January 8, 2012 | 15 Pages
Global Industrial Infrastructure Company Report
Manitowoc Co., Inc.
(NYSE: MTW)
MANITOWOC 2012 OUTLOOK - ARE IMPROVING END
MARKETS BEING IGNORED? REITERATE BUY RATING: BUY
Ben Elias, CFA
2011 Underperformance Despite Meeting Expectations of (212) 338-4706
belias@sterneagee.com
Meeting Sales and Operating Targets – Manitowoc has
underperformed its Industrial peers as well as the broader market
in general, whether one looks at its 52-week performance, or Fiscal Year Ends Dec
from the April 2011 high. The company will likely deliver on its
goals of 20% revenue growth and mid-single-digit operating Rating: Buy
margins in Cranes, and consistent growth in Foodservice. We Price: $10.10
estimate FY2012 EPS to increase to $1.20 from $0.34, with Price Target: $18
consensus estimates showing an increase to $0.97 from $0.36. At 52-wk Range: $5.76-$23.23
current levels, MTW is trading at 10X FY2012E consensus Market Capitalization (M): $1,332.24
earnings, and a 15% discount to the S&P 500 multiple, well Shares Outstanding (M): 131.91
below its normalized average of a 12X – 15X PE, and at parity to Avg. Daily Vol. (000): 3,051.08
the S&P. Dividend: $0.00
Dividend Yield: 0.00%
What Could Make 2012 a Better Year? MTW management has Consensus EPS Current Year: $0.36
already stated that 2011 will be better than 2010 (true so far), and Consensus EPS Next Year: $0.97
that 2012 will be better than 2011. The question is how much Est. 3-yr. EPS Growth: 20% - 25%
better? Our earnings model is based on flattish order levels
despite stabilization and improvements in specific Crane end
markets (see page 2.). Foodservice, which remains the majority
of earnings, could be gearing up for growth as several quick-
serve restaurant chains have announced ambitious growth plans
for 2012 and beyond. The replacement cycle, which is the base Earnings Summary
of the business, is also normalizing to pre-recession levels. FYE Dec 2011E 2012E 2013E
What Can Go Wrong – With US growth, manufacturing and EPS & P/E Summary
2011 2012 2013
industrial production coming in better than expected, we believe EPS: 2011E Prior 2012E Prior 2013E Prior
Crane order activity could pick up in 2H12. However, we Q1 -$0.10 -- $0.13 -- -- --
believe consensus expectations are low for order intake and Q2 $0.16 -- $0.31 -- -- --
general economic activity. We assume a European recession of Q3 $0.18 -- $0.41 -- -- --
(-3%) to (-5%) for 1H12 but maintain our expectations for flattish Q4 $0.11 -- $0.34 -- -- --
Crane revenues due to the increasing activity on the Full Year $0.34 -- $1.20 -- $1.80 --
Energy/Industrials side. The biggest worries for 2012 are issues P/E Ratio: 30.1 -- 8.4 -- 5.6 --
already raised in FY2011. Supply chain and software issues will
need to be fixed after three consecutive quarters of delayed
shipments, and union contracts at the Wisconsin facilities will
need to be negotiated. Both parties are returning to the
negotiating table with the federal mediator on January 9.
Valuation: Pick Your Poison – Our price target of $18 is based
on FY2012E EPS of $1.20 and a 15X P/E multiple. Excluding
outliers, MTW has traded between 10X and 15X forward
earnings over the last 10 years. If we consider a sum of the parts
scenario, we arrive at an $18.50 price target based on 7.5X and
10X multiples on FY2012 EBITDA estimates for the Crane and
Foodservice businesses.
Source: Factset
Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
800 Shades Creek Parkway Suite 700 Birmingham, AL 35209 205-949-3500
Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
Manitowoc 2012 Outlook
FoodService (40% Sales, and 57% of EBIT)
Sterne Agee’s Restaurant analyst Lynne Collier believes new unit growth will accelerate
in 2012, after several years of minimal growth. While quick-serve restaurants have been
more aggressive about new unit growth in the past, especially globally, it appears that
new concept growth and re-imaging will see higher investment from the Casual Dining
chains. BJ’s (BJRI - $44.61 – Buy/Collier) is looking to grow from 100 locations to
400+, and others like Panera (PNRA - $135.25 – NTRL/Collier), Buffalo Wild Wings
(BWLD - $59.75 – Buy/Collier), and Texas Road House (TXRH - $14.24 –
Neutral/Collier) are all opening stores at a double-digit rate. On the quick-serve side,
Dunkin Donuts (DNKN – $25.34 – NR) is looking to open 200 new stores as they branch
out of the Northeast, and move across the country. However, they are still not looking at
California.
