Business context and reporting period
The Manitowoc Company, Inc. (NYSE: MTW) designs, manufactures, sells and supports cranes and related lifting solutions, with Americas, Europe and Africa (EURAF), and Middle East and Asia Pacific (MEAP) segments. This unaudited Form 10-Q covers the three months ended March 31, 2024; comparisons are with Q1 2023 unless stated otherwise. Amounts are in millions of dollars except per-share data.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Net sales | $495.1 | $508.3 |
| Gross profit / margin | $92.5 / 18.7% | $106.3 / 20.9% |
| Operating income | $15.2 | $30.2 |
| Net income | $4.5 | $16.5 |
| Diluted EPS | $0.12 | $0.46 |
| Operating cash flow | $(30.6) | $15.4 |
| Capital expenditures / free cash flow | $12.2 / $(42.8) | $10.6 / $4.8 |
| Cash at period end | $31.5 | $56.5 at March 31, 2023 |
| Total debt | $415.2 | $372.1 at December 31, 2023 |
| Total liquidity | $232.7 | $280.0 at December 31, 2023 |
Gross margin fell 2.2 percentage points year over year. Adjusted EBITDA was $31.3 (6.3% margin), versus $45.1 (8.9%); these are non-GAAP measures. At March 31, current assets were $1,119.4 and current liabilities $632.2. Debt included $300.0 of 9% second-lien notes due April 2026, $74.0 drawn on the ABL revolver and $42.7 of other debt. Revolver excess availability was approximately $197.6; the company reported compliance with debt covenants.
Material changes versus the prior comparable period
- Sales declined 2.6%; gross profit fell $13.8, and net income decreased $12.0. Management attributed weaker gross profit mainly to lower sales, unfavorable product mix and lower manufacturing-cost absorption in EURAF.
- Orders increased 5.6% to $554.1, while backlog was $971.3: up 5.9% from December 2023 but down 9.7% year over year. Management attributed the year-over-year backlog decline primarily to higher shipments as supply constraints eased.
- Americas sales grew 7.1% to $283.2 and segment operating income rose to $29.5. EURAF sales fell 19.8% to $143.0 and shifted to an $11.8 operating loss from $3.6 income. MEAP sales rose 4.9% to $68.9, while operating income decreased to $8.2.
- Operating cash flow moved from $15.4 provided to $30.6 used, primarily reflecting lower earnings and working-capital movements, including higher receivables and lower accrued expenses and other liabilities. Financing inflows included $29.7 from overdraft facilities and $14.0 from the ABL revolver.
- Total debt rose $43.1 from year-end, and reported liquidity declined $47.3. Inventory increased to $748.0 from $666.5 at year-end.
Outlook, risks, contingencies and unusual items
- No numerical full-year guidance is provided in the filing. Management believes liquidity and expected operating cash flows can meet working-capital, capital-expenditure and other operating needs for the next 12 months, and expects to remain in covenant compliance.
- Management reported some easing in supply-chain and logistics constraints, but certain key components remained constrained. Continued or worsening constraints could materially affect results, cash flows or the ability to convert backlog into sales.
- Macroeconomic conditions, inflation, elevated interest rates, geopolitical conflicts, customer demand and financing, labor and supplier availability, foreign exchange, leverage, and execution of operational initiatives are among the disclosed risks.
- The company is in confidential discussions with the U.S. EPA and Department of Justice concerning engine emissions and certification matters involving approximately 1,420 engines. It recorded a $36.1 liability; it calculated potential statutory maximum Clean Air Act penalties of approximately $174.0, but cannot meaningfully quantify the final outcome. The company says it believes it has strong defenses; resolution could materially affect financial condition, results or cash flows.
- Product-related lawsuits, warranty claims and other legal matters remain contingencies. Warranty and related reserves were $52.6 at quarter-end. Management does not expect the aggregate resolution of the other disclosed matters to materially adversely affect the company, but estimates may change.
- Other notable items include $0.6 of restructuring expense and a $12.5 other comprehensive loss, mainly from $11.0 of foreign-currency translation losses. Trailing-twelve-month adjusted measures include $21.2 of costs associated with the EPA matter and a $9.3 non-cash foreign-currency translation write-off tied to curtailment of Russia operations.
Important facts for investors to verify
- Track whether orders convert to revenue and how backlog, particularly in EURAF, evolves as supply constraints and shipments change.
- Assess whether gross-margin pressure and the EURAF operating loss improve, and whether Americas and MEAP performance can offset weakness.
- Monitor cash conversion, inventory and receivables, borrowing levels, liquidity, and the company’s ability to meet debt covenants and refinance or repay the 2026 notes ahead of the ABL facility’s springing maturity provisions.
- Follow developments in the EPA/DOJ matter, the recorded liability versus potential penalties, and product-liability and warranty reserves.
- Review non-GAAP adjusted EBITDA, free cash flow and Adjusted ROIC alongside their GAAP reconciliations; Q1 Adjusted ROIC was 9.5%.