MTW-2012.12.31-10K
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-K
 
ý
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the fiscal year ended December 31, 2012
 
or
 
o
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)
 
Identification Number)
 
 
 
2400 South 44th Street,
 
 
Manitowoc, Wisconsin
 
54221-0066
(Address of principal executive offices)
 
(Zip Code)
 
(920) 684-4410
(Registrant’s telephone number, including area code)
 
Securities Registered Pursuant to Section 12(b) of the Act:
 
Title of each class
 
Name of each exchange on which registered
Common Stock, $.01 Par Value
 
New York Stock Exchange
Common Stock Purchase Rights
 
 
 
Securities Registered Pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o  No ý
 
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 ý  No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes ý  No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer, accelerated filer, and smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer x
 
Accelerated filer o
Non-accelerated filer o
 (Do not check if a smaller reporting company)
 
Smaller reporting company o
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No ý
 
The Aggregate Market Value on June 29, 2012, of the registrant’s Common Stock held by non-affiliates of the registrant was $1,534.3 million based on the closing per share price of $11.70 on that date.
 
The number of shares outstanding of the registrant’s Common Stock as of January 31, 2013, the most recent practicable date, was 132,781,078.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant’s Proxy Statement, to be prepared and filed for the Annual Meeting of Shareholders, dated March 22, 2013 (the “2013 Proxy Statement”), are incorporated by reference in Part III of this report.
 
See Index to Exhibits immediately following the signature page of this report, which is incorporated herein by reference.



Table of Contents

THE MANITOWOC COMPANY, INC.
Index to Annual Report on Form 10-K
For the Year Ended December 31, 2012
 
 
 
PAGE
 
 
 
 
PART I
 
 
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
 
PART III
 
 
 
 
 
 
 
 
PART IV
 
 
 
 


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Table of Contents

PART I
Item 1.  BUSINESS
GENERAL
The Manitowoc Company, Inc. (referred to as the company, MTW, Manitowoc, we, our, and us) was founded in 1902. We are a multi-industry, capital goods manufacturer operating in two principal markets: Cranes and Related Products (Crane) and Foodservice Equipment (Foodservice). Crane is recognized as one of the world’s leading providers of engineered lifting equipment for the global construction industry, including lattice-boom cranes, tower cranes, mobile telescopic cranes, and boom trucks. Foodservice is one of the world’s leading innovators and manufacturers of commercial foodservice equipment serving the ice, beverage, refrigeration, food-preparation, and cooking needs of restaurants, convenience stores, hotels, healthcare, and institutional applications. We have over a 110-year tradition of providing high-quality, customer-focused products and support services to our markets.  For the year ended December 31, 2012, we had net sales of approximately $3.9 billion.
Our Crane business is a global provider of engineered lift solutions, offering one of the broadest product lines of lifting equipment in our industry.  We design, manufacture, market, and support a comprehensive line of lattice-boom crawler cranes, mobile telescopic cranes, tower cranes, and boom trucks.  Our Crane products are principally marketed under the Manitowoc, Grove, Potain, National, Shuttlelift, and Crane Care brand names and are used in a wide variety of applications, including energy and utilities, petrochemical and industrial projects, infrastructure developments such as road, bridge and airport construction, and commercial and high-rise residential construction.
Our Foodservice business is among the world’s leading designers and manufacturers of commercial foodservice equipment.  Our Foodservice capabilities span refrigeration, ice-making, cooking, holding, food-preparation, and beverage-dispensing technologies, and allow us to be able to equip entire commercial kitchens and serve the world’s growing demand for food prepared away from home.  Our Foodservice products are marketed under the Manitowoc, Garland, U.S. Range, Convotherm, Cleveland, Lincoln, Merrychef, Frymaster, Delfield, Kolpak, Kysor Panel, Servend, Multiplex, and Manitowoc Beverage System brand names.
During the fourth quarter of 2012, the company decided to divest its warewashing equipment business, which operated under the brand name Jackson, and classified this business as discontinued operations in the company's financial statements. Jackson designs, manufactures and sells warewashing equipment, offering a full range of undercounter dishwashers, door-type dishwashers, conveyor, pot washing, and flight-type dishwashers. On January 28, 2013, the company sold the Jackson warewashing equipment business to Hoshizaki USA Holdings, Inc. for approximately $38.5 million. Net proceeds were used to reduce ratably the then-outstanding balances of Term Loan A and B.
On December 15, 2010, the company reached a definitive agreement to divest of its Kysor/Warren and Kysor/Warren de Mexico businesses to Lennox International for approximately $145 million.  The transaction subsequently closed on January 14, 2011 and the net proceeds were used to pay down outstanding debt.  The results of these operations have been classified as discontinued operations.
In order to secure clearance for the acquisition of Enodis plc (“Enodis”) from various regulatory authorities including the European Commission and the United States Department of Justice, the company agreed to sell substantially all of Enodis’ global ice machine operations following completion of the transaction.  In May 2009, the company completed the sale of the Enodis global ice machine operations to Braveheart Acquisition, Inc., an affiliate of Warburg Pincus Private Equity X, L.P., for $160 million.  The businesses sold were operated under the Scotsman, Ice-O-Matic, Simag, Barline, Icematic, and Oref brand names.  The company also agreed to sell certain non-ice businesses of Enodis located in Italy that are operated under the Tecnomac and Icematic brand names.  Prior to disposal, the antitrust clearances required that the ice businesses were treated as standalone operations, in competition with the company.  The results of these operations have been classified as discontinued operations.
In December 2008, the company completed the sale of its Marine segment to Fincantieri Marine Group Holdings Inc., a subsidiary of Fincantieri - Cantieri Navali Italiani SpA. The sale price in the all-cash deal was approximately $120 million.  The results of these operations have been classified as discontinued operations.
In October 2008, we completed our acquisition of Enodis, a global leader in the design and manufacture of innovative equipment for the commercial foodservice industry.  The $2.7 billion acquisition, inclusive of the purchase of outstanding shares and rights to shares, acquired debt, the settlement of hedges related to the acquisition and transaction fees, is the largest acquisition for the company and positioned Manitowoc among the world’s leading designers and manufacturers of commercial foodservice equipment.

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Our principal executive offices are located at 2400 South 44th Street, Manitowoc, Wisconsin 54220.
BUSINESS STRATEGY

We are committed to our tradition of providing high-quality, customer-focused products and services and building our market-leadership positions in our two core businesses. Major elements of our business strategy are as follows:

Emphasize new product development and innovation

We intend to continue to invest capital to develop new products and enhance our existing products with improved cost-effective functionality in response to changing customer requirements. In our Crane segment we have implemented a rigorous Integrated Product Development ("IPD") process that we expect will generate 14 new or updated products in the next two years. We believe these projects will keep us at the forefront of technology and innovation in each of our product lines. Such recent innovations include the introduction of our 2,500 U.S. ton capacity crawler crane, our new patented variable positioning counterweight technology, our innovative winch technology on our tower cranes, and our mega-track suspension systems on our all-terrain cranes.

Similarly in our Foodservice segment, innovative new products include customer-specific models of the Frymaster Protector Fryer which facilitate the use of healthier, zero-trans-fat oil by reducing the amount of oil required to produce consumer-favorite items; new categories of blended ice machines which produce portion-controlled coffee, fruit, yogurt and other flavored "smoothie" drinks in demand by consumers who crave fresh, healthy meal alternatives; and new Indigo line of ice machines, which allow owners to program ice production and monitor key functions, including ice clarity, machine maintenance and energy/water usage, while inhibiting bacterial growth with its unique LuminIce™ feature. We continue to develop resource-saving and reduced environmental footprint products with reduced energy and water consumption, built from materials that are more easily recycled, and shipped in packaging with more recycled content.

For the second consecutive year, the U.S. Environmental Protection Agency ("EPA") and Energy Star recognized our Foodservice segment in 2012 as an Energy Star Sustaining Excellence award winner for its contribution to reducing greenhouse gas emissions by manufacturing energy-efficient products and helping to educate consumers about those products.

Focus on capital, operating efficiency and our company values

We manage our businesses using various qualitative and quantitative measures of success, including an overarching commitment to the framework of economic value-added (EVA®), which drives us to deploy capital in areas with the greatest expected after-tax returns in excess of the cost of capital employed. We will continue to manage our business with rigorous financial and operating discipline aimed at continuously improving value for our shareholders, customers, employees and communities. Operational excellence is one of our seven strategic imperatives and is very important to maintaining and growing our market positions in both segments. The principles of lean manufacturing and Six Sigma are ingrained in a continuous improvement culture in both the Crane and Foodservice segments.

Just as with people, businesses have to decide what it is they stand for and believe in if they are to grow and be successful. At Manitowoc, our beliefs are best summarized in three core values: Integrity, Commitment to Stakeholders, and Passion for Excellence. We rely on these values every day, throughout the company, to set clear expectations, guide decisions and actions, and measure progress. They help us not only build our personal success, but the successes of our teams, business units, and company as a whole.

Optimize global footprint

Over the long-term we plan to continue to optimize our manufacturing, distribution and service networks in existing and select geographic markets. Where appropriate, we will continue to pursue joint ventures and licensing agreements to leverage the operating experience, technical expertise and local market knowledge of our strategic partners.




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Table of Contents

FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
The following is financial information about the Crane and Foodservice segments for the years ended December 31, 2012, 2011 and 2010.  The financial information for 2011 and 2010 has been revised to correct errors identified that relate to prior periods.  See Note 1, “Company and Basis of Presentation” for further discussion.  The accounting policies of the segments are the same as those described in the summary of significant accounting policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K, except that certain expenses are not allocated to the segments.  These unallocated expenses are corporate overhead, amortization expense of intangible assets with definite lives, goodwill impairment, intangible asset impairment, restructuring expense, integration expense and other non-operating expenses.  The company evaluates segment performance based upon profit and loss before the aforementioned expenses.  Amounts are shown in millions of dollars.
(in millions)
2012
 
2011
 
2010
Net sales from continuing operations:
 

 
 

 
 

Crane
$
2,440.8

 
$
2,164.6

 
$
1,748.6

Foodservice
1,486.2

 
1,454.6

 
1,362.9

Total
$
3,927.0

 
$
3,619.2

 
$
3,111.5

 
 
 
 
 
 
Operating earnings from continuing operations:
 

 
 

 
 

Crane
$
156.0

 
$
108.2

 
$
90.6

Foodservice
238.6

 
214.4

 
201.9

Corporate
(63.7
)
 
(61.3
)
 
(42.0
)
Amortization expense
(37.1
)
 
(37.9
)
 
(37.4
)
Restructuring expense
(9.5
)
 
(5.5
)
 
(3.8
)
Other expense
(2.5
)
 
0.5

 
(2.3
)
Total
$
281.8

 
$
218.4

 
$
207.0

 
 
 
 
 
 
Capital expenditures:
 

 
 

 
 

Crane
$
52.7

 
$
52.2

 
$
21.9

Foodservice
17.4

 
11.9

 
12.0

Corporate
2.8

 
0.7

 
2.0

Total
$
72.9

 
$
64.8

 
$
35.9

 
 
 
 
 
 
Total depreciation:
 

 
 

 
 

Crane
$
44.9

 
$
54.2

 
$
56.5

Foodservice
22.3

 
24.5

 
27.1

Corporate
2.3

 
2.8

 
2.9

Total
$
69.5

 
$
81.5

 
$
86.5

 
 
 
 
 
 
Total assets:
 

 
 

 
 

Crane
$
1,903.3

 
$
1,760.8

 
$
1,659.3

Foodservice
1,956.8

 
2,192.6

 
2,193.4

Corporate
197.2

 
69.2

 
219.6

Total
$
4,057.3

 
$
4,022.6

 
$
4,072.3







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PRODUCTS AND SERVICES
We sell our products categorized in the following business segments:
Business Segment
 
Percentage of
2012 Net Sales
 
Key Products
 
Key Brands
Cranes and Related Products
 
62%
 
Lattice-boom Cranes: which include crawler and truck mounted lattice-boom cranes, and crawler crane attachments; Tower Cranes: which include top-slewing, luffing jib, topless, and self-erecting tower cranes; Mobile Telescopic Cranes: which include rough-terrain, all-terrain, truck-mounted and industrial cranes; Boom Trucks: which include telescopic boom trucks; and Parts and Service: which include replacement parts, product services and crane rebuilding and remanufacturing services.
 
Manitowoc
Potain
Grove
National Crane
Shuttlelift
Dongyue
Crane Care
Foodservice Equipment
 
38%
 
Primary cooking and warming equipment; ice machines and storage bins; refrigerator and freezer equipment; beverage dispensers and related products; serving and storage equipment; and parts and service.

