Manitowoc : 2014 Annual Report

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The Manitowoc Company, Inc. 2014 Annual Report

The Manitowoc Company, Inc. 2014 Annual Report

BUILDING SOMETHING REAL AND UNLOCKING VALUE

INTRODUCTION

Founded in 1902, The Manitowoc Company, Inc. has evolved into a multi-industry, capital goods manufacturer with 92 production, distribution, and service facilities in 25 countries. The company is recognized globally as one of the premier innovators and providers of crawler cranes, tower cranes, and mobile cranes for the heavy construction industry. Manitowoc is also one of the world's leading innovators and manufacturers of commercial foodservice equipment, which includes 24 market-leading brands of hot- and cold-focused equipment.

Manitowoc's commitment to innovation results in dozens of new products and technologies every year, which are complemented by a slate of industry-leading product support services under the Crane Care and KitchenCare® brand names.

INNOVATIVE NEW PRODUCTS ENTERPRISE FINANCIAL RESULTS

Revenue $3.9 Billion

Operating Earnings $299 Million

Operating Margin 7.7%

Global Presence with 92 Facilities Across 25 Countries

Manitowoc VPC Crawler Cranes Potain MR 418 Tower Crane

Revenue

($ Millions)

Operating Earnings

($ Millions)

Geographic Exposure End Markets as a Percent of Revenue

Convotherm® 4 Combi Steamer

Multiplex® Blend-in-Cup® with easyTouch® technology

Asia/Pacific 12%

EMEA 28%

Americas 60%

Industrial / Petrochemical 18%

Power & Utilities 13%

Commercial Construction 11%

Infrastructure

11%

Residential Construction 6%

Restaurants 28%

Other Foodservice 13%

LETTER TO SHAREHOLDERS

Fellow Shareholders:

During a recent customer visit I had the opportunity to check off an item on my bucket

list - witnessing the start of the Iditarod, a legendary dogsled race of a thousand miles across the frozen Alaskan landscape. Each of the 78 teams in this year's race prepared for months, or even years, crafting the unique strategy, tactics, and team they believe would get them across the finish line in first place. Shortly before the race (due to unusual weather circum- stances), the organizers announced a major change to the course, adding uncertainty and significant challenges to an already formidable journey. The winning team will be the one that charts the new course with the strongest resolve, teamwork, discipline, and skill.

The Iditarod's themes of unexpected challenges, new opportunities, teamwork, and competition echo those of Manitowoc. Since The Manitowoc Company was founded in

Glen E. Tellock

Chairman & Chief Executive Officer

1902, our strength as an organization has been best exemplified when navigating change. Through numerous cycles, we have consistently adapted to strengthen our market-leading businesses in response to unpredictable and dynamic business conditions. Our success has been driven by a disciplined focus on the customer, aggressively pursuing new product innovation, and providing comprehensive aftermarket support. As a result, we have now reached an inflection point where our Cranes and Foodservice businesses have the size, scope, and scale to stand as independent companies, which is consistent with our overarching goal of creating shareholder value.

Our team has been successfully navigating a changing landscape for well over a century, and we're not stopping now. While 2014 was a challenging year on a number of fronts, it was also a turning point in the evolution of Manitowoc. We will continue Building Something Real while charting a new course to success.

2014 In Review

For the full-year 2014, Manitowoc's revenue declined 4.0% to $3.9 billion. Although our enterprise operating margins declined in 2014, our GAAP net earnings remained essentially flat at $145 million versus 2013 earnings. This was accomplished through lower interest expense and a lower effective tax rate.

For 2014, Crane revenues decreased 8.0% to $2.3 billion with operating earnings of $163.9 million that generated operating margins of 7.1%. Our Crane business faced uncertainty across its customer base driven by ongoing global softness that impacted purchasing decisions. In particular, North American and Latin American weakness in rough-terrain and boom truck markets translated into a significant decline in Crane sales in the Americas region where our brands have leading market-share positions. Despite these pressures, we focused on the areas within our control throughout the last 12 months and were able to achieve safety, quality, and cost reduction goals, while at the same time executing on lean initiatives. While 2014 was disappointing

from a financial perspective, we were encouraged by the improved order intake, a strengthening backlog, and strong market acceptance of our VPC crawler crane technology.

Turning to our Foodservice business, Foodservice revenues increased 2.6% to $1.6 billion with operating earnings of $234.0 million producing operating margins of 14.8%. Despite some headwinds during the year, which included higher selling and engineering expenses, plant consolidation costs, and an unfavorable product mix, we also had multiple successes in 2014. Namely, our ability to bring new products to customers that improve their overall efficiency and create incremental revenue streams, such as our Multiplex Blend-In-Cup workstation, Convotherm 4 Combi Oven, and Garland Dual Platen Grill, which have enhanced

the leadership profile of this business. At the same time, we took decisive actions in the second half of the year, including consolidating our manufacturing footprint and rationalizing our product portfolio, which we believe will position this business for margin expansion as we move into 2015.

