The Manitowoc Company reports First-Quarter 2023 financial results

Posted on May 2, 2023

First-Quarter 2023 Highlights

Net sales of $508.3 million, up 10.7% year-over-year
Diluted net income per share of $0.46, up $0.37 year-over-year
Adjusted EBITDA⁽¹⁾of $45.1 million, margin percentage of 8.9%
Non-new machine sales of $151.0 million, up 16.7% year-over-year

The Manitowoc Company, Inc. today reported a net income of $16.5 million, or $0.46 per diluted share.

Net sales increased 10.7% year-over-year to $ 508.3 million and were unfavorably impacted by $11.2 million from changes in foreign currency exchange rates. Adjusted EBITDA⁽¹⁾ was $45.1 million, an increase of $13.9 million or 44.6% from the prior year.

Orders were $524.8 million, a 9% increase from the prior year. Orders were unfavorably impacted by $8.5 million from changes in foreign currency exchange rates. The backlog increased $19.7 million to $1,075.7 million as of March 31, 2023, from $1,056.0 million as of December 31, 2022.

Net cash provided by operating activities was $15.4 million and free cash flows⁽¹⁾ were $4.8 million, an increase of $9.8 million and $7.9 million, respectively, from the prior year.

“Manitowoc delivered a solid first quarter, generating $508.3 million in revenue and $45.1 million of adjusted EBITDA. I am very proud of our team who demonstrated great resolve to overcome continuing supply chain, labor, and logistics challenges in the quarter. During the quarter, we continued to make meaningful progress on our CRANES+50 strategy by growing non-new machine sales by 16.7% year-over-year,” commented Aaron H. Ravenscroft, President and Chief Executive Officer of The Manitowoc Company, Inc.

“Given our backlog and first-quarter results, we feel confident about our guidance. Looking out, however, we can see a slowdown in the European tower crane business and are cautious regarding the impact higher interest rates could eventually have on demand. While we continue to manage through the challenging environment, we remain committed to our CRANES+50 strategy to reduce cyclicality and improve profitability,” added Ravenscroft.

THE MANITOWOC COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share and share amounts)

	Three Months Ended March 31,
	2023			2022
Net sales	$	508.3		$	459.0
Cost of sales		402.0			374.0
Gross profit		106.3			85.0
Operating costs and expenses:
Engineering, selling, and administrative expenses		75.1			66.5
Amortization of intangible assets		1.0			0.8
Restructuring expense		—			0.1
Total operating costs and expenses		76.1			67.4
Operating income		30.2			17.6
Other expense:
Interest expense		(8.1	)		(7.4	)
Amortization of deferred financing fees		(0.3	)		(0.4	)
Other expense – net		(1.1	)		(0.2	)
Total other expense		(9.5	)		(8.0	)
Income before income taxes		20.7			9.6
Provision for income taxes		4.2			6.5
Net income	$	16.5		$	3.1

Per Share Data and Share Amounts
Basic net income per common share	$	0.47		$	0.09

Diluted net income per common share	$	0.46		$	0.09

Weighted average shares outstanding – basic		35,121,473			35,131,889
Weighted average shares outstanding – diluted		35,748,021			35,565,935

THE MANITOWOC COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value and share amounts)

	March 31, 2023			December 31, 2022
Assets
Current Assets:
Cash and cash equivalents	$	56.5		$	64.4
Accounts receivable, less allowances of $5.4 and $5.3, respectively		250.6			266.3
Inventories		720.6			611.9
Notes receivable — net		9.4			10.6
Other current assets		42.3			45.3
Total current assets		1,079.4			998.5
Property, plant, and equipment — net		331.6			335.3
Operating lease right-of-use assets		43.0			45.2
Goodwill		79.9			80.1
Intangible assets — net		126.6			126.7
Other long-term assets		30.6			29.7
Total assets	$	1,691.1		$	1,615.5
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses	$	518.1		$	446.4
Customer advances		24.0			21.9
Short-term borrowings and the current portion of long-term debt		7.9			6.1
Product warranties		46.5			48.8
Other liabilities		21.1			24.6
Total current liabilities		617.6			547.8
Non-Current Liabilities:
Long-term debt		369.5			379.5
Operating lease liabilities		32.8			34.3
Deferred income taxes		4.9			4.9
Pension obligations		53.5			51.7
Postretirement health and other benefit obligations		8.0			8.2
Long-term deferred revenue		14.7			15.6
Other non-current liabilities		37.3			35.7
Total non-current liabilities		520.7			529.9
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, 35,142,881 and 35,085,008 shares outstanding, respectively)		0.4			0.4
Additional paid-in capital		605.8			606.7
Accumulated other comprehensive loss		(108.0	)		(107.9	)
Retained earnings		120.8			104.3
Treasury stock, at cost (5,651,102 and 5,708,975 shares, respectively)		(66.2	)		(65.7	)
Total stockholders’ equity		552.8			537.8
Total liabilities and stockholders’ equity	$	1,691.1		$	1,615.5

