Manitowoc(MTW) - 2020 Q1 - Quarterly Report

PART I Item 1. Financial Statements The company's Q1 2020 financial statements show a net loss of $7.8 million on $329.2 million net sales, an improvement from Q1 2019, with total assets at $1,584.0 million and a $78.6 million net cash use from operations Condensed Consolidated Statements of Operations Q1 2020 net sales decreased 21.2% to $329.2 million, resulting in an operating income of $5.7 million and a net loss of $7.8 million, significantly improved from Q1 2019's $26.7 million net loss which included a $25.0 million debt extinguishment loss Q1 2020 vs Q1 2019 Statement of Operations Highlights | Metric | Q1 2020 ($M) | Q1 2019 ($M) | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | 329.2 | 418.0 | -21.2% | | Gross Profit | 63.2 | 80.2 | -21.2% | | Operating Income | 5.7 | 16.2 | -64.8% | | Loss on debt extinguishment | 0.0 | (25.0) | N/A | | Net Loss | (7.8) | (26.7) | +70.8% | | Diluted Net Loss per Share | ($0.22) | ($0.75) | +70.7% | Condensed Consolidated Balance Sheets As of March 31, 2020, total assets were $1,584.0 million, with cash and cash equivalents decreasing to $103.6 million and inventories increasing to $545.6 million, resulting in total stockholders' equity of $616.7 million Balance Sheet Highlights (as of March 31, 2020 vs. Dec 31, 2019) | Metric | March 31, 2020 ($M) | Dec 31, 2019 ($M) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | 103.6 | 199.3 | -48.0% | | Inventories — net | 545.6 | 461.4 | +18.2% | | Total current assets | 862.8 | 872.4 | -1.1% | | Total assets | 1,584.0 | 1,617.7 | -2.1% | | Long-term debt | 307.9 | 308.4 | -0.2% | | Total liabilities | 967.3 | 971.8 | -0.5% | | Total stockholders' equity | 616.7 | 645.9 | -4.5% | Condensed Consolidated Statements of Cash Flows Net cash used for operating activities was $78.6 million in Q1 2020, primarily due to an $88.5 million increase in inventories, leading to a $95.8 million decrease in cash and cash equivalents for the quarter Cash Flow Summary (Three Months Ended March 31) | Cash Flow Activity ($M) | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used for operating activities | (78.6) | (267.3) | | Net cash provided by (used for) investing activities | (3.5) | 126.7 | | Net cash provided by (used for) financing activities | (12.4) | 49.7 | | Net decrease in cash and cash equivalents | (95.8) | (91.3) | | Cash and cash equivalents at end of period | 103.6 | 49.0 | - The primary drivers of cash used in operations for Q1 2020 were a net loss of $7.8 million and an $88.5 million increase in inventories, partially offset by non-cash charges like depreciation ($9.0 million)[15] - Financing activities in Q1 2020 included $12.0 million in common stock repurchases, contrasting with Q1 2019's debt refinancing activities including $300.0 million in proceeds and $277.8 million in payments on long-term debt[15] Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, the significant impact of COVID-19 on operations, segment performance, debt structure, and goodwill impairment testing, with total debt at $311.8 million as of March 31, 2020 - The company is a leading provider of engineered lifting solutions with brands like Grove, Manitowoc, and Potain, serving various end markets including construction and petrochemicals[21] - The COVID-19 pandemic led to disruptions at manufacturing facilities in the U.S., Europe, and China, creating uncertainty for future estimates regarding goodwill impairment, inventory recoverability, and income taxes[25][26] - A triggering event for goodwill impairment was identified in Q1 2020 due to a decline in market capitalization from the COVID-19 pandemic, but a qualitative assessment concluded no impairment as of March 31, 2020[44] - In Q1 2020, the company repurchased 1.1 million shares for $12.0 million, subsequently suspending the program to preserve liquidity due to the COVID-19 pandemic[70] Management's Discussion and Analysis (MD&A) Management discusses the significant negative impact of the COVID-19 pandemic, leading to plant closures, withdrawal of 2020 guidance, a 21.2% decrease in Q1 2020 net sales to $329.2 million, and proactive liquidity preservation measures, with total liquidity at $382.0 million COVID-19 Update The company is actively managing the COVID-19 pandemic's impact, which caused temporary European facility shutdowns and led to the withdrawal of 2020 financial guidance due to ongoing uncertainty - Major European facilities in Germany, France, Italy, and Portugal were closed in mid-March, with reopenings staggered from late April to early May 2020[103] - The