The Manitowoc Company 2006 Annual Report

The Manitowoc Company, Inc. 2006 Annual Report Ready for Ready for More By focusing on our core strategies, we’ve achieved record performance and growth. Now, we’re ready for more… More Growth Manitowoc achieves its 12th consecutive year of record revenues. Page 2 Market conditions will remain strong in 2007. Page 3 The crane market is global, diversified, and growing. Page 9 More Innovation The Crane Group launches an entirely new type of crane. Page 7 New Grove GMK4100B allterrain crane features innovative designs and improved ergonomics. Page 10 The Marine Group launches a new generation of naval warship. Page 11 More Customer Focus More Development Since 2004, more than 250 employees have graduated from our leadership development programs. Page 2 Crane CARE instructors provide more than 3,000 training sessions for customers. Page 9 New comprehensive safety management systems at the Crane Group reduce lost-time accidents. Page 10 Foodservice Group’s key account teams focus on meeting the needs of large customers. Page 13 More Value A new strategic priority — World-Class Aftermarket Service and Support — will help increase value for customers and shareholders. Page 3 A new Enterprise Resource Planning system at the Foodservice Group will improve service and lower costs. Page 13 Manitowoc reports record EVA®. Page 2 In 2007, EVA is expected to increase by 50% over the record set in 2006. Page 16 Crane CARE will be the first in its industry to provide 24/7 global support. Page 9 Marine Group becoming shipbuilder of choice for government and commercial customers. Page 11 Foodservice wins high marks from customers. Page 13 More Excellence Six Sigma training moves forward across Manitowoc’s operations. Page 2 Standardizing design and manufacturing processes helps the Crane Group simplify its design, improve quality, and reduce inventories. Page 9 By focusing its operations, the Marine Group improves its processes and profits. Page 11 Littoral Combat Ship All Manitowoc Ice products will comply with EPA 2010 energy standards by end of 2007. Page 13 Foodservice introduces new products to serve changing tastes. Page 13 Chillz Dispenser ™ All foodservice manufacturing facilities meet ISO 9001 standards. Page 15 Vision 2012 Growth Become the global market leader in Manitowoc’s crane and foodservice businesses. Scale the marine business for profitability. Innovation innovative products, processes, and services that enhance our customers’ businesses and the value of our brands. Customer Focus Aftermarket Service and Support People and Organizational Development Enhance all products with superior aftermarket service and support. Excellence in Operations Attract, engage, and develop top talent and structure the organization to lead and manage the global business. Value Creation Deliver extraordinary value through deep understanding of the value stream, embracing new technologies, and continuously developing new and Become a fully integrated global company, the preferred supplier that’s easy to do business with. Drive world-class performance in our manufacturing and business practices. Generate year-over-year improvement in economic value through profitable growth and efficient use of capital. Financial Highlights For the Years Ended December 31 Millions of dollars, except employee, debt-to-capitalization, shares, per share, and return data 2006 2005 % Change For the Year Net sales Operating earnings from continuing operations Earnings from continuing operations Earnings from continuing operations as a percentage of sales Number of employees (approximate) EVA Total assets Debt to capitalization Stockholders’ equity Average shares outstanding (diluted) Earnings from continuing operations Gain (loss) from discontinued operations, net of income taxes Gain on sale or closure of discontinued operations, net of income taxes Net earnings $2,933.3 $ 302.4 $ 166.5 5.7% 9,500 $ 116.9 $2,219.5 25.7% $ 774.5 62,785,766 $ 2.72 (0.01) — $ $ 2.71 2.65 (0.01) — $ 2.65 $2,254.1 $ 133.3 $ 59.1 2.6% 8,000 $ 15.6 $1,961.8 47.6% $ 543.3 61,526,034 $ 0.98 0.02 0.10 $ $ 1.09 0.96 0.02 0.10 $ 1.07 30.1% 126.9% 181.7% 18.8% 649.4% 13.1% 42.6% 2.1% Financial Position Basic Earnings per Share Diluted Earnings per Share Earnings from continuing operations Gain (loss) from discontinued operations, net of income taxes Gain on sale or closure of discontinued operations, net of income taxes Net earnings Net cash provided by operating activities Property, plant and equipment, net Capital expenditures Depreciation Amortization of intangible assets Dividends paid Debt reduction Return on invested capital Return on equity Return on assets Other Information $ 294.1 $ 398.9 $ 67.6 $ 69.0 $ 3.3 $ 8.6 $ 241.4 18.5% 21.5% 7.5% $ 106.7 $ 353.9 $ 54.9 $ 60.4 $ 3.1 $ 8.4 $ 61.5 9.0% 10.9% 3.0% 175.6% 12.7% 23.1% 14.2% 6.5% 2.4% 292.5% Net Sales Net Sales ($ Millions) 06 05 04 03 02 01 $904.0 $1,253.1 $1,468.1 $2,254.1 $1,844.9 $2,933.3 Net Earnings from Continuing Operations Earnings from Continuing Operations ($ Millions) 06 05 04 03 02 01 $38.1 $8.6 $39.0 $39.6 $59.1 $166.5 EBITDA EBITDA ($ Millions) 06 05 04 03 02 01 $190.6 $158.6 $144.1 $157.5 $136.6 $374.7 For the 12th consecutive year, Manitowoc reported record revenues. Net sales increased more than 30% to $2.9 billion. Earnings from continuing operations grew by 182% in 2006 as Manitowoc benefited from the introduction of new products, the growth of key crane markets, and continued improvements in its operations. Since 2001, earnings before interest, taxes, depreciation, and amortization have increased by 174%, the result of increased profitability and value-adding investments. 1 Letter to Shareholders n 2006, we had the best year in our 104-year history. We’re ready for more. Led by the outstanding performance of our Crane Group, we achieved our twelfth consecutive year of record revenues. Sales grew more than 30% to $2.9 billion. Net earnings before special items increased by 139% to $176.5 million, or $2.81 per share. We created more than $100 million in Economic Value-Added (EVA®) — double the previous record set in 1999. Results like these don’t happen by accident, or overnight. Our success results from focusing on six strategic priorities — all aimed at creating value — and then working our plan, year after year. For 2007, we are adding a seventh strategic priority — World-Class Aftermarket Service and Support — to the set of imperatives that we’re currently using as our roadmap to the future. I square-foot crane manufacturing plant in China — three times the size of our previous facility there — that consolidates our position as the leading crane manufacturer in one of the world’s fastest-growing construction markets. The new crane plant along with a new ice machine manufacturing facility that we opened in China a year earlier are the latest in a series of initiatives that have transformed our performance and our prospects. In 1999, 5% of our sales originated outside the United States. Today, we not only operate manufacturing and service facilities in 14 countries, but we earn 48% of our revenues from outside the United States. The 15 acquisitions we have completed since 1995 have brought us leading positions across many of our markets, enabled us to do more for customers, and allowed us to leverage our manufacturing capabilities, distribution channels, and service networks. In early 2006, we announced the acquisition of ExacTech to enhance the heavy-machining capacity within our crane business. The acquisition of McCann’s Engineering, a supplier of backroom beverage dispensing equipment, will help our Foodservice Group gain greater control of its production processes and improve profit margins. In January 2007, we acquired a line of mobile industrial cranes that complement our existing products and give us a leading position in that product category. Innovation the development of new products and services; by listening to their requests at the start of the product development process, we greatly increase the likelihood of our success in the marketplace. Opening a modern crane manufacturing facility in China answered a customer need for shorter delivery times of products destined for the rapidly growing Asian market. New beverage equipment products help convenience store operators capitalize on the growing demand for non-carbonated beverages. In addition, the new ERP system now being implemented across our Foodservice operations will streamline ordering, reduce lead times, and allow for more integrated service. Excellence in Operations Growth Our first priority is profitable, global