UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

 
FORM 8-K
 
Current Report
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):   December 3, 2004
 
The Manitowoc Company, Inc.
(Exact name of registrant as specified in its charter)

Wisconsin	 	1-11978	 	39-0448110	
(State or other jurisdiction
of incorporation)	 	(Commission File
Number)	 	(I.R.S. Employer
Identification Number)	
 
2400 S. 44 th Street, Manitowoc, Wisconsin 54221-0066
(Address of principal executive offices including zip code)
 
(920) 684-4410
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
Item 8.01 Other Events
 
As previously disclosed, in the second quarter of 2004, The Manitowoc Company, Inc. divested of its Delta Manlift SAS (“Delta”) subsidiary.  Consequently, beginning in the first quarter of 2004, Delta has been accounted for as a discontinued operation, and has been reflected as such in the unaudited financial statements included in Manitowoc’s Quarterly Reports on Form 10-Q for the first three quarters of 2004.  In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144 “ Accounting for the Impairment or Disposal of Long-Lived Assets ,” financial statements for corresponding quarterly periods in fiscal 2003 have reflected the reclassification of Delta as a discontinued operation.
 
In the ordinary course of its financial reporting, Manitowoc would reclassify Delta’s prior year financial data in discontinued operations when preparing its 2004 audited financial statements.  Delta was acquired by Manitowoc in August 2002 as part of the acquisition of Grove Investors, Inc.   The statements of earnings and statement of cash flows for 2003 and 2002 are (and 2004 will be) affected in a non-material way by the reclassification; prior years’ are not affected. The reclassification also does not affect Manitowoc’s historical balance sheets or statements of stockholders’ equity.
 
At this time, Manitowoc is not yet required to prepare or file audited financial statements reclassifying Delta as a discontinued operation.  Further, Manitowoc does not believe that accounting for Delta as a discontinued operation in 2003 and 2002 makes a material difference to those years’ financial statements.  However, in the course of its proposed equity offering, Manitowoc has elected to prepare and file as an exhibit to this Report audited financial statements for 2003 and 2002 to reflect Delta as a discontinued operation.  This will facilitate making the treatment of Delta in Manitowoc’s 2003 and 2002 historical financial statements consistent with the presentation included in its 2004 quarterly financial statements and with the presentation to be included in its 2004 year end financial statements, which Manitowoc believes will assist in the comparison of its financial performance from year to year.
 
Audited financial statements of Manitowoc as of December 31, 2003 and 2002 and for the three years ended December 31, 2003 and management’s discussion and analysis of financial condition and results of operations are attached hereto as Exhibit 99.1 and 99.2, respectively, and are incorporated by reference herein.
 
Item 9.01 Financial Statements and Exhibits
 
(c)                       Exhibits
 
23.1                Consent of PricewaterhouseCoopers LLP
 
31                         Rule 13a – 14(a)/15d – 14(a) Certifications
 
32.1                Certification of CEO pursuant to 18 U.S.C. Section 1350
 
32.2                Certification of CFO pursuant to 18 U.S.C. Section 1350
 
99.1                The Manitowoc Company, Inc. audited consolidated financial statements and related notes as of December 31, 2003 and 2002 and for the three years ended December 31, 2003
 
99.2                Management’s discussion and analysis of financial condition and results of operations (reflecting reclassified amounts)
 
99.3                Schedule II: Valuation and qualifying accounts
 
2

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 	THE MANITOWOC COMPANY, INC.	
 	(Registrant)	

DATE:  December 3, 2004	 /s/ Carl J. Laurino	 	
 	Carl J. Laurino	
 	Senior Vice President and Chief Financial Officer	
 
3

 
THE MANITOWOC COMPANY, INC.
 
EXHIBIT INDEX
 
TO
 
FORM 8-K CURRENT REPORT
 
Dated as of December 3, 2004

Exhibit
No.	 	Description	 	Filed/Furnished
Herewith	
 	 	 	 	 	
23.1	 	Consent of PricewaterhouseCoopers LLP	 	X(1)	
 	 	 	 	 	
31	 	Rule 13a - 14(a)/15d - 14(a) Certifications	 	X(1)	
 	 	 	 	 	
32.1	 	Certification of CEO pursuant to 18 U.S.C. Section 1350	 	X(2)	
 	 	 	 	 	
32.2	 	Certification of CFO pursuant to 18 U.S.C. Section 1350	 	X(2)	
 	 	 	 	 	
99.1	 	The Manitowoc Company, Inc. audited consolidated financial statements and related notes as of December 31, 2003 and 2002 and for the three years ended December 31, 2003	 	X(1)	
 	 	 	 	 	
99.2	 	Management’s discussion and analysis of financial condition and results of operations	 	X(1)	
 	 	 	 	 	
99.3	 	Schedule II: Valuation and qualifying accounts	 	X(1)	

(1)  Filed Herewith
(2)  Furnished Herewith
 
4

Exhibit23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-88680) and Form S-8 (Nos. 333-11729, 333-11731, 333-99503, 333-99513, 333-115992, and 333-113804) of The Manitowoc Company, Inc. of our report dated February 5, 2004, except for Note 4, as to which the date is December 2, 2004 relating to the financial statements and to the financial statement schedule, which appear in this Form 8-K.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 2, 2004

 
 
Exhibit 31
 
Certifications
 
Certification of Principal Executive Officer
 
I, Terry D. Growcock, certify that:
 
1.                I have reviewed this current report on From 8-K of The Manitowoc Company, Inc.;
 
2.                Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.                Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;
 
4.                The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
 
(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)          Evaluated the effectiveness of the registrant’s disclosure controls and procedure and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(c)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.                The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)          Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: December 3, 2004	 	
 	 	
 	/s/ Terry D. Growcock	 	
 	Terry D. Growcock	
 	Chairman and Chief Executive Officer	

 
Certifications
 
Certification of Principal Financial Officer
 
I, Carl J. Laurino, certify that:
 
1.                I have reviewed this current report on From 8-K of The Manitowoc Company, Inc.;
 
2.                Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.                Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;
 
4.                The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
 
(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)          Evaluated the effectiveness of the registrant’s disclosure controls and procedure and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(c)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.                The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)          Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: December 3, 2004	 	
 	 	
 	/s/ Carl J. Laurino	 	
 	Carl J. Laurino	
 	Senior Vice President and Chief Financial
Officer	

 
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Current Report of The Manitowoc Company, Inc. (the “Company”) on Form 8-K dated December 3, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Terry D. Growcock, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 
(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the date and for the periods expressed in the Report.

/s/ Terry D. Growcock	 	
Terry D. Growcock	
Chairman and Chief Executive Officer	
December 3, 2004	
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to The Manitowoc Company, Inc. and will be retained by The Manitowoc Company, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 

 
Exhibit 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Current Report of The Manitowoc Company, Inc. (the “Company”) on Form 8-K dated December 3, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carl J. Laurino, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 
(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the date and for the periods expressed in the Report.

/s/ Carl J. Laurino	 	
Carl J. Laurino	
Senior Vice President and Chief Financial Officer	
December 3, 2004	
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to The Manitowoc Company, Inc. and will be retained by The Manitowoc Company, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 

 
Exhibit 99.1
 
Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of The Manitowoc Company, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, stockholders’ equity and comprehensive income (loss) and cash flows present fairly, in all material respects, the financial position of The Manitowoc Company, Inc. and its Subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the accompanying financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.  These financial statements and financial statement schedule are the responsibility of the company’s management.  Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.  We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
As discussed in Note 2 to the consolidated financial statements, the company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 145, “Rescission of the FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” relating to the reclassification of gains and losses from extinguishment of debt effective January 1, 2003.
 
As discussed in Note 7 to the consolidated financial statements, the company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” effective January 1, 2002.

/s/ PricewaterhouseCoopers LLP	 	
 	
PricewaterhouseCoopers LLP	
Milwaukee, Wisconsin	
February 5, 2004, except for Note 4, as to which the date is December 2, 2004	

 
The Manitowoc Company, Inc.
Consolidated Statements of Earnings
For the years ended December 31, 2003, 2002 and 2001

Thousands of dollars, except per share data	 	2003	 	2002	 	2001	 	
Earnings	 	 	 	 	 	 	 	
Net sales	 	$	1,570,856	 	$	1,356,423	 	$	984,423	 	
Costs and expenses:	 	 	 	 	 	 	 	
Cost of sales	 	1,238,122	 	1,035,086	 	713,825	 	
Engineering, selling and administrative expenses	 	246,741	 	192,603	 	143,039	 	
Amortization expense	 	2,919	 	2,001	 	11,074	 	
Plant consolidation and restructuring costs	 	10,089	 	11,609	 	—	 	
Curtailment gain	 	(12,897	)	—	 	—	 	
Total costs and expenses	 	1,484,974	 	1,241,299	 	867,938	 	
Operating earnings from continuing operations	 	85,882	 	115,124	 	116,485	 	
 	 	 	 	 	 	 	 	
Other expenses:	 	 	 	 	 	 	 	
Interest expense	 	(56,901	)	(51,963	)	(37,408	)	
Loss on debt extinguishment	 	(7,300	)	—	 	(5,540	)	
Other income (expense)-net	 	314	 	1,918	 	(1,268	)	
Total other expenses	 	(63,887	)	(50,045	)	(44,216	)	
 	 	 	 	 	 	 	 	
Earnings from continuing operations before taxes on income	 	21,995	 	65,079	 	72,269	 	
 	 	 	 	 	 	 	 	
Provision for taxes on income	 	3,959	 	23,429	 	27,875	 	
 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	18,036	 	41,650	 	44,394	 	
Discontinued operations:	 	 	 	 	 	 	 	
Earnings (loss) from discontinued operations, net of income taxes of $(580), $58 and $726, respectively	 	(2,440	)	105	 	1,154	 	
Loss on sale or closure of discontinued operations, net of income taxes of ($2,829) and $(10,853), respectively	 	(12,047	)	(25,457	)	—	 	
Cumulative effect of accounting change, net of income taxes of $(14,200)	 	—	 	(36,800	)	—	 	
Net earnings (loss)	 	$	3,549	 	$	(20,502	)	$	45,548	 	
 	 	 	 	 	 	 	 	
Per Share Data	 	 	 	 	 	 	 	
Basic earnings (loss) per share:	 	 	 	 	 	 	 	
Earnings from continuing operations	 	$	0.68	 	$	1.65	 	$	1.83	 	
Earnings (loss) from discontinued operations, net of income taxes	 	(0.09	)	0.00	 	0.05	 	
Loss on sale or closure of discontinued operations, net of income taxes	 	(0.45	)	(1.01	)	—	 	
Cumulative effect of accounting change, net of income taxes	 	—	 	(1.46	)	—	 	
Net earnings (loss)	 	$	0.13	 	$	(0.82	)	$	1.87	 	
 	 	 	 	 	 	 	 	
Diluted earnings (loss) per share:	 	 	 	 	 	 	 	
Earnings from continuing operations	 	$	0.68	 	$	1.62	 	$	1.81	 	
Earnings (loss) from discontinued operations, net of income taxes	 	(0.09	)	0.00	 	0.05	 	
Loss on sale or closure of discontinued operations, net of income taxes	 	(0.45	)	(0.99	)	—	 	
Cumulative effect of accounting change, net of income taxes	 	—	 	(1.43	)	—	 	
Net earnings (loss)	 	$	0.13	 	$	(0.80	)	$	1.86	 	
 
The accompanying notes are an integral part of these financial statements.

 
The Manitowoc Company, Inc.
Consolidated Balance Sheets
As of December 31, 2003 and 2002

Thousands of dollars, except share data	 	2003	 	2002	 	
 	 	 	 	 	 	
Assets	 	 	 	 	 	
Current assets:	 	 	 	 	 	
Cash and cash equivalents	 	$	44,968	 	$	28,035	 	
Marketable securities	 	2,220	 	2,371	 	
Accounts receivable, less allowance of $24,419 and $43,156	 	245,010	 	226,091	 	
Inventories-net	 	232,877	 	255,218	 	
Deferred income taxes	 	71,781	 	96,741	 	
Other current assets	 	49,233	 	38,708	 	
Total current assets	 	646,089	 	647,164	 	
 	 	 	 	 	 	
Property, plant and equipment-net	 	334,618	 	319,301	 	
Goodwill-net	 	406,233	 	380,338	 	
Other intangible assets-net	 	124,380	 	127,299	 	
Deferred income taxes	 	34,491	 	19,662	 	
Other non-current assets	 	56,770	 	83,359	 	
Total assets	 	$	1,602,581	 	$	1,577,123	 	
 	 	 	 	 	 	
Liabilities and stockholders’ equity	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	
Accounts payable and accrued expenses	 	$	454,394	 	$	350,315	 	
Current portion of long-term debt	 	3,205	 	33,328	 	
Short-term borrowings	 	22,011	 	9,304	 	
Product warranties	 	33,823	 	31,276	 	
Product liabilities	 	31,791	 	36,175	 	
Total current liabilities	 	545,224	 	460,398	 	
 	 	 	 	 	 	
Non-current liabilities:	 	 	 	 	 	
Long-term debt, less current portion	 	567,084	 	623,547	 	
Pension obligations	 	57,239	 	66,051	 	
Postretirement health and other benefit obligations	 	54,283	 	65,777	 	
Other non-current liabilities	 	80,327	 	66,235	 	
Total non-current liabilities	 	758,933	 	821,610	 	
 	 	 	 	 	 	
Commitments and contingencies (Note 14)	 	 	 	 	 	
 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	
Common stock (36,746,482 shares issued, 26,572,024 and 26,412,735 shares outstanding, respectively)	 	367	 	367	 	
Additional paid-in capital	 	81,297	 	81,230	 	
Accumulated other comprehensive loss	 	(16,768	)	(23,574	)	
Unearned compensation	 	(328	)	(609	)	
Retained earnings	 	340,792	 	344,689	 	
Treasury stock, at cost (10,174,458 and 10,358,562 shares, respectively)	 	(106,936	)	(106,988	)	
Total stockholders’ equity	 	298,424	 	295,115	 	
Total liabilities and stockholders’ equity	 	$	1,602,581	 	$	1,577,123	 	
 
The accompanying notes are an integral part of these financial statements.

 
The Manitowoc Company, Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2003, 2002 and 2001

Thousands of dollars	 	2003	 	2002	 	2001	 	
Cash Flows From Operations	 	 	 	 	 	 	 	
Net earnings (loss)	 	$	3,549	 	$	(20,502	)	$	45,548	 	
Adjustments to reconcile net earnings (loss) to cash provided by operating activities of continuing operations:	 	 	 	 	 	 	 	
Discontinued operations, net of income taxes	 	14,487	 	25,352	 	(1,154	)	
Depreciation	 	45,437	 	33,077	 	19,674	 	
Amortization of intangible assets	 	2,919	 	2,001	 	11,428	 	
Amortization of deferred financing fees	 	1,810	 	4,091	 	3,204	 	
Deferred income taxes	 	(2,492	)	(10,561	)	1,667	 	
Curtailment gain	 	(12,897	)	—	 	—	 	
Plant relocation and restructuring costs	 	10,089	 	11,609	 	—	 	
Cumulative effect of accounting change, net of income taxes	 	—	 	36,800	 	—	 	
Loss on early extinguishment of debt	 	7,300	 	—	 	5,540	 	
Gain on sale of property, plant and equipment	 	(1,363	)	(3,757	)	(2,374	)	
Changes in operating assets and liabilities, excluding the effects of business acquisitions and dispositions:	 	 	 	 	 	 	 	
Accounts receivable	 	5,889	 	(12,907	)	15,228	 	
Inventories	 	25,701	 	9,141	 	29,181	 	
Other assets	 	5,156	 	(5,446	)	(22,563	)	
Accounts payable and accrued expenses	 	15,422	 	27,840	 	(907	)	
Other liabilities	 	27,312	 	2,915	 	710	 	
Net cash provided by operating activities of continuing operations	 	148,319	 	99,653	 	105,182	 	
Net cash provided by (used for) operating activities of discontinued operations	 	2,544	 	(5,114	)	1,433	 	
Net cash provided by operating activities	 	150,863	 	94,539	 	106,615	 	
Cash Flows From Investing	 	 	 	 	 	 	 	
Business acquisitions, net of cash acquired	 	—	 	976	 	(285,533	)	
Capital expenditures	 	(31,977	)	(32,996	)	(29,104	)	
Proceeds from sale of property, plant and equipment	 	14,438	 	16,699	 	10,219	 	
(Purchase) sale of marketable securities	 	150	 	(220	)	(107	)	
Net cash used for investing activities of continuing operations	 	(17,389	)	(15,541	)	(304,525	)	
Net cash provided by (used for) investing activities of discontinued operations	 	2,289	 	11,108	 	(157	)	
Net cash used for investing activities	 	(15,100	)	(4,433	)	(304,682	)	
Cash Flows From Financing	 	 	 	 	 	 	 	
Proceeds from long-term debt	 	—	 	—	 	345,116	 	
Payments on Grove borrowings	 	—	 	(198,328	)	—	 	
Proceeds from senior subordinated notes	 	—	 	175,000	 	156,118	 	
Proceeds from senior notes	 	150,000	 	—	 	—	 	
Payments on long-term debt	 	(257,617	)	(39,280	)	(161,889	)	
Payments on revolver borrowings-net	 	(2,000	)	(10,243	)	(78,727	)	
Payments on commercial paper-net	 	—	 	—	 	(24,700	)	
Debt issue costs	 	(5,599	)	(6,630	)	(21,023	)	
Dividends paid	 	(7,446	)	(7,432	)	(7,358	)	
Exercises of stock options	 	118	 	1,511	 	183	 	
Net cash provided by (used for) financing activities	 	(122,544	)	(85,402	)	207,720	 	
Effect of exchange rate changes on cash	 	3,714	 	(250	)	(55	)	
Net increase in cash and cash equivalents	 	16,933	 	4,454	 	9,598	 	
Balance at beginning of year	 	28,035	 	23,581	 	13,983	 	
Balance at end of year	 	$	44,968	 	$	28,035	 	$	23,581	 	
Supplemental Cash Flow Information	 	 	 	 	 	 	 	
Interest paid	 	$	54,489	 	$	39,284	 	$	29,717	 	
Income taxes paid	 	$	7,559	 	$	25,253	 	$	29,306	 	
 
The accompanying notes are an integral part of these financial statements.

 
The Manitowoc Company, Inc.
Consolidated Statements of Stockholders’ Equity
and Comprehensive Income (Loss)
For the years ended December 31, 2003, 2002 and 2001

Thousands of dollars, except shares data	 	2003	 	2002	 	2001	 	
Common Stock - Shares Outstanding	 	 	 	 	 	 	 	
Balance at beginning of year	 	26,412,735	 	24,053,085	 	24,259,463	 	
Stock issued for Grove acquisition	 	—	 	2,164,502	 	—	 	
Stock options exercised	 	16,656	 	114,548	 	21,799	 	
Stock swap for stock options exercised	 	—	 	(14,449	)	(3,736	)	
Restricted stock issued	 	—	 	24,815	 	—	 	
Stock issued from deferred compensation plans	 	142,633	 	70,234	 	16,108	 	
Stock issued to deferred compensation plans	 	—	 	—	 	(240,549	)	
Balance at end of year	 	26,572,024	 	26,412,735	 	24,053,085	 	
Common Stock - Par Value	 	 	 	 	 	 	 	
Balance at end of year	 	$	367	 	$	367	 	$	367	 	
Additional Paid-in Capital	 	 	 	 	 	 	 	
Balance at beginning of year	 	$	81,230	 	$	31,670	 	$	31,602	 	
Stock issued for Grove acquisition	 	—	 	47,905	 	—	 	
Stock options exercised	 	67	 	1,066	 	68	 	
Restricted stock issued	 	—	 	589	 	—	 	
Balance at end of year	 	$	81,297	 	$	81,230	 	$	31,670	 	
Accumulated Other Comprehensive Loss	 	 	 	 	 	 	 	
Balance at beginning of year	 	$	(23,574	)	$	(3,937	)	$	(2,569	)	
Other comprehensive income (loss):	 	 	 	 	 	 	 	
Foreign currency translation adjustments	 	5,584	 	(15,711	)	656	 	
Derivative instrument fair market adjustment, net of income taxes of $833, $309 and ($1,318)	 	2,379	 	445	 	(2,024	)	
 	 	 	 	 	 	 	 	
Additional minimum pension liability, net of income taxes of $1,075 and $2,459	 	(1,157	)	(4,371	)	—	 	
Balance at end of year	 	$	(16,768	)	$	(23,574	)	$	(3,937	)	
Unearned Compensation	 	 	 	 	 	 	 	
Balance at beginning of year	 	$	(609	)	$	—	 	$	—	 	
Restricted stock issued	 	—	 	(843	)	—	 	
Compensation expense recognized during the year	 	281	 	234	 	—	 	
Balance at end of year	 	$	(328	)	$	(609	)	$	—	 	
Retained Earnings	 	 	 	 	 	 	 	
Balance at beginning of year	 	$	344,689	 	$	372,623	 	$	334,433	 	
Net earnings (loss)	 	3,549	 	(20,502	)	45,548	 	
Cash dividends	 	(7,446	)	(7,432	)	(7,358	)	
Balance at end of year	 	$	340,792	 	$	344,689	 	$	372,623	 	
Treasury Stock	 	 	 	 	 	 	 	
Balance at beginning of year	 	$	(106,988	)	$	(136,928	)	$	(130,064	)	
Stock issued for Grove acquisition	 	—	 	22,095	 	—	 	
Stock options exercised	 	52	 	1,227	 	227	 	
Stock swap for stock options exercised	 	—	 	(615	)	(112	)	
Restricted stock issued	 	—	 	254	 	—	 	
Stock held by deferred compensation plans	 	—	 	6,979	 	(6,979	)	
Balance at end of year	 	$	(106,936	)	$	(106,988	)	$	(136,928	)	
Comprehensive Income (Loss)	 	 	 	 	 	 	 	
Net earnings (loss)	 	$	3,549	 	$	(20,502	)	$	45,548	 	
Other comprehensive income (loss):	 	 	 	 	 	 	 	
Foreign currency translation adjustments	 	5,584	 	(15,711	)	656	 	
Derivative instrument fair market adjustment, net of income taxes	 	2,379	 	445	 	(2,024	)	
Additional minimum pension liability, net of income taxes	 	(1,157	)	(4,371	)	—	 	
Comprehensive income (loss)	 	$	10,355	 	$	(40,139	)	$	44,180	 	
 
The accompanying notes are an integral part of these financial statements.

 
Notes to Consolidated Financial Statements
 
1.               Company and Basis of Presentation
 
Company   The Manitowoc Company, Inc. and its subsidiaries (collectively referred to as the “company”) are diversified industrial manufactures with leading positions in their three principal segments: Cranes and Related Products (Crane); Foodservice Equipment (Foodservice); and Marine.
 
The Crane business is a global provider of engineered lift solutions which designs, manufactures and markets a comprehensive line of lattice-boom crawler cranes, mobile telescopic cranes, tower cranes, and boom trucks.  The Crane products are marketed under the Manitowoc, Grove, Potain, and National brand names and are used in a wide variety of applications, including energy, petrochemical and industrial projects, infrastructure development such as road, bridge and airport construction, commercial and high-rise residential construction, mining and dredging.
 
The Foodservice business is a broad-line manufacturer of “cold side” commercial foodservice products.  Foodservice designs, manufactures and markets full product lines of ice making machines, walk-in and reach-in refrigerators/freezers, fountain beverage delivery systems and other foodservice refrigeration products for the lodging, restaurant, healthcare, convenience store, soft-drink bottling and institutional foodservice markets.  Foodservice products are marketed under the Manitowoc, Kolpak, SerVend, Multiplex, Harford-Duracool, McCall, Flomatic, Compact and Icetronic brand names.
 
The Marine business provides new construction, ship repair and maintenance services for freshwater and saltwater vessels from four shipyards on the U.S. Great Lakes.  Marine is also a provider of Great Lakes and oceangoing mid-sized commercial, research, and military vessels.  Marine serves the Great Lakes maritime market consisting of both U.S. and Canadian fleets, inland waterway operators, and ocean going vessels that transit the Great Lakes and St. Lawrence Seaway.
 
Basis of Presentation  The consolidated financial statements include the accounts of The Manitowoc Company, Inc. and its wholly and majority-owned subsidiaries.  All significant intercompany balances and transactions have been eliminated.  Certain prior year amounts have been reclassified to conform to current year’s presentation.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from these estimates.
 
2.               Summary of Significant Accounting Policies
 
Cash Equivalents and Marketable Securities   All short-term investments purchased with an original maturity of three months or less are considered cash equivalents.  Marketable securities at December 31, 2003 and 2002, include securities which are considered “available for sale.”  The difference between fair market value and cost of these investments was not significant for either year.
 
Inventories Inventories are valued at the lower of cost or market value.  Approximately 88% and 86% of the company’s inventories at December 31, 2003 and 2002, respectively, were computed using the first-in, first-out (FIFO) method.  The remaining inventories were computed using the last-in, first-out (LIFO) method.  If the FIFO inventory valuation method had been used exclusively, inventories would have increased by $18.6 million at both December 31, 2003 and 2002.  Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs.
 
Goodwill and Other Intangible Assets   The company accounts for its goodwill and other intangible assets under Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.”  Under SFAS No. 142, goodwill is not amortized, but it is tested for impairment at least annually.  Each year the company tests for impairment of goodwill according to a two-step approach.  In the first step, the company tests for impairment of goodwill by estimating the fair values of its reporting units using the present value of future cash flows approach, subject to a comparison for reasonableness to its market capitalization at the date of valuation.  If

 
the carrying amount exceeds the fair value, the second step of the goodwill impairment test is performed to measure the amount of the impairment loss, if any.  In the second step the implied fair value of the goodwill is estimated as the fair value of the reporting unit used in the first step less the fair values of all other net tangible and intangible assets of the reporting unit.  If the carrying amount of the goodwill exceeds its implied fair market value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill.  In addition, goodwill of a reporting unit is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.  The company’s other intangible assets with indefinite lives, including trademarks, tradenames, and in-place distributor networks, are not amortized, but are also tested for impairment at least annually.  The impairment test consists of a comparison of the fair value of the intangible assets to their carrying amount.  The company’s other intangible assets subject to amortization are amortized over the following estimated useful lives:

 	 	Useful lives	 	
Patents	 	10-15 years	 	
Engineering drawings	 	15 years	 	
 
Property, Plant and Equipment  Property , plant and equipment is stated at cost.  Expenditures for maintenance, repairs and minor renewals are charged against earnings as incurred.  Expenditures for major renewals and improvements that substantially extend the capacity or useful life of an asset are capitalized and amortized by depreciation charges.  The cost and accumulated depreciation for property, plant and equipment sold, retired, or otherwise disposed of are relieved from the accounts, and resulting gains or losses are reflected in earnings.  Property, plant and equipment is depreciated over the estimated useful lives of the assets primarily using the straight-line depreciation method for financial reporting and on accelerated methods for income tax purposes.
 
Property, plant and equipment is depreciated over the following estimated useful lives:

 	 	Years	 	
Building and improvements	 	2-40	 	
Drydocks and dock fronts	 	15-27	 	
Machinery, equipment and tooling	 	2-25	 	
Furniture and fixtures	 	2-10	 	
Computer hardware and software	 	2-5	 	
 
Property, plant and equipment also include cranes under operating leases with others.  Equipment under lease to others includes equipment leased directly to the customer and equipment for which the company has guaranteed more than insignificant residual value or made a buyback commitment.  The amount of rental equipment included in property, plant and equipment for which the company has guaranteed such residual value or made a buyback commitment amounted to $75.4 million and $36.6 million, net of accumulated depreciation, at December 31, 2003 and 2002, respectively.  Equipment that is leased directly to the customer is accounted for as operating leases with the related assets capitalized and depreciated over their estimated economic life not to exceed 84 months.  Equipment involved in financing arrangements is depreciated over the life of the underlying arrangement so that the net book value at the end of the period equals the buyback amount or the residual value amount.
 
Other Non-Current Assets   At December 31, 2002, other non-current assets included a tooling asset and other project start-up costs of $20.2 million.  These assets were used in the development and production of certain refrigeration equipment produced under contract with a third party.  These costs were being reimbursed by the customer according to the contract, on a per unit sold basis with annual minimum reimbursement required in order to ensure reimbursement of all of the costs.  During December of 2003, the third party prepaid all of the outstanding tooling and start-up costs to the company.  The company received approximately $17.0 million in December 2003 for the remaining unreimbursed amount of the tooling assets.  The prepayment did not have a material impact on the Consolidated Statement of Earnings for the year-ended December 31, 2003.
 
Impairment of Long-Lived Assets  The company reviews long-lived assets, including goodwill and other intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

 
For property, plant and equipment and other long-lived assets, other than goodwill and indefinite-lived intangible assets, the company performs undiscounted operating cash flow analyses to determine if an impairment exists.  If an impairment is determined to exist, any related impairment loss is calculated based upon comparison of the fair value to the net book value of the assets.  Impairment losses on assets held for sale are based on the estimated proceeds to be received, less costs to sell.  See discussion of the impairment of goodwill and indefinite-lived intangible assets above.
 
On January 1, 2002, the company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30 related to the disposal of a segment of a business.  The adoption of SFAS No. 144 did not have a material effect on the company relative to impairment measurement of long-lived assets; however, it did impact the company during 2003 and 2002 related to reporting the disposal of certain businesses as discontinued operations, which prior to the adoption would have been reported in continuing operations in the Consolidated Statements of Earnings (see Note 4. “Discontinued Operations”).
 
Financial Instruments  The carrying amounts reported in the Consolidated Balance Sheet for cash and cash equivalents, accounts receivable, accounts payable, and variable rate debt approximated fair value at December 31, 2003 and 2002.  The fair value of the company’s 10 3/8% Senior Subordinated Notes due 2011 was approximately $239.5 million and $184.4 million at December 31, 2003 and 2002, respectively.  The fair value of the company’s 10 1/2% Senior Subordinated Notes due 2012 was approximately $199.3 million and $181.6 million at December 31, 2003 and 2002, respectively.  The fair value of the company’s 7 1/8% Senior Notes due 2013 was approximately $159.8 million at December 31, 2003.  See Note 9, “Debt” for the related book values of these debt instruments.  The aggregate fair values of interest rate swaps and foreign currency exchange contracts at December 31, 2003 and 2002 were positive $0.3 million and negative $0.1 million, respectively.  These fair values are the amounts at which they could be settled, based on internal estimates and estimates obtained from financial institutions.
 
Warranties  Estimated warranty costs are recorded in cost of sales at the time of sale of the warranted products based on historical warranty experience for the related product or estimates of projected losses due to specific warranty issues on new products.  These estimates are reviewed periodically and are adjusted based on changes in facts, circumstances or actual experience.
 
Environmental Liabilities  The company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable.  Such accruals are adjusted as information develops or circumstances change.  Costs of long-term expenditures for environmental remediation obligations are not discounted to their present value because the timing of cash flows are not estimable.
 
Product Liabilities   The company records product liability reserves for its self-insured portion of any pending or threatened product liability actions.  The reserve is based upon two estimates.  First, the company tracks the population of all outstanding pending and threatened product liability cases to determine an appropriate case reserve for each based upon the company’s best judgment and the advice of legal counsel.  These estimates are continually evaluated and adjusted based upon changes to facts and circumstances surrounding the case.  Second, the company obtains a third-party actuarial analysis to determine the amount of additional reserve required to cover incurred but not reported product liability issues and to account for possible adverse development of the established case reserves (collectively referred to as IBNR).  This actuarial analysis is performed twice annually.
 
Foreign Currency Translation  The financial statements of the company’s non-U.S. subsidiaries are translated using the current exchange rate for assets and liabilities and the weighted-average exchange rate for the year for Consolidated Statements of Earnings items.  Resulting translation adjustments are recorded to Accumulated Other Comprehensive Income (Loss) (OCI) as a component of stockholders’ equity.
 
Derivative Financial Instruments and Hedging Activities  The company has written policies and procedures that place all financial instruments under the direction of corporate treasury and restrict all derivative transactions to those intended for hedging purposes.  The use of financial instruments for trading purposes is strictly prohibited.  The company uses financial instruments to manage the market risk from changes in foreign exchange rates and

 
interest rates.  The company follows the guidance of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137, No. 138, and No. 149.  The fair values of all derivatives are recorded in the Consolidated Balance Sheets.  The change in a derivative’s fair value is recorded each period in current earnings or accumulated OCI depending on whether the derivative is designated and qualifies as part of a hedge transaction and if so, the type of hedge transaction.
 