Figure 1: CapEx - Top 10 Restaurant Companies (By Market Cap)
$7,000
$6,000
$5,000
Dollars in Millions
$4,000
$3,000
$2,000
$1,000
$0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E
MCD SBUX YUM CMG DRI PNRA DNKN EAT WEN DPZ
Source: Company Reports, FactSet Estimates
In a recent National Restaurant Association survey, 47% of restaurant operators, and 54%
of casual dining operators plan to make a capital expenditure for equipment expansion or
modeling in the next six months. At the same time, restaurant operators are more
optimistic about sales growth than they have been in the previous six months with higher
menu prices likely adding to their confidence.
In the menu side, we see great scope with a continuing focus on health and wellness
driving new equipment change. Cheesecake Factory (CAKE – $28.31 – Buy) has a new
range of 20 – 30 items that are all under 600 calories. Applebee’s, BJ, and Chili’s are all
following this concept, with Chili’s specifically commenting on their new oven
technology that improves operating margins.
Page 2
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
Manitowoc’s new product introduction in 2010 and 2011 were geared towards
productivity and efficiency: new fryers requiring 30% less oil, programmable combi-
ovens, and new customizable equipment for non-traditional vending locations. The
smoothie concept has caught on and the company is now offering a smoothie machine to
quick serve and casual dining companies who are attempting to compete with McDonalds
(MCD - $98.47 – Buy).
Operationally, the Enodis integration has been a success and the divestiture of Kysor-
Warren will lead to lower seasonality and higher margins. We believe that the
elimination of redundancies, the new product cycle as well as replacement demand will
allow for 100 – 150 basis points of margin improvement over the prior cycle, especially
towards late 2012, when institutional replacement demand is expected to strengthen
further.
Cranes (60% of sales, 43% of EBIT)
We consider 2010 the new base year, and note a stabilization in order trends. Cranes are
typically late cycle, and we observe a nascent recovery in dirt moving equipment, that
will, if trends hold true, signal the real growth in Crane demand in late 2014. In the
meanwhile, we are seeing projects delayed during the 2009/10 crisis moving along, and
other critical infrastructure needs being pushed down the pipe as well. Looking at the
core end-markets for Cranes, we see surprisingly bullish commentary on investment
spending, especially in Power (utilities, power plants, petro-chem). Road and highway
construction never materialized (stalled Highway Bill), but yet spending has been flat
from 2008/09 levels.
In 2012, we believe energy, notably wind, driven by manufacturing tax credits, will
realize higher utilization for crawler and mobile cranes. Multi-Industrial companies in
our universe are expecting wind deliveries to increase by a further 15 – 20% in 2012,
after a ~15% increase in 2011. We note several new contract awards, along with HVDC
installations, as well as a constant flow of power plant construction. There are 26 nuclear
power plants under construction in China today, and ~65 around the world. With most
plants likely to reach operational status between 2016 and 2020, this should result in
significant crane demand starting 2013. A nuclear power plant typically utilizes 150 –
200 cranes during construction, including 8 – 10 lattice boom crawlers, and 15 – 20 tower
cranes.
Page 3
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
Figure 2: Flamanville Nuclear Power Plant, France
Source: Areva
Figure 3: Taishan Dome Installation, China
Source: Areva
Page 4
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
Figure 4: Manitowoc End Markets
Manufacturing
Utilities Power Plants
US Res Constr
Res Constr Industrial/Petro
Road & Highway
US Comm Constr
Comm Constr
Source: Company Reports, Sterne, Agee & Leach
Figure 5: Insert title Here
End Market Percentage Commentary
of
Revenues
Power Plants 15 – 20% Improving. New Construction + retrofit work. Gas and
Nuclear bailout. Higher reported investment spending.
Industrial/Petrochem 20 - 25% Higher price of oil and resins spurring investment in new
capacity and “bottom of the barrel” infrastructure.
Commercial Construction 15 - 20% Weak. Wait.
US Commercial 4 – 7% Weak. Optimists anxious for 2H12 recovery.
Construction
Road & Highways 15 – 18% Surprisingly steady spending. Highway Bill? New
Administration?
Residential Construction 5–8% Slow.
US Residential 1 – 4% Not meaningful, even with growth.
construction
Utilities 7 – 10% Strong commitments to spend on new infrastructure and
upgrades.
Manufacturing 3 – 6% Firming up.
