MANITOWOC CO INC (MTW)

Item 7. 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 accompanying notes appearing in Part II, Item 8 of this Annual Report on Form 10-K.

Overview: The Manitowoc Company, Inc. (“Manitowoc” or the “Company”) is a leading provider of engineered lifting solutions headquartered in Milwaukee, Wisconsin, United States. Through its wholly owned subsidiaries, Manitowoc designs, manufacturers, markets, distributes and supports comprehensive product lines of mobile hydraulic cranes, lattice-boom crawler cranes, boom trucks, and tower cranes.

All dollar amounts are in millions throughout the tables included in Management’s Discussion and Analysis of Financial Condition and Results of Operations unless otherwise indicated.

Orders and Backlog

Orders and backlog are not measures defined by accounting principles generally accepted in the United States of America ("GAAP") and our methodology for determining orders and backlog may vary from the methodology used by other companies. Management uses orders and backlog for capacity and resource planning. The Company believes this information is useful to investors to provide an indication of future revenues. Backlog represents the dollar value of orders which are expected to be recognized in net sales in the future. Orders are included in backlog when an executed binding contract with a price that has a floor has been received but has not been recognized in net sales.

Orders for the year ended December 31, 2024 decreased 7.7% to $1,922.8 million from $2,082.3 million for the same period in 2023. The decrease in orders was primarily due to lower demand in the Americas segment as a result of uncertainty related to the U.S. presidential election and the high-interest rate environment, and lower demand in MEAP as a result of slowdowns in China and South Korea.

The Company’s backlog as of December 31, 2024 was $650.2 million, a 29.1% decrease from the December 31, 2023 backlog of $917.2 million. The decrease in backlog from December 31, 2023 was primarily attributable to the lower orders as discussed above. Backlog was unfavorably impacted by $12.9 million from changes in foreign currency exchange rates.

Results of Operations

A detailed discussion of the year-over-year changes for the years ended December 31, 2023 and 2022 can be found in the Management's Discussion and Analysis section of the Company's 2023 Annual Report on Form 10-K filed on February 23, 2024, and is available on the SEC's website at www.sec.gov as well as in the "Investors" section of our website at www.manitowoc.com.

Results of Operations for the Years Ended December 31, 2024 and 2023

Net Sales

Consolidated net sales for the year ended December 31, 2024 decreased 2.2% to $2,178.0 million from $2,227.8 million for the year ended December 31, 2023. The decrease was primarily attributable to lower new crane shipments in the EURAF and MEAP segments. This was partially offset by $16.5 million of higher non-new machine sales primarily due to higher used crane shipments. Net sales were unfavorably impacted by $2.7 million from changes in foreign currency exchange rates.

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Gross Profit

Gross profit for the year ended December 31, 2024 decreased 11.8% to $375.0 million compared to $425.2 million for the year ended December 31, 2023. The decrease was primarily attributable to the lower net sales, unfavorable product mix, and under absorption of fixed costs due to lower manufacturing volume of tower cranes in the EURAF segment.

Engineering, Selling, and Administrative Expenses

Engineering, selling, and administrative expenses for the year ended December 31, 2024 decreased 3.8% to $315.7 million compared to $328.3 million for the year ended December 31, 2023. The decrease is primarily due to $12.3 million of lower costs associated with a legal matter with the U.S. Environmental Protection Agency (“U.S. EPA”) and $3.1 million of lower employee-related costs when compared to the prior year. This was partially offset by $2.8 million of higher marketing costs from the Company’s Crane Days event in the U.S. and the China bauma trade show and $5.8 million of higher research and development costs related to new product development.

Interest Expense

Interest expense for the year ended December 31, 2024 increased 13% to $38.3 million compared to $33.9 million for the year ended December 31, 2023. The increase was primarily due to higher average debt and higher interest rates on borrowings from the Company's ABL revolving credit facility when compared to the prior year. See further detail at Note 10, “Debt,” to the Consolidated Financial Statements.

Other Expense – Net

Other expense – net for the year ended December 31, 2024 was $0.4 million and was primarily composed of $2.9 million of pension benefit and postretirement health costs and $1.1 million of non-cash losses associated with the refinancing of the Company’s former senior secured second lien notes. This was partially offset by $2.6 million of net foreign currency transaction gains and $0.7 million of interest income.

Other expense - net for the year ended December 31, 2023 was $13.0 million and was primarily composed of a $9.3 million non-cash write-off of foreign currency translation adjustments related to the curtailment of operations in Russia and $6.0 million of pension benefit and postretirement health costs. This was partially offset by $3.3 million of net foreign currency transaction gains.

Provision (benefit) for Income Taxes

During the year ended December 31, 2024 and 2023 the Company recorded a benefit for income taxes of $44.1 million and a provision for income taxes of $5.0 million, respectively.

The 2024 effective tax rate was favorably impacted by a $57.5 million net reduction of the valuation allowance. The rate was unfavorably impacted by $5.6 million of additional unrecognized tax benefit reserves recorded during the year and non-deductible expenses related to a legal matter.

The 2023 effective tax rate was favorably impacted by the release of a $19.0 million valuation allowance and a $3.2 million tax benefit for the favorable resolution of a previously reserved foreign income tax matter. The rate was unfavorably impacted primarily by non-deductible expenses related to a legal matter, additional valuation allowances recorded during the year and the jurisdictional mix of the financial results.

Due to the Company’s historic losses, impacts from United States tax reform and full valuation allowances in certain jurisdictions, the effective annual tax rate is not a meaningful measure of the Company’s cash tax position or performance of the business. It is reasonably possible that sufficient positive evidence may result in a requirement to release a portion of certain valuation allowances within the next twelve months. Such changes in the realizability of deferred tax assets will be reflected in continuing operations and could have a material effect on the Company’s financial position and results of operations.

Refer to Note 12, “Income Taxes,” to the Consolidated Financial Statements.

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Segment Operating Performance

The Company has three reportable segments, the Americas segment, the Europe and Africa (“EURAF”) segment and the Middle East and Asia Pacific (“MEAP”) segment. The segments were identified using the “management approach,” which designates the internal organization that is used by the CEO, who is also the Company’s Chief Operating Decision Maker (“CODM”), for making decisions about the allocation of resources and assessing performance. Further information regarding the Company’s reportable segments can be found in Note 16, “Segments,” to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Americas

Americas segment net sales decreased 1.1% in 2024 to $1,197.6 million from $1,211.2 million in 2023. The decrease was primarily attributable to product mix.

Americas segment operating income of $103.7 million decreased $8.0 million in 2024 from $111.7 million in 2023. The decrease was primarily attributable to the lower sales, unfavorable product mix, and $4.8 million of higher engineering, selling, and administrative expenses.

EURAF

EURAF segment net sales decreased 8.0% in 2024 to $616.0 million from $669.6 million in 2023. The decrease was primarily attributable to a lower number of new crane shipments, partially offset by $8.6 million of higher non-new machine sales, as a result of higher used crane shipments.

EURAF segment operating loss of $46.6 million increased $38.7 million in 2024 from $7.9 million in 2023. The increase in operating loss was primarily attributable to the lower net sales and under absorption of fixed costs due to lower manufacturing volume of tower cranes.

MEAP

MEAP segment net sales increased 5.0% in 2024 to $364.4 million from $347.0 million in 2023. The increase was primarily attributable to $9.3 million of higher non-new machine sales as a result of higher used crane shipments and $8.1 million of higher new machine sales as a result of favorable product mix. This was partially offset by lower realized pricing. MEAP net sales were unfavorably impacted by $2.7 million from changes in foreign currency exchange rates.

MEAP segment operating income of $39.4 million decreased $12.9 million from $52.3 million in 2023. The decrease was primarily attributable to the lower realized price and unfavorable product mix.

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Financial Condition

Cash Flows

The table below shows a summary of cash flows for the years ended December 31, 2024 and 2023:

Cash Flows from Operating Activities

Net cash provided by operating activities of $49.2 million in 2024 decreased $13.8 million from $63.0 million in 2023. The decrease in net cash provided by operating activities was primarily due to $38.6 million of lower net income adjusted for non-cash items, partially offset by $24.8 million of lower cash use from changes in operating assets and liabilities. The lower cash use was primarily due to $68.1 million of additional cash provided by inventory, $18.3 million of additional cash provided by accounts receivable, $12.5 million of additional cash provided by other assets, partially offset by $74.1 million of higher cash used for accounts payable, accrued expenses, and other liabilities when compared to the prior year.

Cash Flows from Investing Activities

Net cash used for investing activities of $40.4 million in 2024 decreased $31.4 million from $71.8 million in 2023. The decrease in net cash used for investing activities was primarily due to $31.7 million of lower capital expenditures.

Cash Flows from Financing Activities

Net cash provided by financing activities of $6.7 million in 2024 increased $28.1 million from net cash used for financing activities of $21.4 million in 2023. The increase in net cash provided by financing activities was primarily due to $40.7 million of additional proceeds from the revolving credit facility and a $2.8 million increase of proceeds from other debt – net when compared to the prior year. This was partially offset by $7.5 million of payments for other financing activities and $7.4 million of payments for debt issuance costs related to the refinancing of the ABL Revolving Credit Facility and former senior secured second lien notes due April 1, 2026.

Liquidity and Capital Resources

Liquidity

The Company’s liquidity position as of December 31, 2024 and 2023 is summarized as follows:

The Company’s revolving credit facility, or other future facilities, may be used for working capital requirements, capital expenditures, funding future acquisitions (within the Company’s debt limitations), and other operating, investing and financing needs. The Company believes its liquidity and expected cash flows from operations are sufficient to meet expected working capital, capital expenditures, contractual obligations and other ongoing operational needs in the subsequent twelve months.

Cash Sources

The Company has historically relied primarily on cash flows from operations, borrowings under revolving credit facilities, issuances of notes and other forms of debt financing as its sources of cash.

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The maximum availability under the Company’s current ABL Revolving Credit Facility is $325.0 million, of which $100.0 million is available to our German subsidiary. The borrowing capacity under the ABL Revolving Credit Facility is based on the value of inventory, accounts receivable, and certain fixed assets of the Loan Parties. The Loan Parties’ obligations under the ABL Revolving Credit Facility are secured on a first-priority basis, subject to certain exceptions and permitted liens, by substantially all of the personal property and fee-owned real property of the Loan Parties. The liens securing the ABL Revolving Credit Facility are senior in priority to the second-priority liens securing the obligations under the 2031 Notes and the related guarantees. The ABL Revolving Credit Facility has a maturity date of September 18, 2029, and includes a $75.0 million letter of credit sub-facility, $10.0 million of which is available to the Company's German subsidiary that is a borrower under this facility.

In addition to the ABL Revolving Credit Facility, the Company has access to committed and non-committed lines of credit to fund working capital in Europe and China. There are six facilities, of which five facilities are denominated in Euros totaling €37.0 million and one facility denominated in Chinese Yuan totaling ¥30.0 million. Total U.S. dollar availability as of December 31, 2024 for the six overdraft facilities is $42.4 million, with $12.1 million outstanding.

Debt

Outstanding debt as of December 31, 2024 and 2023 is summarized as follows:

Both the ABL Revolving Credit Facility and 2031 Notes include customary covenants and events of default. Refer to Note 10, “Debt,” to the Consolidated Financial Statements for additional discussions of covenants for the ABL Revolving Credit Facility and 2031 Notes. As of December 31, 2024, the Company was in compliance with all affirmative and negative covenants in its debt instruments, inclusive of the financial covenants pertaining to the ABL Revolving Credit Facility and 2031 Notes. Based upon management’s current plans and outlook, the Company believes it will be able to comply with these covenants during the subsequent twelve months. From time to time, the Company may seek to opportunistically raise capital in the debt capital markets and bank credit markets.

Other Financing Arrangements

The Company has two non-U.S. accounts receivable financing programs with no maximum availability. Transactions under the non-U.S. programs were accounted for as sales in accordance with Accounting Standards Codification (“ASC”) 860, “Transfers and Servicing.” Under these financing programs, the Company has the ability to sell eligible receivables up to the customer's maximum limit. Refer to Note 11, “Accounts Receivable Factoring,” to the Consolidated Financial Statements.

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Off-Balance Sheet Arrangements

As of December 31, 2024, the Company had buyback commitments outstanding of $29.9 million. This amount is not reduced for amounts the Company would recover from the repossession and subsequent resale of collateral. Refer to Note 18, “Guarantees,” to the Consolidated Financial Statements for further information.

Contractual Obligations and Commercial Commitments

The Company's material cash requirements, contractual obligations and commercial commitments include the following:

Debt

As of December 31, 2024, the Company had outstanding debt of $390.2 million with $13.1 million payable within one year. The Company is committed to pay 9.25% of annual interest on the $300.0 million 2031 Notes that mature on October 1, 2031. Additionally, the Company's debt outstanding under the ABL Revolving Credit Facility is subject to variable interest using either the Alternate Base Rate or Term Benchmark, Applicable Overnight Rate, Central Bank Rate ("CBR") or RFR rate (each as defined in the ABL Credit Agreement) plus the applicable spread. For the year ended December 31, 2024 the Company incurred $7.8 million and $3.3 million of interest on borrowings from the ABL Revolving Credit Facility and other debts, respectively. Refer to Note 10, “Debt,” to the Consolidated Financial Statements for further information.

Purchase Obligations

As of December 31, 2024, the Company has purchase obligations of $890.4 million with $601.9 million due within one year. Purchase obligations consist primarily of open purchase orders for raw materials and various components used in the manufacturing process and purchase obligations from agreements with various suppliers that include a right of cancellation.

Leases

As of December 31, 2024, the Company had contractual fixed costs related to operating lease commitments of $72.5 million with $15.8 million due within one year. Refer to Note 20, “Leases,” to the Consolidated Financial Statements for further information.

Capital Expenditures

The Company funds capital expenditures that are intended to improve the cost structure of the Company’s business; invest in new processes, products and technology; maintain high-quality production standards; and maintain and expand the Company's rental fleet.

The Company paid a total of $45.7 million during 2024 for capital expenditures. For the year ended December 31, 2024, depreciation was $60.0 million. The Company anticipates that capital expenditures for 2025 will be approximately $47.0 million, of which approximately $23.0 million is for rental fleet assets.

Other Cash Requirements

The Company has unrecognized tax benefits totaling $13.9 million as of December 31, 2024, excluding related interest and penalties. It is reasonably possible that the unrecognized tax benefits could significantly change over the next 12 months. However, due to the highly uncertain nature of resolution and closure on audits, we are unable to estimate the range of impact at this time. Refer to Note 12, “Income Taxes,” to the Consolidated Financial Statements for disclosures surrounding uncertain income tax positions under ASC Topic 740 “Income Taxes.”

The Company maintains defined benefit pension plans for some of the Company’s employees and retirees. The Board of Directors has established the Retirement Plan Committee to manage the operations and administration of all benefit plans and related trusts. Refer to Note 19, “Employee Benefit Plans,” to the Consolidated Financial Statements.

