MANITOWOC CO INC, 10-Q filed on 5/8/2018
Quarterly Report
v3.8.0.1
Document and Entity Information
3 Months Ended
Mar. 31, 2018
shares
Document And Entity Information [Abstract]  
Entity Registrant Name MANITOWOC CO INC
Entity Central Index Key 0000061986
Trading Symbol MTW
Document Type 10-Q
Document Period End Date Mar. 31, 2018
Amendment Flag false
Current Fiscal Year End Date --12-31
Entity Filer Category Large Accelerated Filer
Entity Shares Outstanding 35,519,082
Document Fiscal Year Focus 2018
Document Fiscal Period Focus Q1
v3.8.0.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Operations    
Net sales $ 386.1 $ 305.8
Cost of sales 317.7 253.9
Gross profit 68.4 51.9
Operating costs and expenses:    
Engineering, selling and administrative expenses 60.4 61.4
Amortization of intangible assets 0.1 0.4
Restructuring expense 6.2 11.7
Other operating (income) expense - net   0.2
Total operating costs and expenses 66.7 73.7
Operating income (loss) 1.7 (21.8)
Other income (expense):    
Interest expense (10.0) (10.1)
Amortization of deferred financing fees (0.5) (0.5)
Other income (expense) - net 2.7 (2.1)
Total other expense (7.8) (12.7)
Income (loss) before taxes (6.1) (34.5)
Provision for taxes on income 3.9 1.5
Net income (loss) $ (10.0) $ (36.0)
Per Share Data    
Basic income (loss) per common share (in dollars per share) $ (0.28) $ (1.03)
Diluted income (loss) per common share (in dollars per share) $ (0.28) $ (1.03)
Weighted average shares outstanding - basic (in shares) 35,367,340 35,020,428
Weighted average shares outstanding - diluted (in shares) 35,367,340 35,020,428
v3.8.0.1
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement Of Income And Comprehensive Income [Abstract]    
Net income (loss) $ (10.0) $ (36.0)
Other comprehensive income (loss), net of tax    
Unrealized income on derivatives, net of income tax provision of $0.0 and $0.0, respectively   0.5
Employee pension and postretirement benefits, net of income tax provision of $0.1 and $0.4, respectively 0.7 0.6
Foreign currency translation adjustments 11.4 10.1
Total other comprehensive income, net of tax 12.1 11.2
Comprehensive income (loss) $ 2.1 $ (24.8)
v3.8.0.1
Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (Unaudited) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement Of Income And Comprehensive Income [Abstract]    
Unrealized income on derivatives, net of income taxes $ 0.0 $ 0.0
Employee pension and post retirement benefits, net of income taxes of $ 0.1 $ 0.4
v3.8.0.1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Millions
Mar. 31, 2018
Dec. 31, 2017
Current Assets:    
Cash, cash equivalents and restricted cash $ 99.4 $ 123.0
Accounts receivable, less allowances of $10.6 and $10.9, respectively 168.6 179.2
Inventories — net 471.5 400.6
Notes receivable — net 28.9 31.1
Other current assets 49.6 56.5
Total current assets 818.0 790.4
Property, plant and equipment — net 306.1 303.7
Goodwill 323.9 321.3
Other intangible assets — net 123.7 122.1
Other long-term assets 72.2 70.3
Total assets 1,643.9 1,607.8
Current Liabilities:    
Accounts payable and accrued expenses 403.1 375.8
Short-term borrowings and current portion of long-term debt 7.6 8.2
Product warranties 36.8 35.5
Customer advances 14.4 12.7
Product liabilities 22.4 20.8
Total current liabilities 484.3 453.0
Non-Current Liabilities:    
Long-term debt 266.1 266.7
Deferred income taxes 15.0 13.0
Pension obligations 88.0 88.9
Postretirement health and other benefit obligations 25.1 25.5
Long-term deferred revenue 22.1 20.8
Other non-current liabilities 60.0 62.4
Total non-current liabilities 476.3 477.3
Commitments and contingencies (Note 15)
Stockholders' Equity:    
Preferred stock (authorized 3,500,000 shares of $.01 par value; none outstanding)
Common stock (75,000,000 shares authorized, 40,793,983 shares issued, 35,519,082 and 35,273,864 shares outstanding, respectively) 1.4 1.4
Additional paid-in capital 578.0 576.6
Accumulated other comprehensive loss (85.3) (97.4)
Retained earnings 246.7 256.7
Treasury stock, at cost (5,274,901 and 5,520,119 shares, respectively) (57.5) (59.8)
Total stockholders' equity 683.3 677.5
Total liabilities and stockholders' equity $ 1,643.9 $ 1,607.8
v3.8.0.1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Millions
Mar. 31, 2018
Dec. 31, 2017
Statement Of Financial Position [Abstract]    
Accounts Receivable, allowances (in dollars) $ 10.6 $ 10.9
Preferred stock authorized (in shares) 3,500,000 3,500,000
Par value of preferred stock per share (in dollars per share) $ 0.01 $ 0.01
Preferred stock outstanding (in shares) 0 0
Common stock, shares authorized (in shares) 75,000,000 75,000,000
Common stock, shares issued (in shares) 40,793,983 40,793,983
Common stock, shares outstanding (in shares) 35,519,082 35,273,864
Treasury stock (in shares) 5,274,901 5,520,119
v3.8.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cash Flows from Operations:    
Net income (loss) $ (10.0) $ (36.0)
Adjustments to reconcile net loss to cash used for operating activities:    
Depreciation 9.1 10.6
Amortization of intangible assets 0.1 0.4
Amortization of deferred financing fees 0.5 0.5
(Gain) loss on sale of property, plant and equipment (1.3) (0.8)
Other 3.0 7.5
Changes in operating assets and liabilities, excluding effects of business divestitures:    
Accounts receivable (135.4) (78.6)
Inventories (71.5) (33.3)
Notes receivable 4.1 5.7
Other assets 8.8 0.7
Accounts payable 46.6 37.2
Accrued expenses and other liabilities (27.0) (23.2)
Net cash used for operating activities (173.0) (109.3)
Cash Flows from Investing:    
Capital expenditures (6.4) (3.8)
Proceeds from sale of fixed assets 6.3 1.7
Cash receipts on sold accounts receivable 148.6 76.8
Net cash provided by investing activities 148.5 74.7
Cash Flows from Financing:    
Payments on long-term debt (2.1) (3.3)
Proceeds from long-term debt   2.0
Payments on notes financing - net   (2.2)
Exercises of stock options 1.3 2.7
Net cash used for financing activities (0.8) (0.8)
Effect of exchange rate changes on cash 1.7 0.6
Net decrease in cash, cash equivalents, and restricted cash (23.6) (34.8)
Cash, cash equivalents and restricted cash at beginning of period 123.0 73.9
Cash, cash equivalents and restricted cash at end of period $ 99.4 $ 39.1
v3.8.0.1
Accounting Policies and Basis of Presentation
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Accounting Policies and Basis of Presentation