THE MANITOWOC COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

	Three Months Ended March 31,
	2023			2022
Cash Flows from Operating Activities:
Net income	$	16.5		$	3.1
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		13.9			16.1
Amortization of intangible assets		1.0			0.8
Stock-based compensation expense		3.1			3.1
Amortization of deferred financing fees		0.3			0.4
Net unrealized foreign currency transaction losses (gains)		(1.6	)		1.4
Changes in operating assets and liabilities:
Accounts receivable		17.1			(7.7	)
Inventories		(100.6	)		(69.4	)
Notes receivable		1.7			3.0
Other assets		3.2			0.4
Accounts payable		56.2			54.6
Accrued expenses and other liabilities		4.6			(0.2	)
Net cash provided by operating activities		15.4			5.6
Cash Flows from Investing Activities:
Capital expenditures		(10.6	)		(8.7	)
Proceeds from the sale of fixed assets		2.0			—
Net cash used for investing activities		(8.6	)		(8.7	)
Cash Flows from Financing Activities:
Payments on revolving credit facility – net		(10.0	)		(20.0	)
Other debt – net		(1.9	)		(0.8	)
Exercises of stock options		0.3			0.1
Common stock repurchases		(3.5	)		—
Net cash used for financing activities		(15.1	)		(20.7	)
Effect of exchange rate changes on cash and cash equivalents		0.4			—
Net decrease in cash and cash equivalents		(7.9	)		(23.8	)
Cash and cash equivalents at the beginning of the period		64.4			75.4
Cash and cash equivalents at the end of the period	$	56.5		$	51.6

Non-GAAP Financial Measures

Adjusted net income, Adjusted DEPS, EBITDA, adjusted EBITDA, and free cash flows are financial measures that are not in accordance with U.S. GAAP. Manitowoc believes these non-GAAP financial measures provide important supplemental information to both management and investors regarding financial and business trends used in assessing its results of operations. Manitowoc believes excluding specified items provides a more meaningful comparison to the corresponding reporting periods and internal budgets and forecasts, assists investors in performing analysis that is consistent with financial models developed by investors and research analysts, provides management with a more relevant measure of operating performance, and is more useful in assessing management performance.

Adjusted Net Income and Adjusted DEPS

The Company defines adjusted net income as net income plus the add-back or subtraction of restructuring and other non-recurring items. Adjusted DEPS is defined as adjusted net income divided by diluted weighted average shares outstanding. Diluted weighted average common shares outstanding are adjusted for the effect of dilutive stock awards when there is net income on an adjusted basis, as applicable. The reconciliation of net income and diluted net income per share to adjusted net income and Adjusted DEPS for the three months ended March 31, 2023, and 2022 are summarized as follows. All dollar amounts are in millions, except per share data and share amounts.


	Three Months Ended March 31,
	2023								2022
	As reported			Adjustments		Adjusted			As reported			Adjustments			Adjusted
Gross profit ⁽¹⁾	$	106.3		$	—	$	106.3		$	85.0		$	1.2		$	86.2
Engineering, selling, and administrative expenses⁽²⁾		(75.1	)		—		(75.1	)		(66.5	)		(4.6	)		(71.1	)
Amortization of intangible assets		(1.0	)		—		(1.0	)		(0.8	)		—			(0.8	)
Restructuring expense ⁽³⁾		—			—		—			(0.1	)		0.1			—
Operating income		30.2			—		30.2			17.6			(3.3	)		14.3
Interest expense		(8.1	)		—		(8.1	)		(7.4	)		—			(7.4	)
Amortization of deferred financing fees		(0.3	)		—		(0.3	)		(0.4	)		—			(0.4	)
Other expense – net		(1.1	)		—		(1.1	)		(0.2	)		—			(0.2	)
Income before income taxes		20.7			—		20.7			9.6			(3.3	)		6.3
Provision for income taxes⁽⁴⁾		(4.2	)		—		(4.2	)		(6.5	)		1.2			(5.3	)
Net income	$	16.5		$	—	$	16.5		$	3.1		$	(2.1	)	$	1.0

