of the Companys Common Stock are not converted into or exchanged for stock or securities of any other corporation, cash or any other thing of value, unless persons who beneficially owned shares of the Companys Common Stock outstanding immediately prior to such transaction own beneficially less than a majority of the outstanding voting securities of the Company immediately following the merger or consolidation;
(iii) The Company or any subsidiary sells, assigns or otherwise transfer assets in a transaction or series of related transactions, if the aggregate market value of the assets so transferred exceeds fifty percent (50%) of the Companys consolidated book value, determined by the Company in accordance with generally accepted accounting principles, measured at the time at which such transaction occurs or the first of such series of related transactions occurs; provided, however, that such a transfer effected pursuant to a spin-off or split-up where shareholders of the Company retain ownership of the transferred assets proportionate to their pro rata ownership interest in the Company shall not be deemed a Change of Control;
(iv) The Company dissolves and liquidates substantially all of its assets;
(v) At any time after the Effective Date when the Continuing Directors cease to constitute a majority of the Board. For this purpose, a Continuing Director shall mean: (A) the individuals who, at the Effective Date, constitute the Board; and (B) any new Directors (other than Directors designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii), or (iii) of this definition) whose appointment to the Board or nomination for election by Company shareholders was approved by a vote of at least two-thirds of the then-serving Continuous Directors; or
(vi) A determination by the Board, in view of then current circumstances or impending events, that a Change of Control of the Company has occurred, which determination shall be made for the specific purpose of triggering operative provisions of this Plan.
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11
12
Exhibit 10.11
THE MANITOWOC COMPANY, INC.
AWARD AGREEMENT
2004 NON-EMPLOYEE DIRECTOR STOCK AND AWARDS PLAN
Amended Effective May 3, 2006
THIS AWARD AGREEMENT is entered into this day of , 20 , and reflects action taken by THE MANITOWOC COMPANY, INC. (the Company) to {INSERT NON-EMPLOYEE DIRECTORS NAME} (the Director) pursuant to the 2004 NON-EMPLOYEE DIRECTOR STOCK AND AWARDS PLAN (the Plan).
WHEREAS, the Company believes it to be in the best interests of the Company, its subsidiaries and its stockholders to provide its non-employee directors with incentives to increase shareholder value by offering the opportunity to acquire shares of the Companys common stock, receive incentives based on the value of such common stock, or receive other incentives on potentially favorable terms (collectively referred to and further defined in the Plan as Awards); and
WHEREAS, the Company has adopted the Plan to establish certain parameters regarding such Awards; and
WHEREAS, the Company, acting by the authority of the Compensation Committee of the Board of Directors of the Company (the Committee), has decided to enter into this Agreement, subject to the terms of the Plan.
NOW, THEREFORE, in consideration of the premises set forth herein and of the services to be performed by the Director, the Company and the Director hereby agree to the terms set forth in this Agreement.
1. PLAN AND AGREEMENT. All parties acknowledge that this Agreement and any Award granted hereunder is subject to the terms of the Plan, which shall govern all rights, interests, obligations, and undertakings of both the Company and the Director. Any capitalized term not otherwise defined in this Agreement shall have the meaning set forth in the Plan. To the extent that there is any conflict between the terms of this Agreement and the Plan, the terms of the Plan as determined, interpreted and applied by the Administrator, shall control to resolve such ambiguity or conflict.
2. STOCK OPTION. {ONLY USE THIS OPTIONAL SECTION 2 IF THE AGREEMENT GRANTS STOCK OPTIONS~~RENUMBER THE REMAINING SECTIONS ACCORDINGLY}
(a) OPTION AND EXERCISE PRICE. Pursuant to Section 5 of the Plan and subject to the terms of this Agreement, the Company grants to the Director an Option to purchase {INSERT NUMBER OF SHARES SUBJECT TO THE OPTION} Shares of Common Stock of the Company (the Option Shares) at a price of {INSERT EXERCISE PRICETHE EXERCISE PRICE MAY NOT EXCEED THE FAIR MARKET VALUE OF THE SHARES AS OF THE GRANT DATE} .
