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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to

Commission File Number: 1-11978

 

The Manitowoc Company, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Wisconsin

 

39-0448110

(State or other jurisdiction

 

(I.R.S. Employer

of incorporation or organization)

 

Identification Number)

 

11270 West Park Place

Suite 1000

 

 

Milwaukee, Wisconsin

 

53224

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (414) 760-4600

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $.01 Par Value

 

MTW

 

New York Stock Exchange

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

 

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of June 30, 2020, the registrant had 34,521,063 shares of common stock, $.01 par value per share, outstanding.

1


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE MANITOWOC COMPANY, INC.

Condensed Consolidated Statements of Operations

For the three and six months ended June 30, 2020 and 2019

(Unaudited)

($ in millions, except per share and average share amounts)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net sales

 

$

328.3

 

 

$

504.7

 

 

$

657.5

 

 

$

922.7

 

Cost of sales

 

 

279.9

 

 

 

409.5

 

 

 

545.9

 

 

 

747.3

 

Gross profit

 

 

48.4

 

 

 

95.2

 

 

 

111.6

 

 

 

175.4

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engineering, selling and administrative expenses

 

 

49.7

 

 

 

50.5

 

 

 

105.6

 

 

 

109.9

 

Amortization of intangible assets

 

 

0.1

 

 

 

0.1

 

 

 

0.2

 

 

 

0.2

 

Restructuring expense

 

 

0.2

 

 

 

2.7

 

 

 

1.7

 

 

 

7.2

 

Total operating costs and expenses

 

 

50.0

 

 

 

53.3

 

 

 

107.5

 

 

 

117.3

 

Operating income (loss)

 

 

(1.6

)

 

 

41.9

 

 

 

4.1

 

 

 

58.1

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(7.2

)

 

 

(7.5

)

 

 

(14.4

)

 

 

(18.4

)

Amortization of deferred financing fees

 

 

(0.3

)

 

 

(0.4

)

 

 

(0.7

)

 

 

(0.8

)

Loss on debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

(25.0

)

Other income (expense) - net

 

 

(2.9

)

 

 

15.9

 

 

 

(6.9

)

 

 

12.6

 

Total other income (expense)

 

 

(10.4

)

 

 

8.0

 

 

 

(22.0

)

 

 

(31.6

)

Income (loss) before income taxes

 

 

(12.0

)

 

 

49.9

 

 

 

(17.9

)

 

 

26.5

 

Provision for income taxes

 

 

0.7

 

 

 

3.9

 

 

 

2.6

 

 

 

7.2

 

Net income (loss)

 

$

(12.7

)

 

$

46.0

 

 

$

(20.5

)

 

$

19.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per common share

 

$

(0.37

)

 

$

1.29

 

 

$

(0.59

)

 

$

0.54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per common share

 

$

(0.37

)

 

$

1.29

 

 

$

(0.59

)

 

$

0.54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

34,519,889

 

 

 

35,595,718

 

 

 

34,827,582

 

 

 

35,619,145

 

Weighted average shares outstanding - diluted

 

 

34,519,889

 

 

 

35,725,908

 

 

 

34,827,582

 

 

 

35,799,089

 

 

The accompanying notes are an integral part to these Condensed Consolidated Financial Statements.

 

2


 

THE MANITOWOC COMPANY, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

For the three and six months ended June 30, 2020 and 2019

(Unaudited)

($ in millions)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income (loss)

 

$

(12.7

)

 

$

46.0

 

 

$

(20.5

)

 

$

19.3

 

Other comprehensive income (loss), net of income tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized income on derivatives, net of income

   tax provision of $0.0, $0.0, $0.0 and $0.0, respectively

 

 

0.1

 

 

 

0.6

 

 

 

0.1

 

 

 

0.7

 

Employee pension and postretirement benefit expense, net

   of income tax benefit of $0.3, $0.0, $0.0 and $0.0,

   respectively

 

 

0.6

 

 

 

0.5

 

 

 

1.8

 

 

 

1.0

 

Foreign currency translation adjustments

 

 

8.6

 

 

 

1.2

 

 

 

(5.0

)

 

 

(1.3

)

Total other comprehensive income (loss), net of income tax

 

 

9.3

 

 

 

2.3

 

 

 

(3.1

)

 

 

0.4

 

Comprehensive income (loss)

 

$

(3.4

)

 

$

48.3

 

 

$

(23.6

)

 

$

19.7

 

 

The accompanying notes are an integral part to these Condensed Consolidated Financial Statements.