growth. We are growing organically and pursuing strategic acquisitions. In 2006, we officially opened a new 805,000- Our ongoing target is to generate 80% of our annual revenues from products introduced within the past five years. Innovation adds value to our products and brands, while increasing both the size of our markets and our market shares. In 2006, we introduced 15 new crane products and announced plans for an entirely new type of crane whose revolutionary design combines outstanding mobility with exceptional lifting capacity. Our foodservice equipment business introduced 28 new products in 2006, including new energy-saving ice machines that helped us win a larger share of that market. In addition, our Marine Group launched the first of a new class of advanced ships for the US Navy, the Littoral Combat Ship, just 15 months after laying its keel. Customer Focus To ensure that we achieve profitable growth, we’re pursuing excellence in every aspect of our operations. In 2006, we continued to widen the application of Six Sigma quality practices across our businesses. A new Design For Six Sigma process in our crane business helped to significantly reduce first-90-day warranty claims. Consolidation of two walk-in refrigerator plants is shortening lead times and increasing production. Re-engineering and refocusing our marine business helped it improve efficiency and profitability and win high marks — and repeat orders — from both government and commercial customers. People and Organizational Development Terry D. Growcock Chairman & Chief Executive Officer As a global company that’s easy to do business with, we’re focused on doing more for our customers. Their voices guide To be successful, a global company needs a world-class workforce. Since 2004, more than 250 managers have completed one of our three leadership development programs. In 2006, we implemented new 2 More Global Presence Manitowoc has manufacturing and service facilities located in 14 countries. Cranes and Related Products Foodservice Equipment Marine Operations human resources software and a new employee intranet to provide the common platform needed to manage a global organization. Our enterprise values — integrity, commitment to stakeholders, and passion for excellence — were embedded in a new employee code of conduct to help assure the same standards of behavior across an increasingly multinational, multicultural workforce. And we haven’t lost sight of the basics. A new safety management system that draws on the best practices of all our businesses reduced total lost-time accidents and cut workers compensation costs by more than 50%. Impressively, our foodservice business had no lost-time injuries in 2006. Value Creation have produced record profits. Our commitment to EVA brings financial discipline to the company and helps ensure that we make the best use of our capital. By concentrating on these six priorities, we’ve achieved exceptional results. Now, we are adding a seventh priority: to provide world-class aftermarket service and support for all of our customers around the world. We believe that formalizing this long-standing commitment will increase our value to our customers. World-class service provides another way to differentiate our products and businesses from those of our competitors. World-class service will help deliver new growth. Looking Ahead An organization that grows, innovates, cares about its customers and employees, and works productively will create value. That’s what we’ve done. The tremendous operating leverage of our Crane Group, combined with a steady contribution from the Foodservice Group and improved performance at the Marine Group, Our focus and commitment will continue to carry the company forward. We expect conditions to remain favorable through 2007 and beyond. With growing demand in all major segments and new opportunities in emerging countries, the outlook for the Crane Group is bright. Our Food- service Group will continue to produce consistent cash flows, while new product introductions and the ongoing implementation of its new ERP system will improve both sales and profitability. Our Marine Group is booked for commercial orders into 2010 and is faring well in the competition for new vessels that support our nation’s homeland security and defense initiatives. Given all of our success, we still have more to do. We will further intensify efforts to manage rising material costs and get the most from our supply chain. We’ll also seek to strengthen the protection of our intellectual property. Most of all, we plan to deliver even more for our customers, shareholders, and employees. We will endeavor to expand our global presence in India, South America, Eastern Europe, and the Middle East. Guided by a proven, disciplined approach, we will continue to pursue acquisitions in our foodservice and crane businesses. We will continue to innovate with products that offer new features and benefits and fill the remaining voids in our product lines. We’ll continue to improve every aspect of our operations, at the same time that earlier investments begin to pay off. Our growing global service networks will add to our revenue stream. We also will continue to develop the best people in our respective industries. In 2006, we mourned the passing of Robert Becker, who was the first president of Manitowoc Equipment Works, (the predecessor of Manitowoc Ice). Later in the year, we announced the retirement of Tim Kraus, the president of our Foodservice Group. At different times in our history, both men helped to shape Manitowoc Foodservice into the company it is today. We salute their achievements. We have never been more successful, and we are ready to do even more. I look forward to sharing more good news with you in the months ahead. Terry D. Growcock Chairman & Chief Executive Officer 3 Corporate Overview Manitowoc at a Glance Corporate Mission Crane Group Net Sales ($ Millions) Operating Earnings ($ Millions) 06 05 $280.6 $115.5 $57.0 $24.4 $55.6 $391.1 $62.7 $674.1 $962.8 $1,248.5 $2,235.4 $1,628.7 Manitowoc’s mission is to continuously improve economic value for its shareholders. Corporate Scope 04 03 02 01 The Manitowoc Company is a creator of market-leading engineered capital goods and support services for selected market segments which today include Cranes and Related Products, Foodservice Equipment, and Marine. This is Manitowoc’s strength. Corporate Purpose Financial Results Crane segment sales grew 37% in 2006, while operating earnings climbed an impressive 143% due to the introduction of 15 new products and strong markets for all Crane Group products in all geographic regions. Cranes & Related Products Segment Grove Manitowoc Crane CARE Manitowoc CraneCREDIT The centerpiece of our efforts will continue to be highquality, customer-focused products and support services. Research, marketing, manufacturing, support services, and all related elements will generally be product oriented. The company will apply this focus in evaluating and guiding its business units. Corporate Profile Manitowoc Cranes National Crane Potain Manitowoc is a leading manufacturer of high-capacity latticeboom crawler cranes, tower cranes, and mobile telescopic cranes for heavy construction, commercial construction, energy related, infrastructure, duty-cycle, and crane-rental applications. It is also America’s leading producer of boom trucks. Additionally, Manitowoc is a leading manufacturer of ice machines, ice/beverage dispensers, soft-drink dispensing valves, cast aluminum cold plates, and commercial refrigeration equipment for the foodservice, lodging, convenience store, health care, beverage, and bottling industries. Manitowoc is also a leading provider of shipbuilding, ship repair, and conversion services for government, military, and commercial vessels operating on and off the US Great Lakes. Corporate Values Products & Services Lattice-boom cranes in crawler- and truck-mounted configurations, plus complementary attachments; tower cranes in top-slewing, luffing jib, topless, and self-erecting configurations; mobile telescopic cranes in rough-terrain, all-terrain, truck-mounted, and industrial configurations; boom trucks in articulated and telescopic configurations; aftermarket parts and service including replacement parts, engineering and technical services, and crane rebuilding/remanufacturing services. Brand Names Manitowoc, Potain, Grove, National, Manitowoc Crane CARE, CraneCREDIT Primary Competition Crawler Cranes: Fushun Kobelco Liebherr Sumitomo/Link-Belt Terex/Demag Tower Cranes: Comansa Liebherr Terex Comedil/Peiner Wolff Zoomlion Mobile Cranes: Liebherr Link-Belt Tadano Terex XCMG Boom Trucks: Altec Elliott Manitex Tadano Terex Customers & Markets Contractors specializing in heavy construction; commercial construction; energy exploration and production; oilfield services; utility services; infrastructure, industrial, duty-cycle, dockside, dredging, material-handling, and crane-rental applications. Key Advantages • #1 global market share in high-capacity lattice-boom cranes, tower cranes, and roughterrain cranes; #2 global market share in all-terrain cranes; also holds the #1 market share in North America for boom trucks and truck-mounted cranes. • Best-recognized brands in the crane industry. • Global manufacturing base with service operations on five continents. • Largest installed base of cranes in the world provides strong aftermarket opportunities. • Highest resale values in the industry due to value-added engineering designs, highquality components, and lifetime product support. • Worldwide product innovation leader with over 150 patents and 500 trademarks. Industry Outlook • The Association of Equipment Manufacturers (AEM) expects that construction equipment sales in 2007 will grow 3.9% in the US and 6.4% globally. AEM also projects that sales of lifting equipment will grow by 10.4% in the US and 12.3% globally. • FMI Corporation expects that the total US construction put-in-place will grow 2.2% in 2007, led by growth in non-residential construction climbing as much as 9.0%, with growth in most other industry sectors outpacing the anticipated 2007 GDP growth rate. • SAFETEA, the successor to TEA-21, is expected to fund $284 billion in construction spending over a six-year term. In 2007, SAFETEA authorizations will fund over $41 billion of construction in a variety of categories led by Interstate, National Highway, Surface Transportation, and Bridge Replacement and Rehabilitation programs. • According to Global Insights, worldwide construction spending is projected to reach $5.4 trillion in 2008. • Worldwide construction spending in 2007 will be concentrated in 10 nations: the United States, Japan, China, Germany, France, Italy, the United Kingdom, Spain, Canada, and Mexico. Manitowoc Crane Group has at least one product line in each of these regions (with the exception of Japan) with a market share greater than 25%. Integrity Integrity is the overarching standard of consistency between what we say and what we do. It governs every aspect of our work. Commitment to Stakeholders We are committed to our stakeholders. Our commitment governs the way we do business. Our stakeholders include shareholders, customers, employees, suppliers, and the communities we serve around the world. Passion for Excellence Our passion for excellence describes the importance we place on innovation and continuous improvement to products, processes, services, and people. 0 4 Foodservice Group Net Sales ($ Millions) Operating Earnings ($ Millions) 06 05 04 03 02 01 $56.2 $54.9 $55.7 $53.3 $50.3 $50.2 $415.4 $399.6 $377.2 $368.6 $374.8 $354.1 Marine Group Net Sales ($ Millions) Operating Earnings ($ Millions) 06 05 04 03 02 01 $11.3 ($9.2) $16.5 $4.5 $20.8 $18.0 $136.7 $204.2 $158.8 $282.5 $225.8 $219.2 Financial Results Manitowoc’s Foodservice segment sales grew by nearly 4% in 2006, while operating earnings rose modestly. These results were dampened by soft industry conditions, higher commodity costs, and the continuing impact of an ERP implementation. Foodservice Equipment Segment Harford Duracool Kolpak Kyees Aluminum Manitowoc Beverage Equipment Manitowoc Beverage Systems Financial Results Manitowoc’s Marine segment returned to solid profitability in 2006, while posting a 25% gain in revenue. This improved financial performance was the result of a business re-engineering initiative, an improved mix of work, and the inclusion of commodity cost risk-sharing in our new commercial contracts. Marine Segment Bay Shipbuilding Co. Cleveland Shiprepair Company Marinette Marine Corporation Products & Services New construction services for commercial, government, military, and research vessels of all varieties, including self-unloading bulk carriers, double-hull tank barges, integrated tug/barges, military vessels, icebreakers, ferries, patrol boats, and dredges. Services include inspection, maintenance, conversion, and repair of freshwater and saltwater vessels. Primary Competition Atlantic Marine Bender Shipbuilding & Repair Bollinger Shipyards Manitowoc (China) Refrigeration Manitowoc Foodservice International Manitowoc Ice McCall Refrigeration McCann’s Engineering Products & Services Commercial ice-cube machines, ice flakers, and storage bins; ice/beverage dispensers; long-draw soft drink and beer dispensing systems; walk-in refrigerators and freezers; reach-in refrigerators and freezers; refrigerated undercounters and food prep tables; post-mix beverage dispensing valves; cast aluminum cold plates; compressor racks and modular refrigeration systems; backroom beverage equipment and distribution services. Brand Names Manitowoc, Servend, Multiplex, Kolpak, Harford-Duracool, McCall, McCann’s, Koolaire, Flomatic, Kyees, RDI, Snowball Primary Competition Ice Ice/Beverage Dispensers Machines: & Dispensing Valves: Hoshizaki Automatic Bar Controls Ice-O-Matic Enodis Scotsman I.M.I. Cornelius Hoshizaki/Lancer Corporation Fraser Shipyards VT Halter Marine Port Weller Drydocks Walk-in Refrigerators & Freezers: American Panel Nor-Lake Master-Bilt W. A. Brown Reach-in Refrigerators & Freezers: Beverage Air Delfield Traulsen True Foodservice Customers & Markets Government, research, military, and dredging operations; US and Canadian-flagged Great Lakes fleets; inland waterway operators; oceangoing vessels that transit the St. Lawrence Seaway and the Great Lakes. Key Advantages • Adept at all phases of shipbuilding and ship repair for freshwater and saltwater vessels. • Operates the best-equipped facilities with the most-experienced workforce of any US Great Lakes shipyard. Locations on both the upper and lower lakes. • Facilities include one of the largest graving docks on the Great Lakes; an in-house engineering center; and expansive fabrication and assembly facilities equipped with automated panel lines and automated blast/prime lines. Industry Outlook • OPA-90 legislation requires that all vessels hauling petroleum and refined petroleum products in US waters must be replaced with double-hull tonnage by 2015. • Continued development of the “21st Century Navy” will provide new construction opportunities through the next decade. • Homeland security needs could result in a series of new vessels for the US Coast Guard. • Non-traditional “off-lakes” markets, which require vessels for dredging, commercial, and specialty applications, are continuing to grow. • The US and Canadian-flagged fleets continue to age, which creates ongoing opportunities for dry docking, inspection, maintenance, and repair services. Customers & Markets Foodservice, lodging, hospitality, health care, convenience store, institutional, and supermarket operators; soft-drink bottling and dispensing; commercial ice service. Key Advantages • The market leader in cold-focused equipment for the foodservice industry. • Broadest offering of cold-focused equipment, which is primarily driven by replacement and renovation opportunities. • Largest domestic share of commercial ice-cube machine and walk-in refrigerator/freezer markets. • A low-cost, demand-flow producer of commercial ice-cube machines and walk-in refrigerators and freezers. • Recognized as the industry leader in ice-cube machine technology and innovation. • Manufacturing operations in North America and Asia. • 120 distributors in 90 countries. Industry Outlook • According to the National Restaurant Association (NRA), restaurant industry sales are projected to reach a record $537 billion in 2007, up 5% over 2006. In 2010, the restaurant industry will operate more than 1 million units and post sales of $577 billion. • Based on NRA data, 47.9% of today’s food dollar is spent away from home. By 2010, this number is expected to reach 53%. Approximately 44% of all adults are restaurant patrons on a typical day. • Annual foodservice equipment and supply industry sales are forecast to exceed $9 billion in 2007 due to more US chain restaurants launching or expanding their international presence, especially in Asia; continued high levels of remodeling and renovation by domestic chain restaurants; and an aging society that prefers to dine out more frequently because of its higher levels of disposable income. 