MANITOWOC CO INC, 10-K filed on 2/13/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Jan. 31, 2019
Jun. 29, 2018
Document And Entity Information [Abstract]      
Entity Registrant Name MANITOWOC CO INC    
Entity Central Index Key 0000061986    
Trading Symbol MTW    
Document Type 10-K    
Document Period End Date Dec. 31, 2018    
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 Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 909
Entity Shares Outstanding   35,603,164  
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
v3.10.0.1
Consolidated Statements of Operations - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Income Statement [Abstract]      
Net sales $ 1,846.8 $ 1,581.3 $ 1,613.1
Cost of sales 1,518.7 1,299.4 1,359.8
Gross profit 328.1 281.9 253.3
Operating costs and expenses:      
Engineering, selling and administrative expenses 251.6 245.3 270.4
Asset impairment expense 82.6 0.1 96.9
Amortization of intangible assets 0.3 0.8 3.0
Restructuring expense 12.9 27.2 23.4
Other expense 0.0 0.1 2.6
Total operating costs and expenses 347.4 273.5 396.3
Operating income (loss) (19.3) 8.4 (143.0)
Other expense:      
Interest expense (39.1) (39.2) (39.6)
Amortization of deferred financing fees (1.8) (1.9) (2.2)
Loss on debt extinguishment 0.0 0.0 (76.3)
Other expense — net (11.5) (6.8) (7.0)
Total other expense (52.4) (47.9) (125.1)
Loss from continuing operations before income taxes (71.7) (39.5) (268.1)
Provision (benefit) for income taxes (4.8) (49.5) 100.5
Income (loss) from continuing operations (66.9) 10.0 (368.6)
Discontinued operations:      
Loss from discontinued operations, net of income taxes of $0.0, $0.0 and $0.6, respectively (0.2) (0.6) (7.2)
Net income (loss) (67.1) 9.4 (375.8)
Amounts attributable to the Manitowoc common shareholders:      
Income (loss) from continuing operations (66.9) 10.0 (368.6)
Loss from discontinued operations, net of income taxes (0.2) (0.6) (7.2)
Net income (loss) attributable to Manitowoc common shareholders $ (67.1) $ 9.4 $ (375.8)
Basic income (loss) per common share:      
Income (loss) from continuing operations attributable to Manitowoc common shareholders (in dollars per share) $ (1.88) $ 0.28 $ (10.70)
Loss from discontinued operations attributable to Manitowoc common shareholders (0.01) (0.02) (0.21)
Basic income (loss) per share attributable to Manitowoc common shareholders (in dollars per share) (1.89) 0.26 (10.91)
Diluted income (loss) per common share:      
Income (loss) from continuing operations attributable to Manitowoc common shareholders (in dollars per share) (1.88) 0.28 (10.70)
Loss from discontinued operations attributable to Manitowoc common shareholders (0.01) (0.02) (0.21)
Diluted income (loss) per share attributable to Manitowoc common shareholders (in dollars per share) $ (1.89) $ 0.26 $ (10.91)
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Consolidated Statements of Operations (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Income Statement [Abstract]      
Loss from discontinued operations, income taxes $ 0.0 $ 0.0 $ 0.6
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Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]      
Net income (loss) $ (67.1) $ 9.4 $ (375.8)
Other comprehensive income (loss), net of tax:      
Foreign currency translation adjustments (27.7) 58.4 (20.4)
Unrealized income (loss) on derivatives, net of income tax benefit of $0.0, $0.0 and $0.9, respectively (0.4) 0.4 1.4
Employee pension and postretirement benefit costs, net of income tax expense (benefit) of $1.4, $4.2 and $(0.2), respectively 8.9 6.7 (4.1)
Total other comprehensive income (loss), net of tax (19.2) 65.5 (23.1)
Comprehensive income (loss) $ (86.3) $ 74.9 $ (398.9)
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Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]      
Unrealized income (loss) on derivatives, net of income tax benefit $ 0.0 $ 0.0 $ 0.9
