MANITOWOC CO INC, 10-K filed on 2/28/2017
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Jan. 31, 2017
Jun. 30, 2016
Document and entity information
 
 
 
Entity Registrant Name
MANITOWOC CO INC 
 
 
Entity Central Index Key
0000061986 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2016 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 744 
Entity Common Stock, Shares Outstanding
 
140,190,685 
 
Document Fiscal Year Focus
2016 
 
 
Document Fiscal Period Focus
FY 
 
 
Consolidated Statements of Operations (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Operations
 
 
 
Net sales
$ 1,600.0 
$ 1,865.7 
$ 2,305.2 
Cost of sales
1,359.8 
1,533.5 
1,838.0 
Gross profit
253.3 
332.2 
467.2 
Operating costs and expenses:
 
 
 
Engineering, selling and administrative expenses
280.7 
316.9 
350.2 
Asset impairment expense
96.9 
15.3 
Amortization of intangible assets
3.0 
3.0 
3.3 
Restructuring expense
23.4 
9.4 
6.6 
Other expense
2.6 
Total operating costs and expenses
406.6 
344.6 
360.1 
Operating (loss) income
(153.3)
(12.4)
107.1 
Other (expense) income:
 
 
 
Interest expense
(39.6)
(95.6)
(92.8)
Amortization of deferred financing fees
(2.2)
(4.2)
(4.4)
Loss on debt extinguishment
(76.3)
(0.2)
(25.5)
Other income (expense) — net
3.3 
1.4 
(4.8)
Total other expense
(114.8)
(98.6)
(127.5)
Loss from continuing operations before taxes
(268.1)
(111.0)
(20.4)
Provision (benefit) for taxes on income
100.5 
(41.1)
(17.8)
Loss from continuing operations
(368.6)
(69.9)
(2.6)
Discontinued operations:
 
 
 
(Loss) income from discontinued operations, net of income taxes of $0.6, $35.9 and $26.5, respectively
(7.2)
135.4 
161.4 
Loss on sale of discontinued operations, net of income taxes of $0.0, $0.0, and $(0.6), respectively
(11.0)
Net (loss) income
(375.8)
65.5 
147.8 
Less: Net income attributable to noncontrolling interest, net of tax
3.9 
Net (loss) income attributable to Manitowoc common shareholders
(375.8)
65.5 
143.9 
Amounts attributable to the Manitowoc common shareholders:
 
 
 
Loss from continuing operations
(368.6)
(69.9)
(6.9)
(Loss) income from discontinued operations, net of income taxes
(7.2)
135.4 
161.8 
Loss on sale of discontinued operations, net of income taxes
(11.0)
Net (loss) income attributable to Manitowoc common shareholders
(375.8)
65.5 
143.9 
Net (loss) income
$ (375.8)
$ 65.5 
$ 143.9 
Basic (loss) income per common share:
 
 
 
(Loss) income from continuing operations attributable to Manitowoc common shareholders (in dollars per share)
$ (2.68)
$ (0.51)
$ (0.05)
Income (loss) from discontinued operations attributable to Manitowoc common shareholders (in dollars per share)
$ (0.05)
$ 1.00 
$ 1.20 
Loss on sale of discontinued operations, net of income taxes (in dollars per share)
$ 0.00 
$ 0.00 
$ (0.08)
Basic (loss) income per share attributable to Manitowoc common shareholders (in dollars per share)
$ (2.73)
$ 0.48 
$ 1.07 
Diluted (loss) income per common share:
 
 
 
(Loss) income from continuing operations attributable to Manitowoc common shareholders (in dollars per share)
$ (2.68)
$ (0.51)
$ (0.05)
Income (loss) from discontinued operations attributable to Manitowoc common shareholders (in dollars per share)
$ (0.05)
$ 1.00 
$ 1.20 
Loss on sale of discontinued operations, net of income taxes (in dollars per share)
$ 0.00 
$ 0.00 
$ (0.08)
Diluted (loss) income per share attributable to Manitowoc common shareholders (in dollars per share)
$ (2.73)
$ 0.48 
$ 1.07 
Consolidated Statements of Operations (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Income Statement [Abstract]
 
 
 
Earnings (loss) from discontinued operations, income taxes
$ 0.6 
$ 35.9 
$ 26.5 
Loss on sale of discontinued operations, income taxes
$ 0 
$ 0 
$ (0.6)
Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
 
 
 
Net (loss) income
$ (375.8)
$ 65.5 
$ 147.8 
Other comprehensive income (loss), net of tax:
 
 
 
Employee pension and postretirement benefits, net of income taxes of $(0.2), $4.9 and $(13.3), respectively
(20.4)
(92.2)
(84.0)
Unrealized income (loss) on derivatives, net of income taxes of $0.9, $1.0 and $(3.8), respectively
1.4 
2.5 
(7.3)
Foreign currency translation adjustments
(4.1)
12.4 
(32.3)
Total other comprehensive loss, net of tax
(23.1)
(77.3)
(123.6)
Comprehensive (loss) income
(398.9)
(11.8)
24.2 
Comprehensive income attributable to noncontrolling interest
3.9 
Comprehensive (loss) income attributable to Manitowoc common shareholders
$ (398.9)
$ (11.8)
$ 20.3 
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
 
 
 
Unrealized income (loss) on derivatives, taxes
$ 0.9 
$ 1.0 
$ (3.8)
Employee pension and post retirement benefits, taxes
$ (0.2)
$ 4.9 
$ (13.3)
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Current Assets:
 
 
Cash and cash equivalents
$ 69.9 
$ 31.5 
Accounts receivable, less allowances of $11.1 and $12.8, respectively
134.4 
155.7 
Inventories — net
429.0 
489.2 
Notes receivable — net
62.4 
65.1 
Other current assets
54.0 
45.9 
Current assets of discontinued operations
254.2 
Total current assets
749.7 
1,041.6 
Property, plant and equipment — net
308.8 
410.7 
Goodwill
299.6 
306.5 
Other intangible assets — net
114.1 
119.3 
Other non-current assets
45.6 
177.4 
Long-term assets held for sale
5.5 
Long-term assets of discontinued operations
1,501.5 
Total assets
1,517.8 
3,562.5 
Current Liabilities:
 
 
Accounts payable and accrued expenses
321.2 
436.3 
Short-term borrowings
12.4 
67.2 
Product warranties
36.5 
35.9 
Customer advances
21.0 
10.3 
Product liabilities
21.7 
21.9 
Current liabilities of discontinued operations
312.0 
Total current liabilities
412.8 
883.6 
Non-Current Liabilities:
 
 
Long-term debt
269.1 
1,330.4 
Deferred income taxes
36.6 
25.6 
Pension obligations
86.4 
99.4 
Postretirement health and other benefit obligations
38.0 
44.4 
Long-term deferred revenue
20.3 
29.7 
Other non-current liabilities
64.1 
87.3 
Long-term liabilities of discontinued operations
219.8 
Total non-current liabilities
514.5 
1,836.6 
Commitments and contingencies (Note 18)
   
   
Total Equity:
 
 
Preferred stock (authorized 3,500,000 shares of $.01 par value; none outstanding)
Common stock (authorized 300,000,000 shares of $.01 par value; issued 163,175,928 shares; 139,841,214 and 136,617,161 shares outstanding, respectively)
1.4 
1.4 
Additional paid-in capital
567.6 
558.0 
Accumulated other comprehensive loss
(162.9)
(207.8)
Retained earnings
247.3 
562.3 
Treasury stock, at cost (23,334,714 and 26,558,767 shares, respectively)
(62.9)
(71.6)
Total Manitowoc stockholders’ equity
590.5 
842.3 
Total liabilities and equity
$ 1,517.8 
$ 3,562.5 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]
 
 
Accounts Receivable, allowances (in dollars)
$ 11.1 
$ 12.8 
Preferred stock, shares authorized (in shares)
3,500,000 
3,500,000 
Preferred stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, shares outstanding (in shares)
Common stock, shares authorized (in shares)
300,000,000 
300,000,000 
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares issued (in shares)
163,175,928 
163,175,928 
Common stock, shares outstanding (in shares)
139,841,214 
136,617,161 
Treasury stock, shares (in shares)
23,334,714 
26,558,767 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Cash Flows From Operations
 
 
 
Net (loss) income
$ (375.8)
$ 65.5 
$ 147.8 
Adjustments to reconcile net (loss) income to cash (used for) provided by operating activities of continuing operations:
 
 
 
Asset impairment expense
96.9 
15.3 
Loss (income) from discontinued operations, net of income taxes
7.2 
(135.4)
(161.4)
Depreciation expense
45.6 
50.6 
47.2 
Amortization of intangible assets
3.0 
3.0 
3.3 
Amortization of deferred financing fees
2.2 
4.2 
4.4 
Deferred income tax (benefit) - net
101.4 
(4.4)
11.5 
Noncash loss on early extinguishment of debt
15.4 
0.2 
6.3 
Loss (gain) on sale of property, plant and equipment
1.1 
(0.3)
(6.8)
Loss on sale of discontinued operations
11.0 
Stock-based compensation expense and other
(0.7)
7.5 
(0.2)
Changes in operating assets and liabilities, excluding the effects of business divestitures:
 
