The Manitowoc Company Reports Fourth-Quarter and Full-Year Financial Results

The Manitowoc Company, Inc. (NYSE: MTW) today reported full-year sales of $3.9 billion, a 4.0 percent decrease from $4.0 billion in 2013. GAAP net income in 2014 was $144.5 million, or $1.05 per share, versus GAAP net income of $141.8 million, or $1.05 per share, in the prior year. Excluding the special items described in the reconciliation below, adjusted earnings from continuing operations in 2014 were $159.2 million, or $1.16 per share, versus adjusted earnings from continuing operations of $195.9 million, or $1.45 per share in 2013.

For the fourth quarter of 2014, sales were $1.0 billion, a decrease of 6.1 percent compared to sales of $1.1 billion in the fourth quarter of 2013. On a GAAP basis, the company reported net earnings of $33.6 million, or $0.25 per diluted share, in the fourth quarter versus net earnings of $20.9 million, or $0.15 per diluted share, in the fourth quarter of 2013. Both periods included special items. Excluding special items, the adjusted earnings from continuing operations were $37.5 million, or $0.27 per diluted share, in the fourth quarter of 2014, versus adjusted earnings from continuing operations of $63.9 million, or $0.47 per diluted share, in the fourth quarter of 2013.

Adjustments to GAAP results include certain items management considers in evaluating operating performance in each period. During the fourth quarter of 2014, adjustments included $3.9 million of costs associated with restructuring activities. 2013 restructuring charges were primarily related to the disposal of Manitowoc’s 50-percent interest in Tai’An Dong Yue, a Chinese truck crane business. A reconciliation of GAAP net earnings to net earnings before special items for the quarter and year-to-date periods is provided later in this press release.

“Macroeconomic headwinds continue to put downward pressure on demand for our products and solutions, which muted enterprise results for the fourth-quarter and full-year 2014. In addition, we failed to realize some opportunities that we expected to come to fruition during the quarter,” commented Glen E. Tellock, Manitowoc’s chairman and chief executive officer. “We have, however, accelerated cost optimization programs, initiated headcount rationalizations, and identified near-term margin expansion opportunities. Furthermore, we have maintained our investment in innovation and after-market product support, which should enhance the leadership position of the Cranes and Foodservice businesses in their respective industries near-term while positioning each business for growth as global demand levels normalize.”

Tellock continued, “As we announced separately today, Manitowoc’s management team and Board of Directors have now determined that the Cranes and Foodservice businesses are best-suited to realize their full potential on a standalone basis. This decision was reached as part of our regular evaluation and exploration of opportunities to optimize the company’s performance and create value for shareholders, and included a thorough review of the current and projected operating environments for the two segments.”

Foodservice Results

For the full year, Foodservice revenues rose 2.6 percent to $1.6 billion, operating earnings declined 6.5 percent to $234.0 million, while operating margins were 14.8 percent compared to 16.2 percent in the prior year.

Fourth-quarter 2014 net sales in Foodservice declined to $374.2 million from $399.5 million in the fourth quarter of 2013. The decrease was driven primarily by fewer new product rollouts and unfavorable foreign exchange rates.

Foodservice operating earnings for the fourth quarter of 2014 were $48.3 million versus $68.7 million for the fourth quarter of 2013. This resulted in an operating margin of 12.9 percent in Foodservice for the fourth quarter of 2014, compared to 17.2 percent for the fourth quarter of 2013. The year-over-year decrease in operating margin was driven by lower new product sales, higher discounts, increased warranty costs, higher start-up costs for KitchenCare, unfavorable product mix, as well as cost and efficiency issues for certain hot-side products, which were partially offset by sourcing and procurement initiatives.