Source: Company Reports, Sterne, Agee & Leach
Page 5
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
Figure 6: US Construction Spending
120,000
100,000
80,000
Dollars in Millions
60,000
40,000
20,000
0
Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Commercial Transportation Power
Highway and street Manufacturing
Source: US Census Bureau
Power Plants/Utilities, and Industrial/Petrochem, which combine for 45 – 50% of Crane
end markets are showing improvements in construction spending, while US Commercial
Construction and US Residential construction, which together represent 6 – 9% of
revenues, show no growth. In Europe, commercial construction is improving, while
spending on energy infrastructure is also gathering speed.
Figure 7: CapEx – Top 10 Global Utilities (By Market Cap)
$80,000
$70,000
$60,000
$50,000
Dollars in Millions
$40,000
$30,000
$20,000
$10,000
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E
NEE EDF-FR EOAN-DE SO ENEL-IT IBE-ES NG-GB D DUK EXC
Source: Company Reports, FactSet Estimates
Page 6
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
Figure 8: CapEx – Top 10 US Utilities (By Market Cap)
$40,000
$35,000
$30,000
$25,000
Dollars in Millions
$20,000
$15,000
$10,000
$5,000
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E
SO D EXC DUK NEE AEP FE ED PPL PGN
Source: Company Reports, FactSet Estimates
Figure 9: MTW Orders and Sales
$1,500
Crane Orders
$1,300
Crane Sales
$1,100
$900
$700
$ Million
$500
$300
$100
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12E
3Q12E
-$100
-$300
-$500
Source: Company Reports, Sterne, Agee & Leach
Crane orders have now stabilized at the $550M - $600M level per quarter, and with book
and ship, and Crane Care, will support annual revenues >$2.5B. We believe multiple
expansion at Manitowoc will depend on execution, rather than order activity. Tier IV and
supply chain issues have resulted in ~$50M in delayed shipments in each quarter in 2011,
no doubt impacting margins. In 2009 and 2010, much of the concern was around volume
and absorption, and Manitowoc’s ability to stay profitable even while quarterly Crane
sales dipped below $400M. Quick restructuring actions and deep headcount reduction
Page 7
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
allowed for profitability even at the worst times. As growth re-emerges, it is clear that
Manitowoc needs to adjust on the upswing as well.
We are forecasting another 17% sales growth in Cranes, based on average quarterly order
intake slightly below $600M, and a modest contribution from short cycle orders and
aftermarket and service revenues. In the past, $2.5B in sales has supported profitability
above 10%, but investment programs in Brazil, China, and India, and only modest pricing
benefits will likely result in a 200 – 300 bps drag on margins over the next 2 years.
Valuation
Our price target of $18 is based on FY2012E EPS of $1.20 and a 15X P/E multiple.
Excluding outliers, MTW has traded between 10X and 20X forward earnings over the
last 10 years, and we believe the improving FoodService business and Crane cycle
recovery in FY2012 adequately justify a high P/E multiple.
Manitowoc is currently trading at 10.4X P/E multiple using FY2012 consensus estimates,
and a 15% P/E discount to the S&P 500. Excluding outliers, the company has traded
between 12X - 15X forward earnings over the last 10 years, and usually at parity to the
S&P 500, or a 14X forward multiple.
As we mentioned above, stabilizing end markets should allay concerns, but earning
multiple expansion will now depend on execution, rather than orders. The balance sheet
may still exclude a wide band of investors, but by refinancing, and terming out debt, we
believe the two bullet payments of $150M in 2013, and $30M in 2015 are manageable,
with the bulk of repayments starting in 2016 at the tail end of a potential crane cycle. We
currently estimate $290M and $400M in Cash from Operations in FY2011 and FY2012,
with CapEx of $70M - $75M in both years. The company is targeting $150 M- $200M in
debt reduction in FY2011, which we believe will come in towards the low side, and we
estimate another $150M in debt paydown in 2012. These actions should lessen the
impact of some of the payments towards the end of the decade.
Figure 10: Manitowoc Debt Maturity Schedule
$700
$600
$500
Dollars in Millions
$400
$300
$200
$100
$0
2013 2014 2015 2016 2017 2018 2019 2020
Source: Company Reports
Page 8
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
If we consider a Sum of the Parts scenario, we arrive at a $18.50 price target based on
estimated FY2012 EBITDA of $490M, and applying a 10X EV/EBITDA multiple on
FoodService, and a 7.5X EV/EBITDA multiple on the Crane business. Middleby (MIDD
$93.02 – NR), a pure play FoodService company, currently trades at 12.8X 2011
EV/EBITDA (10.5X historical multiple). Manitowoc is currently trading at 6.6X
FY2012 EBITDA (Sterne Agee estimate).