5 Crane Group MORE GLOBAL 6 M W anitowoc’s Crane Group is a world leader in lifting solutions. In 2006, it achieved record sales of $2.2 billion by doing more, for more customers, in more places, more efficiently than ever before. A Revolutionary Concept The Grove GTK1100 combines crawler, tower, and mobile telescopic crane technologies into an innovative lifting system that’s ideal for refineries and wind turbine applications. Requiring only five trailers for transport and six hours for set-up, the GTK1100 features a six-section telescopic mast and luffing boom that can lift 77 US tons to heights approaching 400 feet. More Solutions ith complete lines of crawler cranes, tower cranes, mobile telescopic cranes, and boom trucks, we can address more customers’ needs and find more ways to grow. Uniting the strengths of our leading brands helps us provide more value to our stakeholders. One example is Grove’s revolutionary new GTK1100 crane, which will be formally introduced in April 2007. Engineered to serve the demanding requirements of the energy industry, the GTK1100 combines the best features of our crawler, tower, and mobile hydraulic cranes. Its patented design can lift more than 77 tons to heights approaching 400 feet, yet it is also easy to deploy, requiring fewer trailers than comparable conventional equipment. The GTK1100 is one of almost two dozen new crane products announced or introduced during the year. Other innovations include High-capacity Performance A Manitowoc 21000, one of the largest crawler cranes in the world, installs an 895 US-ton hydrogenation cracking unit during a refinery modernization project in Zhoukoudian, China. Construction spending is expected to grow 9.7% annually through 2010 as China continues to expand its basic industries and infrastructure. Grove’s new 35-ton RT535E rough-terrain crane, which features a Work Area Definition System that allows operators to pre-set safe working areas. Potain’s new Topless city crane, the MCT 88, is designed for use in builtup urban environments and combines excellent lifting capabilities with easy erection and low transportation costs. Manitowoc Cranes has already received dozens of advance orders for the versatile new Model 14000 crawler crane, which replaces the legendary Model 4100W. And the new Series 1300 boom truck from National Crane sets a new standard for lift performance, easy operation, and enhanced serviceability. We also have continued to extend the range of our products — and to share improvements across our product lines. The acquisition of Shuttlelift (CarryDeck) in 2007 enhances our offerings of industrial cranes and brings us a respected brand name that we can leverage across the world. Our improvements also span to our components, as all crane engines across our product lines are designed to meet global emission standards and efficient energy consumption. More Support roviding complete lifting solutions also requires delivering outstanding service and support throughout the life cycle of every product. Our Crane CARE business has grown to become the industry’s most comprehensive aftermarket support network, delivering the high up-time and low total cost of ownership that customers demand. A network of 22 Manitowoc facilities, 300 dealers, more than 1,000 field technicians P A New Star Manitowoc’s newest crawler crane, the 220 USton capacity Model 14000, is an all-hydraulic crawler crane featuring EPIC® electronic controls and FACT™ self-erect technology. Ideal for contractor and rental fleets, the 14000 can be equipped with multiple boom and luffing jib combinations that provide up to 655' of reach. 7 Crane Group MORE CRANE CHOICES Towering Heights Towering 450' above the Penobscot River, two Potain MD485B tower cranes were instrumental in constructing a pair of concrete pylons for a new $85-million, four-lane, cable-stayed bridge near Bucksport, Maine. 8 and an expansive parts inventory that’s accessible online help assure fast repairs and responsive emergency service. In 2006, we added two new Crane CARE call centers in Decines, France, and Wilhelmshaven, Germany, to our existing call centers in Manitowoc, WI and Shady Grove, PA. A fifth call center, scheduled to open in Asia in 2007, will make Manitowoc the first and only crane company to provide 24-hour service around the world. Training is another essential element of product support. In 2006, Crane CARE instructors provided more than 3,000 training sessions for customers. Regional training centers, including two that were opened in France in 2006, mobile training units, computer simulators, and online classes help bring training to customers and make it easy for them to stay up-to-date. New training materials are prepared in 10 languages. More Efficiency More Presence rom Tibet to Brazil, Canada to Qatar, our cranes are built to serve global markets. Our regional structure, organized around three major geographic markets, brings our brands closer to our customers. New investments are expanding our presence even more. Our new facility in China produces a range of Potain tower cranes as well as components for Manitowoc crawler cranes. To keep pace with demand, we have doubled the size of our workforce to more than 600 people, including local design, engineering, service, and training teams. F Remote-controlled Precision Workers assemble a Potain MD3200 special application tower crane at the Chernobyl nuclear plant. Operated by remote control, the crane is currently renovating a sarcophagus that encloses Chernobyl’s No. 4 reactor, which was damaged 20 years ago. ur goal is to deliver the best value everywhere our customers do business. Our diversified product lines share common materials, components, distribution, and customers, which allows us to achieve economies of scale. Standard design and manufacturing processes simplify design and improve quality, training, and maintenance, while reducing inventories. A global sourcing network lowers costs, streamlines procurement, and promotes the use of locally sourced materials and components. O We also have expanded our network of offices in Australia and South Korea and have opened a new regional headquarters in Singapore. We are growing along with developing economies around the world. We have added new sales and service personnel in Latin America, Russia, and the Middle East. A new Crane CARE training and repair center under construction in Dubai will improve service for energy companies and other customers in the region. New rough-terrain crane production capacity at our tower crane plant in Niella, Italy, and the expansion of our operations in Portugal will improve our ability to serve customers in Southern Europe. At Your Service Manitowoc Crane CARE is the world’s most comprehensive service and support program in the lifting industry. Strategically located parts warehouses, 24/7 call centers, and a network of more than 1,000 field technicians serve customers anywhere they do business around the globe. Telescopic Technology The Potain Igo T-70 is the first in a new range of self-erecting tower cranes that feature a telescopic mast to enhance job-site versatility. Among its key performance features, the Igo T-70 provides a maximum working height of 32 meters, which is complemented by a 4 metric-ton maximum capacity and a 40-meter maximum reach. 9 Crane Group More Operational Excellence W e continued to refine our operations in 2006. Consolidating the production of our boom-truck operations into a single facility reduced costs and helped us achieve the highest monthly production ever. A machining company that we acquired early in 2006 is helping to New Dimensions of Performance Grove’s newest rough-terrain crane, the RT540E, provides an ideal combination of reach and capacity. Rated at 40 US tons, the RT540E features a fully powered, four-section boom and a two-section jib that deliver a maximum tip height of 154'. Other features include compact dimensions, multiple steering modes, an E-Series cab, and Tier III engine emission compliance. More Ahead M Customer Responsive Grove’s new, four-axle GMK4100B all-terrain (foreground) was one of six new cranes introduced by Grove in 2006. Voice-of-the-customer input defined many of the 4100B’s key features, including a six-section boom and an innovative operator’s cab outfitted with a panoramic windshield, ECOS electronic controls, and superior ergonomics. boost production, streamline lead times, and reduce costs. Operational excellence begins with outstanding people. As we have grown, we have worked to improve our training at every level, from welding skills to global strategies. More than 500 employees have received their “green belts” in Six Sigma quality practices, and nearly all design engineers have now been trained in Design for Six Sigma to improve quality and reduce costs. New comprehensive safety management systems have significantly reduced lost-time accidents. ore is on the way. Cranes play a vital role in virtually all of the heavy construction projects spurred by global economic development, and we are a global leader in the crane market. In 2007, we anticipate demand will remain strong across all geographic regions and product categories. We will grow along with developing countries and in growing markets, including energy and commercial construction. We will continue to pursue new opportunities — and more growth. Best in Class National Crane expanded its marketleading line of boom trucks with the introduction of the Model 1300H. Providing a maximum capacity of 30 US tons, the National 1300H also features patented Easy Reach controls, CAN-BUS electronics, a four-section boom, and a maximum tip height of 162'. 