 
Cleveland
Convotherm
Delfield
Frymaster
Garland
Kolpak
Kysor Panel Systems
Lincoln
Manitowoc
Merrychef
Multiplex
Servend

Cranes and Related Products

Our Crane segment designs, manufactures and distributes a diversified line of crawler-mounted lattice-boom cranes, which we sell under the Manitowoc brand name. Our Crane segment also designs and manufactures a diversified line of top-slewing and self-erecting tower cranes, which we sell under the Potain brand name. We design and manufacture mobile telescopic cranes, which we sell under the Grove and Shuttlelift brand names, and a comprehensive line of hydraulically powered telescopic boom trucks, which we sell under the National Crane brand name. We also provide crane product parts and services, and crane rebuilding, remanufacturing, and training services, which are delivered under the Manitowoc Crane Care brand name. In some cases our products are manufactured for us or distributed for us under strategic alliances. Our crane products are used in a wide variety of applications throughout the world, including energy production / distribution and utilities, petrochemical and industrial projects, infrastructure development such as road, bridge and airport construction, and commercial low-rise and high-rise residential construction. Many of our customers purchase one or more cranes together with several attachments to permit use of the crane in a broader range of lifting applications and other operations. Our largest crane model combined with available options has a lifting capacity up to 2,500 U.S. tons. We believe our primary near-term growth drivers are the relative strength in the energy, infrastructure, construction and petro-chemical-related end markets.

Lattice-boom cranes. Under the Manitowoc brand name we design, manufacture and distribute lattice-boom crawler cranes. Lattice-boom cranes consist of a lattice-boom, which is a fabricated, high-strength steel structure that has four chords and tubular lacings, mounted on a base which is either crawler or truck mounted. Lattice-boom cranes weigh less and provide higher lifting capacities than a telescopic boom of similar length. The lattice-boom cranes are the only category of crane that can pick and move simultaneously with a full-rated load. The lattice-boom sections, together with the crane base, are transported to and erected at a project site.

We currently offer models of lattice-boom cranes with lifting capacities up to 2,500 U.S. tons, which are used to lift material and equipment in a wide variety of applications and end markets, including heavy construction, bridge and highway, duty cycle and infrastructure and energy related projects. These cranes are also used by the value-added crane rental industry, which serves all of the above end markets.

Lattice-boom crawler cranes may be classified according to their lift capacity-low capacity and high capacity. Low-capacity crawler cranes with 150-U.S. ton capacity or less are often utilized for general construction and duty-cycle applications. High-capacity crawler cranes with greater than 150-U.S. ton capacity are used to lift materials in a wide variety of applications and are often used in heavy construction, energy-related, stadium construction, petrochemical work, and dockside applications. We offer ten low-capacity models and nine high-capacity models.

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We also offer our lattice-boom crawler crane customers various attachments that provide our cranes with greater capacity in terms of height, movement and lifting. Our principal attachments are: MAX-ER™ attachments, luffing jibs, and RINGER™ attachments. The MAX-ER™ is a trailing counterweight, heavy-lift attachment that dramatically improves the reach, capacity and lift dynamics of the basic crane to which it is mounted. It can be transferred between cranes of the same model for maximum economy and occupies less space than competitive heavy-lift systems. A luffing jib is a fabricated structure similar to, but smaller than, a lattice-boom. Mounted at the tip of a lattice-boom, a luffing jib easily adjusts its angle of operation permitting one crane with a luffing jib to make lifts at additional locations on the project site. It can be transferred between cranes of the same model to maximize utilization. A RINGER™ attachment is a high-capacity lift attachment that distributes load reactions over a large area to minimize ground-bearing pressure. It can also be more economical than transporting and setting up a larger crane.

Tower cranes. Under the Potain brand name, we design and manufacture tower cranes utilized primarily in the energy, building and construction industries. Tower cranes offer the ability to lift and distribute material at the point of use more quickly and accurately than other types of lifting machinery without utilizing substantial square footage on the ground. Tower cranes include a stationary vertical mast and a horizontal jib with a counterweight, which is placed near the vertical mast. A cable runs through a trolley which is mounted on the jib, enabling the load to move along the jib. The jib rotates 360 degrees, thus increasing the crane's work area. Unless using a remote control device, operators occupy a cabin, located where the jib and mast meet, which provides superior visibility above the worksite. We offer a complete line of tower crane products, including top slewing, luffing jib, topless, self-erecting, and special cranes for dams, harbors and other large building projects. Top-slewing cranes are the most traditional form of tower cranes. Self-erecting cranes are bottom-slewing cranes which have a counterweight located at the bottom of the mast and are able to be erected, used and dismantled on job sites without assist cranes.

Top-slewing tower cranes have a tower and multi-sectioned horizontal jib. These cranes rotate from the top of their mast and can increase in height with the project. Top-slewing cranes are transported in separate pieces and assembled at the construction site in one to three days depending on the height. We offer 21 models of top-slewing tower cranes with maximum jib lengths of 80 meters and lifting capabilities ranging between 5 and 80 meter-tons. These cranes are generally sold to medium to large energy, building and construction groups, as well as to rental companies.

Topless tower cranes are a type of top-slewing crane and, unlike all others, have no cathead or jib tie-bars on the top of the mast. The cranes are utilized primarily when overhead height is constrained or in situations where several cranes are installed close together. We currently offer 15 models of topless tower cranes with maximum jib lengths of 75 meters and lifting capabilities ranging between 2.5 and 20 meter-tons.

Luffing jib tower cranes, which are a type of top-slewing crane, have an angled rather than horizontal jib. Unlike other tower cranes which have a trolley that controls the lateral movement of the load, luffing jib cranes move their load by changing the angle of the jib. The cranes are utilized primarily in urban areas where space is constrained or in situations where several cranes are installed close together. We currently offer nine models of luffing jib tower cranes with maximum jib lengths of 60 meters and lifting capabilities ranging between 8 and 32 meter-tons.

Self-erecting tower cranes are mounted on axles or transported on a trailer. The lower segment of the range (Igo cranes up to Igo50) unfolds in four sections, two for the mast and two for the jib. The smallest of our models unfolds in less than eight minutes; larger models erect in a few hours. Self-erecting cranes rotate from the bottom of their mast. We offer 24 models of self-erecting cranes with maximum jib lengths of 50 meters and lifting capacities ranging between 1 and 8 meter-tons which are utilized primarily in low to medium rise construction and residential applications.

Mobile telescopic cranes. Under the Grove brand name we design and manufacture 36 models of mobile telescopic cranes utilized primarily in industrial, commercial and construction applications, as well as in maintenance applications to lift and move material at job sites. Mobile telescopic cranes consist of a telescopic boom mounted on a wheeled carrier. Mobile telescopic cranes are similar to lattice-boom cranes in that they are designed to lift heavy loads using a mobile carrier as a platform, enabling the crane to move on and around a job site without typically having to re-erect the crane for each particular job. Additionally, many mobile telescopic cranes have the ability to drive between sites, and some are permitted on public roadways. We currently offer the following four types of mobile telescopic cranes capable of reaching tip heights of up to 427 feet with lifting capacities up to 550 U.S. tons: rough-terrain, all-terrain, truck-mounted, and industrial.

Rough-terrain cranes are designed to lift materials and equipment on rough or uneven terrain. These cranes cannot be driven on public roadways, and, accordingly, must be transported by truck to a work site. We produce, under the Grove brand name, nine models of rough-terrain cranes capable of tip heights of up to 312 feet and maximum load capacities of up to 150 U.S. tons.

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All-terrain cranes are versatile cranes designed to lift materials and equipment on rough or uneven terrain and yet are highly maneuverable and capable of highway speeds. We produce, under the Grove brand name, 14 models of all-terrain cranes capable of tip heights of up to 449 feet and maximum load capacities of up to 550 U.S. tons.

Truck-mounted cranes are designed to provide simple set-up and long reach high capacity booms and are capable of traveling from site to site at highway speeds. These cranes are suitable for urban and suburban uses. We produce, under the Grove brand name, five models of truck mounted cranes capable of tip heights of up to 237 feet and maximum load capacities of up to 90 U.S. tons.

Industrial cranes are designed primarily for plant maintenance, storage yard and material handling jobs. We manufacture, under the Grove and Shuttlelift brand names, seven models of industrial cranes. We produce industrial cranes with up to 25 U.S. ton capacity and tip heights of up to 86 feet.

High reach telescopic hydraulic cranes. The GTK 1100 is a high-reach telescopic hydraulic crane that can lift a 105 U.S. ton load up to 367 feet, only requires about six hours to erect and is based on a combination of mobile crane and tower crane technology.

Boom trucks. We offer our hydraulic boom truck products under the National Crane product line. A boom truck is a hydraulically powered telescopic crane mounted on a conventional truck chassis. Telescopic boom trucks are used primarily for lifting material on a job site. We currently offer, under the National Crane brand name, 18 models of telescoping boom trucks. The largest capacity cranes of this type are capable of reaching maximum heights of 205 feet and have lifting capacity up to 55 U.S. tons.
Backlog. The year-end backlog of crane products includes accepted orders that have been placed on a production schedule that we expect to be shipped and billed during the next year. Manitowoc’s backlog of unfilled orders for the Crane segment at December 31, 2012, 2011 and 2010 was $755.8 million, $760.5 million and $571.7 million, respectively.
Foodservice Equipment
Our Foodservice Equipment business designs, manufactures and sells primary cooking and warming equipment; ice machines and storage bins; refrigerator and freezer equipment; beverage dispensers and related products; and serving and storage equipment. Our suite of products is used by commercial and institutional foodservice operators such as full service restaurants, quick-service restaurant (QSR) chains, hotels, caterers, supermarkets, convenience stores, business and industry, hospitals, schools and other institutions. We have a presence throughout the world's most significant markets in the following product groups:

Primary cooking and warming equipment. We design, manufacture and sell a broad array of ranges, griddles, grills, combination ovens, convection ovens, conveyor ovens, induction cookers, broilers, tilt fry pans/kettles/skillets, braising pans, cheese melters/salamanders, cook stations, table top and counter top cooking/frying systems, fryers, steam jacketed kettles, and steamers. We sell traditional oven, combi oven, convection oven, conveyor oven, accelerated cooking oven, range and grill products under the Convotherm, Garland, Lincoln, Merrychef, U.S. Range, and other brand names. Fryers and frying systems are marketed under the Frymaster and Dean brand names, while steam equipment is manufactured and sold under the Cleveland brand. In addition to cooking, we provide a range of warming, holding, and serving equipment under the Delfield, Fabristeel, Frymaster, Merco, and other brand names.

Ice-cube machines, ice flaker machines, nugget ice machines, ice dispensers and storage bins. We design, manufacture and sell ice machines under the Manitowoc brand name, serving the foodservice, convenience store, healthcare, restaurant, lodging and other markets. Our ice machines make ice in cube, nugget and flake form, and range in daily production capacities. The ice-cube machines are either self-contained units, which make and store ice, or modular units, which make, but do not store ice.

Refrigerator and freezer equipment. We design, manufacture and sell commercial upright and undercounter refrigerators and freezers, blast freezers, blast chillers and cook-chill systems under the Delfield, McCall, Koolaire and other brand names. We manufacture under the brand names Kolpak, Kysor Panel Systems and Harford-Duracool modular and fully assembled walk-in refrigerators, coolers and freezers and prefabricated cooler and freezer panels for use in the construction of refrigerated storage rooms and environmental systems. We also design and manufacture customized refrigeration systems under the RDI brand name.


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Beverage dispensers and related products. We produce beverage dispensers, blended ice machines, ice/beverage dispensers, beer coolers, post-mix dispensing valves, backroom equipment and support system components and related equipment for use by QSR chains, convenience stores, bottling operations, movie theaters, and the soft-drink industry. Our beverage and related products are sold under the Servend, Multiplex, TruPour, Manitowoc Beverage Systems and McCann's brand names.

Serving and storage equipment. We design, manufacture and sell a range of cafeteria/buffet equipment stations, bins, boxes, warming cabinets, display and deli cases, insulated and refrigerated salad/food bars, and warmers. Our equipment stations, cases, food bars and food serving lines are marketed under the Delfield, Viscount and other brand names.

The end-customer base for the Foodservice Equipment segment is comprised of a wide variety of foodservice providers, including, but not limited to, large multinational and regional chain restaurants, convenience stores and retail stores; chain and independent casual and family dining restaurants; independent restaurants and caterers; lodging, resort, leisure and convention facilities; health care facilities; schools and universities; large business and industrial customers; and many other foodservice outlets. We cater to some of the largest and most widely recognized multinational and regional businesses in the foodservice and hospitality industries. We do not typically have long-term contracts with our customers; however, large chains frequently authorize specific foodservice equipment manufacturers as approved vendors for particular products, and thereafter, sales are made locally or regionally to end customers via kitchen equipment suppliers, dealers or distributors. Many large QSR chains refurbish or open a large number of outlets, or implement menu changes requiring investment in new equipment, over a short period of time. When this occurs, these customers often choose a small number of manufacturers whose approved products may or must be purchased by restaurant operators. We work closely with our customers to develop the products they need and to become the approved vendors for these products.