 
 
Accounts receivable
18.4 
(10.7)
11.7 
Inventories
52.7 
(7.2)
32.6 
Notes receivable
32.2 
9.9 
(21.8)
Other assets
(6.9)
(18.9)
(27.1)
Accounts payable
(105.8)
(12.4)
(29.8)
Accrued expenses and other liabilities
(9.3)
7.6 
(145.4)
Net cash used for operating activities of continuing operations
(122.4)
(25.5)
(116.7)
Net cash (used for) provided by operating activities of discontinued operations
(49.9)
126.3 
197.7 
Net cash (used for) provided by operating activities
(172.3)
100.8 
81.0 
Cash Flows From Investing
 
 
 
Capital expenditures
(45.9)
(54.9)
(59.5)
Proceeds from sale of property, plant and equipment
8.4 
7.3 
12.8 
Other
(1.6)
2.6 
5.7 
Net cash used for investing activities of continuing operations
(39.1)
(45.0)
(41.0)
Net cash (used for) provided by investing activities of discontinued operations
(2.4)
59.1 
(25.3)
Net cash (used for) provided by investing activities
(41.5)
14.1 
(66.3)
Cash Flows From Financing
 
 
 
Payments on long-term debt
(1,389.0)
(105.4)
(635.3)
Proceeds from long-term debt
272.1 
5.1 
637.2 
Payments on notes financing - net
(8.4)
(9.4)
(0.3)
Debt issuance costs
(8.9)
(5.2)
Dividends paid
(10.9)
(10.8)
Exercises of stock options including windfall tax benefits
9.4 
7.9 
25.9 
Dividend from spun-off subsidiary
1,361.7 
Cash transferred to spun-off subsidiary
(17.7)
Net cash provided by (used for) financing activities of continuing operations
219.2 
(112.7)
11.5 
Net cash provided by (used for) financing activities of discontinued operations
0.2 
(0.2)
(7.5)
Net cash provided by (used for) financing activities
219.4 
(112.9)
4.0 
Effect of exchange rate changes on cash
0.9 
(6.6)
(5.6)
Net increase (decrease) in cash and cash equivalents
6.5 
(4.6)
13.1 
Balance at beginning of year, including cash of discontinued operations of $31.9, $16.5 and $9.6, respectively
63.4 
68.0 
54.9 
Balance at end of year, including cash of discontinued operations of $0.0, $31.9, and $16.5, respectively
69.9 
63.4 
68.0 
Supplemental Cash Flow Information
 
 
 
Interest paid
49.6 
98.8 
120.4 
Income taxes paid
$ 8.9 
$ 7.7 
$ 73.8 
Consolidated Statements of Cash Flows (Parenthetical) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Statement of Cash Flows [Abstract]
 
 
 
 
Cash and cash equivalents
$ 0 
$ 31.9 
$ 16.5 
$ 9.6 
Consolidated Statements of Equity (USD $)
In Millions, except Share data, unless otherwise specified
Total
USD ($)
Equity attributable to Manitowoc shareholders
USD ($)
Common Stock
USD ($)
Additional Paid-in Capital
USD ($)
Accumulated Other Comprehensive Loss
USD ($)
Retained Earnings
USD ($)
Treasury Stock
USD ($)
Noncontrolling Interest
USD ($)
Performance shares
Common Stock
Balance at beginning of year at Dec. 31, 2013 (As Reported)
 
 
 
 
 
$ 353.2 
 
 
 
Balance at beginning of year (Restatement Adjustment)
 
 
 
 
 
21.4 
 
 
 
Balance at beginning of year at Dec. 31, 2013
 
 
1.4 
506.0 
(6.9)
374.6 
(78.2)
6.8 
 
Balance (in shares) at Dec. 31, 2013
 
 
133,717,057 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
Stock options exercised (in shares)
 
 
1,726,024 
 
 
 
 
 
 
Restricted stock, net (in shares)
 
 
(14,390)
 
 
 
 
 
 
Performance shares issued (in shares)
 
 
 
 
 
 
 
 
115,178 
Stock options exercised and issuance of other stock awards
 
 
 
13.6 
 
 
4.8 
 
 
Windfall tax benefit on stock options exercised
 
 
 
7.5 
 
 
 
 
 
Stock-based compensation
 
 
 
12.6 
 
 
 
 
 
Distribution of Spun-off subsidiary
 
 
 
 
 
 
 
Other comprehensive loss
(123.6)
 
 
 
(123.6)
 
 
 
 
Net (loss) income
143.9 
 
 
 
 
143.9 
 
 
 
Net (loss) income at Jan. 01, 2014 (As Reported)
144.5 
 
 
 
 
 
 
 
 
Net (loss) income (Restatement Adjustment)
(0.6)
 
 
 
 
 
 
 
 
Cash dividends
 
 
 
 
 
(10.8)
 
 
 
Comprehensive income attributable to noncontrolling interest
(3.9)
 
 
 
 
 
 
3.9 
 
Noncontrolling interest deconsolidation as result of sale
 
 
 
 
 
 
 
(10.7)
 
Balance at end of year at Dec. 31, 2014 (As Reported)
 
 
 
 
 
486.9 
 
 
 
Balance at end of year (Restatement Adjustment)
 
 
 
 
 
20.8 
 
 
 
Balance at end of year at Dec. 31, 2014
844.9 
844.9 
1.4 
539.7 
(130.5)
507.7 
(73.4)
 
Balance (in shares) at Dec. 31, 2014
 
 
135,543,869 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
Stock options exercised (in shares)
 
 
464,616 
 
 
 
 
 
 
Restricted stock, net (in shares)
 
 
361,985 
 
 
 
 
 
 
Performance shares issued (in shares)
 
 
 
 
 
 
 
 
246,691 
Stock options exercised and issuance of other stock awards
 
 
 
2.3 
 
 
1.8 
 
 
Windfall tax benefit on stock options exercised
 
 
 
1.5 
 
 
 
 
 
Stock-based compensation
 
 
 
14.5 
 
 
 
 
 
Distribution of Spun-off subsidiary
 
 
 
 
 
 
 
Other comprehensive loss
(77.3)
 
 
 
(77.3)
 
 
 
 
Net (loss) income
65.5 
 
 
 
 
65.5 
 
 
 
Net (loss) income at Jan. 01, 2015 (As Reported)
63.5 
 
 
 
 
 
 
 
 
Net (loss) income (Restatement Adjustment)
2.0 
 
 
 
 
 
 
 
 
Cash dividends
 
 
 
 
 
(10.9)
 
 
 
Comprehensive income attributable to noncontrolling interest
 
 
 
 
 
 
 
Noncontrolling interest deconsolidation as result of sale
 
 
 
 
 
 
 
 
Balance at end of year at Dec. 31, 2015 (As Reported)
 
 
 
 
 
539.5 
 
 
 
Balance at end of year (Restatement Adjustment)
 
 
 
 
 
22.8 
 
 
 
Balance at end of year at Dec. 31, 2015
842.3 
842.3 
1.4 
558.0 
(207.8)
562.3 
(71.6)
 
Balance (in shares) at Dec. 31, 2015
 
 
136,617,161 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
Stock options exercised (in shares)
 
 
2,750,477 
 
 
 
 
 
 
Restricted stock, net (in shares)
 
 
(36,446)
 
 
 
 
 
 
Performance shares issued (in shares)
 
 
 
 
 
 
 
 
510,022 
Stock options exercised and issuance of other stock awards
 
 
 
0.3 
 
 
8.7 
 
 
Windfall tax benefit on stock options exercised
 
 
 
 
 
 
 
 
Stock-based compensation
 
 
 
9.3 
 
 
 
 
 
Distribution of Spun-off subsidiary
 
 
 
 
68.0 
60.8 
 
 
 
Other comprehensive loss
(23.1)
 
 
 
(23.1)
 
 
 
 
Net (loss) income
(375.8)
 
 
 
 
(375.8)
 
 
 
Cash dividends
 
 
 
 
 
 
 
 
Comprehensive income attributable to noncontrolling interest
 
 
 
 
 
 
 
Noncontrolling interest deconsolidation as result of sale
 
 
 
 
 
 
 
 
Balance at end of year at Dec. 31, 2016
$ 590.5 
$ 590.5 
$ 1.4 
$ 567.6 
$ (162.9)
$ 247.3 
$ (62.9)
$ 0 
 
Balance (in shares) at Dec. 31, 2016
 
 
139,841,214 
 
 
 
 
 