10 Marine Group PREPARED FOR MORE Building the 21st Century Navy On September 23, 2006, Marinette Marine launched FREEDOM, the nation’s first Littoral Combat Ship. Designed to operate in shallow coastal waters, the LCS is an agile, high-speed, multi-mission vessel that can be easily reconfigured for mine warfare, anti-submarine warfare, surface combat, and humanitarian relief. production. Six Sigma projects planned for 2007 are expected to generate additional savings. With efficient operations and a century-long tradition of quality, we have the strengths required to be the shipbuilder of choice for government and commercial projects. We are building both our backlog of orders and long-term relationships. More Backlog W M anitowoc Marine Group is the leading provider of shipbuilding and ship-repair services on the Great Lakes. By focusing its operations, Manitowoc Marine Group has built on its strengths, expanded its markets, and won more contracts from government and commercial customers. In 2006, Manitowoc Marine Group delivered two doublehulled tank barges, a selfunloading cement barge, and an oceangoing tug. It also converted one of the 12 remaining steamships on the Great Lakes to cost- and labor-saving diesel power. And, it launched an innovative prototype of the Littoral Combat Ship — a high-speed, multi-mission naval vessel designed to operate in coastal waters. The Marine Group’s solid performance is the result of focusing our shipyards and our strengths. Our facility in Sturgeon Bay concentrates on commercial shipbuilding and ship repair, while our Marinette facility focuses on government projects and complex commercial orders. Our shipyard in Cleveland provides repair and maintenance services to customers on the lower Great Lakes. In addition to sharpening our focus, we have also improved our production processes. A new plasmacutting table enhances our steel fabricating operations. Bringing the best practices of commercial shipbuilding to complex government vessels improves the management of schedules and budgets. Dividing projects into smaller “work packs” makes it easier to track and monitor performance. Six Sigma quality practices are being applied to tasks such as the pre-outfitting of ship modules to reduce costs and streamline e have one of the largest backlogs for double-hulled tank barges of any shipyard in the country. We will build more than 150 additional components of the Improved Naval Lighterage System over the next four years, and over the next 10 years we will deliver approximately 180 new 45-foot rapid response vessels (RB-Ms) for the Coast Guard. In partnership with major defense contractors, we are leading the competition to build as many as 55 Littoral Combat Ships — the largest single opportunity in the Marine Group’s history. We also see opportunities for the construction of high-value vessels used for offshore oil exploration and other special purposes. High shipping volumes on the Great Lakes should also increase demand for our repair and retrofit services. We’re on the right course. Protecting Our Environment Manitowoc is a leading builder of doublehulled tank barges that comply with the Oil Pollution Act of 1990. 11 Foodservice Group MORE IN FOODSERVICE Today’s Tastes Developed and brought to market in just 10 months, the new FlexTower dispenser offers up to 16 flavors of non-carbonated beverages in a compact footprint that’s ideal for convenience store operations. 0 12 W I ith the broadest line of products and the most extensive global manufacturing, distribution, and service network in the cold-side of the business, Manitowoc’s Foodservice Group leads a market that has enjoyed 15 years of uninterrupted growth. We will extend our lead by doing more of what we are known for, faster and more efficiently. Other new products help customers capitalize on new trends and changing tastes. Developed and test marketed in just 10 months, our new FlexTower dispenser responds to the public’s growing taste for non-carbonated beverages by serving up to 16 different beverages in little more than one and a half square feet of counter space. Research has shown that in self-serve settings, such as convenience stores, customers prefer to choose the type of ice they will use in their drinks. Our new Icepic™ beverage dispensers, which were first introduced in 2005, can deliver cubed or crushed ice from a single machine — and help operators save money and space. New products also help widen our markets. Designed for hospital nursing stations, our award-winning SN-12 and SN-20 ice and water dispensers marked our entry into the health care field. An innovative design reduces wear, assuring more reliable performance and allowing for routine maintenance at threeyear intervals rather than the standard one-year period. We continued to expand our line of residential ice machines and Capturing New Markets The SN-12 countertop ice and water dispenser has enabled Manitowoc to successfully penetrate the health care market. The soft, chewable, nugget-type ice produced by this unit is ideal for post-surgical and physical therapy applications. More Innovation nnovation has been the key to our Foodservice Group’s steady, long-term growth. Innovation increases sales and expands our markets. It begins with designing for customers — and delivering the benefits their businesses need. We are leading the way in meeting concerns about energy and the environment. As larger chain restaurants examine every aspect of their environmental performance, we have responded by modifying the insulating foam used in our foodservice equipment to reduce emissions and boost energy efficiency. We offer the widest range of products that meet California Energy Commission Tier One energy standards, which qualify the products for tax rebates in California and certain other states. In addition, all Manitowoc Ice products will be compliant with the EPA 2010 energy standards by the end of 2007. our presence in that market. Our distributors also wanted a line of glass door merchandisers with improved quality, reliability, and features. Working with an alliance partner, we developed a Visi-Kooler™ product in six months that met or exceeded all US regulations for glass front refrigerators. More Customer-focused N ew, more energy-efficient products are just one of the ways we are meeting our customers’ evolving needs. The use of customer councils helps us understand their concerns and to develop new products accordingly. Key account teams focus on meeting the complex requirements of large customers at the corporate, regional, and local level. A wide network of regional sales offices and company operations, working in conjunction with independent sales representatives, provide responsive service to equipment distributors, dealers, and consultants. Our efforts have paid off — based on a vote by its readers, Foodservice Equipment & Supplies magazine named both Manitowoc Ice and Kolpak as “best in class” for the fifth consecutive year. We’re extending our lead. The completion of a new, centralized Enterprise Resource Planning system, scheduled for 2008, will help improve service and lower costs. For the first time, we will be able to accept orders for any of our products at any of our business units and bill the purchaser with a single invoice. We will also improve our ability to cross-sell our products, streamline information reporting, and gain the insight needed to develop new improvements. Award-winning Performance Based on its annual readers poll, Foodservice Equipment & Supplies magazine named Manitowoc Ice and Kolpak as “Best in Class” in ice machines and walk-in refrigerators, respectively, for the fifth consecutive year. Manitowoc & Kolpak 13 Foodservice Group MORE CHOICES All in the Family Demonstrating the breadth of our cold-focused foodservice equipment, this Harford walk-in is part of an allManitowoc installation at an upscale Mexican restaurant that also includes a Multiplex long-draw beverage system, Servend beverage dispensers, Kyees beer towers, McCall reach-ins, and Manitowoc ice machines. 