Our end-customers often need equipment upgrades that enable them to improve productivity and food safety, reduce labor costs, respond to enhanced hygiene, environmental and menu requirements or reduce energy consumption. These changes often require customized cooking and cooling and freezing equipment. In addition, many restaurants, especially QSRs, seek to differentiate their products by changing their menu and format. We believe that product development is important to our success because a supplier's ability to provide customized or innovative foodservice equipment is a primary factor when customers are making their purchasing decisions. Recognizing the importance of providing innovative products to our customers, we invest significant time and resources into new product research and development.

The Manitowoc Education and Technology Centers ("ETC") in New Port Richey, Florida and Hangzhou, China contain computer-assisted design platforms, a model shop for on-site development of prototypes, a laboratory for product testing and various display areas for new products. Our test kitchen, flexible demonstration areas and culinary team enable us to demonstrate a wide range of equipment in realistic operating environments, and also support a wide range of menu ideation, food development and sensory testing with our customers and food partners. We also use the ETC to provide training for our customers, marketing representatives, service providers, industry consultants, dealers and distributors.

Backlog. The backlog for unfilled orders for our Foodservice segment at December 31, 2012, 2011 and 2010 was not significant because orders are generally filled shortly after receiving the customer order.
Raw Materials and Supplies
The primary raw materials that we use are structural and rolled steel, aluminum, and copper, which are purchased from various domestic and international sources. We also purchase engines and electrical equipment and other semi- and fully-processed materials. Our policy is to maintain, wherever possible, alternate sources of supply for our important materials and parts. We maintain inventories of steel and other purchased material. We have been successful in our goal to maintain alternative sources of raw materials and supplies, and therefore are not dependent on a single source for any particular raw material or supply.
Patents, Trademarks, and Licenses
We hold numerous patents pertaining to our Crane and Foodservice products, and have presently pending applications for additional patents in the United States and foreign countries. In addition, we have various registered and unregistered trademarks and licenses that are of material importance to our business and we believe our ownership of this intellectual property is adequately protected in customary fashions under applicable laws.  No single patent, trademark or license is critical to our overall business.
Seasonality
Typically, the second and third quarters represent our best quarters for our consolidated financial results. More recently, the traditional seasonality for our Crane and Foodservice segments has been slightly muted due to more diversified product and

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geographic end markets, as well as the impact that the global economic recession and downturn in our end markets has had on our revenue.  In our Crane segment, the northern hemisphere summer represents the main construction season.  Customers require new machines, parts, and service during that season.  Since the summer brings warmer weather, there is also an increase in the use and replacement of ice machines, as well as new construction and remodeling within the foodservice industry.  As a result, distributors build inventories during the second quarter to prepare for increased demand.
Competition
We sell all of our products in highly competitive industries. We compete in each of our industries based on product design, quality of products and aftermarket support services, product performance, maintenance costs, energy and resource saving, other contributions to sustainability and price. Some of our competitors may have greater financial, marketing, manufacturing or distribution resources than we do. We believe that we benefit from the following competitive advantages: a strong brand name, a reputation for quality products and aftermarket support services, an established network of global distributors and customer relationships, broad product line offerings in the markets we serve, and a commitment to engineering design and product innovation. However, we cannot be certain that our products and services will continue to compete successfully or that we will be able to retain our customer base or improve or maintain our profit margins on sales to our customers. The following table sets forth our primary competitors in each of our business segments: 
Business Segment
 
Products
 
Primary Competitors
Cranes and Related Products
 
Lattice-boom Crawler Cranes
 
Hitachi Sumitomo; Kobelco; Liebherr; Sumitomo/Link-Belt; Terex; XCMG; Fushun; Zoomlion; Fuwa; and Sany
 
 
 
 
 
 
 
Tower Cranes
 
Comansa; Terex Comedil/Peiner; Liebherr; FM Gru; Jaso; Raimondi; Viccario; Saez; Benezzato; Cattaneo; Sichuan Construction Machinery; Shenyang; Zoomlion; Jianglu; and Yongmao
 
 
 
 
 
 
 
Mobile Telescopic Cranes
 
Liebherr; Link-Belt; Terex; Tadano; XCMG; Kato; Locatelli; Marchetti; Luna; Broderson; Valla; Ormig; Bencini; Sany; and Zoomlion
 
 
 
 
 
 
 
Boom Trucks
 
Terex; Manitex; Altec; Elliott; Tadano; Fassi; Palfinger; Furukawa; and Hiab
 
 
 
 
 
Foodservice Equipment
 
Ice-Cube Machines, Ice Flaker Machines and Storage Bins
 
Hoshizaki; Scotsman; Follet; Ice-O-Matic; Brema; Aucma; and Vogt
 
 
 
 
 
 
 
Beverage Dispensers and Related Products
 
Automatic Bar Controls; Celli; Cornelius; Hoshizaki/Lancer Corporation; Taylor; and Vin Service
 
 
 
 
 
 
 
Refrigerator and Freezer Equipment
 
American Panel; ICS; Nor-Lake; Master-Bilt; Thermo-Kool; Bally; Arctic; Beverage Air; Traulsen; True Foodservice; TurboAir; Masterbilt; and Hoshizaki
 
 
 
 
 
 
 
Primary Cooking Equipment
 
Ali Group; Electrolux; Dover Industries; Duke; Henny Penny; ITW; Middleby; Rational; and Taylor
 
 
 
 
 
 
 
Serving, Warming and Storage Equipment
 
Alto Shaam; Cambro; Duke; Hatco; ITW; Middleby; Standex; and Vollrath
 
 
 
 
 
 
 
Food Preparation Equipment
 
Ali Group; Bizerba; Electrolux; German Knife; Globe; ITW; and Univex
 

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Engineering, Research and Development
We believe our extensive engineering, research and development capabilities have been key drivers of our success. We engage in research and development activities at dedicated locations within both of our segments. We have a staff of in-house engineers and technicians on three continents, supplemented with external engineering resources, who are responsible for improving existing products and developing new products. We incurred research and development costs of $87.7 million in 2012, $80.6 million in 2011 and $72.2 million in 2010.
Our team of engineers focuses on developing innovative, high performance, low maintenance products that are intended to create significant brand loyalty among customers. Design engineers work closely with our manufacturing and marketing staff, enabling us to identify changing end-user requirements, implement new technologies and effectively introduce product innovations. Close, carefully managed relationships with dealers, distributors and end users help us identify their needs, not only for products, but for the service and support that are critical to their profitable operations. As part of our ongoing commitment to provide superior products, we intend to continue our efforts to design products that meet evolving customer demands and reduce the period from product conception to product introduction.
Employee Relations
As of December 31, 2012, we employed approximately 13,500 people and had labor agreements with 13 union locals in North America. A large majority of our European employees belong to European trade unions. We have three trade unions in China and one trade union in India.  During 2010, we had two union contracts that expired and were successfully renegotiated. During 2011, four of our union contracts expired at various times.  Three of the contracts that expired in 2011 were successfully renegotiated without incident, while the International Association of Machinists (IAM) contract with Manitowoc Crane Corporation expired in October 2011 and resulted in a 66-day work stoppage.  The company’s contingency plans ensured that customer needs were met during the work stoppage.  A new contract with the IAM was ratified in January 2012 and expires in January 2016.  During 2012, we successfully negotiated three labor contracts without incident.
Available Information
We make available, free of charge at our internet site (www.manitowoc.com), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our proxy statements and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC). Our SEC reports can be accessed through the investor relations section of our website. Although some documents available on our website are filed with the SEC, the information generally found on our website is not part of this or any other report we file with or furnish to the SEC.
The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room located at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains electronic versions of our reports on its website at www.sec.gov.
Geographic Areas
Net sales from continuing operations and long-lived asset information by geographic area as of and for the years ended December 31 are included below.  Long-lived assets are defined as property, plant and equipment, net, goodwill, other intangible assets, net and other non-current assets, excluding deferred tax assets.
 
Net Sales
 
Long-Lived Assets
(in millions)
2012
 
2011
 
2010
 
2012
 
2011
United States
$
1,833.0

 
$
1,588.8

 
$
1,335.2

 
$
1,905.4

 
$
1,964.7

Other North America
278.2

 
208.8

 
139.0

 
5.3

 
6.0

Europe
788.0

 
813.4

 
749.2

 
510.6

 
511.5

Asia
367.7

 
382.1

 
306.2

 
213.0

 
225.1

Middle East
161.6

 
189.4

 
168.7

 
1.6

 
1.7

Central and South America
243.0

 
237.8

 
203.0

 
33.3

 
15.5

Africa
110.8

 
65.4

 
69.5

 

 

South Pacific and Caribbean
10.6

 
12.0

 
11.5

 
4.6

 
4.8

Australia
134.1

 
121.5

 
129.2

 
4.4

 
4.2

Total
$
3,927.0

 
$
3,619.2

 
$
3,111.5

 
$
2,678.2

 
$
2,733.5


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Item 1A. RISK FACTORS
The following are risk factors identified by management that if any events contemplated by the following risks actually occur, then our business, financial condition or results of operations could be materially adversely affected. 
Some of our business segments are cyclical or are otherwise sensitive to volatile or variable factors. A downturn or weakness in overall economic activity or fluctuations in those other factors can have a material adverse effect on us.

Historically, sales of products that we manufacture and sell have been subject to cyclical variations caused by changes in general economic conditions and other factors. In particular, the demand for our Crane products is cyclical and is impacted by the strength of the economy generally, the availability of financing and other factors that may have an effect on the level of construction activity on an international, national or regional basis. During periods of expansion in construction activity, we generally have benefited from increased demand for our products. Conversely, during recessionary periods, such as the recent global economic recession, we have been adversely affected by reduced demand for our products. In addition, the strength of the economy generally may affect the rates of expansion, consolidation, renovation and equipment replacement within the restaurant, lodging, convenience store and healthcare industries, which may affect the performance of our Foodservice segment. Furthermore, an economic recession may impact leveraged companies, such as Manitowoc, more than competing companies with less leverage and may have a material adverse effect on our financial condition, results of operations and cash flows.

Products in our Crane segment also depend in part on federal, state, local and foreign governmental spending and appropriations, including infrastructure, security and defense outlays. Reductions in governmental spending can reduce demand for our products, which in turn can affect our performance. Weather conditions can substantially affect our Foodservice segment, as relatively cool summer weather and cooler-than-normal weather in hot climates tend to decrease sales of ice and beverage dispensers. Our sales depend in part upon our customers' replacement or repair cycles. Adverse economic conditions may cause customers to forego or postpone new purchases in favor of repairing existing machinery.

Because we participate in industries that are intensely competitive, our net sales and profits could decline as we respond to competition.

We sell most of our products in highly competitive industries. We compete in each of those industries based on product design, quality of products, quality and responsiveness of product support services, product performance, maintenance costs and price. Some of our competitors may have greater financial, marketing, manufacturing and distribution resources than we do. We cannot be certain that our products and services will continue to compete successfully with those of our competitors or that we will be able to retain our customer base or improve or maintain our profit margins on sales to our customers, any of which could materially and adversely affect our financial condition, results of operations and cash flows.

If we fail to develop new and innovative products or if customers in our markets do not accept them, our results would be negatively affected.

Our products must be kept current to meet our customers' needs. To remain competitive, we therefore must develop new and innovative products on an on-going basis. If we fail to make innovations, or the market does not accept our new products, our sales and results would suffer.

We invest significantly in the research and development of new products. These expenditures do not always result in products that will be accepted by the market. To the extent they do not, whether as a function of the product or the business cycle, we will have increased expenses without significant sales to benefit us. Failure to develop successful new products may also cause potential customers to choose to purchase used equipment, or competitors' products, rather than invest in new products manufactured by us.

Price increases in some materials and sources of supply could affect our profitability.

We use large amounts of steel, stainless steel, aluminum, copper and electronic controls, among other items, in the manufacture of our products. Occasionally, market prices of some of our key raw materials increase significantly. If in the future we are not able to reduce product cost in other areas or pass raw material price increases on to our customers, our margins could be adversely affected. In addition, because we maintain limited raw material and component inventories, even brief unanticipated delays in delivery by suppliers-including those due to capacity constraints, labor disputes, impaired financial condition of suppliers, weather emergencies or other natural disasters-may impair our ability to satisfy our customers and could adversely

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affect our financial performance.