In 2024, cash contributions by the Company to defined benefit pension, postretirement medical, and other defined benefit plans were $9.1 million, and the Company estimates that its contributions in 2025 will be approximately $5.2 million. Cash contributions to the Company’s 401(k) plan were $9.0 million in 2024. Cash contributions to the 401(k) plan earned in 2024 and expected to be paid in 2025 are $3.3 million.

The Company maintains a non-qualified supplemental deferred compensation plan for highly compensated and key management employees and for non-employee directors of the Company. The Company contributes a matching contribution

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for eligible wages above IRS employee compensation limits for 401(k) retirement plans and/or an additional contribution from the Company for each individual participant, which may or may not be made, at the full discretion of the Company based on its performance. In 2024, cash contributions by the Company to the non-qualified supplemental deferred compensation plan were $0.2 million. Cash contributions to the non-qualified supplemental deferred compensation plan earned in 2024 and expected to be paid in 2025 are $0.4 million.

Non-GAAP Measures

The Company uses EBITDA, adjusted EBITDA, adjusted operating income, Adjusted ROIC and free cash flows, which are financial measures that are not prepared in accordance with GAAP, as additional metrics to evaluate the Company’s performance. The Company believes these non-GAAP measures provide important supplemental information to readers regarding business trends that can be used in evaluating its results because these financial measures provide a consistent method of comparing financial performance and are commonly used by investors to assess performance. These non-GAAP financial measures should be considered together with, and are not substitutes for, the GAAP financial information provided herein.

Adjusted ROIC

Adjusted ROIC measures how efficiently the Company uses invested capital in its operations. Adjusted ROIC is not a measure defined by GAAP and the Company’s methodology for determining Adjusted ROIC may vary from the methodology used by other companies. Management and the Board use Adjusted ROIC as a measure to assess operational performance and capital allocation. The Company believes this information is useful to investors as it provides a measure of value creation as a percentage of capital invested.

Adjusted ROIC is determined by dividing adjusted net operating profit after tax (“Adjusted NOPAT”) for the year ended December 31, 2024 by the five-quarter average of invested capital. Adjusted NOPAT is calculated by taking operating income plus the addback of amortization of intangible assets and the addback or subtraction of restructuring expenses, other non-recurring items - net, and provision for income taxes, which is determined using a 15% tax rate. Invested capital is defined as net total assets less cash and cash equivalents and income tax assets - net plus short-term and long-term debt. Income taxes are defined as income tax payables/receivables, net deferred tax assets/liabilities, and uncertain tax positions.

The Company’s Adjusted ROIC for the year ended December 31, 2024 was 6.0%. Below is the calculation of Adjusted ROIC for the year ended December 31, 2024.

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(1)
Other non-recurring items - net for the year ended December 31, 2024 relate to $8.9 million of costs associated with a legal matter with the U.S. EPA and $0.2 million of one-time costs.

EBITDA and Adjusted EBITDA

The Company defines EBITDA as net income (loss) before interest, taxes, depreciation, and amortization. The Company defines adjusted EBITDA as EBITDA plus the addback or subtraction of restructuring expense, other income (expense) – net, and certain other non-recurring items.

The reconciliation of net income (loss) to EBITDA, and further to adjusted EBITDA for the years ended December 31, 2024 and 2023 is summarized as follows:

(1)
Other non-recurring items - net for the year ended December 31, 2024 relate to $8.9 million of costs associated with a legal matter with the U.S. EPA and $0.2 million of one-time costs. Other non-recurring items - net for the year ended December 31, 2023 relate to $21.2 million of costs associated with a legal matter with the U.S. EPA and $0.6 million of one-time costs

(2)
Other expense - net includes net foreign currency gains (losses), other components of net periodic pension costs, and other items in the years ended December 31, 2024 and 2023. Other expense – net for the year ended December 31, 2023 includes a $9.3 million write-off of non-cash foreign currency translation adjustments from the curtailment of operations in Russia.

Free Cash Flows

Free cash flows is defined as net cash provided by operating activities less capital expenditures. The reconciliation of net cash provided by operating activities to free cash flows for the years ended December 31, 2024 and 2023 is summarized as follows:

Financial Risk Management

The Company is exposed to market risks from changes in interest rates, commodities, and foreign currency exchange rates. To reduce these risks, the Company selectively makes use of derivative financial instruments and other proactive management techniques. The Company has written policies and procedures that place financial instruments under the direction of corporate finance 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 the Company's accounting policies and the financial instruments that we use, refer to Note 2, “Summary of Significant Accounting Policies,” Note 4, “Fair Value of Financial Instruments,” and Note 10, “Debt,” to the Consolidated Financial Statements.

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Interest Rate Risk

The Company's long-term debt primarily consists of $300.0 million on the 2031 Notes and borrowings under its ABL Revolving Credit Facility. Borrowings under the ABL Revolving Credit Facility are subject to variable interest using either the Alternate Base Rate or Term Benchmark, Applicable Overnight Rate, CBR or RFR rate (each as defined in the ABL Credit Agreement) plus the applicable spread. The variable interest rate is based upon the average availability as of the most recent determination date. As of December 31, 2024, the Company had borrowings on the ABL Revolving Credit Facility of $79.0 million. At any time, the Company could be party to various interest rate swaps in connection with its fixed or floating rate debt. No interest rate swaps were entered into or outstanding during 2024 or 2023. A hypothetical 100 basis point increase/decrease in the average interest rate of the Company's annual average borrowings under its ABL Revolving Credit Facility would have resulted in a $1.2 million increase/decrease to interest expense for the year ended December 31, 2024.

Commodity Prices

The Company is exposed to fluctuating market prices for commodities, including steel, copper, aluminum, and petroleum-based products. From time to time the Company may use commodity financial instruments to hedge commodity prices. No commodity financial instruments were entered into or outstanding during 2024 and 2023. For more information on commodities risk, see Part I, Item 1A. – “Risk Factors.”

Currency Risk

The Company has manufacturing, sales, and distribution facilities around the world, and therefore, makes investments and enters into transactions denominated in various currencies, which introduces transactional currency exchange risk.

To mitigate transactional currency exchange risk, the Company, from time-to-time, enters into foreign exchange contracts to 1) reduce the earnings and cash flows impact on non-functional currency denominated receivables and payables and 2) reduce the impact of changes in foreign currency rates between a budgeted rate and the rate realized at the time it recognizes a particular purchase or sale transaction. Gains and losses resulting from hedging instruments either impact the Company’s Consolidated Statements of Operations in the period of the underlying purchase or sale transaction, or offset the foreign exchange gains and losses on the underlying receivables and payables being hedged. The maturities of these foreign exchange contracts coincide with the expected underlying settlement date of the related cash inflow or outflow. The hedges of anticipated transactions are designated as cash flow hedges as required under ASC Topic 815 “Derivatives and Hedging.” As of December 31, 2024, the Company was party to foreign currency forward contracts with a notional value of $129.7 million all of which are carried on the Company’s balance sheet at fair value. As of December 31, 2024, a hypothetical 10% increase or decrease in the exchange rate in the Company’s portfolio of foreign currency contracts would result in a $11.5 million unrealized gain and a $5.6 million unrealized loss, respectively. Consistent with the use of these contracts to neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the remeasurement of the underlying transactions being hedged.

Amounts invested in non-U.S. based subsidiaries are translated into U.S. dollars at the exchange rate in effect at year-end. Results of operations are translated into U.S. dollars at an average exchange rate for the period. The resulting translation adjustments are recorded in stockholders’ equity as other comprehensive income (loss). The cumulative translation adjustment recorded in other comprehensive income (loss) for the year ended December 31, 2024 was a loss of $20.8 million.

Environmental, Health, Safety, Contingencies and Other Matters

Refer to Part II, Item 8, Note 17, “Commitments and Contingencies,” where the Company has disclosed environmental, health, safety, contingencies and other matters.

Critical Accounting Policies and Estimates

The Consolidated Financial Statements include the accounts of the Company and all its subsidiaries. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements and related footnotes. In preparing these Consolidated Financial Statements, the Company has made its best estimates and judgments of certain amounts included in the Consolidated Financial Statements giving due consideration to materiality. 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 the Company has listed a number of accounting policies and estimates below which the Company believes to be most critical, the Company also believes that all of the Company’s accounting policies are important to the reader. Refer to Part II, Item 8, Note 2, “Summary of Significant Accounting Policies,” for a detailed description of these and other accounting policies of the Company.

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Revenue Recognition – The Company records revenue in accordance with ASC Topic 606 – “Revenue from Contracts with Customers.” Below are the Company's revenue recognition policies by performance obligation.

•
Crane Sales

Crane sales are primarily generated through the sale of new and used cranes. Contracts with customers are generally in the form of a purchase order. Based on the nature of the Company’s contracts, the Company does not have any significant financing terms. Contracts may have variable consideration in the form of early pay discounts or rebates. Revenue is recognized under these contracts when control of the product is transferred to the customer. Control transfers to the customer generally upon delivery to the carrier or acceptance through an independent inspection company that acts as an agent of the customer.

From time to time, the Company enters into agreements where the customer has the right to exercise a put option requiring the Company to buy back a crane at an agreed upon price. The Company evaluates each agreement at inception to determine if the customer has a significant economic incentive to exercise that right. If it is determined that the customer has a significant economic incentive to exercise that right, the agreement is accounted for as a lease in accordance with ASC Topic 842 – “Leases.” If it is determined that the customer does not have a significant economic incentive to exercise that right, then revenue is recognized when control of the asset is transferred to the customer.

Given the nature of the Company’s products, the customer may request that the product be held until a delivery location is identified. Under these “bill and hold” arrangements, sales are recognized when all of the following criteria are met: 1) the reason for the bill-and-hold arrangement is substantive, 2) the product is separately identified as belonging to the customer, 3) the product is ready for transfer to the customer and 4) the Company does not have the ability to use the product or direct it to another customer.

•
Crane Attachment Sales

Crane attachment sales are generated through the sale of new or used crane attachments such as luffing jibs, ecomats and counterweights. Crane attachment sales are recognized when control of the product is transferred to the customer. Control transfers to the customer generally upon delivery to the carrier.

•
Aftermarket Part Sales

Aftermarket part sales are generated through the sale of new and used parts to end customers and distributors. Aftermarket part sales are recognized when control of the product is transferred to the customer. Control transfers to the customer generally upon delivery to the carrier. Customers generally have a right of return which the Company estimates using historical information. The amount of estimated returns is deducted from net sales.

•
Other Sales

The Company’s other sales consist primarily of sales from:

•
Repair and field service work;

•
Remanufacturing; and

•
Rental of cranes.

As it relates to the Company’s other sales, the Company’s performance obligations generally relate to performing specific agreed upon services. Depending on the nature of the contract, sales are recognized based on completion of those services or over the service period based on a measure of progress.

Inventories and Related Reserve for Obsolete and Excess Inventory – Inventories are valued at the lower of cost or net realizable value. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs. Inventories are reduced by a reserve for excess and obsolete inventories. The estimated reserve is based upon specific identification of excess or obsolete inventories based on historical usage and estimated future usage.

Goodwill, Intangible Assets and Other Long-Lived Assets – The Company accounts for goodwill and intangible assets under the guidance of ASC Topic 350-10, “Intangibles – Goodwill and Other.” Under ASC Topic 350-10, goodwill is not amortized;

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instead, the Company performs an annual impairment test. The Company has two reporting units with goodwill: Americas – Distribution and MEAP. The date for the annual impairment test is October 31, or more frequently if events or changes in circumstances indicate that the assets might be impaired. To perform its goodwill impairment test, the Company uses a combination of the income approach and market approach with a weighting of 70/30, respectively, to determine the fair value of the MEAP reporting unit. The Company determined a 70% weighting toward the income approach was appropriate as cash flows for the reporting unit are better aligned to the cyclical nature of the crane business and its unique market dynamics. The Company determined a 30% weighting toward the market approach was appropriate as the valuation is indicative of the fair value of the Company and its reporting unit but there is a lack of comparable peer companies. The Company uses only the income approach to determine the fair value of the Americas – Distribution reporting unit due to the lack of comparable peer companies to determine fair value under the market approach. Impairment is determined based on the amount in which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill at the reporting unit.

The Company has two indefinite-lived intangible assets subject to an annual impairment test: the Potain trademark, tradename, and distribution network assets (“Potain Tradename”) and the Grove trademark, tradename, and distribution network assets (“Grove Tradename”). To perform its indefinite-lived intangible assets impairment test, the Company uses a fair-value method, based on a relief of royalty valuation approach. Management’s judgments and assumptions about the amounts of those cash flows and the discount rates are inputs to the annual impairment test. Impairment is determined based on the amount in which the carrying value of the indefinite-lived intangible asset exceeds its fair value, not to exceed the carrying amount of the indefinite-lived intangible asset.

As of October 31, 2024, the Company performed its annual goodwill impairment test. The fair values of the Americas - Distribution and MEAP reporting units were 13% and 69%, respectively, in excess of their carrying values as of the date of the annual impairment test and, therefore, were not impaired as of December 31, 2024.

As of October 31, 2024 the Company performed its annual indefinite-lived intangible assets impairment test. The fair value of the Potain and Grove Tradenames were substantially in excess of their carrying values as of the date of the annual impairment test and, therefore, were not impaired as of December 31, 2024.

A considerable amount of management judgment and assumptions are required in performing the goodwill and indefinite-lived asset impairment tests as it relates to the forecast of future revenues and margins, especially considering the limited operating history of Americas – Distribution, and the discount rate, as applicable. While the Company believes the judgments and assumptions are reasonable, different assumptions could change the estimated fair value and, therefore, additional impairments could be required. Weakening industry or economic trends, disruptions to the Company's business, unexpected significant changes or planned changes in the use of the assets or in entity structure are all factors which may adversely impact the assumptions used in the valuations.

Intangible assets with definite lives continue to be amortized over their estimated useful lives. Definite-lived intangible assets are also subject to impairment testing whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. The Company determined there was not a triggering event during the year ended December 31, 2024, with the exception of one asset group located in Europe. Based on the results of the recoverability test, it was determined that the undiscounted cash flows were in excess of the carrying value of the long-lived assets.

The Company also reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset's carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC Topic 360-10-5, “Property, Plant, and Equipment.” ASC Topic 360-10-5 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and to evaluate the asset group against the sum of the undiscounted future cash flows.

The Company monitors events and market conditions to determine if any interim impairment tests of goodwill, other intangibles or long-lived assets are warranted. Deterioration in macroeconomic conditions, a decline in actual results as compared with the Company’s projections, or a low equity market capitalization for a prolonged period, are factors which could indicate an interim triggering event has occurred. In the event the Company determines that assets are impaired in the future, the Company would recognize a non-cash impairment charge, which could have a material adverse effect on the Company’s Consolidated Balance Sheet and Results of Operations.