Cash Flow Hedge The company selectively hedges anticipated transactions that are subject to foreign exchange exposure, primarily using foreign currency exchange contracts.  These instruments are designated as cash flow hedges in accordance with SFAS No. 133 and are recorded in the Consolidated Balance Sheets at fair value.  The effective portion of the contracts’ gains or losses due to changes in fair value are initially recorded as a component of accumulated OCI and are subsequently reclassified into earnings when the hedge transactions, typically sales and costs related to sales, occur and affect earnings.  These contracts are highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates.  The company also selectively uses interest rate swaps to modify its exposure to interest rate movements and reduce borrowing costs.  These swaps also qualify as cash flow hedges, with changes in fair value recorded as a component of accumulated OCI.  Interest expense is recorded in earnings at the fixed rate set forth in the swap agreement.
 
For the years ended December 31, 2003 and 2002, no amount was recognized in earnings due to ineffectiveness of a hedge transaction; however, $1.4 million was recognized as a charge to earnings due to the company unwinding a portion of its floating-to-fixed interest rate swap contract.  This charge is included in Loss on Debt Extinguishment in the Consolidated Statements of Earnings for the year-ended December 31, 2003.  The amount reported as derivative instrument fair market value adjustment in the accumulated OCI account within stockholders’ equity represents the net gain/loss on derivatives designated as cash flow hedges.
 
Fair Value Hedges The company periodically enters into interest rate swaps designated as a hedge of the fair value of a portion of its fixed rate debt.  These hedges effectively result in changing a portion of our fixed rate debt to variable interest rate debt.  Both the swaps and the hedged portion of the debt are recorded in the Consolidated Balance Sheet at fair value.  The change in fair value of the swaps exactly offsets the change in fair value of the hedged debt, with no net impact to earnings.  Interest expense of the hedged debt is recorded at the variable rate in earnings.
 
Other The company’s foreign operations are exposed to foreign currency translation risk.  The company’s Euro-denominated 175 million Senior Subordinated Notes due 2011 naturally hedges a significant amount of the translation risk with the company’s operations in Europe.  In addition, a large amount of the translation risk with the company’s Chinese operations are naturally hedged with locally denominated debt.  The currency effects of these foreign-denominated debt obligations are reflected in the accumulated other comprehensive income (loss) account within stockholders’ equity, where they offset the translation impact of an equal amount of similarly foreign-denominated net assets of the European and Chinese operations.
 
Stock-Based Compensation  At December 31, 2003, the company has four stock-based compensation plans, which are described more fully in Note 13, “Stock Options.”  The company accounts for these plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related Interpretations.  No stock-based employee compensation cost related to stock options is reflected in earnings, as all options grants under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.  During 2003 and 2002, the company recognized approximately $0.3 million and $0.2 million, respectively, of compensation expense related to restricted stock which was issued during 2002.  The following table illustrates the effect on net earnings and earnings per share if the company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock based employee compensation.

 

 	 	2003	 	2002	 	2001	 	
Reported net earnings (loss)	 	$	3,549	 	$	(20,502	)	$	45,548	 	
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes	 	(5,243	)	(2,748	)	(1,944	)	
Proforma net earnings (loss)	 	(1,694	)	(23,250	)	43,604	 	
Earnings (loss) per share	 	 	 	 	 	 	 	
Basic - as reported	 	$	0.13	 	$	(0.82	)	$	1.87	 	
Basic - pro forma	 	$	(0.06	)	$	(0.92	)	$	1.80	 	
 	 	 	 	 	 	 	 	
Diluted - as reported	 	$	0.13	 	$	(0.80	)	$	1.86	 	
Diluted - pro forma	 	$	(0.06	)	$	(0.92	)	$	1.80	 	
 
Revenue Recognition and Long-Term Contracts  Revenue is generally recognized and earned when all the following criteria are satisfied with regard to a specific transaction: persuasive evidence of a sales arrangement exists; the price is fixed or determinable; collectibility of cash is reasonably assured; and delivery has occurred or services have been rendered.  Shipping and handling fees are reflected in Net Sales and shipping and handling costs are reflected in Cost of Sales.  Revenues under long-term contracts within the Marine segment, including contracts with the U.S. Government, are recorded using the percentage-of-completion method of accounting.  Revenue under these fixed-price long-term contracts are recorded based on the ratio of costs incurred to estimated total costs at completion, and costs are expensed as incurred.  Amounts representing contract change orders, claims or other items are included in revenue only when they can be reliably estimated and realization is probable.  When adjustments in contract value or estimated costs are determined, any changes from prior estimates are reflected in earnings in the current period.  Anticipated losses on contracts or programs in progress are charged to earnings when identified.
 
Amounts related to long-term contracts accounted for according to the percentage-of-completion method included in the Consolidated Balance Sheet at December 31 were as follows:

 	 	2003	 	2002	 	
 	 	 	 	 	 	
Amounts billed, included in accounts receivable	 	$	10,900	 	$	12,969	 	
Recoverable costs and accrued profit on progress completed-not billed, included in other current assets	 	$	11,574	 	$	17,498	 	
Amounts billed in excess of sales, included in accounts payable and accrued expenses	 	$	7,448	 	$	1,293	 	
 
Recoverable costs and accrued profit on progress completed but not billed related to amounts not billable at the balance sheet date.  It is anticipated that such amounts will be billed in the first quarter of the subsequent year.  Amounts billed but not paid pursuant to retainage contract provisions, which are due upon completion of the contracts, were $5.2 million and $4.0 million as of December 31, 2003 and 2002, respectively, and are included in Other Current Assets in the Consolidated Balance Sheets.
 
As discussed above, the company enters into transactions with customers that provide for residual value guarantees and buyback commitments on certain crane transactions.  The company records these transactions as operating leases.  Net proceeds received in connection with the initial transactions are recorded as deferred revenue and are amortized to income on a straight-line basis over a period equal to that of the customer’s third party financing agreement.  See Note 15. “Guarantees.”
 
The company leases cranes to customers under operating lease terms.  Proceeds received in connection with these transactions are recognized as revenue over the term of the lease, and leased cranes are depreciated over their estimated useful lives.
 
Research and Development   Research and development costs are charged to expense as incurred and amount to $17.4  million, $15.6 million and $7.9 million, for the years ended December 31, 2003, 2002 and 2001, respectively.  Research and development costs include salaries, materials, contractor fees and other administrative costs.

 
Income Taxes  The company utilizes the liability method to recognize deferred tax assets and liabilities for the expected future income tax consequences of events that have been recognized in the company’s financial statements.  Under this method, deferred tax assets and liabilities are determined based on the temporary difference between financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse.  Valuation allowances are provided for deferred tax assets where it is considered more likely than not that the company will not realize the benefit of such assets.
 
Earnings Per Share   Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during each year or period.  Diluted earnings per share is computed similar to basic earnings per share except that the weighted average shares outstanding is increased to include shares of restricted stock and the number of additional shares that would have been outstanding if stock options were exercised and the proceeds from such exercise were used to acquire shares of common stock at the average market price during the year or period.  Shares of common stock held by the Deferred Compensation Plans are not considered outstanding for computing basic earnings per share.
 
Comprehensive Income  Comprehensive income includes, in addition to net income (loss), other items that are reported as direct adjustments to stockholders’ equity.  Currently, these items are foreign currency translation adjustments, additional minimum pension liability adjustments and the change in fair value of certain derivative instruments.
 
Concentration of Credit Risk  Credit extended to customers through trade accounts receivable potentially subjects the company to risk.  This risk is limited due to the large number of customers and their dispersion across various industries and many geographical areas.  However, a significant amount of the company’s receivables are with distributors and contractors in the construction industry, large companies in the foodservice and beverage industry, customers servicing the U.S. steel industry, and the U.S. Government.  The company currently does not foresee a significant credit risk associated with these receivables.
 
Recent Accounting Pronouncements  In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, “ Accounting for Obligations Associated with the Retirement of Long-Lived Assets.”  The provisions of SFAS No. 143 establish accounting standards for the recognition and measurement of an asset retirement obligation.  This statement was effective for the company on January 1, 2003 and did not have a material effect on the Consolidated Financial Statements.
 
In April 2002, the FASB issued SFAS No. 145, “Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13 and Technical Corrections as of April 2002,” which mainly addresses the accounting and disclosure related to early extinguishment of debt transactions as well as several other technical corrections. Generally, SFAS No. 145 was effective for the company beginning January 1, 2003.  The adoption of SFAS No. 145 resulted in the company reclassifying its 2001 loss on early extinguishment of debt from an extraordinary item to a component of earnings from continuing operations.
 
In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit and Disposal Activities,” which addresses financial accounting and reporting for costs associated with these types of activities.  SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.  This statement also establishes that fair value is the objective for initial measurement of the liability.  Severance pay under SFAS No. 146, in many cases, would be recognized over time rather than at the time a plan is approved according to previous guidance.  The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002.
 
In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” which amends and clarifies financial accounting and reporting for certain derivative instruments.  Generally, the provisions of SFAS No. 149 are effective beginning July 1, 2003.  The adoption of SFAS No. 149 did not have a material impact on the company’s Consolidated Financial Statements.
 
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” which requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances).  Many of those instruments were previously classified as equity.  This

 
statement also addresses the classification of financial instruments that include obligations to issue equity shares as equity.  The FASB has also subsequently issued a Staff Position that effectively amended SFAS No. 150.  In general this statement is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective as of July 1, 2003.  The adoption of SFAS No. 150 did not have an impact on the company’s Consolidated Financial Statements.
 
In November 2002, the EITF reached a consensus regarding EITF Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.”  The consensus addresses not only when and how an arrangement involving multiple deliverables should be divided into separate units of accounting but also how the arrangement’s consideration should be allocated among separate units.  The pronouncement was effective for the company commencing July 1, 2003 and did not have a significant impact on its Consolidated Financial Statements.
 
During December 2003, the FASB revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” to require additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans.  These disclosure requirements are effective immediately for the company’s domestic plans, except for estimated future benefit payments, which will be effective in 2004.  This statement also requires interim-period disclosures of the components of net periodic benefit cost and, if significantly different from previously disclosed amounts, the amount of contributions and projected contributions to fund pension plans and other postretirements benefit plans.  These interim-period disclosures will be effective in the first quarter of 2004.
 
In December 2003, the Staff of the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition,” which supercedes SAB No. 101, “Revenue Recognition in Financial Statements.”  The primary purpose of SAB No. 104 is to rescind accounting guidance contained in SAB No. 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF Issue 00-21.  Additionally, SAB No. 104 rescinds the SEC’s “Revenue Recognition in Financial Statements Frequently Asked Questions and Answers” issued with SAB No. 101 that had been codified in SEC Topic 13, “Revenue Recognition.”  The adoption of SAB No. 104 did not have an impact on the company’s Consolidated Financial Statements.
 
In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities.” FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.  A variable interest entity is required to be consolidated by the company that has a majority of the exposure to expected losses of the variable interest entity.  The consolidation provisions of FIN No. 46, as revised, were effective immediately for interests created after January 31, 2003 and are effective on March 31, 2004 for interests created before February 1, 2003.  The adoption of FIN No. 46 did not have an impact on the company’s Consolidated Financial Statements for the year ended December 31, 2003 for interests created after January 31, 2003.  The company is evaluating the impact on the Consolidated Financial Statements for interests created before February 1, 2003.
 
3.               Acquisitions
 
There were no acquisitions made by the company during 2003.
 
2002
On August 8, 2002, the company acquired all of the outstanding common shares of Grove Investors, Inc. (Grove).  The results of Grove’s operations have been included in the Consolidated Statements of Earnings since that date.  Grove is a leading provider of mobile telescopic cranes, truck-mounted cranes, boom trucks and aerial work platforms for the global market.  Grove’s products are used in a wide variety of applications by commercial and residential building contractors as well as by industrial, municipal, and military end users.  Grove’s products are marketed to independent equipment rental companies and directly to end users under the brand names Grove Crane, National Crane, Grove Manlift, and Delta.
 
The company views Grove as a strategic fit with its crane business for a number of reasons.  Grove is a global leader in the mobile telescopic crane industry, specifically in all-terrain and rough-terrain mobile telescopic cranes.  The

 
company did not offer these types of cranes prior to the acquisition, so Grove filled this void in the company’s product offering.  Coupled with the company’s entrance into the tower crane product line with the acquisition of Potain SAS in 2001, Grove enables the company to offer customers four major crane categories, namely crawler cranes, tower cranes, mobile telescopic cranes and boom trucks.  With the addition of Grove, the company is able to offer customers equipment and lifting solutions for virtually every construction application.  The company also believes that the combination of the two companies will provide opportunities to capitalize on their respective strengths in systems, technologies and manufacturing expertise, and that this combination will create natural synergies in its worldwide distribution and service network.
 
The aggregate purchase price paid for Grove was $277.8 million.  This includes the issuance of $70.0 million of the company’s common stock, the assumption of $202.4 million of Grove debt outstanding as of August 8, 2002, and direct acquisition costs of $5.4 million.  In exchange for the outstanding shares of Grove common stock, the company issued approximately 2.2 million shares of the company’s common stock out of treasury with an average market price of $32.34 per share.  The number of shares issued at the close of the transaction was calculated based on the average closing price of the company’s common stock for the ten consecutive trading days ending on and including the second day prior to the closing of the transaction.  In addition, the company assumed all of Grove’s outstanding liabilities (approximately $477.8 million including the outstanding debt), contingencies and commitments.  Substantially all of the assumed debt was refinanced (see further detail in Note 9, “Debt”).
 
The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition.

 	 	August 8, 2002	 	
 	 	 	 	
Current assets	 	$	313,044	 	
Property, plant and equipment	 	116,734	 	
Goodwill	 	63,118	 	
Other intangible assets	 	45,000	 	
Other long-term assets	 	15,366	 	
Total assets acquired	 	553,262	 	
Current liabilities, excluding current debt	 	129,844	 	
Debt	 	202,420	 	
Other long-term liabilities	 	145,559	 	
Total liabilities assumed	 	477,823	 	
Net assets acquired	 	$	75,439	 	
 
Total current assets of $313.0 million includes cash acquired of $13.8 million.  The purchase consideration paid in excess of the fair values of the assets acquired and liabilities assumed was allocated first to the identifiable intangible assets with the remaining excess accounted for as goodwill.  The company obtained third party valuations of identifiable intangible assets acquired.  Based upon the appraisal report of identifiable intangible assets, the allocation was as follows:  $26.0 million to trademarks and tradenames with an indefinite life; $11.9 million to an in-place distributor network with an indefinite life; $7.1 million to patents with a weighted-average 10-year life; and the remaining $63.1 million to goodwill.  The $63.1 million of goodwill is included in the Crane segment.  None of this amount is deductible for tax purposes.  The company also obtained third party valuations of the fair value of inventory and property, plant and equipment acquired.  Based upon the appraisal reports of these assets, the company increased the value of inventory and property, plant and equipment by $3.3 million and $1.1 million, respectively.  The $3.3 million fair value adjustment to inventory was charged to cost of goods sold during the fourth quarter of 2002 as the related inventory items were sold.  The $1.1 million fair value adjustment to property, plant and equipment is being depreciated over the estimated remaining useful lives of the property, plant and equipment.
 
During 2003 the company completed the purchase accounting related to the Grove acquisition and the company recorded $30.2 million of purchase accounting adjustments to the August 8, 2002 Grove opening balance sheet.  The purchase accounting adjustments related to the following: $13.2 million to finalize the accounting for deferred income taxes, related primarily to the non-U.S. Grove operations; $12.4 million for consolidation of the National Crane facility located in Nebraska to the Grove facility located in Pennsylvania (see further detail in Note 16, “Plant Consolidation and Restructuring”); $2.1 million, $0.5 million and $1.5 million for additional accounts receivable,

 
inventory and warranty reserves, respectively; $0.9 million related to severance and other employee related costs for headcount reductions at the Grove facilities in Europe (see further detail in Note 16, “Plant Consolidation and Restructuring”); $2.0 million of curtailment gain as a result of the closing of the National Crane facility located in Nebraska (reduction of goodwill) (see further detail in Note 17, “Employee Benefit Plans”); and $1.6 million for other purchase accounting related items.
 
During 2002 the company also completed certain restructuring and integration activities relating to the Grove acquisition.  The company recorded a charge totaling $12.1 million related to these restructuring and integration activities during 2002.  Of this amount $4.4 million was recorded in the opening balance sheet of Grove and $7.7 million was recorded as a charge to earnings during the fourth quarter of 2002.  The $4.4 million recorded in the opening balance sheet related to severance and other employee related costs for headcount reductions at Grove facilities.  See further detail in Note 16, “Plant Consolidation and Restructuring.”
 
On April 8, 2002, the company purchased the remaining 50% interest in its joint venture Manitowoc Foodservice Europe (f/k/a Fabbrica Apparecchiature per la Praduzione del Ghiaccio Srl), a manufacturer of ice machines based in Italy.  The aggregate cash consideration paid by the company for the remaining interest was $3.4 million and resulted in $2.6 million of additional goodwill.  The $2.6 million of goodwill is included in the Foodservice segment and is not deductible for tax purposes.  During the second quarter of 2003 the company recorded $0.7 million of purchase accounting adjustments to the April 8, 2002 opening balance sheet.
 
2001
On May 9, 2001, the company acquired all of the outstanding capital stock of Potain SAS (formerly Potain SA) (Potain).  Potain is a leading designer, manufacturer and supplier of tower cranes for the building and construction industry.  The aggregate consideration paid was $425.2 million, which includes $307.1 million paid in cash, direct acquisition costs of $4.1 million ($0.4 million incurred during 2002), assumed liabilities of $138.8 million, the payment of a post-closing purchase price adjustment of $3.6 million in February 2002, and is less cash acquired of $28.4 million.
 
During 2002, the company made certain purchase accounting adjustments for the Potain acquisition resulting in a reduction in goodwill of approximately $11.3 million.  The primary purchase accounting adjustments recorded during 2002 were to adjust the book value of property, plant and equipment acquired to fair value based on an appraisal report, adjustment of deferred tax assets and to record a $8.1 million liability associated with certain restructuring and integration activities.  See further detail regarding the restructuring and integration reserve recorded in Note 16, “Plant Consolidation and Restructuring.”
 
In addition, during 2002 a portion of the excess of the cost over fair value of the net assets acquired in the Potain acquisition was allocated to specific other intangible assets.  Based upon an appraisal report, the allocation was as follows: $53.0 million to trademarks and tradenames with an indefinite life; $17.5 million to patents with a weighted-average 15-year life; $8.8 million to engineering drawings with a weighted-average 15-year life; $5.0 million to an in-place distribution network with an indefinite life; and the remaining $118.2 million to goodwill.
 
The following unaudited pro forma financial information of the company and its subsidiaries for the years ended December 31, 2002 and 2001, assumes the acquisitions made in 2002 and 2001 occurred on January 1, 2001.

 	 	Unaudited	 	
Pro Forma:	 	2002	 	2001	 	
Net sales	 	$	1,697,493	 	$	1,763,053	 	
Earnings from continuing operations before income taxes	 	$	45,747	 	$	14,874	 	
Net earnings from continuing operations before discontinued operations and cumulative effect of accounting change	 	$	29,278	 	$	9,073	 	
Net earnings (loss)	 	$	(32,648	)	$	10,227	 	
 	 	 	 	 	 	
Basic earnings (loss) per share:	 	 	 	 	 	
Net earnings from continuing operations before discontinued operations and cumulative effect of accounting change	 	$	1.16	 	$	0.34	 	
Net earnings (loss)	 	$	(1.30	)	$	0.39	 	
 	 	 	 	 	 	
Diluted earnings (loss) per share:	 	 	 	 	 	
Net earnings from continuing operations before discontinued operations and cumulative effect of accounting change	 	$	1.14	 	$	0.34	 	
Net earnings (loss)	 	$	(1.27	)	$	0.38	 	

 
On May 7, 2001, SGPA, Inc. (the predecessor), the predecessor of Grove, filed a pre-negotiated plan of reorganization under Chapter 11 of the U.S. Bankruptcy code that was confirmed by the court on September 14, 2001 and consummated on September 25, 2001.  For financial accounting purposes, the inception date for the reorganized Grove was September 29, 2001.  The Grove financial statements reflect accounting principles set forth by the American Institute of Certified Public Accountants Statement Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code.”  As such, Grove adopted fresh-start reporting as of September 29, 2001, resulting in a revaluation of its assets, liabilities and capital structure.  The predecessor incurred certain costs related to the bankruptcy, which are included in the 2001 pro forma information above.  The costs in the 2001 pro forma information include: $14.5 million recorded in cost of sales related to fresh start accounting adjustments to inventory and other assets; $14.5 million for fees incurred in connection with the design and implementation of the plan of reorganization; and $6.1 million for severance and stay bonuses.
 
4.               Discontinued Operations
 
On February 14, 2003, the company finalized the sale of Femco Machine Company, Inc. (Femco), the Crane segment’s crane and excavator aftermarket replacement parts and industrial repair business, to a group of private investors led by the current Femco management and its employees.  After the Grove acquisition, it was determined that Femco was not a core business to the Crane segment.  Cash proceeds from the sale of Femco were approximately $7.0 million, which includes $0.4 million of cash received by the company for post-closing adjustments, and resulted in a gain on sale of approximately $0.4 million ($0.3 million net of tax).  The disposition of Femco represents a discontinued operation under SFAS No. 144.  Results of Femco for the period from January 1, 2003, through February 14, 2003, have been classified as discontinued, and the results for the twelve months ended December 31, 2002 and 2001, have been restated to also exclude the results of Femco from continuing operations.  During December 2002, the company recorded a $3.4 million ($2.1 million net of tax) charge related to the decision to divest Femco.  Of this charge, $2.2 million related to recording the net assets of Femco at estimated fair value less cost to sell.  In addition, the company performed an impairment analysis of the Femco goodwill in accordance with SFAS No. 142 and determined that the entire $1.2 million of goodwill related to Femco was impaired.  The $3.4 million charge was recorded in Loss on Sale or Closure of Discontinued Operations, Net of Income Taxes, in the Consolidated Statement of Earnings.
 
The following selected financial data of Femco for the period from January 1, 2003, through February 14, 2003, and the years ended December 31, 2002 and 2001 is presented for informational purposes only and does not necessarily reflect what the results of operations would have been had the business operated as a stand-alone entity.  There were no general corporate expense or interest expense allocated to discontinued operations during the years ended December 31, 2003, 2002 or 2001.

 	 	2003	 	2002	 	2001	 	
 	 	 	 	 	 	 	 	
Net sales	 	$	2,178	 	$	19,368	 	$	20,073	 	
 	 	 	 	 	 	 	 	
Pretax earnings from discontinued operations	 	$	47	 	$	1,176	 	$	1,559	 	
Pretax gain (loss) on disposal	 	439	 	(3,405	)	—	 	
Provision (benefit) for taxes on income (loss)	 	165	 	(803	)	603	 	
Net earnings (loss) from discontinued operations	 	$	321	 	$	(1,426	)	$	956	 	

 
During the second quarter of 2004, the company completed the sale of its wholly-owned subsidiary, Delta Manlift SAS (Delta), to JLG Industries, Inc.  Headquartered in Tonneins, France, Delta manufactures the Toucan brand of vertical mast lifts, a line of aerial work platforms distributed throughout Europe for use principally in industrial and maintenance operations.  The company received $9.0 million for Delta and certain other assets of the company’s Aerial Work Platform (AWP) businesses (cash received and gain recorded in the second quarter of 2004).  Delta was acquired in August 2002 as part of the Grove acquisition.  During December 2003, the company completed plans to restructure its AWP businesses.  The restructuring included the closure of the Potain GmbH (Liftlux) facility in Dilingen, Germany and discontinuation of U.S. Manlift production at the Shady Grove, Pennsylvania facility.  With the sale of Delta and the closure of the Liftlux and U.S. Manlift operations, the company no longer participates in the aerial work platform market, other than providing aftermarket parts and service support.  The sale of Delta, the closure of Liftlux and the discontinuation of the U.S. Manlift production represent discontinued operations under SFAS No. 144.  Results of these companies for the years ended December 31, 2003, 2002, and 2001 have been classified as discontinued to exclude the results from continuing operations.  In addition, during 2003 the company recorded a $13.7 million pre-tax ($11.1 million net of taxes) charge for the closure of the AWP businesses.  This charge includes the following: $4.9 million to write-off the goodwill related to the AWP businesses in accordance with SFAS No. 142; $3.5 million to record a reserve for the present value of future non-cancelable operating lease obligations; $3.1 million to write-down inventory to estimated realizable value; and $2.2 million for other closure costs.
 
The following selected financial data of the AWP businesses for the years ended December 31, 2003, 2002 and 2001 is presented for informational purposes only and does not necessarily reflect what the results of operations would have been had the businesses operated as a stand-alone entity.  There were no general corporate expense or interest expense allocated to discontinued operations during the years ended December 31, 2003, 2002 or 2001.

 	 	2003	 	2002	 	2001	 	
 	 	 	 	 	 	 	 	
Net sales	 	$	48,630	 	$	27,527	 	$	23,357	 	
 	 	 	 	 	 	 	 	
Pretax loss from discontinued operations	 	$	(3,316	)	$	(2,501	)	$	(158	)	
Pretax loss on closure	 	(13,677	)	—	 	—	 	
Benefit for taxes on loss	 	(3,232	)	(901	)	(61	)	
Net loss from discontinued operations	 	$	(13,761	)	$	(1,600	)	$	(97	)	

During the fourth quarter of 2003 the company terminated its distributor agreement with North Central Crane, the company’s wholly-owned crane distributor.  The company entered into a new distributor agreement with an independent third party for the area previously covered by North Central Crane.  The termination of the North Central Crane represents a discontinued operation under SFAS No. 144 as this was the company’s only wholly-owned domestic crane distributor. Results of this company for the year ended December 31, 2003, 2002 and 2001 have been classified as discontinued to exclude the results from continuing operations.  In connection with the closure, the company recorded a $1.1 million pre-tax ($0.9 million net of taxes) loss, primarily for a loss on sale of inventory to the new independent third party distributor.
 
The following selected financial data of North Central Crane for the years ended December 31, 2003, 2002 and 2001 is presented for informational purposes only and does not necessarily reflect what the results of operations would have been had the business operated as a stand-alone entity.  There were no general corporate expense or interest expense allocated to discontinued operations during the years ended December 31, 2003, 2002 or 2001.

 	 	2003	 	2002	 	2001	 	
 	 	 	 	 	 	 	 	
Net sales	 	$	22,407	 	$	22,627	 	$	38,778	 	
 	 	 	 	 	 	 	 	
Pretax earnings from discontinued operations	 	$	249	 	$	202	 	$	1,824	 	
Pretax loss on closure	 	(1,051	)	—	 	—	 	
Provision (benefit) for taxes on income (loss)	 	(160	)	73	 	704	 	
Net earnings (loss) from discontinued operations	 	$	(642	)	$	129	 	$	1,120	 	

 
In connection with the Grove acquisition, the United States Department of Justice raised concerns about a possible reduction in competition in the United States boom truck market that could result from the acquisition.  In order to address these concerns, the company and Grove agreed with the Department of Justice that, following the completion of the Grove acquisition, the company would divest of either Manitowoc Boom Trucks, Inc. (Manitowoc Boom Trucks) or National Crane Corporation (Grove’s boom truck business).  On December 17, 2002, the company entered into an agreement with Quantum Heavy Equipment, LLC (Quantum) to sell all of the outstanding stock of Manitowoc Boom Trucks.  The Department of Justice approved the sale on December 30, 2002, and it was completed on December 31, 2002.
 
Cash proceeds from the sale of Manitowoc Boom Trucks, a business in the Crane segment, were approximately $13.2 million, subject to post-closing adjustments, and resulted in a loss on sale of approximately $32.9 million ($23.3 million net of tax) in the fourth quarter of 2002.  The disposition represents a discontinued operation under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”  Accordingly, results of Manitowoc Boom Trucks have been classified as discontinued for the years ended December 31, 2002 and 2001.
 
During the third quarter of 2003, the company and Quantum agreed to the final post-closing adjustment for the sale of Manitowoc Boom Trucks.  The agreement resulted in the company paying $4.7 million to Quantum during 2003.  This payment was largely the result of reduction in working capital of Manitowoc Boom Trucks from September 30, 2002 to December 31, 2002 for which the company already received the cash.  The agreement resulted in the company recording an additional charge for the sale of Manitowoc Boom Trucks of approximately $0.6 million ($0.4 million net of tax) during 2003.  This charge is recorded in loss on sale of discontinued operations, net of income taxes, in the Consolidated Statement of Earnings.
 
The following selected financial data of Manitowoc Boom Trucks for the years ended December 31, 2003, 2002 and 2001 is presented for informational purposes only and does not necessarily reflect what the results of operations would have been had the business operated as a stand-alone entity.  There were no general corporate expense or interest expense allocated to discontinued operations during the years ended December 31, 2003, 2002 or 2001.

 	 	2003	 	2002	 	2001	 	
 	 	 	 	 	 	 	 	
Net sales	 	$	—	 	$	44,169	 	$	49,949	 	
 	 	 	 	 	 	 	 	
Pretax earnings (loss) from discontinued operations	 	$	—	 	$	1,286	 	$	(1,345	)	
Pretax loss on disposal	 	(584	)	(32,905	)	—	 	
Benefit for taxes on income (loss)	 	(179	)	(9,164	)	(520	)	
Net loss from discontinued operations	 	$	(405	)	$	(22,455	)	$	(825	)	

5.               Inventories
 
The components of inventories at December 31 are summarized as follows:

 	 	2003	 	2002	 	
Inventories - gross:	 	 	 	 	 	
Raw materials	 	$	89,851	 	$	90,958	 	
Work-in-process	 	81,378	 	99,545	 	
Finished goods	 	120,565	 	127,073	 	
Total	 	291,794	 	317,576	 	
Less excess and obsolete inventory reserve	 	(40,299	)	(43,734	)	
Net inventories at FIFO cost	 	251,495	 	273,842	 	
Less excess of FIFO costs over LIFO value	 	(18,618	)	(18,624	)	
Inventories - net	 	$	232,877	 	$	255,218	 	

 
6.               Property, Plant and Equipment
 
The components of property, plant and equipment at December 31 are summarized as follows:

 	 	2003	 	2002	 	
 	 	 	 	 	 	
Land	 	$	43,414	 	$	38,840	 	
Building and improvements	 	178,473	 	162,051	 	
Drydocks and dock fronts	 	23,905	 	23,905	 	
Machinery, equipment and tooling	 	224,931	 	216,960	 	
Furniture and fixtures	 	24,985	 	23,665	 	
Computer hardware and software	 	38,998	 	28,694	 	
Rental cranes	 	122,682	 	87,325	 	
Construction in progress	 	4,998	 	18,228	 	
Total cost	 	662,386	 	599,668	 	
Less accumulated depreciation	 	(327,768	)	(280,367	)	
Property, plant and equipment-net	 	$	334,618	 	$	319,301	 	

7.               Goodwill and Other Intangible Assets
 
Effective January 1, 2002, the company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.”  This statement changed the accounting for goodwill and indefinite-lived intangible assets from an amortization approach to an impairment-only approach.
 
The SFAS No. 142 goodwill impairment model is a two-step process.  First, it requires comparison of the book value of net assets to the fair value of the related reporting units that have goodwill assigned to them.  If the fair value is determined to be less than book value, a second step is performed to compute the amount of impairment.  In the second step, the implied fair value of goodwill is estimated as the fair value of the reporting unit used in the first step less the fair values of all other net tangible and intangible assets of the reporting unit.  If the carrying amount of goodwill exceeds its implied fair market value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill.
 
Upon adoption of SFAS No. 142, goodwill and indefinite-lived intangible assets ceased being amortized, and were tested for impairment.  Using the SFAS No. 142 approach described above, the company estimated the fair values of its reporting units using the present value of future cash flows approach, subject to a comparison for reasonableness to its market capitalization at the date of valuation.  As a result, the company recorded a transitional goodwill impairment charge as of January 1, 2002 of $51.0 million ($36.8 million net of income taxes) which is reflected as a cumulative effect of accounting change in the Consolidated Statement of Earnings.  This charge relates to the company’s reporting units as follows: Beverage Group (Foodservice segment) $33.1 million and Manitowoc Boom Trucks (Crane segment) $17.9 million.  The charge was based on current economic conditions in these industries.  This transitional impairment charge resulted from the application of the new impairment methodology introduced by SFAS No. 142.  Under previous requirements, no goodwill impairment would have been recorded on January 1, 2002.
 
During the fourth quarter of 2002, when the company finalized its decision to divest of Femco, an impairment analysis of goodwill related to Femco was performed in accordance with SFAS No. 142.  As a result, the company recorded an additional goodwill impairment charge of $1.2 million.  The impairment charge related to Femco is reflected in Loss on Sale or Closure of Discontinued Operations, Net of Income Taxes in the Consolidated Statement of Earnings.
 
During the second quarter of 2003 the company completed its annual impairment analysis of goodwill and other intangible assets in accordance with SFAS No. 142.  As a result, the company recorded a goodwill impairment charge of $4.9 million.  This charge relates to the company’s Aerial Work Platform reporting unit, a reporting unit in the company’s Crane segment.  The charge was based on current economic conditions in this reporting unit.  The fair value of this reporting unit was based on managements’ estimates of future cash flows.  The impairment charge related to Aerial Work Platform is reflected in Loss on Sale or Closure of Discontinued Operations, Net of Income Taxes in the Consolidated Statement of Earnings.