Navigating Change: The Separation of Cranes and Foodservice

Now we're going to take our legacy of Building Something Real on a new course. As we entered 2015, we announced plans to separate our Cranes and Foodservice businesses in an effort to realize the full potential of each on a standalone basis. This decision was the result of a comprehensive evaluation by our senior leadership and many months of thoughtful deliberation by our Board

of Directors.

As you know, Manitowoc has a rich history and over the last 14 years we have transformed the company into a global industrial manufacturer with two, market-leading businesses.

The global reach, strong presence in emerging markets, expansive product portfolio, and unmatched aftermarket support of

our Cranes business provides the company with exposure to attractive end markets all poised for a cyclical upturn. Our ongoing

emphasis on the development of a diverse product portfolio driven by our commitment to innovation, and leveraging the

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"Voice of the Customer" has been critical. In addition, the implementation of various Lean initiatives has contributed to our financial resilience in Cranes, as these initiatives not only improved quality and product reliability, but drove greater operational efficiencies to help reduce waste, improve lead times, and create a more efficient and profitable business. And finally, with Crane Care, Manitowoc offers a total lifecycle product-support solution for our customers. With 24/7/365 support, Crane Care complements our overall goal of customer focus. With this global aftermarket initiative, we are able to provide customers with an ability to maximize the uptime of their equipment.

Within our Foodservice business, we have witnessed substantial growth in both sales and operating margins over the last six years. More specifically, we have achieved significant margin expansion since the 2008 acquisition of Enodis to current mid-teen levels, underscoring the potential of this business. Our initiatives to grow the business globally, as well as by end market, have significantly improved our competitive position. To date, we have the broadest product offering spanning 24 leading brands in both hot- and cold-side commercial foodservice equipment. We have also established leading market positions across multiple foodservice categories with innovation centered on customer-specific models and new categories across many of our offerings, a hallmark of the business. At the same time, operational excellence has played a vital role in strengthening this business, driving manufacturing efficiencies, and positioning Foodservice for significant long-term growth and margin expansion.

Fulfilling our Quest for Unlocking Value

Since adopting Economic Value-Added (EVA) in 1992 as our primary methodology to consistently create shareholder value, The Manitowoc Company has aligned its decision-making with that focus foremost in mind. Over that time, we have grown and globalized our Crane and Foodservice businesses with strategic acquisitions and internal initiatives that have driven our revenue growth from $246 million to $3.9 billion, while operating earnings have increased more than 28 times and a share price that's accelerated over 20-fold.

Given this notable growth and success, our Crane and Foodservice businesses now have the size, scope, and scale to operate as independent, standalone companies. As I stated in a press release earlier this year, "we have transformed Manitowoc and worked to build two strong business platforms within one enterprise. After a comprehensive evaluation, including a thorough review

of the current and projected operating environments for the two segments, we have determined that the Crane and Foodservice businesses are best-suited to realize their full potential on a standalone basis."

As a result of this value-creating decision, we anticipate the separation of our Crane and Foodservice businesses will be completed during the first quarter of 2016. This is great news for several reasons:

• The businesses have distinct strengths and strategies and a separation will enable each entity to pursue these independently;

• The two companies will have the ability to attract long-term shareholders that are appropriate for their business profile;

• A separation will allow investors to value the companies separately;

• And, each business has different financial characteristics and a separation will allow each entity to optimize its capital structure

and capital allocation.

During the balance of 2015 we will be working diligently on all aspects of the separation, which we anticipate will result in a

tax-free spin-off of the Foodservice business. All shares resulting from this initiative will be distributed to then-current Manitowoc shareholders, which is subject to customary closing conditions and confirmation of the tax-free status. And as we achieve the key milestones in this process, we will report our progress to all shareholders on a timely basis.

In conclusion, I want to take this opportunity to thank our employees, customers, and shareholders for their continued support. You are the team that helped us Build Something Real, and have positioned us for success as we chart our new course. We are excited about the opportunities that lie ahead and have steadfast confidence in our ability to navigate any challenges that arise. We have

the resolve, teamwork, discipline, and skill to realize the potential we have built in both businesses.

Like the first place sled in the Iditarod race, we have a winning strategy and a team that's experienced and surefooted when unexpected challenges arise on the road to success. With the confidence of past wins and the competitive spirit to prove ourselves again, we are excited about the opportunities that lie ahead. We have the agility to respond quickly as the competitive landscape changes and the perseverance to go the distance. We're planning on crossing the finish line in first place. The next thing on my bucket list? Having you along for the ride.

Sincerely,

Glen E. Tellock

Chairman & Chief Executive Officer

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