Employee Benefit Plans – The Company provides a range of benefits to its employees and retired employees, including pensions and postretirement health care coverage. Plan assets and obligations are recorded annually based on the Company’s measurement date utilizing various actuarial assumptions such as discount rates, expected return on plan assets, compensation

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increases, retirement and mortality rates and health care cost trend rates as of that date. The approach the Company uses to determine the annual assumptions are as follows:

•
Discount Rate – The Company’s discount rate assumptions are based on the interest rate of noncallable high-quality corporate bonds, with appropriate consideration of pension plan participant demographics and benefit payment terms. The Company’s discount rate is provided by an independent third party calculated based on an appropriate mix of high-quality bonds.

•
Expected Return on Plan Assets – The Company’s expected return on plan assets assumptions are based on the Company’s 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, net of estimated fees.

•
Compensation increase – The Company’s compensation increase assumptions reflect its long-term actual experience, the near-term outlook and assumed inflation.

•
Retirement and Mortality Rates – The Company’s retirement and mortality rate assumptions are based primarily on actual plan experience and mortality tables.

•
Health Care Cost Trend Rates – The Company’s health care cost trend rate assumptions are developed based on historical cost data, near-term outlook and an assessment of likely long-term trends.

The following table summarizes the sensitivity of the Company's December 31, 2024 retirement obligations and 2024 retirement benefit costs to changes in the key assumptions used to determine those results:

It is reasonably possible that the estimate for future retirement and medical costs may change in the near future due to changes in interest rates. Presently, there is no reliable means to estimate the amount of any such potential changes.

Measurements of net periodic benefit cost are based on the assumptions used for the previous year-end measurements of assets and obligations. The Company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions when appropriate. As required by GAAP, the effects of the modifications are recorded currently or amortized over future periods. The Company has developed the assumptions with the assistance of its independent actuaries and other relevant sources, and believes the assumptions used are reasonable; however, changes in these assumptions could impact the Company’s financial position, results of operations, or cash flows.

Income Taxes – The Company accounts for income taxes under the guidance of ASC Topic 740-10, “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. Management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities, and the valuation allowance recorded against the net deferred tax assets. The Company does not currently provide for additional U.S. and foreign income taxes which would become payable upon repatriation of undistributed earnings of foreign subsidiaries.

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. The Company recognizes deferred tax assets to the extent they are believed to be more likely than not to be realized by considering all available positive and negative evidence,

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including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

The Company reviewed both positive and negative information, including the most recent three-year cumulative income position, and forecasted taxable earnings to determine the realizability of the deferred tax assets. As a result, the Company reduced the valuation allowances by $57.5 million related to U.S. federal and state deferred tax assets for the year ended December 31, 2024, and $19.0 million related to a foreign jurisdiction for the year ended December 31, 2023. As of December 31, 2024, valuation allowances of $73.4 million remained against deferred tax assets that are not more likely than not to be realized based on positive and negative evidence available as of this time. The realizability of deferred tax assets are continuously monitored and adjusted based on most recent available evidence. As such, valuation allowances may be established or reduced in future periods, which would decrease or increase the provision for income taxes.

The Company measures and records income tax contingency accruals under the guidance of ASC Topic 740-10. The Company recognizes liabilities for uncertain income tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company must determine the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis or when new information becomes available to management. These reevaluations are based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, successfully settled issues under audit, expirations due to statutes, and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or an increase to the tax accrual.

Warranties – In the normal course of business, the Company provides its customers warranties covering workmanship, and in some cases materials, on products manufactured. Such warranties generally provide 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 warranties, it may be obligated, at its expense, to correct any defect by repairing or replacing such defective product. The Company provides for an estimate of costs that may be incurred under its warranties 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 the Company’s warranty liabilities include the number of shipped units and historical and anticipated rates or 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.

Item 7. 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 accompanying notes appearing in Part II, Item 8 of this Annual Report on Form 10-K.

Overview: The Manitowoc Company, Inc. (“Manitowoc” or the “Company”) is a leading provider of engineered lifting solutions headquartered in Milwaukee, Wisconsin, United States. Through its wholly owned subsidiaries, Manitowoc designs, manufacturers, markets, distributes and supports comprehensive product lines of mobile hydraulic cranes, lattice-boom crawler cranes, boom trucks and tower cranes.

All dollar amounts are in millions throughout the tables included in Management’s Discussion and Analysis of Financial Condition and Results of Operations unless otherwise indicated.

Current Events

Supply Chain and Logistics Constraints

The Company continues to actively monitor global supply chain and logistics constraints which had a negative impact on the Company's ability to source parts, complete and ship units and service cranes for the years ended December 31, 2023 and 2022. While the Company experienced some relief with supply chain and logistics constraints, supply chains for certain key components remain distressed. The Company continues to actively monitor and manage supply chain constraints through alternative sourcing of parts and adapting production to limit waste and inefficiencies in the facilities. Continuing or worsening supply chain and logistics constraints may have a material adverse impact on the Company's financial condition, results of operations or cash flows.

Curtailment of Operations in Russia

As of December 31, 2023, the Company's operations in Russia have been substantially curtailed. As a result, for the year ended December 31, 2023, the Company released $9.3 million of non-cash foreign currency translation adjustments recorded in accumulated other comprehensive loss on the Consolidated Balance Sheets to other income (expense) – net in the Consolidated Statement of Operations. The Company does not anticipate material future charges related to the curtailment of operations in Russia.

Results of Operations

A detailed discussion of the year-over-year changes for the years ended December 31, 2022 and 2021 can be found in the Management's Discussion and Analysis section of the Company's 2022 Annual Report on Form 10-K filed on February 24, 2023, and is available on the SEC's website at www.sec.gov as well as in the "Investors" section of our website at www.manitowoc.com.

Results of Operations for the Years Ended December 31, 2023 and 2022

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Orders and Backlog

Backlog represents the dollar value of orders which are expected to be recognized in net sales in the future. Orders are included in backlog when an executed binding contract with a price that is fixed or has a floor has been received but has not been recognized in net sales. Orders and backlog are not measures defined by GAAP and the Company's methodology for determining orders and backlog may vary from the methodology used by other companies. Management uses orders and backlog for capacity and resource planning. The Company believes this information is useful to investors to provide an indication of future revenues.

Orders for the year ended December 31, 2023 decreased 0.6% to $2,082.3 million from $2,095.5 million for the same period in 2022. The decrease in orders was primarily attributable to softening demand in the EURAF and Americas segments. This was partially offset by an increase in demand in the MEAP segment. Orders were favorably impacted by $18.3 million from changes in foreign currency exchange rates.

The Company’s backlog as of December 31, 2023 was $917.2 million, a 13.1% decrease from the December 31, 2022 backlog of $1,056.0 million . The decrease in backlog from December 31, 2022 was primarily attributable to higher shipments due to easing of supply chain and logistics constraints and the lower orders. Backlog was favorably impacted by $9.4 million from changes in foreign currency exchange rates.

Net Sales

Consolidated net sales for the year ended December 31, 2023 increased 9.6% to $2,227.8 million from $2,032.5 million for the year ended December 31, 2022. The increase was primarily attributable to higher new and non-new machine sales in the Americas and MEAP segments, higher non-new machine sales in the EURAF segment and global pricing actions. This was partially offset by lower new machine sales in the EURAF segment. Net sales were favorably impacted by $15.5 million from changes in foreign currency exchange rates.

Gross Profit

Gross profit for the year ended December 31, 2023 increased 16.7% to $425.2 million compared to $364.5 million for the year ended December 31, 2022. The increase was primarily attributable to the higher net sales, partially offset by higher material and transportation costs and unfavorable product mix. Gross profit was favorably impacted by $1.8 million from changes in foreign currency exchange rates.

Engineering, Selling and Administrative Expenses

Engineering, selling and administrative expenses for the year ended December 31, 2023 increased 16.8% to $328.3 million compared to $281.0 million for the year ended December 31, 2022. The increase was primarily attributable to a $21.2 million charge related to a legal matter with the U.S. Environmental Protection Agency (“EPA”), higher employee-related costs and $4.8 million of benefit recorded in the prior year from the partial recovery of the previously written-off long-term note receivable from the 2014 divestiture of the Company’s Chinese joint venture. Engineering, selling, and administrative expenses were unfavorably impacted by $2.8 million from changes in foreign currency exchange rates.

Asset Impairment Expense

During the year ended December 31, 2022, the Company recorded non-cash charges in the Americas segment of $171.9 million consisting of a $166.5 million goodwill impairment charge and a $5.4 million indefinite-lived intangible asset impairment charge. Refer to Note 10, “Goodwill and Intangible Assets,” to the Consolidated Financial Statements for further information.

Interest Expense

Interest expense for the year ended December 31, 2023 was $33.9 million compared to $31.6 million for the year ended December 31, 2022. Interest expense increased year-over-year primarily due to higher interest rates on borrowings from the Company's ABL revolving credit facility. See further detail at Note 12, “Debt,” to the Consolidated Financial Statements.

Other Income (Expense) – Net

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Other income (expense) – net for the year ended December 31, 2023 was $13.0 million of expense and was primarily composed of a $9.3 million non-cash write-off of foreign currency translation adjustments related to the curtailment of operations in Russia and $6.0 million of pension benefit and postretirement health costs. This was partially offset by $3.3 million of net foreign currency transaction gains.

Other income (expense) - net for the year ended December 31, 2022 was $5.8 million of income and was primarily composed of $5.5 million of net foreign currency transaction gains and a $0.9 million gain on disposal of property, plant and equipment, partially offset by a $0.5 million charge related to non-capitalizable one-time legal and debt related costs.

Provision for Income Taxes

During the year ended December 31, 2023 and 2022 the Company recorded a provision for income taxes of $5.0 million and $3.4 million, respectively.

Due to the Company’s historic losses, impacts from United States tax reform and full valuation allowances in certain jurisdictions, the effective annual tax rate is not a meaningful measure of the Company’s cash tax position or performance of the business. It is reasonably possible that sufficient positive evidence may result in a requirement to release a portion of certain valuation allowances within the next twelve months. Such changes in the realizability of deferred tax assets will be reflected in continuing operations and could have a material effect on the Company’s financial position and results of operations.

The 2023 effective tax rate was favorably impacted by the release of a $19.0 million valuation allowance and a $3.2 million tax benefit for the favorable resolution of a previously reserved foreign income tax matter. The rate was unfavorably impacted primarily by non-deductible expenses related to a legal matter, additional valuation allowances recorded during the year and the jurisdictional mix of the financial results.

The 2022 effective tax rate was favorably impacted by the net release of unrecognized tax positions of $11.5 million, primarily related to U.S. Federal tax planning strategies implemented as a result of the Coronavirus Aid, Relief and Economic Security Act. The rate was unfavorably impacted primarily by the goodwill and indefinite-lived intangible asset impairment charges for which there was no related tax asset, additional valuation allowances recorded during the year and the jurisdictional mix of the financial results.

Refer to Note 14, “Income Taxes,” to the Consolidated Financial Statements.

Segment Operating Performance

The Company has three reportable segments, the Americas segment, the Europe and Africa (“EURAF”) segment and the Middle East and Asia Pacific (“MEAP”) segment. The segments were identified using the “management approach,” which designates the internal organization that is used by the CEO, who is also the Company’s Chief Operating Decision Maker (“CODM”), for making decisions about the allocation of resources and assessing performance. Further information regarding the Company’s reportable segments can be found in Note 18, “Segments,” to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Americas

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Americas segment net sales increased 19.6% in 2023 to $1,211.2 million from $1,013.0 million in 2022. The increase was primarily attributable to higher new machine sales as a result of a higher shippable backlog entering the year, higher non-new machine sales and pricing actions.

Americas segment operating income of $111.7 million increased $200.5 million in 2023 from an operating loss of $88.8 million in 2022. The increase was primarily attributable to $171.9 million of non-cash goodwill and indefinite-lived intangible asset impairment charges recorded in the prior year and the higher net sales in the current year. This was partially offset by charges for certain product-related lawsuits, higher material costs and higher labor costs.

EURAF

EURAF segment net sales decreased 12.1% in 2023 to $669.6 million from $761.5 million in 2022. The decrease was primarily attributable to lower new machine sales, partially offset by pricing actions and higher non-new machine sales. EURAF net sales were favorably impacted by $15.1 million from changes in foreign currency exchange rates.

EURAF segment operating loss of $7.9 million increased $4.7 million in 2023 from an operating loss of $3.2 million in 2022. The increase was primarily attributable to lower net sales, higher material costs and higher labor costs. Operating loss was unfavorably impacted by $0.7 million from changes in foreign currency exchange rates.

MEAP

MEAP segment net sales increased 34.5% in 2023 to $347.0 million from $258.0 million in 2022. The increase was primarily attributable to higher new and non-new machine sales. MEAP net sales were unfavorably impacted by $0.2 million from changes in foreign currency exchange rates.

MEAP segment operating income increased 30.1% in 2023 to $52.3 million from $40.2 million in 2022. The increase was primarily attributable to the higher net sales and favorable product mix. This was partially offset by higher labor costs and $4.8 million of income recorded in the prior year related to the partial recovery of the previously written-off long-term note receivable from the 2014 divestiture of the Company’s Chinese joint venture. Operating income was favorably impacted by $0.3 million from changes in foreign currency exchange rates.

Financial Condition

Cash Flows

The table below shows a summary of cash flows for the years ended December 31, 2023 and 2022:

Cash Flows from Operating Activities

Net cash provided by operating activities of $63.0 million in 2023 decreased $13.9 million from $76.9 million in 2022. The decrease in net cash provided by operating activities was primarily due to an increase in working capital due to higher inventory as a result of logistics constraints and higher accounts receivable due to the timing of shipments in the fourth quarter. This was partially offset by higher net income adjusted for non-cash items.

Cash Flows from Investing Activities

Net cash used for investing activities of $71.8 million in 2023 increased $13.8 million from $58.0 million in 2022. The increase in net cash used for investing activities was primarily due to higher capital expenditures of $15.6 million and $2.3 million of cash receipts in the prior year related to the finalization of the purchase price for the acquisition of the crane business of H&E Equipment Services, Inc. This was partially offset by $4.1 million of higher proceeds from the sale of property, plant and equipment as compared to the prior year.

Cash Flows from Financing Activities

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Net cash used for financing activities of $21.4 million in 2023 decreased $8.5 million from $29.9 million in 2022. The decrease in net cash used for financing activities was primarily due to $3.8 million of proceeds from other debt in the current year as compared to $5.1 million of payments on other debt in the prior year and $1.9 million of payments in the prior year for debt issuance and other debt related costs. This was partially offset by $2.5 million of higher common stock repurchases compared to the prior year.

Liquidity and Capital Resources

Liquidity

The Company’s liquidity position as of December 31, 2023 and 2022 is summarized as follows:

The Company’s revolving credit facility, or other future facilities, may be used for working capital requirements, capital expenditures, funding future acquisitions (within the Company’s debt limitations), and other operating, investing and financing needs. The Company believes its liquidity and expected cash flows from operations are sufficient to meet expected working capital, capital expenditures, contractual obligations and other ongoing operational needs in the subsequent twelve months.

Cash Sources

The Company has historically relied primarily on cash flows from operations, borrowings under revolving credit facilities, issuances of notes and other forms of debt financing as its sources of cash.