Employee pension and post retirement benefits costs, net of income tax expense (benefit) $ 1.4 $ 4.2 $ (0.2)
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Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Current Assets:    
Cash, cash equivalents and restricted cash $ 140.3 $ 123.0
Accounts receivable, less allowances of $10.3 and $10.9, respectively 171.8 179.2
Inventories — net 453.1 400.6
Notes receivable — net 19.4 31.1
Other current assets 58.3 56.5
Total current assets 842.9 790.4
Property, plant and equipment — net 288.9 303.7
Goodwill 232.8 321.3
Other intangible assets — net 118.1 122.1
Other non-current assets 59.2 70.3
Total assets 1,541.9 1,607.8
Current Liabilities:    
Accounts payable and accrued expenses 425.2 375.8
Short-term borrowings 6.4 8.2
Product warranties 39.1 35.5
Customer advances 9.6 12.7
Other liabilities 16.3 20.8
Total current liabilities 496.6 453.0
Non-Current Liabilities:    
Long-term debt 266.7 266.7
Deferred income taxes 5.7 13.0
Pension obligations 85.7 88.9
Postretirement health and other benefit obligations 18.3 25.5
Long-term deferred revenue 25.2 20.8
Other non-current liabilities 42.4 62.4
Total non-current liabilities 444.0 477.3
Commitments and contingencies (Note 18) 0.0
Total stockholders' equity:    
Preferred stock (3,500,000 shares authorized of $.01 par value; none outstanding)
Common stock (75,000,000 shares authorized, 40,793,983 shares issued, 35,588,833 and 35,273,864 shares outstanding, respectively) 1.4 1.4
Additional paid-in capital 583.8 576.6
Accumulated other comprehensive loss (116.6) (97.4)
Retained earnings 189.6 256.7
Treasury stock, at cost (5,205,150 and 5,520,119 shares, respectively) (56.9) (59.8)
Total stockholders’ equity 601.3 677.5
Total liabilities and equity $ 1,541.9 $ 1,607.8
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Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Statement Of Financial Position [Abstract]    
Accounts Receivable, allowances (in dollars) $ 10.3 $ 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) 35,588,833 35,273,864
Treasury stock (in shares) 5,205,150 5,520,119
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Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash Flows From Operating Activities      
Net income (loss) $ (67.1) $ 9.4 $ (375.8)
Adjustments to reconcile net (loss) income to cash (used for) provided by operating activities of continuing operations:      
Asset impairment expense 82.6 0.1 96.9
Loss from discontinued operations, net of income taxes 0.2 0.6 7.2
Depreciation expense 36.1 38.1 45.6
Amortization of intangible assets 0.3 0.8 3.0
Amortization of deferred financing fees 1.8 1.9 2.2
Deferred income tax (benefit) - net (11.1) (44.1) 101.4
Noncash loss on early extinguishment of debt   0.0 15.4
Loss (gain) on sale of property, plant and equipment 0.9 0.1 1.1
Stock-based compensation expense and other 7.4 8.5 (0.7)
Changes in operating assets and liabilities, excluding the effects of business divestitures:      
Accounts receivable (553.4) (435.5) (435.5)
Inventories (72.7) 51.1 52.7
Notes receivable 18.6 18.8 32.2
Other assets 2.7 4.0 (6.9)
Accounts payable 56.5 27.1 (105.8)
Accrued expenses and other liabilities (15.6) (5.2) (9.3)
Net cash used for operating activities of continuing operations (512.8) (324.3) (576.3)
Net cash used for operating activities of discontinued operations (0.2) (0.6) (49.9)
Net cash used for operating activities (513.0) (324.9) (626.2)
Cash Flows From Investing Activities      
Capital expenditures (31.7) (28.9) (45.9)
Proceeds from sale of property, plant and equipment 13.0 7.0 8.4
Cash receipts on sold accounts receivable 553.1 402.8 453.9
Other   0.4 0.2
Net cash provided by investing activities of continuing operations 534.4 381.3 416.6
Net cash used for investing activities of discontinued operations   0.0 (2.4)
Net cash provided by investing activities 534.4 381.3 414.2
Cash Flows From Financing Activities      
