Manitowoc Announces Strong Fourth-Quarter and Full-Year Revenue and Ea

MANITOWOC, Wis., Feb. 7 /PRNewswire-FirstCall/ -- The Manitowoc Company, Inc. today reported strong increases in sales and earnings for the quarter ended December 31, 2004. Net sales for the quarter increased 38 percent to $535 million, from $389 million during the same period in 2003. Net earnings for the fourth quarter were $5.4 million, or $0.19 per diluted share, compared with a loss of $5.5 million, or a loss of $0.21 per diluted share, for the fourth quarter of 2003. Earnings from continuing operations for the quarter increased 65 percent to $5.2 million, or $0.19 per diluted share, from $3.2 million, or $0.12 per diluted share, in the fourth quarter of 2003. Excluding special items, earnings from continuing operations for the quarter were $5.4 million, or $0.19 per diluted share, compared with $3.5 million, or $0.13 per diluted share, in the fourth quarter of 2003.

For the full-year 2004, net sales increased 25 percent to $1.96 billion, from $1.57 billion in 2003. Net earnings for the year were $39.1 million, or $1.43 per diluted share, compared with earnings of $3.5 million, or $0.13 per diluted share, for 2003. Earnings from continuing operations more than doubled to $39.8 million, or $1.45 per diluted share, compared with $18.0 million, or $0.68 per diluted share, in 2003. Excluding special items, earnings from continuing operations were $40.4 million, or $1.48 per diluted share, compared with $23.1 million, or $0.86 per diluted share, for fiscal year 2003. A reconciliation of GAAP earnings from continuing operations to earnings from continuing operations excluding special items for the fourth quarter and full year is included later in this release.

"2004 was an excellent year for Manitowoc. We posted record revenues, excellent cash generation, and strong profit growth, while improving EVA by $18 million over prior-year levels and exceeding our net debt-reduction goals," said Terry D. Growcock, Manitowoc's chairman and chief executive officer. "We achieved these results despite a net $13 million increase in raw materials prices and pockets of weak demand within some of our businesses. These results clearly demonstrate the strength of our diversified business model and the value of our strategies to capitalize on growing international demand for our crane and foodservice products."

Business Segment Results

Net sales in the Crane segment were $358.4 million for the quarter, increasing 45 percent from $247.7 million in the fourth quarter of 2003. Operating earnings were $15.9 million, up substantially from $5.5 million in the fourth quarter of last year. As of December 31, total crane backlog was $327 million, up from $221 million one year ago.

"Our Crane segment posted year-over-year improvement in sales, earnings, and margins due to our globalization efforts, as well as our cost reduction initiatives and price increases to offset rising steel prices," said Growcock. "Worldwide demand remains strong for our tower cranes, mobile telescopic cranes, and boom trucks, and our crawler cranes are doing well outside of North America.

"Last month, we announced plans to build a new manufacturing facility in China to help meet growing demand in Asia," Growcock continued, "and the 15 new products we launched last year have further helped to spur growth. Looking ahead, our strong backlog gives us confidence that worldwide demand for our products continues to grow. Additionally, we see hints of optimism -- including increased utilization rates and quoting activity -- that indicate the North American crawler crane market may gain some momentum later in 2005."

Net sales in the Foodservice segment increased modestly to $106.9 million, up from $102.3 million in the fourth quarter of 2003. Operating earnings for the quarter declined to $11.5 million from $13.1 million a year ago, negatively affected by a net $1.1 million impact from price increases for steel and other commodities.

"While the 50 new products launched in 2004 -- including our successful S-Series ice machines -- helped to drive sales and expand our market share, rising commodity prices were the primary cause for Foodservice's decline in earnings and margins," said Growcock. "Our global cost cutting and outsourcing efforts, along with the price increases we put in place during the year, should help offset the cost increases we experienced in 2004 and help to regain margins in 2005.

"Our ice machine business continued to flourish during the quarter, outpacing the industry's growth and posting record market shares. In addition, our beverage business performed well," said Growcock. "Looking ahead, the foodservice industry expects top-line growth of 3 to 4 percent next year, benefiting from the improving travel, convenience store, and quick-service industries. We'll continue to capitalize on this growth through another year of aggressive new-product initiatives."

Net sales in the Marine segment were $69.6 million for the quarter, increasing 79 percent from $38.9 million in the fourth quarter of 2003. The segment reported an operating loss of $917,000, compared with a profit of $698,000 last year. "Marine earnings for the quarter were negatively affected by higher-than-expected steel prices and higher-than-anticipated start-up costs on one of our commercial projects," said Growcock. "Looking ahead, we expect profitability to improve as we account for increased raw material prices in future new-construction contracts and get past our 2004 project start-up issues. We're also expecting a healthy winter repair season in 2005, although warm weather has delayed the start of the work by a few weeks. Bidding activity remains brisk, and based on positive economic indicators and strong lake traffic, we expect it to continue through 2005."