“While we had challenging fourth-quarter results in Foodservice, the actions taken in the second half of 2014 should benefit this business’s growth and margins in the coming year. To date, we have completed the organizational restructuring aimed at aligning the business to better serve our growing customer base, while also identifying new areas of opportunity. In addition, we continue to improve efficiencies across our manufacturing footprint. Our customers continue to support our investment in innovation and synergistic solutions as both remain clear differentiators within the market, which we believe will allow us to capture the growth inherent in this business,” Tellock stated.

Crane Results

For the full year, Crane revenues declined 8.0 percent to $2.3 billion, operating earnings declined to $163.9 million versus $218.8 million in the prior-year period, while operating margins were 7.1 percent for the full year ended 2014.

Fourth-quarter 2014 net sales in Cranes were $663.2 million, versus $704.8 million in the fourth quarter of 2013. The decline in sales was due to the negative impact of foreign currency exchange rates between the Euro and US dollar, higher price discounting, and volume decreases that were most pronounced in the rough-terrain and boom truck product categories.

Crane operating earnings for the fourth quarter of 2014 were $45.3 million, down from $54.8 million in the same period last year. This resulted in an operating margin of 6.8 percent for the fourth quarter of 2014 versus 7.8 percent for the fourth quarter of 2013. Fourth-quarter 2014 margins were affected by lower production volumes, pricing pressure amplified by currency headwinds, and foreign exchange rates that were partially offset by ongoing operational efficiencies and cost reductions.

Crane backlog totaled $738 million as of December 31, 2014, an increase of $22 million, or 3.1 percent, from the third quarter 2014 and an increase of 28.6 percent from the prior year period. Fourth-quarter 2014 orders of $686 million increased 23.2 percent from the third quarter of 2014, but declined 3.0 percent from the fourth quarter of 2013, representing a book-to-bill of 1.0 times.

Tellock continued, “Uncertainty among our customers remains at the forefront of their purchasing decisions. Ongoing global softness in the rough-terrain and boom truck markets, coupled with declining oil prices, created a challenging environment for the segment. However, we continue to focus on the areas within our control, such as cost optimization strategies which include lean initiatives and capturing savings through sourcing and purchasing initiatives. As we enter 2015, we anticipate that worldwide crane demand levels will remain very challenging in the near-term, but we are encouraged by our improved order intake, a strengthening backlog, and the strong market acceptance of our VPC crawler crane technology. As a result, we continue to position the business to capture the upside for significant cyclical growth with key investments to drive additional new product innovation, speed of new product introductions, and aftermarket product support initiatives.”

Cash Flow

Cash flow provided from operating activities from continuing operations in the fourth quarter of 2014 was $237.6 million, driven by cash from profitability and improvements in working capital, particularly in inventory levels within the Crane business. Fourth-quarter capital expenditures totaled $26.9 million and $84.8 million for the full-year 2014.

2015 Guidance

For the full-year 2015, Manitowoc expects:

■ Crane revenue – mid single-digit percentage decline

■ Crane operating margins – high single-digit percentage

■ Foodservice revenue – mid single-digit percentage growth

■ Foodservice operating margins – improving mid-teens percentage

■ Capital expenditures – approximately $85 million

■ Depreciation & amortization – approximately $110 million

■ Interest expense – approximately $80 million

■ Amortization of deferred financing fees – approximately $4 million

■ Total leverage – below 3x debt-to-EBITDA

■ Effective tax rate – mid-to-high 20 percent range

Intent to Separate Into Two Independent Publicly-Traded Companies

Manitowoc separately today announced that its Board of Directors has approved a plan to pursue a separation of the company’s Cranes and Foodservice businesses into two independent, publicly-traded companies. The company currently anticipates that the separation will be effected through a tax-free spin-off of the Foodservice business and expects the spin-off to be completed in the first quarter of 2016, creating two separate, industry-leading companies with distinct enterprise strategies.