Payments on long-term debt (3.8) (10.9) (1,389.0)
Proceeds from long-term debt   0.2 272.1
Payments on notes financing - net   (4.7) (8.4)
Debt issuance costs   0.0 (8.9)
Exercises of stock options including windfall tax benefits 2.5 5.7 9.4
Dividend from spun-off subsidiary   0.0 1,361.7
Cash transferred to spun-off subsidiary   0.0 (17.7)
Net cash provided by (used for) financing activities of continuing operations (1.3) (9.7) 219.2
Net cash provided by financing activities of discontinued operations   0.0 0.2
Net cash provided by (used for) financing activities (1.3) (9.7) 219.4
Effect of exchange rate changes on cash (2.8) 2.4 0.9
Net increase (decrease) in cash, cash equivalents and restricted cash 17.3 49.1 8.3
Cash, cash equivalents and restricted cash at beginning of period, including cash of discontinued operations of $0.0, $0.0 and $31.9, respectively 123.0 73.9 65.6
Cash, cash equivalents and restricted cash at end of period, including cash of discontinued operations of $0.0, $0.0, and $0.0, respectively 140.3 123.0 73.9
Supplemental Cash Flow Information      
Interest paid 36.8 37.0 49.6
Income taxes (refunded) paid $ 2.6 $ (7.6) $ 8.9
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Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement Of Cash Flows [Abstract]        
Cash of discontinued operations $ 0.0 $ 0.0 $ 0.0 $ 31.9
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Consolidated Statements of Equity - USD ($)
$ in Millions
Total
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Loss
Retained Earnings
Treasury Stock
Performance Shares
Common Stock
As Reported
Retained Earnings
Restatement Adjustment
Retained Earnings
Balance at beginning of year at Dec. 31, 2015   $ 1.4 $ 558.0 $ (207.8) $ 562.3 $ (71.6)   $ 539.5 $ 22.8
Balance (in shares) at Dec. 31, 2015   34,154,290              
Increase (Decrease) in Stockholders' Equity                  
Stock options exercised and issuance of other stock awards     0.3     8.7      
Distribution of Spun-off subsidiary       68.0 60.8        
Stock options exercised (in shares)   687,619              
Restricted stock, net (in shares)   (9,112)              
Performance shares issued (in shares)             127,506    
Stock-based compensation     9.3            
Other comprehensive income (loss)       (23.1)          
Net income (loss) $ (375.8)       (375.8)        
Balance (in shares) at Dec. 31, 2016   34,960,303              
Balance at end of year at Dec. 31, 2016 590.5 $ 1.4 567.6 (162.9) 247.3 (62.9)   247.3  
Increase (Decrease) in Stockholders' Equity                  
Stock options exercised and issuance of other stock awards     2.0     3.1      
Stock options exercised (in shares)   262,118              
Restricted stock, net (in shares)   23,566              
Performance shares issued (in shares)             27,877    
Stock-based compensation     7.0            
Other comprehensive income (loss)       65.5          
Net income (loss) 9.4       9.4        
Balance (in shares) at Dec. 31, 2017   35,273,864              
Balance at end of year at Dec. 31, 2017 677.5 $ 1.4 576.6 (97.4) 256.7 (59.8)   $ 256.7  
Increase (Decrease) in Stockholders' Equity                  
Stock options exercised and issuance of other stock awards     (1.0)     2.9      
Stock options exercised (in shares)   95,019              
Restricted stock, net (in shares)   165,404              
Performance shares issued (in shares)             54,546    
Stock-based compensation     8.2            
Other comprehensive income (loss)       (19.2)          
Net income (loss) (67.1)       (67.1)        
Balance (in shares) at Dec. 31, 2018   35,588,833              
Balance at end of year at Dec. 31, 2018 $ 601.3 $ 1.4 $ 583.8 $ (116.6) $ 189.6 $ (56.9)      
v3.10.0.1
Company and Basis of Presentation
12 Months Ended
Dec. 31, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Company and Basis of Presentation