Strategic Priorities

Manitowoc made significant progress against each of its four strategic objectives during 2004, and the company will continue to focus on these objectives in 2005:

-- Increase crane sales and market penetration globally. The company's global expansion, facility rationalizations, and new- product development efforts helped achieve extraordinary improvements in sales, earnings, and backlog compared with one year ago. Manitowoc also announced plans to build a new crane manufacturing facility in China to meet robust demand in Asia, and it launched 15 new products this year, which are gaining traction around the world. Eleven new crane products are planned for 2005. -- Strengthen foodservice business and market share. Manitowoc launched 50 new products in 2004, including the S-Series line of ice machines, which has helped raise the company's share of the ice machine market to historically high levels. To capitalize on growing demand for foodservice products worldwide, the company is building a new manufacturing facility in China; construction is now well underway and production should begin by the third quarter of 2005. Finally, the foodservice group will roll out its new ERP system over the next two years to achieve increased efficiencies, cross-selling opportunities, and cost reductions. -- Leverage the strengths and capabilities of multiple shipyards to serve commercial and government customers. Manitowoc won several government and commercial contracts in 2004, including the prototype Littoral Combat Ship for the U.S. Navy. The company also completed a multi-year contract with the U.S. Coast Guard and delivered the first of three Staten Island ferries for the City of New York. The company's strong combination of new-construction and repair facilities will help it maximize opportunities in 2005. -- Strengthen our financial structure by focusing on cash flow and net-debt reduction. Strong cash generation allowed Manitowoc to achieve net debt reduction of $61 million during the year from ongoing operations, exceeding its 2004 goal of $60 million. Manitowoc also completed an equity offering that allowed the company to further reduce its debt and free up resources for continued global expansion. As a result, Manitowoc's end-of- year net debt-to-capital ratio was 44 percent, exceeding its near-term target of 55 percent. Earnings Guidance

"Looking ahead to 2005, we expect the increased worldwide demand for our crane and foodservice products to continue, and we plan to launch more than 30 new products to capitalize on this demand," said Growcock. "We're continuing to watch the North American crawler crane market, which is showing some encouraging signs, as well as steel and commodity prices, which are stabilizing in certain markets.

"Additionally, we remain committed to the strategic objectives listed above, as well as to our diversified business model, our strong management team, and our global acquisition and new-product strategies to continue to grow our business," said Growcock. "As a result, we are targeting net sales growth in the mid single-digit range and earnings per share of $2.00 to $2.20 for 2005, which reflects our new outstanding share count. We have also set a net-debt reduction target of $50 million, with 2005 depreciation and amortization approximating $50 million, interest expense in the $50 million range, and a global effective tax rate of 30 percent. These estimates do not include the impact of mid-year adoption of the new stock compensation expensing requirements."

Three Months Ended Year Ended December 31, December 31, 2004 2003 2004 2003 Earnings from continuing operations $5,204 $3,161 $39,794 $18,036 Special items, net of tax (at statutory rate): Restructuring and plant consolidation 206 2,716 840 6,558 Early extinguishment of debt -- 4,237 673 4,745 Sales and use tax settlement -- -- 359 -- Lawsuit settlement, net of costs -- -- (1,300) -- Curtailment gain, prior year impact -- (6,863) -- (6,863) Other -- 228 -- 618 Earnings from continuing operations before special items $5,410 $3,479 $40,366 $23,094 Diluted earnings per share from continuing operations $ 0.19 $ 0.12 $ 1.45 $ 0.68 Special items, net of tax (at statutory rate): Restructuring and plant consolidation 0.01 0.10 0.03 0.25 Early extinguishment of debt -- 0.16 0.02 0.18 Sales and use tax settlement -- -- 0.01 -- Lawsuit settlement, net of costs -- -- (0.05) -- Curtailment gain, prior year impact -- (0.26) -- (0.26) Other -- 0.01 -- 0.02 Impact of equity offering -- -- 0.01 -- Diluted earnings per share from continuing operations before special items $ 0.19 $ 0.13 $ 1.48 $ 0.86 FAS 52 Adjustment

After discussion with the company's independent public accountants, the company has determined that the accounting treatment of certain of its goodwill and other intangibles related to foreign acquisitions did not satisfy the requirements of FAS 52, "Foreign Currency Translation." At the time these foreign acquisitions were made in 2001 and 2002, the company determined the appropriate accounting treatment was to hold the value of these intangible assets at their historical exchange rate at the date of the respective acquisitions, and the company has consistently applied this accounting treatment. The company has now concluded that it should have translated these intangible assets each period to reflect changes in the foreign currency exchange rate.