To better manage our exposures to certain commodity price fluctuations, we regularly hedge our commodity exposures through financial markets. Through this hedging program we fix the future price for a portion of these commodities utilized in the production of our products. To the extent that our hedging is not successful in fixing commodity prices that are favorable in comparison to market prices at the time of purchase, we would experience a negative impact on our profit margins compared to the margins we would have realized if these price commitments were not in place, which may adversely affect our results of operations, financial condition and cash flows in future periods.

We increasingly manufacture and sell our products outside of the United States, which may present additional risks to our business.

For the years ended December 31, 2012, 2011 and 2010, approximately 53%, 56% and 57%, respectively, of our net sales were attributable to products sold outside of the United States. Expanding the company's international sales is part of our growth strategy. International operations generally are subject to various risks, including political, military, religious and economic instability, local labor market conditions, the imposition of foreign tariffs, the impact of foreign government regulations, the effects of income and withholding tax, governmental expropriation, and differences in business practices. We may incur increased costs and experience delays or disruptions in product deliveries and payments in connection with our international sales, manufacturing and the integration of new facilities that could cause loss of revenue or increased cost. Unfavorable changes in the political, regulatory and business climate and currency devaluations of various foreign jurisdictions could have a material adverse effect on our financial condition, results of operations and cash flows.

We depend on our key personnel and the loss of these personnel could have an adverse effect on our business.

Our success depends to a large extent upon the continued services of our key executives, managers and skilled personnel. Generally, these employees are not bound by employment or non-competition agreements, and we cannot be sure that we will be able to retain our key officers and employees. We could be seriously harmed by the loss of key personnel if it were to occur in the future.

Our operations and profitability could suffer if we experience problems with labor relations.
As of December 31, 2012, we employed approximately 13,500 people and had labor agreements with 13 union locals in North America. A large majority of our European employees belong to European trade unions. We have three trade unions in China and one trade union in India.  During 2010, we had two union contracts that expired and were successfully renegotiated. During 2011, four of our union contracts expired at various times.  Three of the contracts that expired in 2011 were successfully renegotiated without incident, while the International Association of Machinists (IAM) contract with Manitowoc Cranes, LLC expired in October 2011 and resulted in a 66-day work stoppage.  The company’s contingency plans ensured that customer needs were met during the work stoppage.  A new contract with the IAM was ratified in January 2012 and expires in January 2016.  During 2012, we successfully negotiated three labor contracts without incident. Any significant labor relations issues could have a material adverse effect on our results of operations and financial condition.
If we fail to protect our intellectual property rights or maintain our rights to use licensed intellectual property, our business could be adversely affected.

Our patents, trademarks and licenses are important in the operation of our businesses. Although we intend to protect our intellectual property rights vigorously, we cannot be certain that we will be successful in doing so. Third parties may assert or prosecute infringement claims against us in connection with the services and products that we offer, and we may or may not be able to successfully defend these claims. Litigation, either to enforce our intellectual property rights or to defend against claimed infringement of the rights of others, could result in substantial costs and in a diversion of our resources. In addition, if a third party would prevail in an infringement claim against us, then we would likely need to obtain a license from the third party on commercial terms, which would likely increase our costs. Our failure to maintain or obtain necessary licenses or an adverse outcome in any litigation relating to patent infringement or other intellectual property matters could have a material adverse effect on our financial condition, results of operations and cash flows.

Our results of operations may be negatively impacted by product liability lawsuits.

Our business exposes us to potential product liability risks that are inherent in the design, manufacture, sale and use of our products, especially our crane products. Certain of our businesses also have experienced claims relating to past asbestos exposure. Neither we nor our affiliates have to date incurred material costs related to these asbestos claims. We vigorously

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defend ourselves against current claims and intend to do so against future claims. However, a substantial increase in the number of claims that are made against us or the amounts of any judgments or settlements could materially and adversely affect our reputation and our financial condition, results of operations and cash flows.

Strategic divestitures could negatively affect our results.

We regularly review our business units and evaluate them against our core business strategies. In addition to strategic divestiture decisions, at times we may be required by regulatory authorities to make business divestitures as a result of acquisition transactions. As a result, we regularly consider the divestiture of non-core and non-strategic, or acquisition-related operations or facilities. Depending upon the circumstances and terms, the divestiture of an operation or facility could negatively affect our earnings from continuing operations.

Environmental liabilities that may arise in the future could be material to us.

Our operations, facilities and properties are subject to extensive and evolving laws and regulations pertaining to air emissions, wastewater discharges, the handling and disposal of solid and hazardous materials and wastes, the remediation of contamination, and otherwise relating to health, safety and the protection of the environment. As a result, we are involved from time to time in administrative or legal proceedings relating to environmental and health and safety matters, and have in the past and will continue to incur capital costs and other expenditures relating to such matters.

Based on current information, we believe that any costs we may incur relating to environmental matters will not be material, although we can give no assurances. We also cannot be certain that identification of presently unidentified environmental conditions, more vigorous enforcement by regulatory authorities, or other unanticipated events will not arise in the future and give rise to additional environmental liabilities, compliance costs and/or penalties that could be material. Further, environmental laws and regulations are constantly evolving and it is impossible to predict accurately the effect they may have upon our financial condition, results of operations or cash flows.

We are exposed to the risk of foreign currency fluctuations.

Some of our operations are or will be conducted by subsidiaries in foreign countries. The results of the operations and the financial position of these subsidiaries will be reported in the relevant foreign currencies and then translated into U.S. dollars at the applicable exchange rates for inclusion in our consolidated financial statements, which are stated in U.S. dollars. The exchange rates between many of these currencies and the U.S. dollar have fluctuated significantly in recent years and may fluctuate significantly in the future. Such fluctuations may have a material effect on our results of operations and financial position and may significantly affect the comparability of our results between financial periods.

In addition, we incur currency transaction risk whenever one of our operating subsidiaries enters into a transaction using a different currency than its functional currency. We attempt to reduce currency transaction risk whenever one of our operating subsidiaries enters into a material transaction using a different currency than its functional currency by:
• matching cash flows and payments in the same currency;
• direct foreign currency borrowing; and
• entering into foreign exchange contracts for hedging purposes.

However, we may not be able to hedge this risk completely or at an acceptable cost, which may adversely affect our results of operations, financial condition and cash flows in future periods.

Increased or unexpected product warranty claims could adversely affect us.

We provide our customers a warranty covering workmanship, and in some cases materials, on products we manufacture. Our warranty generally provides that products will be free from defects for periods ranging from 12 months to 60 months with certain equipment having longer term warranties. If a product fails to comply with the warranty, we may be obligated, at our expense, to correct any defect by repairing or replacing the defective product. Although we maintain warranty reserves in an amount based primarily on the number of units shipped and on historical and anticipated warranty claims, there can be no assurance that future warranty claims will follow historical patterns or that we can accurately anticipate the level of future warranty claims. An increase in the rate of warranty claims or the occurrence of unexpected warranty claims could materially and adversely affect our financial condition, results of operations and cash flows.

Some of our customers rely on financing with third parties to purchase our products, and we may incur expenses associated with our assistance to customers in securing third party financing.

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A portion of our sales is financed by third-party finance companies on behalf of our customers. The availability of financing by third parties is affected by general economic conditions, the credit worthiness of our customers and the estimated residual value of our equipment. In certain transactions we provide residual value guarantees and buyback commitments to our customers or the third-party financial institutions. Deterioration in the credit quality of our customers or the overall health of the banking industry could negatively impact our customer's ability to obtain the resources needed to make purchases of our equipment or their ability to obtain third-party financing. In addition, if the actual value of the equipment for which we have provided a residual value guaranty declines below the amount of our guaranty, we may incur additional costs, which may negatively impact our financial condition, results of operations and cash flows.

Our leverage may impair our operations and financial condition.

As of December 31, 2012, our total consolidated debt was $1,824.8 million as compared to consolidated debt of $1,890.0 million as of December 31, 2011, including the value of related interest rate hedging instruments. Our debt could have important consequences, including increasing our vulnerability to general adverse economic and industry conditions; requiring a substantial portion of our cash flows from operations be used for the payment of interest rather than to fund working capital, capital expenditures, acquisitions and general corporate requirements; limiting our ability to obtain additional financing; and limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate.

The agreements governing our debt include covenants that restrict, among other matters, our ability to incur additional debt; pay dividends on or repurchase our equity; make investments; and consolidate, merge or transfer all or substantially all of our assets. In addition, our Senior Credit Facility requires us to maintain specified financial ratios and satisfy certain financial condition tests. Our ability to comply with these covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. These covenants may also require that we take action to reduce our debt or to act in a manner contrary to our business objectives. We cannot be certain that we will meet any future financial tests or that the lenders will waive any failure to meet those tests. See additional discussion in Note 11, "Debt," to our Consolidated Financial Statements.

If we default under our debt agreements, our lenders could elect to declare all amounts outstanding under our debt agreements to be immediately due and payable and could proceed against any collateral securing the debt. Under those circumstances, in the absence of readily-available refinancing on favorable terms, we might elect or be compelled to enter bankruptcy proceedings, in which case our shareholders could lose the entire value of their investment in our common stock.

An inability to successfully manage the implementation of a global enterprise resource management (ERP) system in our Crane segment could adversely affect our operating results.

We are in the process of implementing a new global ERP system in the Crane segment. This system will replace many of our existing operating and financial systems. Such an implementation is a major undertaking both financially and from a management and personnel perspective. Should the system not be implemented successfully and within budget, or if the system does not perform in a satisfactory manner, it could be disruptive and adversely affect our operations and results of operations, including the ability of the company to report accurate and timely financial results.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information of our customers and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to malicious attacks or breached due to employee error, malfeasance or other disruptions, including as a result of rollouts of new systems. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings and/or regulatory penalties, disrupt our operations, damage our reputation, and/or cause a loss of confidence in our products and services, which could adversely affect our business.

Our inability to recover from natural or man-made disasters could adversely affect our business.

Our business and financial results may be affected by certain events that we cannot anticipate or that are beyond our control, such as natural or man-made disasters, national emergencies, significant labor strikes, work stoppages, political unrest, war or

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terrorist activities that could curtail production at our facilities and cause delayed deliveries and canceled orders. In addition, we purchase components and raw materials and information technology and other services from numerous suppliers, and, even if our facilities were not directly affected by such events, we could be affected by interruptions at such suppliers. Such suppliers may be less likely than our own facilities to be able to quickly recover from such events and may be subject to additional risks such as financial problems that limit their ability to conduct their operations. We cannot assure you that we will have insurance to adequately compensate us for any of these events.

Our income tax returns are subject to review by taxing authorities, and the final determination of our tax liability with respect to tax audits and any related litigation could adversely affect our financial results.

Although we believe that our tax estimates are reasonable and that we prepare our tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audits, and any related litigation, could be materially different from our estimates or from our historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments. We are undergoing tax audits in various jurisdictions and we regularly assess the likelihood of an adverse outcome resulting from such examinations to determine the adequacy of our tax reserves. In September 2012, we received an examination report from the Internal Revenue Service covering the 2008 and 2009 tax years. The report includes the proposed disallowance of the deductibility of a $380.9 million foreign currency loss that was incurred in 2008. We filed a formal protest to the proposed adjustment during the fourth quarter of 2012. We plan to pursue all administrative and, if necessary, judicial remedies with respect to resolving this matter. However, there can be no assurance that this matter will be resolved in our favor.

Our international sales and operations are subject to applicable laws relating to trade, export controls and foreign corrupt practices, the violation of which could adversely affect our operations.

We must comply with all applicable international trade, customs, export controls and economic sanctions laws and regulations of the United States and other countries.  We are also subject to the Foreign Corrupt Practices Act and other anti-bribery laws that generally bar bribes or unreasonable gifts to foreign governments or officials.  Changes in trade sanctions laws may restrict our business practices, including cessation of business activities in sanctioned countries or with sanctioned entities, and may result in modifications to compliance programs.  Violation of these laws or regulations could result in sanctions or fines and could have a material adverse effect on our financial condition, results of operations and cash flows.