3


 

THE MANITOWOC COMPANY, INC.

Condensed Consolidated Balance Sheets

As of June 30, 2020 and December 31, 2019

(Unaudited)

($ in millions, except per share amounts)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

128.3

 

 

$

199.3

 

Accounts receivable, less allowances of $9.4 and $7.9, respectively

 

 

171.9

 

 

 

168.3

 

Inventories — net

 

 

534.5

 

 

 

461.4

 

Notes receivable — net

 

 

14.0

 

 

 

17.4

 

Other current assets

 

 

33.0

 

 

 

26.0

 

Total current assets

 

 

881.7

 

 

 

872.4

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment — net

 

 

277.8

 

 

 

289.9

 

Operating lease right-of-use assets

 

 

42.8

 

 

 

47.6

 

Goodwill

 

 

232.0

 

 

 

232.5

 

Other intangible assets — net

 

 

115.9

 

 

 

116.3

 

Other non-current assets

 

 

54.7

 

 

 

59.0

 

Total assets

 

$

1,604.9

 

 

$

1,617.7

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

332.6

 

 

$

340.8

 

Short-term borrowings and current portion of long-term debt

 

 

4.3

 

 

 

3.8

 

Product warranties

 

 

45.8

 

 

 

47.2

 

Customer advances

 

 

15.8

 

 

 

25.8

 

Other liabilities

 

 

22.2

 

 

 

23.3

 

Total current liabilities

 

 

420.7

 

 

 

440.9

 

Non-Current Liabilities:

 

 

 

 

 

 

 

 

Long-term debt

 

 

356.9

 

 

 

308.4

 

Operating lease liabilities

 

 

33.3

 

 

 

37.6

 

Deferred income taxes

 

 

4.3

 

 

 

5.5

 

Pension obligations

 

 

83.7

 

 

 

86.4

 

Postretirement health and other benefit obligations

 

 

15.6

 

 

 

16.4

 

Long-term deferred revenue

 

 

27.4

 

 

 

30.3

 

Other non-current liabilities

 

 

47.3

 

 

 

46.3

 

Total non-current liabilities

 

 

568.5

 

 

 

530.9

 

Commitments and contingencies (Note 18)

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Preferred stock (authorized 3,500,000 shares of $.01 par value; none outstanding)

 

 

 

 

 

 

Common stock (75,000,000 shares authorized, 40,793,983 shares issued, 34,521,063

   and 35,374,537 shares outstanding, respectively)

 

 

0.4

 

 

 

0.4

 

Additional paid-in capital

 

 

596.0

 

 

 

592.2

 

Accumulated other comprehensive loss

 

 

(124.1

)

 

 

(121.0

)

Retained earnings

 

 

215.5

 

 

 

236.2

 

Treasury stock, at cost (6,272,920 and 5,419,446 shares, respectively)

 

 

(72.1

)

 

 

(61.9

)

Total stockholders' equity

 

 

615.7

 

 

 

645.9

 

Total liabilities and stockholders' equity

 

$

1,604.9

 

 

$

1,617.7

 

 

The accompanying notes are an integral part to these Condensed Consolidated Financial Statements.

 

4


 

THE MANITOWOC COMPANY, INC.