(b) TIME OF EXERCISE AND LIMITATIONS. Subject to the limitations of this Section and to termination provisions of Section {INSERT THE SECTION
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(c) EXERCISE PROCEDURES. The Director may exercise any Option under this Agreement, in whole or in part, only with respect to any Option Share for which the right to exercise shall have accrued pursuant to sub-section (b) above and only so long as Section {INSERT THE NUMBER OF THE SECTION TITLED TERMINATION OF AWARD} does not prohibit such exercise.
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(d) GRANT DATE. The Grant Date for all Options under this Agreement shall be: }
# RESTRICTED STOCK. {ONLY USE THIS OPTIONAL SECTION IF THE AGREEMENT GRANTS RESTRICTED STOCK~~RENUMBER THE REMAINING SECTIONS ACCORDINGLY AND IN LIGHT OF WHETHER THE AGREEMENT ALSO GRANTS STOCK OPTIONS}
(a) NUMBER OF SHARES. Pursuant to Section 6 of the Plan the Company grants to the Director {INSERT NUMBER OF SHARES OF RESTRICTED STOCK} Shares of Restricted Stock.
(b) RESTRICTIONS. As described in the Termination of Award and the Non-Transferability sections below, each Share of Restricted Stock issued under this Section is subject to significant forfeiture and transfer limitations. Each Share of Restricted Stock is not subject any restrictions or limitations except as set forth in those sections. Accordingly, there are no restrictions with respect to dividends or voting rights for any outstanding Shares of Restricted Stock. {NOTE: IF THE COMPANY WANTS TO, IT CAN ADD OTHER RESTRICTIONS (e.g., VOTING RESTRICTIONS, DIVIDEND LIMITATIONS, ETC.)UNLESS THE COMPANY ADDS SUCH RESTRICTIONS IN THIS SECTION, THE DIRECTOR WILL HAVE THE RIGHT TO VOTE THE RESTRICTED STOCK AND TO RECEIVE DIVIDENDS} .
(c) LAPSE OF RESTRICTIONS. Subject to the limitations of this Section and to the termination provisions of Section {INSERT THE SECTION NUMBER FOR THE SECTION TITLED TERMINATION OF AWARD} .
3
# RESTRICTED STOCK UNITS. {ONLY USE THIS OPTIONAL SECTION IF THE AGREEMENT ALSO GRANTS RESTRICTED STOCK UNITS~~RENUMBER THE REMAINING SECTIONS ACCORDINGLY AND IN LIGHT OF WHETHER THE AGREEMENT ALSO GRANTS STOCK OPTIONS AND/OR RESTRICTED STOCK}
(a) NUMBER OF UNITS. Pursuant to Section 6 of the Plan the Company grants to the Director {INSERT NUMBER OF RESTRICTED STOCK UNITS} Restricted Stock Units.
(b) MATURATION OF UNITS. Subject to the limitations of this Section and to the forfeiture and transferability provisions described in the Termination of Award and the Non-Transferability sections below,
{OPTION 1} the Restricted Stock Units identified in sub-section (a) shall mature on {INSERT LAPSE DATEMUST BE A LEAST THREE YEARS FROM GRANT DATE} .
{OPTION 2{INSERT NUMBER} of the Restricted Stock Units identified in sub-section (a) shall mature on {INSERT FIRST LAPSE DATEMUST BE A LEAST THREE YEARS FROM GRANT DATE} and the remaining Restricted Stock Units identified in sub-section (a) shall mature on {INSERT OPTION DATE} .
4
{OPTION 3 the Restricted Stock Units identified in sub-section (a) shall mature according to the following vesting schedule {INSERT VESTING SCHEDULE WITH VESTING PERCENTAGES AND VESTING DATE OR SERVICE REQUIREMENTSFIRST VESTING MUST BE A LEAST THREE YEARS FROM GRANT DATE} .