Page 9
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
Manitowoc Co., Inc. Statement of Cash Flows
The Manitowoc Company - Summary Financial Statements 2005—2012E
(Dollars and shares in millions, except per-share data)
INCOME STATEMENT 2008 2009 2010 2011E 2012E
Oper. Oper. Oper. Oper. Oper.
Segment Breakdown: Sales Profits Sales Profits Sales Profits Sales Profits Sales Profits
Crane $3,882 $556 $2,285 $145 $1,749 $90 $2,116 $99 $2,466 $180
Food Service $620 $57 $1,497 $174 $1,559 $208 $1,510 $243 $1,662 $243
Corp Expense ($65) ($45) ($41) ($91) ($72)
Total $4,503 $547 $3,782 $275 $3,307 $298 $3,626 $224 $4,128 $352
Pretax Income $82 ($643) ($66) $19 $220
Less Taxes $2 ($59) $26 $20 $66
Net Income Cont. Ops $80 ($643) ($66) $19 $154
Discontinued & Unusuals $30.0 ($35.8) ($8.2) ($3.1) $0.0
Gain on sale or closure of discont ops (net of inc tax) $54.1 ($24.9) $0.0 ($33.6) $0.0
Net Income $164 ($679) ($74) ($12) $160
Special Items $233 $690 $70 $57 $0
Net Income Ibefore Special Items $398 $47 ($3) $44 $160
EPS from Continuing Operations $0.61 ($4.94) ($0.50) $0.19 $1.20
EPS (GAAP) $1.25 ($5.21) ($0.56) ($0.09) $1.20
EPS Before Special Items $3.03 $0.36 ($0.03) $0.34 $1.20
EBITDA $664 $383 $387 $313 $490
EBITDA per share $5.07 $2.94 $2.95 $2.36 $3.66
Shares Outstanding (M ) 131.1 130.2 131.5 132.6 133.6
Quarterly EPS
Q1 $0.78 $0.18 -$0.10 -$0.10 $0.13 E
Q2 $1.03 $0.24 $0.11 $0.16 $0.31 E
Q3 $0.82 $0.00 $0.01 $0.18 $0.41 E
Q4 $0.46 -$0.07 $0.11 $0.11 E $0.34 E
CASH FLOW 2008 2009 2010 2011E 2012E
Sources
Net Earnings (loss) ($10.7) ($678.6) ($73.8) ($12.0) $159.9
Discontinued Operations, net of inc tax $143.4 $25.0 $0.0 $0.0 $0.0
Pension settlements $0.0 $0.0 $0.0 $0.0 $0.0
Gain of sales of parts line $0.0 $0.0 $0.0 $0.0 $0.0
Depreciation $80.2 $95.0 $150.0 $175.0 $175.0
Amortization of intangible assets $11.6 $800.0 $50.0 $10.0 $25.0
Amortization of deferred financing fees $5.7 $4.0 $3.0 $2.0 $5.0
Deferred Taxes $6.9 $4.0 $3.0 $5.0 $5.0
Loss on purchase price hedges $379.4 $0.0 $0.0 $0.0 $0.0
Restructuring expense $21.7 $35.0 $0.0 $0.0 $0.0
Gain on sale of segment ($53.1) $0.0 $0.0 $0.0 $0.0
Loss on early extinguishment of debt $4.1 $4.0 $0.0 $0.0 $0.0
Other (net) $4.7 $10.0 $10.0 $10.0 $5.0
Gain on sale of property, plant and equip ($3.6) $0.0 $0.0 $0.0 $0.0
Change in Working Capital ($303.8) $50.0 $75.0 $100.0 $25.0
Net cash prov by (used for) op act of disc ops $22.5 $0.0 $0.0 $0.0 $0.0
From Operations $309.0 $348.4 $217.2 $290.0 $399.9
Dispositions $128.5 $168.8 $100.0 $0.0 $0.0
Net Debt $2,023.5 ($474.6) ($200.0) ($200.0) ($150.0)
Effect of Exch. Rate ($4.6) $5.8 ($5.0) $10.0 ($10.0)
Other $2.9 ($6.8) $0.0 $0.0 $0.0
Total Sources $2,459.3 $41.6 $112.2 $100.0 $239.9
Uses:
Net Capital Spending $150.3 $72.5 $50.0 $70.0 $75.0
Dividends $10.4 $10.4 $14.0 $14.0 $15.0
Exercise of stock options inc tax benefit ($8.5) ($1.0) ($20.0) $0.0 $0.0
Acquisitions Net $2,410.0 $0.0 $0.0 $0.0 $0.0
Net Equity $0.0 $0.0 $0.0 $0.0 $0.0