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2020 and 2019

(Unaudited)

($ in millions)

 

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(20.5

)

 

$

19.3

 

Adjustments to reconcile net income (loss) to cash used for operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

18.1

 

 

 

17.4

 

Amortization of intangible assets

 

 

0.2

 

 

 

0.2

 

Amortization of deferred financing fees

 

 

0.7

 

 

 

0.8

 

Loss on debt extinguishment

 

 

 

 

 

25.0

 

Other

 

 

5.9

 

 

 

6.0

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(6.4

)

 

 

(222.6

)

Inventories

 

 

(73.4

)

 

 

(106.5

)

Notes receivable

 

 

5.6

 

 

 

(2.3

)

Other assets

 

 

(6.4

)

 

 

26.1

 

Accounts payable

 

 

(6.5

)

 

 

22.1

 

Accrued expenses and other liabilities

 

 

(16.0

)

 

 

(20.9

)

Net cash used for operating activities

 

 

(98.7

)

 

 

(235.4

)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(8.0

)

 

 

(9.7

)

Proceeds from sale of fixed assets

 

 

0.1

 

 

 

4.8

 

Cash receipts on sold accounts receivable

 

 

 

 

 

126.3

 

Net cash provided by (used for) investing activities

 

 

(7.9

)

 

 

121.4

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from revolving credit facility

 

 

50.0

 

 

 

82.8

 

Payments on revolving credit facility

 

 

 

 

 

(82.8

)

Payments on long-term debt

 

 

 

 

 

(276.6

)

Proceeds from long-term debt

 

 

 

 

 

300.0

 

Other debt - net

 

 

(1.5

)

 

 

1.9

 

Debt issuance costs

 

 

 

 

 

(8.2

)

Exercises of stock options

 

 

0.1

 

 

 

0.1

 

Common stock repurchases

 

 

(12.0

)

 

 

(7.4

)

Net cash provided by financing activities

 

 

36.6

 

 

 

9.8

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(1.0

)

 

 

(1.1

)

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(71.0

)

 

 

(105.3

)

Cash and cash equivalents at beginning of period

 

 

199.3

 

 

 

140.3

 

Cash and cash equivalents at end of period

 

$

128.3

 

 

$

35.0

 

 

The accompanying notes are an integral part to these Condensed Consolidated Financial Statements.

 

 

 

 

5


 

THE MANITOWOC COMPANY, INC.

Condensed Consolidated Statements of Equity

For the three and six months ended June 30, 2020 and 2019

(Unaudited)

($ in millions, except share amounts)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Common Stock - Par Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

0.4

 

 

$

0.4

 

 

$

0.4

 

 

$

0.4

 

Balance at end of period

 

$

0.4

 

 

$

0.4

 

 

$

0.4

 

 

$

0.4

 

Additional Paid-in Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

593.7

 

 

$

586.0

 

 

$

592.2

 

 

$

584.8

 

Stock options exercised and issuance of other stock awards

 

 

(0.2

)

 

 

(0.2

)

 

 

(2.1

)

 

 

(2.1

)

Stock-based compensation

 

 

2.5

 

 

 

3.0

 

 

 

5.9

 

 

 

6.1

 

Balance at end of period

 

$

596.0

 

 

$

588.8

 

 

$

596.0

 

 

$

588.8

 

Accumulated Other Comprehensive Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(133.4

)

 

$

(118.5

)

 

$

(121.0

)

 

$

(116.6

)

Other comprehensive income (loss)

 

 

9.3

 

 

 

2.3

 

 

 

(3.1

)

 

 

0.4

 

Balance at end of period

 

$

(124.1

)

 

$

(116.2

)

 

$

(124.1

)

 

$

(116.2

)

Retained Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

228.2

 

 

$

162.9

 

 

$

236.2

 

 

$

189.6

 

Adoption of accounting standards update

 

 

 

 

 

 

 

 

(0.2

)

 

 

 

Net income (loss)

 

 

(12.7

)

 

 

46.0

 

 

 

(20.5

)

 

 

19.3

 

Balance at end of period

 

$

215.5

 

 

$

208.9

 

 

$

215.5

 

 

$

208.9

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(72.2

)

 

$

(55.0

)

 

$

(61.9

)

 

$

(56.9

)

Stock options exercised and issuance of other stock awards

 

 

0.1

 

 

 

0.2

 

 

 

1.8

 

 

 

2.1

 

Common stock repurchases

 

 

 

 

 

(7.4

)

 

 

(12.0

)

 

 

(7.4

)

Balance at end of period

 

$

(72.1

)

 

$

(62.2

)

 

$

(72.1

)

 

$

(62.2

)

Total equity

 

$

615.7

 

 

$

619.7

 

 

$

615.7

 

 

$

619.7

 

 

The accompanying notes are an integral part to these Condensed Consolidated Financial Statements.