0 14 More Global W ith 120 distributors in 90 countries, we can follow customers into new markets and deliver the support they need, whether it is meeting local codes and standards or providing worldwide training and support. The new, 190,000-square-foot plant we opened in China in 2005 not only replaced an existing facility, but equipped us to participate in that market’s growth and to serve customers across the Asia/Pacific region and beyond. In 2006, we began manufacturing beverage equipment at that location as well as the first ice machine designed by our local engineering team. We are working closely with customers in other high-growth markets as well. Dedicated sales resources added to our EMEA team to focus on Eastern Europe are boosting sales in Russia and other countries. We are also expanding our sales and service network in India. More Productive A Appetizing Appeal Built to our specifications by an alliance partner, Manitowoc’s new line of one-, two-, and three-door Visi-Koolers are ideal for point-of-purchase applications at convenience stores, supermarkets, and kiosks. s the Foodservice Group continues to grow, it will continue to improve productivity. Flow manufacturing, which allows multiple products to be produced on the same line, improves fill rates and delivery times, reduces inventory, and enables the company to rationalize production. In 2006, we consolidated two walk-in refrigerator facilities in the US and set the stage for improved operating efficiency. We are making better use of our worldwide resources. An aggressive product cost takeout program is using a number of practices, including material substitution, lowcost country sourcing, and the hedging of key commodities, to meet the challenge of rising material prices. Ongoing Six Sigma training is being combined with lean methodologies aimed at removing waste. All Foodservice Group manufacturing facilities around the world are certified to ISO 9001 standards. New Targets of Opportunity Manitowoc’s SM-50 has enabled us to broaden our markets by adapting our commercial ice machine technology to serve the growing residential market that prefers high-quality, upscale refrigeration products. More Growth I ncreasingly efficient worldwide operations pave the way for more — and faster — innovation and even better service. Acquisitions will broaden our portfolio of products, expand relationships with customers and distributors, add to our manufacturing base, and increase our rate of growth. Restaurants and convenience stores in the US are expected to continue to report increased sales, while our efforts to develop new distribution channels offer excellent opportunities for incremental sales. The US lodging industry is expected to grow as well, with record revenues and profits predicted for 2007. Meanwhile, leading quick-service restaurant chains are planning major expansions in China, while the rise of the middle class in that country will bring greater vehicle ownership and increase the popularity of convenience stores. More is on the way. Chilling Innovation Innovative new Chillz dispensers combine an attractive, easy-to-clean design with a powerful fast-freeze refrigeration system to make and serve slush-type beverages and frozen drinks. 15 EVA Principles at Work MORE VALUE All of our strategic priorities are aimed at creating value, and Economic Value® Added, or EVA, is the single most important measure of our performance. EVA measures the return a business generates after accounting for the cost of its capital. Building EVA means operating more efficiently without using more capital, investing in projects that produce a return over and above their cost of capital, or diverting capital from activities that do not meet cost of capital requirements. I Carl J. Laurino Senior Vice President & Chief Financial Officer n 2006, all three of our business segments contributed to Manitowoc’s record EVA. By far the greatest contribution came from our Crane Group, which added almost $100 million more EVA than it contributed in 2005. The success of the Crane Group reflects the value of our EVAbased approach. We invested in growth by acquiring Potain and Grove and by building a plant in China that is already producing a positive return. We continued to operate more efficiently, which allowed us to boost production to meet demand — and double the group’s profits on a 30% increase in sales. And we have diverted capital from activities that do not produce adequate returns. At the same time, we are leveraging our combined strengths in sales, service, and distribution to create new revenues. Our Crane CARE business is expected to provide a sustainable competitive advantage. We also are building the value of our other businesses. Our Marine Group increased its EVA in 2006 by refocusing its operations and structuring its contracts to mitigate the effects of increased material prices. The progress payments Business Segment Revenues 2006 (Percent) Crane Group 76% Marine Group 10% it receives from customers reduce the amount of capital it requires. Our Foodservice Group continued to progress with the consolidation of its walk-in refrigerator plants, the development of new products, and the continuing rollout of its ERP system. All of these factors are expected to improve EVA performance in 2007. We work hard to use all of our capital well. We have paid down a substantial portion of the debt used to fund our crane acquisitions, giving us the leverage to pursue additional acquisitions in our foodservice and crane segments. The recent expansion of our securitization facility reduces the marginal cost of borrowed funds. Our commitment to achieving the optimal returns for our investments even extends to this publication. We have replaced our traditional financial report with the Form 10-K that appears on the following pages to reduce costs, to streamline production, and to devote more time to looking ahead. We did well in 2006. We plan to do even better. In 2007, we expect total company EVA to increase more than 50% over the record set in 2006. We will deliver even more value. Business Segment Operating Earnings 2006 (Percent) Crane Group 81% Marine Group 3% Foodservice Group 14% Foodservice Group 16% 16 As Manitowoc has transformed itself into a global company, it has diversified and increased its revenue streams, reduced its reliance on any single geographic market, and gained new opportunities to increase profitability while lowering its costs. Sales by Region 2000 (Percent) The Americas 94% Asia/Pacific 3% Sales by Region 2006 (Percent) The Americas 57% Asia/Pacific 8% Europe, Middle East and Africa 3% Europe, Middle East and Africa 35% There is a strong correlation between Manitowoc’s EVA and its market valuation. The investments made in the Crane Group during 2001 and 2002, combined with a downturn in the North American crane market, reduced our EVA performance and market capitalization during that period. However, those same investments began to generate positive returns in 2004 and 2005 and were the primary drivers boosting our substantial EVA and market value gains in 2006. Manitowoc EVA Correlation to Market Value ($ Millions) EVA $120 100 80 60 40 20 0 -20 -40 EVA 1995 1996 1997 1998 Market Value $4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1999 2000 2001 2002 2003 2004 2005 2006 MV $400 $300 $138 $131 $139 $100 $200 $493 32.5% $489 $500 44.7% $584 46.6% $592 Manitowoc is well-positioned to fund acquisitions and pursue its strategic objectives. The company’s strong cash generation characteristics have historically helped Manitowoc to delever quickly. Debt-to-Capitalization Comparison ($ Millions) $800 $700 $600 62.8% 50.4% 48.4% 64.9% 69.3% $666 66.5% 52.9% 47.6% (Percent) 80% 70% 60% 50% 25.7% $268 40% 30% 20% 10% 2001 2002 2003 2004 2005 2006 1995 1996 $88 1997 1998 1999 $112 2000 By managing its capital efficiently, Manitowoc has consistently converted a high percentage of its earnings into cash flow from operations. Cumulative Cash Flow vs. Cumulative Net Earnings of Continuing Operations ($ Millions) Cash Flow Earnings 06 05 04 03 02 $174.2 $136.1 $264.2 $415.1 $233.3 $472.0 $399.9 $578.8 $872.9 $127.5 $169.7 01 $88.5 $63.0 00 $49.0 $219 17 Welcome to Our Form 10-K 10K At Manitowoc, we are committed to providing shareholders with comprehensive information about our company and its operations, performance, management, and financial results. We want investors to know the factors that drive our performance, the risks we face, and how we are building the value of the company. We want shareholders to feel confident in Manitowoc and its management. To provide the most complete information possible, we have replaced the financial presentations traditionally found in our annual reports with a copy of the Form 10-K required by the Securities and Exchange Commission. By doing so, we help to assure that all shareholders have the same information and we reduce the time and expense associated with preparing two separate audited financial presentations. Reading the Form 10-K and the proxy statement that accompanies it in mailings to shareholders provides the information needed to evaluate our performance and compare it to other businesses inside or outside of our industries. We also have included a number of charts that allow readers to easily track our progress over the past five years. 