Other (net) $88.3 $18.1 $0.0 $0.0 $0.0
Total Uses $2,650.5 $100.0 $44.0 $84.0 $90.0
Change in Cash ($191) ($58) $68 $16 $150
CAPITALIZATION 2008 2009 2010 2011E 2012E
Short-Term Debt $182.30 $144.9 $150.0 $102.9 $103.0
Long-Term Debt $2,473 $2,028 $1,828 $1,998 $1,848
Shareholders' Equity $1,322 $606.3 $479 $474 $500
Total Capitalization $3,978 $2,779 $2,456 $2,574 $2,451
Cash & Equivalents $176 $117 $186 $201 $351
1 Yr Cash Return to Shareholders 60.1% -4.2% -19.0% -116.7% 9.4%
3 Yr Avg. Cash Return to Shareholders 7.1% 4.0% 12.3% -46.6% -42.1%
Debt/Total Capital 67% 78% 81% 82% 80%
Net Total Capital $3,802 $2,661 $2,271 $2,373 $2,099
Net Debt/Total Cap. 62% 74% 73% 74% 65%
Debt/EBITDA 4.0x 5.7x 5.1x 6.7x 4.0x
Average ROE -1% -70% -14% -3% 33%
Average ROTC 0% -20% -3% 0% 6%
Average Total Capital $2,508 $3,232 $2,466 $2,322 $2,236
Average Net ROTC -0.4% -21.0% -3.0% -0.5% 7.2%
Source: Company reports and Sterne Agee estimates
Page 10
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
Manitowoc Co., Inc. Annual Income Statement
The Manitowoc Company — Sales And Earnings Model 2002-2013E
(Dollars and shares in millions, exc ept per-share data)
Revenue By Segment 2002 2003 % Chge 2004 % Chge 2005 % Chge 2006 % Chge 2007 % Chge 2008 % Chge 2009 % Chge 2010 % Chge 2011E % Chge 2012E % Chge 2013E % Chge
Crane 674 963 42.8% 1,248 29.7% 1629 30.5% 2,235 37.2% 3,246 45.2% 3,882 19.6% 2,285 -41.2% 1,749 -23.5% 2,116 21.0% 2,466 16.6% 2,836 15.0%
Food Service 463 457 -1.3% 468 2.5% 400 -14.7% 415 4.0% 438 5.5% 620 41.5% 1,497 141.4% 1,559 4.1% 1,510 -3.1% 1,662 10.0% 1,737 4.5%
Total Revenue $1,356 $1,571 15.8% $1,964 25.0% $2,254 14.8% $2,933 30.1% $3,684 25.6% $4,503 22.2% $3,782 -16.0% $3,307 -12.6% $3,626 9.6% $4,128 13.8% $4,573 10.8%
Operating Margin
Crane 8.3% 2.5% 4.6% 7.1% 12.5% 14.5% 14.3% 6.4% 5.1% 4.7% 7.3% 10.0%
Foodservice 12.3% 14.4% 14.1% 14.5% 13.5% 14.0% 9.2% 11.6% 13.3% 14.3% 14.6% 15.5%
Total Operating Margin 8.5% 6.3% 5.5% 5.9% 10.3% 12.9% 11.5% -13.5% 6.4% 6.2% 8.5% 10.4%
Operating Income By Segment
Crane 56 24 57 116 281 142.9% 470 67.7% 556 18.1% 145 -73.9% 90 -38.2% 99 10.9% 180 81.7% 284
Foodservice 57 66 66 58 56 -3.3% 61 9.3% 57 -7.5% 174 206.9% 208 19.3% 215 3.6% 243 12.9% 269
M arine 20 5 9 (9) 11 NA 26 128.9% 28 6.9% NA 0 NA 0 0
Corp Expense (15) (19) (21) (25) (42) 70.6% (48) 13.7% (52) 7.3% (45) -13.8% (41) -7.0% (47) 12.8% (32) (36)
Impairments 0 13 0 0 0 0 0 (700) 0 0 0 0
Loss on sale of product line 0 13 0 0 0 0 0 (3) (2) 0 0 0
Restructuring Expense 0 0 0 0 0 0 (21) (40) (4) (5) (2) (2)
Integration Expense/Other 0 0 0 0 0 0 (6) (4) 0 (0) 0 0
Amortization (2) (3) (3) (6) (3) NA (8) 129.4% (14) 76.9% (39) 185.5% (39) -1.3% (39) 0.0% (38) (38)
Total Operating Income $115 $99 $108 $133 $302 126.9% $476 57.4% $520 9.3% ($511) -198.3% $212 -141.4% $224 5.9% $352 56.9% $477 35.6%
EBITDA $161 $132 $158 $197 $375 90.4% $590 57.4% $664 12.6% $383 -42.3% $387 1.1% $313 -19.1% $490 $612