1.  Accounting Policies and Basis of Presentation

The Manitowoc Company, Inc. (“Manitowoc,” “MTW” or the “Company”) is a leading provider of engineered lifting equipment for the global construction industry, including lattice-boom cranes, tower cranes, mobile telescopic cranes and boom trucks. The Company has three reportable segments, the Americas segment, Europe and Africa (“EURAF”) segment and Middle East and Asia Pacific (“MEAP”) segment. The segments were identified using the “management approach,” which designates the internal organization that is used by management for making operating decisions and assessing performance. Refer to Note 13, “Segments” for additional information.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments necessary for a fair statement of the results of operations and comprehensive income for the three months ended March 31, 2018 and 2017, the cash flows for the same three-month periods and the financial position at March 31, 2018 and December 31, 2017, and except as otherwise discussed, such adjustments consist of only those of a normal recurring nature. The interim results are not necessarily indicative of results for a full year and do not contain information included in the Company’s annual consolidated financial statements and notes for the year ended December 31, 2017. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations dealing with interim financial statements. However, the Company believes that the disclosures made in the Condensed Consolidated Financial Statements included herein are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K.

Effective after the market closed on November 17, 2017, the Company completed a 1-for-4 reverse stock split. The share amounts in this Quarterly Report on Form 10-Q have been adjusted to reflect that reverse stock split.

Cash, cash equivalents and restricted cash on the Condensed Consolidated Balance Sheets includes $4.4 million and $3.8 million of restricted cash as of March 31, 2018 and December 31, 2017, respectively.  

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 2018, the Company identified an adjustment to the Consolidated Balance Sheet as of December 31, 2017. The adjustment related to other current assets and property, plant and equipment – net, whereby the Company had overstated other current assets and understated property, plant and equipment – net by approximately $8.8 million. In evaluating whether the Company’s previously issued consolidated financial statements were materially misstated, the Company considered the guidance in Accounting Standard 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 period consolidated financial statements and therefore, amending the previously filed report was not required.

v3.8.0.1
Revenues
3 Months Ended
Mar. 31, 2018
Revenue From Contract With Customer [Abstract]  
Revenues

2. Revenues

 

Adoption of ASC Topic 606, “Revenue from Contracts with Customers”

 

On January 1, 2018, the Company adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

 

The majority of the Company’s sales revenue continues to be recognized when products are shipped from the Company’s manufacturing facilities. Additional information related to the Company’s “Performance Obligations” are listed below.

 

As a result of the adoption of Topic 606, no cumulative catch up adjustment to retained earnings was recorded as of January 1, 2018.  

 

Significant Accounting Policy

 

Revenue is recognized when obligations under the terms of a contract with the Company’s customer are satisfied; generally this occurs with the transfer of control of the Company’s cranes, or parts, or completion of performance of services. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company recognizes revenue for extended warranties beyond the base warranties over the life of the contract.

 

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, and are collected by the Company from a customer, are excluded from revenue.

 

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are categorized as a fulfillment cost and are included in cost of sales on the income statement.

 

Performance Obligations

 

The following is a description of principle activities from which the Company generates revenue. Disaggregation of the Company’s revenue sources are disclosed in Note 13, “Segments.”

 

Crane Revenue

 

Crane revenue is primarily generated through the sale of new and used cranes. Contracts with customers are generally in the form of a purchase order. Based on the nature of the Company’s contracts, the Company does not have any significant financing terms. Contracts may have variable consideration in the form of early pay discounts or rebates. Revenue is earned under these contracts when control is transferred to the customer. Control transfers to the customer generally upon delivery to the carrier or acceptance through an independent inspection company that acts as an agent of the customer.

 

From time to time, the Company enters into agreements where the customer has the right to exercise an option for the repurchase of a crane by the Company at an agreed upon price. The Company evaluates each agreement at the inception of the order to determine if the customer has a significant economic incentive to exercise that right. If it is determined that the customer has a significant economic incentive to exercise that right, the agreement is accounted for as a lease in accordance with Topic 840. If it is determined that the customer does not have a significant economic incentive to exercise that right, then revenue is recognized when control of the asset is transferred to the customer.

 

Given the nature of the Company’s products, from time to time, the customer may request that the product be held until a location is identified for crane delivery. Under these bill and hold arrangements, revenue is recognized when all of the following criteria are met: 1) the reason for the bill-and-hold arrangement is substantive, 2) the product is separately identified as belonging to the customer, 3) the product is ready for transfer to the customer, and 4) the Company does not have the ability to use the product or direct it to another customer.

 

Aftermarket Part Sales

 

Aftermarket part sales are generated through the sale of new and used parts to end customers and distributors. Aftermarket parts revenue is recognized when control of the asset is transferred to the customer. Control transfers to the customer generally upon delivery to the carrier. Customers generally have a right of return which the Company estimates using historical information. The amount of estimated returns is deducted from revenue.