The cumulative impact of this change has increased the company's intangible asset balance and currency translation adjustment balance within shareholders equity by $77.6 million and $57.6 million as of December 31, 2004 and 2003, respectively. This change has no impact on the company's historical consolidated income statements or statements of cash flow, the company's financial debt covenants in prior years, or the company's previous intangible asset impairment analyses under FAS 142, "Goodwill and Other Intangible Assets." The change increases comprehensive income by $20.0 million, $34.0 million and $23.9 million for the years ended 2004, 2003 and 2002 respectively.

The company's restated balance sheet as of December 31, 2003, and the restatement of stockholders equity and comprehensive income for the years ended December 31, 2002 and 2003, will be reflected in the company's amended filings for all affected periods to be made at the same time or before the filing of its Annual Report on Form 10-K with the Securities and Exchange Commission (SEC) for the year ended December 31, 2004.

Management and its independent public accountants are currently evaluating the impact of this adjustment on their assessment of the effectiveness of the company's internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Management expects this evaluation to be completed before the filing of its Annual Report on Form 10-K for the year ended December 31, 2004 which is expected to occur on or before March 15, 2005. At this time, the company has not identified or been made aware of any other control deficiencies as defined by PCAOB Standard No. 2 that represent "material weaknesses" in its internal control over financial reporting.

The Manitowoc Company will host a conference call tomorrow, February 8, at 10:00 a.m. Eastern Time. The call will also be broadcast live via the Internet at Manitowoc's Web site: http://www.manitowoc.com/ .

About The Manitowoc Company

The Manitowoc Company, Inc. is one of the world's largest providers of lifting equipment for the global construction industry, including lattice-boom cranes, tower cranes, mobile telescopic cranes, and boom trucks. As a leading manufacturer of ice-cube machines, ice/beverage dispensers, and commercial refrigeration equipment, the company offers the broadest line of cold-focused equipment in the foodservice industry. In addition, the company is a leading provider of shipbuilding, ship repair, and conversion services for government, military, and commercial customers throughout the U.S. maritime industry.

Forward-looking Statements

Any statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve risks and uncertainties. Potential factors could cause actual results to differ materially from those expressed or implied by such statements. These statements and potential factors include, but are not limited to, those relating to:

-- anticipated changes in revenue, margins, and costs, -- new crane and foodservice product introductions, -- successful and timely completion of facility expansions, -- foreign currency fluctuations, -- increased raw material prices, including steel prices, -- steel industry conditions, -- changes in crane utilization rates, -- the risks associated with growth, -- weather, geographic factors and political and economic risks, -- added financial leverage resulting from acquisitions, -- actions of company competitors, -- changes in economic or industry conditions generally or in the markets served by our companies, -- Great Lakes water levels, -- work stoppages and labor negotiations, -- government approval and funding of projects, -- the ability of our customers to receive financing, and -- the ability to complete and appropriately integrate restructurings, consolidations, acquisitions, divestitures, strategic alliances, and joint ventures.

Information on the potential factors that could affect the company's actual results of operations is included in its filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