EBITDA as a % of sales 11.9% 8.4% 8.1% 8.7% 12.8% 14.7% 14.8% 10.1% 11.7% 8.6% 11.9% 13.4%
Interest income (expense), net (52) (57) (57) (53) (43) (36) (52) (182) (175) (146) (125) (122)
Loss on currency hedge 0 0 0 0 0 0 (379) 0 0 0 0 0
Loss on debt extinguishment 0 (7) (1) (9) (14) (13) (4) (9) (44) (28) 0 0
Amortization of Deferred Financing Fee 0 0 0 0 0 0 0 (21) (22) (15) (11) (11)
Other income (expense) net 2 0 (1) 3 0 10 (3) 18 (10) 3 4 0
Pre-Tax Income $65 $35 $49 $74 $245 231.4% $437 78.4% $82 -81.3% ($706) -963.5% ($40) -94.4% $39 -198.1% $220 466.0% $344 56.4%
Income Tax Provision (Benefit) 23 4 9 15 78 122 2 (59) 26 20 66 103
Tax Rate (%) 36.0% 11.4% 19.0% 19.9% 32.0% 27.9% 1.8% 8.3% -65.7% 52.1% 30.0% 30.0%
M inority interest, net of income taxes 0 0 0 0 0 0 0 (4) (2) (6) (6) 0
Net Income from Continuing Operations 42 31 40 59 167 181.3% 315 89.1% 80 -74.6% ($643) -902.5% ($66) -89.8% $19 -128.4% $154 727.4% $241 56.4%
Earnings (loss) from discontinued ops net of tax 0 (2) (2) 6 11 22 30 ($36) (8) (3) 0 0
Gain on sale or closure of discont ops (net of inc tax) (25) (12) 1 0 0 0 54 ($25) 0 (34) 0 0
Net Income 16 16 39 139.0% 66 67.4% 177 170.2% 337 90.2% 164 -51.2% ($704) -528.4% ($74) -89.5% ($12) -83.7% $160 -1432.3% $241 50.5%
Special Items (37) 0 0 0 0 7 233 $690 $70 $57 0 $0
Net Earnings before Special Items (21) 16 39 139.0% 66 67.4% $177.0 170.2% 344 94.1% 398 15.7% $47 -88.1% $5 -89.9% $44 827.1% $160 259.3% $241 50.5%
EPS from Continuing Operations $0.47 $1.32 178.7% $2.46 86.0% $0.61 -75.1% ($4.94) -907.6% ($0.50) -89.9% $0.19 -137.3% $1.20 542.3% $1.80 50.5%
EPS (GAAP) $0.63 $0.61 $1.43 $0.52 $1.40 167.8% $2.63 87.2% $1.25 -52.3% ($5.40) -531.2% ($0.56) -89.6% ($0.09) -83.9% $1.20 -1421.9% $1.80 50.5%
EPS Before Special Items ($0.80) $0.61 $1.43 $0.52 $1.40 167.8% $2.68 91.0% $3.03 13.1% $0.36 -88.0% $0.04 -90.0% $0.34 819.5% $1.20 256.5% $1.80 50.5%
Diluted Shares Out (Mil) 25.8 26.7 27.4 124.9 126.1 128.1 131.1 130.2 131.5 132.6 133.6 133.6
Source: Company reports and Sterne Agee estimates
Page 11
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
Manitowoc Co., Inc. Quarterly Income Statement
The Manitow oc Company — 2011E Quarterly Sales And Earnings Model
(Dollars and shares in millions, except per-share data)
Revenue By Segment 1Q11 1010 % Chge 2Q11 2Q10 % Chge 3Q11 3Q10 % Chge 4Q11E 4Q10 % Chge 2011E 2010 % Chge
Crane 393 367 7.1% 555 452 22.9% 529 439 20.6% 639 491 30.0% 2,116 1,749 21.0%
Foodservice 339 318 6.9% 395 368 7.4% 406 368 10.2% 370 340 7.0% 1,510 1,559 -3.1%
Total Revenue $732 $684 7.0% $950 $819 15.9% $935 $807 15.9% $1,009 $831 21.4% $3,626 $3,307 9.6%
Operating Margin
Crane 3.2% 1.2% 5.3% 8.5% 4.8% 3.7% 5.0% 6.2% 4.7% 5.1%
Foodservice 12.1% 14.7% 15.7% 15.0% 16.7% 16.7% 12.0% 12.4% 14.3% 13.3%
Total Operating Margin 4.0% 4.7% 7.1% 8.6% 7.4% 6.7% 5.7% 6.4% 6.2% 6.4%
Operating Income By Segment
Crane 12.5 4.5 177.8% 29.5 38.5 -23.4% 25.4 16.1 57.8% 31.9 30.4 5.1% 99.3 89.6 10.9%