{OPTION 4COPY THE INTRODUCTORY LANGUAGE FROM OPTION 1 OR OPTION 2 upon the satisfaction of the following Performance Goals: {INSERT PERFORMANCE GOALSSEE SECTION 12(r) OF THE PLAN} .
(c) ISSUANCE OF SHARES.
{OPTION 1} When any Restricted Stock Unit matures under sub-section (b), the Company shall issue a Share of Common Stock to the Director.
{OPTION 2} When any Restricted Stock Unit matures under this sub-section, the Company shall issue a Share of Restricted Stock to the Director, subject to such limitations as established by the Committee at that time {OR SUBJECT TO THE FOLLOWING RESTRICTIONS: . . .} .
(d) RESTRICTIONS. The Director shall have no right to vote or earn dividends on any un-matured Restricted Stock Units {MODIFY THIS SECTION IF THE COMMITTEE GRANTS SUCH RIGHTS TO THE DIRECTOR} .
# TERMINATION OF AWARD.
(a) Resignation/Removal From Board. If a Director ceases to be a member of the Board for any reason other than the Directors retirement due to reaching the mandatory retirement age established by the Board, or other than death or disability (as determined by the Committee), all nonvested Options, all Restricted Stock as to which all restrictions have not lapsed, and all Restricted Stock Units which have not yet matured shall be immediately forfeited except as the Committee, in its sole discretion, shall otherwise determine. {NOTETHE COMMITTEE CAN MODIFY THIS FORFEITURE PROVISION AT THE TIME THAT THE DIRECTOR LEAVES THE BOARD OR AS PART OF THIS AWARD AGREEMENT}. . Upon the retirement (due to reaching the mandatory retirement age established by the Board), death or disability of the Director, all Options held by the Director shall be fully vested, all restrictions with respect to Restricted Stock held by the Director shall immediately lapse, and all Performance Goals with respect to Restricted Stock Units held by the Director shall be deemed immediately satisfied. All vested Options (and any non-vested Option or other Award that is not immediately forfeited under this Section) must be exercised, cease to be subject to restrictions or mature on or before the earliest of: (1) the anniversary {NOTECANNOT EXCEED ONE YEAR} of the date that the Director ceases to be a member of the Board; or (2) that date that the Award (or limitation) was otherwise set to expire, lapse or mature. For purposes of this sub-section (a), any termination or forfeiture shall be deemed to occur at 11:59 P.M. (Central Time) on the applicable date described herein.
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(b) Fraud/Misconduct. Notwithstanding any other provision in the Plan or in this Agreement, if the Director ceases to be a member of the Board due to any of the following act(s), then all Awards previously granted to the Director under this or any other Award Agreement shall immediately be forfeited as of the date of the first such act: (1) fraud or intentional misrepresentation; (2) embezzlement, misappropriation or conversion of assets or opportunities of the Company or any Affiliate of the Company; or (3) any other gross or willful misconduct as determined by the Committee, in its sole and conclusive discretion.
# NON-TRANSFERABILITY. Except as provided in this Section, Awards granted under this Agreement are not transferable and they may not be assigned, pledged or mortgaged, including any attempted transfer by will or by the laws of descent and distribution. {NOTETHE COMMITTEE CAN MODIFY THE PRECEDING LIMITATIONS, BUT ANY SUCH CHANGE MUST BE REFLECTED IN THIS AGREEMENT}. During the lifetime of the Director, such Awards may be exercised only by the Director or the Directors legal representative or by the permitted transferee of the Director as hereinafter provided (or by the legal representative of such permitted transferee). The Director may transfer Awards only to (i) the Directors spouse, children or grandchildren (Immediate Family Members); (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; or (iii) a partnership in which such Immediate Family Members are the only partners. The transfer will be effective only if the Director receives no consideration for such transfer. Subsequent transfers of transferred Awards are prohibited except transfers to those persons or entities to which the Director could have transferred such Awards, or transfers otherwise in accordance with this Section. Any attempted transfer not permitted under this Section shall be null and void and have no legal effect. The transfer restrictions set forth in this Section shall not, however, apply to any Shares that the Director obtains {NOTEINCLUDE ANY OR ALL OF THE FOLLOWING, AS APPROPRIATE} : (a) after exercising an Option; (b) after all restrictions lapse on Restricted Stock; or (c) upon maturation of a Restricted Stock Unit.