 

6


 

THE MANITOWOC COMPANY, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2020 and 2019

1.  Accounting Policies and Basis of Presentation

The Manitowoc Company, Inc. (“Manitowoc,” “MTW” or the “Company”) was founded in 1902 and has over a 117-year tradition of providing high-quality, customer-focused products and support services to its markets. Manitowoc is one of the world’s leading providers of engineered lifting solutions.  Manitowoc, through its wholly-owned subsidiaries, designs, manufactures, markets, and supports comprehensive product lines of mobile telescopic cranes, tower cranes, lattice-boom crawler cranes, and boom trucks under the Grove, Manitowoc, National Crane, Potain, Shuttlelift and Manitowoc Crane Care 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, the Company’s Manitowoc Crane Care offering leverages Manitowoc's installed base of approximately 149,000 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.

The Company has three reportable segments, the Americas segment, Europe and Africa (“EURAF”) segment and Middle East and Asia Pacific (“MEAP”) segment. The segments were identified using the “management approach,” which designates the internal organization that is used by management for making operating decisions and assessing performance. Refer to Note 17, “Segments” for additional information.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments necessary for a fair statement of the results of operations, comprehensive income and equity for the three and six months ended June 30, 2020 and 2019, the cash flows for the same six-month periods and the financial position at June 30, 2020 and December 31, 2019, and except as otherwise discussed, such adjustments consist of only those of a normal recurring nature. The interim results are not necessarily indicative of results for a full year and do not contain information included in the Company’s annual consolidated financial statements and notes for the year ended December 31, 2019. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations dealing with interim financial statements. However, the Company believes that the disclosures made in the Condensed Consolidated Financial Statements included herein are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K.

All amounts, except share and per share amounts, are in millions throughout the tables in these notes unless otherwise indicated.

Impact of COVID-19 Pandemic

 

There is considerable uncertainty regarding the future impact, and expected duration, of the COVID-19 pandemic, and restrictions on the Company’s access to its facilities or on its support operations or workforce, or similar limitations for its customers, dealers and suppliers. There is no certainty that measures taken by governmental authorities will be sufficient to mitigate the risks posed by the virus, and the Company’s ability to perform critical functions could be harmed. This uncertainty could have an impact in future periods on certain estimates used in the preparation of the Company’s second quarter financial results, including, but not limited to, impairment of goodwill and other long-lived assets, income tax provision, recoverability of inventory and hedge accounting with respect to forecasted future transactions.  

 

2.  Recent Accounting Changes and Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12 “Income Taxes (Topic 740).” The amendments in this ASU simplify accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The standard is effective for annual periods beginning after December 15, 2020. The Company is currently evaluating the impact the adoption of the ASU will have on the Company’s consolidated financial statements.

7


 

In August 2018, the FASB issued 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 adoption of the ASU did not have a material impact on the Company’s condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses,” which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. The new guidance is applicable to financial assets measured at amortized cost, net investments in leases and certain off-balance sheet credit exposures. The standard was effective for annual periods beginning after December 15, 2019. The adoption of the ASU resulted in a $0.2 million reduction in beginning retained earnings and a corresponding reduction in accounts receivable on the Company’s Condensed Consolidated Balance Sheets as of June 30, 2020. There was no material impact to the Company’s Condensed Consolidated Statements of Operations or Condensed Consolidated Statements of Cash Flows.

3. Revenues

 

The Company records deferred revenue when cash payments are received or due in advance of satisfying the performance obligation. The table below shows the change in the customer advances balance for the three and six months ended June 30, 2020 and 2019 which are included in current liabilities in the Condensed Consolidated Balance Sheets.