New regulations related to conflict minerals may force us to incur additional expenses and affect the manufacturing and sale of our products.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), signed into law on July 21, 2010, includes Section 1502, which requires the Securities and Exchange Commission (“SEC”) to adopt additional disclosure requirements related to certain minerals sourced from the Democratic Republic of Congo and surrounding countries, or “conflict minerals”, for which such conflict minerals are necessary to the functionality of a product manufactured, or contracted to be manufactured, by an SEC reporting company.  The metals covered by the final rules, adopted on August 22, 2012, are commonly referred to as “3TG” and include tin, tantalum, tungsten and gold.  Implementation of the new disclosure requirements could affect the sourcing and availability of some of the minerals used in the manufacture of our products.  Our supply chain is complex, and if we are not able to conclusively verify the origins for all conflict minerals used in our products or that our products are “conflict free,” we may face reputational challenges with our customers or investors.  Furthermore, we may also encounter challenges to satisfy customers who require that our products be certified as "conflict free," which could place us at a competitive disadvantage if we are unable to do so. Additionally, as there may be only a limited number of suppliers offering “conflict free” metals, we cannot be sure that we will be able to obtain necessary metals from such suppliers in sufficient quantities or at competitive prices.  While these rules are currently the subject of a legal challenge, we could incur significant costs related to the compliance process, including potential difficulty or added costs in satisfying the disclosure requirements.
Item 1B.  UNRESOLVED STAFF COMMENTS
The company has received no written comments regarding its periodic or current reports from the staff of the Securities and Exchange Commission (SEC) that were issued 180 days or more preceding the end of our fiscal year 2012 that remain unresolved.


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Item 2.  PROPERTIES
The following table outlines the principal facilities we own or lease as of December 31, 2012.
Facility Location
 
Type of Facility
 
Approximate
Square Footage
 
Owned/Leased
Cranes and Related Products
 
 
 
 
 
 
Europe/Asia/Middle East
 
 
 
 
 
 
Wilhelmshaven, Germany
 
Manufacturing/Office and Storage
 
410,000
 
Owned/Leased
Moulins, France
 
Manufacturing/Office
 
355,000
 
Owned/Leased
Charlieu, France
 
Manufacturing/Office
 
323,000
 
Owned/Leased
Presov, Slovak Republic
 
Manufacturing/Office
 
295,300
 
Owned
Zhangjiagang, China
 
Manufacturing
 
800,000
 
Owned
Fanzeres, Portugal
 
Manufacturing
 
183,000
 
Owned/Leased
Baltar, Portugal
 
Manufacturing
 
68,900
 
Owned
Pune, India
 
Manufacturing
 
190,000
 
Leased
Niella Tanaro, Italy
 
Manufacturing
 
370,016
 
Owned
Ecully, France
 
Office
 
85,000
 
Leased
Langenfeld, Germany
 
Office/Storage and Field Testing
 
80,300
 
Leased
Osny, France
 
Office/Storage/Repair
 
43,000
 
Owned
Decines, France
 
Office/Storage
 
47,500
 
Leased
Vaux-en-Velin, France
 
Office/Workshop
 
17,000
 
Owned
Vitrolles, France
 
Office
 
16,000
 
Owned
Buckingham, United Kingdom
 
Office/Storage
 
78,000
 
Leased
Lusigny, France
 
Crane Testing Site
 
10,000
 
Owned
Baudemont, France
 
Office & Training Center
 
8,000
 
Owned
Singapore
 
Office/Storage
 
49,000
 
Leased
Tai’an, China (Joint Venture)
 
Manufacturing
 
571,000
 
Owned
Sydney, Australia
 
Office/Storage
 
21,500
 
Leased
Dubai, United Arab Emirates
 
Office/Workshop
 
10,000
 
Leased
Americas
 
 
 
 
 
 
Shady Grove, Pennsylvania
 
Manufacturing/Office
 
1,286,000
 
Owned
Manitowoc, Wisconsin
 
Manufacturing/Office
 
570,000
 
Owned
Manitowoc, Wisconsin
 
Office
 
10,000
 
Leased
Manitowoc, Wisconsin
 
Land
 
250,200
 
Leased
Passo Fundo, Brazil
 
Manufacturing/Office
 
265,000
 
Owned
Quincy, Pennsylvania
 
Manufacturing
 
36,000
 
Owned
Bauxite, Arkansas
 
Manufacturing/Office
 
22,000
 
Owned
Port Washington, Wisconsin
 
Manufacturing
 
81,000
 
Owned


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Table of Contents

Foodservice Equipment
Europe/Asia
 
 
 
 
 
 
Hangzhou, China
 
Manufacturing/Office
 
260,000
 
Owned/Leased
Eglfing, Germany
 
Manufacturing/Office/Warehouse
 
130,000
 
Leased
Halesowen, United Kingdom(1)
 
Manufacturing/Office
 
86,000
 
Leased
Sheffield, United Kingdom
 
Manufacturing/Office
 
100,000
 
Leased
Guildford, United Kingdom
 
Office
 
12,500
 
Leased
Shanghai, China
 
Office/Warehouse
 
28,933
 
Leased
Foshan, China
 
Manufacturing/Office/Warehouse
 
40,000
 
Leased
Singapore (1)
 
Manufacturing/Office/Warehouse
 
45,335
 
Leased
Prachinburi, Thailand (Joint Venture)
 
Manufacturing/Office/Warehouse
 
80,520
 
Owned
Samutprakarn, Thailand (Joint Venture)
 
Office
 
4,305
 
Leased
North America
 
 
 
 
 
 
Manitowoc, Wisconsin
 
Manufacturing/Office
 
376,000
 
Owned
Parsons, Tennessee (1)
 
Manufacturing
 
120,000
 
Owned
Sellersburg, Indiana
 
Manufacturing/Office
 
146,000
 
Owned
La Mirada, California
 
Manufacturing/Office
 
15,000
 
Leased
Los Angeles, California
 
Manufacturing/Office
 
90,000
 
Leased
Tijuana, Mexico (1)
 
Manufacturing
 
111,000
 
Leased
New Port Richey, Florida
 
Office/Technology Center
 
42,000
 
Owned
Goodyear, Arizona
 
Manufacturing/Office
 
75,000
 
Leased
Fort Wayne, Indiana
 
Manufacturing/Office
 
413,000
 
Owned
Barbourville, Kentucky (2)
 
Manufacturing/Office
 
115,000
 
Owned
Shreveport, Louisiana (1)
 
Manufacturing/Office
 
435,000
 
Owned
Mt. Pleasant, Michigan
 
Manufacturing/Office
 
345,000
 
Owned
Baltimore, Maryland
 
Manufacturing/Office
 
16,000
 
Owned
Cleveland, Ohio
 
Manufacturing/Office
 
224,000
 
Owned
Freeland, Pennsylvania
 
Manufacturing/Office
 
160,000
 
Owned
Covington, Tennessee
 
Manufacturing/Office
 
186,000
 
Owned
Piney Flats, Tennessee
 
Manufacturing/Office
 
131,000
 
Leased
Fort Worth, Texas
 
Manufacturing/Office
 
182,000
 
Leased
Concord, Ontario, Canada
 
Manufacturing/Office
 
116,000
 
Leased
Mississauga, Ontario, Canada
 
Manufacturing/Office
 
155,000
 
Leased
Corporate
 
 
 
 
 
 
Manitowoc, Wisconsin
 
Office
 
34,000
 
Owned
Manitowoc, Wisconsin
 
Office
 
5,000
 
Leased
Manitowoc, Wisconsin
 
Hangar Ground Lease
 
31,320
 
Leased
 
(1)    There are multiple separate facilities within these locations.
(2)    This location was divested with the Jackson business in January 2013.

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Table of Contents

In addition, we lease sales office and warehouse space for our Crane segment in Breda, The Netherlands; Begles, France; Nantes, France; Toulouse, France; Nice, France; Orleans, France; Persans, France; Lainate, Italy; Lagenfeld, Germany; Munich, Germany; Budapest, Hungary; Warsaw, Poland; Melbourne, Australia; Brisbane, Australia; Beijing, China; Chengdu, China; Guangzhou, China; Xi’an, China; Dubai, UAE; Makati City, Philippines; Cavite, Philippines; Gurgaon, India; Chennai, India; Hyderabad, India; Seoul, Korea; Moscow, Russia; Netvorice, the Czech Republic; Jeffersonville, Indiana; Manitowoc, Wisconsin; Shanghai, China; Monterrey, Mexico; Sao Paulo, Brazil; Recife, Brazil; Santiago, Chile; Johannesburg, South Africa; Ellis Ras, South Africa; Rio de Janeiro, Brazil; and Vitoria, Brazil. We lease office and warehouse space for our Foodservice segment in Salem, Virginia; Irwindale, California; Goodyear, Arizona; Miami, Florida; Herborn, Germany; Moscow, Russia; Belgium, Netherlands; Kuala Lumpur, Malaysia; Barcelona, Spain; and Naucalpan de Juarez, Mexico.  We also own sales offices for our Crane segment in Dole, France.
See Note 21, “Leases,” to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for additional information regarding leases.
Item 3.  LEGAL PROCEEDINGS
Our global operations are governed by laws addressing the protection of the environment and employee safety and health.  Under various circumstances, these laws impose civil and criminal penalties and fines, as well as injunctive and remedial relief, for noncompliance.  They also may require remediation at sites where company related substances have been released into the environment.
We have expended substantial resources globally, both financial and managerial, to comply with the applicable laws and regulations, and to protect the environment and our workers.  We believe we are in substantial compliance with such laws and regulations and we maintain procedures designed to foster and ensure compliance.  However, we have been and may in the future be subject to formal or informal enforcement actions or proceedings regarding noncompliance with such laws or regulations, whether or not determined to be ultimately responsible in the normal course of business.  Historically, these actions have been resolved in various ways with the regulatory authorities without material commitments or penalties to the company.
For information concerning other contingencies and uncertainties, see Note 17, “Contingencies and Significant Estimates,” to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K, as well as Note 13, "Income Taxes," related to a matter involving the Company's tax return for 2008.
Executive Officers of the Registrant
Each of the following officers of the company has been elected by the Board of Directors.  The information presented is as of February 28, 2013.
Name
 
Age
 
Position With The Registrant
 
Principal
Position Held
Since
Glen E. Tellock
 
52
 
Chairman and Chief Executive Officer
 
2009
 
 
 
 
 
 
 
Carl J. Laurino
 
51
 
Senior Vice President and Chief Financial Officer
 
2004
 
 
 
 
 
 
 
Thomas G. Musial
 
61
 
Senior Vice President of Human Resources and Administration
 
2000
 
 
 
 
 
 
 
Maurice D. Jones
 
53
 
Senior Vice President, General Counsel and Secretary
 
2004
 
 
 
 
 
 
 
Dean J. Nolden
 
44
 
Vice President of Finance and Treasurer
 
2005
 
 
 
 
 
 
 
Eric P. Etchart
 
56
 
Senior Vice President of the Company and President Crane Segment
 
2007
 
 
 
 
 
 
 
Michael J. Kachmer
 
54
 
Senior Vice President of the Company and President Foodservice Segment
 
2007
Glen E. Tellock has been the company’s chief executive officer since May 2007 and was elected as chairman of the board effective February 13, 2009.  He previously served as the senior vice president of The Manitowoc Company, Inc. and president of the Crane segment since 2002.  Earlier, he served as the company’s senior vice president and chief financial officer (1999),

19

Table of Contents

vice president of finance and treasurer (1998), corporate controller (1992) and director of accounting (1991).  Prior to joining the company, Mr. Tellock served as financial planning manager with the Denver Post Corporation, and as an audit manager for Ernst & Whinney.
Carl J. Laurino was named senior vice president and chief financial officer in May 2004.  He had served as treasurer since May 2001.  Mr. Laurino joined the company in January 2000 as assistant treasurer and served in that capacity until his promotion to treasurer.  Previously, Mr. Laurino spent 15 years in the commercial banking industry with Firstar Bank (n/k/a US Bank), Norwest Bank (n/k/a Wells Fargo), and Associated Bank.  During that period, Mr. Laurino held numerous positions of increasing responsibility including commercial loan officer with Norwest Bank, Vice President - Business Banking with Associated Bank and Vice President and Commercial Banking Manager with Firstar.
Thomas G. Musial has been senior vice president of human resources and administration since 2000.  Previously, he was vice president of human resources and administration (1995), manager of human resources (1987), and personnel/industrial relations specialist (1976).
Maurice D. Jones has been general counsel and secretary since 1999 and was elected vice president in 2002 and a senior vice president in 2004.  Prior to joining the company, Mr. Jones was a shareholder in the law firm of Davis and Kuelthau, S.C., and served as legal counsel for Banta Corporation.
Dean J. Nolden was named vice president of finance and treasurer in May 2009.  He previously served as the vice president and assistant treasurer since 2005.  Mr. Nolden joined the company in November 1998 as corporate controller and served in that capacity until his promotion to Vice President Finance and Controller in May 2004.  Prior to joining the company, Mr. Nolden spent eight years in public accounting in the audit practice of PricewaterhouseCoopers LLP.  He left that firm in 1998 as an audit manager.
Eric P. Etchart was named senior vice president of The Manitowoc Company, Inc. and president of the Manitowoc Crane segment in May 2007.  Mr. Etchart previously served as executive vice president of the Crane segment for the Asia/Pacific region since 2002.  Prior to joining the company, Mr. Etchart served as managing director in the Asia/Pacific region for Potain S.A., as managing director in Italy for Potain S.P.A. and as vice president of international sales and marketing for PPM.
Michael J. Kachmer joined the company in February of 2007 as senior vice president of The Manitowoc Company, Inc. and president of the Foodservice segment.  Prior to joining the company, Mr. Kachmer held executive positions for Culligan International Company since 2000, most recently serving as its chief operating officer.  In addition, Mr. Kachmer has held executive and operational roles in a number of global manufacturing companies, including Ball Corporation and Firestone Tire & Rubber. 
Item 4.  MINE SAFETY DISCLOSURE
Not Applicable.