10K Contents Our Business Risk Factors Properties Owned Legal Proceedings Submission of Matters to a Vote of Security Holders Market for Registrant’s Common Equity Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations Consolidated Balance Sheets Consolidated Statements of Cash Flows Consolidated Statements of Stockholders’ Equity and Comprehensive Income Notes to Consolidated Financial Statements Company and Basis of Presentation Summary of Significant Accounting Policies Acquisitions Discontinued Operations Inventories Property, Plant and Equipment Goodwill and Other Intangible Assets Accounts Payable and Accrued Expenses 18 0 1 8 12 13 14 15 17 19 33 34 35 36 37 38 39 40 40 40 44 44 46 46 46 47 Debt Accounts Receivable Securitization Income Taxes Earnings Per Share Stockholders’ Equity Stock Based Compensation Contingencies and Significant Estimates Guarantees Restructuring and Plant Consolidation Employee Benefit Plans Leases Business Segments Subsidiary Guarantors of Senior Subordinated Notes 2012 and Senior Notes Due 2013 Quarterly Financial Data (Unaudited) Changes In and Disagreement with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors and Executive Officers of the Registrant Executive Compensation Security Ownership of Certain Beneficial Owners and Management Certain Relationships and Related Transactions Principal Accounting Fees and Service Exhibits and Financial Statement Schedules 47 49 50 51 51 52 54 55 55 56 60 60 61 70 70 70 71 71 71 71 71 71 72 Gross Profit ($ Millions) $647.3 International Shipments ($ Millions) $1,398 Cash Gap (Days) 112.2 Return on Invested Capital (Percent) 18.4% 79.9 68.3 65.5 10.3% 8.1% 01 02 03 04 05 06 $421.9 $863 $1,076 $375.7 67.4 100.1 $311.4 $316.7 $258.3 $668 $444 01 02 03 04 05 06 $233 01 02 03 04 05 06 01 02 03 04 05 06 For the 13th consecutive year, Manitowoc’s gross profit reached record levels. In 2006, gross profit increased by more than $225 million over 2005, to $647.3 million. In 2006, Manitowoc generated 48% of its revenues outside the United States. The acquisitions of Potain and Grove, the opening of new crane and foodservice plants in China, plus other initiatives to increase the company’s international presence have increased the size of Manitowoc’s markets and helped produce record growth. Manitowoc’s cash gap, which is a measure tracking working capital efficiency, has steadily improved in each of the past four years. The successful integration of two major crane acquisitions coupled with improved market conditions helped increase Manitowoc’s return on invested capital to 18.4% in 2006. SG&A as a Percent of Sales (Percent) 16.6% Capital Expenditures ($ Millions) $67.6 Research & Development ($ Millions) $31.2 Sales per Employee ($ Thousands) $308.8 15.4% 5.3% 7.0% $190.7 $242.8 $281.8 15.0% 14.4% 12.5% 11.6% $54.9 $43.2 $17.4 $21.2 $26.0 $27.6 01 02 03 04 05 06 01 02 03 04 05 06 $7.9 01 02 03 04 05 06 $9.7 Record revenue and efficiencies gained by cross-selling our products in new markets have reduced this metric to the lowest level in more than a decade. SG&A decreased by 90 basis points to 11.6% in 2006. Manitowoc’s capital expenditures increased in 2006 to complete the construction of a new tower crane facility in China and the continued implementation of an ERP system in the Foodservice Group. The company expects that capital expenditures will exceed $70 million in 2007. Innovative products increase sales and expand markets and market shares. In 2006, Manitowoc invested $31.2 million in research and development, which resulted in 15 new crane products and 28 new foodservice products. Manitowoc’s efficient operations and adoption of Lean Manufacturing and Six Sigma methodologies have generated continued improvement in sales per employee, which now tops $308,000 per employee. $147.6 $32.3 $31.7 01 02 03 04 05 06 $160.7 9.0% 19 Selected Glossary Terms Financial Terms Backlog — Firm, unfilled orders. Cash Gap — A working capital measure that is equal to accounts receivable days sales outstanding plus inventory days less accounts payable days outstanding. Cost of Capital — A weighted average of the after-tax cost of equity and borrowed funds. Current Ratio — Current assets divided by current liabilities, an indicator of liquidity. Debt to Cap — An indicator of financial leverage; the ratio of longterm debt to total capitalization. Earnings per Share (basic) — Calculated by dividing the reported earnings available to common stockholders (net income) by the weighted average shares outstanding. Earnings per Share (diluted) — Calculated by dividing the reported earnings available to An indicator of future sales. Book Value — Another term for shareholder equity, most often shown on a per-share basis. Capital Expenditure — Funds used to purchase physical assets including property, plant, and equipment. Capitalization — The total market value of a company’s outstanding stock calculated by multiplying the stock price times the number of shares. Cash Flow — Funds generated by a company to operate the business, make capital investments, repay debt, pay dividends, repurchase stock, and make acquisitions. common stockholders (net income) by the weighted average shares outstanding, including the assumption of the exercise of all potentially dilutive securities such as stock options. Diluted earnings per share are always less than or equal to basic earnings per share. EVA® (Economic Value-Added) — A financial measure to determine if a company is creating or depleting value for its shareholders. EVA is calculated by taking after-tax operating profits and subtracting the capital charge. Manitowoc uses this measure to evaluate its performance, to drive its decision-making, to incentivize management, and to evaluate acquisition opportunities. Outsourcing — Contracting with an outside supplier to provide a service or function that had been previously performed within the company. Littoral Combat Ship — A new class Return on Assets — Net earnings divided by total assets, an indicator of how profitable a company is relative to its total assets. Return on Equity — Net earnings divided by stockholders’equity, a measurement of the amount earned on the shareholder’s investment. Return on Invested Capital — A measurement of after-tax operating profit divided by invested capital, an indicator of how efficiently the company employs its assets. Total Return — Return on an investment that includes any dividends or interest as well as price appreciation. Industry Terms All-terrain Crane — A high- Graving Dock — An in-ground capacity, hydraulic telescopic crane, also known as an AT, that can travel at highway speed from project to project. ATs usually feature multiple steering axles to enhance performance, mobility, and roadability. Articulated Tug/Barge — A form of bulk-cargo transportation that combines a non-powered notch barge that is pushed by a highhorsepower diesel tug. Boom Truck — A hydraulic telescopic crane mounted to a commercial truck chassis. A boom truck differs from a truck crane because it can haul up to several thousand pounds of payload on its cargo deck. Crawler Crane — Usually refers to lattice-boom cranes that are mounted on crawlers rather than a truck chassis. This method of mounting significantly reduces ground-bearing pressures and enables the crane to pick-and-carry virtually any rated load. Double-hull Tank Barge — A twinhulled, non-powered vessel designed and built to comply with OPA-90 regulations to assure the safe transport of crude oil and refined petroleum