company withdrew its 2020 financial guidance on March 27, 2020, due to continuing economic uncertainties caused by the pandemic[105] Segment Operating Performance All three segments experienced declines in Q1 2020 net sales and operating income, with Americas sales down 24.2%, EURAF down 20.3% (impacted by $31.5 million from COVID-19), and MEAP down 13.2% Segment Performance (Q1 2020 vs Q1 2019) | Segment | Net Sales Q1 2020 ($M) | Net Sales Q1 2019 ($M) | % Change | Operating Income Q1 2020 ($M) | Operating Income Q1 2019 ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Americas | 156.2 | 206.1 | -24.2% | 9.1 | 15.2 | -40.1% | | EURAF | 122.9 | 154.2 | -20.3% | (0.4) | 3.4 | -111.8% | | MEAP | 50.1 | 57.7 | -13.2% | 6.3 | 7.3 | -13.7% | - The sales decrease in the Americas was primarily due to lower shipments for commercial construction and energy end markets resulting from a lower starting backlog[108] - The COVID-19 pandemic directly resulted in approximately $31.5 million of lower crane shipments in the EURAF segment[110] Results of Operations Consolidated net sales for Q1 2020 fell 21.2% to $329.2 million, with COVID-19 impacting sales by $37.0 million, while orders decreased 15.0% and backlog stood at $520.9 million - Consolidated net sales decreased by 21.2% YoY, with approximately $37.0 million of the decline attributed to the COVID-19 pandemic's impact on crane shipments[115] Orders and Backlog | Metric | Q1 2020 ($M) | Q1 2019 ($M) | YoY Change | | :--- | :--- | :--- | :--- | | Orders | 375.0 | 441.0 | -15.0% | | Backlog (as of Mar 31) | 520.9 | 693.6 | -24.9% | - Interest expense decreased to $7.2 million from $10.9 million in Q1 2019, primarily due to a lower average effective interest rate (9.2% vs 13.4%) following the debt refinancing in March 2019[122] Financial Condition, Liquidity and Capital Resources The company ended Q1 2020 with total liquidity of $382.0 million, including $103.6 million in cash, and is implementing measures like suspending share repurchases and reducing capital expenditures to preserve liquidity amidst COVID-19 uncertainty Liquidity Position | Component ($M) | March 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | 103.6 | 199.3 | | Revolver borrowing capacity | 244.2 | 210.4 | | Total liquidity | 382.0 | 444.5 | - Actions taken to preserve liquidity include reducing discretionary spending, suspending the share repurchase program, reducing capital expenditures, and deferring employer Social Security taxes under the CARES Act[135] - As of March 31, 2020, the company had no borrowings on its ABL Revolving Credit Facility and was in compliance with all debt covenants[54][57] Quantitative and Qualitative Disclosure about Market Risk There have been no material changes to the company's market risk disclosures since its 2019 Form 10-K filing, with information incorporated by reference - There were no material changes to the company's market risk disclosures from the 2019 Annual Report on Form 10-K[146] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[147] - No changes were made during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[148] PART II Risk Factors A new risk factor details the negative impacts of the COVID-19 pandemic, highlighting disruptions to operations, workforce, and supply chains, and increased economic uncertainty, with the full extent remaining unknown - A new risk factor was added to address the negative impact of the COVID-19 pandemic on the business, financial condition, cash flows, results of operations, and supply chain[151] - The pandemic has caused disruptions at manufacturing facilities, weakened demand, and created volatility in global capital markets, potentially affecting liquidity for the company, its customers, and suppliers[151][153][154] - The full extent of the pandemic's impact is highly uncertain and depends on future developments such as its duration, spread, and the effectiveness of containment actions[155] Issuer Purchases of Equity Securities In Q1 2020, the company repurchased 1,061,711 shares for approximately $12.0 million, with $10.6 million remaining under authorization before the program was suspended to preserve liquidity Q1 2020 Share Repurchases | Period | Total Shares Purchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | January 2020 | — | — | | February 2020 | 466,635 | 12.84 | | March 2020 | 595,076 | 10.06 | | Total | 1,061,711 | N/A | - As of the end of March 2020, approximately $10.6 million remained available under the company's $30.0 million share repurchase authorization[157] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files