20

Table of Contents

PART II
Item 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The company’s common stock is traded on the New York Stock Exchange under the symbol MTW.  At December 31, 2012, the approximate number of record shareholders of common stock was 2,307.
The amount and timing of the annual dividend are determined by the Board of Directors at its regular meetings each year, subject to limitations within the company’s Senior Credit Facility described below.  In each of the years ended December 31, 2012, December 31, 2011 and December 31, 2010, the company paid an annual dividend of $0.08 per share in the fourth quarter. 
The high and low sales prices of the common stock were as follows for 2012, 2011 and 2010
Year Ended
2012
 
2011
 
2010
December 31
High
 
Low
 
Close
 
High
 
Low
 
Close
 
High
 
Low
 
Close
1st Quarter
$
16.97

 
$
9.45

 
$
13.86

 
$
22.12

 
$
12.80

 
$
21.88

 
$
14.60

 
$
10.03

 
$
13.00

2nd Quarter
15.11

 
9.60

 
11.70

 
23.23

 
14.79

 
16.84

 
16.43

 
9.09

 
9.14

3rd Quarter
15.44

 
9.90

 
13.34

 
18.19

 
6.56

 
6.71

 
12.26

 
8.48

 
12.11

4th Quarter
16.03

 
12.82

 
15.68

 
12.60

 
5.76

 
9.19

 
13.53

 
10.55

 
13.11

Under our Senior Credit Facility, we are limited on the amount of dividends we may pay out in any one year.  The amount of dividend payments is restricted based on our consolidated total leverage ratio as defined in the credit agreement and is limited along with other restricted payments in aggregate.  If the consolidated total leverage ratio is less than 3.00 to 1.00, total restricted payments are not limited in any given year.  If the consolidated total leverage ratio is less than 4.00 to 1.00 but greater than or equal to 3.00 to 1.00, restricted payments may not exceed $40.0 million per year.  If the consolidated total leverage ratio is less than 5.00 to 1.00 but greater than or equal to 4.00 to 1.00, restricted payments may not exceed $30.0 million per year.  Lastly, if the consolidated total leverage ratio is greater than or equal to 5.00 to 1.00, total restricted payments are limited to $20.0 million per year.





21

Table of Contents

 
Total Return to Shareholders
(Includes reinvestment of dividends)
 
Annual Return Percentages
 
Years Ending December 31,
 
2008
 
2009
 
2010
 
2011
 
2012
The Manitowoc Company, Inc.
(82.19
)%
 
16.77
%
 
32.30
%
 
(29.39
)%
 
71.53
%
S&P 500 Index
(37.00
)%
 
26.46
%
 
15.06
%
 
2.11
 %
 
16.00
%
S&P 600 Industrial Machinery
(32.86
)%
 
18.68
%
 
31.01
%
 
(2.67
)%
 
20.56
%
 
 
Indexed Returns
 
Years Ending December 31,
 
2007
 
2008
 
2009
 
2010
 
2011
 
2012
The Manitowoc Company, Inc.
100.00

 
17.81

 
20.80

 
27.52

 
19.43

 
33.33

S&P 500 Index
100.00

 
63.00

 
79.67

 
91.68

 
93.61

 
108.59

S&P 600 Industrial Machinery
100.00

 
67.14

 
79.68

 
104.38

 
101.59

 
122.48



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Table of Contents

Item 6.  SELECTED FINANCIAL DATA
The following selected historical financial data have been derived from the Consolidated Financial Statements of The Manitowoc Company, Inc. The data should be read in conjunction with these financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Results of the Jackson business, the Kysor/Warren business, substantially all Enodis ice businesses and certain Enodis non-ice businesses, and the Marine segment in the years presented have been classified as discontinued operations to exclude those results from continuing operations. In addition, the earnings (loss) from discontinued operations include the impact of adjustments to certain retained liabilities for operations sold or closed in periods prior to those presented. Financial data for the years prior to 2012 have been revised to correct errors identified in 2012 relating to these periods. See Note 1, "Company and Basis of Presentation," in the Consolidated Financial Statements for further discussion of these revisions. For businesses acquired during the time periods presented, results are included in the table from their acquisition date. Amounts are in millions except share and per share data.
 
2012
 
2011
 
2010
 
2009
 
2008
Net Sales
 

 
 

 
 

 
 

 
 

Cranes and Related Products
$
2,440.8

 
$
2,164.6

 
$
1,748.6

 
$
2,285.0

 
$
3,882.9

Foodservice Equipment
1,486.2

 
1,454.6

 
1,362.9

 
1,302.9

 
589.7

Total
3,927.0

 
3,619.2

 
3,111.5

 
3,587.9

 
4,472.6

Gross Profit
934.4

 
826.7

 
759.5

 
788.6

 
1,013.9

Earnings (Loss) from Operations
 

 
 

 
 

 
 

 
 

Cranes and Related Products
156.0

 
108.2

 
90.6

 
146.7

 
556.7

Foodservice Equipment
238.6

 
214.4

 
201.9

 
164.1

 
59.0

Corporate
(63.7
)
 
(61.3
)
 
(42.0
)
 
(46.1
)
 
(52.8
)
Amortization expense
(37.1
)
 
(37.9
)
 
(37.4
)
 
(37.5
)
 
(11.3
)
Goodwill impairment

 

 

 
(515.6
)
 

Intangible asset impairment

 

 

 
(146.4
)
 

Restructuring expense
(9.5
)
 
(5.5
)
 
(3.8
)
 
(39.6
)
 
(21.7
)
Integration expense

 

 

 
(3.6
)
 
(7.6
)
Other expense
(2.5
)
 
0.5

 
(2.3
)
 
(3.4
)
 

Total
281.8

 
218.4

 
207.0

 
(481.4
)
 
522.3

Interest expense
(137.1
)
 
(146.7
)
 
(175.0
)
 
(174.0
)
 
(51.6
)
Amortization of deferred financing fees
(8.2
)
 
(10.4
)
 
(22.0
)
 
(28.8
)
 
(2.5
)
Loss on debt extinguishment
(6.3
)
 
(29.7
)
 
(44.0
)
 
(9.2
)
 
(4.1
)
Loss on purchase price hedges

 

 

 

 
(379.4
)
Other income (expense) - net
0.1

 
2.3

 
(9.0
)
 
17.3

 
(3.0
)
Earnings (loss) from continuing operations before income taxes
130.3

 
33.9

 
(43.0
)
 
(676.1
)
 
81.7

Provision (benefit) for taxes on income
38.0

 
13.6

 
26.2

 
(68.2
)
 
(20.8
)
Earnings (loss) from continuing operations
92.3

 
20.3

 
(69.2
)
 
(607.9
)
 
102.5

Discontinued operations:
 

 
 

 
 

 
 

 
 

Earnings (loss) from discontinued operations, net of income taxes
0.3

 
(3.4
)
 
(8.1
)
 
(34.6
)
 
(144.8
)
Gain (loss) on sale or closure of discontinued operations, net of income taxes

 
(34.6
)
 

 
(24.2
)
 
53.1

Net earnings (loss)
92.6

 
(17.7
)
 
(77.3
)
 
(666.7
)
 
10.8

Less: Net loss attributable to noncontrolling interest, net of tax
(9.1
)
 
(6.5
)
 
(2.7
)
 
(2.5
)
 
(1.9
)
Net earnings (loss) attributable to Manitowoc
$
101.7

 
$
(11.2
)
 
$
(74.6
)
 
$
(664.2
)
 
$
12.7

Amounts attributable to the Manitowoc common shareholders:
 

 
 

 
 

 
 

 
 

Earnings (loss) from continuing operations
$
101.4

 
$
26.8

 
$
(66.5
)
 
$
(605.4
)
 
$
104.4

Loss from discontinued operations, net of income taxes
0.3

 
(3.4
)
 
(8.1
)
 
(34.6
)
 
(144.8
)
Gain (loss) on sale or closure of discontinued operations, net of income taxes

 
(34.6
)
 

 
(24.2
)
 
53.1

Net earnings (loss) attributable to Manitowoc
$
101.7

 
$
(11.2
)
 
$
(74.6
)
 
$
(664.2
)
 
$
12.7


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Table of Contents

Cash Flows
 

 
 

 
 

 
 

 
 

Cash flow from operations
$
162.3

 
$
15.6

 
209.3

 
$
339.5

 
$
306.1

Identifiable Assets
 

 
 

 
 

 
 

 
 

Cranes and Related Products
$
1,903.3

 
$
1,760.8

 
1,659.3

 
$
1,803.3

 
$
2,288.6

Foodservice Equipment
1,956.8

 
2,192.6

 
2,193.4

 
2,272.1

 
3,381.0

Corporate
197.2

 
69.2

 
219.6

 
262.6

 
444.5

Total
$
4,057.3

 
$
4,022.6

 
4,072.3

 
$
4,338.0

 
$
6,114.1

Long-term Obligations
$
1,824.8

 
$
1,890.0

 
1,997.4

 
$
2,172.4

 
$
2,655.3

Depreciation
 

 
 

 
 

 
 

 
 

Cranes and Related Products
$
44.9

 
$
54.2

 
56.5

 
$
55.3

 
$
66.3

Foodservice Equipment
22.3

 
24.5

 
27.1

 
29.0

 
11.7

Corporate
2.3

 
2.8

 
2.9

 
2.8

 
1.5

Total
$
69.5

 
$
81.5

 
86.5

 
$
87.1

 
$
79.5

Capital Expenditures
 

 
 

 
 

 
 

 
 

Cranes and Related Products
52.7

 
52.2

 
21.9

 
51.5

 
129.4

Foodservice Equipment
17.4

 
11.9

 
12.0

 
14.4

 
10.5

Corporate
2.8

 
0.7

 
2.0

 
2.6

 
10.0

Total
$
72.9

 
$
64.8

 
35.9

 
$
68.5

 
$
149.9

Per Share
 

 
 

 
 

 
 

 
 

Basic earnings (loss) per common share:
 

 
 

 
 

 
 

 
 

Earnings (loss) from continuing operations attributable to Manitowoc common shareholders
$
0.77

 
$
0.21

 
$
(0.51
)
 
$
(4.65
)
 
$
0.80

Loss from discontinued operations attributable to Manitowoc common shareholders

 
(0.03
)
 
(0.06
)
 
(0.27
)
 
(1.11
)
Gain (loss) on sale or closure of discontinued operations, net of income taxes

 
(0.27
)
 

 
(0.19
)
 
0.41

Earnings (loss) per share attributable to Manitowoc common shareholders
$
0.77

 
$
(0.09
)
 
$
(0.57
)
 
$
(5.10
)
 
$
0.10

Diluted earnings (loss) per common share:
 

 
 

 
 

 
 
 
 
Earnings (loss) from continuing operations attributable to Manitowoc common shareholders
$
0.76

 
$
0.20

 
(0.51
)
 
$
(4.65
)
 
$
(0.79
)
Loss from discontinued operations attributable to Manitowoc common shareholders

 
(0.03
)
 
(0.06
)
 
(0.27
)
 
(1.10
)
Gain (loss) on sale or closure of discontinued operations, net of income taxes

 
(0.26
)
 

 
(0.19
)
 
0.40

Earnings (loss) per share attributable to Manitowoc common shareholders
$
0.76

 
$
(0.08
)
 
$
(0.57
)
 
$
(5.10
)
 
$
0.10

Avg Shares Outstanding
 
 
 
 
 
 
 
 
 
Basic
131,447,895

 
130,481,436

 
130,581,040

 
130,268,670

 
129,930,749

Diluted
133,317,050

 
133,377,109

 
130,581,040

 
130,268,670

 
131,630,215

 
(1)
Discontinued operations represent the results of operations and gain or loss on sale or closure of the Marine segment, substantially all Enodis ice businesses and certain Enodis non-ice businesses, Kysor/Warren, and Jackson, which either qualified for discontinued operations treatment or were sold or closed during 2008 through 2012.
(2)
We acquired one business in 2010 and two businesses during 2008.
(3)
Cash dividends per share for 2008 through 2012 were $0.08.
(4)
Balance sheet data for 2008 through 2011 have been revised to correct errors identified in 2012. The impact of these errors on balance sheet data related to identifiable assets for Cranes and Related Products was a $62.0 million increase for 2011 and a $64.9 million increase for 2010, 2009 and 2008. The impact of these errors on balance sheet data related to identifiable assets for Foodservice Equipment was an $8.6 million decrease for 2011, 2010, and 2009 and a $9.8 million decrease for 2008. The impact of these errors on the 2011, 2010 and 2009 balance sheet data related to identifiable assets for Corporate was increases of $4.0 million, $4.9 million and $1.8 million, respectively. 2011, 2010, 2009 and 2008 net earnings (loss) data have been revised to correct errors identified in 2012. There was a $0.7 million increase to net loss in 2011, and a reduction of $4.9 million to the net loss in 2010 and 2009, and an increase to net earnings of $1.9 million in 2008. There was a $0.04 decrease to basic and diluted loss per share in 2010 and 2009 and a $0.02 increase to basic and diluted earnings per share in 2008. See Note 1, "Company and Basis of Presentation," to the Consolidated Financial Statements for further discussion of the nature of these errors.