Investor Conference Call

Today at 6:00 p.m. ET (5:00 p.m. CT), Manitowoc’s senior management will discuss its fourth-quarter and full-year results as well as review the proposed separation during an investor conference call. All interested parties may listen to the live conference call via the Internet by going to the Investor Relations area of Manitowoc’s Web site at http://www.manitowoc.com. A replay of the conference call will also be available at the same location on the Web site. In addition, a supplemental presentation to be referenced during the call will be available on the company’s website.

About The Manitowoc Company, Inc.

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

Forward-looking Statements

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

• unanticipated changes in revenues, margins, costs, and capital expenditures;
• the ability to significantly improve profitability;
• the ability to direct resources to those areas that will deliver the highest returns;
• uncertainties associated with new product introductions, the successful development and market acceptance of new and innovative products that drive growth;
• the ability to focus on the customer, new technologies, and innovation;
• the ability to focus and capitalize on product quality and reliability;
• the ability to increase operational efficiencies across each of Manitowoc’s business segments and to capitalize on those efficiencies;
• the ability to capitalize on key strategic opportunities and the ability to implement Manitowoc’s long-term initiatives;
• the ability to generate cash and manage working capital consistent with Manitowoc’s stated goals;
• the ability to convert order and order activity into sales and the timing of those sales;
• pressure of financing leverage;
• matters impacting the successful and timely implementation of ERP systems;
• foreign currency fluctuations and their impact on reported results and hedges in place with Manitowoc;
• changes in raw material and commodity prices;
• unexpected issues associated with the quality of materials and components sourced from third parties and the resolution of those issues;
• unexpected issues associated with the availability and viability of suppliers;
• the risks associated with growth;
• geographic factors and political and economic conditions and risks;
• actions of competitors;
• changes in economic or industry conditions generally or in the markets served by Manitowoc;
• unanticipated changes in customer demand, including changes in global demand for high-capacity lifting equipment; changes in demand for lifting equipment and foodservice equipment in emerging economies, and changes in demand for used lifting equipment and foodservice equipment;
• global expansion of customers;
• the replacement cycle of technologically obsolete cranes;
• the ability of Manitowoc's customers to receive financing;
• foodservice equipment replacement cycles in national accounts and global chains, including unanticipated issues associated with refresh/renovation plans by national restaurant accounts and global chains;
• efficiencies and capacity utilization of facilities;
• issues relating to the ability to timely and effectively execute on manufacturing strategies, including issues relating to new plant start-ups, plant closings, and/or consolidations of existing facilities and operations;
• issues related to workforce reductions and subsequent rehiring;
• work stoppages, labor negotiations, labor rates, and temporary labor costs;
• government approval and funding of projects and the effect of government-related issues or developments;
• the ability to complete and appropriately integrate restructurings, consolidations, acquisitions, divestitures, strategic alliances, joint ventures, and other strategic alternatives;
• realization of anticipated earnings enhancements, cost savings, strategic options and other synergies, and the anticipated timing to realize those savings, synergies, and options;
• unanticipated issues affecting the effective tax rate for the year;
• unanticipated changes in the capital and financial markets;
• risks related to actions of activist shareholders;
• changes in laws throughout the world;
• natural disasters disrupting commerce in one or more regions of the world;
• risks associated with data security and technological systems and protections;
• acts of terrorism; and
• risks and other factors cited in Manitowoc's filings with the United States Securities and Exchange Commission.

Manitowoc undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. Forward-looking statements only speak as of the date on which they are made. Information on the potential factors that could affect the company's actual results of operations is included in its filings with the Securities and Exchange Commission, including but not limited to its Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Adjusted EBITDA

The company defines Adjusted EBITDA as earnings before interest, taxes, depreciation, and amortization, plus certain items such as pro-forma acquisition results and the addback of certain restructuring charges, that are adjustments per the credit agreement definition. The company's trailing twelve-month Adjusted EBITDA for covenant compliance purposes as of December 31, 2014 was $403.6 million. The reconciliation of net income attributable to Manitowoc to Adjusted EBITDA is as follows (in millions):

GAAP Reconciliation

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