The maximum availability under the Company’s current ABL Revolving Credit Facility (as defined below) is $275.0 million. The borrowing capacity under the ABL Revolving Credit Facility is based on the value of inventory, accounts receivable and certain fixed assets of the Loan Parties (as defined below). The Loan Parties’ obligations under the ABL Revolving Credit Facility are secured on a first-priority basis, subject to certain exceptions and permitted liens, by substantially all of the personal property and fee-owned real property of the Loan Parties. The liens securing the ABL Revolving Credit Facility are senior in priority to the second-priority liens securing the obligations under the senior secured second lien notes due on April 1, 2026 (the "2026 Notes") and the related guarantees. The ABL Revolving Credit Facility has a maturity date of May 19, 2027 (with a springing maturity date of December 30, 2025 if the 2026 Notes have not been repaid in full or refinanced prior to December 30, 2025), and includes a $75.0 million letter of credit sub-facility, $10.0 million of which is available to the Company’s German subsidiary that is a borrower under the ABL Revolving Credit Facility.

In addition to the ABL Revolving Credit Facility, the Company has access to non-committed overdraft facilities to fund working capital in Europe and China. There are six facilities, of which five facilities are denominated in Euros totaling €37.0 million and one facility denominated in Chinese Yuan totaling ¥30.0 million. Total U.S. dollar availability as of December 31, 2023 for the six overdraft facilities is $45.2 million, with $11.2 million outstanding.

Debt

On March 25, 2019, the Company and certain subsidiaries of the Company (the “Loan Parties”) entered into a credit agreement (the “ABL Credit Agreement”) with JP Morgan Chase Bank, N.A. as administrative and collateral agent, and certain financial institutions party thereto as lenders, providing for a senior secured asset-based revolving credit facility (the “ABL Revolving Credit Facility”) of up to $275.0 million. The borrowing capacity under the ABL Revolving Credit Facility is based on the value of inventory, accounts receivable and certain fixed assets of the Loan Parties. The Loan Parties’ obligations under the ABL Revolving Credit Facility are secured on a first-priority basis, subject to certain exceptions and permitted liens, by substantially all of the personal property and fee-owned real property of the Loan Parties. The liens securing the ABL Revolving Credit Facility are senior in priority to the second-priority liens securing the obligations under the 2026 Notes and the related guarantees. The ABL Revolving Credit Facility includes a $75.0 million letter of credit sub-facility, $10.0 million of which is available to the Company’s German subsidiary that is a borrower under the ABL Revolving Credit Facility.

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On June 17, 2021, the Company amended the ABL Credit Agreement to adjust certain negative covenants which reduced restrictions on the Company's ability to expand its rental business. On May 19, 2022, the Company further amended the ABL Credit Agreement to (i) extend the maturity date to May 19, 2027 (subject to a springing maturity date of December 30, 2025 if the 2026 Notes have not been repaid in full or refinanced prior to December 30, 2025), (ii) permit the inclusion, subject to certain limitations, of the crane rental assets of certain subsidiaries in the borrowing base used to calculate availability under the ABL Credit Agreement, (iii) permit separate financing of crane rental assets not included in the borrowing base and (iv) replace U.S. dollar London Inter-bank Offered Rate with interest rates based on the secured overnight financing rate plus a credit spread adjustment (“SOFR”). Refer to Note 12, “Debt,” to the Consolidated Financial Statements for further information regarding the ABL Credit Agreement.

As of December 31, 2023 and 2022, the Company had $60.0 million and $80.0 million, respectively, of borrowings outstanding under the ABL Revolving Credit Facility. During the year ended December 31, 2023, the highest daily borrowing under the ABL Revolving Credit Facility was $119.6 million and the average borrowing was $103.4 million, while the weighted-average annual interest rate was 5.2%. During the year ended December 31, 2022, the highest daily borrowing under the ABL Revolving Credit Facility was $112.5 million and the average borrowing was $90.9 million, while the weighted-average annual interest rate was 3.1%. The interest rate of the ABL Revolving Credit Facility fluctuates based on excess availability. During the year ended December 31, 2023, the spreads for SOFR and Alternative Base Rate borrowings were 1.25% and 0.25%, respectively. Excess availability as of December 31, 2023 was $211.6 million, which represents revolver borrowing capacity of $275.0 million less $60.0 million in borrowings outstanding and U.S. letters of credit outstanding of $3.4 million.

On March 25, 2019, the Company and certain of its subsidiaries entered into an indenture with U.S. Bank National Association as trustee and notes collateral agent, pursuant to which the Company issued $300.0 million aggregate principal amount of the 2026 Notes with an annual coupon rate of 9.000%. Interest on the 2026 Notes is payable in cash semi-annually in arrears on April 1 and October 1 of each year. The 2026 Notes are fully and unconditionally guaranteed on a senior secured second lien basis, jointly and severally, by each of the Company’s existing and future domestic subsidiaries that is either a guarantor or a borrower under the ABL Revolving Credit Facility or that guarantees certain other debt of the Company or a guarantor. The 2026 Notes and the related guarantees are secured on a second-priority basis, subject to certain exceptions and permitted liens, by pledges of capital stock and other equity interests and other security interests in substantially all of the personal property and fee-owned real property of the Company and of the guarantors that secure obligations under the ABL Revolving Credit Facility.

As of December 31, 2023, the Company was in compliance with all affirmative and negative covenants in its debt instruments, inclusive of the financial covenants pertaining to the ABL Revolving Credit Facility and 2026 Notes. Based upon management’s current plans and outlook, the Company believes it will be able to comply with these covenants during the subsequent twelve months. From time to time, the Company seeks to opportunistically raise capital in the debt capital markets and bank credit markets.

Other Financing Arrangements

The Company has two non-U.S. accounts receivable financing programs with no maximum availability and one U.S. accounts receivable financing program with maximum availability of $25.0 million. Transactions under the non-U.S. and U.S. programs were accounted for as sales in accordance with Accounting Standards Codification (“ASC”) 860, “Transfers and Servicing.” Under these financing programs, the Company has the ability to sell eligible receivables up to the maximum limit. Refer to Note 13, “Accounts Receivable Factoring,” to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements

As of December 31, 2023, the Company had buyback commitments with a balance outstanding of $43.4 million. This amount is not reduced for amounts the Company would recover from the repossession and subsequent resale of collateral. Refer to Note 20, “Guarantees,” to the Consolidated Financial Statements for further information.

Contractual Obligations and Commercial Commitments

The Company's material cash requirements, contractual obligations and commercial commitments include the following:

Debt

As of December 31, 2023, the Company had outstanding debt of $372.1 million with $13.4 million payable within one year. The Company is committed to pay 9.000% of annual interest on the $300.0 million 2026 Notes that mature on April 1, 2026. Additionally, the Company's debt outstanding under the ABL Revolving Credit Facility is subject to variable interest based on

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prevailing rates. For the year ended December 31, 2023, the Company incurred $5.4 million and $1.6 million of interest on borrowings from the ABL Revolving Credit Facility and other debts, respectively. Refer to Note 12, “Debt,” to the Consolidated Financial Statements for further information.

Purchase Obligations

As of December 31, 2023, the Company has purchase obligations of $1,151.6 million with $674.4 million due within one year. Purchase obligations consist primarily of open purchase orders for raw materials and various components used in the manufacturing process and purchase obligations from agreements with various suppliers that include a right of cancellation.

Leases

As of December 31, 2023, the Company had contractual fixed costs related to operating lease commitments of $72.6 million with $15.4 million due within one year. Refer to Note 22, “Leases,” to the Consolidated Financial Statements for further information.

Capital Expenditures

The Company funds capital expenditures that are intended to improve the cost structure of the Company’s business; invest in new processes, products and technology; maintain high-quality production standards; and maintain and expand the Company's rental fleet.

The Company paid a total of $77.4 million during 2023 for capital expenditures. For the year ended December 31, 2023, depreciation was $56.6 million. The Company anticipates that capital expenditures for 2024 will be approximately $60.0 million, of which approximately $25.0 million will be for growth of the rental fleet.

Other Cash Requirements

The Company has unrecognized tax benefits totaling $9.1 million as of December 31, 2023, excluding related interest and penalties. During the next twelve months, the unrecognized tax benefits are not expected to significantly increase or decrease due to audit settlements or lapsing statuses of limitations. Refer to Note 14, “Income Taxes,” to the Consolidated Financial Statements for disclosures surrounding uncertain income tax positions under ASC Topic 740 “Income Taxes.”

The Company maintains defined benefit pension plans for some of the Company’s employees and retirees. The Board of Directors has established the Retirement Plan Committee to manage the operations and administration of all benefit plans and related trusts. Refer to Note 21, “Employee Benefit Plans,” to the Consolidated Financial Statements.

In 2023, cash contributions by the Company to defined benefit pension, postretirement medical and other benefit plans were $5.1 million, and the Company estimates that its contributions in 2024 will be approximately $9.8 million. Cash contributions to the Company’s 401(k) plan were $12.2 million in 2023. Cash contributions to the 401(k) plan earned in 2023 and expected to be paid in 2024 are $3.1 million.

The Company maintains a non-qualified supplemental deferred compensation plan for highly compensated and key management employees and for non-employee directors of the Company. The Company contributes a matching contribution for eligible wages above IRS employee compensation limits for 401(k) retirement plans and/or an additional contribution from the Company for each individual participant, which may or may not be made, at the full discretion of the Company based on its performance. In 2023, cash contributions by the Company to the non-qualified supplemental deferred compensation plan were $0.4 million. Cash contributions to the non-qualified supplemental deferred compensation plan earned in 2023 and expected to be paid in 2024 are $0.2 million.

Non-GAAP Measures

The Company uses EBITDA, adjusted EBITDA, adjusted operating income, Adjusted ROIC and free cash flows, which are financial measures that are not prepared in accordance with GAAP, as additional metrics to evaluate the Company’s performance. The Company believes these non-GAAP measures provide important supplemental information to readers regarding business trends that can be used in evaluating its results because these financial measures provide a consistent method of comparing financial performance and are commonly used by investors to assess performance. These non-GAAP

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financial measures should be considered together with, and are not substitutes for, the GAAP financial information provided herein.

Adjusted ROIC

Adjusted ROIC measures how efficiently the Company uses invested capital in its operations. Adjusted ROIC is not a measure defined by GAAP and the Company’s methodology for determining Adjusted ROIC may vary from the methodology used by other companies. Management and the Board use Adjusted ROIC as a measure to assess operational performance and capital allocation. The Company believes this information is useful to investors as it provides a measure of value creation as a percentage of capital invested.

Adjusted ROIC is determined by dividing adjusted net operating profit after tax (“Adjusted NOPAT”) for the year ended December 31, 2023 by the five-quarter average of invested capital. Adjusted NOPAT is calculated for each quarter by taking operating income (loss) plus the addback of amortization of intangible assets and the addback or subtraction of restructuring expenses, certain other non-recurring items - net and income taxes, which is determined using a 15% tax rate. Invested capital is defined as net total assets less cash and cash equivalents and income tax assets - net plus short-term and long-term debt. Income taxes are defined as income tax payables/receivables, net deferred tax assets/liabilities, and uncertain tax positions.

The Company’s Adjusted ROIC for the year ended December 31, 2023 was 11.2%. Below is the calculation of Adjusted ROIC for the year ended December 31, 2023.

(1)
Other non-recurring items - net for the year ended December 31, 2023 relate to $21.2 million of costs associated with a legal matter with the U.S. EPA and $0.6 million of one-time costs.

EBITDA and Adjusted EBITDA

The Company defines EBITDA as net income (loss) before interest, taxes, depreciation and amortization. The Company defines adjusted EBITDA as EBITDA plus the addback or subtraction of restructuring expense, other income (expense) - net and certain other non-recurring items.

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The reconciliation of net income (loss) to EBITDA, and further to adjusted EBITDA for the years ended December 31, 2023 and 2022 is summarized as follows:

(1)
The asset impairment expense in 2022 represents non-cash goodwill and indefinite-lived intangible asset impairment charges.

(2)
Other non-recurring items - net for the year ended December 31, 2023 relate to $21.2 million of costs associated with a legal matter with the U.S. EPA and $0.6 million of one-time costs. Other non-recurring items - net for the year ended December 31, 2022 relate to $4.8 million of income from the partial recovery of the previously written off long-term note receivable from the 2014 divestiture of the Company's Chinese joint venture, partially offset by $3.0 million of fair value step up on rental fleet assets sold during the period that was expensed within cost of sales, $0.6 million of other one-time costs associated with the businesses acquired in 2021, and other one-time charges of $0.2 million.

(3)
Other (income) expense - net includes net foreign currency gains (losses), other components of net periodic pension costs and other items in the years ended December 31, 2023 and 2022. Other income (expense) – net for the year ended December 31, 2023 includes a $9.3 million write-off of non-cash foreign currency translation adjustments from the curtailment of operations in Russia.

Free Cash Flows

Free cash flows is defined as net cash provided by operating activities less capital expenditures. The reconciliations of net cash provided by operating activities to free cash flows for the year ended December 31, 2023 and 2022 are summarized as follows:

Financial Risk Management

The Company is exposed to market risks from changes in interest rates, commodities and foreign currency exchange rates. To reduce these risks, the Company selectively makes use of derivative financial instruments and other proactive management techniques. The Company has written policies and procedures that place financial instruments under the direction of corporate finance 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 the Company's accounting policies and the financial instruments that we use, refer to Note 2, “Summary of Significant Accounting Policies,” Note 5, “Fair Value of Financial Instruments,” and Note 12, “Debt,” to the Consolidated Financial Statements.

Interest Rate Risk

The Company's long-term debt primarily consists of $300.0 million on the 2026 Notes and borrowings under its ABL Revolving Credit Facility. Borrowings under the ABL Revolving Credit Facility bear interest at a variable rate using SOFR

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plus a spread. The variable interest rate is based upon the average availability as of the most recent determination date. As of December 31, 2023, the Company had borrowings on the ABL Revolving Credit Facility of $60.0 million. At any time, the Company could be party to various interest rate swaps in connection with its fixed or floating rate debt. No interest rate swaps were entered into or outstanding during 2023 or 2022. A hypothetical 100 basis point increase/decrease in the average interest rate of the Company's annual average borrowings under its ABL Revolving Credit Facility would have resulted in a $0.8 million increase/decrease to interest expense for the year ended December 31, 2023.

Commodity Prices

The Company is exposed to fluctuating market prices for commodities, including steel, copper, aluminum and petroleum-based products. From time to time the Company may use commodity financial instruments to hedge commodity prices. No commodity financial instruments were entered into or outstanding during 2023 and 2022. For more information on commodities risk, see Part I, Item 1A. – “Risk Factors.”

Currency Risk

The Company has manufacturing, sales and distribution facilities around the world, and therefore, makes investments and enters into transactions denominated in various currencies, which introduces transactional currency exchange risk.