 
Company and Basis of Presentation
Company and Basis of Presentation
Company and Basis of Presentation
The Manitowoc Company, Inc. (“Manitowoc”, “MTW” and the “Company”) was founded in 1902 and has over a 110-year tradition of providing high-quality, customer-focused products and support services to its markets and for the year ended December 31, 2016, the Company had net sales of approximately $1.6 billion. MTW is one of the world’s leading providers of engineered lifting equipment for the global construction industry. Manitowoc designs, manufactures, markets, and supports one of the most comprehensive product lines of mobile telescopic cranes, tower cranes, lattice-boom crawler cranes, and boom trucks.  Its Crane products are principally marketed under the Manitowoc, Grove, Potain and National Crane brand names. The Company serves a wide variety of customers, including dealers, rental companies, contractors, and government entities, across the petrochemical and industrial, commercial, power and utilities, infrastructure, and residential end markets. Additionally, its Manitowoc Crane Care offering leverages MTW's installed base of approximately 140,000 cranes to provide aftermarket parts and services to enable its customers to manage their fleets most effectively and improve their return on investment. Due to the ongoing and predictable maintenance needed by cranes, as well as the high cost of crane downtime, Crane Care provides the Company with a consistent stream of recurring revenue. Manitowoc is a Wisconsin corporation, and its principal executive offices are located at 2400 South 44th Street, Manitowoc, Wisconsin 54220.
During the first quarter of fiscal 2016, the Board of Directors of The Manitowoc Company, Inc. approved the tax-free Spin-Off of the Company’s former foodservice business (“MFS” or “Foodservice”) into an independent, public company (the “Spin-Off”). To effect the Spin-Off, the Board declared a pro rata dividend of MFS common stock to MTW’s stockholders of record as of the close of business on February 22, 2016 (the “Record Date”) and the Company paid the dividend on March 4, 2016. Each MTW stockholder received one share of MFS common stock for every share of MTW common stock held as of the close of business on the Record Date.
In these Consolidated Financial Statements, unless otherwise indicated, references to Manitowoc, MTW and the Company refer to The Manitowoc Company, Inc. and its consolidated subsidiaries after giving effect to the Spin-Off, or, in the case of information as of dates or for periods prior to the Spin-Off, the consolidated entities of the Crane business and certain other assets and liabilities that were historically held at the MTW corporate level but were specifically identifiable and attributable to the Crane business.
As a result of the Spin-Off, the Consolidated Financial Statements and related financial information reflect MFS operations, assets and liabilities, and cash flows as discontinued operations for all periods presented.
During the first quarter of 2014, the Company sold its 50% interest in Manitowoc Dong Yue Heavy Machinery Co., Ltd. (“Manitowoc Dong Yue” or the “joint venture”), which produces mobile and truck-mounted hydraulic cranes in China, to its joint venture partner, Tai’an Taishan Heavy Industry Investment Co., Ltd., for a nominal amount. Consequently, the joint venture has been classified as discontinued operations in the Company’s financial statements.
See Note 3, “Discontinued Operations,” for further details concerning the above transactions being reported as discontinued operations.
Certain prior period amounts have been reclassified to conform to the current period presentation. All dollar amounts, except share and per share amounts, are in millions of dollars throughout the tables included in these notes unless otherwise indicated.
During the first quarter of 2016, in conjunction with the Spin-Off, the Company identified an out-of-period adjustment related to deferred tax assets, which originated prior to 2010, whereby the Company had understated the deferred tax assets by $6.2 million at each balance sheet date prior to March 31, 2016. In the first quarter of 2016, the Company recorded an adjustment to the deferred tax assets and the income tax provision on continuing operations to record the out-of-period adjustment. Additionally, the Company identified an out-of-period adjustment in MFS’ deferred tax assets, which also originated prior to 2010, whereby the Company had understated the deferred tax assets by $2.9 million at each balance sheet date prior to March 31, 2016. In the first quarter of 2016, prior to the Spin-Off, the Company recorded an adjustment to the deferred tax assets and the income tax provision on discontinued operations to correct the out-of-period adjustment. The Company does not believe that these adjustments were material to its Consolidated Financial Statements.
During the third quarter of 2016, the Company identified one adjustment to the previously issued financial statements whereby the Company, at each balance sheet date since March 2014, incorrectly classified a note receivable balance from Manitowoc's former joint venture partner Manitowoc Dong Yue as restricted cash. In evaluating whether the Company’s previously issued consolidated financial statements were materially misstated, the Company considered the guidance in Accounting Standards Codification (“ASC”) Topic 250, “Accounting Changes and Error Corrections” and ASC Topic 250-10-S99-1, “Assessing Materiality.” The Company determined that this error was not material to the Company's prior interim and annual period consolidated financial statements and therefore, amending the previously filed reports was not required. However, the Company determined that for purposes of comparability, the revision for the correction is reflected in the financial information of the applicable prior periods. The impact to the December 31, 2015 balance sheet is a reclassification of $14.0 million of restricted cash to $5.4 million in short-term notes receivable and $8.6 million of long-term notes receivable. The impact to the full year and fourth quarter 2015 cash flow statement is a decrease of $2.8 million of source of cash from “other” within cash flows from investing, and increase of $2.8 million of source of cash from “notes receivable” within cash flows from operations. The impact to the 2014 cash flow statement is a decrease of $17.3 million of source of cash from “other” within cash flows from investing, and increase of $17.3 million of source of cash from “notes receivable” within cash flows from operations.
Refer to Note 23, “Quarterly Financial Data (Unaudited),” for discussion of errors identified during the year which impacted only the quarterly financial data.
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.  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.
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Cash Equivalents All short-term investments purchased with an original maturity of three months or less are considered cash equivalents. 
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 historical experience, which are subject to change if experience improves or deteriorates.
Inventories Inventories are valued at the lower of cost or market value. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs. In the fourth quarter of 2016, the Company changed its method of inventory costing for certain inventory in the U.S. to the first-in, first-out (FIFO) method from the last-in, last-out (LIFO) method. The Company believes that the FIFO method is preferable as it results in uniformity across its global operations, aligns with how the Company internally manages inventory, provides better matching of revenues and expenses and improves comparability with its peers. The Company's other locations determine costs using the FIFO method. The impact of this change in accounting principle has been reflected through retrospective application to the financial statements for each period presented, and is further explained in Note 6, “Inventories”.
Goodwill and Other Intangible Assets The Company accounts for its goodwill and other intangible assets under the guidance of ASC Topic 350-10, “Intangibles — Goodwill and Other.” Under ASC Topic 350-10, goodwill is not amortized, but it is tested for impairment annually during the fourth quarter, or more frequently, as events dictate. See additional discussion of impairment testing under “Impairment of Long-Lived Assets” below. The Company’s other intangible assets with indefinite lives, including trademarks and tradenames and in-place distributor networks, are not amortized but are also tested for impairment annually, or more frequently, as events dictate. The Company’s other intangible assets subject to amortization are tested for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Other intangible assets are amortized straight-line over the following estimated useful lives:
 
Useful lives
Patents
3-20 years
Engineering drawings
3-15 years
Customer relationships
10 years

Property, Plant and Equipment Property, plant and equipment are stated at cost. Expenditures for maintenance, repairs and minor renewals are charged against earnings as incurred. Expenditures for major renewals and improvements that substantially extend the capacity or useful life of an asset are capitalized and are then depreciated. 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 are 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 are depreciated over the following estimated useful lives:
 
Years
Building and improvements
2 - 40
Machinery, equipment and tooling
2 - 20
Furniture and fixtures
3 - 20
Computer hardware and software
2 - 10
Rental cranes
5 - 15