# REGISTRATION. If the Company is advised by its counsel that Shares deliverable under this Agreement are required to be registered under the Securities Act of 1933 (Act) or any applicable state or foreign securities laws, or that delivery of the Shares must be accompanied or preceded by a prospectus meeting the requirements of that Act or such state or foreign securities laws, then the Company will use its best efforts to effect the registration or provide the prospectus within a reasonable time, but delivery of Shares by the Company may be deferred until the registration is effected or the prospectus is available. The Director shall have no interest in Shares covered by this Agreement until certificates for the Shares are issued.
# ADJUSTMENTS AND CHANGE OF CONTROL. The number and type of Shares subject to this Agreement and any Option exercise price may be adjusted, or this Award may be completely or partially assumed, cancelled or otherwise changed, in the event of certain transactions, as provided in the Plan, including, without limitation, Sections 2(b) and 10 of the Plan. Upon a Change of Control, the rules set forth in Section 10 of the Plan shall govern this Agreement. The grant of any Award under this Agreement shall not affect in any way the right or power of the Company or any of its subsidiaries to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Companys or any subsidiarys capital structure or its business, or any merger, consolidation or business combination of the Company or any subsidiary, or any issuance or modification of any term, condition, or covenant of any bond, debenture, debt, preferred stock or other instrument ahead of or affecting the Common Stock or the rights of the holders of Common Stock, or the dissolution or liquidation of the
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# AMENDMENT OR MODIFICATION. Except as expressly provided in the Plan, no term or provision of this Agreement may be amended, modified or supplemented orally, but only by an instrument in writing signed by the party against which or whom the enforcement of the amendment, modification or supplement is sought.
# LIMITED INTEREST. The Director shall have no rights as a stockholder as a result of the grant of any Award under this Agreement until the Director receives unrestricted Shares issued (via certificate, electronically or by any other permissible means) {NOTEINCLUDE ANY OR ALL OF THE FOLLOWING, AS APPROPRIATE} : (a) after exercising an Option; (b) after all restrictions lapse on Restricted Stock; or (c) upon maturation of a Restricted Stock Unit. The grant of any Award and the execution of this Agreement shall not confer on the Director any right to continue as a member of the Board, nor interfere in any way with the right of the Company to remove the Director from the Board at any time.
# GOVERNING LAW. The granting of Awards under this Agreement and the issuance of Shares in connection with any such Award are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision of this Agreement or Plan, the Company has no liability to deliver any Shares under the Plan or make any payment unless such delivery or payment would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity. This Agreement and the Plan will be construed in accordance with and governed by the laws of the State of Wisconsin, without reference to any conflict of law principles. Any legal action or proceeding with respect to this Agreement, to the Plan, to any Award or for recognition and enforcement of any judgment in respect to this Agreement, to the Plan or any Award may be brought and determined only in a court sitting in the County of Manitowoc, or the Federal District Court for the Eastern District of Wisconsin sitting in the County of Milwaukee, in the State of Wisconsin.
# SEVERABILITY. If any provision of this Agreement, of the Plan or any Award (a) is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any person or Award, or (b) would disqualify this Agreement, the Plan or any Award under any law the Committee deems applicable, then such provision should be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of this Agreement, the Plan or Award, then such provision should be stricken as to such jurisdiction, person or Award, and the remainder of this Agreement, the Plan and such Award will remain in full force and effect.
# COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Director has executed this Agreement all as of the day and date first above written.
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THE MANITOWOC COMPANY, INC. |
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By: |
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Name: |
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Title: |
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{DIRECTORS NAME} |
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8
Exhibit 12.1
The Manitowoc
Company, Inc
Statement of Computation of Ratio of Earnings to Fixed Charges
(in thousands, except ratio data)
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For the Year Ended December 31, |
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2006 |
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2005 |
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2004 |
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2003 |
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2002 |
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2001 |
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Earnings from continuing operations before income taxes |
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$ |
244.9 |
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$ |
73.9 |
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$ |
47.0 |
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$ |
10.5 |
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$ |
60.9 |
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$ |
64.4 |
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Fixed charges |
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54.2 |
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61.0 |
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62.9 |
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61.6 |
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57.4 |
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41.5 |
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Total earnings available for fixed charges |
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$ |
299.1 |
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$ |
134.9 |
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$ |
109.9 |
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$ |
72.1 |
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$ |
118.3 |
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$ |
105.9 |
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Fixed charges: |
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Interest expense |
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$ |
44.9 |
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$ |
51.7 |
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$ |
52.9 |
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$ |
52.8 |
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$ |
46.5 |
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$ |
33.4 |
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Amortization of deferred financing costs (1) |
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1.4 |
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2.1 |
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3.1 |
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2.9 |
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4.1 |
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3.2 |
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Portion of rent deemed interest factor (2) |
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7.9 |
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7.2 |
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6.9 |
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5.9 |
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6.8 |
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4.9 |
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Total fixed charges |
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$ |
54.2 |
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$ |
61.0 |
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$ |
62.9 |
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$ |
61.6 |
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$ |
57.4 |
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$ |
41.5 |
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Ratio of earnings to fixed charges |
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5.5x |
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2.2x |
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1.8x |
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1.2x |
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2.1x |
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2.6x |
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Notes for explanations:
(1) Amortization of deferred financing costs is included in interest expense in the companys Consolidated Statement of Operations:
Interest expense per Consolidated Statements of Operations |
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$ |
46.3 |
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$ |
53.8 |
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$ |
56.0 |
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$ |
55.7 |
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$ |
50.6 |
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$ |
36.6 |
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Less amortization of deferred financing costs |
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1.4 |
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2.1 |
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3.1 |
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2.9 |
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4.1 |
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3.2 |
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Interest expense |
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$ |
44.9 |
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$ |
51.7 |
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$ |
52.9 |
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$ |
52.8 |
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$ |
46.5 |
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$ |
33.4 |
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(2) One third of all rent expense is deemed representative of the interest factor
Exhibit 21
Subsidiaries
of
The Manitowoc Company, Inc.