To mitigate transactional currency exchange risk, the Company, from time-to-time, enters into foreign exchange contracts to 1) reduce the earnings and cash flows impact on non-functional currency denominated receivables and payables and 2) reduce the impact of changes in foreign currency rates between a budgeted rate and the rate realized at the time it recognizes a particular purchase or sale transaction. Gains and losses resulting from hedging instruments either impact the Company’s Consolidated Statements of Operations in the period of the underlying purchase or sale transaction, or offset the foreign exchange gains and losses on the underlying receivables and payables being hedged. The maturities of these foreign exchange contracts coincide with the expected underlying settlement date of the related cash inflow or outflow. The hedges of anticipated transactions are designated as cash flow hedges as required under ASC Topic 815 “Derivatives and Hedging.” As of December 31, 2023, the Company was party to foreign currency forward contracts with a notional value of $140.1 million all of which are carried on the Company’s balance sheet at fair value. As of December 31, 2023, a hypothetical 10% increase or decrease in the exchange rate in the Company’s portfolio of foreign currency contracts would result in a $8.7 million unrealized gain and a $5.9 million unrealized loss, respectively. Consistent with the use of these contracts to neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the remeasurement of the underlying transactions being hedged.

Amounts invested in non-U.S. based subsidiaries are translated into U.S. dollars at the exchange rate in effect at year-end. Results of operations are translated into U.S. dollars at an average exchange rate for the period. The resulting translation adjustments are recorded in stockholders’ equity as other comprehensive income (loss). The cumulative translation adjustment recorded in other comprehensive income (loss) for the year ended December 31, 2023 was income of $20.6 million.

Environmental, Health, Safety, Contingencies and Other Matters

Refer to Part II, Item 8, Note 19, “Commitments and Contingencies,” where the Company has disclosed environmental, health, safety, contingencies and other matters.

Critical Accounting Policies and Estimates

The Consolidated Financial Statements include the accounts of the Company and all its subsidiaries. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements and related footnotes. In preparing these Consolidated Financial Statements, the Company has made its best estimates and judgments of certain amounts included in the Consolidated Financial Statements giving due consideration to materiality. 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 the Company has listed a number of accounting policies and estimates below which the Company believes to be most critical, the Company also believes that all of the Company’s accounting policies are important to the reader. Refer to Part II, Item 8, Note 2, “Summary of Significant Accounting Policies,” for a detailed description of these and other accounting policies of the Company.

Revenue Recognition – The Company records revenue in accordance with ASC Topic 606 – “Revenue from Contracts with Customers.” Below are the Company's revenue recognition policies by performance obligation.

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Crane Sales

Crane sales are primarily generated through the sale of new and used cranes. Contracts with customers are generally in the form of a purchase order. Based on the nature of the Company’s contracts, the Company does not have any significant financing terms. Contracts may have variable consideration in the form of early pay discounts or rebates. Revenue is recognized under these contracts when control of the product is transferred to the customer. Control transfers to the customer generally upon delivery to the carrier or acceptance through an independent inspection company that acts as an agent of the customer.

From time to time, the Company enters into agreements where the customer has the right to exercise a put option requiring the Company to buy back a crane at an agreed upon price. The Company evaluates each agreement at the inception of the order to determine if the customer has a significant economic incentive to exercise that right. If it is determined that the customer has a significant economic incentive to exercise that right, the agreement is accounted for as a lease in accordance with ASC Topic 842 – “Leases.” If it is determined that the customer does not have a significant economic incentive to exercise that right, then revenue is recognized when control of the asset is transferred to the customer.

Given the nature of the Company’s products, the customer may request that the product be held until a delivery location is identified. Under these “bill and hold” arrangements, sales are recognized when all of the following criteria are met: 1) the reason for the bill-and-hold arrangement is substantive, 2) the product is separately identified as belonging to the customer, 3) the product is ready for transfer to the customer and 4) the Company does not have the ability to use the product or direct it to another customer.

•
Crane Attachment Sales

Crane attachment sales are generated through the sale of new or used crane attachments such as luffing jibs, ecomats and counterweights. Crane attachment sales are recognized when control of the product is transferred to the customer. Control transfers to the customer generally upon delivery to the carrier.

•
Aftermarket Part Sales

Aftermarket part sales are generated through the sale of new and used parts to end customers and distributors. Aftermarket part sales are recognized when control of the product is transferred to the customer. Control transfers to the customer generally upon delivery to the carrier. Customers generally have a right of return which the Company estimates using historical information. The amount of estimated returns is deducted from net sales.

•
Other Sales

The Company’s other sales consist primarily of sales from:

•
Repair and field service work;

•
Remanufacturing; and

•
Rental of cranes.

As it relates to the Company’s other sales, the Company’s performance obligations generally relate to performing specific agreed upon services. Depending on the nature of the contract, sales are recognized based on completion of those services or over the service period based on a measure of progress.

Inventories and Related Reserve for Obsolete and Excess Inventory – Inventories are valued at the lower of cost or net realizable value. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs. Inventories are reduced by a reserve for excess and obsolete inventories. The estimated reserve is based upon specific identification of excess or obsolete inventories based on historical usage, estimated future usage, sales requiring the inventory and historical write-off experience.

Goodwill, Intangible Assets and Other Long-Lived Assets – The Company accounts for goodwill and intangible assets under the guidance of ASC Topic 350-10, “Intangibles – Goodwill and Other.” Under ASC Topic 350-10, goodwill is not amortized; instead, the Company performs an annual impairment test. The Company has two reporting units with goodwill: Americas – Distribution and MEAP. The date for the annual impairment test is October 31, or more frequently if events or changes in

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circumstances indicate that the assets might be impaired. To perform its goodwill impairment test, the Company uses a combination of the income approach and market approach with a weighting of 70/30, respectively, to determine the fair value of the MEAP reporting unit. The Company determined a 70% weighting toward the income approach was appropriate as cash flows for the reporting unit are better aligned to the cyclical nature of the crane business and its unique market dynamics. The Company determined a 30% weighting toward the market approach was appropriate as the valuation is indicative of the fair value of the Company and its reporting unit but there is a lack of comparable peer companies. The Company uses only the income approach to determine the fair value of the Americas – Distribution reporting unit due to the lack of comparable peer companies to determine fair value under the market approach. Impairment is determined based on the amount in which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill at the reporting unit.

The Company has two indefinite-lived intangible assets subject to an annual impairment test: the Potain trademark, tradename and distribution network assets (“Potain Tradename”) and the Grove trademark, tradename and distribution network assets (“Grove Tradename”). To perform its indefinite-lived intangible assets impairment test, the Company uses a fair-value method, based on a relief of royalty valuation approach. Management’s judgments and assumptions about the amounts of those cash flows and the discount rates are inputs to the annual impairment test. Impairment is determined based on the amount in which the carrying value of the indefinite-lived intangible asset exceeds its fair value, not to exceed the carrying amount of the indefinite-lived intangible asset.

As of October 31, 2023, the Company performed its annual goodwill impairment test. Based on the results of the test, the fair value of the Americas – Distribution and MEAP reporting units were substantially in excess of their carrying values as of the date of the annual impairment test and, therefore, were not impaired as of December 31, 2023.

As of October 31, 2023, the Company performed its annual indefinite-lived intangible assets impairment test of the Potain Tradename and Grove Tradename. Based on the results of the test, the fair value of the Grove Tradename and Potain Tradename were substantially in excess of their carrying value as of the date of the annual impairment test and, therefore, were not impaired as of December 31, 2023.

A considerable amount of management judgment and assumptions are required in performing the goodwill and indefinite-lived asset impairment tests as it relates to revenue growth rates, projected margin, the discount rate and relevant market multiples, as applicable. The Americas – Distribution reporting unit’s fair value equaled its purchase price as of December 31, 2021, and has limited history when determining revenue growth rates and projected margin. While the Company believes the judgments and assumptions are reasonable, different assumptions could change the estimated fair value and, therefore, additional impairments could be required. Weakening industry or economic trends, disruptions to the Company's business, unexpected significant changes or planned changes in the use of the assets or in entity structure are all factors which may adversely impact the assumptions used in the valuations.

Intangible assets with definite lives continue to be amortized over their estimated useful lives. Definite-lived intangible assets are also subject to impairment testing whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. If an indicator of impairment is identified, the Company would use the income approach, which is based on the present value of expected future cash flows.

The Company also reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset's carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC Topic 360-10-5, “Property, Plant, and Equipment.” ASC Topic 360-10-5 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and to evaluate the asset group against the sum of the undiscounted future cash flows.

The Company monitors for events and market conditions to determine if any interim impairment tests of goodwill, other intangibles or long-lived assets are warranted. Deterioration in macroeconomic conditions, a decline in actual results as compared with the Company’s projections, or a low equity market capitalization for a prolonged period, are factors which could indicate an interim triggering event has occurred. In the event the Company determines that assets are impaired in the future, the Company would recognize a non-cash impairment charge, which could have a material adverse effect on the Company’s Consolidated Balance Sheet and Results of Operations.

Employee Benefit Plans – The Company provides a range of benefits to its employees and retired employees, including pensions and postretirement health care coverage. Plan assets and obligations are recorded annually based on the Company’s measurement date utilizing various actuarial assumptions such as discount rates, expected return on plan assets, compensation increases, retirement and mortality rates and health care cost trend rates as of that date. The approach the Company used to determine the annual assumptions are as follows:

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Discount Rate – The Company’s discount rate assumptions are based on the interest rate of noncallable high-quality corporate bonds, with appropriate consideration of pension plan participant demographics and benefit payment terms. The Company’s discount rate is provided by an independent third party calculated based on an appropriate mix of high-quality bonds.

•
Expected Return on Plan Assets – The Company’s expected return on plan assets assumptions are based on the Company’s 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, net of estimated fees.

•
Compensation increase – The Company’s compensation increase assumptions reflect its long-term actual experience, the near-term outlook and assumed inflation.

•
Retirement and Mortality Rates – The Company’s retirement and mortality rate assumptions are based primarily on actual plan experience and mortality tables.

•
Health Care Cost Trend Rates – The Company’s health care cost trend rate assumptions are developed based on historical cost data, near-term outlook and an assessment of likely long-term trends.

The following table summarizes the sensitivity of our December 31, 2023 retirement obligations and 2023 retirement benefit costs of the Company's plans to changes in the key assumptions used to determine those results:

It is reasonably possible that the estimate for future retirement and medical costs may change in the near future due to changes in interest rates. Presently, there is no reliable means to estimate the amount of any such potential changes.

Measurements of net periodic benefit cost are based on the assumptions used for the previous year-end measurements of assets and obligations. The Company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions when appropriate. As required by GAAP, the effects of the modifications are recorded currently or amortized over future periods. The Company has developed the assumptions with the assistance of its independent actuaries and other relevant sources, and believes the assumptions used are reasonable; however, changes in these assumptions could impact the Company’s financial position, results of operations or cash flows.

Product Liability – The Company is subject, in the normal course of business, to product liability lawsuits. To the extent permitted under applicable laws, the Company’s exposure to losses from these lawsuits is mitigated by insurance with self-insurance retention limits. The Company’s reserve is based upon two estimates. First, the Company tracks the population of all outstanding product liability cases to determine an appropriate case reserve for each based upon its best judgment and the advice of legal counsel. These estimates are continuously evaluated and adjusted based upon changes to the facts and circumstances surrounding the case. Second, the Company determines 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”). The Company has established a position within the actuarially determined range, which it believes is the best estimate of the IBNR liability.

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Income Taxes – The Company accounts for income taxes under the guidance of ASC Topic 740-10, “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. The Company records a valuation allowance that represents a reserve on deferred tax assets for which utilization is not more likely than not. Management judgment is required in determining its provision for income taxes, deferred tax assets and liabilities, and the valuation allowance recorded against its net deferred tax assets. The Company does not currently provide for additional U.S. and foreign income taxes which would become payable upon repatriation of undistributed earnings of foreign subsidiaries.

The Company measures and records income tax contingency accruals under the guidance of ASC Topic 740-10. The Company recognizes liabilities for uncertain income tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company must determine the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis or when new information becomes available to management. These reevaluations are based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, successfully settled issues under audit, expirations due to statutes, and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or an increase to the tax accrual.

Warranties – In the normal course of business, the Company provides its customers warranties covering workmanship, and in some cases materials, on products manufactured. Such warranties generally provide that products will be free from defects for periods ranging from 12 months to 60 months with certain equipment having longer-term warranties. If a product fails to comply with the Company’s warranties, it may be obligated, at its expense, to correct any defect by repairing or replacing such defective product. The Company provides for an estimate of costs that may be incurred under its warranties 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 the Company’s warranty liabilities include the number of shipped units and historical and anticipated rates or 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.

Item 7. 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 accompanying notes appearing in Part II, Item 8 of this Annual Report on Form 10-K.

Overview: The Manitowoc Company, Inc. (“Manitowoc” or the “Company”) is a leading provider of engineered lifting solutions headquartered in Milwaukee, Wisconsin, United States. Through its wholly-owned subsidiaries, Manitowoc designs, manufacturers, markets, distributes and supports comprehensive product lines of mobile hydraulic cranes, lattice-boom crawler cranes, boom trucks and tower cranes. The Company has three reportable segments, the Americas segment, the Europe and Africa (“EURAF”) segment and the Middle East and Asia Pacific (“MEAP”) segment. The segments were identified using the “management approach,” which designates the internal organization that is used by the CEO, who is also the Company’s Chief Operating Decision Maker (“CODM”), for making decisions about the allocation of resources and assessing performance. Further information regarding the Company’s reportable segments can be found in Note 18, “Segments,” to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

All dollar amounts are in millions throughout the tables included in Management’s Discussion and Analysis of Financial Conditions and Results of Operations unless otherwise indicated.

Current Events

Inflation

The Company was negatively impacted by inflation in wages, logistics, energy, raw material and component costs for the years ended December 31, 2022 and 2021. The Company has implemented price increases and provisional pricing strategies to mitigate the impact of cost inflation on margins and continues to actively monitor costs. There is a delay, however, in the realization of pricing due to long lead times of orders in the backlog, exacerbated by global supply chain and logistics constraints. In response to high inflation, the U.S. Federal Reserve and other central banks around the globe, have increased interest rates throughout 2022 and into the first quarter of 2023. The pace of interest rate increases and rising interest rates have resulted in further macroeconomic uncertainty and could impact our customer's decision to purchase cranes. Further inflationary pressure could increase our input costs and negatively impact our margins if we cannot obtain a corresponding increase in the pricing of our products. Furthermore, persistent inflation may prompt further governmental monetary policy response, such as continued interest rate increases by central banks, that in combination with higher pricing could negatively impact customer demand for our products. Continuing or worsening inflation may have a material adverse impact on the Company's financial condition, results of operations or cash flows.

Supply Chain and Logistics Constraints

The Company continues to actively monitor global supply chain and logistics constraints which had a negative impact on the Company's ability to source parts and complete and ship units for the years ended December 31, 2022 and 2021. While the Company experienced some relief with supply chain and logistics constraints in the fourth-quarter of 2022, the Company anticipates these constraints to persist throughout 2023. Further, global supply chain and logistics constraints have also impacted end market customers, particularly in the European construction industry, which resulted in the postponement of certain construction projects in 2022 and negatively impacted customer demand for our products. The Company continues to actively monitor and manage supply chain constraints through alternative sourcing of parts and adapting production to limit waste and inefficiencies in the facilities. Continuing or worsening supply chain and logistics constraints may have a material adverse impact on the Company's financial condition, results of operations or cash flows. Refer to Item 1. “Business,” section, Raw Material Sources and Availability for more information.