 

Other Revenues

 

The Company’s other revenues consist primarily of revenues from:

 

Repair and field service work; and

 

Trainings and technical publications.

As it relates to the Company’s other revenues, the Company’s performance obligations generally relate to performing specific agreed upon services. Revenue is earned upon the completion of those services.


Customer Advances

 

The Company records deferred revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. The table below shows the change in the customer advances balance for the three months ended March 31, 2018 ($ in millions).

 

 

 

Customer Advances

Balance as of

January 1, 2018

 

 

Cash Received in Advance of Satisfying Performance Obligation

 

 

Revenue Recognized

 

 

Customer Advances

Balance as of March 31, 2018

 

Total

 

$

12.7

 

 

$

26.3

 

 

$

24.6

 

 

$

14.4

 

 

Practical Expedients and Exemptions

 

The Company expenses sales commissions when incurred because the amortization period would be one year or less. These costs are recorded within engineering, selling and administrative expenses in the Condensed Consolidated Statement of Operations.

 

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.

v3.8.0.1
Inventories
3 Months Ended
Mar. 31, 2018
Inventory Disclosure [Abstract]  
Inventories

3.  Inventories

The components of inventories as of March 31, 2018 and December 31, 2017 are summarized as follows:

 

($ in millions)

 

March 31,

2018

 

 

December 31,

2017

 

Raw materials

 

$

144.6

 

 

$

122.0

 

Work-in-process

 

 

136.6

 

 

 

98.8

 

Finished goods

 

 

241.4

 

 

 

227.7

 

Total inventories

 

 

522.6

 

 

 

448.5

 

Excess and obsolete inventory reserve

 

 

(51.1

)

 

 

(47.9

)

Inventories — net

 

$

471.5

 

 

$

400.6

 

 

v3.8.0.1
Notes Receivable
3 Months Ended
Mar. 31, 2018
Receivables [Abstract]  
Notes Receivable

4.  Notes Receivable

Notes receivable balances as of March 31, 2018 and December 31, 2017, consisted primarily of amounts due to the Company's captive finance company in China and the remaining balance on the note from the 2014 sale of Manitowoc Dong Yue. During 2017, the Company renegotiated the terms of the note with Manitowoc Dong Yue to provide extended payment terms. As a result of the renegotiation, the entire balance of the Manitowoc Dong Yue note is included in long-term notes receivable in the Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017. As of March 31, 2018, the Company had current and long-term notes receivable in the amount of $28.9 million and $27.3 million, respectively. As of December 31, 2017, the Company had current and long-term notes receivable in the amount of $31.1 million and $27.4 million, respectively.  Long-term notes receivable are included within other long-term assets on the Condensed Consolidated Balance Sheet.

v3.8.0.1
Goodwill and Other Intangible Assets
3 Months Ended
Mar. 31, 2018
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets

5.  Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the year ended December 31, 2017 and the three months ended March 31, 2018 are as follows:

 

($ in millions)

 

Cranes

 

 

Americas

 

 

EURAF

 

 

MEAP

 

Balance as of January 1, 2017

 

$

299.6

 

 

$

 

 

$

 

 

$

 

Foreign currency impact

 

 

16.5

 

 

 

 

 

 

 

 

 

 

Reallocation of goodwill at October 31, 2017

 

 

(316.1

)

 

 

166.5

 

 

 

81.5

 

 

 

68.1

 

Foreign currency impact

 

 

 

 

 

 

 

 

4.4

 

 

 

0.8

 

Balance as of December 31, 2017

 

 

 

 

 

166.5

 

 

 

85.9

 

 

 

68.9

 

Foreign currency impact

 

 

 

 

 

 

 

 

2.4

 

 

 

0.2

 

Balance as of March 31, 2018

 

$

 

 

$

166.5

 

 

$

88.3

 

 

$

69.1

 

 

The Company accounts for goodwill and other intangible assets under the guidance of ASC Topic 350, “Intangibles — Goodwill and Other.”

The Company performs an annual impairment review during the fourth quarter of every year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. There have been no impairment indicators since the fourth quarter of 2017; therefore, no impairment review has occurred. The Company performs the impairment review 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.

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 the Company's 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 Condensed Consolidated Balance Sheets and Results of Operations.

Other intangible assets with definite lives continue to be amortized over their estimated useful lives. Definite lived intangible assets are also subject to impairment testing whenever events or circumstances indicate that the carrying value of the assets may not be recoverable.

The gross carrying amount, accumulated amortization and net book value of the Company’s intangible assets other than goodwill at March 31, 2018 and December 31, 2017 are as follows:

 

 

 

March 31, 2018

 

 

December 31, 2017

 

($ in millions)

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Book

Value

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Book

Value

 

Trademarks and tradenames

 

$

101.1

 

 

$

 

 

$

101.1

 

 

$

99.7

 

 

$

 

 

$

99.7

 

Customer relationships

 

 

10.6

 

 

 

(8.7

)

 

 

1.9

 

 

 

10.7

 

 

 

(8.7

)

 

 

2.0

 

Patents

 

 

31.2

 

 

 

(30.1

)

 

 

1.1

 

 

 

30.6

 

 

 

(29.7

)

 

 

0.9

 

Engineering drawings

 

 

10.9

 

 

 

(10.9

)

 

 

0.0

 

 

 

10.8

 

 

 

(10.7

)

 

 

0.1

 

Distribution network

 

 

19.8

 

 

 

(0.2

)

 

 

19.6

 

 

 

19.5

 

 

 

(0.1

)

 

 

19.4

 

Other intangibles

 

 

0.1

 

 

 

(0.1

)

 

 

 

 

 

0.1

 

 

 

(0.1

)

 

 

 

Total

 

$

173.7

 

 

$

(50.0

)

 

$

123.7

 

 

$

171.4

 

 

$

(49.3

)

 

$

122.1

 

 

Amortization expense for the three months ended March 31, 2018 and 2017 was $0.1 million and $0.4 million, respectively.