(WI)
1. |
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Axiome de Re SA (Luxembourg) |
|
2. |
|
Brunello Holding Co. LLC (DE) |
|
3. |
|
Cadillon GmbH (Germany) [Inactive] |
|
4. |
|
Diversified Refrigeration, LLC (TN) |
|
5. |
|
DRI Holding Company, LP (DE) |
|
6. |
|
Environmental Rehab, Inc. (WI) [Inactive] |
|
7. |
|
Femco Machine Company, Inc. (NV) [Inactive] |
|
8. |
|
Grove Cranes Limited (UK) [In Liquidation] |
|
9. |
|
Grove Cranes S.L. (Spain) |
|
10. |
|
Grove Europe Pension Trustees Limited (UK) |
|
11. |
|
Grove U.S. L.L.C. (DE) |
|
12. |
|
Grove Worldwide Holdings Germany AG (Germany) |
|
13. |
|
Harford Duracool, LLC (WI) |
|
14. |
|
KMT Refrigeration, Inc. (WI) |
|
15. |
|
Liftlux Potain GmbH (Germany) [Inactive] |
|
16. |
|
Manimex, S.A. de C.V. (Mexico) [In Liquidation] |
|
17. |
|
Manitowoc Asia Global Sourcing (China) |
|
18. |
|
Manitowoc (Bermuda) Ltd. (Bermuda) |
|
19. |
|
Manitowoc Beverage Equipment, Inc. (MO) |
|
20. |
|
Manitowoc Beverage Systems, Inc. (NV) |
|
21. |
|
Manitowoc (China) Refrigeration Co., Ltd (China) |
|
22. |
|
Manitowoc CP, Inc. (NV) |
|
23. |
|
Manitowoc Crane Group Germany GmbH (Germany) |
|
24. |
|
Manitowoc Crane Companies, Inc. (NV) |
|
25. |
|
Manitowoc Crane Group Asia Pte Ltd (Singapore) |
|
26. |
|
Manitowoc Crane Group Australia Pty Ltd. (Australia) |
|
27. |
|
Manitowoc Crane Group (Brazil) (Brazil) |
|
28. |
|
Manitowoc Crane Group Chile Limitada (Chile) |
|
29. |
|
Manitowoc Crane Group China Co., Ltd. (China ) |
|
30. |
|
Manitowoc Crane Group CIS (Russia) |
|
31. |
|
Manitowoc Crane Group Czech Republic SRO (Czech Republic) |
|
32. |
|
Manitowoc Crane Group France SAS a/k/a MCG France SAS (France) |
|
33. |
|
Manitowoc Crane Group Ibéria Sl (Spain) |
|
34. |
|
Manitowoc Crane Group Inc. (Philippines) |
|
35. |
|
Manitowoc Crane Group Italy Srl a/k/a MCG Italy Srl (Italy) |
|
36. |
|
Manitowoc Crane Group Korea Co., Ltd. (Korea) |
|
37. |
|
Manitowoc Crane Group M-E (FZE) (Dubai, UAE) |
|
38. |
|
Manitowoc Crane Group Netherlands B.V. (Netherlands) |
|
39. |
|
Manitowoc Crane Group Poland Sp (Poland) |
|
40. |
|
Manitowoc Crane Group Portugal Ltda (Portugal) |
|
41. |
|
Manitowoc Crane Group (UK) Limited (UK) |
|
42. |
|
Manitowoc Cranes, Inc. (WI) |
|
43. |
|
Manitowoc Credit (China) Leasing Company Limited (China) |
|
44. |
|
Manitowoc EMEA Holding Sarl (France) |
|
45. |
|
Manitowoc Equipment Works, Inc. (NV) |
|
46. |
|
Manitowoc Europe Holdings Ltd. (UK) |
|
47. |
|
Manitowoc Foodservice Companies, Inc. (NV) |
|
48. |
|
Manitowoc Foodservice Europe Srl (Italy) [In Liquidation] |
|
49. |
|
Manitowoc Foodservice International SAS (France) |
|
1
50. |
|
Manitowoc FP, Inc. (NV) |
|
51. |
|
Manitowoc France SAS (France) |
|
52. |
|
Manitowoc FSG Mexico, SRL de C.V. (Mexico) |
|
53. |
|
Manitowoc FSG Services, LLC (WI) |
|
54. |
|
Manitowoc Funding LLC (NV) |
|
55. |
|
Manitowoc GEC Limited (Ireland) |
|
56. |
|
Manitowoc GmbH & Co. KG (Germany) |
|
57. |
|
Manitowoc Grove (Cayman Islands) Ltd. (Cayman Islands) |
|
58. |
|
Manitowoc (Hangzhou) Refrigeration Co., Ltd (China) |
|
59. |
|
Manitowoc Holding Asia SAS (France) |
|
60. |
|
Manitowoc Holding (Cayman Islands) Ltd. (Cayman Islands) |
|
61. |
|
Manitowoc Ice, Inc. (WI) |
|
62. |
|
Manitowoc Insurance Company Ltd. (Barbados) |
|
63. |
|
Manitowoc International (Shanghai) Trading Co., Ltd (China) |
|
64. |
|
Manitowoc Marine Group, LLC (NV) |
|
65. |
|
Manitowoc (Mauritius) Ltd. (Mauritius) |
|
66. |
|