Diluted weighted average common shares outstanding		35,748,021					35,748,021			35,565,935						35,565,935

Diluted net income per share	$	0.46				$	0.46		$	0.09					$	0.03

(1)	The adjustment in 2022 represents $0.9 million of fair value step-up on rental fleet assets sold during the period that were expensed within the cost of sales and $0.3 million of other one-time costs associated with the acquired businesses.
(2)	The adjustment in 2022 represents $0.2 million of one-time legal costs associated with the acquired businesses and $4.8 million of income from the partial recovery of the previously written-off long-term note receivable from the 2014 divestiture of the Company’s Chinese joint venture.
(3)	Represents adjustments for restructuring expenses.
(4)	The adjustment in 2022 represents the net income tax impacts of items (1), (2), and (3).

Free Cash Flows

The Company defines free cash flows as net cash provided by operating activities less cash outflow from investment in capital expenditures. The reconciliation of net cash provided by operating activities to free cash flows for the three months ended March 31, 2023 and 2022 are summarized as follows. All dollar amounts are in millions.


	Three Months Ended March 31,
	2023			2022
Net cash provided by operating activities	$	15.4		$	5.6
Capital expenditures		(10.6	)		(8.7	)
Free cash flows	$	4.8		$	(3.1	)

EBITDA and Adjusted EBITDA

The Company defines EBITDA as net income (loss) before interest, taxes, depreciation, and amortization. The Company defines adjusted EBITDA as EBITDA plus the addback or subtraction of restructuring, other income (expense), and certain other non-recurring items – net. The reconciliation of net income (loss) to EBITDA, and further to adjusted EBITDA for the three months ended March 31, 2023, and 2022 and trailing twelve months are summarized as follows. All dollar amounts are in millions.


	Three Months Ended March 31,						Trailing Twelve
	2023			2022			Months
Net income (loss)	$	16.5		$	3.1		$	(110.2	)
Interest expense and amortization of deferred financing fees		8.4			7.8			33.6
Provision for income taxes		4.2			6.5			1.1
Depreciation expense		13.9			16.1			58.4
Amortization of intangible assets		1.0			0.8			3.3
EBITDA		44.0			34.3			(13.8	)
Restructuring expense		—			0.1			1.4
Asset impairment expense ⁽¹⁾		—			—			171.9
Other non-recurring items – net ⁽²⁾		—			(3.4	)		2.4
Other (income) expense – net ⁽³⁾		1.1			0.2			(4.9	)
Adjusted EBITDA	$	45.1		$	31.2		$	157.0

Adjusted EBITDA margin percentage		8.9	%		6.8	%		7.5	%

(1)	The adjustment for the trailing twelve months represents non-cash goodwill and indefinite-lived intangible asset impairment charges.
(2)	Other non-recurring items – net for the three months ended March 31, 2022, primarily related to $4.8 million of income from the partial recovery of the previously written-off long-term note receivable from the 2014 divestiture of the Company’s Chinese joint venture, partially offset by $0.9 million of fair value step up on rental fleet assets sold during the period that was expensed within the cost of sales, and $0.5 million of other one-time costs associated with the acquired businesses. Other non-recurring items – net for the trailing twelve months relate to $2.1 million of fair value step-up on rental fleet assets sold during the period that was expensed within the cost of sales, $0.1 million of other one-time costs associated with the acquired businesses, and $0.2 million of other one-time charges.
(3)	Other expense – net includes net foreign currency (gains) losses, other components of net periodic pension costs, and other items in the three months ended March 31, 2023, and 2022. Other income – net for the trailing twelve months includes net foreign currency gains, other components of net periodic pension costs, a $0.5 million write-off of other debt-related charges, and other items.