The Company also reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset's carrying amount may not be recoverable.  The Company conducts its long-lived asset impairment analyses in accordance with ASC Topic 360-10-5, “Property, Plant and Equipment.”  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. 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.

v3.8.0.1
Accounts Payable and Accrued Expenses
3 Months Ended
Mar. 31, 2018
Payables And Accruals [Abstract]  
Accounts Payable and Accrued Expenses

6.  Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at March 31, 2018 and December 31, 2017 are summarized as follows:

 

($ in millions)

 

March 31, 2018

 

 

December 31, 2017

 

Trade accounts payable

 

$

253.8

 

 

$

204.9

 

Employee-related expenses

 

 

48.0

 

 

 

59.7

 

Accrued vacation

 

 

25.5

 

 

 

23.8

 

Miscellaneous accrued expenses

 

 

75.8

 

 

 

87.4

 

Total

 

$

403.1

 

 

$

375.8

 

 

v3.8.0.1
Debt
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Debt

7.  Debt

Outstanding debt at March 31, 2018 and December 31, 2017 is summarized as follows:

 

($ in millions)

 

March 31, 2018

 

 

December 31, 2017

 

Revolving credit facility

 

$

 

 

$

 

Senior secured second lien notes due 2021

 

 

252.5

 

 

 

251.9

 

Other

 

 

24.1

 

 

 

26.1

 

Deferred financing costs

 

 

(2.9

)

 

 

(3.1

)

Total debt

 

 

273.7

 

 

 

274.9

 

Short-term borrowings and current portion of long-term

   debt

 

 

(7.6

)

 

 

(8.2

)

Long-term debt

 

$

266.1

 

 

$

266.7

 

 

The balance sheet values of the 12.750% Senior Secured Second Lien Notes due 2021 (the "2021 Notes") as of March 31, 2018 and December 31, 2017 are not equal to the face value of the 2021 Notes, $260.0 million, because of original issue discounts included in the applicable balance sheet values.

As of March 31, 2018, the Company had outstanding $24.1 million of other indebtedness that has a weighted-average interest rate of approximately 5.37%. This debt includes balances on local credit lines and capital lease obligations.

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 related credit agreement and is 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.

In October 2016, the ABL Revolving Credit Facility was amended to accommodate certain previously restricted activities related to the relocation of the Company’s manufacturing operations from Manitowoc, Wisconsin to Shady Grove, Pennsylvania.  Among other things, the amendment allows the Company to transfer, sell, and/or impair fixed assets located at the Wisconsin facility with limited impact on the availability under the facility.

In April 2017, the ABL Revolving Credit Facility was amended to modify several definitions regarding eligible equipment and inventory as it relates to a key financing partner of the Company. The amendment has had, and is expected to continue to have, a minimal impact on the Company’s daily operations and borrowing limits.

In December 2017, the Company notified the administrative agent of its intent to sell its corporate headquarters in Manitowoc, Wisconsin, and the ABL Revolving Credit Facility was amended to permit that transaction and related restructuring activities. The sale was finalized in the first quarter of 2018 and is reflected in the borrowing base of the ABL Revolving Credit Facility as of March 31, 2018.

The Company had no borrowings on the ABL Revolving Credit Facility as of March 31, 2018 and December 31, 2017. During the quarter ended March 31, 2018, the highest daily borrowing was $36.8 million and the average borrowing was $9.7 million, while the average annual interest rate was 3.53%. The interest rate of the ABL Revolving Credit Facility fluctuates based on excess availability. As of March 31, 2018, the spreads for London Interbank Offered Rate and prime rate borrowings were 1.50% and 0.50%, respectively, with excess availability of approximately $117.7 million, which represents revolver borrowing capacity of $132.1 million less U.S. letters of credit outstanding of $14.4 million.

On February 18, 2016, the Company entered into an indenture with Wells Fargo Bank, N.A., as trust and collateral agent, and sold $260.0 million aggregate principal amount of its 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 related credit agreement, to (ii) fixed charges, as defined in the credit agreement. The financial covenant is triggered only if the Company fails to maintain minimum levels of availability under the facility. If triggered, the Company must maintain a minimum fixed charge coverage ratio of 1.00 to 1.

As of March 31, 2018, 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. 

v3.8.0.1
Accounts Receivable Securitization
3 Months Ended
Mar. 31, 2018
Transfers And Servicing [Abstract]  
Accounts Receivable Securitization

8.  Accounts Receivable Securitization

The Company maintains a U.S. accounts receivable securitization program with a commitment size of $75.0 million, whereby transactions under the program are accounted for as sales in accordance with ASC Topic 860, “Transfers and Servicing.”   

On March 3, 2016, the Company replaced the Fifth Amended and Restated Receivables Purchase Agreement dated December 15, 2014 and entered into a Receivables Purchase Agreement (“RPA”) among Manitowoc Funding, LLC (“MTW Funding”), as Seller, The Manitowoc Company, Inc., as Servicer, and Wells Fargo Bank, N.A., as Purchaser and as Agent.

Under the RPA (and the related Purchase and Sale Agreements referenced in the RPA), the Company’s domestic trade accounts receivable are sold to MTW Funding which, in turn, sells, conveys, transfers and assigns to a third-party financial institution (“Purchaser”), all of MTW Funding's rights, title and interest in a pool of receivables to the Purchaser.

The Purchaser receives ownership of the pool of receivables in each instance. New receivables are purchased by MTW Funding and sold to the Purchaser as cash collections reduce previously sold investments discharged through normal cash collection processes. The Company acts as the servicer (in such capacity, the “Servicer”) of the receivables and, as such, administers, collects and otherwise enforces the receivables. The Servicer is compensated for doing so on terms that are generally consistent with what would be charged by an unrelated servicer. The Servicer initially receives payments made by obligors on the receivables but is required to remit those payments to the Purchaser in accordance with the RPA. The Purchaser has no recourse for uncollectible receivables.