Property, plant and equipment also include cranes accounted for as operating leases. Equipment accounted for as operating leases includes equipment leased directly to the customer and equipment for which the Company has assisted in the financing arrangement, whereby it has guaranteed more than insignificant residual value or made a buyback commitment. Equipment that is leased directly to the customer is accounted for as an operating lease with the related assets capitalized and depreciated over their estimated economic life. Equipment involved in a financing arrangement 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 buyback and rental equipment included in property, plant and equipment amounted to $57.9 million and $69.4 million, net of accumulated depreciation, at December 31, 2016 and 2015, respectively.
Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the assets’ carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC Topic 360-10-5.  ASC Topic 360-10-5 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and to evaluate the asset group against the sum of the undiscounted future cash flows.
For property, plant and equipment and other long-lived assets, other than goodwill and other indefinite lived intangible assets, the Company performs undiscounted operating cash flow analysis 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.
Historically, the annual goodwill impairment testing was performed during the second quarter. The Company performed this test during the second quarter with no impairment. Subsequent to the impairment test performed during the second quarter, the Company moved the annual test to the fourth quarter on a prospective basis in order to align more closely to its internal forecasting cycle. Based on the results of that test, no impairment was indicated. The Company tests for impairment of goodwill annually 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 indefinite lived intangible assets, the impairment test consists of a comparison of the fair value of the intangible assets to their carrying amount. See Note 9, “Goodwill and Other Intangible Assets,” for further details on our impairment assessments.
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.
Product Liabilities The Company records product liability reserves for its self-insured portion of any pending or threatened product liability actions when losses are probable and reasonably estimable. 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 Company’s 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 determines the amount of additional reserve required to cover incurred but not reported product liability obligations and to account for possible adverse development of the established case reserves (collectively referred to as IBNR) utilizing actuarially developed estimates.
Foreign Currency Translation The financial statements of the Company’s non-U.S. subsidiaries are translated using the current exchange rate for assets and liabilities and the average exchange rate for the year for income and expense items. Resulting translation adjustments are recorded to Accumulated Other Comprehensive Income (AOCI) as a component of Manitowoc 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, commodities and interest rates. The Company follows the guidance in accordance with ASC Topic 815-10, “Derivatives and Hedging.” The fair values of all derivatives are recorded in the Consolidated Balance Sheets. The change in a derivative’s fair value is recorded each period in current earnings or AOCI depending on whether the derivative is designated and qualifies as a cash flow hedge transaction.
During 2016, 2015 and 2014, minimal amounts were recognized in earnings due to ineffectiveness of certain commodity hedges. The amount reported as derivative instrument fair market value adjustment in the AOCI account within the Consolidated Statements of Comprehensive Income (Loss) represents the net gain (loss) on foreign currency exchange contracts, commodity contracts and interest rate contracts designated as cash flow hedges, net of income taxes.
Cash Flow Hedges The Company selectively hedges anticipated transactions that are subject to foreign exchange exposure, commodity price exposure or variable interest rate exposure, primarily using foreign currency exchange contracts, commodity contracts and interest rate contracts, respectively.  These instruments are designated as cash flow hedges in accordance with ASC Topic 815-10 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 AOCI and are subsequently reclassified into earnings when the hedged transactions, typically sales and costs related to sales and interest expense, occur and affect earnings. These contracts are highly effective in hedging the variability in future cash attributable to changes in currency exchange rates, commodity prices or interest rates.
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 debt are recorded in the Consolidated Balance Sheets at fair value. The change in fair value of the swaps should exactly offset 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 11, “Debt” for further discussion of fair value hedges.
The Company selectively hedges cash inflows and outflows that are subject to foreign currency exposure from the date of transaction to the related payment date. The hedges for these foreign currency accounts receivable and accounts payable are recorded in the Consolidated Balance Sheets at fair value. Gains or losses due to changes in fair value are recorded as an adjustment to earnings in the Consolidated Statements of Operations.
Stock-Based Compensation The Company recognizes expense for all stock-based compensation with graded vesting on a straight-line basis over the vesting period of the entire award. Stock-based compensation plans are described more fully in Note 16, “Stock-Based Compensation.”
Revenue Recognition Revenue is generally 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; collectability 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.
The Company enters into transactions with customers that provide for residual value guarantees and buyback commitments on certain 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 customer’s third party financing agreement.  See Note 19, “Guarantees.”
The Company also leases cranes to customers under operating lease terms. Revenue from operating leases is recognized ratably 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 amounted to $44.5 million, $57.6 million and $56.4 million for the years ended December 31, 2016, 2015 and 2014, 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 Company’s 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 not that the Company will not realize the benefit of such assets. The Company evaluates its uncertain tax positions as new information becomes available. Tax benefits are recognized to the extent a position is more likely than not to be sustained upon examination by the taxing authority.
Earnings Per Share Basic earnings per share is computed by dividing net earnings attributable to Manitowoc 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, performance shares 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 (Loss) Comprehensive income (loss) includes, in addition to net earnings, other items that are reported as direct adjustments to Manitowoc stockholders’ equity. These items are foreign currency translation adjustments, employee postretirement benefit 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 Company’s receivables are with distributors and contractors in the construction industry, customers servicing the U.S. steel industry and government agencies. The Company currently does not foresee a significant credit risk associated with these individual groups of receivables but continues to monitor the exposure, if any.
Recent Accounting Changes and Pronouncements
In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04 “Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment.” This ASU simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company is evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
In November 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).” The amendments of this ASU address the diversity of presentation of restricted cash by requiring a statement of cash flows to explain the change during the period in the total cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 will be effective for fiscal years beginning after December 15, 2017. The Company is evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16 - “Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory,” which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-06 will be effective for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15 - “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice and affects all entities required to present a statement of cash flows under Topic 230. This standard will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09 - “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This was further clarified with technical corrections issued within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, and ASU 2016-20. The new revenue recognition guidance was issued to provide a single, comprehensive revenue recognition model for all contracts with customer. Under the new guidance, an entity will recognize revenue to depict the transfer of promised goods or services to customer at an amount that the entity expects to be entitled to in exchange for those goods or services. A five step model has been introduced for an entity to apply when recognizing revenue. The new guidance also includes enhanced disclosure requirements, and is effective January 1, 2018, with early adoption permitted as of January 1, 2017. Entities have the option to apply the new guidance under a retrospective approach to each prior reporting period presented, or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Consolidated Statement of Changes in Stockholder's Equity. Manitowoc plans to adopt the new guidance effective January 1, 2018 utilizing the modified retrospective approach and is in the process of evaluating the financial impact of the adoption on its financial statements. The Company expects to conclude its assessment on the impact of adoption in the first half of 2017.
In March 2016, the FASB issued ASU 2016-09 - “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This update is part of the Simplification Initiative, and its objective is to identify, evaluate and improve areas of GAAP for which cost and complexity can be reduced while maintaining or improving usefulness of the information provided to users of financial statements. The update involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The effective date for this ASU is for annual periods beginning after December 15, 2016 and interim periods within those annual periods. We believe the adoption of this ASU will not have a material impact on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-06 - “Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments.” The amendments clarify the steps required to assess whether a call or put option meets the criteria for bifurcation as an embedded derivative. The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2016. We believe the adoption of this ASU will not have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02 - “Leases”, which is intended to improve financial reporting on leasing transactions. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than 12 months. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01 - “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. Most significantly, ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of an investee) to be measured at fair value with changes in fair value recognized in net income (loss). ASU 2016-01 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2017. The Company is evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
In August 2015, the FASB issued ASU No. 2015-15 - “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements.” This update clarifies the guidance related to accounting for debt issuance costs related to line-of-credit arrangements. In April 2015, the FASB issued ASU 2015-03, which requires entities to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability; see further discussion of ASU 2015-03 below. The guidance in ASU 2015-03 did not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The amendments in this ASU are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The guidance was applied on a retrospective basis. The Company adopted this guidance as required beginning January 1, 2016. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-11 - “Inventory (Topic 330): Simplifying the Measurement of Inventory.” This update changes the guidance on accounting for inventory accounted for on a first-in first-out (FIFO) basis. Under the revised standard, an entity should measure FIFO inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured on a last-in, first-out (LIFO) basis. The amendments in this ASU are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. We believe the adoption of this ASU will not have a material impact on our consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-05 - “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This update provides guidance on accounting for a software license in a cloud computing arrangement. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. Further, all software licenses are within the scope of Accounting Standards Codification Subtopic 350-40 and will be accounted for consistent with other licenses of intangible assets. The amendments in this ASU are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted this guidance as required beginning January 1, 2016. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03 - “Simplifying the Presentation of Debt Issuance Costs.” To simplify the presentation of debt issuance costs, this update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, rather than as a deferred asset. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The amendments in this ASU effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The guidance is applied on a retrospective basis. The Company adopted this guidance as required beginning January 1, 2016. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02 - “Consolidation (Topic 820)—Amendments to the Consolidation Analysis.” This update amends the current consolidation guidance for both the variable interest entity (VIE) and voting interest entity (VOE) consolidation models. The amendments in this ASU are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company adopted this guidance as required beginning January 1, 2016. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.
In January 2015, the FASB issued ASU No. 2015-01 - “Income Statement—Extraordinary and Unusual Items.” This update eliminates from GAAP the concept of extraordinary items. ASU 2015-01 is effective for the first interim period within fiscal years beginning after December 15, 2015. A reporting entity may apply the amendments prospectively or retrospectively to all prior periods presented in the financial statements. The Company adopted this guidance as required beginning January 1, 2016. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern.” This ASU provided guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective in the first annual period ending after December 15, 2016, with early adoption permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Discontinued Operations
Discontinued Operations
Discontinued Operations
On March 4, 2016, Manitowoc completed the Spin-Off of MFS. The financial results of MFS are presented as income (loss) from discontinued operations, net of income taxes in the Consolidated Statements of Operations. Concurrent with the Spin-Off, the Company received a $1,361.7 million dividend from MFS. The following table presents the financial results of MFS through the date of the Spin-Off for the indicated periods and do not include corporate overhead allocations:
Major classes of line items constituting earnings from discontinued operations before income taxes related to MFS
 
 
 
 
 
 
(in millions)
 
2016
 
2015
 
2014
Net sales
 
$
219.6

 
$
1,570.1

 
$
1,581.3

 
 
 
 
 
 
 
Cost of sales
 
141.5

 
1,065.6

 
1,070.7

Engineering, selling and administrative expenses
 
48.3

 
271.3

 
284.2

Amortization of intangible assets
 
5.2

 
31.4

 
31.8

Asset impairment expense
 

 
9.0

 
1.1

Restructuring expense
 
0.3

 
4.6

 
2.5

Separation expense
 
27.7

 
39.4

 

Other
 

 
0.9

 
0.4

Total operating costs and expenses
 
223.0

 
1,422.2

 
1,390.7

Operating (loss) income
 
(3.4
)
 