 
The following sets forth a reconciliation of net earnings and earnings per share information for the years ended December 31, 2003, 2002 and 2001 adjusted for non-amortization provisions of SFAS No. 142.

 	 	2003	 	2002	 	2001	 	
Reported net earnings from continuing operations	 	$	18,036	 	$	41,650	 	$	44,394	 	
Add back: Goodwill amortization, net of income taxes	 	—	 	—	 	5,829	 	
Adjusted reported net earnings from continuing operations	 	18,036	 	41,650	 	50,223	 	
Discontinued operations:	 	 	 	 	 	 	 	
Reported earnings (loss) from discontinued operations, net of income taxes	 	(2,440	)	105	 	1,154	 	
Add back: Goodwill amortization, net of income taxes	 	—	 	—	 	903	 	
Loss on sale or closure of discontinued operations, net of income taxes	 	(12,047	)	(25,457	)	—	 	
Cumulative effect of accounting change, net of income taxes	 	—	 	(36,800	)	—	 	
Net earnings (loss )	 	$	3,549	 	$	(20,502	)	$	52,280	 	
 	 	 	 	 	 	 	 	
Basic earnings (loss) per share:	 	 	 	 	 	 	 	
Reported net earnings from continuing operations	 	$	0.68	 	$	1.65	 	$	1.83	 	
Goodwill amortization, net of income taxes	 	—	 	—	 	0.24	 	
Adjusted reported net earnings from continuing operations	 	0.68	 	1.65	 	2.07	 	
Discontinued operations:	 	 	 	 	 	 	 	
Reported earnings (loss) from discontinued operations, net of income taxes	 	(0.09	)	0.00	 	0.05	 	
Goodwill amortization, net of income taxes	 	—	 	—	 	0.04	 	
Loss on sale or closure of discontinued operations, net of income taxes	 	(0.45	)	(1.01	)	—	 	
Cumulative effect of accounting change, net of income taxes	 	—	 	(1.46	)	—	 	
Adjusted net earnings (loss )	 	$	0.13	 	$	(0.82	)	$	2.15	 	
 	 	 	 	 	 	 	 	
Diluted earnings (loss) per share:	 	 	 	 	 	 	 	
Reported net earnings from continuing operations	 	$	0.68	 	$	1.62	 	$	1.81	 	
Goodwill amortization, net of income taxes	 	—	 	—	 	0.24	 	
Adjusted reported net earnings from continuing operations	 	0.68	 	1.62	 	2.05	 	
Discontinued operations:	 	 	 	 	 	 	 	
Reported earnings (loss) from discontinued operations, net of income taxes	 	(0.09	)	0.00	 	0.05	 	
Goodwill amortization, net of income taxes	 	—	 	—	 	0.04	 	
Loss on sale or closure of discontinued operations, net of income taxes	 	(0.45	)	(0.99	)	—	 	
Cumulative effect of accounting change, net of income taxes	 	—	 	(1.43	)	—	 	
Adjusted net earnings (loss )	 	$	0.13	 	$	(0.80	)	$	2.13	 	

The changes in carrying amount of goodwill by reportable segment for the years ended December 31, 2003 and 2002, were as follows:

 	 	Cranes	 	Foodservice	 	Marine	 	Total	 	
 	 	 	 	 	 	 	 	 	 	
Balance as of January 1, 2002	 	$	243,286	 	$	217,036	 	$	47,417	 	$	507,739	 	
Goodwill of acquired business	 	32,945	 	1,872	 	—	 	34,817	 	
Potain purchase accounting, net	 	(7,264	)	—	 	—	 	(7,264	)	
Allocation of purchase price to other intangible assets	 	(84,300	)	—	 	—	 	(84,300	)	
Impairment charge upon adoption of SFAS No. 142	 	(17,900	)	(33,100	)	 	 	(51,000	)	
Sale of Manitowoc Boom Trucks	 	(19,204	)	—	 	—	 	(19,204	)	
Femco impairment charge	 	(1,194	)	—	 	—	 	(1,194	)	
Foreign currency impact	 	744	 	—	 	—	 	744	 	
Balance as of December 31, 2002	 	147,113	 	185,808	 	47,417	 	380,338	 	
Grove purchase accounting, net	 	30,173	 	—	 	—	 	30,173	 	
Manitowoc Foodservice Europe purchase accounting, net	 	—	 	678	 	—	 	678	 	
Potain purchase accounting, net	 	(1,021	)	—	 	—	 	(1,021	)	
Impairment charge AWP	 	(4,900	)	—	 	—	 	(4,900	)	
Foreign currency impact	 	965	 	—	 	—	 	965	 	
Balance as of December 31, 2003	 	$	172,330	 	$	186,486	 	$	47,417	 	$	406,233	 	

 
During the first quarter of 2002, $84.3 million of the excess of the cost over fair value of the net assets acquired in the Potain acquisition was allocated to other intangible assets.  Based upon management’s estimates, including consideration of appraisal information, the allocation was as follows: $53.0 million to trademarks and tradenames with an indefinite life; $17.5 million to patents with a weighted-average 15-year life; $8.8 million to engineering drawings with a weighted-average 15-year life; and $5.0 million to an in-place distributor network with an indefinite life.  During the fourth quarter of 2002 a portion of the excess of the cost over fair value of the net assets acquired in the Grove acquisition was allocated to specific other intangible assets.  Based upon management’s estimates, including consideration of appraisal information, the allocation was as follows: $26.0 million to trademarks and tradenames with an indefinite life; $11.9 million to an in-place distributor network with an indefinite life; and $7.1 million to patents with a weighted-average 10-year life.  The gross carrying amount and accumulated amortization of the company’s intangible assets other than goodwill, all as a result of the Potain and Grove acquisitions, were as follows as of December 31, 2003 and 2002.

 	 	December 31, 2003	 	December 31, 2002	 	
 	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net Book
Value	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net Book
Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Trademarks and tradenames	 	$	79,000	 	$	—	 	$	79,000	 	$	79,000	 	$	—	 	$	79,000	 	
Patents	 	24,600	 	(3,383	)	21,217	 	24,600	 	(1,376	)	23,224	 	
Engineering drawings	 	8,800	 	(1,537	)	7,263	 	8,800	 	(625	)	8,175	 	
Distribution network	 	16,900	 	—	 	16,900	 	16,900	 	—	 	16,900	 	
 	 	$	129,300	 	$	(4,920	)	$	124,380	 	$	129,300	 	$	(2,001	)	$	127,299	 	

Amortization expense recorded for the other intangible assets for the years ended December 31, 2003, 2002 and 2001 was $2.9 million, $2.0 million and $0.0 million, respectively.  Estimated amortization expense for the five years beginning in 2004 is estimated to be approximately $2.9 million per year.
 
8.               Accounts Payable and Accrued Expenses
 
Accounts payable and accrued expenses at December 31 are summarized as follows:

 	 	2003	 	2002	 	
Trade accounts payable	 	$	219,332	 	$	184,786	 	
Employee related expenses	 	53,991	 	38,322	 	
Income taxes payable	 	5,843	 	—	 	
Profit sharing and incentives	 	11,459	 	10,515	 	
Customer progress payments	 	14,664	 	2,220	 	
Restructuring reserve	 	27,216	 	13,075	 	
Unremitted cash liability	 	16,648	 	11,554	 	
Miscellaneous accrued expenses	 	105,241	 	89,843	 	
 	 	$	454,394	 	$	350,315	 	

 
9. Debt
 
Debt at December 31 is summarized as follows:

 	 	2003	 	2002	 	
Senior credit facility:	 	 	 	 	 	
Term loan A	 	$	—	 	$	101,713	 	
Term loan B	 	17,710	 	172,375	 	
Revolving credit facility	 	—	 	2,000	 	
Senior subordinated notes due 2011 (175 million Euro)	 	217,682	 	183,523	 	
Senior subordinated notes due 2012	 	175,000	 	175,000	 	
Senior notes due 2013	 	150,000	 	—	 	
Industrial revenue bond	 	2,900	 	3,150	 	
Fair value of interest rate swaps	 	(752	)	2,493	 	
Other	 	29,760	 	25,925	 	
Total debt	 	592,300	 	666,179	 	
Less current portion	 	(25,216	)	(42,632	)	
Long-term debt	 	$	567,084	 	$	623,547	 	
 
In May 2001, the company entered into a $475 million Senior Credit Facility (Senior Credit Facility) maturing in May 2007.  The Senior Credit Facility is comprised of a $175 million Term Loan A, a $175 million Term Loan B and a $125 million Revolving Credit Facility.  As a result of scheduled payments and prepayments made since 2001, the company has no amounts outstanding under its Term Loan A and Term Loan B requires quarterly principal payments of $0.1 million from December 2004 through March 2006 and $3.5 million from June 2006 through May 2007.  Substantially all domestic, tangible and intangible assets of the company and its subsidiaries are pledged as collateral under the Senior Credit Facility.
 
Borrowings under the Senior Credit Facility bear interest at a rate equal to the sum of a base rate or a Eurodollar rate plus an applicable margin, which is based on the company’s consolidated total leverage ratio, as defined by the Senior Credit Facility.  The weighted-average interest rate for the Term Loan B facility was 4.33% at December 31, 2003.  The annual commitment fee in effect on the unused portion of the company’s Revolving Credit Facility was 0.5% at December 31, 2003.  The company had $96.4 million of unused availability under the terms of its Revolving Credit Facility at December 31, 2003 due to the impact on this borrowing availability of $28.6 million of outstanding letters of credit.
 
To help finance the Potain acquisition in May 2001, the company issued 175 million Euro (approximately $217.7 million at December 31, 2003 exchange rates) of 10 3/8% Senior Subordinated Notes due May 2011 (Senior Subordinated Notes due 2011).  The Senior Subordinated Notes due 2011 are unsecured obligations of the company ranking subordinate in right of payment to all senior debt of the company, rank equal to the company’s Senior Subordinated Notes due 2012 (see below), and are fully and unconditionally, jointly and severally guaranteed by substantially all of the company’s domestic subsidiaries (see Note 20, “Subsidiary Guarantors of Senior Subordinated Notes due 2011”).  Interest on the Senior Subordinated Notes due 2011 is payable semiannually in May and November of each year.  The Senior Subordinated Notes due 2011 can be redeemed in whole or in part by the company for a premium after May 15, 2006.  The following is the premium paid by the company, expressed as a percentage of the principal amount, if it redeems the Senior Subordinated Notes due 2011 during the 12-month period commencing on May 15 of the year set forth below:

Year	 	Percentage	 	
2006	 	105.188	%	
2007	 	103.458	%	
2008	 	101.729	%	
2009 and thereafter	 	100.000	%	
 
In addition, the company may redeem for a premium (110.375% of the face amount of the notes, plus interest) at any time prior to May 15, 2004, up to 35% of the face amount of the Senior Subordinated Notes due 2011 with the proceeds from one or more public equity offerings.

 
As part of the Grove acquisition in August 2002, the company issued $175 million of 10 ½% Senior Subordinated Notes due August 2012 (Senior Subordinated Notes due 2012).  The Senior Subordinated Notes due 2012 are unsecured obligations of the company ranking subordinate in right of payment to all senior debt of the company, rank equal to the company’s Senior Subordinated Notes due 2011 and are fully and unconditionally, jointly and severally guaranteed by substantially all of the company’s domestic subsidiaries (see Note 21, “Subsidiary Guarantors of Senior Subordinated Notes due 2012 and Senior Notes due 2013”).  Interest on the Senior Subordinated Notes due 2012 is payable semiannually in February and August each year, commencing February 1, 2003.  The Senior Subordinated Notes due 2012 can be redeemed by the company in whole or in part for a premium on or after August 1, 2007.  The following is the premium paid by the company, expressed as a percentage of the principal amount, if it redeems the Senior Subordinated Notes due 2012 during the 12-month period commencing on August 1 of the year set forth below:

Year	 	Percentage	 	
2007	 	105.250	%	
2008	 	103.500	%	
2009	 	101.750	%	
2010 and thereafter	 	100.000	%	
 
In addition, the company may redeem for a premium (110.5% of the face amount of the notes, plus interest), at any time prior to August 1, 2005, up to 35% of the face amount of the Senior Subordinated Notes due 2012 with the proceeds from one or more public equity offerings.
 
On November 6, 2003, the company completed the sale of $150.0 million of 7 1/8% Senior Notes due 2013 (Senior Notes due 2013).  The Senior Notes due 2013 are unsecured senior obligations ranking prior to the company’s Senior Subordinated Notes due 2011 and Senior Subordinated Notes due 2012.  The company’s collateralized senior indebtedness, including indebtedness under its Senior Credit Facility, ranks equally with the Senior Notes due 2013 except that the Senior Credit Facility is collateralized by substantially all domestic tangible and intangible assets of the company and its subsidiaries.  The Senior Notes due 2013 are fully and unconditionally jointly and severally guaranteed by substantially all of the company’s domestic subsidiaries (see Note 21, “Subsidiary Guarantors of Senior Subordinated Notes due 2012 and Senior Notes due 2013”).  Interest on the Senior Notes due 2013 is payable semiannually in May and November each year, commencing May 1, 2004.  The Senior Notes due 2013 can be redeemed by the company in whole or in part for a premium on or after November 1, 2008.  The following is the premium paid by the company, expressed as a percentage of the principal amount, if it redeems the Senior Notes due 2013 during the 12-month period commencing on November 1 of the year set forth below:

Year	 	Percentage	 	
2008	 	103.563	%	
2009	 	102.375	%	
2010	 	101.188	%	
2011 and thereafter	 	100.000	%	
 
In addition, the company may redeem for a premium (107.125% of the face amount of the notes, plus interest) at any time prior to November 1, 2006 up to 35% of the face amount of the Senior Notes due 2013 with the proceeds of one or more equity offerings.  The company used the net proceeds from the sale of the Senior Notes due 2013 for the prepayment of its Term Loan A and partial prepayment of the Term Loan B under its Senior Credit Facility.
 
During the fourth quarter of 2003, the company recorded a loss of $7.3 million ($4.7 million net of income taxes) related to the prepayment of the Term Loan A and partial prepayment of the Term Loan B facilities.  The loss related to the write-off of unamortized financing fees and unwinding of the company’s floating-to-fixed interest rate swap.  The loss was recorded as a component of earnings from continuing operations in the Consolidated Statement of Earnings.
 
In May 2001, the company incurred a loss of $5.5 million ($3.3 million net of income taxes) related to a prepayment penalty and the write-off of unamortized financing fees from its previous credit facility.  In prior years the loss was reported net of tax as an extraordinary loss in the Consolidated Statement of Earnings.  On January 1, 2003, the company adopted SFAS No. 145, “Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13 and Technical

 
Corrections as of April 2002,” which addresses the accounting and disclosure related to early extinguishment of debt transactions as well as several other technical corrections.  The adoption of SFAS No. 145 resulted in the company reclassifying its 2001 loss on early extinguishment of debt from an extraordinary item to a component of earnings from continuing operations in the Consolidated Statement of Earnings.
 
The Senior Credit Facility, Senior Notes due 2013 and Senior Subordinated Notes due 2011 and 2012 contain customary affirmative and negative covenants.  In general, the covenants contained in the Senior Credit Facility are more restrictive than those of the Senior Notes due 2013 and Senior Subordinated Notes due 2011 and 2012.  Among other restrictions, the Senior Credit Facility covenants had required us to meet specified financial tests, which included minimum levels of earnings before interest, taxes, depreciation, and amortization (EBITDA), and various debt to EBITDA ratios which became more restrictive over time.  These covenants also limited the company’s ability to redeem or repurchase its debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, repurchase capital stock, lend money or make advances, create or become subject to liens, and make capital expenditures.  The Senior Credit Facility also contains cross-default provisions whereby certain defaults under any other debt agreements would result in default under the Senior Credit Facility.  At December 31, 2002, the company was not in compliance with certain of its financial covenants.  On February 4, 2003, the company received an amendment and waiver to its Credit Agreement dated May 9, 2001, which cured these violations.  In addition, this amendment provided future relief under certain financial covenants that became more restrictive over time.  At June 30, 2003 the company was not in compliance with certain of its financial covenants.  On July 23, 2003, the company received an amendment and waiver to its Senior Credit Agreement dated May 9, 2001, which cured these violations.  In addition, the amendment eliminates the minimum EBITDA covenants and provides future relief under certain financial covenants that became more restrictive over time.  The non-financial test covenants discussed above are still in-place under the amended Senior Credit Agreement.  The company was in compliance with all covenants as of December 31, 2003, and based upon our current plans and outlook, the company believes it will be able to comply with these covenants during the subsequent 12-month period.
 
The industrial revenue bond relates to the company’s obligation on a property located in Indiana.  The remaining obligation of $2.9 million is due in 2004.  The bond had an interest rate of 1.1% at December 31, 2003.
 
As of December 31, 2003, the company also had outstanding $29.8 million of other indebtedness with a weighted-average interest rate of 5.96%.  This debt includes $6.7 million of outstanding bank debt in China, $8.4 million of bank overdrafts in Europe, $14.5 million of capital lease obligations in Europe, and $0.2 million of other miscellaneous debt.
 
The company periodically enters into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate debt.  These interest rate swap agreements are designed as cash flow hedges in accordance with SFAS No. 133 and are recorded in the Consolidated Balance Sheet at fair value with changes in fair value recorded as a component of accumulated OCI.  As of December 31, 2003, the company had outstanding one floating-to-fixed interest rate swap agreement with a financial institution, having a notional principal amount of $17.3 million.  This swap fixes interest paid by the company for debt equaling the notional value of the swap at 3.56% and matures in August 2005.  The fair value of this arrangement, which represents the cost to settle this contract, approximated a loss of $0.5 million  ($0.4 million net of income taxes) at December 31, 2003.
 
In addition, as of December 31, 2003, the company had five fixed-to-floating rate swap contracts which effectively converted $232.4 million of its fixed rate Senior and Senior Subordinated Notes to variable rate debt.  These contracts are considered to be a hedge against changes in the fair value of the fixed rate debt obligation.  Accordingly, the interest rate swap contracts are reflected at fair value in the company’s Consolidated Balance Sheet as an asset of $0.1 million and a liability of $0.9 million as of December 31, 2003.  Debt is reflected at an amount equal to the sum of its carrying value plus an adjustment representing the change in fair value of the debt obligation attributable to the interest rate risk being hedged.  Changes during any accounting period in the fair value of the interest rate swap contract, as well as offsetting changes in the adjusted carrying value of the related portion of fixed-rate debt being hedged, are recognized as an adjustment to interest expense in the Consolidated Statement of Earnings.  The change in fair value of the swaps exactly offsets the change in fair value of the hedged fixed-rate debt; therefore, there was no net impact on earnings for the years ended December 31, 2003 and 2002.  The fair

 
value of these contracts, which represents the cost to settle these contracts, approximated a loss of $0.9 million at December 31, 2003.
 
The aggregate scheduled maturities of outstanding debt obligations in subsequent years are as follows:

2004	 	$	25,216	 	
2005	 	1,801	 	
2006	 	12,161	 	
2007	 	8,575	 	
2008	 	1,432	 	
Thereafter	 	543,115	 	
 	 	$	592,300	 	

The company participates in an accounts receivable factoring arrangement with a bank.  The company factored $220.1 million and $205.8 million in accounts receivable to the bank under this arrangement during 2003 and 2002, respectively.  According to the Senior Credit Facility, the maximum amount of accounts receivable that can be outstanding at any one time under this arrangement, net of amounts collected from customers, is $45.0 million.  The company’s contingent factoring liability, net of cash collected from customers, was $22.4 million and $19.5 million at December 31, 2003 and 2002, respectively.  The cash flow impact of this arrangement is reported as cash flows from operations in the Consolidated Statement of Cash Flows.  Under this arrangement, the company is required to purchase from the bank the first $0.5 million and amounts greater than $1.0 million of the aggregate uncollected receivables during a 12-month period.
 
10.  Income Taxes
 
Income tax expense for continuing operations before discontinued operations and cumulative effect of accounting change is summarized below:

 	 	2003	 	2002	 	2001	 	
Earnings from continuing operations before income taxes:	 	 	 	 	 	 	 	
Domestic	 	$	795	 	$	40,686	 	$	55,675	 	
Foreign	 	21,200	 	24,393	 	16,594	 	
Total	 	$	21,995	 	$	65,079	 	$	72,269	 	
 
The provision for taxes on earnings from continuing operations for the years ended December 31, 2003, 2002 and 2001 as follows:

 	 	2003	 	2002	 	2001	 	
Current:	 	 	 	 	 	 	 	
Federal	 	$	(11,089	)	$	8,439	 	$	13,842	 	
State	 	380	 	4,383	 	3,948	 	
Foreign	 	8,434	 	(1,906	)	2,573	 	
Total current	 	(2,275	)	10,916	 	20,363	 	
Deferred:	 	 	 	 	 	 	 	
Federal and state	 	10,810	 	7,034	 	5,519	 	
Foreign	 	(4,576	)	5,479	 	1,993	 	
Total deferred	 	6,234	 	12,513	 	7,512	 	
Provision for taxes on earnings	 	$	3,959	 	$	23,429	 	$	27,875	 	
 
The federal statutory income tax rate is reconciled to the company’s effective income tax rate for continuing operations for the years ended December 31, 2003, 2002 and 2001 as follows:

 

 	 	2003	 	2002	 	2001	 	
Federal income tax at statutory rate	 	35.0	%	35.0	%	35.0	%	
State income tax (benefit)	 	(5.0	)	0.8	 	2.1	 	
Non-deductible book intangible asset amortization	 	(0.1	)	—	 	4.2	 	
Tax exempt export or FSC income	 	(1.8	)	(0.9	)	(0.9	)	
Taxes on foreign income which differ from the U.S. statutory rate	 	(9.9	)	0.7	 	(0.2	)	
Accrual adjustment	 	0.2	 	0.2	 	(2.1	)	
Other items	 	(0.4	)	0.2	 	0.6	 	
Provision for taxes on earnings	 	18.0	%	36.0	%	38.7	%	
 
In 2003, the effective tax rate from continuing operations differs from the statutory rate primarily due to the impact of certain global tax planning initiatives and fixed permanent book-tax differences on significantly lower pre-tax income.  This significantly affected the effective rate on both the state income tax benefit and provision for tax on foreign income.
 
The deferred income tax accounts reflect the impact of temporary differences between the basis of assets and liabilities for financial reporting purposes and their related basis as measured by income tax regulations.  A summary of the deferred income tax accounts at December 31 is as follows:

 	 	2003	 	2002	 	
Current deferred assets:	 	 	 	 	 	
Inventories	 	$	7,099	 	$	13,576	 	
Accounts receivable	 	11,257	 	15,169	 	
Product warranty reserves	 	11,725	 	11,283	 	
Product liability reserves	 	5,486	 	14,622	 	
Other employee-related benefits and allowances	 	7,972	 	10,876	 	
Net operating losses carryforwards, current portion	 	7,128	 	6,778	 	
Refundable foreign taxes	 	2,069	 	2,972	 	
Deferred revenue, current portion	 	8,576	 	3,601	 	
Other employee-related benefits and allowances	 	10,469	 	17,864	 	
Future income tax benefits, current	 	$	71,781	 	$	96,741	 	
 	 	 	 	 	 	
Non-current deferred assets (liabilities)	 	 	 	 	 	
Property, plant and equipment	 	$	(40,634	)	$	(53,052	)	
Intangible assets	 	(1,210	)	7,144	 	
Postretirement benefits other than pensions	 	31,933	 	41,346	 	
Deferred employee benefits	 	5,366	 	4,686	 	
Severance benefits	 	5,380	 	1,549	 	
Product warranty reserves	 	3,284	 	2,096	 	
Net operating loss carryforwards	 	24,429	 	9,662	 	
Deferred revenue	 	6,937	 	5,594	 	
Other	 	564	 	2,681	 	
Total non-current deferred asset	 	36,049	 	21,706	 	
Less valuation allowance	 	(1,558	)	(2,044	)	
Net future tax benefits, non-current	 	$	34,491	 	$	19,662	 	

The company’s policy is to remit earnings from foreign subsidiaries only to the extent any resultant foreign taxes are creditable in the United States.  Accordingly, the company does not currently provide for additional United States and foreign income taxes which would become payable upon remission of undistributed earnings of foreign subsidiaries.  Undistributed earnings from continuing operations on which additional income taxes have not been provided amounted to approximately $33.3 million at December 31, 2003.  If all such undistributed earnings were remitted, an additional provision for income taxes of approximately $11.7 million would have been necessary as of December 31, 2003.
 
As of December 31, 2003, the company had approximately $154.1 million of state net operating loss carryforwards, which are available to reduce future state tax liabilities.  These state net operating loss carryforwards expire beginning 2007 through 2023.  The company previously acquired federal net operating losses of $19.4 million available to reduce federal taxable income.  The federal net operating loss carryforward expires 2016.  The company

 
also has approximately $21.1 million of foreign net operating loss carryforwards, which are available to reduce income in certain foreign jurisdictions.  These foreign loss carryforwards generally have no expiration under current foreign local law.  The valuation allowance represents a reserve for acquired foreign operating loss carryforwards for which realization is not “more likely than not.”  The decrease in the valuation allowance represents the effect of utilization of a portion of the foreign operating loss carryforward by current year profits.  If these acquired foreign operating loss carryforwards are ultimately realized, the valuation allowance will be reversed and the benefit will reduce goodwill associated with the acquisition.  During 2003, the company reversed the valuation allowance on approximately $1.0 million of acquired foreign operating loss carryforwards and reduced goodwill accordingly.
 
11.  Earnings Per Share
 
The following is a reconciliation of the weighted average shares outstanding used to compute basic and diluted earnings per share.

 	 	2003	 	2002	 	2001	 	
Basic weighted average common shares outstanding	 	26,575,450	 	25,192,562	 	24,269,807	 	
Effect of dilutive securities - stock options and restricted stock	 	127,402	 	589,239	 	278,656	 	
Diluted weighted average common shares outstanding	 	26,702,852	 	25,781,801	 	24,548,463	 	
 
For the years ended December 31, 2003, 2002 and 2001, 2,019,764, 1,600,279 and 995,199, respectively, common shares issuable upon the exercise of stock options were anti-dilutive and were excluded from the calculation of diluted earning (loss) per share.
 
12.  Stockholders’ Equity
 
Authorized capitalization consists of 75 million shares of $0.01 par value common stock and 3.5 million shares of $0.01 par value preferred stock.  None of the preferred shares have been issued.  Pursuant to a Rights Agreement dated August 5, 1996, each common share carries with it four-ninths of a Right to purchase additional stock.  The Rights are not currently exercisable and cannot be separated from the shares unless certain specified events occur, including the acquisition of 20% or more of the company’s common stock.  In the event a person or group actually acquires 20% or more of the common stock, or if the company is merged with an acquiring person, subject to approval by the board of directors, each full Right permits the holder to purchase one share of common stock for $100.  The Rights expire on September 18, 2006, and may be redeemed by the company for $0.01 per Right (in cash or stock) under certain circumstances.
 
The amount and timing of the annual dividend is determined by the board of directors at its regular Fall meeting each year.  In December 2003 and 2002, the company paid a cash dividend to shareholders of $0.28 per share of common stock.  In March 2001 and December 2001, the company paid cash dividends to shareholders of $0.075 and $0.225, respectively, per share of common stock.
 
Currently, the company has authorization to purchase up to 2.5 million shares of common stock at management’s discretion.  As of December 31, 2003, the company had purchased approximately 1.9 million shares at a cost of $49.8 million pursuant to this authorization.  The company did not purchase any shares of its common stock during 2003 or 2002.
 
As discussed in Note 3, “Acquisitions,” the company issued approximately 2.2 million shares of the company’s common stock with an average market price of $32.34 per share in connection with the Grove Acquisition.  The common stock was issued from treasury stock with a per share historical cost value of $10.21.  The difference between the average market price of $32.34 per share and the treasury stock value of $10.21 per share was reflected in additional paid-in capital.  In addition, each outstanding option to purchase Grove shares was converted into an immediately exercisable option to purchase shares of the company’s common stock.  The number of shares of the company’s stock into which a Grove option was converted and the exercise price of those options was calculated based on the average closing price of the company’s common stock for the ten consecutive trading days ending on and including the second day prior to the closing of the transaction as defined in the merger agreement.  As a result of the conversion, the number of company shares underlying the Grove options approximated 0.1 million with an exercise price of $18.30 per share to certain Grove employees.

 
13.  Stock Options
 
Historically the company maintained two stock plans, The Manitowoc Company, Inc. 1995 Stock Plan, and The Manitowoc Company, Inc. Non-Employee Director 1999 Stock Plan, for the granting of stock options as an incentive to certain employees and to non-employee members of the board of directors.  Under these plans, stock options to acquire up to 2.5 million (employee) and 0.187 million (non-employee directors) shares of common stock, in the aggregate, may be granted under the time-vesting formula at an exercise price equal to the market price of the common stock at the date of grant.  For the 1995 Stock Plan, the options become exercisable in equal 25% increments beginning on the second anniversary of the grant date over a four-year period and expire ten years subsequent to the grant date.  For the 1999 Stock Plan, the options become exercisable in equal 25% increments beginning on the first anniversary of the grant date over a four-year period and expire ten years subsequent to the grant date.
 
In addition, with the acquisition of Grove, the company inherited the Grove Investors, Inc. 2001 Stock Incentive Plan.  As discussed above, the company converted the outstanding Grove stock options under the Grove Investors, Inc. 2001 Stock Incentive plan to Manitowoc stock options at the date of acquisition.  No future stock options may be granted under this plan.  Under this plan, after the conversion of Grove stock options to Manitowoc stock options, stock options to acquire 0.1 million shares of common stock were outstanding.  These options are fully vested and expire on September 25, 2011.
 
During the annual shareholder meeting held on May 6, 2003, the shareholders of the company’s common stock approved the adoption of The Manitowoc Company, Inc. 2003 Incentive Stock and Awards Plan (2003 Stock Plan).  The 2003 Stock Plan provides for both short-term and long-term incentive awards.  Stock-based awards may take the form of stock options, stock appreciation rights, restricted stock, or performance share awards.  The total number of shares of the company’s common stock available for awards under the 2003 Stock Plan will be 3.0 million shares subject to adjustments for stock splits, stock dividends and certain other transactions or events.  There were no awards granted under the 2003 Stock Plan as of December 31, 2003.
 
Stock option transactions under these plans for the years ended December 31, 2003, 2002 and 2001 are summarized as follows:

 	 	Shares
2003	 	Weighted
Average
Exercise
Price
2003	 	Shares
2002	 	Weighted
Average
Exercise
Price
2002	 	Shares
2001	 	Weighted
Average
Exercise
Price
2001	 	
Options outstanding, beginning of year	 	2,189,518	 	$	25.04	 	1,273,855	 	$	22.19	 	1,311,379	 	$	21.79	 	
Options granted	 	185,900	 	19.20	 	965,565	 	28.45	 	95,250	 	28.46	 	
Options exchanged in Grove acquisition	 	—	 	—	 	113,921	 	18.30	 	—	 	—	 	
Options exercised	 	(16,656	)	25.90	 	(114,548	)	20.02	 	(21,799	)	13.50	 	
Options forfeited and/or expired	 	(211,596	)	25.60	 	(49,275	)	29.59	 	(110,975	)	24.50	 	
Options outstanding, end of year	 	2,147,166	 	$	24.25	 	2,189,518	 	$	25.04	 	1,273,855	 	$	22.19	 	
Options exercisable, end of year	 	683,618	 	$	22.47	 	484,965	 	$	22.76	 	203,939	 	$	22.11	 	

 
The outstanding stock options at December 31, 2003, have a range of exercise prices of $9.93 to $40.39 per option.  The following table shows the options outstanding and exercisable by range of exercise prices at December 31, 2003:

Range of Exercise Prices	 	Outstanding	 	Weighted
Average
Remaining
Contractual
Life (Years)	 	Weighted
Average
Exercise
Price	 	Exercisable	 	Weighted
Average
Exercise
Price	 	
$ 9.93 - $12.12	 	11,329	 	0.6	 	$	9.93	 	11,329	 	$	9.93	 	
$ 16.16 - $20.20	 	827,690	 	7.0	 	19.26	 	388,190	 	19.20	 	
$ 20.20 - $24.23	 	25,000	 	8.8	 	24.08	 	—	 	—	 	
$ 24.23 - $28.27	 	890,954	 	7.8	 	25.30	 	169,599	 	25.45	 	
$ 28.27 - $32.31	 	152,938	 	5.1	 	29.84	 	107,000	 	30.17	 	
$ 32.31 - $36.35	 	237,255	 	8.1	 	34.72	 	7,500	 	33.72	 	
$ 36.35 - $40.39	 	2,000	 	8.4	 	38.94	 	—	 	—	 	
 	 	2,147,166	 	7.3	 	$	24.25	 	683,618	 	$	22.47	 	
 
The weighted-average fair value at date of grant for options granted during 2003, 2002 and 2001 was $16.12, $14.16 and $11.65 per option, respectively.  The fair value of options at date of grant was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions:

 	 	2003	 	2002	 	2001	 	
Expected life (years)	 	7	 	7	 	7	 	
Risk-free interest rate	 	3.3	%	3.5	%	5.2	%	
Expected volatility	 	35.0	%	34.3	%	33.6	%	
Expected dividend yield	 	1.1	%	1.1	%	1.1	%	
 
During February 2002, the company issued a total of 24 thousand shares of restricted stock with a fair market value of $33.99 at the date of grant to certain employees.  The restricted shares are actual shares of company stock that cannot be sold or otherwise transferred during a specified vesting period from the date of issuance.  The restrictions on transfer lapse evenly over a three-year period, provided the employee continues in active service at the company during this period.  As the restrictions lapse, the employee will own the shares outright without any investment, except the payment of applicable federal, state and local withholding taxes.  At the date of grant the company recorded $0.8 million of unearned compensation in stockholders’ equity.  This amount is being recognized as compensation expense over the three year vesting period.  During 2003 and 2002, the company recognized $0.3 million and $0.2 million, respectively, of compensation expense related to the restricted stock awards.
 
14.  Contingencies and Significant Estimates
 
The company has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in connection with the Lemberger Landfill Superfund Site near Manitowoc, Wisconsin.  Approximately 150 potentially responsible parties have been identified as having shipped hazardous materials to this site.  Eleven of those, including the company, have formed the Lemberger Site Remediation Group and have successfully negotiated with the United States Environmental Protection Agency and the Wisconsin Department of Natural Resources to fund the cleanup and settle their potential liability at this site.  Recent estimates indicate that the total costs to clean up this site are approximately $30 million.  However, the ultimate allocations of cost for this site are not yet final.  Although liability is joint and several, the company’s share of the liability is estimated to be 11% of the total cost.  Prior to December 31, 1996, the company accrued $3.3 million in connection with this matter.  The amounts the company has spent each year through December 31, 2003 to comply with its portion of the cleanup costs have not been material.  Remediation work at the site has been substantially completed, with only long-term pumping and treating of groundwater and site maintenance remaining.  The company’s remaining estimated liability for this matter, included in other current liabilities in the Consolidated Balance Sheet at December 31, 2003, is $0.6 million.  Based on the size of the company’s current allocation of liability at this site, the existence of other viable potential responsible parties and current reserve, the company does

 
not believe that any liability imposed in connection with this site will have a material adverse effect on its financial conditions results of operations, or cash flows.
 
At certain of the company’s other facilities, the company has identified potential contaminants in soil and groundwater.  The ultimate cost of any remediation required will depend upon the results of future investigation.  Based upon available information, we do not expect that the ultimate costs will be expected to be material to the company.
 
The company believes that it has obtained and is in substantial compliance with those material environmental permits and approvals necessary to conduct its various businesses.  Based on the facts presently known, the company does not expect environmental compliance costs to have a material adverse effect on its financial condition, results of operations or cash flows.
 
As of December 31, 2003, various product-related lawsuits were pending.  To the extent permitted under applicable law, all of these are insured with self-insurance retention levels.  The company’s self-insured retention levels vary by business unit, and have fluctuated over the last five years.  The range of the company’s self-insured retention levels is $0.1 million to $3.0 million per occurrence.  The high-end of the company’s self-insurance retention level is a legacy product liability insurance program inherited in the Grove acquisition in 2002 for cranes manufactured in the United States for occurrences from 2000 through October 2002.  As of December 31, 2003, the largest self-insured retention level currently maintained by the company is $2.0 million per occurrence and applies to product liability for cranes manufactured in the United States.
 
Product liability reserves in the Consolidated Balance Sheet at December 31, 2003, were $31.8 million; $9.6 million reserved specifically for cases and $22.2 million for claims incurred but not reported which were estimated using actuarial methods.  Based on the company’s experience in defending product liability claims, management believes the current reserves are adequate for estimated case resolutions on aggregate self-insured claims and insured claims.  Any recoveries from insurance carriers are dependent upon the legal sufficiency of claims and solvency of insurance carriers.
 
At December 31, 2003, and 2002, the company had reserved $41.7 million and $38.5 million, respectively, for warranty claims included in Product Warranties and Other Non-Current Liabilities in the Consolidated Balance Sheets.  Certain of these warranties and other related claims involve matters in dispute that ultimately are resolved by negotiations, arbitration or litigation.
 
It is reasonably possible that the estimates for environmental remediation, product liability and warranty costs may change in the near future based upon new information that may arise or matters that are beyond the scope of the company’s historical experience.  Presently, there are no reliable methods to estimate the amount of any such potential changes.
 
We are involved in numerous lawsuits involving asbestos-related claims in which the company is one of numerous defendants.  After taking into consideration legal counsel’s evaluation of such actions, the current political environment with respect to asbestos related claims, and the liabilities accrued with respect to such matters, in the opinion of management, ultimate resolution is not expected to have a material adverse effect on the financial conditions, results of operations and cash flows of the company.
 
The company is also involved in various other legal actions arising in the normal course of business, which, taking into account the liabilities accrued and legal counsel’s evaluation of such actions, in the opinion of management, ultimate resolution is not expected to have a material adverse effect on its financial conditions, results of operations and cash flows.
 
At December 31, 2003, the company is contingently liable under open standby letters of credit issued by the company’s bank in favor of third parties totaling $28.6 million primarily related to business in the Marine segment.

 
15.  Guarantees
 
As of December 31, 2003, the company offers certain buyback commitments and guaranteed residual values on cranes and indemnifications under its accounts receivable factoring arrangements.  Effective January 1, 2003, the company adopted the initial recognition and measurement provisions of FASB Interpretation (FIN) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.”  Therefore, for all indemnifications or guarantees meeting the FIN No. 45 requirements of an obligation and issued by the company beginning January 1, 2003, the company is required to recognize a liability for the fair value of such obligations.  The adoption of the initial recognition and measurement provisions of FIN No. 45 did not have a material impact on the company’s financial statements.
 
The company periodically enters into transactions with customers that provide for residual value guarantees and buyback commitments.  These transactions are recorded as operating leases.  Net proceeds received in connection with the initial transactions have been recorded as deferred revenue and are being amortized to income on a straight-line basis over a period equal to that of the customer’s third party financing agreement.  The deferred revenue included in other current and non-current liabilities at December 31, 2003 and 2002 was $75.2 million and $42.3 million, respectively.
 
If all buyback commitments and significant residual value guarantees outstanding were satisfied at December 31, 2003, the total cash cost to the company would be $33.1 million.  These buyback commitments expire at various time through 2009.
 
On May 28, 1999, the company entered into an accounts receivable factoring arrangement with a bank.  Under this arrangement, the company is required to purchase from the bank the first $0.5 million and amounts greater than $1.0 million of the aggregate uncollected receivables during a twelve-month period.  The company’s contingent factoring liability, net of cash collected from customers, was $22.4 million and $19.5 million at December 31, 2003 and 2002, respectively.
 
In the normal course of business, the company provides its customers a warranty covering workmanship, and in some cases materials, on products manufactured by the company.  Such warranty generally provides that products will be free from defects for periods ranging from 12 months to 60 months.  If a product fails to comply with the company’s warranty, the company may be obligated, at its expense, to correct any defect by repairing or replacing such defective products.  The company provides for an estimate of costs that may be incurred under its warranty at the time product revenue is recognized.  These costs primarily include labor and materials, as necessary, associated with repair or replacement.  The primary factors that affect the company’s warranty liability include the number of units shipped and historical and anticipated warranty claims.  As these factors are impacted by actual experience and future expectations, the company assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.  Below is a table summarizing the warranty activity for the year ended December 31, 2003:

Balance at December 31, 2002	 	$	38,514	 	
Accruals for warranties issued during 2003	 	22,901	 	
Settlements made (in cash or in kind) during 2003	 	(23,759	)	
Grove purchase accounting adjustment	 	1,509	 	
Currency translation	 	2,605	 	
Balance at December 31, 2003	 	$	41,770	 	
 
16.  Plant Consolidation and Restructuring
 
During the first quarter of 2002, the company recorded a pre-tax restructuring charge of $3.9 million in connection with the consolidation of its Multiplex operations into other of its Foodservice operations.  These actions were taken in an effort to streamline the company’s cost structure and utilize available capacity.  The charge included $2.8 million to write-down the building and land, which were available for sale, to estimated fair market value less cost to sell, $0.7 million related to the write-down of certain equipment, and $0.4 million related to severance and other employee related costs.  The entire charge was paid or utilized by December 31, 2002.  During the fourth quarter of 2003, the company recorded an additional charge related to the Multiplex building and land of $0.3 million.  This charge is recorded in restructuring costs of the Consolidated Statement of Earnings for the year ended December 31,

 
2003. During the first quarter of 2004, the company completed the sale of the Multiplex building and land.  The company received proceeds of $2.7 million from the sale.
 
During the second quarter of 2002, the company finalized the purchase accounting for the Potain acquisition, which included recording an $8.1 million liability associated with certain restructuring and integration activities.  To achieve reductions in operating costs and to integrate the operations of Potain, the company recorded an $8.1 million liability related primarily to employee severance benefits and workforce reductions.  Approximately 135 hourly and salaried positions were eliminated.  To date the company has utilized approximately $4.0 million of this liability.  The remainder of this reserve will be utilized through 2006.
 
During the fourth quarter of 2002, the company completed certain integration activities related to the Grove acquisition and other restructuring activities in the Crane segment.  The total amount recognized by the company for these integration and restructuring activities was $12.1 million.  Of this amount $4.4 million was recorded in the opening balance sheet of Grove and $7.7 million was recorded as a charge to earnings during the fourth quarter of 2002.  These actions were taken in an effort to achieve reductions in operating costs, integrate and consolidate certain operations and functions within the segment and to utilize available capacity.
 
The $4.4 million recorded in Grove’s opening balance sheet related to severance and other employee related costs for headcount reductions at various Grove facilities.  The $7.7 million charge included $4.0 million related to severance and other employee related costs for headcount reductions at various Manitowoc and Potain facilities, $2.7 million related to the write-down of certain property, plant and equipment, and $1.0 million related to lease termination costs.  In total approximately 600 hourly and salaried positions were eliminated and four facilities were consolidated into other Crane operations.  To date, the company has utilized approximately $8.7 million of the total $12.1 million reserve which includes $2.7 million non-cash write-down of property, plant and equipment, and $6.0 million of cash paid to employees for severance.
 
During the second quarter of 2003, the company completed certain additional integration activities related to the Grove acquisition and other restructuring activities in the Crane segment.  The integration and restructuring charges recorded during the second quarter of 2003 include the following: $12.4 million for consolidation of the National Crane facility located in Nebraska to the Grove facility located in Pennsylvania; $4.2 million to write-down certain facilities to estimated book value less cost to sell as a result of consolidation of certain Crane segment operations; and  $0.9 million related to severance and other employee related costs for headcount reductions at the Grove facilities in Europe.  Both the $12.4 million charge for the consolidation of National Crane and the $0.9 million charge for severance and other employee related costs were recorded in the opening balance sheet of Grove.  The $4.2 million charge for the write-down of the facilities was recorded as a charge to earnings during the second quarter of 2003.  All of these actions were taken in an effort to achieve further reductions in operating costs, to integrate and consolidate certain operations and functions within the segment and to utilize available capacity.
 
The actions to consolidate the National Crane facility with the Grove facility were taken in an effort to streamline the company’s cost structure and utilize available capacity at the Grove facility.  The charge included $3.7 million related to severance and other employee related costs for workforce reductions.  Approximately 290 hourly and salaried positions were eliminated with the consolidation.  The charge also included $6.8 million to write-down the National Crane building and land to estimated fair market value less cost to sell, to prepare the facility for sale and to write-down certain machinery and equipment which will not be relocated to the Grove facility.  In addition, the company recorded reserves of $1.2 million to write-off inventory which was acquired in the Grove acquisition and will not be relocated and $0.7 million for other consolidation costs.  Of the $12.4 million recorded for the consolidation of the National Crane facility, approximately $6.2 million are non-cash-related charges.  Of the $6.2 million cash related charges, $1.6 million has been utilized as of December 31, 2003.  The cash payments are expected to be completed by the first quarter of 2004.  In addition to the $12.4 million recorded in the opening balance sheet, the company recorded a charge of $2.4 million to earnings during the year ended December 31, 2003 for consolidation costs which were expensed as incurred.  This amount is recorded in Restructuring Costs in the Consolidated Statement of Earnings.
 
The $4.2 million pre-tax charge was recorded by the company to write-down certain facilities to estimated fair value less cost to sell primarily as a result of the consolidation of certain Crane segment operations.  The entire $4.2 million charge is a non-cash charge.

 
During the second quarter of 2003, the company completed negotiations with the Works Council in Europe and recorded a $0.9 million reserve in the Grove opening balance sheet for costs related to work force reductions in its Grove facilities in Europe.  Approximately 10 salaried positions were eliminated as a result of the work force reduction.  All of this reserve has been utilized as of December 31, 2003.
 
On January 1, 2003, the company adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.”  SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities.  SFAS No. 146 requires that a liability for certain costs associated with an exit or disposal activity be recognized when the liability is incurred.  During the year ended December 31, 2003, the company incurred approximately $3.1 million of restructuring costs related to the consolidation of its European crane facilities.  These charges have been included in Restructuring Costs in the Consolidated Statement of Earnings for the year ended December 31, 2003.
 
17. Employee Benefit Plans
 
Savings and Investment Plans The company sponsors a defined contribution savings plan that allows substantially all domestic employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan-specific guidelines.  The plan requires the company to match 100% of the participants’ contributions up to 3% and match an additional 50% of the participants’ contributions between 3% to a maximum of 6% of the participants’ compensation.  The company also provides retirement benefits through noncontributory deferred profit sharing plans covering substantially all employees.  Company contributions to the plans are based upon formulas contained in the plans.  Total costs incurred under these plans were $7.6 million, $5.6 million and $10.6 million for the years ended December 31, 2003, 2002 and 2001, respectively.
 
Pension, Postretirement Health and Other Benefit Plans Prior to the acquisition of Marinette Marine, the company did not have any defined benefit pension plans, rather the company provided retirement benefits through noncontributory deferred profit sharing plans.  As a result of the acquisitions of Marinette Marine in 2000, Potain in 2001 and Grove in 2002, the company has assumed several pension plans and has assumed two additional postretirement health plans.  With the acquisition of Marinette Marine in 2000, the company assumed one pension plan and one postretirement plan.  The pension plan was frozen in 2001 and converted the participants to the deferred profit sharing program discussed above.  With the acquisition of Grove in 2002, the company assumed six pension plans and a postretirement plan.  During 2002, the company froze two of the Grove pension plans and converted the participants to the deferred profit sharing plan program described above.  The company also merged those two frozen Grove plans with the frozen Marinette Marine pension plan.  In addition, because of the consolidation of the National Crane facility to the Shady Grove facility in 2003, the company partially terminated the two National Crane pension plans.
 
As a result of the above, the company now provides certain pension, health care and death benefits for eligible retirees and their dependents.  The pension benefits are funded, while the health care and death benefits are not funded but are paid as incurred.  Eligibility for coverage is based on meeting certain years of service and retirement qualifications.  These benefits may be subject to deductibles, co-payment provisions, and other limitations.  The company has reserved the right to modify these benefits.
 
In the fourth quarter of 2003, the company eliminated certain future postretirement medical benefits for participating employees in the company’s postretirement medical plans.  This amendment resulted in a curtailment gain of $12.9 million being recorded by the company in the Consolidated Statement of Earnings.  See further discussion below.
 
The tables that follow contain the components of the periodic benefit costs for 2003, 2002 and 2001, respectively, the reconciliation of changes in the benefit obligations, the changes in plan assets and the funded status as of December 31, 2003 and 2002, the company’s asset allocation as of December 31, 2003 and 2002 for U.S. plans, the estimated 2004 contributions for U.S. plans, and the accumulated benefit obligation for all U.S. pension plans as of December 31, 2003.  Data presented in the reconciliation of the changes in benefit obligation, the changes in plan assets and the funded status of the plan titled “Acquisitions” relate to the Grove acquisition in August 2002.  Period benefit cost of assumed plans through acquisition is recognized in the Consolidated Statement of Earnings from the date of acquisition.

 
The components of period benefit costs for the years ended December 31, 2003, 2002 and 2001 are as follows:

 	 	U.S. Pension Plans	 	Non-U.S. Pension
Plans	 	Postretirement Health
and Other	 	
 	 	2003	 	2002	 	2001	 	2003	 	2002	 	2001	 	2003	 	2002	 	2001	 	
For the Years Ended December 31	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost- benefits earned during the year	 	$	448	 	$	1,026	 	$	—	 	$	1,274	 	$	719	 	$	324	 	$	1,583	 	$	1,037	 	$	547	 	
Interest cost of projected benefit obligation	 	6,259	 	3,259	 	787	 	3,356	 	1,581	 	218	 	5,303	 	3,226	 	1,667	 	
Expected return on assets	 	(5,092	)	(2,877	)	(1,032	)	(2,134	)	(914	)	(27	)	—	 	—	 	—	 	
Amortization of transition (asset) obligation	 	10	 	10	 	—	 	—	 	—	 	—	 	—	 	16	 	83	 	
Amortization of prior service cost	 	2	 	2	 	—	 	—	 	—	 	—	 	—	 	—	 	—	 	
Amortization of actuarial net (gain) loss	 	92	 	173	 	4	 	(39	)	(49	)	—	 	362	 	417	 	—	 	
Net periodic benefit cost	 	$	1,719	 	$	1,593	 	$	(241	)	$	2,457	 	$	1,337	 	$	515	 	$	7,248	 	$	4,696	 	$	2,297	 	
Weighted average assumptions:-	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount rate	 	6.75	%	7.75	%	7.75	%	5.75	%	3.75	%	N/A	 	6.75	%	7.24	%	7.25	%	
Expected return on plan assets	 	9.00	%	9.00	%	9.00	%	5.50	%	5.50	%	N/A	 	N/A	 	N/A	 	N/A	 	
Rate of compensation increase	 	4.00	%	4.00	%	4.00	%	3.00	%	3.00	%	N/A	 	N/A	 	N/A	 	N/A	 	
 
The prior service costs are amortized on a straight-line basis over the average remaining service period of active participants.  Gains and losses in excess of 10% of the greater of the benefit obligation and the market-related value of assets are amortized over the average remaining service period of active participants.
 
The following is a reconciliation of the changes in benefit obligation, the changes in plan assets, and the funded status as of December 31, 2003 and 2002, respectively.

 

 	 	U.S. Pension Plans	 	Non-U.S. Pension Plans	 	Postretirement Health
and Other	 	
 	 	2003	 	2002	 	2003	 	2002	 	2003	 	2002	 	
Change in Benefit Obligation	 	 	 	 	 	 	 	 	 	 	 	 	 	
Benefit obligation, beginning of year	 	$	94,715	 	$	10,909	 	$	62,598	 	$	7,427	 	$	78,677	 	$	29,893	 	
Service cost	 	448	 	1,026	 	1,274	 	719	 	1,583	 	1,037	 	
Interest cost	 	6,259	 	3,259	 	3,356	 	1,581	 	5,303	 	3,226	 	
Acquisitions (divestitures)	 	—	 	83,429	 	—	 	49,288	 	(381	)	44,689	 	
Participant contributions	 	—	 	—	 	129	 	—	 	1,614	 	1,199	 	
Actuarial (gain) loss	 	7,945	 	(1,545	)	(158	)	2,155	 	5,903	 	3,724	 	
Currency translation adjustment	 	—	 	—	 	7,530	 	2,241	 	—	 	—	 	
Curtailments	 	(2,080	)	—	 	(279	)	—	 	(29,780	)	—	 	
Settlements	 	—	 	—	 	(844	)	—	 	—	 	—	 	
Benefits paid	 	(3,956	)	(2,363	)	(1,128	)	(813	)	(7,083	)	(5,091	)	
Benefit obligation, end of year	 	103,331	 	94,715	 	72,478	 	62,598	 	55,836	 	78,677	 	
Change in Plan Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value of plan assets, beginning of year	 	60,915	 	11,406	 	32,574	 	5,660	 	—	 	—	 	
Actual return on plan assets	 	11,566	 	(962	)	3,976	 	(241	)	—	 	—	 	
Acquisitions	 	—	 	51,508	 	—	 	25,742	 	—	 	—	 	
Employer contributions	 	2,138	 	1,326	 	2,389	 	892	 	5,469	 	3,892	 	
Participant contributions	 	—	 	—	 	129	 	—	 	1,614	 	1,199	 	
Currency translation adjustment	 	—	 	—	 	4,309	 	1,334	 	—	 	—	 	
Benefits paid	 	(3,956	)	(2,363	)	(1,128	)	(813	)	(7,083	)	(5,091	)	
Settlements	 	—	 	—	 	(844	)	—	 	—	 	—	 	
Fair value of plan assets, end of year	 	70,663	 	60,915	 	41,405	 	32,574	 	—	 	—	 	
Funded status	 	(32,668	)	(33,800	)	(31,073	)	(30,024	)	(55,836	)	(78,677	)	
Unrecognized loss	 	7,706	 	4,659	 	441	 	1,490	 	1,553	 	12,900	 	
Unrecognized prior service cost	 	6	 	—	 	—	 	—	 	—	 	—	 	
Unrecognized transition obligation	 	39	 	1,727	 	—	 	—	 	—	 	—	 	
Accrued benefit cost	 	$	(24,917	)	$	(27,414	)	$	(30,632	)	$	(28,534	)	$	(54,283	)	$	(65,777	)	
Amounts recognized in the Consolidated Balance sheet at December 31	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prepaid benefit cost	 	$	—	 	$	3,217	 	$	92	 	$	—	 	$	—	 	$	—	 	
Accounts payable and accrued expenses	 	(7,509	)	—	 	—	 	—	 	—	 	—	 	
Pension obligation	 	(26,410	)	(37,517	)	(30,829	)	(28,534	)	—	 	—	 	
Postretirement health and other benefit obligations	 	—	 	—	 	—	 	—	 	(54,283	)	(65,777	)	
Intangible asset, included in other non-current assets	 	45	 	56	 	—	 	—	 	—	 	—	 	
Accumulated other comprehensive income	 	8,957	 	6,830	 	105	 	—	 	—	 	—	 	
Net amount recognized	 	$	(24,917	)	$	(27,414	)	$	(30,632	)	$	(28,534	)	$	(54,283	)	$	(65,777	)	
Weighted-Average Assumptions	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount rate	 	6.25	%	6.75	%	5.25	%	5.75	%	6.25	%	6.75	%	
Expected return on plan assets	 	8.50	%	9.00	%	5.25	%	5.50	%	N/A	 	N/A	 	
Rate of compensation increase	 	N/A	 	4.00	%	3.50	%	3.00	%	N/A	 	N/A	 	

For measurement purposes, an 11.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2003.  The rate was assumed to decrease gradually to 5.0% for 2010 and remain at that level thereafter.  Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans.  A 1% change in assumed health care cost trend rates would have the following effects:

 	 	1%
Increase	 	1%
Decrease	 	
Effect on total service and interest cost components of net periodic postretirement health care benefit cost	 	$	493	 	$	(433	)	
 	 	 	 	 	 	
Effect on the health care component of the accumulated postretirement benefit obligation	 	$	5,982	 	$	(5,295	)	
 
It is reasonably possible that the estimate for future retirement and health costs may change in the near future due to changes in the health care environment or changes in interest rates that may arise.  Presently, there is no reliable means to estimate the amount of any such potential changes.
 
During 2003 there were curtailments of the National Crane Non-bargaining Pension Plan due to the closing of the facility (this curtailment gain was recorded in purchase accounting; therefore, there is no impact on the Consolidated Statement of Earnings).  In addition there were curtailments of the Grove and Manitowoc postretirement health plan

 
due to the elimination of post-65 medical coverage for future retirees.  Below is a summary of the curtailment gains for both plans all of which were recorded in 2003.
 
National Crane Pension Plan

 	 	Before
Curtailment	 	Effect of
Curtailment	 	After
Curtailment	 	
Projected benefit obligation	 	$	(8,881	)	$	(2,080	)	$	(6,801	)	
Plan assets at fair value	 	5,380	 	—	 	5,380	 	
Funded status	 	(3,501	)	(2,080	)	(1,421	)	
Unamortized (gain) loss	 	(1,251	)	—	 	(1,251	)	
 	 	$	(4,752	)	$	(2,080	)	$	(2,672	)	

Postretirement Health

 	 	Before
Curtailment	 	Effect of
Curtailment	 	After
Curtailment	 	
Accumulated postretirement benefit obligation	 	$	(83,646	)	$	29,780	 	$	(53,866	)	
Plan assets at fair value	 	—	 	—	 	—	 	
Funded status	 	(83,646	)	29,780	 	(53,866	)	
Unamortized (gain) loss	 	16,883	 	(16,883	)	—	 	
 	 	$	(66,763	)	$	12,897	 	$	(53,866	)	

The company’s postretirement benefit plans provide for prescription drug benefits.  On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was signed into law.  The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FASB Staff Position FAS 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” any measures of the company’s accumulated postretirement benefit obligation or net periodic postretirement benefit cost in the Consolidated Financial Statements and accompanying notes do not reflect the effects of the Act on the plans.  Specific authoritative guidance on the accounting for the federal subsidy is pending and that guidance, when issued, could require the company to change previously reported information.
 
The weighted-average asset allocations of the U.S. Pension Plans at December 31, 2003 and 2002, by asset category are as follows:

 	 	2003	 	2002	 	
Small cap stocks	 	1.60	%	10.30	%	
Mid cap stocks	 	2.30	%	15.30	%	
Large cap stocks	 	45.80	%	27.80	%	
International stocks	 	9.50	%	5.20	%	
Intermediate bonds	 	36.90	%	39.50	%	
Cash	 	3.90	%	1.90	%	
 	 	100.00	%	100.00	%	
 
The board of directors has established the Retirement Plan Committee (the Committee) to manage the operations and administration of all U.S. benefit plans and related trusts.  The Committee has an investment policy for the pension plan assets that establishes target assets allocations for the above listed asset classes as follows:  Small Cap Stocks 10%; Mid Cap Stocks 15%; Large Cap Stocks 25%; International Stock 10% Intermediate Bonds 40% and cash 0%.  The Committee is committed to diversification to reduce the risk of large losses.  To that end, the Committee has adopted polices requiring that each asset class will be diversified, multiple managers with differing styles of management will be employed, and equity exposure will be limited to 60% of the total portfolio value.  On a quarterly basis, the Committee reviews progress towards achieving the pension plans’ and individual managers’ performance objectives.

 
To develop the expected long-term rate of return on assets assumptions, the company considered the historical returns and future expectations for returns in each asset class, as well as targeted asset allocation percentages within the pension portfolio.  This resulted in the selection of 8.5% for 2003 and 2004 long-term rate of return on assets assumption.
 
The expected 2004 contributions for the U.S. pension plans are as follows: Minimum contribution for 2004 is $9.6 million; Discretionary contribution is $0; and Non-cash contribution is $0.  Expected company paid claims for the postretirement health and life plans are $4.2 million for the 2004 calendar year.
 
The accumulated benefit obligation for all of our U.S. pension plans at December 31, 2003 is as follows:

Manitowoc Merged Plan	 	$	83,120	 	
National Crane Bargaining Plan	 	4,202	 	
National Crane Non-Bargaining Plan	 	6,802	 	
Grove Supplemental Executive Retirement Plan (SERP)	 	3,482	 	
Manitowoc SERP	 	5,725	 	
Accumulated benefit obligation December 31, 2003	 	$	103,331	 	

The measurement date for all plans is December 31, 2003.
 
The company maintains a supplemental executive retirement plan (SERP) for certain executive officers of the company and its subsidiaries that is unfunded.  Expenses related to the plan in the amount of $1.2 million and $1.0 million were recorded in 2003 and 2002, respectively.  Amounts accrued as of December 31, 2003 and 2002 related to the plans were $4.6 million and $3.2 million, respectively.
 
The company has a deferred compensation plan that enables certain key employees and non-employee directors to defer a portion of their compensation or fees on a pre-tax basis.  The company matches contributions under this plan at a rate equal to an employee’s profit sharing percentage plus one percent.  Effective January 1, 2002, the company amended its deferred compensation plan to provide plan participants the ability to direct deferrals and company matching contributions into two separate investment programs, Program A and Program B.
 
The investment assets in Program A and B are held in two separate Deferred Compensation Plans, which restrict the company’s use and access to the funds but which are also subject to the claims of the company’s general creditors in rabbi trusts.  Program A invests solely in the company’s stock; dividends paid on the company’s stock are automatically reinvested; and all distributions must be made in company stock.  Program B offers a variety of investment options but does not include company stock as an investment option.  All distributions from Program B must be made in cash.  Participants cannot transfer assets between programs.
 
Program A is accounted for as a plan which does not permit diversification.  As a result, the company stock held by Program A is classified in equity in a manner similar to accounting for treasury stock.  The deferred compensation obligation is classified as an equity instrument.  Changes in the fair value of the company’s stock and the compensation obligation are not recognized.  The asset and obligation for Program A were both $1.0 million at December 31, 2003 and $1.4 million at December 31, 2002.  These amounts are offset in the Consolidated Statement of Stockholders’ Equity and Comprehensive Income (Loss).
 
Program B is accounted for as a plan which permits diversification.  As a result, the assets held by Program B are classified as an asset in the Consolidated Balance Sheets and changes in the fair value of the assets are recognized in earnings.  The deferred compensation obligation is classified as a liability in the Consolidated Balance Sheets and adjusted, with a charge or credit to compensation cost, to reflect changes in the fair value of the obligation.  The assets, included in other non-current assets, and obligation, included in other non-current liabilities were both $9.2 million at December 31, 2003 and $8.0 million at December 31, 2002.  The net impact on the Consolidated Statements of Earnings was $0 for both the years ended December 31, 2003 and 2002.

 
18. Leases
 
The Company leases various property, plant and equipment.  Terms of the leases vary, but generally require the company to pay property taxes, insurance premiums, and maintenance costs associated with the leased property.  Rental expense attributed to operating leases was $17.8 million, $20.3 million, and $14.6 million in 2003, 2002 and 2001, respectively.  Future minimum rental obligations under non-cancelable operating leases, as of December 31, 2003, are payable as follows:

2004	 	$	16,087	 	
2005	 	13,534	 	
2006	 	11,971	 	
2007	 	10,613	 	
2008	 	8,965	 	
Thereafter	 	21,058	 	
 
19. Business Segments
 
The company identifies its segments using the “management approach,” which designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the company’s reportable segments.
 
The company has three reportable segments: Crane; Foodservice and Marine.
 
The Crane business is a global provider of engineered lift solutions which designs, manufactures and markets a comprehensive line of lattice-boom crawler cranes, mobile telescopic cranes, tower cranes and boom trucks.  The Crane products are marketed under the Manitowoc, Grove, Potain and National brand names and are used in a wide variety of applications, including energy, petrochemical and industrial projects, infrastructure development such as road, bridge and airport construction, commercial and high-rise residential construction, mining and dredging.
 
The Foodservice business is a broad-line manufacturer of “cold side” commercial foodservice products.  Foodservice designs, manufactures and markets full product lines of ice making machines, walk-in and reach-in refrigerators/freezers, fountain beverage delivery systems and other foodservice refrigeration products for the lodging, restaurant, healthcare, convenience store, soft-drink bottling and institutional foodservice markets.  Foodservice products are marketed under the Manitowoc, Kolpak, SerVend, Multiplex, Harford-Duracool, McCall, Flomatic, Compact and Icetronic brand names.
 
The Marine business provides new construction, ship repair and maintenance services for freshwater and saltwater vessels from four shipyards on the U.S. Great Lakes.  Marine is also a provider of Great Lakes and oceangoing mid-sized commercial, research, and military vessels.  Marine serves the Great Lakes maritime market consisting of both U.S. and Canadian fleets, inland waterway operators, and ocean going vessels that transit the Great Lakes and St. Lawrence Seaway.
 
The accounting policies of the segments are the same as those described in the summary of significant accounting policies except that certain expenses are not allocated to the segments.  These unallocated expenses are corporate overhead, amortization expense of intangible assets with definite lives, interest expense and income taxes.  The company evaluates segment performance based upon profit and loss before the aforementioned expenses.  Financial information relating to the company’s reportable segments for the years ended December 31, 2003, 2002 and 2001 is as follows.  Restructuring costs separately identified in the Consolidated Statements of Earnings are included as reductions to the respective segments operating earnings for each year below.

 

 	 	2003	 	2002	 	2001	 	
 	 	 	 	 	 	 	 	
Net sales from continuing operations:	 	 	 	 	 	 	 	
Crane	 	$	962,808	 	$	674,060	 	$	391,109	 	
Foodservice	 	457,000	 	462,906	 	411,637	 	
Marine	 	151,048	 	219,457	 	181,677	 	
Total	 	$	1,570,856	 	$	1,356,423	 	$	984,423	 	
 	 	 	 	 	 	 	 	
Operating earnings from continuing operations:	 	 	 	 	 	 	 	
Crane	 	$	24,437	 	$	55,613	 	$	62,654	 	
Foodservice	 	65,927	 	56,749	 	57,942	 	
Marine	 	4,750	 	19,934	 	18,924	 	
Corporate	 	(19,210	)	(15,171	)	(11,961	)	
Amortization expense	 	(2,919	)	(2,001	)	(11,074	)	
Curtailment gain	 	12,897	 	—	 	—	 	
Operating earnings from continuing operations	 	$	85,882	 	$	115,124	 	$	116,485	 	
 	 	 	 	 	 	 	 	
Capital expenditures	 	 	 	 	 	 	 	
Crane	 	$	25,028	 	$	19,116	 	$	17,032	 	
Foodservice	 	5,005	 	4,107	 	7,307	 	
Marine	 	735	 	1,490	 	2,908	 	
Corporate	 	1,209	 	8,283	 	1,857	 	
Total	 	$	31,977	 	$	32,996	 	$	29,104	 	
 	 	 	 	 	 	 	 	
Total assets:	 	 	 	 	 	 	 	
Crane	 	$	1,094,183	 	$	1,022,771	 	$	577,920	 	
Foodservice	 	290,586	 	320,840	 	368,363	 	
Marine	 	91,519	 	93,983	 	77,291	 	
Corporate	 	126,293	 	139,529	 	57,238	 	
Total	 	$	1,602,581	 	$	1,577,123	 	$	1,080,812	 	

Net sales from continuing operations and long-lived asset information by geographic area as of and for the years ended December 31 are as follows:

 	 	Net Sales	 	Long-Lived Assets	 	
 	 	2003	 	2002	 	2001	 	2003	 	2002	 	
United States	 	$	902,486	 	$	912,328	 	$	751,071	 	$	498,729	 	$	493,869	 	
Other North America	 	13,173	 	25,711	 	17,333	 	—	 	—	 	
Europe	 	477,001	 	296,597	 	155,728	 	425,383	 	425,783	 	
Asia	 	84,066	 	68,390	 	31,264	 	9,610	 	9,454	 	
Middle East	 	59,881	 	18,885	 	6,905	 	—	 	—	 	
Central and South America	 	10,883	 	7,410	 	6,468	 	711	 	853	 	
Africa	 	7,906	 	7,291	 	6,180	 	—	 	—	 	
South Pacific and Caribbean	 	2,989	 	13,275	 	6,872	 	—	 	—	 	
Australia	 	12,471	 	6,536	 	2,602	 	1,136	 	—	 	
Total	 	$	1,570,856	 	$	1,356,423	 	$	984,423	 	$	935,569	 	$	929,959	 	

Net sales from continuing operations and long-lived asset information for Europe primarily relates to France, Germany and the United Kingdom.
 
20. Subsidiary Guarantors of Senior Subordinated Notes due 2011
 
The following tables present condensed consolidating financial information for (a) the parent company, The Manitowoc Company, Inc. (Parent); (b) on a combined basis, the guarantors of the Senior Subordinated Notes due 2011, which include all of the domestic wholly owned subsidiaries of the company (Subsidiary Guarantors); and (c)

 
on a combined basis, the wholly and partially owned foreign subsidiaries of the company which do not guarantee the Senior Subordinated Notes due 2011 (Non-Guarantor Subsidiaries).  Separate financial statements of the Subsidiary Guarantors are not presented because the guarantors are fully and unconditionally, jointly and severally liable under the guarantees, and the company believes such separate statements or disclosures would not be useful to investors.
 
Condensed Consolidating Statement of Earnings
For the year ended December 31, 2003

 	 	Parent	 	Guarantor	 	Non-
Guarantor	 	Eliminations	 	Total	 	
Net sales	 	$	—	 	$	993,987	 	$	689,536	 	$	(112,667	)	$	1,570,856	 	
Costs and expenses:	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	—	 	782,060	 	568,729	 	(112,667	)	1,238,122	 	
Engineering, selling and administrative expenses	 	17,942	 	140,107	 	88,692	 	—	 	246,741	 	
Amortization expense	 	—	 	682	 	2,237	 	—	 	2,919	 	
Plant consolidation and restructuring costs	 	—	 	4,799	 	5,290	 	—	 	10,089	 	
Curtailment gain	 	—	 	(12,897	)	—	 	—	 	(12,897	)	
Total costs and expenses	 	17,942	 	914,751	 	664,948	 	(112,667	)	1,484,974	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings (loss) from continuing operations	 	(17,942	)	79,236	 	24,588	 	—	 	85,882	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	(51,287	)	(2,158	)	(3,456	)	—	 	(56,901	)	
Management fees	 	22,664	 	(22,664	)	—	 	—	 	—	 	
Loss on debt extinguishment	 	(7,300	)	—	 	—	 	—	 	(7,300	)	
Other income (expense) - net	 	38,188	 	(21,288	)	(16,586	)	—	 	314	 	
Total other income (expenses) - net	 	2,265	 	(46,110	)	(20,042	)	—	 	(63,887	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from continuing operations before taxes on income (loss)	 	(15,677	)	33,126	 	4,546	 	—	 	21,995	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Provision (benefit) for taxable income (loss)	 	(3,138	)	6,625	 	472	 	—	 	3,959	 	
Earnings (loss) before equity in earnings of subsidiaries	 	(12,539	)	26,501	 	4,074	 	—	 	18,036	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of subsidiaries	 	16,088	 	—	 	—	 	(16,088	)	—	 	
Earnings from continuing operations	 	3,549	 	26,501	 	4,074	 	(16,088	)	18,036	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Loss from discontinued operations, net of income taxes	 	—	 	(793	)	(1,647	)	—	 	(2,440	)	
Loss on sale or closure of discontinued operations, net of income taxes	 	—	 	(2,005	)	(10,042	)	—	 	(12,047	)	
Net earnings (loss)	 	$	3,549	 	$	23,703	 	$	(7,615	)	$	(16,088	)	$	3,549	 	

 
Condensed Consolidating Statement of Earnings
For the year ended December 31, 2002

 	 	Parent	 	Guarantor	 	Non-
Guarantor	 	Eliminations	 	Total	 	
Net sales	 	$	—	 	$	984,650	 	$	433,089	 	$	(61,316	)	$	1,356,423	 	
Costs and expenses:	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	—	 	753,186	 	343,216	 	(61,316	)	1,035,086	 	
Engineering, selling and administrative expenses	 	14,171	 	129,967	 	48,465	 	—	 	192,603	 	
Amortization expense	 	—	 	—	 	2,001	 	—	 	2,001	 	
Plant consolidation and restructuring costs	 	—	 	4,901	 	6,708	 	—	 	11,609	 	
Total costs and expenses	 	14,171	 	888,054	 	400,390	 	(61,316	)	1,241,299	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings (loss) from continuing operations	 	(14,171	)	96,596	 	32,699	 	—	 	115,124	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	(46,906	)	(1,368	)	(3,689	)	—	 	(51,963	)	
Management fees	 	20,600	 	(21,275	)	675	 	—	 	—	 	
Other income (expense) - net	 	11,485	 	3,462	 	(13,029	)	—	 	1,918	 	
Total other expenses - net	 	(14,821	)	(19,181	)	(16,043	)	—	 	(50,045	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from continuing operations before taxes on income (loss)	 	(28,992	)	77,415	 	16,656	 	—	 	65,079	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Provision (benefit) for taxes on income (loss)	 	(11,324	)	30,237	 	4,516	 	—	 	23,429	 	
Earnings (loss) before equity in earnings of subsidiaries	 	(17,668	)	47,178	 	12,140	 	—	 	41,650	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of subsidiaries	 	33,966	 	—	 	—	 	(33,966	)	—	 	
Earnings from continuing operations	 	16,298	 	47,178	 	12,140	 	(33,966	)	41,650	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from discontinued operations, net of income taxes	 	—	 	2,639	 	(2,534	)	—	 	105	 	
Loss on sale or closure of discontinued operations, net of income taxes	 	—	 	(25,457	)	—	 	—	 	(25,457	)	
Cumulative effect of accounting change, net of income taxes	 	(36,800	)	(36,800	)	—	 	36,800	 	(36,800	)	
Net earnings (loss)	 	$	(20,502	)	$	(12,440	)	$	9,606	 	$	2,834	 	$	(20,502	)	

 
Condensed Consolidating Statement of Earnings
For the year ended December 31, 2001

 	 	Parent	 	Guarantor	 	Non-
Guarantor	 	Eliminations	 	Total	 	
Net sales	 	$	—	 	$	817,475	 	$	185,322	 	$	(18,374	)	$	984,423	 	
Costs and expenses:	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	—	 	593,866	 	138,333	 	(18,374	)	713,825	 	
Engineering, selling and administrative expenses	 	11,962	 	106,737	 	24,340	 	—	 	143,039	 	
Amortization expense	 	336	 	7,377	 	3,361	 	—	 	11,074	 	
Total costs and expenses	 	12,298	 	707,980	 	166,034	 	(18,374	)	867,938	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings (loss) from continuing operations	 	(12,298	)	109,495	 	19,288	 	—	 	116,485	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	(26,937	)	(1,661	)	(8,810	)	—	 	(37,408	)	
Management fees	 	13,803	 	(13,803	)	—	 	—	 	—	 	
Loss on debt extinguishment	 	(5,540	)	—	 	—	 	—	 	(5,540	)	
Other net income (expense) - net	 	(1,004	)	(919	)	655	 	—	 	(1,268	)	
Total other expense - net	 	(19,678	)	(16,383	)	(8,155	)	—	 	(44,216	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from continuing operations before taxes on income (loss)	 	(31,976	)	93,112	 	11,133	 	—	 	72,269	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Provision (benefit) for taxes on income (loss)	 	(12,159	)	35,407	 	4,627	 	—	 	27,875	 	
Earnings (loss) before equity in earnings of subsidiaries	 	(19,817	)	57,705	 	6,506	 	—	 	44,394	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of subsidiaries	 	65,365	 	—	 	—	 	(65,365	)	—	 	
Earnings from continuing operations	 	45,548	 	57,705	 	6,506	 	(65,365	)	44,394	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from discontinued operations, net of income taxes	 	—	 	1,251	 	(97	)	—	 	1,154	 	
Net earnings	 	$	45,548	 	$	58,956	 	$	6,409	 	$	(65,365	)	$	45,548	 	

Condensed Consolidating Balance Sheet
As of December 31, 2003

 	 	Parent	 	Guarantor	 	Non-
Guarantor	 	Eliminations	 	Total	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	11,816	 	$	(100	)	$	33,252	 	$	—	 	$	44,968	 	
Marketable securities	 	2,220	 	—	 	—	 	—	 	2,220	 	
Accounts receivable- net	 	4,086	 	76,648	 	164,276	 	—	 	245,010	 	
Inventories -  net	 	—	 	89,103	 	143,774	 	—	 	232,877	 	
Deferred income taxes	 	50,297	 	—	 	21,484	 	—	 	71,781	 	
Other current assets	 	302	 	24,944	 	23,987	 	—	 	49,233	 	
Total current assets	 	68,721	 	190,595	 	386,773	 	—	 	646,089	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Property, plant and equipment -  net	 	12,089	 	149,696	 	172,833	 	—	 	334,618	 	
Goodwill -  net	 	5,434	 	249,599	 	151,200	 	—	 	406,233	 	
Other intangible assets	 	—	 	44,483	 	79,897	 	—	 	124,380	 	
Deferred income taxes	 	12,906	 	—	 	21,585	 	—	 	34,491	 	
Other non-current assets	 	26,370	 	8,397	 	22,003	 	—	 	56,770	 	
Investment in affiliates	 	448,160	 	100,937	 	210,667	 	(759,764	)	—	 	
Total assets	 	$	573,680	 	$	743,707	 	$	1,044,958	 	$	(759,764	)	$	1,602,581	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities and stockholders’ equity	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable and accrued expenses	 	$	17,649	 	$	202,917	 	$	233,828	 	$	—	 	$	454,394	 	
Current portion of long-term debt	 	2,900	 	—	 	305	 	—	 	3,205	 	
Short-term borrowings	 	—	 	—	 	22,011	 	—	 	22,011	 	
Product warranties	 	—	 	19,805	 	14,018	 	—	 	33,823	 	
Product liabilities	 	—	 	29,145	 	2,646	 	—	 	31,791	 	
Total current liabilities	 	20,549	 	251,867	 	272,808	 	—	 	545,224	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt	 	559,640	 	—	 	7,444	 	—	 	567,084	 	
Pension obligations	 	12,467	 	14,309	 	30,463	 	—	 	57,239	 	
Postretirement health and other benefit obligations	 	—	 	54,283	 	—	 	—	 	54,283	 	
Intercompany	 	(332,026	)	(113,823	)	227,802	 	218,047	 	—	 	
Other non-current liabilities	 	14,626	 	9,362	 	56,339	 	—	 	80,327	 	
Total non-current liabilities	 	254,707	 	(35,869	)	322,048	 	218,047	 	758,933	 	
Stockholders’ equity	 	298,424	 	527,709	 	450,102	 	(977,811	)	298,424	 	
Total liabilities and stockholders’ equity	 	$	573,680	 	$	743,707	 	$	1,044,958	 	$	(759,764	)	$	1,602,581	 	

 
Condensed Consolidating Balance Sheet
As of December 31, 2002

 	 	Parent	 	Guarantor	 	Non-
Guarantor	 	Eliminations	 	Total	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	2,650	 	$	(1,427	)	$	26,812	 	$	—	 	$	28,035	 	
Marketable securities	 	2,371	 	—	 	—	 	—	 	2,371	 	
Account receivable- net	 	3,934	 	91,724	 	130,433	 	—	 	226,091	 	
Inventories- net	 	—	 	128,327	 	126,891	 	—	 	255,218	 	
Deferred income taxes	 	72,887	 	(206	)	24,060	 	—	 	96,741	 	
Other current assets	 	429	 	35,919	 	2,360	 	—	 	38,708	 	
Total current assets	 	82,271	 	254,337	 	310,556	 	—	 	647,164	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Property, plant and equipment -  net	 	12,687	 	159,021	 	147,593	 	—	 	319,301	 	
Goodwill-net	 	—	 	207,088	 	173,250	 	—	 	380,338	 	
Other intangible assets	 	5,439	 	32,093	 	89,767	 	—	 	127,299	 	
Deferred income taxes	 	9,931	 	9,517	 	214	 	—	 	19,662	 	
Other non-current assets	 	29,201	 	28,817	 	25,341	 	—	 	83,359	 	
Investments in affiliates	 	448,160	 	73,857	 	204,198	 	(726,215	)	—	 	
Total assets	 	$	587,689	 	$	764,730	 	$	950,919	 	$	(726,215	)	$	1,577,123	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities and stockholders’ equity	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable and accrued expenses	 	$	20,881	 	$	158,818	 	$	170,616	 	$	—	 	$	350,315	 	
Current portion of long-term debt	 	28,419	 	—	 	4,909	 	—	 	33,328	 	
Short-term borrowings	 	2,000	 	—	 	7,304	 	—	 	9,304	 	
Product warranties	 	—	 	20,754	 	10,522	 	—	 	31,276	 	
Product liabilities	 	—	 	33,525	 	2,650	 	—	 	36,175	 	
Total current liabilities	 	51,300	 	213,097	 	196,001	 	—	 	460,398	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt	 	609,836	 	209	 	13,502	 	—	 	623,547	 	
Pension obligations	 	10,357	 	27,780	 	27,914	 	—	 	66,051	 	
Postretirement health and other benefit obligations	 	925	 	64,852	 	—	 	—	 	65,777	 	
Intercompany	 	(377,767	)	(209,380	)	351,745	 	235,402	 	—	 	
Other non-current liabilities	 	(2,077	)	9,058	 	59,254	 	—	 	66,235	 	
Total non-current liabilities	 	241,274	 	(107,481	)	452,415	 	235,402	 	821,610	 	
Stockholders’ equity	 	295,115	 	659,114	 	302,503	 	(961,617	)	295,115	 	
Total liabilities and stockholders’ equity	 	$	587,689	 	$	764,730	 	$	950,919	 	$	(726,215	)	$	1,577,123	 	

 
 
Condensed Consolidating Statement of Cash flows
For the year ended December 31, 2003

 	 	Parent	 	Guarantor	 	Non-guarantor	 	Total	 	
Net cash provided by operating activities	 	$	9,513	 	$	108,642	 	$	32,708	 	$	150,863	 	
 	 	 	 	 	 	 	 	 	 	
Cash flows from (used for) investing activities:	 	 	 	 	 	 	 	 	 	
Capital expenditures	 	(1,209	)	(10,949	)	(19,819	)	(31,977	)	
Proceeds from sale of properly, plant and equipment	 	—	 	1,569	 	12,869	 	14,438	 	
Sale of marketable securities	 	150	 	—	 	—	 	150	 	
Intercompany investment	 	122,267	 	(100,015	)	(22,252	)	—	 	
 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used for) investing activities of continuing operations	 	121,208	 	(109,395	)	(29,202	)	(17,389	)	
Net cash provided by investing activities of discontinued operations	 	—	 	2,289	 	—	 	2,289	 	
Net cash provided by (used for) investing activities	 	121,208	 	(107,106	)	(29,202	)	(15,100	)	
 	 	 	 	 	 	 	 	 	 	
Cash flows used for financing activities:	 	 	 	 	 	 	 	 	 	
Proceeds from senior notes	 	150,000	 	—	 	—	 	150,000	 	
Payments on long-term debt	 	(256,628	)	(209	)	(780	)	(257,617	)	
Payments on revolver borrowings-net	 	(2,000	)	—	 	—	 	(2,000	)	
Debt issue costs	 	(5,599	)	—	 	—	 	(5,599	)	
Dividends paid	 	(7,446	)	—	 	—	 	(7,446	)	
Exercise of stock options	 	118	 	—	 	—	 	118	 	
Net cash used for financing activities	 	(121,555	)	(209	)	(780	)	(122,544	)	
Effect of exchange rate changes on cash	 	—	 	—	 	3,714	 	3,714	 	
Net increase in cash and cash equivalents	 	9,166	 	1,327	 	6,440	 	16,933	 	
Balance at end of year	 	2,650	 	(1,427	)	26,812	 	28,035	 	
Balance at beginning of year	 	$	11,816	 	$	(100	)	$	33,252	 	$	44,968	 	

 
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2002

 	 	Parent	 	Guarantor	 	Non-guarantor	 	Total	 	
Net cash provided by (used for) operating activities	 	$	(62,730	)	$	207,964	 	$	(50,695	)	$	94,539	 	
 	 	 	 	 	 	 	 	 	 	
Cash flows from (used for) investing activities:	 	 	 	 	 	 	 	 	 	
Business acquisitions	 	—	 	8,363	 	(7,387	)	976	 	
Capital expenditures	 	(8,284	)	(9,707	)	(15,005	)	(32,996	)	
Proceeds from sale of properly, plant and equipment	 	19	 	(101	)	16,781	 	16,699	 	
Purchase of marketable securities	 	(220	)	—	 	—	 	(220	)	
Intercompany investment	 	(60,882	)	—	 	60,882	 	—	 	
Net cash provided by (used for) investing activities of continuing operations	 	(69,367	)	(1,445	)	55,271	 	(15,541	)	
Net cash provided by investing activities of discontinued operations	 	—	 	11,108	 	—	 	11,108	 	
Net cash provided by (used for) investing activities	 	(69,367	)	9,663	 	55,271	 	(4,433	)	
 	 	 	 	 	 	 	 	 	 	
Cash flows from (used for) financing activities:	 	 	 	 	 	 	 	 	 	
Payments on Grove borrowings	 	—	 	(198,328	)	—	 	(198,328	)	
Proceeds from senior subordinate notes	 	175,000	 	—	 	—	 	175,000	 	
Proceeds from (payments on) long-term debt	 	(21,915	)	(20,867	)	3,502	 	(39,280	)	
Payments on revolver borrowings-net	 	(10,243	)	—	 	—	 	(10,243	)	
Debt issue costs	 	(6,630	)	—	 	—	 	(6,630	)	
Dividends paid	 	(7,432	)	—	 	—	 	(7,432	)	
Exercises of stock options	 	1,511	 	—	 	—	 	1,511	 	
Cash provided by (used for) financing activities	 	130,291	 	(219,195	)	3,502	 	(85,402	)	
Effect of exchange rate changes on cash	 	—	 	—	 	(250	)	(250	)	
Net increase (decrease) in cash and cash equivalents	 	(1,806	)	(1,568	)	7,828	 	4,454	 	
Balance at beginning of year	 	4,456	 	1,129	 	17,996	 	23,581	 	
Balance at end of year	 	$	2,650	 	$	(439	)	$	25,824	 	$	28,035	 	

 
 
Condensed Consolidating Statement of Cash flows
For the year ended December 31, 2001

 	 	Parent	 	Guarantor	 	Non-guarantor	 	Total	 	
 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used for) operating activities	 	$	(54,029	)	$	9,751	 	$	150,893	 	$	106,615	 	
 	 	 	 	 	 	 	 	 	 	
Cash flows used for investing activities:	 	 	 	 	 	 	 	 	 	
Business acquisitions	 	—	 	(954	)	(284,579	)	(285,533	)	
Capital expenditures	 	(1,857	)	(13,901	)	(13,346	)	(29,104	)	
Proceeds from sale of property, plant and equipment	 	—	 	662	 	9,557	 	10,219	 	
Purchase of marketable securities	 	(107	)	—	 	—	 	(107	)	
Intercompany investing	 	(163,535	)	—	 	163,535	 	—	 	
Net cash used for investing activities of continuing operations	 	(165,499	)	(14,193	)	(124,833	)	(304,525	)	
Net cash used for investing activities of discontinued operations	 	—	 	(157	)	—	 	(157	)	
Net cash used for investing activities	 	(165,499	)	(14,350	)	(124,833	)	(304,682	)	
Cash flows from (used for) financing activities:	 	 	 	 	 	 	 	 	 	
Proceeds from long-term debt	 	345,116	 	—	 	—	 	345,116	 	
Proceeds from senior subordinate notes	 	156,118	 	—	 	—	 	156,118	 	
Payments on long-term debt	 	(159,632	)	—	 	(2,257	)	(161,889	)	
Payments on revolver borrowings - net	 	(75,100	)	—	 	(3,627	)	(78,727	)	
Payments on commercial paper - net	 	(24,700	)	—	 	—	 	(24,700	)	
Debt issue costs	 	(21,023	)	—	 	—	 	(21,023	)	
Dividends paid	 	(257	)	—	 	(7,101	)	(7,358	)	
Exercises of stock options	 	183	 	—	 	—	 	183	 	
Cash provided by (used for) financing activities	 	220,705	 	—	 	(12,985	)	207,720	 	
Effect of exchange rate changes on cash	 	—	 	—	 	(55	)	(55	)	
Net increase (decrease) in cash and cash equivalents	 	1,177	 	(4,599	)	13,020	 	9,598	 	
Balance at beginning of year	 	3,279	 	4,740	 	5,964	 	13,983	 	
Balance at end of year	 	$	4,456	 	$	141	 	$	18,984	 	$	23,581	 	
 
21. Subsidiary Guarantors of Senior Subordinated Notes due 2012 and Senior Notes due 2013
 
The following tables present condensed consolidating financial information for (a) the parent company, The Manitowoc Company, Inc. (Parent); (b) on a combined basis, the guarantors of the Senior Subordinated Notes due 2012 and Senior Notes due 2013, which include substantially all of the domestic wholly owned subsidiaries of the company (Subsidiary Guarantors); and (c) on a combined basis, the wholly and partially owned foreign subsidiaries of the company and Manitowoc Boom Trucks, Inc.  (Manitowoc Boom Trucks was sold by the company during 2002), all of which do not guarantee the Senior Subordinated Notes due 2012 and the Senior Notes due 2013 (Non-Guarantor Subsidiaries).  Separate financial statements of the Subsidiary Guarantors are not presented because the guarantors are fully and unconditionally, jointly and severally liable under the guarantees, and the company believes such separate statements or disclosures would not be useful to investors.

 
Condensed Consolidating Statement of Earnings
For the year ended December 31, 2003

 	 	Parent	 	Guarantor	 	Non-
Guarantor	 	Eliminations	 	Total	 	
Net sales	 	$	—	 	$	993,987	 	$	689,536	 	$	(112,667	)	$	1,570,856	 	
Costs and expenses:	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	—	 	782,060	 	568,729	 	(112,667	)	1,238,122	 	
Engineering, selling and administrative expenses	 	17,942	 	140,107	 	88,692	 	—	 	246,741	 	
Amortization expense	 	—	 	682	 	2,237	 	—	 	2,919	 	
Plant consolidation and restructuring costs	 	—	 	4,799	 	5,290	 	—	 	10,089	 	
Curtailment gain	 	—	 	(12,897	)	—	 	—	 	(12,897	)	
Total costs and expenses	 	17,942	 	914,751	 	664,948	 	(112,667	)	1,484,974	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings (loss) from continuing operations	 	(17,942	)	79,236	 	24,588	 	—	 	85,882	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	(51,287	)	(2,158	)	(3,456	)	—	 	(56,901	)	
Management fees	 	22,664	 	(22,664	)	—	 	—	 	—	 	
Loss on debt extinguishment	 	(7,300	)	—	 	—	 	—	 	(7,300	)	
Other income (expense)-net	 	38,188	 	(21,288	)	(16,586	)	—	 	314	 	
Total other income (expense)-net	 	2,265	 	(46,110	)	(20,042	)	—	 	(63,887	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from continuing operations before taxes on income (loss)	 	(15,677	)	33,126	 	4,546	 	—	 	21,995	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Provision (benefit) for taxes on income (loss)	 	(3,138	)	6,625	 	472	 	—	 	3,959	 	
Earnings (loss) before equity in earnings of subsidiaries	 	(12,539	)	26,501	 	4,074	 	—	 	18,036	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of subsidiaries	 	16,088	 	—	 	—	 	(16,088	)	—	 	
Earnings from continuing operations	 	3,549	 	26,501	 	4,074	 	(16,088	)	18,036	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Loss from discontinued operations, net of income taxes	 	—	 	(793	)	(1,647	)	—	 	(2,440	)	
Loss on sale or closure of discontinued operations, net of income taxes	 	—	 	(2,005	)	(10,042	)	—	 	(12,047	)	
Net earnings (loss)	 	$	3,549	 	$	23,703	 	$	(7,615	)	$	(16,088	)	$	3,549	 	

 
Condensed Consolidating Statement of Earnings
For the year ended December 31, 2002

 	 	Parent	 	Guarantor	 	Non-
Guarantor	 	Eliminations	 	Total	 	
Net sales	 	$	—	 	$	984,650	 	$	433,089	 	$	(61,316	)	$	1,356,423	 	
Total costs and expenses:	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	—	 	753,186	 	343,216	 	(61,316	)	1,035,086	 	
Engineering, selling and administrative expenses	 	14,171	 	129,967	 	48,465	 	—	 	192,603	 	
Amortization expense	 	—	 	—	 	2,001	 	—	 	2,001	 	
Plant consolidation and restructuring costs	 	—	 	4,901	 	6,708	 	—	 	11,609	 	
Total costs and expenses	 	14,171	 	888,054	 	400,390	 	(61,316	)	1,241,299	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings (loss) from continuing operations	 	(14,171	)	96,596	 	32,699	 	—	 	115,124	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	(46,906	)	(1,368	)	(3,689	)	—	 	(51,963	)	
Management fees	 	20,600	 	(21,275	)	675	 	—	 	—	 	
Other income (expenses) - net	 	11,485	 	3,462	 	(13,029	)	—	 	1,918	 	
Total other expense-net	 	(14,821	)	(19,181	)	(16,043	)	—	 	(50,045	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from continuing operations before taxes on income (loss)	 	(28,992	)	77,415	 	16,656	 	—	 	65,079	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Provision (benefit) for taxes on income (loss)	 	(11,324	)	30,237	 	4,516	 	—	 	23,429	 	
Earnings (loss) before equity in earnings of subsidiaries	 	(17,668	)	47,178	 	12,140	 	—	 	41,650	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of subsidiaries	 	33,966	 	—	 	—	 	(33,966	)	—	 	
Earnings from continuing operations	 	16,298	 	47,178	 	12,140	 	(33,966	)	41,650	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from discontinued operations, net of income taxes	 	—	 	1,816	 	(1,711	)	—	 	105	 	
Loss on sale or closure of discontinued operations, net of income taxes	 	—	 	(2,179	)	(23,278	)	—	 	(25,457	)	
Cumulative effect of accounting change, net of income taxes	 	(36,800	)	(26,100	)	(10,700	)	36,800	 	(36,800	)	
Net earnings (loss)	 	$	(20,502	)	$	20,715	 	$	(23,549	)	$	2,834	 	$	(20,502	)	

 
Condensed Consolidating Statement of Earnings
For the year ended December 31, 2001

 	 	Parent	 	Guarantor	 	Non-
Guarantor	 	Eliminations	 	Total	 	
Net sales	 	$	—	 	$	817,475	 	$	185,322	 	$	(18,374	)	$	984,423	 	
Costs and expenses	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	—	 	593,866	 	138,333	 	(18,374	)	713,825	 	
Engineering, selling and administrative expenses	 	11,962	 	106,737	 	24,340	 	—	 	143,039	 	
Amortization expense	 	336	 	7,377	 	3,361	 	—	 	11,074	 	
Total costs and expenses	 	12,298	 	707,980	 	166,034	 	(18,374	)	867,938	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings (loss) from continuing operations	 	(12,298	)	109,495	 	19,288	 	—	 	116,485	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	(26,937	)	(1,661	)	(8,810	)	—	 	(37,408	)	
Management fees	 	13,803	 	(13,803	)	—	 	—	 	—	 	
Loss on debt extinguishment	 	(5,540	)	—	 	—	 	—	 	(5,540	)	
Other income (expense)-net	 	(1,004	)	(919	)	655	 	 	 	(1,268	)	
Total other expense-net	 	(19,678	)	(16,383	)	(8,155	)	—	 	(44,216	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) before equity in earnings of subsidiaries	 	(31,976	)	93,112	 	11,133	 	—	 	72,269	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Provision (benefit) for taxes on income (loss)	 	(12,159	)	35,407	 	4,627	 	—	 	27,875	 	
Earnings (loss) before equity in earnings of subsidiaries	 	(19,817	)	57,705	 	6,506	 	—	 	44,394	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of subsidiaries	 	65,365	 	—	 	—	 	(65,365	)	—	 	
Earnings from continuing operations	 	45,548	 	57,705	 	6,506	 	(65,365	)	44,394	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from discontinued operations, net of income taxes	 	—	 	2,076	 	(922	)	—	 	1,154	 	
Net earnings	 	$	45,548	 	$	59,781	 	$	5,584	 	$	(65,365	)	$	45,548	 	

 
Condensed Consolidating Balance Sheet
As of December 31, 2003

 	 	Parent	 	Guarantor	 	Non-
Guarantor	 	Eliminations	 	Total	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	11,816	 	$	(100	)	$	33,252	 	$	—	 	$	44,968	 	
Marketable securities	 	2,220	 	—	 	—	 	—	 	2,220	 	
Accounts receivable -net	 	4,086	 	76,648	 	164,276	 	—	 	245,010	 	
Inventories -net	 	—	 	89,103	 	143,774	 	—	 	232,877	 	
Deferred income taxes	 	50,297	 	—	 	21,484	 	—	 	71,781	 	
Other current assets	 	302	 	24,944	 	23,987	 	—	 	49,233	 	
Total current assets	 	68,721	 	190,595	 	386,773	 	—	 	646,089	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Property, plant and equipment -net	 	12,089	 	149,696	 	172,833	 	—	 	334,618	 	
Goodwill -net	 	5,434	 	249,599	 	151,200	 	—	 	406,233	 	
Other intangible assets	 	—	 	44,483	 	79,897	 	—	 	124,380	 	
Deferred income taxes	 	12,906	 	—	 	21,585	 	—	 	34,491	 	
Other non-current assets	 	26,370	 	8,397	 	22,003	 	—	 	56,770	 	
Investments in affiliates	 	448,160	 	100,937	 	210,667	 	(759,764	)	—	 	
Total assets	 	$	573,680	 	$	743,707	 	$	1,044,958	 	$	(759,764	)	$	1,602,581	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities and stockholders’ equity	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable and accrued expenses	 	$	17,649	 	$	202,917	 	$	233,828	 	$	—	 	$	454,394	 	
Current portion of long-term debt	 	2,900	 	—	 	305	 	—	 	3,205	 	
Short-term borrowings	 	—	 	—	 	22,011	 	—	 	22,011	 	
Product warranties	 	—	 	19,805	 	14,018	 	—	 	33,823	 	
Product liabilities	 	—	 	29,145	 	2,646	 	—	 	31,791	 	
Total current liabilities	 	20,549	 	251,867	 	272,808	 	—	 	545,224	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt	 	559,640	 	—	 	7,444	 	—	 	567,084	 	
Pension obligations	 	12,467	 	14,309	 	30,463	 	—	 	57,239	 	
Postretirement health and other benefit obligations	 	—	 	54,283	 	—	 	—	 	54,283	 	
Intercompany	 	(332,026	)	(113,823	)	227,802	 	218,047	 	—	 	
Other non-current liabilities	 	14,626	 	9,362	 	56,339	 	—	 	80,327	 	
Total non-current liabilities	 	254,707	 	(35,869	)	322,048	 	218,047	 	758,933	 	
Stockholders’ equity	 	298,424	 	527,709	 	450,102	 	(977,811	)	298,424	 	
Total liabilities and stockholders’ equity	 	$	573,680	 	$	743,707	 	$	1,044,958	 	$	(759,764	)	$	1,602,581	 	

 
 
Condensed Consolidating Balance Sheet
As of December 31, 2002

 	 	Parent	 	Guarantor	 	Non-
Guarantor	 	Eliminations	 	Total	 	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	2,650	 	$	(1,427	)	$	26,812	 	$	—	 	$	28,035	 	
Marketable securities	 	2,371	 	—	 	—	 	—	 	2,371	 	
Account receivable -net	 	3,934	 	91,724	 	130,433	 	—	 	226,091	 	
Inventories -net	 	—	 	128,327	 	126,891	 	—	 	255,218	 	
Deferred income taxes	 	72,887	 	(206	)	24,060	 	—	 	96,741	 	
Other current assets	 	429	 	35,919	 	2,360	 	—	 	38,708	 	
Total current assets	 	82,271	 	254,337	 	310,556	 	—	 	647,164	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Property, plant and equipment -net	 	12,687	 	159,021	 	147,593	 	—	 	319,301	 	
Goodwill -net	 	—	 	207,088	 	173,250	 	—	 	380,338	 	
Other intangible assets	 	5,439	 	32,093	 	89,767	 	—	 	127,299	 	
Deferred income taxes	 	9,931	 	9,517	 	214	 	—	 	19,662	 	
Other non-current assets	 	29,201	 	28,817	 	25,341	 	—	 	83,359	 	
Investments in affiliates	 	448,160	 	73,857	 	204,198	 	(726,215	)	—	 	
Total assets	 	$	587,689	 	$	764,730	 	$	950,919	 	$	(726,215	)	$	1,577,123	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities and stockholders’ equity	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable and accrued expenses	 	$	20,881	 	$	158,818	 	$	170,616	 	$	—	 	$	350,315	 	
Current portion of long-term debt	 	28,419	 	—	 	4,909	 	—	 	33,328	 	
Short-term borrowings	 	2,000	 	—	 	7,304	 	—	 	9,304	 	
Product warranties	 	—	 	20,754	 	10,522	 	—	 	31,276	 	
Product liabilities	 	—	 	33,525	 	2,650	 	—	 	36,175	 	
Total current liabilities	 	51,300	 	213,097	 	196,001	 	—	 	460,398	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt	 	609,836	 	209	 	13,502	 	—	 	623,547	 	
Pension obligations	 	10,357	 	27,780	 	27,914	 	—	 	66,051	 	
Postretirement health and other benefit obligations	 	925	 	64,852	 	—	 	—	 	65,777	 	
Intercompany	 	(377,767	)	(209,380	)	351,745	 	235,402	 	—	 	
Other non-current liabilities	 	(2,077	)	9,058	 	59,254	 	—	 	66,235	 	
Total non-current liabilities	 	241,274	 	(107,481	)	452,415	 	235,402	 	821,610	 	
Stockholders’ equity	 	295,115	 	659,114	 	302,503	 	(961,617	)	295,115	 	
Total liabilities and stockholders’ equity	 	$	587,689	 	$	764,730	 	$	950,919	 	$	(726,215	)	$	1,577,123	 	

Condensed Consolidating Statement of Cash flows
For the year ended December 31, 2003

 	 	Parent	 	Guarantor	 	Non-guarantor	 	Total	 	
Net cash provided by operating activities	 	$	9,513	 	$	108,642	 	$	32,708	 	$	150,863	 	
 	 	 	 	 	 	 	 	 	 	
Cash flows from (used for) investing activities:	 	 	 	 	 	 	 	 	 	
Capital expenditures	 	(1,209	)	(10,949	)	(19,819	)	(31,977	)	
Proceeds from sale of property, plant and equipment	 	—	 	1,569	 	12,869	 	14,438	 	
Sale of marketable securities	 	150	 	—	 	—	 	150	 	
Intercompany investing	 	122,267	 	(100,015	)	(22,252	)	—	 	
 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used for) investing activities of continuing operations	 	121,208	 	(109,395	)	(29,202	)	(17,389	)	
Net cash provided by investing activities of discontinued operations	 	—	 	2,289	 	—	 	2,289	 	
Net cash provided by (used for) investing activities	 	121,208	 	(107,106	)	(29,202	)	(15,100	)	
 	 	 	 	 	 	 	 	 	 	
Cash flows used for financing activities:	 	 	 	 	 	 	 	 	 	
Proceeds from senior notes	 	150,000	 	—	 	—	 	150,000	 	
Payments on long-term debt	 	(256,628	)	(209	)	(780	)	(257,617	)	
Payments on revolver borrowings-net	 	(2,000	)	—	 	—	 	(2,000	)	
Debt issue costs	 	(5,599	)	—	 	—	 	(5,599	)	
Dividends paid	 	(7,446	)	—	 	—	 	(7,446	)	
Exercises of stock options	 	118	 	—	 	—	 	118	 	
Net cash used for financing activities	 	(121,555	)	(209	)	(780	)	(122,544	)	
Effect of exchange rate changes on cash	 	—	 	—	 	3,714	 	3,714	 	
Net increase in cash and cash equivalents	 	9,166	 	1,327	 	6,440	 	16,933	 	
Balance at beginning of year	 	2,650	 	(1,427	)	26,812	 	28,035	 	
Balance at end of year	 	$	11,816	 	$	(100	)	$	33,252	 	$	44,968	 	

 
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2002

 	 	Parent	 	Guarantor	 	Non-guarantor	 	Total	 	
Net cash provided by (used for) operating activities	 	$	(62,730	)	$	207,964	 	$	(50,695	)	$	94,539	 	
 	 	 	 	 	 	 	 	 	 	
Cash flows from (used for) investing activities:	 	 	 	 	 	 	 	 	 	
Business acquisitions	 	—	 	8,363	 	(7,387	)	976	 	
Capital expenditures	 	(8,284	)	(9,707	)	(15,005	)	(32,996	)	
Proceeds from sale of property, plant and equipment	 	19	 	(101	)	16,781	 	16,699	 	
Purchase of marketable securities	 	(220	)	—	 	—	 	(220	)	
Intercompany investment	 	(60,882	)	—	 	60,882	 	—	 	
Net cash provided by (used for) investing activities of continuing operations	 	(69,367	)	(1,445	)	55,271	 	(15,541	)	
Net cash provided by (used for) investing activities of discontinued operations	 	—	 	(75	)	11,183	 	11,108	 	
Net cash provided by (used for) investing activities	 	(69,367	)	(1,520	)	66,454	 	(4,433	)	
 	 	 	 	 	 	 	 	 	 	
Cash flows from (used for) financing activities:	 	 	 	 	 	 	 	 	 	
Payments on Grove borrowings	 	—	 	(198,328	)	—	 	(198,328	)	
Proceeds from senior subordinate notes	 	175,000	 	—	 	—	 	175,000	 	
Proceeds from (payments on) long-term debt	 	(21,915	)	(20,867	)	3,502	 	(39,280	)	
Payments on revolver borrowings-net	 	(10,243	)	—	 	—	 	(10,243	)	
Debt issue costs	 	(6,630	)	—	 	—	 	(6,630	)	
Dividends paid	 	(7,432	)	—	 	—	 	(7,432	)	
Exercises of stock options	 	1,511	 	—	 	—	 	1,511	 	
Net cash provided by (used for) financing activities	 	130,291	 	(219,195	)	3,502	 	(85,402	)	
Effect of exchange rate changes on cash	 	—	 	—	 	(250	)	(250	)	
Net increase (decrease) in cash and cash equivalents	 	(1,806	)	(12,751	)	19,011	 	4,454	 	
Balance at beginning of year	 	4,456	 	1,129	 	17,996	 	23,581	 	
Balance at end of year	 	$	2,650	 	$	(11,622	)	$	37,007	 	$	28,035	 	

 
Condensed Consolidating Statement of Cash flows
For the year ended December 31, 2001

 	 	Parent	 	Guarantor	 	Non-guarantor	 	Total	 	
 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used for) operating activities	 	$	(54,029	)	$	10,716	 	$	149,928	 	$	106,615	 	
 	 	 	 	 	 	 	 	 	 	
Cash flows used for investing activities:	 	 	 	 	 	 	 	 	 	
Business acquisitions	 	—	 	(954	)	(284,579	)	(285,533	)	
Capital expenditures	 	(1,857	)	(13,901	)	(13,346	)	(29,104	)	
Proceeds from sale of property, plant and equipment	 	—	 	662	 	9,557	 	10,219	 	
Purchase of marketable securities	 	(107	)	—	 	—	 	(107	)	
Intercompany investment	 	(163,535	)	—	 	163,535	 	—	 	
Net cash used for investing activities of continuing operations	 	(165,499	)	(14,193	)	(124,833	)	(304,525	)	
Net cash used for investing activities of discontinued operations	 	—	 	(134	)	(23	)	(157	)	
Net cash used for investing activities	 	(165,499	)	(14,327	)	(124,856	)	(304,682	)	
Cash flows from (used for) financing activities:	 	 	 	 	 	 	 	 	 	
Proceeds from long-term debt	 	345,116	 	—	 	—	 	345,116	 	
Proceeds from senior subordinate notes	 	156,118	 	—	 	—	 	156,118	 	
Payments on of long-term debt	 	(159,632	)	—	 	(2,257	)	(161,889	)	
Payments on revolver borrowings-net	 	(75,100	)	—	 	(3,627	)	(78,727	)	
Payments on commercial paper-net	 	(24,700	)	—	 	—	 	(24,700	)	
Debt issue costs	 	(21,023	)	—	 	—	 	(21,023	)	
Dividends paid	 	(257	)	—	 	(7,101	)	(7,358	)	
Exercises of stock options	 	183	 	—	 	—	 	183	 	
Cash provided by (used for) financing activities	 	220,705	 	—	 	(12,985	)	207,720	 	
Effect of exchange rate changes on cash	 	—	 	—	 	(55	)	(55	)	
Net increase (decrease) in cash and cash equivalents	 	1,177	 	(3,611	)	12,032	 	9,598	 	
Balance at beginning of year	 	3,279	 	4,740	 	5,964	 	13,983	 	
Balance at end of year	 	$	4,456	 	$	1,129	 	$	17,996	 	$	23,581	 	

 
22. Quarterly Financial Data (Unaudited)
 
Quarterly financial data for 2003 and 2002 is as follows:

 	 	2003	 	2002	 	
 	 	First	 	Second	 	Third	 	Fourth	 	First	 	Second	 	Third	 	Fourth	 	
Net sales	 	$	360,909	 	$	413,824	 	$	407,156	 	$	388,967	 	$	272,395	 	$	321,007	 	$	381,183	 	$	381,838	 	
Gross profit	 	77,743	 	93,334	 	85,410	 	76,247	 	67,222	 	87,731	 	87,594	 	78,790	 	
Earnings (loss) from continuing operations	 	970	 	5,589	 	8,075	 	3,402	 	6,626	 	20,151	 	14,834	 	39	 	
Discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from discontinued operations, net of income taxes	 	(725	)	(392	)	(877	)	(446	)	(36	)	(70	)	(106	)	317	 	
Gain (loss) on sale or closure of discontinued operations, net of income taxes	 	290	 	(3,884	)	—	 	(8,453	)	—	 	—	 	—	 	(25,457	)	
Cumulative effect of accounting change, net of income taxes	 	—	 	—	 	—	 	—	 	(36,800	)	—	 	—	 	—	 	
Net earnings (loss)	 	$	535	 	$	1,313	 	$	7,198	 	$	(5,497	)	$	(30,210	)	$	20,081	 	$	14,728	 	$	(25,101	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	$	0.04	 	$	0.21	 	$	0.30	 	$	0.12	 	$	0.27	 	$	0.83	 	$	0.58	 	$	0.00	 	
Discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from discontinued operations, net of income taxes	 	(0.03	)	(0.01	)	(0.03	)	(0.01	)	—	 	—	 	(0.00	)	0.01	 	
Gain (loss) on sale or closure of discontinued operations, net of income taxes	 	0.01	 	(0.15	)	—	 	(0.31	)	—	 	—	 	—	 	(0.96	)	
Cumulative effect of accounting change, net of income taxes	 	—	 	—	 	—	 	—	 	(1.52	)	—	 	—	 	—	 	
Net earnings (loss)	 	$	0.02	 	$	0.05	 	$	0.27	 	$	(0.21	)	$	(1.25	)	$	0.83	 	$	0.58	 	$	(0.94	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings from continuing operations	 	$	0.04	 	$	0.21	 	$	0.30	 	$	0.11	 	$	0.27	 	$	0.81	 	$	0.57	 	$	0.00	 	
Discontinued operations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) from discontinued operations, net of income taxes	 	(0.03	)	(0.01	)	(0.03	)	(0.01	)	—	 	—	 	(0.00	)	0.01	 	
Gain (loss) on sale or closure of discontinued operations, net of income taxes	 	0.01	 	(0.15	)	—	 	(0.31	)	—	 	—	 	—	 	(0.95	)	
Cumulative effect of accounting change, net of income taxes	 	—	 	—	 	—	 	—	 	(1.48	)	—	 	—	 	—	 	
Net earnings (loss)	 	$	0.02	 	$	0.05	 	$	0.27	 	$	(0.21	)	$	(1.22	)	$	0.81	 	$	0.57	 	$	(0.93	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends per common share	 	$	—	 	$	—	 	$	—	 	$	0.28	 	$	—	 	$	—	 	$	—	 	$	0.28	 	

 
Exhibit 99.2
 
Management’s discussion and analysis of financial condition and results of operations
 
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in this current report on Form 8-K.
 
OVERVIEW
 
Manitowoc is a diversified, multi-industry manufacturer of cranes, foodservice equipment and mid-size commercial and military ships. The centerpiece of our efforts is and will continue to be to provide customer-focused, quality products and services to the markets we serve, with the goal to continuously improve economic value for our shareholders. We report in three segments, Crane, Foodservice and Marine.
 
The following discussion and analysis covers key drivers behind our results for 2003 and is broken down into three major sections. First, we provide an overview of our results of operations for the years 2001 through 2003 on a consolidated basis and by business segment. Next we discuss our market conditions, acquisitions, liquidity and capital resources, and our risk management techniques. Finally, we provide a discussion of contingent liabililty issues, critical accounting policies, impacts of future accounting changes, and cautionary statements.
 
All dollar amounts, except per share amounts, are in thousands of dollars throughout the tables included in this Management Discussion and Analysis of Financial Conditions and Results of Operations unless otherwise indicated.
 
During the second quarter of 2004, we completed the sale of Delta Manlift SAS (“Delta”). In 2003, we decided to discontinue the scissor-lift and boom-lift product segments, to close the Potain GmbH facility in Dillingen, Germany (“Liftlux”) and to discontinue US Manlift production at the Shady Grove, Pennsylvania facility. The Delta, Liftlux and US Manlift businesses together constituted our aerial work platform (“AWP”) business. In addition, we sold the assets of North Central Crane & Excavator Sales Corporation (“North Central Crane”). In 2002, we sold Manitowoc Boom Trucks, Inc. (“Manitowoc Boom Trucks”) and determined to divest from Femco Machine Company, Inc. (“Femco”), which sale and divestiture occurred in 2003. The following discussion and analysis reflects the treatment of all of these operations as discontinued in accordance with SFAS No. 144. See “Selected financial data” and “Reconciliation of adjusted to historical financial data” for further information on our historical and adjusted results.

 
RESULTS OF CONSOLIDATED OPERATIONS

 	 	Year Ended December 31,	 	
 	 	2003	 	2002	 	2001	 	
 	 	(Amounts in thousands of dollars)	 	
 	 	 	 	 	 	 	 	
Net sales	 	$	1,570,856	 	$	1,356,423	 	$	984,423	 	
Costs and expenses:	 	 	 	 	 	 	 	
Cost of sales	 	1,238,122	 	1,035,086	 	713,825	 	
Engineering, selling and administrative expenses	 	246,741	 	192,603	 	143,039	 	
Amortization expense	 	2,919	 	2,001	 	11,074	 	
Restructuring and plant consolidation costs	 	10,089	 	11,609	 	—	 	
Curtailment gain	 	(12,897	)	—	 	—	 	
Total costs and expenses	 	1,484,974	 	1,241,299	 	867,938	 	
 	 	 	 	 	 	 	 	
Earnings from operations	 	85,882	 	115,124	 	116,485	 	
 	 	 	 	 	 	 	 	
Other expenses:	 	 	 	 	 	 	 	
Interest expense	 	(56,901	)	(51,963	)	(37,408	)	
Loss on debt extingushment	 	(7,300	)	—	 	(5,540	)	
Other income (expense), net	 	314	 	1,918	 	(1,268	)	
Total other expenses	 	(63,887	)	(50,045	)	(44,216	)	
 	 	 	 	 	 	 	 	
Earnings from continuing operations before income taxes	 	21,995	 	65,079	 	72,269	 	
Provision for taxes on income	 	3,959	 	23,429	 	27,875	 	
Earnings from continuing operations	 	18,036	 	41,650	 	44,394	 	
 	 	 	 	 	 	 	 	
Discontinued operations:	 	 	 	 	 	 	 	
Earnings (loss) from discontinued operations, net of income taxes	 	(2,440	)	105	 	1,154	 	
Gain (loss) on sale or closure of discontinued operations, net of income taxes	 	(12,047	)	(25,457	)	—	 	
Cumulative effect of accounting change, net of income taxes	 	—	 	(36,800	)	—	 	
Net earnings (loss)	 	$	3,549	 	$	(20,502	)	$	45,548	 	
 
Year ended December 31, 2003 compared to 2002
 
Consolidated net sales increased 15.8% in 2003 to $1.6 billion from $1.4 billion in 2002. This increase in sales was due to the acquisition of Grove on August 8, 2002. Grove was included in our consolidated financial results for a full year in 2003 versus just under five months in 2002. Consolidated net sales for 2003 were also impacted by a further downturn in the US crawler crane market that began in 2002. The decline in the domestic crawler crane market was partially offset in the Crane segment by modest improvements in tower and mobile telescopic crane sales in parts of Europe and Asia. Consolidated net sales in 2003 were also negatively impacted in our Marine segment from customer deferrals of new construction projects and a union strike in the first quarter. In addition, our 2003 consolidated net sales were bolstered by the impact that the stronger euro had on the global consolidation of our US dollar denominated financial statements.
 
Gross margin decreased in 2003 to 21.2% from 23.7% in 2002. This decline was due to reduced margins in our Crane and Marine segments, offset by a gross margin improvement in our Foodservice segment. Crane segment gross margin declined 4.4 percentage points during 2003 as a result of the following items: (i) the loss of our ability to spread fixed costs over a comparable base of revenue due to the decline in production volumes in our domestic crawler crane business; (ii) a shift in product mix toward smaller mobile

 
telescopic cranes; (iii) worldwide price competition in our Crane segment; and (iv) lower historical margins for the Grove product line. Foodservice segment gross margin increased 1.5 percentage points during 2003 as the result of facility consolidations and operational improvements. Marine segment gross margin declined 0.5 percentage points during 2003 due to the following: (i) the change in mix of new construction project work toward projects in their earlier stages; (ii) customer deferrals of new project awards during the year; and (iii) the impact of the strike at Marinette during the first quarter of the year. The strengthening of the euro versus the US dollar in 2003 caused our manufacturing costs to increase at our European manufacturing facilities when converted to US dollars in our consolidated financial statements. In addition, all of our segments experienced increased healthcare and insurance costs during 2003 versus 2002.
 
ES&A increased during 2003 to 15.7% of net sales versus 14.2% of net sales in 2002. This percentage increase was due to lower sales volumes in the Crane and Marine segments, a larger volume of new project quotation activity within our Marine segment, the impact of the exchange rate between the US dollar and the euro in 2003 versus 2002, and higher corporate expenses. The increase in corporate expenses in 2003 is the result of growth due to recent acquisitions, corporate assumption of certain staff responsibilities previously handled by acquired companies and 2003 increases in health and insurance costs. In addition, during 2003, we invested in the development and introduction of new products within both our Crane and Foodservice segments. Our investment in new products resulted in increases in research and development spending as well as additional engineering costs. During 2003, the Crane segment introduced 15 new products, while the Foodservice segment introduced 25 new products. Offsetting these increases in ES&A costs, the total ES&A expenses were less in the Foodservice and Marine segments in 2003 than they were in 2002 by 1.4% and 4.3%, respectively. All three of our segments took several actions to control and reduce certain ES&A expenses in 2003 and future years. These actions included the continued consolidation of Crane segment facilities in Europe, closure of our National Crane facility in Waverly, Nebraska, consolidating support functions and consolidations of certain of our beverage equipment distribution facilities.
 
Amortization expense of $2.9 million during 2003 increased 45.9% over the $2.0 million reported in 2002. This increase in amortization expense in 2003 was the result of a full year of amortization of patents acquired in the Grove acquisition during the third quarter of 2002 and the increased US dollar translation of amortization expenses denominated in euros.
 
Throughout 2003, we completed certain restructuring activities primarily within our Crane segment as a continuation of the Grove acquisition in 2002 as well as other initiatives to reduce our overall fixed cost structure.
 
We recorded a total of $10.1 million in restructuring costs during 2003. Of this amount, $3.5 million was the result of the write-down of the values of certain properties in the US and Europe that were made redundant as a result of our integration and reorganization activities. Our European crane operations also recognized $2.5 million in restructuring costs associated with the closure of certain facilities and the relocation of inventory, equipment and people to other facilities. We also recorded $3.0 million in restructuring costs associated with the closure of our National Crane production facility and the relocation of the production of our National Boom Truck product line. In addition, our Foodservice segment recorded $1.0 million in restructuring costs associated with the closure of its ice-machine production facility in Italy to be relocated to China and the disposal of our Multiplex facility in St. Louis, Missouri.
 
During 2003, we recognized a $12.9 million curtailment gain as the result of certain amendments to our postretirement health benefit plan, which will reduce the amount of certain benefits participants will receive in future years.
 
After taking all of the above matters into account, our consolidated operating earnings from continuing operations for the year ended December 31, 2003 were $85.9 million, which was 25.4% lower than 2002. Consolidated operating earnings in 2003 were 5.5% of net sales compared to 8.5% of net sales in 2002.

 
Interest expense during 2003 of $56.9 million was 9.6% higher than the $52.0 million recorded during 2002. This increase in 2003 is due to a full year’s worth of interest expense related to the 10 1 / 2% senior subordinated notes due 2012. These notes were issued in August 2002 to complete the Grove acquisition. In addition, the increase in the euro versus US dollar exchange rate caused increased expense associated with our euro-denominated 10 3 /8% senior subordinated notes due 2011. The weighted average interest rate paid on all outstanding debt at December 31, 2003 was 7.9% as compared to 7.0% at December 31, 2002.
 
During 2003, we paid down $109.6 million of outstanding term debt due to strong cash flows. Only $46.3 million of our 2003 debt payments were required during the year. The remaining $63.3 million of debt reduction in 2003 was prepayments. During 2003, we incurred $7.3 million in costs resulting from these prepayments, of which $5.9 million was due to the write-off of deferred financing fees, and $1.4 million was costs incurred to unwind certain interest rate swaps.
 
The 2003 effective income tax rate for continuing operations was 18.0%, compared to 36.0% in 2002. The decrease in our effective tax rate in 2003 was due to the impact of certain global tax planning initiatives as well as the impact of fixed permanent book-tax differences on significantly lower pre-tax income.
 
Discontinued operations include the results of operations of Femco, North Central Crane and our AWP business and the costs associated with the sale or closure of these businesses. In addition, discontinued operations include the cost associated with the final purchase price adjustment from the sale of Manitowoc Boom Trucks in 2002. The AWP business which was discontinued included our Delta subsidiary, which was sold in the second quarter of 2004, the Liftlux product line and facility located in Dillingen, Germany, our scissor-lift and boom-lift product categories and our US Manlift product line. During 2003, we recorded a $14.8 million charge ($12.0 million net of tax) related to the decision to exit these AWP product categories and facilities and the sale of North Central Crane. This total charge is made up of the following items: (i) $3.5 million for early termination of a facility lease contract; (ii) $3.9 million for the write-down of certain inventory to its estimated realizable value; (iii) $1.4 million for employee severance; (iv) $4.9 million for the recognition of a goodwill impairment charge in the AWP reporting unit in the second quarter of 2003; and (v) $1.1 million for other asset impairment charges and estimated costs to close these operations.
 
Year ended December 31, 2002 compared to 2001
 
Consolidated net sales for the year ended December 31, 2002 increased 37.8% to $1.4 billion, from just under $1.0 billion for the same period in 2001. A significant portion of this increase is the result of the acquisitions in our Crane segment. Results for 2002 included a partial year of Grove, which we completed on August 8, 2002, and a full year of Potain, which was acquired on May 9, 2001. During 2002, Foodservice segment net sales increased 12.5% and Marine segment sales increased 20.8% versus the prior year. The Foodservice increase was due to increased volumes in our ice and beverage businesses during the second half of 2002, as well as increased sales volumes in our private label residential refrigerator product throughout the year. The sales increase in our Marine segment was due to strong new construction activity versus the prior year, including several US Coast Guard buoy tenders and the start up of production on one of three Staten Island ferries and a Great Lakes ice breaker for the US Coast Guard.
 
Gross margin decreased in 2002 to 23.7% from 27.5% in 2001. Gross margin in the Crane segment declined 5.4 percentage points in 2002 versus 2001. Cost of sales for 2002 includes a fourth quarter charge of $3.3 million associated with selling acquired Grove inventory at fair market value rather than actual production costs. Future periods will not been affected by similar charges because all of the write-up to fair value of the acquired inventory was reflected through costs of sales in 2002. The decline in gross margin in 2002 versus 2001 also resulted from lower volumes in our Crane segment and historically lower gross margins from the Grove product lines. Gross margin in the Foodservice segment decreased approximately 1.3 percentage points in 2002. The gross margin in our Marine segment decreased 3.9 percentage points in 2002 versus 2001. This decrease is primarily the result of a continued shift in the mix of revenues to lower-margin project work versus higher-margin repair work. In addition, all of our segments were impacted by higher healthcare costs in 2002.

 
ES&A expenses increased $49.6 million for the year ended December 31, 2002, compared to 2001. The majority of this increase was the result of the acquisition of Grove in August 2002, the acquisition of Potain in May 2001 and increased healthcare costs across all segments. These three items accounted for approximately $46.8 million of the $49.6 million increase. The remainder of the increase was primarily the result of increased engineering expenses in the Crane and Foodservice segments for new product development and increases in corporate expense as corporate assumed certain staff responsibilities previously handled in the business units of the acquired companies. As a percent of sales, ES&A decreased slightly to 14.2% of net sales in 2002 versus 14.5% for the year ended December 31, 2001. We took several actions in 2002 to control ES&A expense in the current and future years. These actions include consolidation of the Multiplex operation within the Foodservice segment and implementing a reorganization plan in the Crane segment following the Grove acquisition.
 
Amortization expense decreased $9.1 million for the year ended December 31, 2002, compared to the year ended December 31, 2001. This decrease is the result of our adoption of SFAS No. 142. Under the new rules, goodwill and other intangible assets deemed to have indefinite lives are no longer amortized, but are subject to at least annual impairment tests at each reporting unit.
 
We adopted these new accounting rules for goodwill and other intangible assets on January 1, 2002. Under the transitional provisions of SFAS No. 142, we identified our reporting units, performed impairment tests on the net goodwill and other intangible assets associated with each of the reporting units using a valuation date of January 1, 2002, and determined that a transitional goodwill impairment charge of $51.0 million ($36.8 million net of income tax) was required. This impairment related to our reporting units as follows: Beverage Group (Foodservice segment) $33.1 million and Manitowoc Boom Trucks (Crane segment) $17.9 million. This charge was based upon current economic conditions in those industries. The impairment charge was recorded as a cumulative effect of accounting change in our consolidated statement of earnings in the first quarter of 2002 in accordance with the transitional provisions of SFAS No. 142. Under previous accounting requirements, no goodwill impairment would have been recorded on January 1, 2002.
 
During the first quarter of 2002, we recorded a charge of $3.9 million in connection with the consolidation of our Multiplex operations into our other Foodservice operations. We took these actions to streamline our cost structure and utilize available capacity. The charge included $2.8 million to write down the building and land, which was held for sale, to estimated fair market value less cost to sell; $0.7 million for the write-down of certain equipment; and $0.4 million related to severance and other employee related costs.
 
During the fourth quarter of 2002, we recorded a $7.7 million charge associated with the completion of certain integration activities related to the Grove acquisition and certain other restructuring activities in the Crane segment. This charge included $4.0 million related to severance and other employee related costs for headcount reductions at various Manitowoc Crane and Potain facilities; $2.7 million related to the write-down of certain property, plant and equipment; and $1.0 million related to lease termination costs.
 
After taking all of these matters into account, consolidated operating earnings for the year ended December 31, 2002, were $115.1 million, or 8.5% of net sales. This compares with $116.5 million, or 11.8% of net sales, for the year ended December 31, 2001.
 
Interest expense increased $14.6 million for the year ended December 31, 2002, compared to the same period in 2001. This increase was due to additional interest expense related to the 10 1 / 2% senior subordinated notes due 2012, which were issued in August 2002 to complete the Grove acquisition; additional amortization of debt issue costs related to these notes; and a full year of interest expense and amortization of debt issue costs related to the debt incurred for the Potain acquisition in May 2001. The weighted-average interest rate paid on all outstanding debt as of December 31, 2002 was 7.0%. The 2002 effective tax rate was 36.0% compared to 38.7% in 2001. The effective rate for 2002 approximated the combined domestic federal and state statutory rate reduced by lower foreign effective rates. The lower effective rate reflects the benefits of our global tax planning initiatives and the reduction of non-deductible goodwill amortization associated with our adoption of SFAS No. 142.

 
Discontinued operations include the results of operations of our AWP business, Femco, Manitowoc Boom Trucks and the costs associated with the sale or closure of these businesses. Our discontinued AWP business included Delta, the Liftlux product line and facility, our scissor-lift and boom-lift product categories and our US Manlift product line. In connection with the Grove acquisition, the United States Department of Justice raised concerns about a possible reduction in competition in the US boom truck market that could result from the acquisition. In order to address these concerns, Manitowoc and Grove agreed with the Department of Justice that, following the completion of the Grove acquisition, we would divest of either Manitowoc Boom Trucks or National Crane Corporation (Grove’s boom truck business). On December 17, 2002, we entered into an agreement with Quantum to sell all of the outstanding stock of Manitowoc Boom Trucks. The Department of Justice approved the sale on December 30, 2002, and it was completed on December 31, 2002. The sales resulted in a loss of approximately $32.9 million ($23.3 million net of income taxes), which has been recorded in gain (loss) on sale or closure of discontinued operations.
 
In addition, during the fourth quarter of 2002 we finalized our decision to offer Femco for sale. Femco was the Crane segment’s aftermarket replacement parts and industrial repair business. After the Grove acquisition, it was determined that Femco was not a core business to the Crane segment. Femco was sold in February 2003.
 
During December 2002, we recorded a $3.4 million ($2.1 million net of income taxes) charge related to the decision to divest of Femco. Of the charge, $2.2 million related to recording the net assets of Femco at fair value less cost to sell based on internal estimates. In addition, we performed an impairment analysis of the Femco goodwill in accordance with SFAS No. 142, and determined that the entire $1.2 million of goodwill was impaired. The cumulative $3.4 million charge was recorded in discontinued operations. At December 31, 2002, the assets and liabilities of Femco were recorded as held for sale in other non-current assets and liabilities, respectively, in our consolidated balance sheet.
 
ANNUAL SALES AND OPERATING EARNINGS BY SEGMENT
 
Operating earnings reported below by segment are reduced by the amount of expenses relating to restructurings and plant consolidations; these expenses were separately identified, and thus operating earnings did not reflect such expenses, in the Results of Consolidated Operations table above.
 
Crane
 
Net sales, operating earnings and operating margin of the Crane segment reflect the operations of AWP, North Central Crane, Manitowoc Boom Trucks and Femco as discontinued. See “Reconciliation of adjusted to historical financial data.”

 	 	2003	 	2002	 	2001	 	
 	 	amounts in thousands	 	
Net sales	 	$	962,808	 	$	674,060	 	$	391,109	 	
Operating earnings	 	24,437	 	55,613	 	62,654	 	
Operating margin	 	2.5	%	8.3	%	16.0	%	

Year ended December 31, 2003 compared to 2002
 
Net sales in the Crane segment increased 42.8% in 2003 compared to 2002. This increase was primarily due to our acquisition of Grove on August 8, 2002. A full year of Grove sales is included in the Crane segment results for 2003. Grove’s net sales for the period from January 1, 2003 through August 8, 2003 were $311.1 million compared to zero in 2002 prior to its acquisition. Crane segment net sales in 2003

 
were also impacted by the continued and further downturn in the US crawler crane market that began for us in 2002. This decline in the crawler crane market was partially offset by modest improvements in tower and mobile telescopic crane sales in parts of Europe and Asia. In addition, the strengthening of the euro as compared to the US dollar during 2003 resulted in an increase in the US dollar equivalent for sales denominated in euro versus the prior year. Crane segment backlog stood at $213.2 million at December 31, 2003, versus $133.8 million at December 31, 2002.
 
Crane segment operating earnings decreased $31.2 million in 2003 versus 2002, which represents an operating margin decrease of 5.8 percentage points. A portion of the decrease is attributable to the inclusion of $9.1 million in restructuring costs as a reduction of Crane operating earnings in 2003 versus $7.7 million in 2002. These 2003 costs included $3.5 million for write-down of certain properties to their net realizable value. Approximately $3.0 million in restructuring costs related to the consolidation of our Waverly, Nebraska production into Shady Grove, and $2.5 million for the completion of our restructuring activities associated with our Potain workforce and facilities in Europe. Crane segment operating earnings were also negatively impacted by the following: (i) lower volumes in our domestic crawler crane business; (ii) a shift in product mix in the mobile telescopic product category to smaller capacity units; (iii) worldwide price competition across all product categories; and (iv) lower historical gross margins from the Grove product line.
 
Year ended December 31, 2002 compared to 2001
 
Net sales in the Crane segment increased 72.3% to $674.1 million in 2002 compared to 2001. This increase was primarily due to our acquisition of Grove in August 2002 and a full year of Potain sales in 2002. Grove’s net sales since the date of acquisition and Potain’s net sales from January 1, 2002 through May 9, 2002 were $218.4 million and $78.0 million, respectively. The Crane segment experienced a dramatic slowdown in the third quarter of 2002, which continued into the fourth quarter led primarily by decreased volumes in the crawler crane product category and the domestic market. During the first half of 2002, our crane sales outperformed the market and remained relatively stable compared to the overall industry, which was declining at a rate exceeding 10%. Beginning in the third quarter, our sales declined closer to industry rates. Crane segment backlog stood at $133.8 million at December 31, 2002, versus $54.8 million at December 31, 2001. The increase is primarily due to the acquisition of Grove during 2002. Excluding Grove, the Crane segment backlog stood at $48.9 million at December 31, 2002. The decrease in backlog, excluding Grove, is due to the weakened economic conditions that slowed the sales of our crawler cranes.
 
Crane segment 2002 operating earnings of $55.6 million include a reduction of $7.7 million for restructuring costs. This represents a 7.7% reduction in operating earnings in 2002 compared to 2001. Crane segment operating earnings in 2002 also include the full year impact of Potain operating earnings and the impact of Grove operating earnings since the date of acquisition. In addition, during the fourth quarter of 2002, the Crane segment recognized a $3.3 million charge for selling acquired Grove inventory at fair market value rather than actual production costs. The remaining decrease in Crane segment operating earnings in 2002 compared to 2001 occurred primarily as the result of the lower crawler crane production levels due to the sales decline discussed above.
 
Foodservice

 	 	2003	 	2002	 	2001	 	
 	 	amounts in thousands	 	
Net sales	 	$	457,000	 	$	462,906	 	$	411,637	 	
Operating earnings	 	65,927	 	56,749	 	57,942	 	
Operating margin	 	14.4	%	12.3	%	14.1	%	

 
Year ended December 31, 2003 compared to 2002
 
Foodservice segment net sales decreased 1.3% in 2003 compared to 2002. This decrease was the result of lower overall industry shipments in the segment’s ice and beverage businesses. For the full year, industry shipments of ice machines were down approximately 5%. Despite these industry trends, the segment’s ice business reflected increased sales in 2003 compared to 2002, increasing our market share.
 
Beverage equipment sales in 2003 showed negative comparisons to 2002 due to a major chain new equipment rollout that occurred in the fourth quarter of 2002 that did not reoccur in 2003. Our private label residential refrigerator division net sales in 2003 remained flat compared to 2002. New product introductions by our Foodservice segment bolstered 2003 sales results with the introduction of 25 new products, including the initial rollout of its new “S” Series ice machine product during the fourth quarter of the year.
 
Foodservice segment operating earnings increased 16.2% in 2003 versus 2002 despite the slight decline in net sales. The significant improvement in operating earnings was due to the strength of the ice business sales, facility consolidation, continued operational improvements across all of the divisions and lower restructuring costs in 2003 ($1.0 million) compared to 2002 ($3.9 million). The 2003 restructuring costs included $0.7 million for closure of our Italian ice-machine production facility and movement of production to China. The remaining restructuring costs were recorded as a result of the additional loss on final disposition of the segment’s Multiplex production facility located in St. Louis, Missouri. In summary, the 2003 operating earnings increase of 16.2% far outpaced the 2003 net sales decline of 1.3% due to favorable mix of sales, operational improvements and facility consolidation.
 
Year ended December 31, 2002 compared to 2001
 
Foodservice segment net sales increased 12.5% to $462.9 million in 2002 compared to 2001 levels. This increase was primarily due to increased sales of ice and beverage products throughout the second half of the year, as well as increases in our private label residential refrigeration product throughout the year, while sales of commercial refrigeration products remained flat. We attributed this to commercial refrigeration’s dependency on new-store construction, which has been slower to recover compared with the replacement, expansion and remodeling activity that boosted ice and beverage equipment. For the full year, industry shipments of ice machines were up approximately 5%. New products played a key roll in our 2002 sales growth as several of our Foodservice businesses had major new product introductions during the year.
 
Operating earnings of the Foodservice segment decreased $1.2 million, or 2.1%, in 2002 compared to 2001. This decrease was primarily due to a $3.9 million restructuring charge taken by the Foodservice segment during 2002 for the consolidation of our Multiplex operations into other Foodservice operations. This improvement in the Foodservice segment’s operating margin was due to growth and related margin contributions in our ice, beverage and residential refrigerator operations, further cost reduction benefits from implementation of manufacturing operational improvements across all the segment’s businesses and consolidations within our beverage and refrigeration operations.
 
Marine

 	 	2003	 	2002	 	2001	 	
 	 	amounts in thousands	 	
Net sales	 	$	151,048	 	$	219,457	 	$	181,677	 	
Operating earnings	 	4,750	 	19,934	 	18,924	 	
Operating margin	 	3.1	%	9.1	%	10.4	%	

 
Year ended December 31, 2003 compared to 2002
 
Marine segment net sales decreased 31.2% in 2003 versus 2002. This decrease was due in part to the impact of the 44-day union strike at Marinette in the first quarter of 2003. The strike slowed ship construction progress. The impact of customer deferrals of awarding new construction contracts in the second half 2003 also contributed to the decrease. In addition, several ships that were scheduled to dock at our facilities on the Great Lakes in the fourth quarter of 2003 were rescheduled for winter dry docking until the first quarter of 2004 as many of these boats remained active longer than expected.
 
Operating earnings in the Marine segment decreased $15.2 million, or 76.2% in 2003 compared to 2002. The reasons for this decline are the following: (i) the change in mix of new construction project work toward newer projects and more commercial construction contracts; (ii) customer deferrals of new project awards during the year; (iii) the impact of the first quarter strike at Marinette on project construction progress and efficiency; and (iv) additional costs incurred in 2003 on bidding for new project contracts. These negative pressures on operating earnings were offset slightly by an increase in ship repair activities during 2003 compared to 2002.
 
Year ended December 31, 2002 compared to 2001
 
New construction activity was strong throughout the year and resulted in Marine segment net sales increasing 20.8% to $219.5 million in 2002 compared to 2001. Our 2002 new-construction projects included several buoy tenders and a Great Lakes icebreaker for the US Coast Guard, in addition to the start up of construction on the first of three Staten Island ferries for the City of New York.
 
Operating earnings increased approximately $1.0 million for the year ended December 31, 2002 compared to the same period in 2001 due primarily to new-construction growth. Operating margins in 2002 decreased approximately 1.3 percentage points compared to 2001. We have experienced a decline in demand for higher-margin repair work for more than two years, primarily due to issues affecting the steel industry, low water levels on the Great Lakes and general domestic economic conditions.
 
General corporate expenses

 	 	2003	 	2002	 	2001	 	
 	 	amounts in thousands	 	
Corporate expenses	 	$	19,210	 	$	15,171	 	$	11,961	 	
% of net sales	 	1.2	%	1.1	%	1.2	%	

Year ended December 31, 2003 compared to 2002
 
Corporate expenses increased 26.6% in 2003 versus 2002, but remained flat as a percentage of net sales at 1.2%. The reasons for the $4.0 million increase year-over-year include additional personnel and related benefits resulting from our growth and the assumption of certain staff responsibilities previously handled by acquired companies, costs of compliance with new governmental regulations, certain reserves for litigation and additional depreciation expense.
 
Year ended December 31, 2002 compared to 2001
 
Despite increasing 26.8% in 2002, corporate expenses remained constant as a percentage of net sales. This reflects both the growth from acquisition and corporate assumption of certain staff responsibilities previously handled in the field.

 
Market Conditions and Outlook
 
During 2003, nearly 70 percent of our Crane segment revenues and 40 percent of our consolidated net sales were from international markets.  The increases were the result of strategies to diversify our geographic base and product offering during the continued downturn in the U.S. crane market, especially for the crawler crane products.  While penetration in global markets is helpful to us, it also adds complexity and susceptability to global risks and issues.  Specifically, the issues of the strengthening Euro versus the U.S. Dollar throughout 2003, and the impact of worldwide steel market activities on the costs of steel for our manufacturing processes, impacted us during the year and will continue to provide challenges and opportunities in 2004.  With the end of the war in Iraq, certain markets have now become available to us that were not available in past years, but continued unrest in Iraq and the Middle East in general, have stymied significant immediate growth in that region.  The U.S. economy appears to have hit the bottom in our end markets. We are seeing preliminary signs of recovery in the U.S., while certain European and Asian economies also appear to be strengthening.
 
Although the signs appear to be favorable, we are cautiously optimistic about the strength and significance of the U.S. or any global economic recovery.  We have not planned for any significant recoveries in 2004 and we will continue to protect our market shares and improve our cost structures so that we increase our benefits when the economies do rebound. Because of our efforts to become more global in our Crane and Foodservice businesses, we continue to be affected now more than ever by non-domestic world economies.  The economies of Europe and Asia, in particular, affect our international performance.
 
We believe that our diversified business model in terms of global presence and broad product offerings proved beneficial to us in 2003 and will continue to provide stability to our company into the future.  The strength of our Foodservice segment performance in 2003 helped to offset relatively weaker performances in our Crane and Marine segments.  Diversification within our segments also proves beneficial.  In our Crane segment, stronger international performance, particularly in some parts of Europe and Asia, helped to lessen the continued impact of a weak North American crawler crane market.
 
Cranes and Related Products — The Crane market continued its decline during 2003.  With the exception of the Chinese market, most of our global markets were down in 2003.  The continued decline in the North American crane market was most pronounced, especially the crawler crane market, which declined by over 50 percent from 2002.  Pricing has been competitive on a global basis.  Declining market prices accelerated in the second half of 2003.  As we head into 2004.  However, we believe that the decline in volumes and prices, in general, has now stabilized.
 
During 2003, we grew market share in most product segments in North America and Europe.  In addition, we grew market share in many of our Asian markets and made inroads in South America.  We are investing in infrastructure in Asia so that we can continue to grow faster in that market place.  During 2003, we also formed an alliance with Kobelco Construction Machinery Company, a large Japanese construction equipment manufacturer.  We continue to invest in new products and product support.  In 2003, we introduced 15 new products in the Crane segment, which is the most that the Crane segment has introduced in one year.
 
Looking into 2004, we expect volumes to be flat to slightly up from 2003 on worldwide basis.  We believe that we have seen the bottom of the market, but at this point we are not seeing any significant signs of a recovery.  In addition, we believe we will continue to see a relatively strong Euro through 2004, as well as increased costs of some commodities such as steel.  We have plans to adapt to these conditions.  In this environment we plan to protect our market share by providing our customers with what we believe is the best value in the industry.  We will also work to grow our market share globally by leveraging the strength of our brand names and expanded product offering.
 
In 2004 we plan to introduce 16 new models.  We will also continue to expand our global reach.  One way to achieve this expansion is through the strategic positioning of our sales and product support infrastructure in Asia.  In addition, our global sales force is cross selling our entire product line.  Our recent acquisitions of Potain and Grove have given us a broad product offering and worldwide distribution and product support.  We believe these factors will help us grow market share in 2004.  In addition, we made great strides in 2003 to streamline our cost structure.  We have essentially completed the integration of Grove,

 
including the rationalization of our AWP business, and the consolidation of our North American boom-truck production into our Shady Grove facility.  These consolidation and restructuring efforts have resulted in annual savings of $36 million over our 2002 cost base.  We believe that our growth strategy is solid and supported by the diversification of our global manufacturing and distribution presence.  We will continue to attack our markets geographically, rather than by product line.
 
Foodservice Equipment — In 2003, the Foodservice segment introduced more than 25 new products.  We believe these new product introductions helped us to outperform our industries during 2003 as we held sales steady in generally declining markets.  During 2003, we believe that our key markets hit the bottom of their cycles.  We believe these markets are beginning to improve.  During the last quarter of 2003, we experienced positive trends in year-over-year, same-store sales improvements in many of our customers’ segments, including the quick-serve segment.  In addition, we are seeing continued strengthening in the full-service and quick-casual dining segments, and rising lodging rates in the lodging industry.  Industry experts generally predict a two to two-and-a-half percent growth in foodservice equipment and supply sales for 2004.
 
The same factors that drove our strong operating performance in 2003 will continue to drive our business in 2004.  As the market improves, we expect to outperform the industry on the top line due to our wide range of new products that were introduced in 2003 and that continue to be rolled out in 2004.  Our strategy is to generate eighty percent of revenues from products introduced in the previous five years.  We also will continue to invest in foreign markets during 2004.  We plan to build a new engineering and manufacturing operations center in China.  Our plan is to relocate our existing operation to a new, larger and more high-tech facility, which will include manufacturing space, global procurement, and other global/regional centers of excellence.  Initially, we will manufacture ice machines and beverage equipment in this facility, but plan to expand to manufacture other products for this region.
 
Marine – The Marine segment had a difficult year in 2003 due to a number of factors, some of which were internal, but most of which were external.  One of the factors which hurt this segment during 2003 was the impact of the first quarter strike at Marinette Marine.  Although we believe that the outcome was favorable to all parties, the resolution took longer than we had hoped.  This labor action not only impacted our first quarter operating results, but had a ripple effect on our business through the remainder of 2003.  The larger issue that impacted the Marine segment in 2003 was the industry conditions that caused many of our customers to defer the award of major shipbuilding contracts until late in the year.  We believe the primary causes of these deferrals were our customers’ uncertainty about the state of the U.S. economy, as well as their inability to secure financing for these high dollar value projects.
 
Once our customers began to award new construction projects later in the year, our Marine segment won nearly all the major contracts that it bid on during the year.  Therefore, we go into 2004 with a full slate of work in our shipyards.  In addition, with a number of these contracts, we could land additional work through changes to the project scope and options for follow-on contracts.  Further more we bid on three new contracts in January 2004.  Even though we experienced the delay in contract awards through much of 2003, we are starting to see greater numbers of contracts out for bid at this point in 2004 as compared to the same period in 2003.  We are also working intently on two major contracts that will be announced in 2004.  One is the next phase of the U.S. Navy’s Littoral Combat Ship (LCS) project, which will involve construction of a prototype vessel, which we expect will be awarded in the second quarter of 2004.  We have been selected as a finalist, with our partners, Lockheed Martin, Gibbs & Cox, and Bollinger Shipyards, for the LCS project.  Furthermore, we are one of three companies in the running for a 180-vessel Response Boat Medium (RBM) contract, which the U.S. Coast Guard is expected to award in August 2004.
 
The improving U.S. economy is helping buoy our shipbuilding business.  We are beginning to see more impact on ship construction demand due to the OPA-90 legislation, as all current U.S. waterway oil hauling vessels will begin to be phased out in 2004, and must be replaced with double-hull vessels.  Another positive sign is that charter rates are beginning to increase worldwide, which means additional revenue for commercial customers that can be used to build new vessels.  Despite these positive economic indicators, however, there are two key issues which will impact our end markets in 2004.  The first issue continues to be the ability of our customers to find and secure adequate financing to support their new ship construction

 
initiatives.  The second issue will be the financial strength of a portion of our non-governmental customer base, which is negatively impacted by the poor financial condition and outlook for U.S. steel manufacturers and customers in the supply chain for those companies.  Our Marine segment plans to continue to pursue new construction activities, provide superior repair and maintenance support to our customers, and work with other shipyards to provide integrated solutions to our mutual customers as the need arises.
 
ACQUISITIONS
 
Our growth in 2003, 2002 and 2001 was mainly due to our acquisitions in these years. Over the past five years we have completed eleven acquisitions. All of them were recorded using the purchase method of accounting. Each of these acquisitions is included in our consolidated statements of earnings beginning with the date of acquisition.
 
The success of our acquisition strategy is dependent upon our ability to successfully integrate the acquired businesses, operate them profitably and accomplish our strategic objectives underlying these acquisitions. We attempt to address these challenges by adhering to a structured acquisition assessment and integration process and by employing appropriate internal resources and experienced personnel to assist us in accomplishing our objectives.
 
2002 Acquisitions —On August 8, 2002 we acquired all of the outstanding common shares of Grove. The results of Grove’s operations have been included in our consolidated statements of earnings since that date. Grove is a leading provider of mobile telescopic cranes, truck-mounted cranes, boom trucks and aerial work platforms for the global market. Grove’s products are used in a wide variety of applications by commercial and residential building contractors as well as by industrial, municipal and military end users. Grove’s products are marketed to independent equipment rental companies and directly to end users under the brand names Grove Crane and National Crane.
 
We view Grove as a strategic fit with our crane business for a number of reasons. Grove is a global leader in the mobile telescopic crane industry, specifically in all-terrain and rough-terrain mobile telescopic cranes. We did not offer these types of cranes prior to the acquisition, so Grove filled this void in our product offering. Coupled with our entrance into the tower crane product line with the acquisition of Potain in 2001, Grove enables us to offer customers four major crane categories, namely crawler cranes, tower cranes, mobile telescopic cranes and boom trucks. With the addition of Grove, we are able to offer customers equipment and lifting solutions for virtually every construction application. We also believed that the combination of Potain and Grove would provide opportunities to capitalize on their respective strengths in systems, technologies and manufacturing expertise, and that this combination would create natural synergies in our worldwide distribution and service network.
 
The aggregate purchase price paid for Grove was $277.8 million. This included the issuance of $70.0 million of our common stock, the assumption of $202.4 million of Grove debt outstanding as of August 8, 2002 and direct acquisition costs of $5.4 million. In exchange for the outstanding shares of Grove common stock, we issued approximately 2.2 million shares of our common stock out of treasury with an average market price of $32.34 per share. The number of shares issued at the close of the transaction was calculated based on the average closing price of our common stock for the ten consecutive trading days ending on and including the second day prior to the closing of the transaction. In addition, we assumed all of Grove’s outstanding liabilities (approximately $477.8 million including the outstanding debt), contingencies and commitments. Substantially all of the assumed debt was refinanced.
 
The purchase consideration paid in excess of the fair values of the assets acquired and liabilities assumed was allocated first to the identifiable intangible assets with the remaining excess accounted for as goodwill. We obtained third party valuations of identifiable intangible assets acquired. Based upon the appraisal report of identifiable intangible assets, the allocation was as follows: $26.0 million to trademarks and tradenames with an indefinite life; $11.9 million to an in-place distributor network with an indefinite life; $7.1 million to patents with a weighted-average 10-year life; and the remaining $63.1 million to goodwill.

 
The $63.1 million of goodwill is included in the Crane segment. None of this amount is deductible for tax purposes. We also obtained third party valuations of the fair value of inventory and property, plant and equipment acquired. Based upon the appraisal reports of these assets, we increased the value of inventory and property, plant and equipment by $3.3 million and $1.1 million, respectively. The $3.3 million fair value adjustment to inventory was charged to cost of goods sold during the fourth quarter of 2002 as the related inventory items were sold. The $1.1 million fair value adjustment to property, plant and equipment is being depreciated over the estimated remaining useful lives of the property, plant and equipment.
 
During 2003, we completed the purchase accounting related to the Grove acquisition and we recorded $30.2 million of purchase accounting adjustments to the August 8, 2002 Grove opening balance sheet. The purchase accounting adjustments related to the following: $13.2 million to finalize the accounting for deferred income taxes, related primarily to the Grove non-US operations; $12.4 million for consolidation of the National Crane facility located in Nebraska to the Grove facility located in Pennsylvania; $2.1 million, $0.5 million and $1.5 million for additional accounts receivable, inventory and warranty reserves, respectively; $0.9 million related to severance and other employee related costs for headcount reductions at the Grove facilities in Europe; $2.0 million of curtailment gain as a result of the closing of the National Crane facility located in Nebraska and its impact on pension obligations (reduction of goodwill); and $1.6 million for other purchase accounting related items.
 
During 2002, we also completed certain restructuring and integration activities relating to the Grove acquisition. We recorded a charge totaling $12.1 million related to these restructuring and integration activities during 2002. Of this amount, $4.4 million was recorded in the opening balance sheet of Grove and $7.7 million was recorded as a charge to earnings during the fourth quarter of 2002. The $4.4 million recorded in the opening balance sheet related to severance and other employee related costs for headcount reductions at Grove facilities.
 
On April 8, 2002, we purchased the remaining 50% interest in our joint venture Manitowoc Foodservice Europe (f/k/a Fabbrica Apparecchiature per la Praduzione del Ghiaccio Srl), a manufacturer of ice machines based in Italy. The aggregate cash consideration paid by us for the remaining interest was $3.4 million and resulted in $2.6 million of additional goodwill. The $2.6 million of goodwill is included in the Foodservice segment and is not deductible for tax purposes. During the second quarter of 2003, we recorded $0.7 million of purchase accounting adjustments to the April 8, 2002 opening balance sheet.
 
2001 Acquisitions —On May 9, 2001, we acquired all of the outstanding capital stock of Potain. Potain is a leading designer, manufacturer and supplier of tower cranes for the building and construction industry. The aggregate consideration paid was $425.2 million, which includes $307.1 million paid in cash, direct acquisition costs of $4.1 million ($0.4 million incurred during 2002), assumed liabilities of $138.8 million, the payment of a post-closing purchase price adjustment of $3.6 million in February 2002, and is less cash acquired of $28.4 million.
 
During 2002, we made certain purchase accounting adjustments for the Potain acquisition resulting in a reduction in goodwill of approximately $11.3 million. The primary purchase accounting adjustments recorded during 2002 were to adjust the book value of property, plant and equipment acquired to fair value based on an appraisal report, adjustment of deferred tax assets and to record a $8.1 million liability associated with certain restructuring and integration activities.
 
In addition, during 2002 a portion of the excess of the cost over fair value of the net assets acquired in the Potain acquisition was allocated to specific other intangible assets. Based upon an appraisal report, the allocation was as follows: $53.0 million to trademarks and tradenames with an indefinite life; $17.5 million to patents with a weighted-average 15-year life; $8.8 million to engineering drawings with a weighted-average 15-year life; $5.0 million to an in-place distribution network with an indefinite life; and the remaining $118.2 million to goodwill.

 
During the fourth quarter of 2003, we made a $1.0 million dollar adjustment to the Potain opening balance sheet for the reversal of the valuation allowance against an acquired net operating loss carryforward.
 
LIQUIDITY AND CAPITAL RESOURCES
 
Cash flow from operations for the year ended December 31, 2003 was $150.9 million compared to $94.5 million for the year ended December 31, 2002.  This was applied to capital spending, dividends and a reduction in debt.  We had $47.2 million in cash and short term investments along with $96.4 million of unused availability under the terms of the Revolving Credit portion of our Senior Credit Facility at December 31, 2003.
 
On November 6, 2003, the company completed the sale of $150.0 million of 7 1/8% Senior Notes due 2013 (Senior Notes due 2013).  The Senior Notes due 2013 are unsecured senior obligations ranking prior to the company’s Senior Subordinated Notes due 2011 and Senior Subordinated Notes due 2012.  The company’s collateralized senior indebtedness, including indebtedness under its Senior Credit Facility, ranks equally with the Senior Notes due 2013, except that the Senior Credit Facility is collateralized by substantially all domestic tangible and intangible assets of the company and its subsidiaries.  The Senior Notes due 2013 are fully and unconditionally jointly and severally guaranteed by substantially all of the company’s domestic subsidiaries.  Interest on the Senior Notes due 2013 is payable semiannually in May and November each year, commencing May 1, 2004.  The Senior Notes due 2013 can be redeemed by the company in whole or in part for a premium on or after November 1, 2008. In addition, the company may redeem for a premium (107.125% of the face amount of the notes, plus interest) at any time prior to November 1, 2006 up to 35% of the face amount of the Senior Notes due 2013 with the proceeds of one or more equity offerings.  We used the net proceeds from the sale of the Senior Notes due 2013 for the prepayment of our Term Loan A and partial prepayment of the Term Loan B under the Senior Credit Facility.  We incurred approximately $3.6 million in financing fees in connection with the sale of these notes.
 
The company also incurred approximately $5.6 million of financing fees in 2003 related to senior debt covenants amendments and issuance of our $150 million of senior notes.  This amount is included Debt Issue Costs of the Consolidated Statement of Cash Flows.
 
We spent a total of $32.0 million during 2003 for capital expenditures.  The following table summarizes 2003 capital expenditures and depreciation by segment.

 	 	Capital
Expenditures	 	Depreciation	 	
Crane	 	$	25,028	 	$	36,776	 	
Foodservice	 	5,005	 	6,474	 	
Marine	 	735	 	1,027	 	
Corporate	 	1,209	 	1,160	 	
Tota	 	$	31,977	 	$	45,437	 	
 
We continue to fund capital expenditures to improve the cost structure of our business, to invest in new processes and technology, and to maintain high-quality production standards.  We expect that the trend in capital expenditures in 2004 will approximate segment depreciation levels.  As a result, we expect that our total capital expenditures should be near $40 million in 2004.
 
The change in working capital of continuing operations was a decrease (source of cash) of $79.5 million.  The details of these changes are reflected in the Consolidated Statement of Cash Flows.  The drivers of this decrease were an increase in short-term payables of $15.4 million, a decrease in inventory of $25.7 million, a decrease in accounts receivable of $5.0 million, and an increase in other liabilities of $27.3 million.

 
Our outstanding debt at December 31, 2003, consisted primarily of our 10 3/8% Senior Subordinated Notes due 2011, 10 ½% Senior Subordinated Notes due 2012, 7 1/8% Senior Notes due 2013, and borrowings under our Senior Credit Facility.
 
The Senior Credit Facility is comprised of a $175 million Term Loan A, a $175 million Term Loan B and $125 million Revolving Credit Facility.  As a result of scheduled payments and prepayments made since 2001, we have no amounts outstanding under our Term Loan A and $17.7 million outstanding under our Term Loan B, which requires quarterly principal payments of $0.1 million from December 2004 through March 2006, and quarterly principal payments of $3.5 million from June 2006 through May 2007.  There was no amount outstanding under the Revolving Credit Facility as of December 31, 2003.
 
Borrowings under the Senior Credit Facility bear interest at a rate equal to the sum of a base rate or a Eurodollar rate plus an applicable margin, which is based on our consolidated total leverage ratio, as defined by the Senior Credit Facility.  The weighted-average interest rate for the Term Loan B facility was 4.33% at December 31, 2003.  The annual commitment fee in effect on the unused portion of our Revolving Credit Facility was 0.5% at December 31, 2003.  We had $96.4 million of unused availability under the terms of our Revolving Credit Facility at December 31, 2003.
 
To help finance the Potain acquisition in May 2001, we issued 175 million Euro (approximately $217.7 million at December 31, 2003 exchange rates) of 10 3/8% Senior Subordinated Notes due May 2011 (Senior Subordinated Notes due 2011).  The Senior Subordinated Notes due 2011 are unsecured obligations ranking subordinate in right of payment to all senior debt, rank equal to the Senior Subordinated Notes due 2012, and are fully and unconditionally, jointly and severally guaranteed by substantially all of our domestic subsidiaries.  Interest on the Senior Subordinated Notes due 2011 is payable semiannually in May and November of each year.  The Senior Subordinated Notes due 2011 can be redeemed in whole or in part by the company for a premium after May 15, 2006.  In addition, we may redeem for a premium (110.375% of the face amount of the notes, plus interest) at any time prior to May 15, 2004, up to 35% of the face amount of the Senior Subordinated Notes due 2011 with the proceeds from one or more public equity offerings.
 
As part of the Grove acquisition in August 2002, we issued $175 million of 10 ½% Senior Subordinated Notes due August 2012 (Senior Subordinated Notes due 2012).  The Senior Subordinated Notes due 2012 are unsecured obligations ranking subordinate in right of payment to all senior debt, rank equal to the Senior Subordinated Notes due 2011 and are fully and unconditionally, jointly and severally guaranteed by substantially all of our domestic subsidiaries.  Interest on the Senior Subordinated Notes due 2012 is payable semiannually in February and August each year, commencing February 1, 2003.  The Senior Subordinated Notes due 2012 can be redeemed by us in whole or in part for a premium on or after August 1, 2007. In addition, we may redeem for a premium (110.5% of the face amount of the notes, plus interest), at any time prior to August 1, 2005, up to 35% of the face amount of the Senior Subordinated Notes due 2012 with the proceeds from one or more public equity offerings.
 
Our debt-to-capital ratio at the end of 2003 was 66.5% versus 69.3% at the end of 2002.  This decrease was driven by repayment of debt during 2003, which was partially offset by foreign currency exchange rates..
 
The Senior Credit Facility, Senior Notes due 2013 and Senior Subordinated Notes due 2011 and 2012 contain customary affirmative and negative covenants.  In general, the covenants contained in the Senior Credit Facility are more restrictive than those of the Senior Notes due 2013 and Senior Subordinated Notes due 2011 and 2012.  Among other restrictions, the Senior Credit Facility covenants had required us to meet specified financial tests, which included minimum levels of earnings before interest, taxes, depreciation, and amortization (EBITDA), and various debt to EBITDA ratios which became more restrictive over time.  These covenants also limited the company’s ability to redeem or repurchase its debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, repurchase capital stock, lend money or make advances, create or become subject to liens, and make capital expenditures.  The Senior Credit Facility also contains cross-default provisions whereby certain defaults under any other debt agreements would result in default under the Senior Credit Facility.  At December 31, 2002, the company was not in compliance with certain of its financial covenants.  On February 4, 2003, the company received

 
an amendment and waiver to its Credit Agreement dated May 9, 2001, which cured these violations.  In addition, this amendment provided future relief under certain financial covenants that became more restrictive over time.  At June 30, 2003, the company was not in compliance with certain of its financial covenants.  On July 23, 2003, the company received an amendment and waiver to its Senior Credit Agreement dated May 9, 2001, which cured these violations.  In addition, the amendment eliminates the minimum EBITDA covenants and provides future relief under certain financial covenants that became more restrictive over time.  The non-financial test covenants discussed above are still in-place under the amended Senior Credit Agreement.  The company was in compliance with all covenants as of December 31, 2003, and based upon our current plans and outlook, the company believes it will be able to comply with these covenants during the subsequent 12-month period.
 
In April 2001, Standard & Poor’s assigned a double “B” corporate credit rating to our company, a double “B” rating to our Senior Credit Facility, and a single “B” plus rating to our Senior Subordinated Notes, all with a stable outlook.  Also in April 2001, Moody’s Investors Service assigned a Ba2 rating to our Senior Credit Facility and a B2 rating to our Senior Subordinated Notes with a positive outlook.  In March 2002, Standard & Poor’s issued a press release stating that we had been placed on credit watch with negative implications.  In July 2002, Standard & Poor’s removed the credit watch, but changed it’s outlook from stable to negative.  In July 2003, Standard & Poor’s lowered our corporate credit rating from a double “B” to a double “B” minus, lowered the rating to our Senior Credit Facility from a double “B” to a double “B” minus and lowered the rating on our Senior Subordinated Notes from a single “B” plus to a single “B.”  Moody’s Investors Service has taken no action concerning our rating since initiating them in April 2001.  We do not anticipate any future adjustments to these ratings would have a material impact on our liquidity.
 
Our debt position increases our vulnerability to general adverse industry and economic conditions and results in a significant portion of our cash flow from operations being used for payment of interest on our debt and making scheduled principal payments.  This could potentially limit our ability to respond to market conditions or take advantage of future business opportunities.  Our ability to service our debt is dependent upon many factors, some of which are not subject to our control, such as general economic, financial, competitive, legislative, and regulatory factors.  In addition, our ability to borrow additional funds under the Senior Credit Facility in the future will depend on our meeting the financial covenants contained in the credit agreement, even after taking into account such new borrowings.
 
The Senior Credit Facility or other future facilities may be used for funding future acquisitions, seasonal working capital requirements, capital expenditures, and other investing and financing needs.  We believe that our available cash, credit facility, cash generated from future operations, and access to debt and equity markets will be adequate to fund our capital and debt financing requirements for the foreseeable future.
 
Management also considers the following regarding liquidity and capital resources to identify trends, demands, commitments, events and uncertainties that require disclosure:
 
A.            Our Senior Credit Facility requires us to comply with certain financial ratios and tests to comply with the terms of the agreement. We were in compliance with these covenants as of December 31, 2003, the latest measurement date. The occurrence of any default of these covenants could result in acceleration of our obligations under the Senior Credit Facility (approximately $17.7 million as of December 31, 2003) and foreclosure on the collateral related to such obligations. Further, such an acceleration would constitute an event of default under the indentures governing our Senior Subordinated Notes due 2011 and 2012 and our Senior Notes due 2013.
 
B.              Circumstances that could impair our ability to continue to engage in transactions that have been integral to historical operations or are financially or operationally essential, or that could render that activity commercially impracticable, such as the inability to maintain a specified investment grade credit rating, level of earnings, earnings per share, financial ratios, or collateral. We do not believe that the risk factors applicable to our business are reasonably likely to impair our ability to continue to engage in our historical operations at this time.

 
C.              Factors specific to us and our markets that we expect to be given significant weight in the determination of our credit rating or will otherwise affect our ability to raise short-term and long-term financing . We do not presently believe that the risk factors applicable to our business are reasonably likely to materially affect our credit ratings or would otherwise adversely affect our ability to raise short-term or long-term financing.
 
D.             We do not have any significant guarantees of debt or other commitments to third parties. We have disclosed information related to guarantees in Note 15 to our Consolidated Financial Statements.
 
E.               Written options on non-financial assets (for example, real estate puts). We do not have any written options on non-financial assets.
 
OFF-BALANCE SHEET ARRANGEMENTS
 
Our disclosures concerning transactions, arrangements and other relationships with unconsolidated entities or other persons that are reasonably likely to affect materially liquidity or the availability of or requirements for capital resources are as follows:
 
•                   We have disclosed in Note 15 to the Consolidated Financial Statements our buyback and residual value guarantee commitments.
 
•                   We also lease various assets under operating leases. The future estimated payments under these arrangements are also disclosed in Note 18 to the Consolidated Financial Statements.
 
•                   We have disclosed our accounts receivable factoring arrangement with a bank in Note 9 to the Consolidated Financial Statements.
 
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
 
A summary of our significant contractual obligations as of December 31, 2003 is as follows:

 	 	Total Committed	 	2004	 	2005	 	2006	 	2007	 	2008	 	Thereafter	 	
Long-term debt	 	$	577,810	 	$	18,216	 	$	183	 	$	10,507	 	$	6,974	 	$	—	 	$	541,930	 	
Capital leases	 	14,490	 	7,000	 	1,618	 	1,654	 	1,601	 	1,432	 	1,185	 	
Operating leases	 	82,228	 	16,087	 	13,534	 	11,971	 	10,613	 	8,965	 	21,058	 	
Purchase obligations	 	—	 	—	 	—	 	—	 	—	 	—	 	—	 	
Total committed	 	$	674,528	 	$	41,303	 	$	15,335	 	$	24,132	 	$	19,188	 	$	10,397	 	$	564,173	 	

* - There were no significant purchase obligation commitments at December 31, 2003
 
Additionally, at December 31, 2003, we had outstanding letters of credit that totaled $28.6 million.  We also had buyback commitments and residual value guarantees outstanding, that if all were satisfied at December 31, 2003, the total cash cost to us would be $33.1 million.
 
We maintain defined benefit pension plans for some of our operations in the United States and Europe. It is our policy to fund the pension plans at the minimum level required by applicable regulations. In 2003, cash contributions to the pension plans by us were $4.5 million, and we estimate that our pension plan contributions will be approximately $9.6 million in 2004.
 
RISK MANAGEMENT
 
We are exposed to market risks from changes in interest rates, commodities, and changes in foreign currency exchange.  To reduce these risks, we selectively use financial instruments and other proactive management techniques.  We have written policies and procedures that place financial instruments under

 
the direction of corporate treasury and restrict all derivative transactions to those intended for hedging purposes.  The use of financial instruments for trading purposes or speculation is strictly prohibited.
 
For a more detailed discussion of our accounting policies and the financial instruments that we use, please refer to Note 2, “Summary of Significant Accounting Policies,” and Note 9, “Debt,” of the Notes to the Consolidated Financial Statements.
 
Interest Rate Risk
In 2003 we used interest rate swaps to manage our exposure to interest rate movements such that approximately 50% of our debt is fixed rate and 50% is floating.  Under these swap agreements, we contract with a counter party to exchange the difference between fixed rates and floating rates applied to the notional amount of the swaps.  At December 31, 2003, we had outstanding one floating-to-fixed interest rate swap with a financial institution.  The fair value of the swap is recorded in the Consolidated Balance Sheet, with changes in fair value recorded in the accumulated other comprehensive income (loss) account within stockholders’ equity.  The interest payments or receipts from the interest rate swap are recognized in net earnings as adjustments to interest expense on a current basis.  At December 31, 2003, the floating-to-fixed interest rate swap had a notional amount of $17.3 million, interest rate of 3.56% and maturity date of August 2005.  The aggregate fair value of this swap agreement was negative $0.5 million at December 31, 2003.  In addition, as a result of prepayments made during 2003 we unwound a portion of this interest rate swap and recorded a charge of $1.4 million in the Consolidated Statement of Earnings as a component of Early Extinguishment of Debt. Our earnings exposure related to adverse movements in interest rates is primarily derived from our outstanding floating rate debt instruments that are indexed to a short-term international bank lending rate.  A 10% increase or decrease in the average cost of our variable rate debt would result in a change in pre-tax interest expense (net of impact of interest rate swaps) of approximately $0.2 million.  This amount was calculated assuming the year-end rate of interest on our variable rate debt was constant throughout the year.
 
As of December 31, 2003, we also have entered into five fixed-to-floating interest rate swaps with financial institutions.  These swap contracts effectively convert $232.4 million of our fixed rate Senior Subordinated and Senior Notes to variable rate debt.  Under these swap agreements, we contract with a counter-party to exchange the difference between a floating rate and the fixed rate applied to $232.4 million of our Senior Subordinated and Senior Notes.  These contracts are considered to be a hedge against changes in the fair value of the fixed-rate obligations.  Accordingly, these interest rate swap contracts are reflected at fair value in our Consolidated Balance Sheet at December 31, 2003, as an asset of $0.1 million and a liability of $0.9 million and the related debt is reflected at an amount equal to the sum of its carrying value plus an adjustment representing the change in fair value of the debt obligation attributable to the interest rate risk being hedged.  Changes during any accounting period in the fair value of the interest rate swap contract, as well as the offsetting changes in the adjusted carrying value of the related portion of fixed-rate debt being hedged, are recognized as an adjustment to interest expense in the Consolidated Statements of Earnings.  The change in the fair value of the swaps exactly offsets the change in fair value of the hedged fixed-rate debt; therefore, there was no net impact on earnings from these swaps for the year ended December 31, 2003.  A 10% increase or decrease in the floating rate we pay under these swap agreements would result in a change in pre-tax interest expense of approximately $1.6 million.  This amount was calculated assuming the year-end weighted-average rate of the swaps was constant throughout the year.
 
Interest swaps expose us to the risk that the counter-party may be unable to pay amounts it owes us under the swap agreements.  To manage this risk we enter into swap agreements only with financial institutions that have high credit ratings.
 
Commodity Prices
We are exposed to fluctuating market prices for commodities, including steel, copper, and aluminum.  Each of our business segments is subject to the effects of changing raw material costs caused by movements in underlying commodity prices.  We have established programs to manage the negotiations of commodity prices.  Some of these programs are centralized within business segments, and others are specific to a business unit.  In 2004, certain of these commodities, notably steel, have become subject to abnormal

 
availability and price increase pressures. Although we have established procedures in place to manage these pressures, no guarantee of success can be made at this time.
 
Currency Risk
We have manufacturing, sales and distribution facilities around the world and thus make investments and enter into transactions denominated in various foreign currencies.  International sales, including those sales that originated outside of the United States, were approximately 43% of our total sales for 2003, with the largest percentage (31%) being sales into various European countries.  Although the vast majority of our international sales which originate within the United States are denominated in U.S. Dollars, with the acquisitions of Grove in 2002 and Potain in 2001, we are more exposed to transactional and translational foreign exchange risk in recent years.
 
Regarding transactional foreign exchange risk, we enter into limited forward exchange contracts to reduce earnings and cash flow impact on nonfunctional currency denominated receivables and payables, predominantly between our Euro-denominated operations and their customers outside the Euro zone.  Gains and losses resulting from hedging instruments offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged.  The maturities of these forward exchange contracts generally coincide with the settlement date of the related transactions.  We also periodically hedge anticipated transactions, primarily at firm order date for orders to be sold into non-Euro-denominated locations, with forward exchange contracts.  These forward exchange contracts are designated as cash flow hedges in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”  At December 31, 2003, we had outstanding $1.5 million of forward exchange contracts hedging outstanding firm orders and $1.1 million of forward exchange contracts hedging underlying accounts receivable.  A 10% appreciation or depreciation of the underlying functional currency at December 31, 2003, would not have a significant impact on our Consolidated Balance Sheet or Consolidated Statement of Earnings.  This is because any gains or losses under the foreign exchange contracts hedging accounts receivable balances would be offset by equal gains or losses on the underlying receivables.  Any gains or losses under the foreign exchange contracts hedging outstanding firm orders would not have a significant impact due to the relatively immaterial amount of contracts outstanding being hedged.
 
Our primary translation exchange risk exposure at December 31, 2003, was with the Euro.  To a much lesser extent, we are also exposed to translation risk with our other foreign operations, primarily in the United Kingdom and in China.  Our Euro-denominated 175 million Senior Subordinated Notes due 2011 offsets a significant amount of the translation risk with our operating movement Europe.  In addition, a large amount of the translation risk with our Chinese operations are naturally hedged with locally denominated debt.  The currency effects of these foreign-denominated debt obligations are reflected in the accumulated other comprehensive income (loss) account within stockholders’ equity, where they offset the translation impact of an equal amount of similarly foreign-denominated net assets of our European and Chinese operations.  A 10% appreciation or depreciation of the value of the Euro to the U.S. Dollar at December 31, 2003 would have the impact of increasing or decreasing the outstanding debt balance on our Consolidated Balance Sheet by $21.8 million.  This impact would be partially offset by gains and losses on our net investments in foreign subsidiaries whose functional currency is the Euro.
 
Continued expected strength in the Euro versus the U.S. Dollar in 2004 will require us to manage the transactional exchange risk through continued use of foreign currency hedging.  In addition, relative currency values will impact our strategic and operational activities.
 
At December 31, 2003, there was also a portion of our foreign currency translation exposure that was not hedged.  As a result, fluctuations in currency exchange can affect our stockholders’ equity.  Amounts invested in non-U.S. based subsidiaries are translated into U.S. Dollars at the exchange rate in effect at year-end.
 
The resulting translation adjustments are recorded in stockholders’ equity as cumulative translation adjustments.  The cumulative translation adjustment component of stockholders’ equity at December 31,

 
2003, is negative $12.0 million, or approximately 4.0% of total stockholders’ equity.  Using year-end exchange rates, the total amount invested in foreign operations at December 31, 2003 was approximately $450.1 million of which approximately $247.4 million was naturally hedged with local, non-U.S. Dollar debt.
 
ENVIRONMENTAL, HEALTH, SAFETY AND OTHER MATTERS
 
Our global operations are governed by laws addressing the protection of the environment, workers safety, and health.  Under various circumstances, these laws impose civil and criminal penalties and fines, as well as injunctive and remedial relief, for noncompliance.  They also may require remediation at sites where company-related substances have been released into the environment.
 
We have expended substantial resources globally, both financial and managerial, to comply with the applicable laws and regulations, and to protect the environment and our workers.  We believe we are in substantial compliance with such laws and regulations and we maintain procedures designed to foster and ensure compliance.  However, we have been and may in the future be subject to formal or informal enforcement actions or proceedings regarding noncompliance with such laws or regulations, whether or not determined to be ultimately responsible in the normal course of business.  Historically, these actions have been resolved in various ways with the regulatory authorities without material commitments or penalties to the company.
 
We have been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in connection with the Lemberger Landfill Superfund Site near Manitowoc, Wisconsin.  Approximately 150 potentially responsible parties have been identified as having shipped hazardous materials to this site.  Eleven of those, including us, have formed the Lemberger Site Remediation Group and have successfully negotiated with the United States Environmental Protection Agency and the Wisconsin Department of Natural Resources to fund the cleanup and settle our potential liability at this site.  Recent estimates indicate that the total costs to clean up this site are approximately $30 million.  However, the ultimate allocations of cost for this site are not yet final.  Although liability is joint and several, our share of the liability is estimated to be 11% of the total cost.  Prior to December 31, 1996, we accrued $3.3 million in connection with this matter.  The amounts we have spent each year through December 31, 2003 to comply with our portion of the cleanup costs have not been material.  Remediation work at the site has been substantially completed, with only long-term pumping and treating of groundwater and site maintenance remaining.  Our remaining estimated liability for this matter, included in other current liabilities in the Consolidated Balance Sheet at December 31, 2003 is $0.6 million.  Based on the size of our current allocation of liability at this site, the existence of other viable potentially responsible parties and current reserve, we do not believe that any liability imposed in connection with this site will have a material adverse effect on our financial conditions results of operations, or cash flows.
 
At certain of our other facilities, we have identified potential contaminants in soil and groundwater.  The ultimate cost of any remediation required will depend upon the results of future investigation.  Based upon available information, we do not expect that the ultimate costs will be material to us.
 
We believe that we have obtained and are in substantial compliance with those material environmental permits and approvals necessary to conduct our various businesses.  Based on the facts presently known, we do not expect environmental compliance costs to have a material adverse effect on our financial condition, results of operations or cash flows.
 
As of December 31, 2003, various product-related lawsuits were pending.  To the extent permitted under applicable law, all of these are insured with self-insurance retention levels.  Our self-insured retention levels vary by business unit, and have fluctuated over the last five years.  The range of our self-insured retention levels are $0.1 million to $3.0 million per occurrence.  The high-end of our self-insurance retention level is a legacy product liability insurance program inherited in the Grove acquisition in 2002 for cranes manufactured in the United States for occurrences from 2000 through October 2002.  As of

 
December 31, 2003, the largest self-insured retention level currently maintained by us is $2.0 million per occurrence and applies to product liability for cranes manufactured in the United States.
 
Product liability reserves in the Consolidated Balance Sheet at December 31, 2003, were $31.8 million; $9.6 million reserved specifically for cases and $22.2 million for claims incurred but not reported which were estimated using actuarial methods.  Based on our experience in defending product liability claims, management believes the current reserves are adequate for estimated case resolution on aggregate self-insured claims and insured claims.  Any recoveries from insurance carriers are dependent upon the legal sufficiency of claims and solvency of insurance carriers.
 
At December 31, 2003 and 2002, we had reserved $41.7 million and $38.5 million, respectively, for warranty claims included in product warranties and other non-current liabilities in the Consolidated Balance Sheets.  Certain of these warranties and other related claims involve matters in dispute that ultimately are resolved by negotiations, arbitration or litigation.  Infrequently a material warranty issue can arise which is beyond the scope of our historical experience.
 
It is reasonably possible that the estimates for environmental remediation, product liability and warranty costs may change in the near future based upon new information that may arise or matters that are beyond the scope of our historical experience.  Presently, there are no reliable methods to estimate the amount of any such potential changes.
 
We are also involved in various other legal actions arising in the normal course of business, including numerous lawsuits involving asbestos-related claims in which we are one of numerous defendants.  After taking into consideration legal counsel’s evaluation of such actions, the current political environment with respect to asbestos related claims, and the liabilities accrued with respect to such matters, management, believes that the ultimate resolution of these claims will not to have a material adverse effect on the financial conditions, results of operations and cash flows.
 
We are also involved in various other legal actions arising in the normal course of business, which, taking into account the liabilities accrued and legal counsel’s evaluation of such actions, in the opinion of management, ultimate resolution is not expected to have a material adverse effect on our financial conditions, results of operations and cash flows.
 
CRITICAL ACCOUNTING POLICIES
 
Our consolidated financial statements include accounts of The Manitowoc Company, Inc. and all its subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires us to make estimates and assumptions in certain circumstances that affect amounts reported in our consolidated financial statements and related notes that are incorporated by reference in this prospectus supplement. In preparing these consolidated financial statements, we have made our best estimates and judgments of certain amounts included in the consolidated financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Although we have listed a number of accounting policies below which we believe to be most critical, we also believe that all of our accounting policies are important to the reader. Therefore, please refer also to the notes to the consolidated financial statements for more detailed description of these and other accounting policies of ours.
 
Revenue Recognition.     Revenue is generally recognized and earned when all the following criteria are satisfied with regard to a specific transaction: persuasive evidence of an arrangement exists, the price is fixed and determinable, collectibility of cash is reasonably assured and delivery has occurred or services have been rendered. We periodically enter into transactions with customers that provide for residual value guarantees and buyback commitments. These transactions are recorded as operating leases for all

 
significant residual value guarantees and for all buyback commitments. These initial transactions are recorded as deferred revenue and are amortized to income on a straight-line basis over a period equal to that of the customer’s third-party financing agreement. In addition, we lease cranes to customers under operating lease terms. Proceeds received in connection with these transactions are recognized as revenue over the term of the lease, and leased cranes are depreciated over their estimated useful lives.
 
Revenue Recognition Under Percentage-of-Completion Accounting.     Revenue under long-term contracts within the Marine segment are recognized using the percentage-of-completion (“POC”) method of accounting. Under this method, sales and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at the completion of the contract. Recognized revenues that will not be billed under the terms of the contract until a later date are recorded as “recoverable costs and accrued profit on progress completed not billed”, which are included in other current assets in the Consolidated balance sheet. Likewise, contracts where billings to date have exceeded recognized revenues are recorded as “amounts billed in excess of sales”, which are included in accounts payable and accrued expenses in the Consolidated balance sheet. Changes to the original estimates may be required during the life of the contract and such estimates are reviewed when customer change orders are placed. Sales and gross profit are adjusted prospectively for revisions in estimated total contract costs and contract values. Claims against customers are recognized as revenue when it is probable that the claim will result in additional contract revenue and the amount can be reliably estimated. Estimated losses are recorded when identified. Historically, the reviews have not resulted in adjustments that were significant to our results of operations. The use of the POC method of accounting involves considerable use of estimates in determining revenues, costs and profits and in assigning the amounts to accounting periods. We continually evaluate all of the issues related to the assumptions, risks and uncertainties inherent with the application of the POC method of accounting.
 
Allowance for Doubtful Accounts.     Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. Our estimate for the allowance for doubtful accounts related to trade receivables includes evaluation of specific accounts where we have information that the customer may have an inability to meet its financial obligations together with a general provision for unknown but existing doubtful accounts based on pre-established percentages to specific aging categories which are subject to change if experience improves or deteriorates.
 
Inventories and Related Reserve for Obsolete and Excess Inventories.     Inventories are valued at the lower of cost or market using both the first-in, first-out (FIFO) method and the last-in, first-out (LIFO) method and are reduced by a reserve for excess and obsolete inventories. The estimated reserve is based upon pre-established percentages applied to specific aging categories of inventory. These categories are evaluated based upon historical usage, estimated future usage and sales requiring the inventory. These percentages were established based upon historical write-off experience.
 
Goodwill and Other Intangible Assets.     We account for goodwill and other intangible assets under the guidance of SFAS No. 142. Under SFAS No. 142, goodwill is no longer amortized; however, it is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. We perform impairment reviews for our reporting units, which have been determined to be Cranes Americas; Cranes Europe, Middle East and Africa; Cranes Asia; Ice Group; Refrigeration Group; Beverage Group; and Marine Group, using a fair-value method based on the present value of future cash flows, which involves management’s judgments and assumptions. The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill. We are subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value. The impairment testing performed by us at June 30, 2004 indicated that the estimated fair value of each reporting unit exceeded its corresponding carrying amount, including recorded goodwill, and that no impairment existed at that time. Other intangible assets with definite lives continue to be amortized over their estimated useful lives. Indefinite and definite lived intangible assets are also subject to impairment testing. A considerable amount of management judgment and assumptions are required in performing the impairment tests, principally in determining the fair value of each reporting unit. While we believe our

 
judgments and assumptions were reasonable, different assumptions could change the estimated fair values and, therefore, impairment charges could be required.
 
Employee Benefit Plans.     We provide a range of benefits to our employees and retired employees, including pension and postretirement healthcare. Annually we record expenses relating to these plans based on calculations specified by US GAAP, which are dependent upon various actuarial assumptions such as discount rates, assumed rates of return, compensation increases, turnover rates and healthcare cost trend rates. The expected return on plan assets is based on our expectation of the long-term average rate of return on assets in the pension funds, which is reflective of the current and projected asset mix of the funds and considers the historical returns earned on the funds. We review our actuarial assumptions on at least an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. As required by US GAAP, the effects of the modifications are recorded currently or amortized over future periods. Based on information provided by our independent actuaries and other relevant sources, we believe that the assumptions used are reasonable.
 
Product Liability.     We are subject in the normal course of business to product liability lawsuits. To the extent permitted under applicable laws, our exposure to losses from these lawsuits is mitigated by insurance with self-insurance retention limits. We record product liability reserves for our self-insured portion of any pending or threatened product liability actions. Our reserve is based upon two estimates. First, we track the population of all outstanding pending and threatened product liability cases to determine an appropriate case reserve for each based upon our best judgment and the advice of legal counsel. These estimates are continually evaluated and adjusted based upon changes to the facts and circumstances surrounding the case. Second, we obtain a third-party actuarial analysis to determine the amount of additional reserve required to cover incurred but not reported product liability issues and to account for possible adverse development of the established case reserve (collectively referred to as “IBNR”). This actuarial analysis is performed at least twice annually and our IBNR reserve for product liability is adjusted based upon the results of these analysis. We have established a position within the actuarially determined range, which we believe is the best estimate of the IBNR liability.
 
Income Taxes.     We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recorded a valuation allowance that represents foreign operating loss carryforwards for which utilization is uncertain. Management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against our net deferred tax assets. The valuation allowance would need to be adjusted in the event future taxable income is materially different than amounts estimated. Our policy is to remit earnings from foreign subsidiaries only to the extent any resultant foreign taxes are creditable in the United States. Accordingly, we do not currently provide for additional US and foreign income taxes which would become payable upon remission of undistributed earnings of foreign subsidiaries.
 
Stock Options.     We account for our stock option plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and related Interpretations. No stock option based employee compensation costs are reflected in earnings, as all option grants under the plans had an excise price equal to the market value of the underlying common stock on the date of grant.
 
Warranties.     In the normal course of business we provide our customers a warranty covering workmanship, and in some cases materials, on products manufactured by us. Such warranty generally provides that products will be free from defects for periods ranging from 12 months to 60 months. If a product fails to comply with our warranty, we may be obligated, at our expense, to correct any defect by repairing or replacing such defective product. We provide for an estimate of costs that may be incurred under our warranty at the time product revenue is recognized based on historical warranty experience for

 
the related product or estimates of projected losses due to specific warranty issues on new products. These costs primarily include labor and materials, as necessary associated with repair or replacement. The primary factors that affect our warranty liability include the number of shipped units and historical and anticipated rates of warranty claims. As these factors are impacted by actual experience and future expectations, we assess the adequacy of our recorded warranty liability and adjust the amounts as necessary.
 
Restructuring Charges.     Restructuring charges for exit and disposal activities are recognized when the liability is incurred. We use the definition of liability found in Financial Accounting Standards Board (“FASB”) Concept Statement No. 6, “Elements of Financial Statements.” In addition, the liability for the restructuring charge associated with an exit or disposal activity is measured initially at its fair value.
 
RECENT ACCOUNTING CHANGES AND PRONOUNCEMENTS
 
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, “ Accounting for Obligations Associated with the Retirement of Long-Lived Assets.”  The provisions of SFAS No. 143 establish accounting standards for the recognition and measurement of an asset retirement obligation.  This statement was effective for us on January 1, 2003 and did not have a material effect on our Consolidated Financial Statements.
 
In April 2002, the FASB issued SFAS No. 145, “Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13 and Technical Corrections as of April 2002,” which mainly addresses the accounting and disclosure related to early extinguishment of debt transactions as well as several other technical corrections.  Generally, SFAS No. 145 was effective for us beginning January 1, 2003.  The adoption of SFAS No. 145 resulted in us reclassifying our 2001 loss on early extinguishment of debt from an extraordinary item to a component of earnings from continuing operations.
 
In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit and Disposal Activities,” which addresses financial accounting and reporting for costs associated with exit or disposal activities.  SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.  This statement also establishes that fair value is the objective for initial measurement of the liability.  Severance pay under SFAS No. 146, in many cases, would be recognized over time rather than up front.  The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, and did not have a significant impact on our Consolidated Financial Statements for 2003.
 
In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” which amends and clarifies financial accounting and reporting for certain derivative instruments.  Generally, the provisions of SFAS No. 149 are effective beginning July 1, 2003.  The adoption of SFAS No. 149 did not have a material impact on the company’s Consolidated Financial Statements.
 
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” which requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances).  Many of those instruments were previously classified as equity.  This statement also addresses the classification of financial instruments that include obligations to issue equity shares as equity.  The FASB has also subsequently issued a staff-position that effectively amended SFAS No. 150.  In general, this statement is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective as of July 1, 2003.  The adoption of SFAS No. 150 did not have an impact on our Consolidated Financial Statements.
 
In November 2002, the EITF reached a consensus regarding EITF Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.”  The consensus addresses not only when and how an

 
arrangement involving multiple deliverables should be divided into separate units of accounting but also how the arrangement’s consideration should be allocated among separate units.  The pronouncement was effective for us commencing July 1, 2003 and did not have a significant impact on our Consolidated Financial Statements.
 
During December 2003, the FASB revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” to require additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans.  These disclosure requirements are effective immediately for our domestic plans, except for estimated future benefit payments, which will be effective in 2004.  This statement also requires interim-period disclosures of the components of net periodic benefit costs and, if significantly different from previously disclosed amounts, the amount of contributions and projected contributions to fund pension plans and other postretirement benefit plans.  These interim-period disclosures will be effective in the first quarter of 2004.
 
In December 2003, the Staff of the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition,” which supercedes SAB No. 101, “Revenue Recognition in Financial Statements.”  The primary purpose of SAB No. 104 is to rescind accounting guidance contained in SAB No. 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF Issue 00-21.  Additionally, SAB No. 104 rescinds the SEC’s “Revenue Recognition in Financial Statements Frequently Asked Questions and Answers” issued with SAB No. 101 that had been Codified in SEC Topic 13, Revenue Recognition.  The adoption of SAB No. 104 did not have an impact on our Consolidated Financial Statements.
 
In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities.” FIN No 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.  A variable interest entity is required to be consolidated by the company that has a majority of the exposure to expected losses of the variable interest entity. The consolidation provisions of FIN No. 46, as revised, were effective immediately for interests created after January 31, 2003 and are effective on March 31, 2004 for interest created before February 1, 2003.  The adoption of FIN No. 46 did not have an impact on our Consolidated Financial Statements for interests created after January 31, 2003.  The company is evaluating the impact on the Consolidated Financial Statements for interests created before February 1, 2003.
 
Cautionary Statements about Forward-Looking Information
 
Statements in this report and in other company communications that are not historical facts are forward-looking statements, which are based upon our current expectations.  These statements involve risks and uncertainties that could cause actual results to differ materially from what appears within this annual report.
 
Forward-looking statements include descriptions of plans and objectives for future operations, and the assumptions behind those plans.  The words “anticipates,” “believes,” “intends,” “estimates,” and “expects,” or similar expressions, usually identifies forward-looking statements.  Any and all projections of future performance are forward-looking statements.
 
In addition to the assumptions, uncertainties, and other information referred to specifically in the forward-looking statements, a number of factors relating to each business segment could cause actual results to be significantly different from what is presented in this annual report.  Those factors include, without limitation, the following:
 
Crane— market acceptance of new and innovative products; cyclicality of the construction industry; the effects of government spending on construction-related projects throughout the world; changes in world

 
demand for our crane product offering; the replacement cycle of technologically obsolete cranes; demand for used equipment; actions of competitors; and foreign exchange rate risk.
 
Foodservice— market acceptance of new and innovative products; weather; consolidations within the restaurant and foodservice equipment industries; global expansion of customers; actions of competitors; the commercial ice-cube machine replacement cycle in the United States; specialty foodservice market growth; future strength of the beverage industry; and the demand for quickservice restaurant and kiosks.
 
Marine— shipping volume fluctuations based on performance of the steel industry; weather and water levels on the Great Lakes; trends in government spending on new vessels; five-year survey schedule; the replacement cycle of older marine vessels; growth of existing marine fleets; consolidation of the Great Lakes marine industry; frequency of casualties on the Great Lakes; and the level of construction and industrial maintenance.
 
Corporate (including factors that may affect all three segments)— changes in laws and regulations throughout the world; the ability to finance, complete and/or successfully integrate, restructure and consolidate acquisitions, divestitures, strategic alliances and joint ventures; successful and timely completion of new facilities and facility expansions; competitive pricing; availability of certain raw materials; changes in raw materials and commodity prices; changes in domestic and international economic and industry conditions, including steel industry conditions; changes in the interest rate environment; risks associated with growth; foreign currency fluctuations; world-wide political risk; health epidemics; pressure of additional financing leverage resulting from acquisitions; success in increasing manufacturing efficiencies; changes in revenue, margins and costs; work stoppages and labor negotiations; and the ability of our customers to obtain financing.

 
Exhibit 99.3
 
THE MANITOWOC COMPANY, INC.
AND SUBSIDIARIES
 
Schedule II:  Valuation and Qualifying Accounts
 For The Years Ended December 31, 2001, 2002, and 2003
(dollars in thousands)

 	 	Balance at
Beginning of
Year	 	Acquisitions
of Business	 	Charged to
Costs and
Expenses	 	Deductions
(1)	 	Balance at
End of Year	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Year Ended December 31, 2001	 	 	 	 	 	 	 	 	 	 	 	
Allowance for doubtful accounts	 	$	3,037	 	$	6,433	 	$	(816	)	$	(359	)	$	8,295	 	
Inventory obsolesence reserve	 	$	9,315	 	$	8,775	 	$	(1,064	)	$	(2,065	)	$	14,961	 	
Deferred tax asset valuation allowance	 	$	—	 	$	3,951	 	$	—	 	$	—	 	$	3,951	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Year Ended December 31, 2002	 	 	 	 	 	 	 	 	 	 	 	
Allowance for doubtful accounts	 	$	8,295	 	$	31,793	 	$	5,147	 	$	(2,079	)	$	43,156	 	
Inventory obsolesence reserve	 	$	14,961	 	$	30,668	 	$	5,668	 	$	(7,563	)	$	43,734	 	
Deferred tax asset valuation allowance	 	$	3,951	 	$	—	 	$	—	 	$	(1,907	)	$	2,044	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Year Ended December 31, 2003	 	 	 	 	 	 	 	 	 	 	 	
Allowance for doubtful accounts	 	$	43,156	 	$	2,089	 	$	2,674	 	$	(23,500	)	$	24,419	 	
Inventory obsolesence reserve	 	$	43,734	 	$	459	 	$	4,824	 	$	(8,718	)	$	40,299	 	
Deferred tax asset valuation allowance	 	$	2,044	 	$	(1,021	)	$	1,271	 	$	(736	)	$	1,558	 	

(1)  Deductions represent inventories and bad debts written - off, net of recoveries, and the effect of utilization of a portion of the foreign operating loss carryforwards.