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Balance at beginning of period

 

$

21.0

 

 

$

13.3

 

 

$

25.8

 

 

$

9.6

 

Cash received or due in advance of satisfying

   performance obligation

 

 

15.9

 

 

 

18.3

 

 

 

44.8

 

 

 

50.2

 

Revenue recognized

 

 

(21.6

)

 

 

(21.1

)

 

 

(54.1

)

 

 

(49.4

)

Currency translation

 

 

0.5

 

 

 

0.1

 

 

 

(0.7

)

 

 

0.2

 

Balance at end of period

 

$

15.8

 

 

$

10.6

 

 

$

15.8

 

 

$

10.6

 

 

Disaggregation of the Company’s revenue sources are disclosed in Note 17, “Segments.”

4. Fair Value of Financial Instruments

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value as of June 30, 2020 and December 31, 2019, by level within the fair value hierarchy. 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 June 30, 2020

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Recognized Location

Forward currency exchange contracts

 

$

 

 

$

0.1

 

 

$

 

 

$

0.1

 

 

Other current assets

 

 

 

Fair Value as of December 31, 2019

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Recognized Location

Forward currency exchange contracts

 

$

 

 

$

0.1

 

 

$

 

 

$

0.1

 

 

Other current assets

Forward currency exchange contracts

 

 

 

 

 

0.1

 

 

 

 

 

 

0.1

 

 

Accounts payable and

   accrued expenses

 

The fair value of the senior secured second lien notes due on April 1, 2026, with an annual coupon rate of 9.000% (the “2026 Notes”), was approximately $299.0 million as of June 30, 2020. See Note 11, “Debt,” for a description of the 2026 Notes and the related carrying value.

The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  The Company estimates the fair value of its 2026 Notes based on quoted market prices; because these markets are typically actively traded, the liabilities are classified as Level 1 within the valuation hierarchy. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and short-term variable debt, including any amounts outstanding under the revolving

8


 

credit facility, approximate fair value, without being discounted as of June 30, 2020 and December 31, 2019, due to the short-term nature of these instruments.

Forward currency exchange contracts (“FX Forward 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. See Note 5, “Derivative Financial Instruments” for additional information.

5.  Derivative Financial Instruments

 

The Company’s risk management objective is to ensure that business exposures to risks are minimized using the most effective and efficient methods to eliminate, reduce, or transfer such exposures. Operating decisions consider these associated risks and, whenever possible, transactions are structured to avoid or mitigate these risks.

 

From time to time, the Company enters into FX Forward Contracts to manage the exposure on forecasted transactions denominated in non-functional currencies and to manage the risk of transaction gains and losses associated with assets/liabilities in currencies other than the functional currency of certain subsidiaries. Certain of these FX Forward Contracts are designated as cash flow hedges. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives’ fair value are not included in current earnings but are included in accumulated other comprehensive income (loss). These changes in fair value are reclassified into earnings as a component of cost of sales, as applicable, when the forecasted transaction impacts earnings. In addition, if the forecasted transaction is no longer probable, the cumulative change in the derivatives’ fair value is recorded as a component of other income expense – net in the period in which the transaction is no longer considered probable of occurring. No amounts were recorded related to these types of transactions during the three and six months ended June 30, 2020 and 2019, respectively.

 

The Company had FX Forward Contracts with an aggregate notional amount of $9.6 million and $32.6 million outstanding as of June 30, 2020 and December 31, 2019, respectively. The aggregate notional amount outstanding as of June 30, 2020 is scheduled to mature within one year. The FX Forward Contracts purchased are denominated in various foreign currencies. As of June 30, 2020 and December 31, 2019, the net fair value of these contracts was a net current asset of $0.1 million and a net zero balance, respectively. There was $0.1 million and zero unrealized gains, net of income tax, recorded in accumulated other comprehensive loss as of June 30, 2020 and December 31, 2019, respectively.  

 

The following table provides the amount of gain or loss recorded in the Condensed Consolidated Statement of Operations for FX Forward Contracts for the three and six months ended June 30, 2020 and June 30, 2019.