147.9

 
190.6

Other (expense) income
 
(2.2
)
 
23.4

 
(1.7
)
(Loss) income from discontinued operations before income taxes
 
(5.6
)
 
171.3

 
188.9

Provision for taxes on income
 
0.6

 
35.9

 
26.5

(Loss) income from discontinued operations, net of income taxes (1)
 
$
(6.2
)
 
$
135.4

 
$
162.4

 
(1)
For the year ended December 31, 2016, 2015 and 2014, the Company recorded net (losses) income of $(1.0) million, $0.0 million and $(1.0) million, respectively, from various other businesses disposed of prior to 2014. This is presented for informational purposes only and does not necessarily reflect what the results of operations would have been had the businesses operated as stand-alone entities.
No assets or liabilities of MFS are reflected on the Company's Consolidated Balance Sheet as of December 31, 2016. The assets and liabilities of MFS have been classified as discontinued operations and are reflected as such on the Company's Consolidated Balance Sheet as of December 31, 2015. These amounts consisted of the following carrying amounts in each major class at December 31, 2015:
Carrying amounts of major classes of assets and liabilities included as part of discontinued operations related to MFS
 
 
(in millions)
 
 
December 31,
2015
Assets
 
 
 
Cash and cash equivalents
 
 
$
31.9

Restricted cash
 
 
0.6

Accounts receivable - net
 
 
63.8

Inventories - net
 
 
145.9

Other current assets
 
 
12.0

Property, plant and equipment - net
 
 
116.3

Goodwill
 
 
845.8

Other intangible assets - net
 
 
519.5

Other non-current assets
 
 
16.2

Long-term assets held for sale
 
 
3.7

Total major classes of assets of discontinued operations
 
 
$
1,755.7

 
 
 
 
Liabilities
 
 
 
Accounts payable and accrued expenses
 
 
$
271.6

Current portion of long-term debt
 
 
0.4

Other current liabilities
 
 
40.0

Long-term debt
 
 
2.3

Deferred income taxes
 
 
167.9

Pension obligation
 
 
29.3

Postretirement health and other benefit obligations
 
 
3.0

Other non-current liabilities
 
 
17.3

Total major classes of liabilities of discontinued operations
 
 
$
531.8


Manitowoc and MFS entered into several agreements in connection with the separation, including a transition services agreement (“TSA”), separation and distribution agreement, tax matters agreement, intellectual property matters agreement and an employee matters agreement.
Pursuant to the TSA, Manitowoc, MFS and their respective subsidiaries are providing various services to each other on an interim, transitional basis. Services being provided by Manitowoc include, among others, finance, information technology and certain other administrative services. The services generally commenced on March 4, 2016, and are expected to terminate within 12 months of that date. Billings by Manitowoc under the TSA are recorded as a reduction of the costs to provide the respective service in the applicable expense category.
During the twelve months ended December 31, 2016 and 2015, the Company recorded $27.7 million and $39.4 million, respectively, of separation costs related to the Spin-Off. Separation costs consist primarily of professional and consulting fees, and are included in the results of discontinued operations.
During the first quarter of 2014, the Company sold its 50% interest in Manitowoc Dong Yue, a consolidated entity, which produces mobile and truck-mounted hydraulic cranes in China, to its joint venture partner, Tai’an Taishan Heavy Industry Investment Co., Ltd. Consequently, the joint venture has been classified as discontinued operations in the Company’s financial statements. In connection with the sale, the Company agreed to forgive all loans and accrued interest owed by Manitowoc Dong Yue to the Company and its affiliates and paid an additional $7.2 million to Manitowoc Dong Yue for a portion of debt the joint venture had outstanding with third parties. After this payment, Manitowoc Dong Yue owed approximately $17.3 million to the Company. The loan is secured by certain of Manitowoc Dong Yue’s fixed assets, as well as finished goods inventory. Manitowoc Dong Yue is repaying the loan over a four-year period, with the last payment due on December 31, 2017. As of December 31, 2016, the outstanding balance was $14.2 million.
Fair Value of Financial Instruments
Fair Value of Financial Instruments
Fair Value of Financial Instruments
The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2016 and 2015 by level within the fair value hierarchy.  Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
 
 
Fair Value as of December 31, 2016
(in millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
Current Assets:
 
 

 
 

 
 

 
 

Foreign currency exchange contracts
 
$

 
$
0.2

 
$

 
$
0.2

Commodity contracts
 

 
0.2

 

 
0.2

Total current assets at fair value
 
$

 
$
0.4

 
$

 
$
0.4


 
 
 
 
 
 
 
 
Current Liabilities:
 
 

 
 

 
 

 
 

Foreign currency exchange contracts
 
$

 
$
1.0

 
$

 
$
1.0

Total current liabilities at fair value
 
$

 
$
1.0

 
$

 
$
1.0

 
 
Fair Value as of December 31, 2015
(in millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
Current Assets:
 
 

 
 

 
 

 
 

Foreign currency exchange contracts
 
$

 
$
0.3

 
$

 
$
0.3

Total current assets at fair value
 
$

 
$
0.3

 
$

 
$
0.3


 
 
 
 
 
 
 
 
Current Liabilities:
 
 

 
 

 
 

 
 

Foreign currency exchange contracts
 
$

 
$
1.1

 
$

 
$
1.1

Commodity contracts
 

 
0.7

 

 
0.7

Interest rate swap contracts: Float-to-fixed
 

 
1.7

 

 
1.7

Total current liabilities at fair value
 
$

 
$
3.5

 
$

 
$
3.5


 
 
 
 
 
 
 
 
Non-current Liabilities:
 
 

 
 

 
 

 
 

Interest rate swap contracts: Float-to-fixed
 
$

 
$
0.6

 
$

 
$
0.6

Foreign currency exchange contract
 

 
0.1

 

 
0.1

Total non-current liabilities at fair value
 
$

 
$
0.7

 
$

 
$
0.7

On March 3, 2016, the Company redeemed the then-outstanding 2020 Notes and 2022 Notes using proceeds from the newly issued 2021 Notes. The fair value of the Company’s 2021 Notes was approximately $282.2 million as of December 31, 2016. The fair value of the Company’s 2020 Notes and 2022 Notes was approximately $623.1 million and $310.6 million, respectively, as of December 31, 2015. The fair values of the Company’s term loans under its Prior Senior Credit Facility, respectively, were as follows as of December 31, 2015:  Term Loan A — $307.7 million and Term Loan B — $116.7 million. The Prior Senior Credit Facility was terminated on March 3, 2016. See Note 11, “Debt,” for a description of the debt instruments and their related carrying values.
ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820-10 classifies the inputs used to measure fair value into the following hierarchy:
Level 1
 
Unadjusted quoted prices in active markets for identical assets or liabilities
 
 
 
Level 2
 
Unadjusted quoted prices in active markets for similar assets or liabilities, or
 
 
 
 
 
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
 
 
 
 
 
Inputs other than quoted prices that are observable for the asset or liability
 
 
 
Level 3
 
Unobservable inputs for the asset or liability
The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company estimates fair value of its Term Loans and Senior Notes based on quoted market prices of the instruments; because these markets are typically thinly traded, the liabilities are classified as Level 2 within the valuation hierarchy. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, deferred purchase price notes on receivables sold (see Note 12, “Accounts Receivable Securitization”) and short-term variable debt, including any amounts outstanding under our revolving credit facility, approximate fair value, without being discounted as of December 31, 2016 and December 31, 2015 due to the short-term nature of these instruments.
As a result of its global operating and financing activities, the Company is exposed to market risks from changes in interest rates, foreign currency exchange rates, and commodity prices, which may adversely affect its operating results and financial position. When deemed appropriate, the Company minimizes these risks through the use of derivative financial instruments. Derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes, and the Company does not use leveraged derivative financial instruments. The foreign currency exchange, interest rate, and commodity contracts are valued through an independent valuation source which uses an industry standard data provider, with resulting valuations periodically validated through third-party or counterparty quotes. As such, these derivative instruments are classified within Level 2.
Derivative Financial Instruments
Derivative Financial Instruments
Derivative Financial Instruments
The Company’s risk management objective is to ensure that business exposures to risks that have been identified and measured and are capable of being controlled, are minimized using the most effective and efficient methods to eliminate, reduce, or transfer such exposures.  Operating decisions consider these associated risks and structure transactions to avoid these risks whenever possible.
Use of derivative instruments is consistent with the overall business and risk management objectives of the Company. Derivative instruments may be used to manage business risk within limits specified by the Company’s risk policy and manage exposures that have been identified through the risk identification and measurement process, provided that they clearly qualify as “hedging” activities as defined in the risk policy.  Use of derivative instruments is not automatic, nor is it necessarily the only response to managing pertinent business risk.  Use is permitted only after the risks that have been identified are determined to exceed defined tolerance levels and are considered to be unavoidable.
The primary risks managed by the Company by using derivative instruments are commodity price risk and foreign currency exchange risk. Interest rate derivative instruments were utilized in prior years to help manage interest rate risk.  Swap contracts on various commodities are entered into to help manage the price risk associated with forecasted purchases of materials used in the Company’s manufacturing process.  The Company also enters into various foreign currency derivative instruments to help manage foreign currency risk associated with the Company’s projected purchases and sales and foreign currency denominated receivable and payable balances.
ASC Topic 815-10 requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the statement of financial position.  In accordance with ASC Topic 815-10, the Company designates commodity swaps, foreign currency exchange contracts, and float-to-fixed interest rate derivative contracts as cash flow hedges of forecasted purchases of commodities and currencies, and variable rate interest payments.  Also in accordance with ASC Topic 815-10, the Company designates fixed-to-float interest rate swaps as fair market value hedges of fixed rate debt, which synthetically swaps the Company’s fixed rate debt to floating rate debt.
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.  Gains and losses on the derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, are recognized in current earnings.  In the next twelve months, the Company estimates $0.6 million of unrealized losses, net of tax, related to commodity price and currency rate hedging will be reclassified from other comprehensive income into earnings.  Foreign currency and commodity hedging is generally completed prospectively on a rolling basis for twelve and twenty-four months, respectively, depending on the type of risk being hedged.
The Company previously had interest rate hedges related to its senior notes. The risk management objective for the Company’s fair market value interest rate hedges was to effectively change the amount of the underlying debt equal to the notional value of the hedges from a fixed to a floating interest rate based on the one-month LIBOR rate.  These swaps included an embedded call feature to match the terms of the call schedule embedded in the Senior Notes. Changes in the fair value of the interest rate swaps were expected to offset changes in the fair value of the debt due to changes in the one-month LIBOR rate.
As of December 31, 2016, the Company had the following outstanding commodity swap and currency forward contracts that were entered into as hedges of forecasted transactions:
Designated Hedging Instruments
 