Trade accounts receivable sold to the Purchaser and being serviced by the Company totaled $160.9 million and $118.2 million for the three months ended March 31, 2018 and 2017, respectively. Cash proceeds received from customers related to the receivables previously sold for the three months ended March 31, 2018 and 2017 were $168.9 million and $116.7 million, respectively.

Sales of trade receivables under the program reflected as a reduction of accounts receivable in the accompanying Condensed Consolidated Balance Sheets were $48.6 million and $31.8 million as of March 31, 2018 and December 31, 2017, respectively. The proceeds received from the sale of trade receivables under the program are included in cash flows from operating activities; whereas cash collections related to the deferred purchase price are classified as cash flows from investing activities in the accompanying Condensed Consolidated Statements of Cash Flows. The Company deems the interest rate risk related to the deferred purchase price notes to be de minimis, primarily because the average collection cycle of the related receivables is less than 60 days; and as such, the fair value of the Company’s deferred purchase price notes approximates book value. The fair value of the deferred purchase price notes recorded as of March 31, 2018 and December 31, 2017 was $39.9 million and $60.6 million, respectively, and is included in accounts receivable in the accompanying Condensed Consolidated Balance Sheets. For the three months ended March 31, 2018 and 2017 non-cash investing activities related to the increase in the deferred purchase price was $126.4 million and $92.1 million, respectively.

The securitization program contains customary affirmative and negative covenants. Among other restrictions, these covenants require the Company to meet specified financial tests, which include a minimum fixed charge coverage ratio which is the same as the covenant ratio required per the ABL Revolving Credit Facility. As of March 31, 2018, the Company was in compliance with all affirmative and negative covenants pertaining to the RPA, as amended.

v3.8.0.1
Income Taxes
3 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

9.  Income Taxes

For the three months ended March 31, 2018 and 2017, the Company recorded income tax expense of $3.9 million and $1.5 million, respectively. The increase in the Company’s tax expense for the three months ended March 31, 2018 relative to the prior year primarily relates to additional tax expense in foreign jurisdictions. In addition to the above, the Company’s effective tax rate varies from the U.S. federal statutory rate of 21% due to results of foreign operations that are subject to income taxes at different statutory rates.

The Company continues to evaluate the impact of the Tax Cuts and Jobs Act (the "Tax Act") enacted in December 2017. The Act reduced the U.S. federal corporate tax rate from 35 percent to 21 percent, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and added other provisions including creating new taxes on certain foreign sourced earnings. The Company continues to evaluate the impact of these new provisions under The Act including Transition Tax, Global Intangible Low Taxed Income (GILTI), Foreign Derived Intangible Income (FDII), Base Erosion and Anti-Abuse Tax (BEAT), and Internal Revenue Code Section 163(j) interest limitation (Interest Limitation) which are complex and subject to continuing regulatory interpretation by the Internal Revenue Service. The Company was able to make a reasonable estimate of the applicable provisions of the Tax Act; however, because the Company remains in a domestic net operating loss carryforward position and has a valuation allowance on its deferred tax assets, the Company does not expect an impact to the income statement. As of March 31, 2018, the Company has not changed the provisional estimates recognized in 2017. Adjustments related to the amount of these provisions recorded in its consolidated financial statements may be required based on the outcome of these elections and further interpretation by the Internal Revenue Service.

The Company will also continue to evaluate its valuation allowance requirements on an ongoing basis in light of changing facts and circumstances and may adjust its deferred tax asset valuation allowances accordingly, and it is a reasonable possibility that the Company will either add to or reverse a portion of its existing deferred tax asset valuation allowances in the future. Such changes in the deferred tax asset valuation allowances will be reflected in the current operations through the Company’s income tax provision and could have a material effect on operating results.

The Company’s unrecognized tax benefits, excluding interest and penalties, were $19.6 million as of March 31, 2018 and $19.5 million as of December 31, 2017. 

The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. As of March 31, 2018, the Company believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits, resulting in no material impact on its consolidated financial position and the results of operations and cash flows. However, the final determination with respect to any tax audits and any related litigation could be materially different from the Company’s estimates and/or from its historical income tax provisions and accruals and could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties and/or interest assessments.

v3.8.0.1
Earnings Per Share
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Earnings Per Share

10.  Earnings Per Share

Basic earnings (loss) per share is computed as net earnings (loss) divided by the basic weighted average common shares outstanding of 35.4 million and 35.0 million shares for the three months ended March 31, 2018 and 2017, respectively. The calculation of diluted earnings (loss) per share includes the effect of any dilutive equity incentive instruments. The Company uses the treasury stock method to calculate the effect of outstanding dilutive equity incentive instruments, which requires the Company to compute total proceeds as the sum of the amount the employee must pay upon exercise of the award and the amount of unearned stock-based compensation costs attributable to future services.

Equity incentive instruments for which the total employee proceeds from exercise exceed the average fair value of the same equity incentive instrument over the period have an anti-dilutive effect on earnings per share during periods with net earnings, and accordingly, the Company excludes them from the calculation. Due to the net loss incurred during the three months ended March 31, 2018 and 2017, the assumed exercise of all equity incentive instruments was anti-dilutive and, therefore, not included in the diluted loss per share calculation for those periods.