Conflict in Ukraine

Russia’s invasion and the related economic sanctions by Western governments on Russia resulted in volatile raw material and component costs in Europe during 2022, exacerbating the inflation and supply chain situation. Ongoing economic sanctions targeting Russia may cause further disruptions to the Company’s supply chain and impact access to certain materials in its European operations which may have a material adverse impact on the Company’s financial condition, results of operations or cash flows. Further, the conflict has also heightened the threat of cybersecurity attacks. In response, the Company has increased monitoring of such threats and continues to take steps to enhance the security of its systems.

In the second quarter of 2022, the Company began to curtail its operations in Russia due to the ongoing conflict in Ukraine. The Company’s operations in Russia accounted for less than two percent of consolidated net sales in 2021 and were primarily limited to sales and aftermarket support with less than twenty employees. As part of the curtailment, the Company cancelled

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$21.0 million of orders in Russia and stopped taking new orders. For the year ended December 31, 2022, the Company recorded $0.8 million of restructuring expense in the Consolidated Statements of Operations. The Company expects future charges of $5.0 million to $10.0 million related to the non-cash write-off of foreign currency adjustments recorded in accumulated other comprehensive loss in the Consolidated Balance Sheets.

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Segment Operating Performance

Americas

Americas net sales increased 33.7% in 2022 to $1,013.0 million from $757.6 million in 2021. The increase was primarily attributable to higher new machine and non-new machine sales, inclusive of the acquisitions, and pricing actions. The acquisitions contributed to the increase in net sales by $189.8 million. While backlog was higher entering the year, supply chain constraints negatively impacted the Company's ability to produce and ship certain products.

Americas operating loss of $88.8 million in 2022 was primarily attributable to $171.9 million of non-cash goodwill and indefinite-lived intangible asset impairment charges. Refer to Note 10, “Goodwill and Other Intangible Assets,” to the Consolidated Financial Statements for further information. Excluding this item, operating income was $83.1 million, an increase of $25.8 million or 45.0% from 2021. This increase was primarily attributable to higher net sales and favorable product mix, partially offset by higher raw material, component, logistics and employee related costs.

Americas net sales increased 21.0% in 2021 to $757.6 million from $626.1 million in 2020. The increase was primarily attributable to favorable product mix and pricing actions taken during the year. While demand for cranes was higher year-over-year, supply chain constraints impacted the Company's ability to produce and ship certain products. The acquisitions of Aspen Equipment Company (“Aspen”) and the crane business of H&E Equipment Services, Inc. (“H&E”) contributed to the increase of net sales by $26.7 million. However, the acquisitions generated $74.2 million of net sales during the period on a standalone basis.

Americas operating income increased 78.5% in 2021 to $57.3 million from $32.1 million in 2020. The increase was primarily attributable to higher net sales, favorable product mix and the impact of pricing actions taken during the year. This was partially offset by unfavorable impacts from higher material and transportation costs, increased short-term incentive compensation costs and a $1.9 million asset impairment charge to write-down the value of one of the Company's Brazilian entities to its expected sale price.

EURAF

EURAF net sales increased 12.5% in 2022 to $761.5 million from $677.0 million in 2021. The increase was primarily attributable to higher new machine sales and pricing actions. While backlog was higher entering the year, supply chain constraints negatively impacted the Company's ability to produce and ship certain products. EURAF net sales were unfavorably impacted by $88.7 million from changes in foreign currency exchange rates.

EURAF operating loss of $3.2 million decreased $12.1 million in 2022 from operating income of $8.9 million in 2021. The decrease was primarily attributable to higher raw material, component and logistics costs, tradeshow costs related to the triennial bauma tradeshow and unfavorable absorption of overhead and labor costs due to inefficiencies from the supply chain constraints. This was partially offset by higher net sales and price increases. Operating loss was favorably impacted by $1.3 million from changes in foreign currency exchange rates.

EURAF net sales increased 13.1% in 2021 to $677.0 million from $598.7 million in 2020. The increase was primarily due to higher shipments of cranes compared to the year ended December 31, 2020, which was negatively impacted by the COVID-19 pandemic. While demand for cranes was higher year-over-year, supply chain constraints impacted the ability to produce and ship certain products. EURAF net sales were favorably impacted by $20.9 million from changes in foreign currency exchange rates.

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EURAF operating income decreased 25.8% in 2021 to $8.9 million from $12.0 million in 2020. The decrease was primarily due to higher material and transportation costs and engineering, selling and administrative expenses including short-term incentive compensation costs. This was partially offset by higher net sales. Operating income was favorably impacted by $2.4 million from changes in foreign currency exchange rates.

MEAP

MEAP net sales decreased 9.7% in 2022 to $258.0 million from $285.6 million in 2021. The decrease was primarily due to lower new machine sales, partially offset by pricing actions. MEAP net sales were unfavorably impacted by $18.1 million from changes in foreign currency exchange rates.

MEAP operating income increased 30.1% in 2022 to $40.2 million from $30.9 million in 2021. The increase was primarily attributable to lower engineering, selling and administrative expenses as a result of $3.6 million of higher prior year expense due to a write-off of a long-term note receivable from the 2014 divestiture of the Company's Chinese joint venture, $4.8 million of benefit in the current year from the partial recovery of the previously written-off long-term note receivable and realization of pricing in net sales. This was partially offset by lower net sales and higher raw material, component and logistics costs. Operating income was unfavorably impacted by $2.7 million from changes in foreign currency exchange rates.

MEAP net sales increased 30.6% in 2021 to $285.6 million from $218.6 million in 2020. The increase was primarily due to higher crane shipments compared to the year ended December 31, 2020, which was negatively impacted by the COVID-19 pandemic. MEAP net sales were favorably impacted by $10.0 million from changes in foreign currency exchange rates.

MEAP operating income increased 1.6% in 2021 to $30.9 million from $30.4 million in 2020. The increase was primarily due to higher net sales. This was partially offset by higher material and transportation costs, engineering, selling and administrative expenses including short-term incentive compensation costs and a $3.6 million loss from a write-off of a long-term note receivable resulting from the 2014 divestiture of the Company’s Chinese joint venture. MEAP operating income was favorably impacted by $0.3 million from changes in foreign currency exchange rates.

Results of Operations for the Years Ended December 31, 2022, 2021 and 2020:

Orders and Backlog

Backlog represents the dollar value of orders which are expected to be recognized in net sales in the future. Orders are included in backlog when an executed binding contract has been received but has not been recognized in net sales. Orders and backlog are not measures defined by accounting principles generally accepted in the United States of America (“GAAP”) and our methodology for determining orders and backlog may vary from the methodology used by other companies. Management uses orders and backlog for capacity and resource planning purposes. We believe this information is useful to investors to provide an indication of our future revenues.

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Orders for the year ended December 31, 2022 decreased 3.3% to $2,095.5 million from $2,166.6 million for the same period in 2021. The decrease in orders was primarily attributable to softening demand in the EURAF segment and certain regions of the MEAP segment as a result of macroeconomic conditions and geopolitical uncertainty. This was partially offset by an increase in demand in the Americas segment. In addition, the Company cancelled $21.0 million of orders in Russia, which were included in backlog as of December 31, 2021, as a result of Russia's invasion of Ukraine and the Company's curtailment of its operations in Russia. Orders were unfavorably impacted by $92.3 million from changes in foreign currency exchange rates.

The Company’s backlog as of December 31, 2022, 2021, and 2020, was $1,056.0 million, $1,010.9 million and $543.2 million, respectively. The increase in backlog from December 31, 2021, was primarily attributable to an increase in demand in the Americas segment and continued delays in shipments due to supply chain constraints. This was partially offset by lower orders due to softening demand in the EURAF segment. Backlog was unfavorably impacted by $24.5 million from changes in foreign currency exchange rates.

Net Sales

Consolidated net sales for the year ended December 31, 2022 increased 18.2% to $2,032.5 million from $1,720.2 million for the same period in 2021.The increase was primarily attributable to higher new machine sales in the Americas and EURAF segments, pricing actions and higher non-new machine sales in the Americas segment, inclusive of the acquisitions. The acquisitions contributed to the increase in net sales by $189.8 million. While the higher backlog entering the year contributed to the increase in net sales, this was partially offset by supply chain constraints which negatively impacted the Company's ability to produce and ship certain products. Net sales were unfavorably impacted by $106.5 million from changes in foreign currency exchange rates.

Consolidated net sales for the year ended December 31, 2021 increased 19.2% to $1,720.2 million from $1,443.4 million for the same period in 2020. The increase was primarily attributable to higher crane shipments due to increased demand as compared to the year ended December 31, 2020, which was negatively impacted by the COVID-19 pandemic. While demand for cranes was higher year-over-year, supply chain constraints negatively impacted the Company's ability to produce and ship certain products. The acquisitions of Aspen and the crane business of H&E contributed to the increase of net sales by $26.7 million. However, the acquisitions generated $74.2 million of net sales during the period on a standalone basis. Net sales were favorably impacted by $31.0 million from changes in foreign currency exchange rates.

Gross Profit

Gross profit for the year ended December 31, 2022 increased 18.7% to $364.5 million compared to $307.2 million for the year ended December 31, 2021. The increase was primarily attributable to higher net sales and pricing actions. This was partially offset by higher employee related, raw material, component and logistics costs and unfavorable absorption of overhead and labor costs due to inefficiencies from the supply chain constraints. Gross profit was unfavorably impacted by $15.6 million from changes in foreign currency exchange rates.

Gross profit percentage in 2022 and 2021 was 17.9%.

Gross profit for the year ended December 31, 2021 increased by 20.6% to $307.2 million compared to $254.7 million for the year ended December 31, 2020. The increase was primarily due to the increase in net sales, partially offset by increases in material and transportation costs. Gross profit was favorably impacted by $7.1 million from changes in foreign currency exchange rates.

Gross profit percentage in 2021 was 17.9% compared to 17.6% in 2020.

Engineering, Selling and Administrative Expenses

Engineering, selling and administrative expenses for the year ended December 31, 2022 increased $22.5 million to $281.0 million. The increase was primarily attributable to the acquisitions which accounted for incremental costs of $36.9 million and higher stock-based compensation expense, other employee related costs and tradeshow costs related to the triennial bauma tradeshow. This was partially offset by a $13.9 million charge recorded in the prior year related to a legal matter with the U.S. Environmental Protection Agency, $3.6 million of higher prior year expense due to a write-off of a long-term note receivable from the 2014 divestiture of the Company's Chinese joint venture and $4.8 million of benefit in the current year from the partial

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recovery of the previously written-off long-term note receivable. Engineering, selling and administrative expenses were favorably impacted by $14.6 million from changes in foreign currency exchange rates.

Engineering, selling and administrative expenses for the year ended December 31, 2021 increased $49.7 million to $258.5 million. The increase was primarily due to a $13.9 million charge related to a legal matter with the U.S. Environmental Protection Agency, higher employee-related costs, inclusive of short-term incentive compensation costs, a $3.6 million loss from a write-off of a long-term note receivable resulting from the 2014 divestiture of the Company’s Chinese joint venture and acquisition related costs. This was partially offset by lower tradeshow costs from the triennial ConExpo trade show in March 2020. Engineering, selling and administrative expenses were unfavorably impacted by $4.4 million from changes in foreign currency exchange rates.

Asset Impairment Expense

During the year ended December 31, 2022, the Company recorded non-cash charges in the Americas segment of $171.9 million consisting of a $166.5 million goodwill impairment charge and a $5.4 million indefinite-lived intangible asset impairment charge. Refer to Note 10, “Goodwill and Other Intangible Assets,” to the Consolidated Financial Statements for further information.

During the year ended December 31, 2021, the Company recorded an asset impairment charge of $1.9 million to write-down the value of one of the Company's Brazilian entities to its expected sale price.

Restructuring (Income) Expense

Restructuring expense for the year ended December 31, 2022 was immaterial to the financial statements.

Restructuring income for the year ended December 31, 2021 primarily related to adjustments of previously recorded costs associated with a lease write-off in the Americas and headcount reduction in Europe. In addition, the Company recorded income on the sale of previously expensed Brazilian tax credits.

Restructuring expense for the year ended December 31, 2020 primarily related to costs associated with headcount reductions in Europe and North America, partially offset by $2.5 million of income primarily related to the forfeiture of equity compensation awards associated with employee separation agreements.

Interest Expense

Interest expense for the year ended December 31, 2022 was $31.6 million compared to $28.9 million for the year ended December 31, 2021. The increase in interest expense is due to higher average outstanding balances of debt with higher variable interest rates. Refer to Note 12, “Debt,” to the Consolidated Financial Statements.

Interest expense remained flat for the year ended December 31, 2021 at $28.9 million compared to $29.1 million for the year ended December 31, 2020.

Other Income (Expense) – Net

Other income (expense) – net for the year ended December 31, 2022 was $5.8 million of income and was primarily composed of $5.5 million of net foreign currency gains and a $0.9 million gain on disposal of property, plant and equipment, partially offset by a $0.5 million charge related to non-capitalizable one-time legal and debt related costs.

Other income (expense) - net for the year ended December 31, 2021 was $1.0 million of income and was primarily composed of $1.1 million of net foreign currency gains.

Other income (expense) - net for the year ended December 31, 2020 was $10.0 million of expense was primarily composed of $3.9 million of net foreign currency losses, $3.7 million charge related to the settlement of a legal matter and $1.6 million of pension benefit costs.

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Provision for Income Taxes

During the year ended December 31, 2022, 2021 and 2020 the Company recorded a provision for income taxes of $3.4 million, $6.1 million and $17.1 million respectively.

Due to the Company’s historic losses, impacts from United States tax reform and full valuation allowances in certain jurisdictions, the effective annual tax rate is not a meaningful measure of the Company’s cash tax position or performance of the business.

The 2022 effective tax rate was favorably impacted by the net release of unrecognized tax positions of $11.5 million. The rate was unfavorably impacted primarily by the goodwill impairment charge for which there was no related tax asset, additional valuation allowances recorded during the year and the jurisdictional mix of the financial results.

The 2021 effective tax rate was favorably impacted primarily by the release of unrecognized tax positions of $2.8 million and a $2.7 million partial release of a Chinese valuation allowance. The rate was unfavorably impacted by the jurisdictional mix of the financial results which included recognition of additional valuation allowances in certain jurisdictions.

The 2020 effective tax rate was favorably impacted primarily by the passing of The Coronavirus Aid, Relief and Economic Security Act by $3.7 million that allowed the Company to implement certain United States tax planning strategies. The rate was unfavorably impacted primarily by additional valuation allowances recorded during the year and the jurisdictional mix of the financial results.

Refer to Note 14, “Income Taxes,” to the Consolidated Financial Statements.