1. Company and Basis of Presentation

The Manitowoc Company, Inc. (“Manitowoc”, “MTW” and the “Company”) was founded in 1902 and has over a 116-year tradition of providing high-quality, customer-focused products and support services to its markets and for the year ended December 31, 2018, the Company had net sales of approximately $1.8 billion. Manitowoc is one of the world’s leading providers of engineered lifting solutions. 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, industrial, commercial construction, power and utilities, infrastructure and residential construction end markets. Additionally, its Manitowoc Crane Care offering leverages Manitowoc's installed base of approximately 144,000 cranes to provide aftermarket parts and services to enable its customers to manage their fleets more 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, Manitowoc 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 11270 West Park Place Suite 1000, Milwaukee, Wisconsin 53224.

During the first quarter of fiscal 2016, the Board of Directors of Manitowoc 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 Manitowoc 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.

See Note 4, “Discontinued Operations,” for further details concerning the above transaction being reported as discontinued operations.

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 (“GAAP”) 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.

Certain prior period amounts have been reclassified to conform to the current period presentation. All 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.

 

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Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

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

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 net realizable value. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs. The Company determines inventory value using the first-in, first-out method.

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

 

20 years

Engineering drawings

 

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 accelerated depreciation methods for income tax purposes.

Property, plant and equipment are depreciated over the following estimated useful lives:

 

 

 

Years

Building and improvements

 

2 - 43

Machinery, equipment and tooling

 

1 - 21

Furniture and fixtures

 

1 - 10

Computer hardware and software

 

1 - 10

Rental cranes

 

5 - 15

 

Property, plant and equipment also includes 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 made a buyback commitment that the customer has a significant economic incentive of exercising. 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 to the net book value at the end of the lease period which equals the buyback amount. The amount of buyback and rental equipment included in property, plant and equipment amounted to $49.4 million and $54.3 million, net of accumulated depreciation, at December 31, 2018 and 2017, 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.

The Company tests for impairment of goodwill annually in the fourth quarter. To test goodwill, 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, 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 standard manufacturing 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. When a customer purchases an extended warranty, revenue is recognized over the life of the contract. Costs related to the extended warranty are expensed as incurred.

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 with 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 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 monthly exchange rate throughout 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 2018, 2017 and 2016, 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.”

Research and Development Research and development costs are charged to expense as incurred and amounted to $35.2 million, $37.9 million and $44.5 million for the years ended December 31, 2018, 2017 and 2016, 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.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Tax Reform Act”). Further information on the tax impacts of the Tax Reform Act is included in Note 13, “Income Taxes.”

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 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 August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15 “Intangibles – Goodwill and Other – Internal-use Software (Subtopic 250-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for annual periods beginning after December 15, 2019. The Company is evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14 “Compensation – Retirement Benefits – Defined Benefit Plans – General (subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans,” which removed disclosures and added disclosures. The standard is effective for annual periods beginning after December 15, 2020 with early adoption permitted. The Company adopted this ASU as of December 31, 2018. The updated disclosures are included in Note 21, “Employee Benefit Plans.”

In June 2018, the FASB issued ASU No. 2018-7 “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment Accounting,” which aligns the accounting for nonemployee share-based payments with employee share-based payments under Topic 718. The standard is effective for annual periods beginning after December 15, 2018, including interim periods therein. The adoption of the ASU will not have a material impact on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12 “Targeted Improvements to Accounting for Hedging Activities,” which amends ASC 815, “Derivatives and Hedging.” The purpose of this ASU is to better align a company’s risk management activities and financial reporting for hedging relationships, simplify the hedge accounting requirements, and improve the disclosures of hedging arrangements. The standard is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The adoption of the ASU will not have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09 “Compensation - Stock Compensation (Topic 718):  Scope of Modification Accounting,” to provide clarity and reduce both diversity in practice and cost complexity when applying the guidance in Topic 718 to a change to the terms and conditions of a stock-based payment award. ASU 2017-09 also provides guidance about the types of changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting in accordance with Topic 718. The standard was effective for annual periods beginning after December 15, 2017, and for interim periods therein. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08 “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20):  Premium Amortization on Purchased Callable Debt Securities,” to shorten the amortization period for the premium to the earliest call date instead of the contractual life of the instrument. This new guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with early adoption permitted. Entities will be required to apply the new guidance using the modified retrospective method with a cumulative-effect adjustment to retained earnings upon the adoption date. The adoption of this ASU will not have a material impact on the Company's consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07 “Compensation - Retirement Benefits (Topic 715):  Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.”  This ASU amends ASC 715, “Compensation – Retirement Benefits,” to require employers that present a measure of operating income in their statement of income to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses (together with other employee compensation costs). The other components of net benefit cost, including amortization of prior service cost/credit and settlement and curtailment effects, are to be included in nonoperating expenses. This ASU also allows only the service cost component of net benefit cost to be capitalized (for example, as a cost of inventory). The amendments in this ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets, and is effective for public companies for fiscal years beginning after December 15, 2017. As a result of the adoption of ASU No. 2017-07, the Company reclassified approximately $7.3 million and $10.3 million to other income (expense) – net from engineering, selling, and administrative expense on the Consolidated Statement of Operations for the years ended December 31, 2017 and 2016, respectively.

In November 2016, the 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 was effective for fiscal years beginning after December 15, 2017. The adoption of ASU No. 2016-18 resulted in a change in certain disclosures within the Consolidated Statement of Cash Flows, including cash flows from investing activities and total cash, cash equivalents and restricted cash.

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 2016-16 was effective for fiscal years beginning after December 15, 2017. The adoption of this ASU did not have a material impact on the Company’s 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 was effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. As a result of the adoption of ASU No. 2016-15, the Company reclassified $402.8 million and $453.9 million of operating cash flows to investing cash flows for the years ended December 31, 2017 and 2016, respectively.

