(Source: PRNewswire-FirstCall)
MANITOWOC, Wis., April 30 /PRNewswire-FirstCall/ -- The Manitowoc Company, Inc. reported sales of $1,027.6 million for the first quarter of 2009, a 4 percent increase from $988.5 million in the first quarter of 2008. The sales increase was due primarily to the October 2008 acquisition of Enodis plc. On a pro-forma basis, which includes relevant Enodis sales in the prior year, sales declined 22 percent from $1,311.7 million in the first quarter of 2008. This includes a negative 7 percent impact from foreign currency fluctuations. Excluding one-time items, adjusted earnings from continuing operations were $22.9 million, or $0.18 per share, versus similarly adjusted earnings of $95.4 million, or $0.72 per share in the first quarter of 2008.
In connection with the preparation of the first-quarter financial statements, the company recorded non-cash impairment charges of $700 million for the write-down of goodwill and other intangible assets in certain Foodservice reporting units. This is in addition to the previously announced $29 million write-down related to the expected proceeds from the sale of the Enodis ice business. The company recorded these charges in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," and the required analysis was performed with the assistance of a third-party valuation firm. These impairments are non-cash expenses that do not affect the company's debt position, cash flow, liquidity, or financial covenant ratios contained in our credit agreement. "These charges were driven by the current economic environment and compliance with the appropriate accounting standards," said Glen E. Tellock, Manitowoc's chairman and chief executive officer. "We remain confident in the long-term growth and profitability opportunities for both of our market-leading businesses."
On a GAAP basis, the company reported a net loss of $656.3 million, or a loss of $5.04 per share, for the quarter versus net income of $102.7 million, or $0.78 per share in the first quarter of the prior year. The loss in the current quarter was due to the combined $729 million non-cash impairment charges. Also affecting profitability in the quarter was a reduction in crane sales, a $10.8 million reduction from foreign currency fluctuations, and restructuring charges of $2.8 million. A reconciliation of GAAP earnings from continuing operations before special items for the three months ended March 31, 2009 is included later in this press release.
Operating earnings for the first quarter of 2009, excluding special items, were $62.8 million, down 53 percent from $132.6 million in the first quarter of 2008. This reflects a decline of $78.1 million in the Crane segment, partially offset by an increase of $15.2 million in the Foodservice segment.
"This quarter contrasts sharply with the first quarter of 2008 when we were near the peak of the business cycle in our Crane segment," added Tellock. "We experienced a dramatic reversal in demand for cranes over the past several quarters driven primarily by constrained credit availability. As a result, customers have cancelled or delayed deliveries across many of our end markets and product lines. Fortunately, we have experienced a less severe decline in the Foodservice segment.
"We have acted quickly and aggressively to maximize opportunities to improve our operations and adjust our cost structure in ways that will improve our competitive strength. We are focused on initiatives that will improve profitability for the long term and allow us to emerge from the worldwide recession in a stronger competitive position. On an annual run-rate we have lowered our cost structure by over $260 million."
Business Segment Results
First-quarter 2009 net sales in the Crane segment were $672.9 million, down nearly 24 percent from $884.4 million in the first quarter of the prior year. This includes an 8 percent negative impact from foreign currency fluctuations. Crane segment operating earnings for the first quarter of 2009 decreased 58 percent to $56.5 million from $134.6 million in the same period last year.
Crane segment backlog totaled $1.4 billion at March 31, 2009, a decrease of 28 percent from the $1.9 billion backlog at December 31, 2008. Although the backlog declined for a third consecutive quarter, the net-negative order flow driven by backlog cancellations has recently stabilized to net-positive orders on a more consistent basis.
In the Foodservice segment, first-quarter 2009 net sales increased to $354.7 million from $104.1 million in the first quarter of 2008. This increase was related to the acquisition of Enodis. On a pro-forma basis, excluding the Enodis ice business, Foodservice revenues decreased 17 percent in the first quarter of 2009 from $427.3 million in the first quarter of 2008. This includes a 5 percent negative impact from foreign currency fluctuations.
Foodservice operating earnings, excluding the impairment charges, for the first quarter of 2009 were $27.5 million, up from $12.3 million in the same period in 2008. On a pro-forma basis, Foodservice operating earnings were down 31 percent, due primarily to a 16-month contraction in capital spending by the restaurant industry. The Foodservice segment's organic revenue and operating earnings, which exclude the revenue and earnings from Enodis, declined 22 percent and 34 percent, respectively, for the first quarter of 2009 compared to the first quarter of 2008.
"We see tremendous potential for our combined Foodservice segment," continued Tellock. "Manitowoc has now become a market leader across broad product categories in the global foodservice equipment industry. Our integration is tracking ahead of plan and the anticipated synergies are being achieved. Taking the best talent from both organizations, we have built a Foodservice management team that is moving ahead aggressively to build a foundation for sustainable growth, in spite of current market conditions.
"Even though the industry has reduced its capital spending in light of the current economic recession, we are encouraged by the positive dynamic of our new Foodservice segment. This dynamic drives equipment sales to end users who are aggressively seeking additional revenue and market share in these challenging times by pursuing multiple initiatives such as menu changes, energy efficiency, and productivity gains."
Results from Discontinued Operations
The ice-machine operations of Enodis generated an operating loss of $27.8 million in the first quarter of 2009 including the previously announced $29 million goodwill impairment charge. This business is being sold to Warburg Pincus Private Equity X, L.P. in order to satisfy US and European regulatory conditions related to the Enodis acquisition. The sale is expected to be completed in May 2009. The company intends to use the after-tax net proceeds of approximately $150 million to reduce the $181.5 million remaining on Term Loan "X" which matures in April of 2010.
Cash Flow/Debt Reduction
Cash flow from continuing operations in the first quarter was a negative $16.0 million, due primarily to a $58 million legal settlement of a previous accrual for a long-standing, non-operational Enodis matter. While lower proceeds from the sale of the Enodis ice business and business conditions have constrained our expectations for cash generation in 2009, we continue to expect to make substantial progress toward our debt reduction target of $700 million this year.
Debt Covenants
As a result of the lower-than-expected proceeds from the sale of the Enodis ice-machine operations combined with lower projected earnings, the company will seek to amend the financial covenants in its credit facility during the second quarter of 2009. Management has been communicating with numerous members of its bank group to keep them informed of the situation, and formal negotiations are expected to begin shortly. We anticipate that a mutually agreeable amendment to the credit facility will be completed during the second quarter.
GAAP Reconciliation
In this release, the company refers to various non-GAAP measures. The company believes that these measures are helpful to investors in assessing the company's ongoing performance of its underlying businesses before the impact of special items. In addition, these non-GAAP measures provide a comparison to commonly used financial metrics within the professional investing community which do not include special items.