Foodservice 41.2 46.6 -11.6% 62.2 55.1 12.9% 67.6 61.4 10.1% 44.4 42.1 5.5% 215.4 207.9 3.6%
Corp Expense (13.5) (9.3) 45.2% (12.5) (11.9) 5.0% (12.7) (10.7) 18.7% (8.0) (9.5) -15.8% (46.7) (41.4) 12.8%
Impairments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NA
Loss on sale of product lines 0.0 0.0 0.0 0.0 0.0 (2.0) 0.0 0.0 0.0 (2.0)
Restructuring Expense (0.8) (0.3) (2.0) (1.3) (0.9) (1.4) (1.0) (0.6) (4.7) (3.6) NA
Integration Expense/Other 0.0 0.0 0.0 0.0 (0.3) 0.0 0.0 0.0 (0.3) 0.0 NA
Amortization (9.8) (9.5) (9.7) (9.7) (9.9) (9.5) (9.5) (9.6) (38.9) (38.9) 0.0%
Total Operating Income $29.6 $32 -7.5% $67.5 $71 -4.5% $69 $54 28.4% $58 $53 9.5% $224 $212 5.9%
Interest income (expense), net (39.4) (40.6) (38.3) (43.2) (34.0) (46.2) (34.0) (45.0) (145.7) (175.0)
Loss on currency hedge 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Loss on debt extinguishment (3.6) (15.7) (24.2) 0.0 0.0 (1.1) 0.0 (27.3) (27.8) (44.1)
Amortization of Deferred Financing Fee (3.4) (6.9) (2.7) (5.2) (2.2) (5.3) (6.7) (4.5) (15.0) (21.9)
Other income (expense) net 0.9 (6.3) 0.3 (5.5) 2.0 0.0 0.0 1.7 3.2 (10.2)
Pre-Tax Income ($15.9) ($37.5) -57.6% $2.6 $16.8 -84.5% $35.0 $1.3 2592.3% $17.1 ($22.3) $38.8 ($39.6) -198.1%
Income Tax Provision (Benefit) $1.3 ($13.8) $0.5 $3.9 $13.3 $2.7 $5.1 $32.2 $20.2 $26.0
Tax Rate (%) -8.2% 36.8% 19.2% 23.2% 35.0% 207.7% 30.0% -144.4% 52.1% -65.7%
M inority interest, net of income taxes (0.9) (0.4) (1.1) (0.8) (2.1) (0.9) (2.0) 0.6 ($6.1) ($1.5)
Net Income from Continuing Operations ($17.2) ($23.7) -27.4% $2.1 $12.9 -83.7% $21.7 ($1.4) -1650.0% $12.0 ($54.5) $18.6 ($65.6) -128.4%
Earnings (loss) from discontinued ops net of tax (2.7) 0.1 (0.3) 0.4 (0.1) 1.9 0.0 (9.9) (3.1) (8.2)
Gain on sale or closure of discont ops (net of inc tax) (33.4) 0.0 (0.2) 0.0 0.0 0.0 0.0 0.0 (33.6) 0.0
Net Income (GAAP) ($52.4) ($23.6) 122.0% $2.7 $14.1 -80.9% $23.7 $1.4 1592.9% $14.0 ($64.4) ($12.0) ($73.8) -83.7%
Special Items $38.9 ($10.3) $17.5 ($0.4) $0.1 $0.0 $0.0 $79.4 56.5 70.4
Net Earnings before Special Items ($13.5) ($13.3) $20.2 $14.5 $23.8 $1.4 $14.0 $15.0 $44.5 ($3.4)
EPS from Continuing Operations ($0.12) ($0.18) -31.2% $0.02 $0.10 -75.4% $0.18 ($0.01) -1789.7% $0.11 ($0.42) $0.19 ($0.50) -137.3%
EPS (GAAP) ($0.40) ($0.18) 122.1% $0.02 $0.11 -81.0% $0.18 $0.01 1582.6% $0.11 ($0.49) -121.3% ($0.09) ($0.56) -83.9%
EPS Before Special Items ($0.10) ($0.10) 1.5% $0.16 $0.11 47.2% $0.18 $0.01 1589.7% $0.11 $0.11 -8.4% $0.34 ($0.03) -1398.1%
Diluted Shares Out (M il) 130.4 130.5 133.8 132.6 133.0 132.2 133.0 130.6 132.6 131.5
Source: Company reports and Sterne Agee estimates
Page 12
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
APPENDIX SECTION
Company Description: The Manitowoc Company, Inc. produces lattice-boom cranes, boom trucks, and related products for the
construction industry and manufactures ice-cube machines, ice/beverage dispensers, and commercial refrigeration equipment for the
foods service industry.