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, ASU 2016-20, and ASU 2017-05. The new revenue recognition guidance was issued to provide a single, comprehensive revenue recognition model for all contracts with customers. Under the new guidance, an entity will recognize revenue to depict the transfer of promised goods or a service to a customer at an amount that the entity expects to be entitled to in exchange for those goods or services. A five-step model was introduced for an entity to apply when recognizing revenue. The new guidance also included enhanced disclosure requirements and was effective January 1, 2018. Entities had 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. The Company has adopted the new guidance effective January 1, 2018 utilizing the modified retrospective approach. Refer to Note 3, “Revenues” for further details.

 

In February 2016, the FASB issued ASU 2016-02 - “Leases”, which is intended to improve financial reporting on leasing transactions. This was further clarified with technical corrections issued within ASU 2018-10 and ASU 2018-11. 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 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is adopting this guidance effective January 1, 2019 using the modified retrospective approach. The adoption of this ASU will not have a material impact on the Company’s Consolidated Statement of Operations and Consolidated Statement of Cash Flows. The adoption of this ASU will result in an approximate $49.0 million to $53.0 million increase in right of use assets, $10.0 million to $13.0 million increase in short-term lease obligations and $38.0 million to $41.0 million increase in long-term lease obligations on the Consolidated Balance Sheet as it relates to operating leases. However, this estimated range is subject to change as the Company finalizes its implementation. As part of the adoption of this accounting standard, the Company plans to use the package of practical expedients which does not require the Company to reassess the lease classification for any expired or existing leases upon adoption of the standard. The Company will implement enhanced internal controls and a software solution to comply with the requirements of the standard.

v3.10.0.1
Revenues
12 Months Ended
Dec. 31, 2018
Revenue From Contract With Customer [Abstract]  
Revenues

3. Revenues

 

Adoption of Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”

 

On January 1, 2018, the Company adopted ASC 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 ASC Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 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 ASC 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 Condensed Consolidated Statement of Operations.

 

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 17, “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, however the variable consideration is not material to the overall contract with the customer. Revenue is earned under these contracts when control of the product 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 a buyback 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 ASC 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. Refer to Note 19, “Guarantees” for additional information.

 

Given the nature of the Company’s products, from time to time, the customer may request that the product be held until a delivery location is identified. 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 product 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

 

Training 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 revenue when cash payments are received or due in advance of performance, including amounts which are refundable. The table below shows the change in the customer advances balance for the year ended December 31, 2018 which is included in current liabilities in the Consolidated Balance Sheet.

 

 

 

Customer Advances

Balance as of

January 1, 2018

 

 

Cash Received in Advance of Satisfying Performance Obligation

 

 

Revenue Recognized

 

 

Currency Translation

 

 

Customer Advances

Balance as of December 31, 2018

 

Total

 

$

12.7

 

 

$

96.5

 

 

$

98.5

 

 

$

1.1

 

 

$

9.6

 

 

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 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.

v3.10.0.1
Discontinued Operations
12 Months Ended
Dec. 31, 2018
Discontinued Operations And Disposal Groups [Abstract]  
Discontinued Operations

4. Discontinued Operations

On March 4, 2016, Manitowoc completed the Spin-Off. The financial results of MFS are presented as 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 period and do not include corporate overhead allocations:

Major classes of line items constituting earnings from discontinued operations before income taxes related to MFS

 

 

 

2016

 

Net sales

 

$

219.6

 

 

 

 

 

 

Cost of sales

 

 

141.5

 

Engineering, selling and administrative expenses

 

 

48.3

 

Amortization of intangible assets

 

 

5.2

 

Asset impairment expense

 

 

 

Restructuring expense

 

 

0.3

 

Separation expense

 

 

27.7

 

Other

 

 

 

Total operating costs and expenses

 

 

223.0

 

Operating loss

 

 

(3.4

)

Other expense

 

 

(2.2

)

Loss from discontinued operations before income taxes

 

 

(5.6

)

Provision for income taxes

 

 

0.6

 

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

 

$

(6.2

)

 

(1)

For the year ended December 31, 2016, the Company recorded net losses of $(1.0) million 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, 2018 and 2017.

Costs recorded by the Company during the twelve months ended December 31, 2018 and 2017 related to the Spin-Off were not material. During the twelve months ended December 31, 2016, the Company recorded $27.7 million of costs related to the Spin-Off. These costs consisted primarily of professional and consulting fees and were included in the results of discontinued operations.

v3.10.0.1
Fair Value of Financial Instruments
12 Months Ended
Dec. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

5. Fair Value of Financial Instruments

The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value as of December 31, 2018 by level within the fair value hierarchy. At 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.