 

 

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

Recognized Location

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Designated

 

Cost of sales

 

$

0.2

 

 

$

0.7

 

 

$

0.3

 

 

$

1.5

 

Non-Designated

 

Other income (expense) - net

 

$

(0.4

)

 

$

(1.6

)

 

$

(0.4

)

 

$

(2.3

)

 

6.  Inventories

The components of inventories as of June 30, 2020 and December 31, 2019 are summarized as follows:

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Raw materials

 

$

140.7

 

 

$

156.3

 

Work-in-process

 

 

116.5

 

 

 

116.3

 

Finished goods

 

 

329.7

 

 

 

239.4

 

Total inventories

 

 

586.9

 

 

 

512.0

 

Excess and obsolete inventory reserve

 

 

(52.4

)

 

 

(50.6

)

Inventories — net

 

$

534.5

 

 

$

461.4

 

 

9


 

7.  Notes Receivable

The Company has notes receivable balances that are classified as current or long-term based on the timing of amounts due. Long-term notes receivable are included within other non-current assets on the Condensed Consolidated Balance Sheets. Current and long-term notes receivable balances primarily relate to the Company’s captive finance entity in China. As of June 30, 2020, the Company had current and long-term notes receivable in the amount of $14.0 million and $14.8 million, respectively. As of December 31, 2019, the Company had current and long-term notes receivable in the amount of $17.4 million and $16.3 million, respectively.

 

8.  Property, Plant and Equipment

The components of property, plant and equipment at June 30, 2020 and December 31, 2019 are summarized as follows:

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Land

 

$

23.2

 

 

$

24.0

 

Building and improvements

 

 

195.6

 

 

 

197.3

 

Machinery, equipment and tooling

 

 

275.3

 

 

 

274.2

 

Furniture and fixtures

 

 

18.8

 

 

 

18.5

 

Computer hardware and software

 

 

117.6

 

 

 

119.3

 

Rental cranes

 

 

75.2

 

 

 

77.7

 

Construction in progress

 

 

10.8

 

 

 

11.2

 

Total cost

 

 

716.5

 

 

 

722.2

 

Less accumulated depreciation

 

 

(438.7

)

 

 

(432.3

)

Property, plant and equipment — net

 

$

277.8

 

 

$

289.9

 

 

Property, plant and equipment are depreciated over the asset’s estimated useful life using the straight-line depreciation method for financial reporting and accelerated methods for income tax purposes.

9.  Goodwill and Other Intangible Assets

The Company performs an annual impairment review of goodwill and indefinite-lived intangible assets during the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired. During the three months ended March 31, 2020, the Company considered the decline in its market capitalization due to the COVID-19 pandemic as an interim triggering event. The Company’s interim test results as of March 31, 2020 indicated that the fair values of all reporting units exceeded their carrying values and thus, no impairment of goodwill existed. No additional triggers for an interim impairment test have been identified since March 31, 2020. However, the Company is unable to predict future impacts of the COVID-19 pandemic, including a prolonged and/or more severe pandemic than anticipated, or future changes in management’s judgements and assumptions used to assess the fair value of the reporting units, which could result in a non-cash impairment charge in the future.

The changes in the carrying amount of goodwill for the year ended December 31, 2019 and the six months ended June 30, 2020 are summarized as follows:

 

 

 

Americas

 

 

MEAP

 

 

Consolidated

 

Balance as of January 1, 2019

 

$

166.5

 

 

$

66.3

 

 

$

232.8

 

Foreign currency impact

 

 

 

 

 

(0.3

)

 

 

(0.3

)

Balance as of December 31, 2019

 

 

166.5

 

 

 

66.0

 

 

 

232.5

 

Foreign currency impact

 

 

 

 

 

(0.5

)

 

 

(0.5

)

Balance as of June 30, 2020

 

$

166.5

 

 

$

65.5

 

 

$

232.0

 

10


 

The gross carrying amount, accumulated amortization and net book value of the Company’s intangible assets other than goodwill at June 30, 2020 and December 31, 2019 are summarized as follows:

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

Gross

Carrying

Amount

 

 

Accumulated