IMPORTANT DISCLOSURES:
Price Target Risks & Related Risk Factors:
Risks to our investment thesis and price target for The Manitowoc Company, Inc. include: 1) rising transportation costs; 2) surging
commodity cost inflation without the benefit of full recovery through pricing; 3) any potential slowdown in spending related to
highway and bridge resurfacing and refurbishment, as well as investment and spending in the energy sector; 4) supply constraints for
critical gearing and high tensile steel; 5) the emergence of low-cost manufacturers of small and medium-sized cranes in China which
could also emerge as aftermarket competitors for parts and services; and 6) slower spending by global restaurant and food preparation
companies as discretionary spending by consumers weakens.
Valuation Methodology:
We initiated coverage on The Manitowoc Company on 3/26/08. Our price target of $18 is based on FY2012E EPS of $1.20 and a 15X
P/E multiple. Excluding outliers, MTW has traded between 12X and 15X forward earnings over the last 10 years, and we believe the
improving FoodService business and Crane cycle recovery in FY2012 adequately justify a high P/E multiple.
Regulation Analyst Certification:
I, Ben Elias, CFA, (212) 338-4706, hereby certify the views expressed in this research report accurately reflect my personal views
about the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed by me in this report.
Sterne, Agee & Leach, Inc. Disclosure Legend as of January 8, 2012:
Company Disclosure(s) – See Below
BJ's Restaurants, Inc. (BJRI - NNM): 1,4
Manitowoc Co., Inc. (MTW - NYSE): 1
McDonald's Corporation (MCD - NYSE): 1
Panera Bread Co. (PNRA - NNM): 1
Texas Roadhouse, Inc. (TXRH - NNM): 1
The Cheesecake Factory Incorporated (CAKE - NNM): 1
Disclosure Legend
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provided other investment banking services for the subject company.
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from the subject company in the past 12 months.
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Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject
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Definition of Investment Ratings:
BUY: We expect this stock to outperform the industry over the next 12 months.
NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months.
UNDERPERFORM: We expect this stock to underperform the industry over the next 12 months.
RESTRICTED: Restricted list requirements preclude comment.
Ratings Distribution:
Of the securities rated by Sterne, Agee & Leach, Inc., as of December 31, 2011, 49.7% had a BUY rating, 43.6% had a NEUTRAL
rating, 6.7% had a UNDERPERFORM rating, and 0% was RESTRICTED. Within those ratings categories, 3.8% of the securities
Appendix Section, Page I
MANITOWOC CO., INC. (NYSE: MTW) January 8, 2012
rated BUY, 1.1% rated NEUTRAL, 0% rated UNDERPERFORM, and 0% rated RESTRICTED received investment banking services
from Sterne, Agee & Leach, Inc., within the 12 months preceding December 31, 2011.
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or
more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein
and may act as principal or agent to buy or sell such securities.
Copyright © 2012 Sterne, Agee & Leach, Inc. All Rights Reserved.
Sterne, Agee & Leach, Inc. disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA
regulations. Price charts for companies initiated upon in the current quarter, and rating and target price changes occurring in the
current quarter, will not be displayed until the following quarter.
Price Chart(s):
To receive price charts or other disclosures on the companies mentioned in this report, please contact
Sterne, Agee & Leach, Inc. toll-free at (800) 240-1438 or (205) 949-3689.
Appendix Section, Page II
Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the
early years, our founders prominently established themselves in the financial securities industry in the southeastern United States. Today, we
have expanded to serve all regions of the country. Sterne, Agee is headquartered in Birmingham, Alabama with offices in 22 states. Sterne
Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also
includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee
Financial Services, Inc.—www.sterneagee.com
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INSTITUTIONAL SALES INSTITUTIONAL TRADING
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