 

 

 

Fair Value as of December 31, 2018

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange contracts

 

$

 

 

$

0.1

 

 

$

 

 

$

0.1

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange contracts

 

$

 

 

$

1.8

 

 

$

 

 

$

1.8

 

 

The fair value of the Company’s 12.750% senior secured second lien notes due 2021 (the “2021 Notes”) was approximately $278.1 million and $297.3 million as of December 31, 2018 and 2017, respectively.

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 2021 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, 2018 and 2017 due to the short-term nature of these instruments.

As a result of the Company’s 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.

v3.10.0.1
Inventories
12 Months Ended
Dec. 31, 2018
Inventory Disclosure [Abstract]  
Inventories

6. Inventories

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

 

 

 

2018

 

 

2017

 

Raw materials

 

$

159.2

 

 

$

122.0

 

Work-in-process

 

 

102.0

 

 

 

98.9

 

Finished goods

 

 

248.0

 

 

 

227.7

 

Total inventories — gross

 

 

509.2

 

 

 

448.5

 

Excess and obsolete inventory reserve

 

 

(56.1

)

 

 

(47.9

)

Net inventories

 

$

453.1

 

 

$

400.6

 

 

v3.10.0.1
Notes Receivable
12 Months Ended
Dec. 31, 2018
Receivables [Abstract]  
Notes Receivable

7. Notes Receivable

The Company has notes receivable balances that are classified as current or long-term based on the timing of the amounts due. Long-term notes receivable are included within other non-current assets on the Consolidated Balance Sheet. Current and long-term notes receivable balances primarily relate to the Company's captive finance entity in China. The Company also has a long-term note receivable balance related to the 2014 sale of Manitowoc Dong Yue. During 2018, the Company recorded $3.6 million related to the write down of the note with Manitowoc Dong Yue to the anticipated collection amount based on current expectations. As of December 31, 2018, the Company had current and long-term notes receivable in the amount of $19.4 million and $17.0 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.

v3.10.0.1
Property, Plant and Equipment
12 Months Ended
Dec. 31, 2018
Property Plant And Equipment [Abstract]  
Property, Plant and Equipment

8. Property, Plant and Equipment

The components of property, plant and equipment at December 31, 2018 and 2017 are summarized as follows:

 

 

 

2018

 

 

2017

 

Land

 

$

24.1

 

 

$

25.4

 

Building and improvements

 

 

195.3

 

 

$

196.4

 

Machinery, equipment and tooling

 

 

269.4

 

 

$

263.6

 

Furniture and fixtures

 

 

16.4

 

 

$

15.6

 

Computer hardware and software

 

 

117.1

 

 

$

114.4

 

Rental cranes

 

 

84.0

 

 

$

90.2

 

Construction in progress

 

 

9.6

 

 

$

17.3

 

Total cost

 

 

715.9

 

 

 

722.9

 

Less accumulated depreciation

 

 

(427.0

)

 

 

(419.2

)

Property, plant and equipment-net

 

$

288.9

 

 

$

303.7

 

 

In the years ended December 31, 2018 and 2017, the Company recorded $0.4 million and $0.1 million in asset impairment charges, respectively.

 

Assets Held for Sale

 

The Company has classified the Manitowoc, Wisconsin manufacturing building as held for sale on the Consolidated Balance Sheet for the year ended December 31, 2018. The Company classified the Manitowoc, Wisconsin manufacturing building and Corporate headquarters as held for sale on the Consolidated Balance Sheet for the year ended December 31, 2017. The net book value of assets held for sale were $12.9 million and $16.2 million as of December 31, 2018 and 2017, respectively, and are included in other current assets on the balance sheet. The decrease in assets held for sale is related to the sale of the Corporate headquarters during 2018.

 


These assets were carried at the lesser of the original cost or fair value, less the estimated costs to sell. The fair values were determined by the Company to be Level 3 (see Note 5, “Fair Value of Financial Instruments,” for the definition of Level 3 inputs) under the fair value hierarchy and were estimated based on broker quotes and internal expertise related to current marketplace conditions.

v3.10.0.1
Goodwill and Other Intangible Assets
12 Months Ended
Dec. 31, 2018
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets

9. Goodwill and Other Intangible Assets

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

 

 

 

Cranes

 

 

Americas

 

 

Europe and Africa ("EURAF")

 

 

Middle East and Asia Pacific ("MEAP")

 

Net 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

 

Net balance as of December 31, 2017

 

 

 

 

 

166.5

 

 

 

85.9

 

 

 

68.9

 

Foreign currency impact

 

 

 

 

 

 

 

 

(3.7

)

 

 

(2.6

)

Goodwill impairment - October 31, 2018

 

 

 

 

 

 

 

 

(82.2

)

 

 

 

Net balance as of December 31, 2018

 

$

 

 

$

166.5

 

 

$

 

 

$

66.3

 

 

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.