24

Table of Contents

Item 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes appearing in Part II, Item 8 of the Annual Report on Form 10-K.
Overview The Manitowoc Company, Inc. is a multi-industry, capital goods manufacturer in two principal markets: Cranes and Related Products (Crane) and Foodservice Equipment (Foodservice).  Crane is recognized as one of the world’s leading providers of lifting equipment for the global construction industry, including lattice-boom cranes, tower cranes, mobile telescopic cranes, and boom trucks.  Foodservice is one of the world’s leading innovators and manufacturers of commercial foodservice equipment serving the ice, beverage, refrigeration, food preparation, and cooking needs of restaurants, convenience stores, hotels, healthcare, and institutional applications.
During the fourth quarter of 2012, the company decided to divest its warewashing equipment business, which operated under the brand name Jackson, and classified this business as discontinued operations in the company's financial statements. Jackson designs, manufactures and sells warewashing equipment, offering a full range of undercounter dishwashers, door-type dishwashers, conveyor, pot washing, and flight-type dishwashers. On January 28, 2013, the company sold the Jackson warewashing equipment business to Hoshizaki USA Holdings, Inc. for approximately $38.5 million. Net proceeds were used to reduce ratably the then-outstanding balances of Term Loan A and B.
On December 15, 2010, the company reached a definitive agreement to divest its Kysor/Warren and Kysor/Warren de Mexico (collectively “Kysor/Warren”) businesses, which manufactured frozen, medium temperature and heated display merchandisers, mechanical refrigeration systems and remote mechanical and electrical houses to Lennox International for approximately $145 million, including a preliminary working capital adjustment.  The transaction subsequently closed on January 14, 2011 and the net proceeds were used to pay down outstanding debt.  On July 1, 2011, the company made a payment to Lennox International of $2.4 million as the final working capital adjustment under the sale agreement.  The results of these operations have been classified as discontinued operations.
The following discussion and analysis covers key drivers behind our results for 2010 through 2012 and is broken down into three major sections.  First, we provide an overview of our results of operations for the years 2010 through 2012 on a consolidated basis and by business segment.  Next we discuss our market conditions, liquidity and capital resources, off-balance sheet arrangements, and obligations and commitments.  Finally, we provide a discussion of risk management techniques, contingent liability issues, critical accounting policies, impacts of future accounting changes, and cautionary statements.
All dollar amounts, except per share amounts, are in millions of dollars throughout the tables included in this Management’s Discussion and Analysis of Financial Conditions and Results of Operations unless otherwise indicated.  The 2011 and 2010 results have been revised to reflect the correction of errors relating to these periods.  See Note 1, “Company and Basis of Presentation” for further discussion.


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Table of Contents

Results of Consolidated Operations
Millions of dollars
2012
 
2011
 
2010
Operations
 

 
 

 
 

Net sales
$
3,927.0

 
$
3,619.2

 
$
3,111.5

Cost of sales
2,992.6

 
2,792.5

 
2,352.1

Gross Profit
934.4

 
826.7

 
759.4

Operating expenses:
 

 
 

 
 

Engineering, selling and administrative expenses
603.5

 
565.4

 
508.9

Amortization expense
37.1

 
37.9

 
37.4

Restructuring expense
9.5

 
5.5

 
3.8

Other expenses (income)
2.5

 
(0.5
)
 
2.3

Total operating expenses
652.6

 
608.3

 
552.4

Operating earnings from continuing operations
281.8

 
218.4

 
207.0

Other income (expenses):
 

 
 

 
 

Interest expense
(137.1
)
 
(146.7
)
 
(175.0
)
Amortization of deferred financing fees
(8.2
)
 
(10.4
)
 
(22.0
)
Loss on debt extinguishment
(6.3
)
 
(29.7
)
 
(44.0
)
Other income (expense)-net
0.1

 
2.3

 
(9.0
)
Total other expenses
(151.5
)
 
(184.5
)
 
(250.0
)
Earnings (loss) from continuing operations before taxes on earnings
130.3

 
33.9

 
(43.0
)
Provision for taxes on earnings
38.0

 
13.6

 
26.2

Earnings (loss) from continuing operations
92.3

 
20.3

 
(69.2
)
Discontinued operations:
 

 
 

 
 

Earnings (loss) from discontinued operations, net of income taxes
0.3

 
(3.4
)
 
(8.1
)
Loss on sale of discontinued operations, net of income taxes

 
(34.6
)
 

Net earnings (loss)
92.6

 
(17.7
)
 
(77.3
)
Less: Net loss attributable to noncontrolling interest, net of tax
(9.1
)
 
(6.5
)
 
(2.7
)
Net earnings (loss) attributable to Manitowoc
$
101.7

 
$
(11.2
)
 
$
(74.6
)
Amounts attributable to the Manitowoc common shareholders:
 

 
 

 
 

Earnings (loss) from continuing operations
$
101.4

 
$
26.8

 
$
(66.5
)
Loss from discontinued operations, net of income taxes
0.3

 
(3.4
)
 
(8.1
)
Loss on sale of discontinued operations, net of income taxes

 
(34.6
)
 

Net earnings (loss) attributable to Manitowoc
$
101.7

 
$
(11.2
)
 
$
(74.6
)
 
Year Ended December 31, 2012 Compared to 2011
Net Sales
(in millions)
 
2012
 
2011
 
Change
  Net Sales
 
$
3,927.0

 
$
3,619.2

 
8.5
%
Consolidated net sales increased 8.5% in 2012 to $3.9 billion from $3.6 billion in 2011.  The increase was primarily the result of the year-over-year increase in the Crane segment along with a modest increase in the Foodservice segment.  Crane segment sales increased in all regions except China, which decreased as a result of volume reductions. The overall increase in the Crane segment was primarily driven by the Americas region due to economic recoveries and higher demand in certain emerging markets.  Crane segment sales increased 12.8% for the year ended December 31, 2012 compared to 2011.  Foodservice sales increased in the Americas and Asia Pacific (APAC) regions from the prior year due to volume increases. Foodservice sales increased 2.2% for the year ended December 31, 2012 compared to 2011.  Consolidated net sales were unfavorably impacted by approximately $73.5 million, or 2.0%, from foreign currency volatility in relation to the U.S. Dollar for the year ended December 31, 2012 compared with the year ended December 31, 2011.  Further analysis of the changes in sales by segment is presented in the "Sales and Operating Earnings by Segment" section below.


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Table of Contents

Gross Profit
(in millions)
 
2012
 
2011
 
Change
Gross Profit
 
$
934.4

 
$
826.7

 
13.0
%
Gross Margin
 
23.8
%
 
22.8
%
 
 
Gross profit for the year ended December 31, 2012 increased to $934.4 million compared to $826.7 million for the year ended December 31, 2011, an increase of 13.0%. Gross margin increased in 2012 to 23.8% from 22.8% in 2011.  The increase in consolidated gross profit was attributable to sales volume increases in both the Crane and Foodservice segments in the regions noted above and pricing actions.  Crane segment gross profit increases were partially offset by increases in manufacturing costs.  The increase in gross margin was primarily due to pricing actions, cost reduction and lean actions slightly offset by investment in optimizing global footprint.
Engineering, Selling and Administrative Expenses
(in millions)
 
2012
 
2011
 
Change
Engineering, selling and administrative expenses
 
$
603.5

 
$
565.4

 
6.7
%
Engineering, selling and administrative (ES&A) expenses for the year ended December 31, 2012 increased $38.1 million to $603.5 million compared to $565.4 million for the year ended December 31, 2011.  Crane segment ES&A increased $38.3 million, or 15.4%, for the year ended December 31, 2012 compared to the same period in 2011.  This increase was driven by increased employee compensation and benefit costs, increased levels of engineering expenses, recognition of reserves for a small number of discrete customer financing issues and enterprise resource planning system implementation costs. Foodservice ES&A decreased $2.8 million, or 1.1%, for the year ended December 31, 2012 compared to the same period in 2011.  This decrease was driven by reduction in sales related costs, favorable foreign exchange impact, and reduced employee costs.
Amortization Expense
(in millions)
 
2012
 
2011
 
Change
Amortization expense
 
$
37.1

 
$
37.9

 
(2.1
)%
Amortization expense for the year ended December 31, 2012 was $37.1 million compared to $37.9 million for 2011.  See further detail related to intangible assets at Note 9, “Goodwill and Other Intangible Assets.”
Restructuring Expense
(in millions)
 
2012
 
2011
 
Change
Restructuring expense
 
$
9.5

 
$
5.5

 
*
* Measure not meaningful
Restructuring expenses for the year ended December 31, 2012 totaled $9.5 million compared to $5.5 million in 2011.  Crane segment restructuring expenses totaled $7.2 million for the year ended December 31, 2012.  These expenses primarily related to workforce reductions at our France operations.  Foodservice segment restructuring expenses totaled $2.3 million for the year ended December 31, 2012.  These expenses primarily related to plant consolidation efforts in the Americas region and workforce reductions in Europe.  See further detail at Note 19, “Restructuring.”
Interest Expense & Amortization of Deferred Financing Fees
(in millions)
 
2012
 
2011
 
Change
Interest expense
 
$
137.1

 
$
146.7

 
(6.5
)%
Amortization of deferred financing fees
 
$
8.2

 
$
10.4

 
(21.2
)%
Interest expense for the year ended December 31, 2012 totaled $137.1 million versus $146.7 million for the year ended December 31, 2011.  The decrease in interest expense of $9.6 million for the year ended December 31, 2012 compared to the year ended December 31, 2011 was due to the amendment of our Senior Credit Facility during the second quarter of 2011, which lowered the associated interest rates along with debt reductions in 2012 and 2011. Amortization expense for deferred financing fees were $8.2 million for the year ended December 31, 2012 as compared to $10.4 million in 2011.  The decrease in amortization expense for deferred financing fees of $2.2 million was attributable to the write-off of a portion of the deferred

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financing fees associated with the amendment in the second quarter of 2011, partially offset by the amortization of new fees associated with the Senior Credit Facility and the Senior Notes due 2022.  See further detail at Note 11, “Debt.”
Loss on Debt Extinguishment
(in millions)
 
2012
 
2011
 
Change
Loss on debt extinguishment
 
$
6.3

 
$
29.7

 
*
* Measure not meaningful
Loss on debt extinguishment for the year ended December 31, 2012 totaled $6.3 million, compared to $29.7 million in 2011.  The loss on debt extinguishment in 2012 was attributable to the accelerated paydown of Term Loans A and B associated with our Senior Credit Facility and the redemption of our 7.125% Senior Notes due 2013. The loss on debt extinguishment in 2011 was attributable to the write-off of a portion of the deferred financing fees associated with the amendment to the Senior Credit Facility in the second quarter of 2011.
Other Income - Net
(in millions)
 
2012
 
2011
 
Change
Other income - net
 
$
0.1

 
$
2.3

 
*
* Measure not meaningful
Other income, net for the year ended December 31, 2012 was $0.1 million versus $2.3 million for the prior year.  The decrease of $2.2 million in other income for the year ended December 31, 2012 compared to the year ended December 31, 2011 was primarily due to reductions in interest income and gains from asset sales, partially offset by foreign currency losses in 2011 that did not reoccur at the same level in 2012.
Income Taxes
(in millions)
 
2012
 
2011
 
Change
Effective annual tax rate
 
29.2
%
 
40.1
%
 
 
Provision for taxes on earnings
 
$
38.0

 
$
13.6

 
*
* Measure not meaningful
The effective tax rate for the year ended December 31, 2012 was 29.2% compared to 40.1% for the year ended December 31, 2011.  The effective tax rate in 2012 was favorably impacted by the release of an $11.6 million reserve resulting from a favorable audit outcome. The 2011 and 2012 effective tax rates were favorably impacted by income earned in jurisdictions where the statutory rate was less than 35%.
Tax expense for the year ended December 31, 2012 was unfavorably impacted by valuation allowance adjustments on deferred tax assets totaling $17.5 million compared to $12.3 million in 2011.  The company recorded valuation allowance adjustments related to current year losses and income tax rate changes in jurisdictions with valuation allowances established in prior years. See further detail at Note 13, “Income Taxes.”
The company is under examination by the Internal Revenue Service (“IRS”) for the calendar years 2008 and 2009.  In August 2012, the company received a Notice of Proposed Assessment (“NOPA”) related to the disallowance of the deductibility of a $380.9 million foreign currency loss incurred in calendar year 2008. In September 2012, the company responded to the NOPA indicating its formal disagreement and subsequently received an Examination Report which includes the proposed disallowance.  The largest potential adjustment for this matter could, if the IRS were to prevail, increase the company's potential federal tax expense and cash outflow by approximately $134.0 million plus interest and penalties, if any. The company filed a formal protest to the proposed adjustment during the fourth quarter of 2012.  The company plans to pursue all administrative and, if necessary, judicial remedies with respect to resolving this matter.  However, there can be no assurance that this matter will be resolved in the company's favor.  The IRS also examined and proposed adjustments to the research and development credit generated in 2009; the company also formally disagreed with the adjustments.
 