 
 
 
 
 
Commodity
 
Units Hedged
 
Unit
 
Type
Natural Gas
 
26,807
 
MMBtu
 
Cash Flow
Steel
 
3,190
 
Short Tons
 
Cash Flow

Designated Hedging Instruments
 
 
 
Currency
 
Units Hedged
 
Type
Australian Dollar
 
611,143

 
Cash Flow
European Euro
 
9,834,120

 
Cash Flow
South Korean Won
 
218,408,100

 
Cash Flow
Singapore Dollar
 
900,000

 
Cash Flow
United States Dollar
 
2,311,697

 
Cash Flow
Japanese Yen
 
65,502,800

 
Cash Flow

The Company has been party to various fixed-to-float interest rate swaps designated as fair market value hedges of its Senior Notes.  In the third quarter of 2012, the Company monetized the derivative asset related to its fixed-to-float interest rate swaps related to its 2018 and 2020 Notes and received $14.8 million in the quarter. The gain was treated as an increase to the debt balances for the 2018 and 2020 Notes and was being amortized against interest expense over the life of the original swap. Subsequently, the Company entered into new interest rate swaps due in 2020 and 2022, designating them as fair market value hedges of the 2020 and 2022 Notes, respectively.
As of December 31, 2014, the Company had $75.0 million and $125.0 million notional amount of fixed-to-float interest rate swaps outstanding related to the 2020 and 2022 Notes, respectively, which were designated as fair value hedges.
In April 2015, the Company monetized the derivative liability related to $75.0 million notional amount of its fixed-to-float interest rate swaps related to the 2020 Notes and $45.0 million notional amount of its fixed-to-float interest rate swaps related to the 2022 Notes. The loss on the monetization of these swaps of $0.7 million was treated as a decrease to the debt balances for the 2020 Notes and 2022 Notes, and was amortized against interest expense over the life of the original swaps.
In September 2015, the Company monetized the derivative liability related to the remaining $80.0 million notional of its fixed-to-float interest rate swaps related to the 2022 Notes. The loss on monetization of these swaps of $0.5 million was treated as a decrease to the debt balances and 2022 Notes, and was amortized against interest expense over the life of the original swaps.
The Company redeemed the 2020 and 2022 Notes on March 3, 2016. The then outstanding net gain from the monetization of fixed-to-float swaps due 2020 and 2022 was amortized to interest income. See Note 11, “Debt,” for more information.
As of December 31, 2016, the Company had no outstanding fixed-to-float interest rate swaps related to the Senior Notes due 2021.
For derivative instruments that are not designated as hedging instruments under ASC Topic 815-10, the gains or losses on the derivatives are recognized in current earnings within other (expense) income, net in the Consolidated Statement of Operations. As of December 31, 2016, the Company had the following outstanding currency forward contracts that were not designated as hedging instruments:
Non Designated Hedging Instruments
 
 
 
 
 
Currency
 
Units Hedged
 
 
Recognized Location
 
Purpose
European Euro
 
10,502,111
 
 
Other (expense) income, net
 
Accounts payable and receivable settlement
United States Dollar
 
15,318,000
 
 
Other (expense) income, net
 
Accounts payable and receivable settlement

The fair value of outstanding derivative contracts recorded as assets in the accompanying Consolidated Balance Sheet as of December 31, 2016 was as follows:
 
ASSET DERIVATIVES
(in millions)
Balance Sheet Location
Fair Value
Derivatives designated as hedging instruments
 
 

Foreign exchange contracts
Other current assets
$
0.1

Commodity contracts
Other current assets
0.2

Total derivatives designated as hedging instruments
 
$
0.3

 
 
ASSET DERIVATIVES
(in millions)
Balance Sheet Location
Fair Value
Derivatives NOT designated as hedging instruments
 
 

Foreign exchange contracts
Other current assets
$
0.1

Total derivatives NOT designated as hedging instruments
 
$
0.1

 
 
 

Total asset derivatives
 
$
0.4


The fair value of outstanding derivative contracts recorded as liabilities in the accompanying Consolidated Balance Sheet as of December 31, 2016 was as follows:
 
LIABILITY DERIVATIVES
(in millions)
Balance Sheet Location
Fair Value
Derivatives designated as hedging instruments
 
 

Foreign exchange contracts
Accounts payable and accrued expenses
$
0.9

Total derivatives designated as hedging instruments
 
$
0.9

 
LIABILITY DERIVATIVES
(in millions)
Balance Sheet Location
Fair Value
Derivatives NOT designated as hedging instruments
 
 

Foreign exchange contracts
Accounts payable and accrued expenses
$
0.1

Total derivatives NOT designated as hedging instruments
 
$
0.1

 
 
 

Total liability derivatives
 
$
1.0


As of December 31, 2015, the Company had the following outstanding commodity and currency forward contracts that were entered into as hedges of forecasted transactions:
Designated Hedging Instruments
 
 
 
 
 
 
Commodity
 
Units Hedged
 
Unit
 
Type
Natural Gas
 
175,617
 
MMBtu
 
Cash Flow
Steel
 
4,811
 
Short Tons
 
Cash Flow
Designated Hedging Instruments
 
 
 
 
Currency
 
Units Hedged
 
Type
South Korean Won
 
1,533,257,930
 
Cash Flow
Singapore Dollar
 
1,800,000
 
Cash Flow
Japanese Yen
 
245,915,700
 
Cash Flow

For derivative instruments that are not designated as hedging instruments under ASC Topic 815-10, the gains or losses on the derivatives are recognized in current earnings within other (expense) income, net. As of December 31, 2015, the Company had the following outstanding currency forward contracts that were not designated as hedging instruments:
Non Designated Hedging Instruments
 
 
 
 
Currency
 
Units Hedged
 
Recognized Location
 
Purpose
European Euro
 
20,490,320
 
Other (expense) income, net
 
Accounts Payable and Receivable Settlement
United States Dollar
 
17,321,106
 
Other (expense) income, net
 
Accounts Payable and Receivable Settlement
Japanese Yen
 
70,518,463
 
Other (expense) income, net
 
Accounts Payable and Receivable Settlement
Singapore Dollar
 
500,000
 
Other (expense) income, net
 
Accounts Payable and Receivable Settlement
British Pound Sterling
 
4,840,238
 
Other (expense) income, net
 
Accounts Payable and Receivable Settlement

The fair value of outstanding derivative contracts recorded as assets in the accompanying Consolidated Balance Sheet as of December 31, 2015 was as follows:
 
ASSET DERIVATIVES
(in millions)
Balance Sheet Location
Fair Value
Derivatives designated as hedging instruments
 
 

Foreign exchange contracts
Other current assets
$
0.3

Total derivatives designated as hedging instruments
 
$
0.3

 
ASSET DERIVATIVES
 (in millions)
Balance Sheet Location
Fair Value
Derivatives NOT designated as hedging instruments
 
 

Foreign exchange contracts
Other current assets
$

Total derivatives NOT designated as hedging instruments
 
$

 
 
 

Total asset derivatives
 
$
0.3


The fair value of outstanding derivative contracts recorded as liabilities in the accompanying Consolidated Balance Sheet as of December 31, 2015 was as follows:
 
LIABILITY DERIVATIVES
 (in millions)
Balance Sheet Location
Fair Value
Derivatives designated as hedging instruments
 
 

Foreign exchange contracts
Accounts payable and accrued expenses
$
0.2

Commodity contracts
Accounts payable and accrued expenses
0.7

Interest rate swap contracts: Float-to-fixed
Accounts payable and accrued expenses
1.7

Foreign exchange contracts
Other non-current liabilities
0.1

Interest rate swap contracts: Float-to-fixed
Other non-current liabilities
0.6

Total derivatives designated as hedging instruments
 
$
3.3

 
 
LIABILITY DERIVATIVES
(in millions)
Balance Sheet Location
Fair Value
Derivatives NOT designated as hedging instruments
 
 

Foreign exchange contracts
Accounts payable and accrued expenses
$
0.9

Total derivatives NOT designated as hedging instruments
 
$
0.9

 
 
 

Total liability derivatives
 
$
4.2

Inventories
Inventories
Inventories
The components of inventories at December 31, 2016 and December 31, 2015 are summarized as follows:
(in millions)
 
2016
 
2015
Raw materials
 
$
109.3

 
$
155.3

Work-in-process
 
88.4

 
116.3

Finished goods
 
270.9

 
251.7

Total inventories — gross
 
468.6

 
523.3

Excess and obsolete inventory reserve
 
(39.6
)
 
(34.1
)
Net inventories
 
$
429.0

 
$
489.2


As described in Note 2, in the fourth quarter of 2016, the Company elected to change its method of accounting for certain inventory in the U.S. from LIFO to FIFO. The Company applied this change in method of inventory costing by retrospectively adjusting the prior period financial statements. As a result of the retrospective adjustment of the change in accounting principle, certain amounts in the Company's consolidated financial statements for the years ended December 31, 2015 and 2014 were adjusted as follows:
For the years ended December 31,
 
 
 
2015
 
 
 
 
 
2014
 
 
 
 
Impact of Change
 
Impact of Change
In millions (except per share data)
 
Historical
 
to FIFO
 
As adjusted
 
Historical
 
to FIFO
 
As adjusted
Cost of sales
 
$
1,537.0

 
$
(3.5
)
 
$
1,533.5

 
$
1,837.6

 
$
0.4

 
$
1,838.0

Operating (loss) income
 
(15.9
)
 
3.5

 
(12.4
)
 
107.5

 
(0.4
)
 
107.1

Loss from continuing operations before taxes
 
(114.5
)
 
3.5

 
(111.0
)
 
(20.0
)
 
(0.4
)
 
(20.4
)
Benefit for income taxes
 
(42.6
)
 
1.5

 
(41.1
)
 
(18.0
)
 
0.2

 
(17.8
)
Loss from continuing operations
 
(71.9
)
 
2.0

 
(69.9
)
 
(2.0
)
 
(0.6
)
 
(2.6
)
Net (loss) income
 
63.5

 
2.0

 
65.5

 
148.4

 
(0.6
)
 
147.8

Net (loss) income attributable to Manitowoc common shareholders
 
63.5

 
2.0

 
65.5

 
144.5

 
(0.6
)
 
143.9

Basic (loss) income per share from continuing operations
 
(0.53
)
 
0.02

 
(0.51
)
 
(0.04
)
 
(0.01
)
 
(0.05
)
Diluted (loss) income per share from continuing operations
 
(0.53
)
 
0.02

 
(0.51
)
 
(0.04
)
 
(0.01
)
 
(0.05
)
The Consolidated Balance Sheet for the year ended December 31, 2015 was adjusted as follows:
 
 
Impact of Change
In millions
 
Historical
 
to FIFO
 
As adjusted
Inventories
 
$
452.6

 
$
36.6

 
$
489.2

Other non-current assets
 
191.2

 
(13.8
)
 
177.4

Retained earnings
 
539.5

 
22.8

 
562.3

The Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014 were adjusted as follows:
For the years ended December 31,
 
 
 
2015
 
 
 
 
 
2014
 
 
 
 
Impact of Change
 
Impact of Change
In millions
 
Historical
 
to FIFO
 
As adjusted
 
Historical
 
to FIFO
 
As adjusted
Net (loss) income
 
$
63.5

 
$
2.0

 
$
65.5

 
$
148.4

 
$
(0.6
)
 
$
147.8

Deferred income taxes
 
(5.9
)
 
1.5

 
(4.4
)
 
11.3

 
0.2

 
11.5

Change in inventories, net
 
(3.7
)
 
(3.5
)
 
(7.2
)
 
32.2

 
0.4

 
32.6


The tables above present selected financial information “as adjusted for impact of change to FIFO” and “historical,” which represents the results of operations prior to the change to FIFO but after the classification of MFS to discontinued operations.
See Note 23, “Quarterly Financial Data (Unaudited),” for the impact of the change to FIFO on selected quarterly data.
Notes Receivable Notes Receivable
Notes Receivable
Notes Receivable
Notes receivable balances as of December 31, 2016 and 2015, consisted primarily of amounts due to the Company's captive finance company in China, as well as the note receivable related to the sale of Manitowoc Dong Yue in 2014. As of December 31, 2016, the Company had current and long-term notes receivable in the amount of $62.4 million and $21.1 million, respectively. As of December 31, 2015, the Company had current and long-term notes receivable in the amount of $65.1 million and $56.7 million, respectively. Long-term notes receivable are included within other long-term assets on the Consolidated Balance Sheet. The collection of scheduled and past due payments resulted in a decrease in outstanding notes receivable.
Property, Plant and Equipment
Property, Plant and Equipment
Property, Plant and Equipment
The components of property, plant and equipment at December 31, 2016 and December 31, 2015 are summarized as follows:
(in millions)
 
2016
 
2015
Land
 
$
23.6

 
$
23.7

Building and improvements
 
225.0

 
218.7

Machinery, equipment and tooling
 
292.6

 
274.4

Furniture and fixtures
 
16.7

 
16.6

Computer hardware and software
 
126.0

 
132.4

Rental cranes
 
89.0

 
99.5

Construction in progress
 
16.7

 
81.0

Total cost
 
789.6

 
846.3

Less accumulated depreciation
 
(480.8
)
 
(435.6
)
Property, plant and equipment-net
 
$
308.8

 
$
410.7


In the twelve months ended December 31, 2016, the Company recorded $96.9 million in asset impairment charges. See additional discussion of impairments in Note 20, “Restructuring and Asset Impairments.”
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
The changes in carrying amount of goodwill for the years ended December 31, 2016 and December 31, 2015 are as follows:
(in millions)
 
 
2016
 
2015
Gross balance as of January 1,
 
 
$
306.5

 
$
325.3

Foreign currency impact
 
 
(6.9
)
 
(18.8
)
Net balance as of December 31,
 
 
$
299.6

 
$
306.5


The Company accounts for goodwill and other intangible assets under the guidance of ASC Topic 350, “Intangibles — Goodwill and Other.” The Company performs impairment reviews for goodwill and indefinite-lived intangible assets using a fair-value method based on the present value of future cash flows, which involves management’s judgments and assumptions about the amounts of those cash flows and the discount rates used. The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill, or indefinite-lived intangible asset. The intangible asset is then subject to risk of write-down to the extent that the carrying amount exceeds the estimated fair value.
Historically, the annual goodwill and indefinite-lived assets impairment testing was performed during the second quarter. The Company performed this test during the second quarter with no impairment. Subsequent to the impairment test performed during the second quarter, the Company moved the annual test to the fourth quarter on a prospective basis in order to align more closely to its internal forecasting cycle. Based on the results of that test, no impairment was indicated. The Company will continue to monitor changes in circumstances and test more frequently if those changes indicate that assets might be impaired.
The cranes business provides engineered lifting products that are used in a wide variety of applications, including energy and utilities, petrochemical and industrial projects, infrastructure development such as road, bridge and airport construction, and commercial and high-rise residential construction. The decline in oil prices, as well as uncertainty in global macroeconomic factors related to infrastructure and construction has caused the Company's customers to defer or reduce capital spending.
A considerable amount of management judgment and assumptions are required in performing the impairment test, principally in determining the fair value of the reporting unit. While the Company believes the judgments and assumptions are reasonable, different assumptions could change the estimated fair value and, therefore, impairment charges could be required. Weakening industry or economic trends, disruptions to our business, unexpected significant changes or planned changes in the use of the assets or in entity structure may adversely impact the assumptions used in the valuations. The Company continually monitors market conditions and determines if any additional interim reviews of goodwill, other intangibles or long-lived assets are warranted. In the event the Company determines that assets are impaired in the future, the Company would recognize a non-cash impairment charge, which could have a material adverse effect on the Company’s Consolidated Balance Sheets and Results of Operations.
The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill are as follows as of December 31, 2016 and December 31, 2015.
 
 
December 31, 2016
 
December 31, 2015
(in millions)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Amount
 
Net
Book
Value
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Amount
 
Net
Book
Value
Trademarks and tradenames
 
$
92.4

 
$

 
$
92.4

 
$
94.2

 
$

 
$
94.2

Customer relationships
 
10.3

 
(7.8
)
 
2.5

 
10.4

 
(7.1
)
 
3.3

Patents
 
28.5

 
(27.4
)
 
1.1

 
29.1

 
(26.6
)
 
2.5

Engineering drawings
 
10.0

 
(9.9
)
 
0.1

 
10.2

 
(9.3
)
 
0.9

Distribution network
 
18.0

 

 
18.0

 
18.4

 

 
18.4

Other intangibles
 
0.2

 
(0.2
)
 

 
0.3

 
(0.3
)
 

 
 
$
159.4

 
$
(45.3
)
 
$
114.1

 
$
162.6

 
$
(43.3
)
 
$
119.3


Amortization of intangible assets for the years ended December 31, 2016, 2015 and 2014 was $3.0 million, $3.0 million and $3.3 million, respectively.  Excluding the impact of any future acquisitions, divestitures or impairments, the Company anticipates amortization will be approximately $2 million in 2017 and approximately $0.4 million per year through 2021.
Accounts Payable and Accrued Expenses
Accounts Payable and Accrued Expenses
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31, 2016 and December 31, 2015 are summarized as follows:
(in millions)
 
2016
 
2015
Trade accounts payable
 
$
157.7

 
$
268.5

Employee related expenses
 
28.1

 
35.0

Accrued vacation
 
21.8

 
25.1

Miscellaneous accrued expenses
 
113.6

 
107.7

 
 
$
321.2

 
$
436.3

Debt
Debt
Debt
Outstanding debt at December 31, 2016 and December 31, 2015 is summarized as follows:
(in millions)
 
2016
 
2015
Term loan A
 
$

 
$
312.8

Term loan B
 

 
119.5

Senior notes due 2020
 

 
613.1

Senior notes due 2022
 

 
299.2

Senior notes due 2021
 
249.8

 

Other
 
35.7

 
66.3

Deferred financing costs
 
(4.0
)
 
(13.3
)
Total debt
 
281.5

 
1,397.6

Less current portion and short-term borrowings
 
(12.4
)
 
(67.2
)
Long-term debt
 
$
269.1

 
$
1,330.4

 
On March 3, 2016, the Company entered into a $225.0 million Asset Based Revolving Credit Facility (as amended, the “ABL Revolving Credit Facility”) with Wells Fargo Bank, N.A. as administrative agent, and JP Morgan Chase Bank, N.A. and Goldman Sachs Bank USA as joint lead arrangers. The ABL Revolving Credit Facility capacity calculation is defined in the Agreement and dependent on the fair value of inventory and fixed assets of the Loan Parties, which secure the borrowings. The ABL Revolving Credit Facility has a term of 5 years, and includes a $75.0 million Letter of Credit sublimit, $10.0 million of which can be applied to the German borrower.
As of December 31, 2016, the Company did not have any borrowings outstanding on the ABL Revolving Credit Facility. During the year ended December 31, 2016, the highest daily borrowing was $30.0 million and the average borrowing was $8.1 million, while the average annual interest rate was 2.51%. The interest rate of the ABL Revolving Credit Facility fluctuates based on excess availability.  As of December 31, 2016, the spreads for LIBOR and Prime borrowings were 1.50% and 0.50%, respectively, with excess availability of approximately $144.0 million, which represents revolver borrowing capacity of $160.4 million less U.S. letters of credit outstanding of $16.4 million.
The ABL Revolving Credit Facility replaced the $1,050.0 million Third Amended and Restated Credit Agreement (the “Prior Senior Credit Facility”), which was entered into on January 3, 2014. The Prior Senior Credit Facility included three different loan facilities. The first was a revolving facility in the amount of $500.0 million, with a term of five years. The second facility was a Term A Loan in the aggregate amount of $350.0 million, with a term of five years. The third facility was a Term B Loan in the amount of $200.0 million, with a term of seven years.
Prior to termination of the Prior Senior Credit Facility in March 2016, the highest daily borrowing was $234.0 million, the average borrowing was $117.4 million, and the average annual interest rate was 3.5%.
As of December 31, 2015, the Company had outstanding $175.0 million notional amount of float-to-fixed interest rate swaps outstanding related to Term Loan A under the Prior Senior Credit Facility that were designated as cash flow hedges. In 2016, these swaps were terminated along with the Prior Senior Credit Facility resulting in a loss of $5.9 million related to the write-off of deferred financing expenses and $4.3 million related to termination of interest rate swaps.
On February 18, 2016, the Company entered into an indenture with Wells Fargo Bank, N.A., as trust and collateral agent, and completed the sale of $260.0 million aggregate principal amount of its 12.750% Senior Secured Second Lien Notes due August 15, 2021 (the “2021 Notes”). Interest on the 2021 Notes is payable semi-annually in February and August of each year. The 2021 Notes were sold pursuant to exemptions from registration under the Securities Act of 1933.
Both the ABL Revolving Credit Facility and 2021 Notes include customary covenants and events of default which include, without limitation, restrictions on indebtedness, capital expenditures, restricted payments, disposals, investments and acquisitions.
Additionally, the ABL Revolving Credit Facility contains a Fixed Charge Coverage springing financial covenant, which measures the ratio of (i) consolidated earnings before interest, taxes, depreciation, amortization and other adjustments as defined in the credit agreement, to (ii) fixed charges, as defined in the related credit agreement. The financial covenant is triggered only if the Company fails to maintain minimum levels of availability under the credit facility. If triggered, the Company must maintain a Minimum Fixed Charge Coverage Ratio of 1.00 to 1.
In October 2016, the ABL Revolving Credit Facility was amended to accommodate certain previously restricted activities related to the relocation of its manufacturing operations from Manitowoc, Wisconsin to Shady Grove, Pennsylvania as announced during the third quarter of 2016. Among other things, the amendment will allow the Company to transfer, sell and/or impair fixed assets located at the Manitowoc, Wisconsin facility with limited impact on the availability under the facility.
As of December 31, 2016, the Company had no outstanding fixed-to-float interest rate swaps related to the 2021 Notes.
On March 3, 2016, the Company redeemed its 8.50% Senior Notes due 2020 (the “Prior 2020 Notes”) and 5.875% Senior Notes due 2022 (the “Prior 2022 Notes”) for $625.5 million and $330.5 million, or 104.250% and 110.167% as expressed as a percentage of the principal amount, respectively.
The redemption of the Prior 2020 Notes resulted in a loss on debt extinguishment of $31.5 million during the first quarter of 2016 and consisted of $24.6 million related to redemption premium and $6.9 million related to write-off of deferred financing fees. Previously monetized derivative assets related to fixed-to-float interest rate swaps were treated as an increase to the debt balance of the Prior 2020 Notes and were being amortized to interest expense over the life of the original swap. As a result of the redemption, the remaining monetization balance of $11.8 million as of March 3, 2016 was amortized as a reduction to interest expense during the first quarter of 2016.
The redemption of the Prior 2022 Notes resulted in a loss on debt extinguishment of $34.6 million during the first quarter of 2016 and consisted of $31.2 million related to redemption premium and $3.4 million related to write-off of deferred financing fees. Previously, derivative liabilities related to termination of fixed-to-float swaps were treated as a decrease to the debt balance of the Prior 2022 Notes and were being amortized to interest expense over the life of the original swap. As a result of the redemption, the remaining balance of $0.7 million as of March 3, 2016 was amortized as an increase to interest expense during the first quarter of 2016.
Outstanding balances under the Company's Prior Senior Credit Facility and Prior 2020 and Prior 2022 Notes were repaid with proceeds from the 2021 Notes and a cash dividend from MFS in conjunction with the Spin-Off.
The balance sheet values of the Senior Notes as of December 31, 2016 and December 31, 2015 are not equal to the face value of the Senior Notes because of gains (losses) of previously terminated fixed-to-float interest rate hedges and original issue discounts included in the applicable balance sheet values (see Note 5, “Derivative Financial Instruments,” of the Consolidated Financial Statements for more information).
As of December 31, 2016, the Company had outstanding $35.7 million of other indebtedness that has a weighted-average interest rate of approximately 5.43%.  This debt includes balances on local credit lines and capital lease obligations.
The aggregate scheduled maturities of outstanding debt obligations in subsequent years are as follows (in millions):
Year
 
 
2017
 
$
12.4

2018
 
5.8

2019
 
5.7

2020
 
3.8

2021
 
263.3

Thereafter
 
0.7

Total
 
$
291.7


The table of scheduled maturities above does not agree to the Company’s total debt as of December 31, 2016 as shown on the Consolidated Balance Sheet due to $10.2 million of OID.


As of December 31, 2016, the Company was in compliance with all affirmative and negative covenants in its debt instruments, inclusive of the financial covenants pertaining to the ABL Revolving Credit Facility and 2021 Notes.  Based upon management’s current plans and outlook, the Company believes it will be able to comply with these covenants during the subsequent twelve months.
Accounts Receivable Securitization
Accounts Receivable Securitization
Accounts Receivable Securitization
The Company maintains an accounts receivable securitization program with a commitment size of