The annual goodwill and indefinite-lived assets impairment testing was performed during the fourth quarter. Based on the results of that test, the EURAF reporting unit recorded a non-cash goodwill impairment charge of $82.2 million. The goodwill impairment charge resulted from a reduction in the estimated fair value of the reporting unit based on the continued decline in the Company’s equity market capitalization and lower forecasted results in the region. The Company will continue to monitor changes in circumstances and test more frequently if those changes indicate that assets might be impaired.

A considerable amount of management judgment and assumptions are required in performing the impairment tests as it relates to revenue growth rates, projected operating income, discount rates and royalty rates. While the Company believes the judgments and assumptions are reasonable, different assumptions could change the estimated fair value and, therefore, additional 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, 2018 and 2017.

 

 

 

December 31, 2018

 

 

December 31, 2017

 

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

Amount

 

 

Net

Book

Value

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

Amount

 

 

Net

Book

Value

 

Trademarks and tradenames

 

$

96.7

 

 

$

 

 

$

96.7

 

 

$

99.7

 

 

$

 

 

$

99.7

 

Customer relationships

 

 

10.1

 

 

 

(8.4

)

 

 

1.7

 

 

 

10.7

 

 

 

(8.7

)

 

 

2.0

 

Patents

 

 

29.8

 

 

 

(29.0

)

 

 

0.8

 

 

 

30.6

 

 

 

(29.7

)

 

 

0.9

 

Engineering drawings

 

 

10.5

 

 

 

(10.5

)

 

 

 

 

 

10.8

 

 

 

(10.7

)

 

 

0.1

 

Distribution network

 

 

19.0

 

 

 

(0.1

)

 

 

18.9

 

 

 

19.5

 

 

 

(0.1

)

 

 

19.4

 

Net balance

 

$

166.1

 

 

$

(48.0

)

 

$

118.1

 

 

$

171.3

 

 

$

(49.2

)

 

$

122.1

 

 

Amortization of intangible assets for the years ended December 31, 2018, 2017 and 2016 was $0.3 million, $0.8 million and $3.0 million, respectively. Excluding the impact of any future acquisitions, divestitures or impairments, the Company anticipates amortization will be approximately $0.3 million per year through 2022.

v3.10.0.1
Accounts Payable and Accrued Expenses
12 Months Ended
Dec. 31, 2018
Payables And Accruals [Abstract]  
Accounts Payable and Accrued Expenses

10. Accounts Payable and Accrued Expenses

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

 

 

 

2018

 

 

2017

 

Trade accounts payable

 

$

249.2

 

 

$

204.9

 

Employee-related expenses

 

 

59.5

 

 

 

59.7

 

Accrued vacation

 

 

24.3

 

 

 

23.8

 

Miscellaneous accrued expenses

 

 

92.2

 

 

 

87.4

 

Total accounts payable and accrued expenses

 

$

425.2

 

 

$

375.8

 

 

v3.10.0.1
Debt
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Debt

11. Debt

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

 

 

 

2018

 

 

2017

 

Revolving credit facility

 

$

 

 

$

 

Senior notes due 2021

 

 

254.2

 

 

 

251.9

 

Other

 

 

21.2

 

 

 

26.1

 

Deferred financing costs

 

 

(2.3

)

 

 

(3.1

)

Total debt

 

 

273.1

 

 

 

274.9

 

Less current portion and short-term borrowings

 

 

(6.4

)

 

 

(8.2

)

Long-term debt

 

$

266.7

 

 

$

266.7

 

 

The balance sheet values of the 2021 Notes as of December 31, 2018 and 2017 are not equal to the face value of the 2021 Notes, $260.0 million, because of original issue discounts (“OID”) included in the applicable balance sheet values.

As of December 31, 2018, the Company had outstanding $21.2 million of other indebtedness that has a weighted-average interest rate of approximately 5.3%. 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 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, 2018, the Company did not have an outstanding balance on the ABL Revolving Credit Facility. During the year ended December 31, 2018, the highest daily borrowing was $47.0 million and the average borrowing was $7.0 million, while the average annual interest rate was 3.99%. The interest rate of the ABL Revolving Credit Facility fluctuates based on excess availability. As of December 31, 2018, the spreads for London interbank offer rate and prime rate borrowings were 1.50% and 0.50%, respectively, with excess availability of approximately $96.5 million, which represents revolver borrowing capacity of $107.8 million less U.S. letters of credit outstanding of $11.3 million.