The following is a reconciliation of the average shares outstanding used to compute basic and diluted earnings per share:

 

 

 

Three Months Ended

March 31,

 

 

 

2018

 

 

2017

 

Basic weighted average common shares outstanding

 

 

35,367,340

 

 

 

35,020,428

 

Effect of dilutive securities

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

 

35,367,340

 

 

 

35,020,428

 

 

No cash dividends were paid during any of the three months ended March 31, 2018 and 2017.

v3.8.0.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Stockholders' Equity

11.  Stockholders’ Equity

The following is a roll forward of retained earnings for the three months ended March 31, 2018 and 2017:

 

($ in millions)

 

Retained Earnings

 

Balance at December 31, 2017

 

$

256.7

 

Net loss

 

 

(10.0

)

Balance at March 31, 2018

 

$

246.7

 

 

 

Authorized capital consists of 75 million shares of $0.01 par value common stock and 3.5 million shares of $0.01 par value preferred stock.  None of the preferred shares have been issued.

Currently, the Company has authorization to purchase up to 0.6 million shares of common stock at management’s discretion; however, the Company has certain restrictions from repurchasing shares of its capital stock or other equity interests under various covenants of its debt agreements. Further, the Company has not purchased any shares of its common stock under this authorization since 2006.

A reconciliation for the changes in accumulated other comprehensive loss, net of tax, by component for the three months ended March 31, 2018 and 2017 is as follows:

 

($ in millions)

 

Gains and Losses on

Cash Flow Hedges

 

 

Pension &

Postretirement

 

 

Foreign Currency

Translation

 

 

Total

 

Balance at December 31, 2017

 

$

0.1

 

 

$

(45.1

)

 

$

(52.4

)

 

$

(97.4

)

Other comprehensive income before

   reclassifications

 

 

 

 

 

0.1

 

 

 

11.4

 

 

 

11.5

 

Amounts reclassified from accumulated other

   comprehensive loss

 

 

 

 

 

0.6

 

 

 

 

 

 

0.6

 

Net other comprehensive income

 

 

 

 

 

0.7

 

 

 

11.4

 

 

 

12.1

 

Balance at March 31, 2018

 

$

0.1

 

 

$

(44.4

)

 

$

(41.0

)

 

$

(85.3

)

 

($ in millions)

 

Gains and Losses on

Cash Flow Hedges

 

 

Pension &

Postretirement

 

 

Foreign Currency

Translation

 

 

Total

 

Balance at December 31, 2016

 

$

(0.3

)

 

$

(51.8

)

 

$

(110.8

)

 

$

(162.9

)

Other comprehensive income (loss) before

   reclassifications

 

 

0.3

 

 

 

 

 

 

10.1

 

 

 

10.4

 

Amounts reclassified from accumulated

   other comprehensive loss

 

 

0.2

 

 

 

0.6

 

 

 

 

 

 

0.8

 

Net other comprehensive income

 

 

0.5

 

 

 

0.6

 

 

 

10.1

 

 

 

11.2

 

Balance at March 31, 2017

 

$

0.2

 

 

$

(51.2

)

 

$

(100.7

)

 

$

(151.7

)

 

The following is a reconciliation of the reclassifications out of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2018:

 

($ in millions)

 

Amount Reclassified

from Accumulated

Other Comprehensive

Income (Loss)

 

 

 

Recognized

Location

Amortization of pension and postretirement items

 

 

 

 

 

 

 

Actuarial losses

 

$

(1.4

)

(a)

 

Other income (expense) - net

Prior service cost

 

 

0.7

 

 

 

Other income (expense) - net

 

 

 

(0.7

)

 

 

Total before tax

 

 

 

0.1

 

 

 

Tax expense

 

 

$

(0.6

)

 

 

Net of tax

 

 

 

 

 

 

 

 

Total reclassifications for the period

 

$

(0.6

)

 

 

Net of tax

 

(a)

These accumulated other comprehensive income (loss) components are components of net periodic pension cost (see Note 17, “Employee Benefit Plans,” for further details).

The following is a reconciliation of the reclassifications out of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2017:

 

($ in millions)

 

Amount Reclassified

from Accumulated

Other Comprehensive

Income (Loss)

 

 

Recognized

Location

Gains and losses on cash flow hedges

 

 

 

 

 

 

Foreign exchange contracts

 

$

(0.2

)

 

Cost of sales

 

 

 

(0.2

)

 

Total before tax

 

 

 

 

 

Tax expense

 

 

$

(0.2

)

 

Net of tax

Amortization of pension and postretirement items

 

 

 

 

 

 

Actuarial losses

 

$

(1.3

)

(a)

Other income (expense) - net

Prior service cost

 

 

0.3

 

(a)

Other income (expense) - net

 

 

 

(1.0

)

 

Total before tax

 

 

 

0.4

 

 

Tax expense

 

 

$

(0.6

)

 

Net of Tax

 

 

 

 

 

 

 

Total reclassifications for the period

 

$

(0.8

)

 

Net of Tax

 

(a)

These accumulated other comprehensive income (loss) components are components of net periodic pension cost (see Note 17, “Employee Benefit Plans,” for further details).

v3.8.0.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-Based Compensation

12.  Stock-Based Compensation

The Company’s 2013 Omnibus Incentive Plan (the “2013 Plan”) was approved by shareholders on May 7, 2013 and replaced several of the Company's incentive plans (collectively referred to as the “Prior Plans”). No new awards may be granted under the Prior Plans; however, outstanding awards under the Prior Plans will continue in force and effect pursuant to their terms. The 2013 Plan provides for both short-term and long-term incentive awards for employees and non-employee directors. Stock-based awards may take the form of stock options, stock appreciation rights, restricted stock (“RSAs”), restricted stock units (“RSUs”) and performance shares or performance unit awards. Following amendments to the 2013 Plan to reflect the effect of the spin-off of the Company’s former foodservice business and the November 17, 2017 1-for-4 reverse stock split, the total number of shares of the Company’s common stock available for awards under the 2013 Plan is 7,477,395 shares.

Stock-based compensation expense was $2.4 million and $2.2 million for the three months ended March 31, 2018 and 2017, respectively. The Company recognizes stock-based compensation expense over the awards' vesting period.