The company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves.  As of December 31, 2012, the company believes that it is more-likely-than-not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial position and the results of operations and cash flows.  However, the final determination with respect to any tax audits, and any related litigation, could be materially different from the company's estimates and/or from its historical income tax provisions and accruals and could have a material effect on operating results and/or cash flows in the periods for which that determination is

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made.  In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments.
Earnings (Loss) from Discontinued Operations
(in millions)
 
2012
 
2011
 
Change
Earnings (loss) from discontinued operations
 
$
0.3

 
$
(3.4
)
 
*
* Measure not meaningful
The results from discontinued operations were earnings of $0.3 million and a loss of $3.4 million, net of income taxes, for the years ended December 31, 2012 and 2011, respectively.  The earnings from discontinued operations relates primarily to the Jackson business which was classified as discontinued operations in the fourth quarter of 2012, partially offset by a loss in the Kysor/Warren business that was sold on January 14, 2011.  See additional discussion at Note 4, “Discontinued Operations.”
Net Loss Attributable to Noncontrolling Interest
(in millions)
 
2012
 
2011
 
Change
Net loss attributable to noncontrolling interest
 
$
9.1

 
$
6.5

 
40.0
%
For the year ended December 31, 2012, a net loss attributable to a noncontrolling interest of $9.1 million was recorded in relation to the minority partners' portion of the full year loss from our Chinese affiliate joint venture, Manitowoc Dongyue Heavy Machinery Co., Ltd. (Manitowoc Dongyue).  There was a net loss of $6.5 million attributable to the minority partner in connection with Manitowoc Dongyue for the same period of 2011.
Year Ended December 31, 2011 Compared to 2010
Net Sales
(in millions)
 
2011
 
2010
 
Change
  Net Sales
 
$
3,619.2

 
$
3,111.5

 
16.3
%
Consolidated net sales increased 16.3% in 2011 to $3.6 billion from $3.1 billion in 2010.  The increase was the result of year-over-year increases in both the Crane and Foodservice segments.  Crane segment sales increased in all regions and in all product lines from 2010 due to modest economic recoveries in the Americas region and in certain emerging markets.  Crane segment sales increased 23.8% for the year ended December 31, 2011 compared to 2010.  Foodservice sales increased in all regions from 2010 due to continued penetration of global chains with whom we partner and modest economic improvements. Foodservice sales increased 6.7% for the year ended December 31, 2011 compared to 2010.  Weaker foreign currencies as compared to the U.S. Dollar had a favorable impact on consolidated net sales of $55.1 million, or 1.8%, for the year ended December 31, 2011 compared with the year ended December 31, 2010.  Further analysis of the changes in sales by segment is presented in the "Sales and Operating Earnings by Segment" section below.
Gross Profit
(in millions)
 
2011
 
2010
 
Change
Gross Profit
 
$
826.7

 
$
759.4

 
8.9
%
Gross Margin
 
22.8
%
 
24.4
%
 
 
Gross profit for the year ended December 31, 2011 increased to $826.7 million compared to $759.4 million million for the year ended December 31, 2010, an increase of 8.9%. Gross margin decreased in 2011 to 22.8% from 24.4% in 2010.  The increase in consolidated gross profit was attributable to sales volume increases in both the Crane and Foodservice segments in all regions.  Crane segment gross profit increases were partially offset by increases in material costs, labor costs and additional provisions for warranty and excess and obsolete inventory.  Foodservice segment gross profit increases were offset by higher material and other manufacturing costs. The decrease in gross margin was due to higher material and labor costs in both segments.
Engineering, Selling and Administrative Expenses
(in millions)
 
2011
 
2010
 
Change
Engineering, selling and administrative expenses
 
$
565.4

 
$
508.9

 
11.1
%

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Table of Contents

Engineering, selling and administrative (ES&A) expenses for the year ended December 31, 2011 increased $56.5 million to $565.4 million compared to $508.9 million for the year ended December 31, 2010.  Crane segment ES&A increased $35.1 million or 16.5% for the year ended December 31, 2011 compared to the same period in 2010.  This increase was driven by increased employee compensation and benefit costs, increased marketing expenses and increased levels of research and development.  Foodservice ES&A increased $1.6 million or 0.6% for the year ended December 31, 2011 compared to the same period in 2010.  This increase was driven by increased employee compensation and benefit costs, partially offset by cost reduction activities.
Amortization Expense
(in millions)
 
2011
 
2010
 
Change
Amortization expense
 
$
37.9

 
$
37.4

 
1.3
%
Amortization expense for the year ended December 31, 2011 was $37.9 million compared to $37.4 million for 2010.  See further detail related to intangible assets at Note 9, “Goodwill and Other Intangible Assets.”
Restructuring Expense
(in millions)
 
2011
 
2010
 
Change
Restructuring expense
 
$
5.5

 
$
3.8

 
44.7
%
Restructuring expenses for the year ended December 31, 2011 totaled $5.5 million compared to $3.8 million in 2010.  Crane segment restructuring expenses totaled $3.2 million for the year ended December 31, 2011.  These expenses primarily related to the consolidation of certain European operations.  Foodservice segment restructuring expenses totaled $2.3 million for the year ended December 31, 2011.  These expenses primarily related to plant consolidation efforts in the United States and Europe.  See further detail at Note 19, “Restructuring.”
Interest Expense & Amortization of Deferred Financing Fees
(in millions)
 
2011
 
2010
 
Change
Interest expense
 
$
146.7

 
$
175.0

 
(16.2
)%
Amortization of deferred financing fees
 
$
10.4

 
$
22.0

 
(52.7
)%
Interest expenses for the year ended December 31, 2011 totaled $146.7 million versus $175.0 million for the year ended December 31, 2010.  The decrease in interest expense of $28.3 million for the year ended December 31, 2011 compared to the year ended December 31, 2010 was due to refinancing of our Senior Credit Facility during the second quarter of 2011, which lowered the associated interest rate paid, and debt reductions in 2011 and 2010. Amortization expense for deferred financing fees was $10.4 million for the year ended December 31, 2011 as compared to $22.0 million in 2010.  The decrease in amortization expense for deferred financing fees of $11.6 million was attributable to the write-off of a portion of the deferred financing fees associated with the refinancing in the second quarter of 2011, partially offset by the amortization of new fees associated with the New Senior Credit Facility.  See further detail at Note 11, “Debt.”
Loss on Debt Extinguishment
(in millions)
 
2011
 
2010
 
Change
Loss on debt extinguishment
 
$
29.7

 
$
44.0

 
(32.5
)%
Loss on debt extinguishment for the year ended December 31, 2011 totaled $29.7 million compared to $44.0 million in 2010.  The loss on debt extinguishment in 2011 was attributable to the write-off of a portion of the deferred financing fees associated with the amendment to the Senior Credit Facility in the second quarter of 2011. The loss on debt extinguishment in 2010 was attributable to the accelerated paydown of Term Loans A and B associated with the Senior Credit Facility.  See further detail at Note 11, “Debt.”
Other Income (Expense) - Net
(in millions)
 
2011
 
2010
 
Change
Other income (expense) - net
 
$
2.3

 
$
(9.0
)
 
*
* Measure not meaningful

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Other income (expense), net for the year ended December 31, 2011 was income of $2.3 million versus a loss of $9.0 million for the prior year.  The increase of $11.3 million in other income for the year ended December 31, 2011 compared to the year ended December 31, 2010 was due to foreign currency losses in 2010 that did not reoccur at the same level in 2011.  Other income in 2011 consisted of interest income and gains from asset sales offset by bank fees and currency losses.
Income Taxes
(in millions)
 
2011
 
2010
 
Change
Effective annual tax rate
 
40.1
%
 
(60.9
)%
 
 
Provision for taxes on earnings
 
$
13.6

 
$
26.2

 
*
* Measure not meaningful
The effective tax rate for the year ended December 31, 2011 was 40.1% compared to negative 60.9% for the year ended December 31, 2010.  As the company posted pre-tax losses in 2010, the negative effective tax rate was an expense to the consolidated statement of operations. The effective tax rate in 2010 was unfavorably impacted by the full valuation allowance of $45.6 million on the net deferred tax asset in France. The 2011 and 2010 effective tax rates were favorably impacted by income earned in jurisdictions where the statutory rate was less than 35%.
Tax expense for the year ended December 31, 2011 was unfavorably impacted by valuation allowance adjustments on deferred tax assets totaling $12.3 million compared to $52.0 million in 2010.  The company recorded a full valuation allowance of $45.6 million on the net deferred tax asset for net operating loss carryforwards in France during the fourth quarter of 2010. During 2011, the company continued to record valuation allowances on the deferred tax assets in France and certain other jurisdictions, as it remained more-likely-than-not that they would not be utilized. See further detail at Note 13, “Income Taxes.”
Loss from Discontinued Operations
(in millions)
 
2011
 
2010
 
Change
Loss from discontinued operations
 
$
(3.4
)
 
$
(8.1
)
 
(58.0
)%
The results from discontinued operations were a loss of $(3.4) million and a loss of $(8.1) million, net of income taxes, for the years ended December 31, 2011 and 2010, respectively.  The loss from discontinued operations related primarily to the Kysor/Warren business that was sold on January 14, 2011.  See additional discussion at Note 4, “Discontinued Operations.”
Net Loss Attributable to Noncontrolling Interest
(in millions)
 
2011
 
2010
 
Change
Net loss attributable to noncontrolling interest
 
$
6.5

 
$
2.7

 
*
* Measure not meaningful
For the year ended December 31, 2011, a net loss attributable to a noncontrolling interest of $6.5 million was recorded in relation to the minority partners' portion of the full year loss from our Chinese joint venture Manitowoc Dongyue Heavy Machinery Co., Ltd. (Manitowoc Dongyue).  There was a net loss of $2.7 million attributable to the minority partner in connection with Manitowoc Dongyue for the same period of 2010.
Sales and Operating Earnings by Segment
Cranes and Related Products Segment
(in millions)
2012
 
2011
 
2010
Net sales
$
2,440.8

 
$
2,164.6

 
$
1,748.6

Operating earnings
$
156.0

 
$
108.2

 
$
90.6

Operating margin
6.4
%
 
5.0
%
 
5.2
%
Year Ended December 31, 2012 Compared to 2011
Crane segment net sales for the year ended December 31, 2012 increased to $2.4 billion versus $2.2 billion for the year ended December 31, 2011, which was primarily the result of volume increases and pricing actions. The increase was partially offset by the unfavorable impact of approximately $61.7 million from foreign currency volatility in relation to the U.S. Dollar for the

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Table of Contents

year ended December 31, 2012 compared with the year ended December 31, 2011. As of December 31, 2012, total Crane segment backlog was $755.8 million, a slight decrease from the December 31, 2011 backlog of $760.5 million.
For the year ended December 31, 2012, the Crane segment reported operating earnings of $156.0 million compared to $108.2 million for the year ended December 31, 2011.  Operating earnings for the Crane segment