Financial Condition

Cash Flows

The table below shows a summary of cash flows for the years ended December 31, 2022, 2021 and 2020:

Cash Flows from Operating Activities

Net cash provided by operating activities of $76.9 million in 2022 increased $0.7 million from net cash provided by operating activities of $76.2 million in 2021. The increase in net cash provided by operating activities was due to higher net income adjusted for non-cash items including higher depreciation and amortization due to the acquisitions, non-cash goodwill and indefinite-lived intangible asset impairment charges of $171.9 million and higher stock-based compensation expense. The higher non-cash items were partially offset by unfavorable changes in working capital due to higher inventory from supply chain constraints and inflation and accounts receivable driven by the timing of shipments in the fourth quarter.

Net cash provided by operating activities of $76.2 million in 2021 increased $111.3 million from net cash used for operating activities of $35.1 million in 2020. The increase in net cash provided by operating activities was due to higher net income adjusted for non-cash items such as higher depreciation due to the acquisitions as well as favorable changes in working capital primarily due to lower accounts receivable and higher accrued expenses and other liabilities year-over-year.

Cash Flows from Investing Activities

Net cash used for investing activities of $58.0 million in 2022 decreased $168.3 million from net cash used for investing activities of $226.3 million in 2021. The decrease in net cash used for investing activities was primarily due to $186.2 million of cash paid for the acquisitions in 2021 and a $2.3 million cash receipt related to the finalization of the purchase price for the acquisition of the crane business of H&E in 2022. This was partially offset by higher capital expenditures of $21.4 million which included $16.5 million of incremental capital expenditures for the rental fleet year-over-year.

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Net cash used for investing activities of $226.3 million in 2021 increased $200.5 million from net cash used for investing activities of $25.8 million in 2020. The increase in net cash used for investing activities was primarily due to $186.2 million of cash paid for the acquisitions in 2021 and higher capital expenditures which included $14.1 million of incremental capital expenditures for the rental fleet year-over-year.

Cash Flows from Financing Activities

Net cash used for financing activities of $29.9 million in 2022 compares to net cash provided by financing activities of $100.9 million in 2021. The change in net cash from financing activities was primarily due to $20.0 million in repayments of borrowings from the Company's ABL Revolving Credit Facility in 2022, as compared to $100.0 million of proceeds on the ABL revolving Credit Facility in 2021. Additionally, there was $1.9 million of payments for debt issuance and other debt related costs, $3.0 million of common stock repurchases and $5.7 million of lower proceeds from the exercises of stock options compared to the prior year.

Net cash provided by financing activities of $100.9 million in 2021 compares to net cash used for financing activities of $14.8 million in 2020. The change in net cash from financing activities was primarily due to $100.0 million of borrowings from the ABL Revolving Credit Facility to fund the acquisitions and higher proceeds from exercise of stock options. This was partially offset by no repurchases of common stock in 2021, compared to $12.0 million of repurchases in 2020.

Liquidity and Capital Resources

Liquidity

The Company’s liquidity position as of December 31, 2022 and 2021 is summarized as follows:

The Company’s revolving credit facility, or other future facilities, may be used for working capital requirements, capital expenditures, funding future acquisitions (within the Company’s debt limitations), and other operating, investing and financing needs. The Company believes its liquidity and expected cash flows from operations are sufficient to meet expected working capital, capital expenditures, contractual obligations and other ongoing operational needs in the subsequent twelve months.

Cash Sources

The Company has historically relied primarily on cash flows from operations, borrowings under revolving credit facilities, issuances of notes and other forms of debt financing as its sources of cash.

The maximum availability under the Company’s current ABL Revolving Credit Facility is $275.0 million. The borrowing capacity under the ABL Revolving Credit Facility is based on the value of inventory, accounts receivable and certain fixed assets of the Loan Parties. The Loan Parties’ obligations under the ABL Revolving Credit Facility are secured on a first-priority basis, subject to certain exceptions and permitted liens, by substantially all of the personal property and fee-owned real property of the Loan Parties. The liens securing the ABL Revolving Credit Facility are senior in priority to the second-priority liens securing the obligations under the 2026 Notes and the related guarantees. The ABL Revolving Credit Facility has a maturity date of May 19, 2027 (with a springing maturity date of December 30, 2025 if the 2026 Notes have not been repaid in full or refinanced prior to December 30, 2025), and includes a $75.0 million letter of credit sub-facility, $10.0 million of which is available to the Company’s German subsidiary that is a borrower under the ABL Revolving Credit Facility.

In addition to the ABL Revolving Credit Facility, the Company has access to non-committed overdraft facilities to fund working capital in Europe and China. There are six facilities, of which four are denominated in Euros totaling €28.0 million, one facility denominated in U.S. dollars totaling $9.5 million and one denominated in Chinese Yuan totaling ¥30.0 million. Total U.S. dollar availability as of December 31, 2022 for the six overdraft facilities is $43.8 million, with $4.3 million outstanding.

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Debt

On March 25, 2019, the Company and certain subsidiaries of the Company (the “Loan Parties”) entered into a credit agreement (the “ABL Credit Agreement”) with JP Morgan Chase Bank, N.A as administrative and collateral agent, and certain financial institutions party thereto as lenders, providing for a senior secured asset-based revolving credit facility (the “ABL Revolving Credit Facility”) of up to $275.0 million. The borrowing capacity under the ABL Revolving Credit Facility is based on the value of inventory, accounts receivable and certain fixed assets of the Loan Parties. The Loan Parties’ obligations under the ABL Revolving Credit Facility are secured on a first-priority basis, subject to certain exceptions and permitted liens, by substantially all of the personal property and fee-owned real property of the Loan Parties. The liens securing the ABL Revolving Credit Facility are senior in priority to the second-priority liens securing the obligations under the 2026 Notes and the related guarantees. The ABL Revolving Credit Facility includes a $75.0 million letter of credit sub-facility, $10.0 million of which is available to the Company’s German subsidiary that is a borrower under the ABL Revolving Credit Facility.

On June 17, 2021, the Company amended the ABL Credit Agreement to adjust certain negative covenants which reduces restrictions on the Company's ability to expand its rental business. On May 19, 2022, the Company further amended the ABL Credit Agreement to (i) extend the maturity date to May 19, 2027 (subject to a springing maturity date of December 30, 2025 if the 2026 Notes have not been repaid in full or refinanced prior to December 30, 2025), (ii) permit the inclusion, subject to certain limitations, of the crane rental assets of certain subsidiaries in the borrowing base used to calculate availability under the ABL Credit Agreement, (iii) permit separate financing of crane rental assets not included in the borrowing base and (iv) replace U.S. dollar London Inter-bank Offered Rate with interest rates based on the secured overnight financing rate plus a credit spread adjustment (“SOFR”). Refer to Note 12, “Debt,” to the Consolidated Financial Statements for further information regarding the ABL Credit Agreement.

As of December 31, 2022, the Company had $80.0 million of borrowings outstanding under the ABL Revolving Credit Facility and $100.0 million of borrowings outstanding as of December 31, 2021. During the year ended December 31, 2022, the highest daily borrowing under the ABL Revolving Credit Facility was $112.5 million and the average borrowing was $90.9 million, while the weighted-average annual interest rate was 3.1%. During the year ended December 31, 2021, the highest daily borrowing under the ABL Revolving Credit Facility was $100.0 million and the average borrowing was $26.0 million, while the weighted-average annual interest rate was 1.4%. The interest rate of the ABL Revolving Credit Facility fluctuates based on excess availability. During the year ended December 31, 2022, the spreads for SOFR and Eurodollar, and Alternative Base Rate borrowings were 1.25% and 0.25%, respectively. Excess availability as of December 31, 2022 was $192.0 million, which represents revolver borrowing capacity of $275.0 million less $80.0 million in borrowings outstanding and U.S. letters of credit outstanding of $3.0 million.

On March 25, 2019, the Company and certain of its subsidiaries entered into an indenture with U.S. Bank National Association as trustee and notes collateral agent, pursuant to which the Company issued $300.0 million aggregate principal amount of the 2026 Notes with an annual coupon rate of 9.000%. Interest on the 2026 Notes is payable in cash semi-annually in arrears on April 1 and October 1 of each year. The 2026 Notes are fully and unconditionally guaranteed on a senior secured second lien basis, jointly and severally, by each of the Company’s existing and future domestic subsidiaries that is either a guarantor or a borrower under the ABL Revolving Credit Facility or that guarantees certain other debt of the Company or a guarantor. The 2026 Notes and the related guarantees are secured on a second-priority basis, subject to certain exceptions and permitted liens, by pledges of capital stock and other equity interests and other security interests in substantially all of the personal property and fee-owned real property of the Company and of the guarantors that secure obligations under the ABL Revolving Credit Facility.

As of December 31, 2022, the Company was in compliance with all affirmative and negative covenants in its debt instruments, inclusive of the financial covenants pertaining to the ABL Revolving Credit Facility and 2026 Notes. Based upon management’s current plans and outlook, the Company believes it will be able to comply with these covenants during the subsequent twelve months. From time to time, the Company seeks to opportunistically raise capital in the debt capital markets and bank credit markets.

Other Financing Arrangements

The Company has two non-U.S. accounts receivable financing programs with no maximum availability and one U.S. accounts receivable financing program with maximum availability of $36.0 million. Transactions under the U.S. and non-U.S. programs were accounted for as sales in accordance with Accounting Standards Codification (“ASC”) 860, “Transfers and Servicing.” Under these financing programs, the Company has the ability to sell eligible receivables up to the maximum limit. Refer to Note 13, “Accounts Receivable Factoring,” to the Consolidated Financial Statements.

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Off-Balance Sheet Arrangements

The Company's disclosures concerning transactions, arrangements and other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity or the availability of or requirements for capital resources are as follows:

•
As of December 31, 2022, the Company had buyback commitments with a balance outstanding of $42.5 million. This amount is not reduced for amounts the Company would recover from the repossession and subsequent resale of collateral. Refer to Note 20, “Guarantees,” to the Consolidated Financial Statements for further information.

Contractual Obligations and Commercial Commitments

The Company's material cash requirements, contractual obligations and commercial commitments include the following:

Debt

As of December 31, 2022, the Company had outstanding debt of $385.6 million with $6.1 million payable within one year. The Company is committed to pay 9.000% of annual interest on the $300.0 million 2026 Notes that mature on April 1, 2026. Additionally, the Company's debt outstanding under the ABL Revolving Credit Facility is subject to variable interest based on prevailing rates. For the year ended December 31, 2022, the Company incurred $2.8 million of interest on borrowings from the ABL Revolving Credit Facility. Refer to Note 12, “Debt,” to the Consolidated Financial Statements for further information.

Purchase Obligations

As of December 31, 2022, the Company has purchase obligations of $1,017.9 million with $667.6 million due within one year. Purchase obligations consist primarily of open purchase orders for raw materials and various components used in the manufacturing process and purchase obligations from agreements with various suppliers that include a right of cancellation.

Leases

As of December 31, 2022, the Company had contractual fixed costs related to operating lease commitments of $64.6 million with $13.5 million due within one year. Refer to Note 23, “Leases,” to the Consolidated Financial Statements for further information.

Capital Expenditures

The Company funds capital expenditures that are intended to improve the cost structure of the Company’s business; invest in new processes, products and technology; maintain high-quality production standards; and maintain and expand the Company's rental fleet.

The Company paid a total of $61.8 million during 2022 for capital expenditures. For the year ended December 31, 2022, depreciation was $60.6 million. The Company anticipates that capital expenditures for 2023 will be approximately $65.0 million to $75.0 million, of which approximately $25.0 million will be funded from sales of the Company's existing rental fleet through rent to own programs and sales of older cranes. If the value of rental fleet sales is less than expected, capital expenditures will be reduced accordingly.

Other Cash Requirements

The Company has unrecognized tax benefits totaling $9.1 million as of December 31, 2022, excluding related interest and penalties. During the next twelve months, the unrecognized tax benefits are not expected to significantly increase or decrease due to audit settlements or lapsing statuses of limitations. Refer to Note 14, “Income Taxes,” to the Consolidated Financial Statements for disclosures surrounding uncertain income tax positions under ASC Topic 740 “Income Taxes.”

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The Company maintains defined benefit pension plans for some of the Company’s employees and retirees. The Board of Directors has established the Retirement Plan Committee to manage the operations and administration of all benefit plans and related trusts. Refer to Note 22, “Employee Benefit Plans,” to the Consolidated Financial Statements.

In 2022, cash contributions by the Company to defined benefit pension plans were $3.9 million, and the Company estimates that its contributions in 2023 will be approximately $3.7 million. Cash contributions to the Company’s 401(k) plan were $7.2 million in 2022. Cash contributions to the 401(k) plan earned in 2022 and committed to be paid in 2023 is $6.6 million.

Non-GAAP Measures

The Company uses EBITDA, adjusted EBITDA, adjusted operating income and free cash flows, which are financial measures that are not prepared in accordance with GAAP, as additional metrics to evaluate the Company’s performance. The Company believes these non-GAAP measures provide important supplemental information to readers regarding business trends that can be used in evaluating its results of operations because these financial measures provide a consistent method of comparing financial performance and are commonly used by investors to assess performance. These non-GAAP financial measures should be considered together with, and are not substitutes for, the GAAP financial information provided herein.

EBITDA, Adjusted EBITDA and Adjusted Operating Income

The Company defines EBITDA as net income (loss) before interest, taxes, depreciation and amortization. The Company defines adjusted EBITDA as EBITDA plus the addback or subtraction of restructuring, other income (expense) and certain other charges. The Company defines adjusted operating income as operating income (loss) plus the addback or subtraction of restructuring and certain other charges.

The reconciliation of net income (loss) to EBITDA, and further to adjusted EBITDA and to adjusted operating income and operating income (loss):

(1)
Asset impairment expense in 2022 represents non-cash goodwill and indefinite-lived intangible asset impairment charges. Asset impairment expense in 2021 represents a write-down of one of the Company’s Brazilian entities to its expected sale price.

(2)
Other non-recurring charges for the year ended December 31, 2022 relate to the fair value step up on rental fleet assets sold during the period that was expensed within cost of sales, one-time costs associated with the acquired businesses, income from the partial recovery of the previously written off long-term note receivable from the 2014 divestiture of the Company's Chinese joint venture and other one-time charges. Other non-recurring charges for the year ended December 31, 2021 relate to acquisition costs, certain purchase accounting impacts from the acquisitions, a write off of a long-term note receivable from the 2014 divestiture of the Company's Chinese joint

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venture, and costs associated with the U.S. Environmental Protection Agency. Costs are included in engineering, selling and administrative expenses or cost of sales in the Consolidated Statement of Operations.

(3)
Other income - net includes net foreign currency (gains) losses, other components of net periodic pension costs, costs associated with legal matters and other items in the years ended December 31, 2022 and 2021.