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 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 indenture governing the 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.

The aggregate scheduled maturities of outstanding debt obligations in subsequent years are as follows:

 

Year

 

 

 

 

2019

 

$

6.4

 

2020

 

 

4.2

 

2021

 

 

269.4

 

2022

 

 

0.6

 

2023

 

 

 

Thereafter

 

 

0.7

 

Total

 

$

281.2

 

 

 

The table of scheduled maturities above does not agree to the Company’s total debt as of December 31, 2018 as shown on the Consolidated Balance Sheet due to $5.8 million of OID and $2.3 million of deferred financing costs.

As of December 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. 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.

v3.10.0.1
Accounts Receivable Securitization and Other Factoring Arrangements
12 Months Ended
Dec. 31, 2018
Transfers And Servicing [Abstract]  
Accounts Receivable Securitization and Other Factoring Arrangements

12. Accounts Receivable Securitization and Other Factoring Arrangements

The Company has various U.S. and Non-U.S. accounts receivable financing programs. The Company accounts for transactions under these arrangements 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. The commitment size of the RPA is $75.0 million.

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.


The Purchaser receives ownership of the pool of receivables in each instance. New receivables are purchased by MTW Funding and resold to the Purchaser to replace 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 receivables sold to the Purchaser and being serviced by the Company totaled $863.5 million and $691.0 million as of December 31, 2018 and 2017, respectively. Cash proceeds received from customers related to the receivables previously sold for the years ended December 31, 2018 and 2017 were $781.6 million and $609.8 million, respectively.

Sales of trade receivables under the program reflected as a reduction of accounts receivable in the accompanying Consolidated Balance Sheets were $75.0 million and $31.8 million as of December 31, 2018 and 2017, respectively. The proceeds received, including collections on the deferred purchase price notes, are included in cash flows from operating activities in the accompanying 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 December 31, 2018 and December 31, 2017 was $71.5 million and $60.6 million, respectively, and is included in accounts receivable in the accompanying Consolidated Balance Sheets. For the years ended December 31, 2018, 2017 and 2016 non-cash investing activities related to the increase in the deferred purchase price was $594.2 million, $538.1 million and $490.9 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 December 31, 2018, the Company was in compliance with all affirmative and negative covenants inclusive of the financial covenants pertaining to the RPA, as amended. Based on management’s current plans and outlook, the Company believes it will be able to comply with these covenants during the subsequent twelve months.

The Company has two non-U.S. accounts receivable financing programs. Under these financing programs, the Company sold €215.7 million of receivables and received €215.7 million of cash on the sold receivables. The maximum availability under these programs is €45 million.

v3.10.0.1
Income Taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

13. Income Taxes

Income (loss) from continuing operations before income taxes for the years ended December 31, 2018, 2017 and 2016 is summarized as follows:

 

 

 

2018

 

 

2017

 

 

2016

 

Income (loss) from continuing operations before

   income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

$

(76.4

)

 

$

(98.5

)

 

$

(293.0

)

Foreign

 

 

4.7

 

 

 

59.0

 

 

 

24.9

 

Total

 

$

(71.7

)

 

$

(39.5

)

 

$

(268.1

)

 

Income tax provision (benefit) from continuing operations for the years ended December 31, 2018, 2017 and 2016 is summarized as follows:

 

 

 

2018

 

 

2017

 

 

2016

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal and state

 

$

(7.3

)

 

$

(12.8

)

 

$

(13.0

)

Foreign

 

 

13.6

 

 

 

7.4

 

 

 

12.1

 

Total current

 

$

6.3

 

 

$

(5.4

)

 

$

(0.9

)

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal and state

 

$

(6.2

)

 

$

(7.0

)

 

$

98.7

 

Foreign

 

 

(4.9

)

 

 

(37.1

)

 

 

2.7

 

Total deferred

 

$

(11.1

)

 

$

(44.1

)

 

$

101.4

 

Income tax provision (benefit) from continuing operations

 

$

(4.8

)

 

$

(49.5

)

 

$

100.5

 

 

The federal statutory income tax rate is reconciled to the Company’s effective income tax rate for continuing operations for the years ended December 31, 2018, 2017 and 2016 as follows: