August 3, 2004

Margins squeezed in Manitowoc's marine sector

The Manitowoc Company (MTW) yesterday reported strong increases in sales and earnings for the quarter ended June 30, 2004. Net sales increased 27 percent to $526.2 million, from $413.8 million during the same period last year. Net earnings were $15.3 million, or $0.56 per diluted share for the quarter, up twelve-fold from earnings of $1.3 million, or $0.05 per diluted share, for the second quarter of 2003.

Net sales in the Marine segment were $63.5 million for the quarter, increasing 59 percent from $39.9 million in the second quarter of 2003. Operating earnings of $2.7 million for the quarter decreased slightly from $2.9 million last year.

"While our Marine segment posted strong gains in sales, several factors caused the decline in operating margins," said Chairman & CEO Terry D. Growcock. "First, our current business mix contains more commercial, single-unit contracts than one year ago, when more profitable multi-unit contracts made up the bulk of our work. Second, we made substantial investments during the first half of the year in potential contracts for the U.S. Navy's Littoral Combat Ship (for which we were awarded the first prototype during the quarter as part of the Lockheed Martin team), and the U.S. Coast Guard's Response Boat -- Medium test vessel. Third, we began to experience the effects of increased steel prices during the quarter; however, the full effect of these price increases should hit in the third and fourth quarters, when we will need to order additional materials for contracts with pre-established pricing. Finally, a large customer has requested multiple changes to its vessel, for which we are currently working through pricing issues. While we feel confident that we will reach an agreement that's fair to both parties, executing the change orders has affected our near-term profitability."

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