products in US waters. concrete structure in which ships can be built or repaired. A graving dock is equipped with pumps and watertight gates. It is flooded so ships can float in; then it is pumped dry so crews can work on those parts of a ship that normally are underwater. Ice/Beverage Dispenser — A foodservice appliance that dispenses ice and soft drinks for self-service applications such as quick-service restaurants, movie theatres, and convenience stores. Lattice Boom — A fabricated, high-strength steel structure that usually has four chords and tubular lacings. Lattice booms typically weigh less and provide higher lifting capacities than telescopic booms of similar lengths. Lean Manufacturing — A process philosophy focused on eliminating any items or procedures that do not add value to a product or service. Lean systems are customer focused and driven. The products of a lean enterprise are created and delivered in the right amounts, at the correct time, to the intended location, in the desired condition. of naval vessels that provides highspeed, multi-mission capabilities in a mid-sized hull form for littoral (coastal water) deployment. OPA-90 — An acronym for the Oil Pollution Act of 1990, which mandates that vessels transporting crude oil or refined petroleum products in US waters must be converted or replaced by new double-hull tonnage by 2015. Rough-terrain Crane — A dual-axle, hydraulic telescopic crane, also known as an RT, that is mounted on oversized tires and has the capability to pick-and-carry loads without needing to deploy its outriggers. Because of their size and chassis configurations, roughterrain cranes cannot travel at highway speed. Self-unloading Vessel — Refers to the fleet of ships operating on the Great Lakes that are equipped with cargo-hold conveyors and lattice discharge booms. This equipment enables vessels to offload their bulk cargoes, such as iron ore, coal, or limestone, without requiring dockside assist equipment. Six Sigma — A disciplined methodology focused on product and service excellence. Six Sigma is a systematic statistical method that breaks down customer requirements into a series of process steps, then identifies the root causes of problems to reduce the number of defects while controlling and improving the process to sustain improvements. Telescopic Boom — A boxsection boom, consisting of multiple telescopic sections that are extended or retracted to a desired length, using hydraulic or mechanical means. Tower Crane — Refers to the category of cranes that feature a variable-length vertical mast and a fixed-length horizontal jib. Tower cranes are available in top-slewing and self-erecting configurations and are commonly used on commercial construction, high-rise, and infrastructure projects. Visi-Kooler — A refrigerated cabinet typically used in pointof-purchase applications to chill beverages and pre-packaged foodservice items. Walk-in — A large, foamed-inplace, refrigerated structure, frequently used in restaurants, that can be equipped with cooling or freezing systems for longer term storage of foodservice items prior to preparation. 20 Investor Information Corporate Headquarters The Manitowoc Company, Inc. 2400 South 44th Street P.O. Box 66 Manitowoc, WI 54221-0066 Telephone: 920-684-4410 Telefax: 920-652-9778 Independent Registered Public Accounting Firm have timely submitted the certifications required by Section 302 of the Sarbanes-Oxley Act as exhibits to the company’s annual report on Form 10-K. Corporate Governance Guidelines, Code of Conduct & Code of Ethics PricewaterhouseCoopers LLP 100 East Wisconsin Avenue Suite 1800 Milwaukee, WI 53202 Stock Transfer Agent & Registrar The Manitowoc Company’s corporate governance guidelines, committee charters, code of conduct, and code of ethics are posted in the investor relations section of our Web site: www.manitowoc.com. This information may also be obtained by any shareholder, without charge, upon written request to Maurice D. Jones, Senior Vice President, General Counsel & Secretary, at the company’s address indicated at left. Dividends Computershare Trust Company, N.A. First Class, Registered & Certified Mail: P.O. Box 43078 Providence, RI 02940-3078 Overnight or Other Delivery: 250 Royall Street Canton, MA 02021-1011 Telephone: 1-877-498-8861 1-800-952-9245 (Hearing impaired in US) 1-781-575-4592 (Hearing impaired outside US) Web site: www.computershare.com/investor Annual Meeting Manitowoc has paid continuous dividends, without interruption, since 1971. The amount and timing of any dividend will be determined by the board of directors. Dividend Reinvestment & Stock Purchase Plan Computershare sponsors and administers a Dividend Reinvestment and Stock Purchase Plan for The Manitowoc Company’s common stock. Under this plan, shareholders may also purchase shares by investing cash, as often as once a month, in varying amounts from $10 up to a maximum of $120,000 each calendar year. Participation is voluntary. To receive an information booklet and enrollment form, please contact our stock transfer agent and registrar, Computershare. Manitowoc also participates in the Own Your Share of America and the Low-Cost Stock Ownership Plans as offered and administered by Better Investing, formerly known as the National Association of Investors Corporation. Investor Inquiries The annual meeting of Manitowoc Company shareholders will be held at 10:00 a.m. CDT, Tuesday, May 1, 2007, at the Best Western Lakefront Hotel (formerly the Inn on Maritime Bay), 101 Maritime Drive, Manitowoc, WI. We encourage our shareholders to participate in this meeting either in person or by proxy. Stock Listing & Related Information Security analysts, portfolio managers, individual investors, and media professionals seeking information about Manitowoc are encouraged to visit our Web site, or contact the following individuals: Analysts & Portfolio Managers: Manitowoc’s common stock is traded on the New York Stock Exchange and is identified by the ticker symbol MTW. Current trading volume, share price, dividends, and related information can be found in the financial section of most daily newspapers. Quarterly common stock price information for our three most recent fiscal years can be found on page 15 of our Form 10-K, which is part of this annual report. Shares of Manitowoc’s common stock have been publicly traded since 1971. Manitowoc Shareholders Carl J. Laurino Senior Vice President & Chief Financial Officer Telephone: 920-652-1720 Telefax: 920-652-9775 Media Inquiries: Steven C. Khail Director of Investor Relations & Corporate Communications Telephone: 920-652-1713 Telefax: 920-652-9775 General Inquiries: On December 31, 2006, there were 62,121,862 shares of Manitowoc common stock outstanding. On that date, there were 2,531 shareholders of record. Form 10-K Report Joan Risch Shareholder Relations Telephone: 920-652-1731 Telefax: 920-652-9775 Quarterly Earnings Each year, Manitowoc files its Annual Report on Form 10-K with the Securities and Exchange Commission. Financial information contained in that report is included in this Annual Report to Shareholders. A copy of Form 10-K, as filed with the Securities and Exchange Commission for 2006, may be obtained by any shareholder, without charge, upon written request to: Maurice D. Jones Senior Vice President, General Counsel & Secretary The Manitowoc Company, Inc. P.O. Box 66 Manitowoc, WI 54221-0066 CEO Certification to the New York Stock Exchange Manitowoc is planning to announce its quarterly earnings for calendar 2007 according to the following schedule: 1st Quarter − May 2, 2007 2nd Quarter − July 31, 2007 3rd Quarter − October 31, 2007 4th Quarter − To be announced Join MTW on the Internet Manitowoc provides a variety of information about its businesses, products, and markets at its Web site address: www.manitowoc.com. Equal Opportunity During 2006, the chief executive officer of the company timely submitted to the New York Stock Exchange the CEO certification required by Section 12(a) of the NYSE corporate governance listing standards. The certification was not qualified in any way. Additionally, the company’s principal executive officer and principal financial officer Manitowoc believes that a diverse workforce is required to compete successfully in today’s global markets. The company provides equal employment opportunities in its global operations without regard to race, color, age, gender, religion, national origin, or physical disability. This report is printed on recycled and recyclable paper using soy-based ink. The Manitowoc Company, Inc. 2400 South 44th Street P.O. Box 66 Manitowoc, WI 54221-0066