Manitowoc MEC, Inc. (NV) |
|
67. |
|
Manitowoc Potain (Cayman Islands) Ltd. (Cayman Islands) |
|
68. |
|
Manitowoc Potain Ltd (UK) |
|
69. |
|
Manitowoc Potain Pty Ltd (Australia) |
|
70. |
|
Manitowoc Re-Manufacturing, Inc. (WI) |
|
71. |
|
Manitowoc TJ, SRL de C.V. (Mexico) |
|
72. |
|
Manitowoc Worldwide Holdings (France) SAS (France) |
|
73. |
|
Manitowoc Worldwide Holdings (France) SCS (France) |
|
74. |
|
Manitowoc Worldwide Holdings (Netherlands) BV (Netherlands) |
|
75. |
|
Marinette Marine Corporation (WI) |
|
76. |
|
McCanns Engineering & Manufacturing Co., LLC (CA) |
|
77. |
|
MTW (Barbados) Srl (Barbados) |
|
78. |
|
Multiplex GmbH (Germany) [In Liquidation] |
|
79. |
|
National Crane Corporation (DE) |
|
80. |
|
North Central Crane & Excavator Sales Corp. (NV) |
|
81. |
|
Potain GmbH (Germany) [Inactive] |
|
82. |
|
Potain Hungaria Kft (Hungary) |
|
83. |
|
Potain Industrie Srl (Italy) |
|
84. |
|
Potain Ire Ltd (Ireland) |
|
85. |
|
Potain Portugal Equipamentos Para a Construcao Ltd (Portugal) |
|
86. |
|
Potain Pte Ltd (Singapore) |
|
87. |
|
Potain Technik GmbH (Germany) [Inactive] |
|
88. |
|
Potain Zhangjiagang Ltd (China) |
|
89. |
|
S.C.I Les Sthenes du Plateau (France) |
|
90. |
|
Servend Sales Corp. (NV) |
|
91. |
|
Solum Grundstücks Vermeitungs GmbH (Germany) |
|
2
Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-88680-22) and Form S-8 (Nos. 333-115992, 333-113804, 333-40622, 333-37266, 333-11729, 333-11731, 333-99503 and 333-99513) of The Manitowoc Company, Inc. of our report dated February 28, 2007, relating to the financial statements, financial statement schedule, managements assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K .
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
March 1, 2007
I, Terry D. Growcock, certify that:
1. I have reviewed this Annual Report on Form 10-K of The Manitowoc Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedure and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 1, 2007 |
|
|
|
|
/s/ Terry D. Growcock |
|
Terry D. Growcock |
|
Chairman and Chief Executive officer |
I, Carl J. Laurino, certify that:
1. I have reviewed this Annual Report on Form 10-K of The Manitowoc Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedure and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 1, 2007 |
|
|
|
|
/s/ Carl J. Laurino |
|
Carl J. Laurino |
|
Senior Vice President and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Manitowoc Company, Inc. (the Company) on Form 10-K for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Terry D. Growcock, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the date and for the periods expressed in the Report.
/s/ Terry D. Growcock |
|
Terry D. Growcock |
|
Chairman and Chief Executive Officer |
|
March 1, 2007 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to The Manitowoc Company, Inc. and will be retained by The Manitowoc Company, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Manitowoc Company, Inc. (the Company) on Form 10-K for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Carl J. Laurino, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the date and for the periods expressed in the Report.
/s/ Carl J. Laurino |
|
Carl J. Laurino |
|
Senior Vice President and Chief Financial Officer |
|
March 1, 2007 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to The Manitowoc Company, Inc. and will be retained by The Manitowoc Company, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.