THE MANITOWOC COMPANY, INC. Unaudited Consolidated Financial Information For the Fourth Quarter and Calendar Years 2004 and 2003 (In thousands, except per-share data) INCOME STATEMENT QUARTER ENDED TWELVE MONTHS ENDED December 31 December 31 2004 2003 2004 2003 Net sales $534,915 $388,966 $1,964,101 $1,570,856 Cost of sales 445,098 312,721 1,582,131 1,238,122 Gross profit 89,817 76,245 381,970 332,734 Engineering, selling and administrative expenses 69,019 62,404 269,639 246,741 Amortization expense 811 766 3,141 2,919 Restructuring and plant consolidation costs 317 4,179 1,293 10,089 Curtailment gain - (12,897) - (12,897) Operating earnings 19,670 21,793 107,897 85,882 Interest expense (15,147) (13,221) (56,895) (56,901) Other expense - net (2,138) (6,680) (1,873) (6,986) Earnings from continuing operations before taxes on income 2,385 1,892 49,129 21,995 Provision (benefit) for taxes on income (2,819) (1,269) 9,335 3,959 Earnings from continuing operations 5,204 3,161 39,794 18,036 Discontinued operations: Loss from discontinued operations, net of income taxes (353) (352) (1,861) (2,440) Gain (loss) on sale or closure of discontinued operations, net of income taxes 563 (8,306) 1,205 (12,047) NET EARNINGS (LOSS) $5,414 $(5,497) $39,138 $3,549 BASIC EARNINGS (LOSS) PER SHARE: Earnings from continuing operations $0.19 $0.12 $1.48 $0.68 Loss from discontinued operations, net of income taxes (0.01) (0.01) (0.07) (0.09) Gain (loss) on sale or closure of discontinued operations, net of income taxes 0.02 (0.31) 0.04 (0.45) BASIC EARNINGS (LOSS) PER SHARE $0.20 $(0.21) $1.45 $0.13 DILUTED EARNINGS (LOSS) PER SHARE: Earnings from continuing operations $0.19 $0.12 $1.45 $0.68 Loss from discontinued operations, net of income taxes (0.01) (0.01) (0.07) (0.09) Gain (loss) on sale or closure of discontinued operations, net of income taxes 0.02 (0.31) 0.04 (0.45) DILUTED EARNINGS (LOSS) PER SHARE $0.19 $(0.21) $1.43 $0.13 AVERAGE SHARES OUTSTANDING: Average Shares Outstanding - Basic 27,277 26,575 26,901 26,575 Average Shares Outstanding - Diluted 27,895 26,809 27,377 26,703 SEGMENT SUMMARY QUARTER ENDED TWELVE MONTHS ENDED December 31 December 31 2004 2003 2004 2003 Net sales from continuing operations: Cranes and related products $358,369 $247,737 $1,248,476 $962,808 Foodservice products 106,920 102,296 468,483 457,000 Marine 69,626 38,933 247,142 151,048 Total $534,915 $388,966 $1,964,101 $1,570,856 Operating earnings from continuing operations: Cranes and related products $15,909 $5,479 $57,827 $33,557 Foodservice products 11,536 13,127 66,667 66,896 Marine (917) 698 9,080 4,750 General corporate expense (5,730) (5,464) (21,243) (19,210) Amortization (811) (765) (3,141) (2,919) Restructuring and plant consolidation costs (317) (4,179) (1,293) (10,089) Curtailment Gain - 12,897 - 12,897 Total $19,670 $21,793 $107,897 $85,882 THE MANITOWOC COMPANY, INC. Unaudited Consolidated Financial Information For the Fourth Quarter and Calendar Years 2004 and 2003 (In thousands) BALANCE SHEET ASSETS December 31 December 31 2003 2004 (Restated) Current assets: Cash and temporary investments $178,663 $47,188 Accounts receivable - net 244,335 245,010 Inventories - net 287,036 232,877 Other current assets 135,928 121,014 Total current assets 845,962 646,089 Intangible assets - net 606,210 588,181 Other assets 118,397 91,261 Property, plant and equipment - net 357,568 334,618 TOTAL ASSETS $1,928,137 $1,660,149 LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $543,205 $486,185 Current portion of long-term debt 61,250 3,205 Short-term borrowings 10,355 22,011 Product warranties 37,870 33,823 Total current liabilities 652,680 545,224 Long-term debt 512,236 567,084 Other non-current liabilities 244,294 191,849 Stockholders' equity 518,927 355,992 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $1,928,137 $1,660,149 CASH FLOW SUMMARY THREE MONTHS ENDED TWELVE MONTHS ENDED December 31 December 31 2004 2003 2004 2003 Net earnings (loss) $5,414 $(5,497) $39,138 $3,549 Non-cash adjustments 12,922 15,918 51,956 65,290 Changes in operating assets and liabilities 34,159 43,859 (31,450) 79,480 Net cash provided by operating activities of continuing operations 52,495 54,280 59,644 148,319 Net cash provided by (used for) operating activities of discontinued operations (107) 2,855 (2,681) 2,544 Net cash provided by operating activities 52,388 57,135 56,963 150,863 Capital expenditures (16,940) (9,728) (44,386) (31,977) Proceeds from sale of fixed assets 8,956 3,729 15,458 14,438 Net cash provided by sale of discontinued operations - - 9,000 2,289 Payments on borrowings - net (25,126) (52,423) (34,720) (109,617) Proceeds from receivable financing - net 1,613 - 23,244 - Debt issuance costs - (3,622) - (5,599) Dividends paid (7,532) (7,446) (7,532) (7,446) Net proceeds of equity offering 104,948 - 104,948 - Stock options exercised 1,031 23 6,687 118 Effect of exchange rate changes on cash 4,446 1,787 1,813 3,714 Net increase (decrease) in cash & temporary investments $123,784 $(10,545) $131,475 $16,783