Manitowoc(MTW) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2019, and 2018, including detailed notes on accounting policies and significant financial events Condensed Consolidated Statements of Operations For Q3 2019, net sales were nearly flat at $448.0 million, while operating income nearly doubled to $32.5 million, and for the nine-month period, net sales increased by 2.9% to $1.37 billion with operating income more than doubling Condensed Consolidated Statements of Operations Highlights ($ in millions, except per-share data) | Metric | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $448.0 | $450.1 | $1,370.7 | $1,331.5 | | Gross profit | $88.4 | $80.0 | $263.8 | $238.9 | | Operating income | $32.5 | $16.9 | $90.6 | $42.7 | | Net income | $18.1 | $11.5 | $37.3 | $11.2 | | Diluted income per common share | $0.51 | $0.32 | $1.05 | $0.31 | Condensed Consolidated Balance Sheets As of September 30, 2019, total assets increased to $1.59 billion, driven by higher inventories and accounts receivable, while cash and cash equivalents decreased, and long-term debt increased due to refinancing activities Condensed Consolidated Balance Sheet Highlights ($ in millions) | Account | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $67.5 | $140.3 | | Inventories — net | $521.9 | $453.1 | | Total assets | $1,590.7 | $1,541.9 | | Long-term debt | $309.1 | $266.7 | | Total liabilities | $965.6 | $940.6 | | Total stockholders' equity | $625.1 | $601.3 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2019, the company experienced a net decrease in cash of $72.8 million, primarily due to a significant cash outflow from operating activities of $197.9 million, driven by working capital changes and the termination of an accounts receivable securitization program Condensed Consolidated Statements of Cash Flows Highlights ($ in millions) | Cash Flow Activity | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | | Net cash used for operating activities | $(197.9) | $(420.5) | | Net cash provided by investing activities | $121.1 | $392.1 | | Net cash provided by (used for) financing activities | $5.1 | $(2.1) | | Net decrease in cash and cash equivalents | $(72.8) | $(32.4) | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail significant financial events and accounting policies, including a major debt refinancing, a $25.0 million loss on debt extinguishment, the termination of a domestic accounts receivable securitization program, a $24.4 million net gain from a legal settlement, and the adoption of the new lease accounting standard - The company completed a debt refinancing on March 25, 2019, issuing $300.0 million of 9.000% senior secured second lien notes due 2026, with proceeds used to redeem the 12.750% notes due 2021[38][40] - A loss on debt extinguishment of $25.0 million was recorded, comprising a $16.6 million call premium and write-offs of unamortized discount and debt issuance costs[41] - The domestic Receivables Purchase Agreement (RPA) with a commitment size of $75.0 million was terminated on March 25, 2019[47] - During the nine months ended September 30, 2019, the company settled a legal matter, resulting in a net gain of $24.4 million, which was recorded as other income and a reduction in SG&A expenses[81] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's performance, highlighting a 23% decrease in Q3 orders and a 33.4% drop in backlog year-over-year, with Americas segment growth offsetting declines in Europe and MEAP, while financial condition was impacted by debt refinancing and A/R securitization termination Results of Operations In Q3 2019, consolidated net sales decreased 0.5% to $448.0 million, orders fell 23.0% to $352.8 million, and backlog dropped 33.4% to $466.5 million, despite gross profit rising to $88.4 million due to favorable pricing, with nine-month sales growing 2.9% driven by strong Americas performance Key Performance Indicators (Q3 2019 vs Q3 2018) | Metric | Q3 2019 | Q3 2018 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $448.0M | $450.1M | -0.5% | | Orders | $352.8M | $458.1M | -23.0% | | Backlog (as of Sep 30) | $466.5M | $700.2M | -33.4% | - The Americas segment was the primary driver of performance, with net sales increasing 12.0% in Q3 and 17.5% in the nine-month period, mainly due to the expansion of customers' rental fleets[141][142] - Performance in other regions was weak: EURAF net sales decreased 9.0% in Q3 due to lower shipments and currency effects, and MEAP net sales decreased 20.9% in Q3 due to lower shipments to the energy end market[144][148] Financial Condition, Liquidity and Capital Resources The company's cash position decreased by $72.8 million in the first nine months of 2019, primarily due to the termination of the accounts receivable securitization program and working capital investments, but total liquidity increased to $354.4 million following a new, larger ABL credit facility - Cash and cash equivalents decreased by $72.8 million from December 31, 2018, primarily due to the termination of the accounts receivable securitization program, working capital investments, and debt issuance costs[152] Total Liquidity ($ in millions) | Component | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $67.5 | $140.3 | | Revolver borrowing capacity | $253.8 | $107.8 | | Other debt availability | $37.1 | $38.9 | | Less: Outstanding letters of credit | $(4.0) | $(11.3) | | Total liquidity | $354.4 | $275.7 | Non-GAAP Measures The company provides non-GAAP metrics, with Adjusted EBITDA increasing to $42.8 million (9.6% margin) in Q3 2019 and $125.7 million for the nine-month period, and Adjusted free cash flow being positive at $24.9 million for Q3 2019 Reconciliation to Adjusted EBITDA ($ in millions) | Metric | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Income from continuing operations | $18.1 | $11.5 | $37.3 | $11.4 | | EBITDA | $37.7 | $20.2 | $100.9 | $61.5 | | Adjusted EBITDA | $42.8 | $30.5 | $125.7 | $85.1 | | Adjusted EBITDA margin | 9.6% | 6.8% | 9.2% | 6.4% | Adjusted Free Cash Flows ($ in millions) | Metric | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Adjusted operating cash flows | $37.6 | $7.9 | $3.4 | $(38.8) | | Capital expenditures | $(12.7) | $(6.2) | $(22.4) | $(21.4) | | Adjusted free cash flows | $24.9 | $1.7 | $(19.0) | $(60.2) | Quantitative and Qualitative Disclosure about Market Risk The company's disclosures regarding market risk, including interest rates, foreign currency exchange rates, and commodity prices, have not materially changed since its 2018 Annual Report on Form 10-K - The Company's market risk disclosures have not materially changed since the 2018 Form 10-K was filed[170] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2019, with only changes related to the adoption of the new lease accounting standard, ASC 842, reported - The CEO and CFO concluded that the Company's disclosure controls and procedures are effective as of the end of the period[171] - Changes were made to the internal control structure related to the adoption of ASC 842 – "Leases," but there were no other changes that materially affected internal control over financial reporting[172] PART II. OTHER INFORMATION Risk Factors The company states that there have been no material changes to the risk factors disclosed in its Annual Report on Form 10-K for the year ended December 31, 2018 - The Company's risk factors disclosures have not materially changed since the 2018 Form 10-K was filed[175] Exhibits This section lists the exhibits filed with the quarterly report, which include certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and Interactive Data Files (XBRL) - The report includes filed exhibits such as Rule 13a-14(a)/15d-14(a) certifications, Section 1350 certifications, and Inline XBRL documents[176] Signatures The report is duly signed by the company's President and Chief Executive Officer, Senior Vice President and Chief Financial Officer, and Vice President and Corporate Controller on November 8, 2019