Options to acquire 160,462 and 273,800 shares of common stock were granted to employees during the three months ended March 31, 2018 and 2017, respectively. The options granted in 2018 and 2017 become exercisable in three annual increments over a three-year period beginning on the first anniversary of the grant date and expire 10 years subsequent to the grant date. 

A total of 55,146 and 135,353 RSUs were issued by the Company to employees and directors during the three months ended March 31, 2018 and 2017, respectively. The RSUs granted to employees generally vest on the third anniversary of the grant date, depending on the grant. The RSUs granted in 2018 to directors immediately vested. The RSUs granted in 2017 to directors vest on the second anniversary of the grant date.

A total of 76,531 and 115,047 performance shares were issued during the three months ended March 31, 2018 and 2017, respectively. Performance shares are earned based on the extent to which performance goals are met over the applicable performance period.  The performance goals and the applicable performance period vary for each grant year. The performance goals for the performance shares granted in 2018 and 2017 are based on 50% on total shareholder return relative to peers during the three-year performance period and 50% on Adjusted EBITDA percentage from continuing operations in 2020 and 2019, respectively. Depending on the foregoing factors, the number of shares earned could range from zero to 153,062 and zero to 197,530 for the 2018 and 2017 performance share grants, respectively.

 

v3.8.0.1
Segments
3 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
Segments

13. Segments

The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by the CEO, who is also the Company’s Chief Operating Decision Maker (“CODM”), for making decisions about the allocation of resources and assessing performance as the source of the Company’s reportable operating segments.

The Company has three reportable segments: Americas, EURAF, and MEAP. The Americas operating segment includes the North American and South American continents. The EURAF operating segment includes the continents of Europe and Africa. The MEAP operating segment includes the Asia and Australian continents and the Middle East region.

The CODM evaluates the performance of its reportable segments based on net sales and operating income. Net sales for geographic segments are based on the geographic region that sells the products. Operating income for each segment includes net sales to third parties, cost of sales directly attributable to the segment, and operating expenses directly attributable to the segment. Manufacturing variances generated within each reportable segment are maintained in each segment’s operating income. Operating income for each segment excludes other income and expense and certain expenses managed outside the reportable operating segments. Costs excluded from segment operating income include various corporate expenses such as stock-based compensation expenses, income taxes, nonrecurring charges and other separately managed general and administrative costs. The Company does not include intercompany sales between segments for management reporting purposes.

The following table shows information by reportable segment for the three months ended March 31, 2018 and 2017 (in millions):

 

 

Three Months Ended March 31, 2018

 

 

Three Months Ended March 31, 2017

 

Net Sales

 

 

 

 

 

 

 

 

Americas

 

$

162.9

 

 

$

120.5

 

EURAF

 

 

154.2

 

 

 

125.3

 

MEAP

 

 

69.0

 

 

 

60.0

 

Total

 

$

386.1

 

 

$

305.8

 

Segment Operating Income (Loss)

 

 

 

 

 

 

 

 

Americas

 

$

2.7

 

 

$

(18.5

)

EURAF

 

 

3.4

 

 

 

(3.8

)

MEAP

 

 

7.9

 

 

 

8.7

 

Total

 

$

14.0

 

 

$

(13.6

)

Depreciation

 

 

 

 

 

 

 

 

Americas

 

$

3.5

 

 

$

4.4

 

EURAF

 

 

3.8

 

 

 

3.9

 

MEAP

 

 

1.0

 

 

 

0.9

 

Corporate

 

 

0.8

 

 

 

1.4

 

Total

 

$

9.1

 

 

$

10.6

 

Capital Expenditures

 

 

 

 

 

 

 

 

Americas

 

$

2.3

 

 

$

3.0

 

EURAF

 

 

2.4

 

 

 

0.7

 

MEAP

 

 

1.2

 

 

 

 

Corporate

 

 

0.5

 

 

 

0.1

 

Total

 

$

6.4

 

 

$

3.8

 

A reconciliation of the Company’s segment operating income (loss) to the consolidated statement of operations for the three months ended March 31, 2018 and 2017 was as follows (in millions):

 

 

Three Months Ended March 31, 2018

 

 

Three Months Ended March 31, 2017

 

Segment operating income (loss)

 

$

14.0

 

 

$

(13.6

)

Unallocated corporate expenses

 

 

(9.6

)

 

 

(9.1

)

Restructuring expense

 

 

(2.2

)

 

 

(0.2

)

Other operating income (expense) - net

 

 

(0.5

)

 

 

1.1

 

Total operating income (loss)

 

$

1.7

 

 

$

(21.8

)

 


Net sales by geographic area for the three months ended March 31, 2018 and 2017 are as follows (in millions):

 

 

Three Months Ended March 31, 2018

 

 

Three Months Ended March 31, 2017

 

United States

 

$

144.3

 

 

$

109.3

 

Other North America

 

 

7.8

 

 

 

6.5

 

Europe

 

 

150.3

 

 

 

120.3

 

Asia

 

 

20.3

 

 

 

24.3

 

Middle East

 

 

33.8

 

 

 

24.1

 

Central and South America

 

 

9.9

 

 

 

4.2

 

Africa

 

 

3.9

 

 

 

5.0

 

Caribbean

 

 

0.9

 

 

 

0.5

 

Australia

 

 

14.9

 

 

 

11.6

 

Total

 

$

386.1

 

 

$

305.8

 

 

Net sales by product for the three months ended March 31, 2018 and 2017 are as follows (in millions):

 

 

Three Months Ended March 31, 2018

 

 

Three Months Ended March 31, 2017

 

Cranes

 

$

307.5

 

 

$

228.4

 

Aftermarket parts and other*

 

 

78.6

 

 

 

77.4

 

Total net sales

 

$

386.1

 

 

$

305.8

 

*Other revenue consists of revenue related to miscellaneous CraneCare services such as trainings and field    service work.

v3.8.0.1
Fair Value of Financial Instruments
3 Months Ended
Mar. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

14.  Fair Value of Financial Instruments

As of March 31, 2018 and December 31, 2017, there was an immaterial amount of financial assets and liabilities that were accounted for at 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 fair value of the Company's 2021 Notes was approximately $290.6 million and $297.3 million as of March 31, 2018 and December 31, 2017, respectively. See Note 7, “Debt,” for a description of the debt instruments and their related carrying values.

ASC Topic 820-10, “Fair Value Measurement,” 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 the fair value of its 2021 Notes based on quoted market prices; because these markets are typically thinly traded, the assets and/or 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 8, “Accounts Receivable Securitization”) and short-term variable debt, including any amounts outstanding under the ABL Revolving Credit Facility, approximate fair value, without being discounted as of March 31, 2018 and December 31, 2017, 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 the Company’s operating results and financial position. When deemed appropriate, the Company attempts to minimize 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. Foreign currency exchange, commodity and interest rate contracts are valued through an independent valuation source that 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.

v3.8.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2018
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

15.  Commitments and Contingencies

 

Product liability reserves in the Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017 were $22.4 million and $20.8 million, respectively, and were estimated using a combination of actual case reserves and actuarial methods. Based on the Company’s experience in defending product liability claims, management believes the current reserves are adequate for estimated case resolutions on aggregate self-insured claims and insured claims. Any recoveries from insurance carriers are dependent upon the legal sufficiency of claims and solvency of insurance carriers.

The Company is involved in various legal actions arising out of the normal course of business, which, taking into account the liabilities accrued and legal counsel’s evaluation of such actions, in the opinion of management, the ultimate resolution, individually and in the aggregate, is not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

It is reasonably possible that the estimates for warranty costs, product liability, environmental remediation, asbestos-related claims and other various legal matters may change based upon new information that may arise or matters that are beyond the scope of the Company’s historical experience. Presently, there are no reliable methods to estimate the amount of any such potential changes.

v3.8.0.1
Guarantees
3 Months Ended
Mar. 31, 2018
Guarantees [Abstract]  
Guarantees

16.  Guarantees

The Company periodically enters into transactions with customers that provide for residual value guarantees and buyback commitments.  These initial transactions are recorded as deferred revenue and are amortized to income on a straight-line basis over a period equal to that of the customer’s third-party financing agreement.  The deferred revenue included in other current and non-current liabilities as of March 31, 2018 and December 31, 2017 was $32.2 million and $29.7 million, respectively.  The total amount of residual value guarantees and buyback commitments given by the Company and outstanding as of March 31, 2018 and December 31, 2017 was $26.9 million and $28.2 million, respectively.  These amounts are not reduced for amounts the Company would recover from the repossession and subsequent resale of the units.  The residual value guarantees and buyback commitments expire at various times through 2021.

As of March 31, 2018 and December 31, 2017, the Company had reserved $35.2 million for warranty claims included in product warranties, as well as other non-current liabilities in the Condensed Consolidated Balance Sheets. In the normal course of business, the Company provides its customers a warranty covering workmanship, and in some cases materials, on products manufactured by the Company. Such warranty generally provides that products will be free from defects for periods ranging from 12 to 60 months. If a product fails to comply with the Company’s warranty, the Company may be obligated, at its expense, to correct any defect by repairing or replacing such defective products. The Company provides for an estimate of costs that may be incurred under its warranty at the time product revenue is recognized. These costs primarily include labor and materials, as necessary, associated with repair or replacement. The primary factors that affect the Company’s warranty liability include the number of units shipped and historical and anticipated warranty claims. As these factors are impacted by actual experience and future expectations, the Company assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary. Below is a table summarizing the warranty activity for the three months ended March 31, 2018 and the year ended December 31, 2017:

 

($ in millions)

 

Three Months Ended

March 31, 2018

 

 

Year Ended December 31, 2017

 

Balance at beginning of period

 

$

35.2

 

 

$

28.6

 

Accruals for warranties issued during the period

 

 

5.4

 

 

 

34.6

 

Settlements made (in cash or in kind) during the

   period

 

 

(5.8

)

 

 

(29.9

)

Currency translation

 

 

0.4

 

 

 

1.9

 

Balance at end of period

 

$

35.2

 

 

$

35.2

 

 

v3.8.0.1
Employee Benefit Plans
3 Months Ended
Mar. 31, 2018
Compensation And Retirement Disclosure [Abstract]  
Employee Benefit Plans

17.  Employee Benefit Plans

The Company provides certain pension, health care and death benefits to eligible retirees and their dependents. The funding mechanism for such benefits varies based on the country where the retiree resides and receives benefits.  Eligibility for pension coverage is based on retirement qualifications. Healthcare benefits may be subject to deductibles, co-payments and other limitations. The Company reserves the right to modify benefits unless a government agency in a certain country prohibits it from doing so.

 

Effective July 1, 2017, The Manitowoc Company, Inc. Post-65 Retiree Health Plan (“the Plan”) was amended.  Eligible retirees and their spouses were provided access to a Retiree Health Exchange where they may purchase Medicare Supplement Plans, including Medicare Advantage and Medigap plan prescription drug coverage.  The enrollment and payment for this coverage is facilitated by an outside third-party, and these plans have no affiliation with the Company.  To assist retirees with premium and out-of-pocket expenses they incur, the Company funds a Health Reimbursement Account (“HRA”) for each enrolled retiree.   The value of the HRA is based on the plan type and premium cost for each specific retiree before the Plan was amended.

The components of periodic benefit costs for the three months ended March 31, 2018 and March 31, 2017 are as follows:

 

 

 

Three Months Ended March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

Postretirement

 

 

 

U.S.

 

 

Non-U.S.

 

 

Health and

 

 

 

Pension

 

 

Pension

 

 

Other

 

($ in millions)

 

Plans

 

 

Plans

 

 

Plans

 

Service cost - benefits earned during the period

 

$