Free Cash Flows

Free cash flows is defined as net cash provided by (used for) operating activities less capital expenditures. The reconciliation of net cash provided by (used for) operating activities to free cash flows for the year ended December 31, 2022, 2021 and 2020 are summarized as follows:

Financial Risk Management

The Company is exposed to market risks from changes in interest rates, commodities and foreign currency exchange rates. To reduce these risks, the Company selectively makes use of derivative financial instruments and other proactive management techniques. The Company has written policies and procedures that place financial instruments under the direction of corporate finance 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, refer to Note 2, “Summary of Significant Accounting Policies,” Note 5, “Fair Value of Financial Instruments,” and Note 12, “Debt,” to the Consolidated Financial Statements.

Interest Rate Risk

As previously discussed, the Company's long-term debt primarily consists of $300.0 million on the 2026 Notes and borrowings under its ABL Revolving Credit Facility. Borrowings under the ABL Revolving Credit Facility bear interest at a variable rate using either the Alternative Base Rate or SOFR plus a spread. The variable interest rate is based upon the average availability as of the most recent determination date. As of December 31, 2022, the Company had borrowings on the ABL Revolving Credit Facility of $80.0 million. At any time, the Company could be party to various interest rate swaps in connection with its fixed or floating rate debt. No interest rate swaps were entered into or outstanding during 2022 or 2021. A hypothetical 100 basis point increase/decrease in the average interest rate of the Company's annual average borrowings under its ABL Revolving Credit Facility would have resulted in approximately a $1.0 million increase/decrease to interest expense for the year ended December 31, 2022.

Commodity Prices

The Company is exposed to fluctuating market prices for commodities, including steel, copper, aluminum and petroleum-based products. From time to time the Company may use commodity financial instruments to hedge commodity prices. No commodity financial instruments were entered into or outstanding during 2022 and 2021. For more information on commodities risk, see Part I, Item 1A. – “Risk Factors.”

Currency Risk

The Company has manufacturing, sales and distribution facilities around the world, and therefore, makes investments and enters into transactions denominated in various currencies, which introduces transactional currency exchange risk.

To mitigate transactional currency exchange risk, the Company, from time-to-time, enters into foreign exchange contracts to 1) reduce the earnings and cash flows impact on non-functional currency denominated receivables and payables and 2) reduce the impact of changes in foreign currency rates between a budgeted rate and the rate realized at the time it recognizes a particular purchase or sale transaction. Gains and losses resulting from hedging instruments either impact the Company’s Consolidated Statements of Operations in the period of the underlying purchase or sale transaction, or offset the foreign exchange gains and losses on the underlying receivables and payables being hedged. The maturities of these foreign exchange contracts coincide with the expected underlying settlement date of the related cash inflow or outflow. The hedges of anticipated transactions are

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designated as cash flow hedges as required under ASC Topic 815 “Derivatives and Hedging.” As of December 31, 2022, the Company was party to foreign currency forward contracts with a notional value of $87.7 million all of which are carried on the Company’s balance sheet at fair value. As of December 31, 2022, a hypothetical 10% increase or decrease in the exchange rate in the Company’s portfolio of foreign currency contracts would result in a $13.7 million unrealized gain and a $4.1 million unrealized loss, respectively. Consistent with the use of these contracts to neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the remeasurement of the underlying transactions being hedged.

Amounts invested in non-U.S. based subsidiaries are translated into U.S. dollars at the exchange rate in effect at year-end. Results of operations are translated into U.S. dollars at an average exchange rate for the period. The resulting translation adjustments are recorded in stockholders’ equity as other comprehensive income (loss). The cumulative translation adjustment recorded in accumulated other comprehensive loss as of December 31, 2022 was a loss of $27.9 million.

Environmental, Health, Safety, Contingencies and Other Matters

Refer to Part II, Item 8, Note 19, “Commitments and Contingencies,” where the Company has disclosed environmental, health, safety, contingencies and other matters.

Critical Accounting Policies and Estimates

The Consolidated Financial Statements include the accounts of the Company and all its subsidiaries. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements and related footnotes. In preparing these Consolidated Financial Statements, the Company has made its best estimates and judgments of certain amounts included in the Consolidated Financial Statements giving due consideration to materiality. 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 the Company has listed a number of accounting policies below which the Company believes to be most critical, the Company also believes that all of the Company’s accounting policies are important to the reader. Refer to Part II, Item 8, Note 2, “Summary of Significant Accounting Policies,” for a detailed description of these and other accounting policies of the Company.

Revenue Recognition – The Company records revenue in accordance with ASC Topic 606 – “Revenue from Contracts with Customers.” Below are the Company's revenue recognition policies by performance obligation.

•
Crane Sales

Crane sales are primarily generated through the sale of new and used cranes. Contracts with customers are generally in the form of a purchase order. Based on the nature of the Company’s contracts, the Company does not have any significant financing terms. Contracts may have variable consideration in the form of early pay discounts or rebates. Revenue is earned under these contracts when control of the product is transferred to the customer. Control transfers to the customer generally upon delivery to the carrier or acceptance through an independent inspection company that acts as an agent of the customer.

From time to time, the Company enters into agreements where the customer has the right to exercise a put option requiring the Company to buyback a crane at an agreed upon price. The Company evaluates each agreement at the inception of the order to determine if the customer has a significant economic incentive to exercise that right. If it is determined that the customer has a significant economic incentive to exercise that right, the agreement is accounted for as a lease in accordance with ASC Topic 842 – “Leases.” If it is determined that the customer does not have a significant economic incentive to exercise that right, then revenue is recognized when control of the asset is transferred to the customer.

Given the nature of the Company’s products, the customer may request that the product be held until a delivery location is identified. Under these “bill and hold” arrangements, sales are recognized when all of the following criteria are met: 1) the reason for the bill-and-hold arrangement is substantive, 2) the product is separately identified as belonging to the customer, 3) the product is ready for transfer to the customer and 4) the Company does not have the ability to use the product or direct it to another customer.

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•
Aftermarket Part Sales

Aftermarket part sales are generated through the sale of new and used parts to end customers and distributors. Aftermarket part sales are recognized when control of the product is transferred to the customer. Control transfers to the customer generally upon delivery to the carrier. Customers generally have a right of return which the Company estimates using historical information. The amount of estimated returns is deducted from net sales.

•
Other Sales

The Company’s other sales consist primarily of sales from:

•
Repair and field service work;

•
Rental of cranes; and

•
Training and technical publications.

As it relates to the Company’s other sales, the Company’s performance obligations generally relate to performing specific agreed upon services. Sales are earned upon the completion of those services.

Inventories and Related Reserve for Obsolete and Excess Inventory – Inventories are valued at the lower of cost or net realizable value. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs. Inventories are reduced by a reserve for excess and obsolete inventories. The estimated reserve is based upon specific identification of excess or obsolete inventories based on historical usage, estimated future usage, sales requiring the inventory and historical write-off experience and are subject to change if experience improves or deteriorates.

Goodwill, Other Intangible Assets and Other Long-Lived Assets – The Company accounts for goodwill and other intangible assets under the guidance of ASC Topic 350-10, “Intangibles – Goodwill and Other.” Under ASC Topic 350-10, goodwill is not amortized; instead, the Company performs an annual impairment test. The Company has three reporting units with goodwill: Americas – Manufacturing, Americas – Distribution and MEAP. The date for the annual impairment test is October 31, 2022, or more frequently if events or changes in circumstances indicate that the assets might be impaired. To perform its goodwill impairment test, the Company uses a combination of the income approach and market approach with a weighting of 70/30, respectively, to determine the fair value of the Americas – Manufacturing and MEAP reporting units. The Company determined a 70% weighting toward the income approach was appropriate as cash flows for each reporting unit are better aligned to the cyclical nature of the crane business and its unique market dynamics. The Company determined a 30% weighting toward the market approach was appropriate as the valuation is indicative of the fair value of the Company and its reporting units but there is a lack of comparable peer companies. The Company uses only the income approach to determine the fair value of the Americas – Distribution reporting unit due to the lack of comparable peer companies to determine fair value under the market approach. Impairment is determined based on the amount in which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill at the reporting unit.

The Company has two indefinite-lived intangible assets subject to an annual impairment test: the Potain trademark, tradename and distribution network assets (“Potain Tradename”) and the Grove trademark, tradename and distribution network assets (“Grove Tradename”). To perform its indefinite-lived intangible assets impairment test, the Company uses a fair-value method, based on a relief of royalty valuation approach. Management’s judgments and assumptions about the amounts of those cash flows and the discount rates are inputs to the annual impairment test. Impairment is determined based on the amount in which the carrying value of the indefinite-lived intangible asset exceeds its fair value, not to exceed the carrying amount of the indefinite-lived intangible asset.

As of October 31, 2022, the Company performed its annual goodwill impairment test. Based on the results of the test, the carrying value of the Americas – Manufacturing reporting unit exceeded its fair value. As a result, the Company recorded a $166.5 million non-cash impairment charge to write down the carrying value of goodwill to zero. The goodwill impairment charge resulted from a reduction in the estimated fair value of the reporting unit based on a prolonged low Company equity market capitalization that continued into the fourth quarter of 2022 and a higher discount rate. The fair value of the Americas – Distribution and MEAP reporting units were substantially in excess of their carrying values as of the date of the annual impairment test and, therefore, were not at risk of impairment as of December 31, 2022.

As of October 31, 2022, the Company performed its annual indefinite-lived intangible assets impairment test of the Potain Tradename and Grove Tradename. Based on the results of the test, the carrying value of the Grove Tradename exceeded its fair value. As a result, the Company recorded a $5.4 million non-cash impairment charge to write down the carrying value to its fair value of $39.0 million. The Grove Tradename impairment charge was a result of downward pressure from the use of similar

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assumptions to those used in the annual goodwill impairment test which included revenue growth and discount rate. The fair value of the Potain Tradename was substantially in excess of its carrying value as of the date of the annual impairment test and, therefore, was not at risk of impairment as of December 31, 2022.

A considerable amount of management judgment and assumptions are required in performing the goodwill and indefinite-lived asset impairment tests as it relates to revenue growth rates, projected operating income, the discount rate and relevant market multiples, as applicable. While the Company believes the judgments and assumptions are reasonable, different assumptions could change the estimated fair value and, therefore, additional impairments could be required. Weakening industry or economic trends, disruptions to the Company's business, unexpected significant changes or planned changes in the use of the assets or in entity structure are all factors which may adversely impact the assumptions used in the valuations.

Other intangible assets with definite lives continue to be amortized over their estimated useful lives. Definite-lived intangible assets are also subject to impairment testing whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. If an indicator of impairment is identified, the Company would use the income approach, which is based on the present value of expected future cash flows.

The Company also reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset's carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC Topic 360-10-5, “Property, Plant, and Equipment.” ASC Topic 360-10-5 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and to evaluate the asset group against the sum of the undiscounted future cash flows.

The Company monitors for events and market conditions to determine if any interim impairment tests of goodwill, other intangibles or long-lived assets are warranted. Deterioration in macroeconomic conditions, a decline in actual results as compared with the Company’s projections, or a low equity market capitalization for a prolonged period, are factors which could indicate an interim triggering event has occurred. In the event the Company determines that assets are impaired in the future, the Company would recognize a non-cash impairment charge, which could have a material adverse effect on the Company’s Consolidated Balance Sheet and Results of Operations.

Employee Benefit Plans – The Company provides a range of benefits to its employees and retired employees, including pensions and postretirement health care coverage. Plan assets and obligations are recorded annually based on the Company’s measurement date utilizing various actuarial assumptions such as discount rates, expected return on plan assets, compensation increases, retirement and mortality rates and health care cost trend rates as of that date. The approach the Company used to determine the annual assumptions are as follows:

•
Discount Rate – The Company’s discount rate assumptions are based on the interest rate of noncallable high-quality corporate bonds, with appropriate consideration of pension plan participant demographics and benefit payment terms. The Company’s discount rate is provided by an independent third party calculated based on an appropriate mix of high-quality bonds.

•
Expected Return on Plan Assets – The Company’s expected return on plan assets assumptions are based on the Company’s 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, net of estimated fees.

•
Compensation increase – The Company’s compensation increase assumptions reflect its long-term actual experience, the near-term outlook and assumed inflation.

•
Retirement and Mortality Rates – The Company’s retirement and mortality rate assumptions are based primarily on actual plan experience and mortality tables.

•
Health Care Cost Trend Rates – The Company’s health care cost trend rate assumptions are developed based on historical cost data, near-term outlook and an assessment of likely long-term trends.

Measurements of net periodic benefit cost are based on the assumptions used for the previous year-end measurements of assets and obligations. The Company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions when appropriate. As required by GAAP, the effects of the modifications are recorded currently or amortized over future periods. The Company has developed the assumptions with the assistance of its independent actuaries and other relevant sources, and believes the assumptions used are reasonable; however, changes in these assumptions could impact the Company’s financial position, results of operations or cash flows. Refer to Note 22, “Employee Benefit Plans,” to the Consolidated

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Financial Statements, for a summary of the impact of a 0.50% change in the discount rate and rate of return on plan assets would have on the Company’s financial statements.

Product Liability – The Company is subject, in the normal course of business, to product liability lawsuits. To the extent permitted under applicable laws, the Company’s exposure to losses from these lawsuits is mitigated by insurance with self-insurance retention limits. The Company’s reserve is based upon two estimates. First, the Company tracks the population of all outstanding product liability cases to determine an appropriate case reserve for each based upon its best judgment and the advice of legal counsel. These estimates are continuously evaluated and adjusted based upon changes to the facts and circumstances surrounding the case. Second, the Company determines 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”). The Company has established a position within the actuarially determined range, which it believes is the best estimate of the IBNR liability.

Income Taxes – The Company accounts for income taxes under the guidance of ASC Topic 740-10, “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. The Company records a valuation allowance that represents a reserve on deferred tax assets for which utilization is not more likely than not. Management judgment is required in determining its provision for income taxes, deferred tax assets and liabilities, and the valuation allowance recorded against its net deferred tax assets. The Company does not currently provide for additional U.S. and foreign income taxes which would become payable upon repatriation of undistributed earnings of foreign subsidiaries.

The Company measures and records income tax contingency accruals under the guidance of ASC Topic 740-10. The Company recognizes liabilities for uncertain income tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company must determine the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis or when new information becomes available to management. These reevaluations are based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, successfully settled issues under audit, expirations due to statutes, and new audit activity. Such a change in recognition or measurement could result in the recognition of a tax benefit or an increase to the tax accrual.

Warranties – In the normal course of business, the Company provides its customers warranties covering workmanship, and in some cases materials, on products manufactured. Such warranties generally provide that products will be free from defects for periods ranging from 12 months to 60 months with certain equipment having longer-term warranties. If a product fails to comply with the Company’s warranties, it may be obligated, at its expense, to correct any defect by repairing or replacing such defective product. The Company provides for an estimate of costs that may be incurred under its warranties 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 the Company’s warranty liabilities include the number of shipped units and historical and anticipated rates or 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.

Item 7. 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 appearing in Part II, Item 8 of this Annual Report on Form 10-K.

Overview: Manitowoc is a leading provider of engineered lifting solutions, including lattice-boom cranes, tower cranes, mobile hydraulic cranes and boom trucks. The Company has three reportable segments, the Americas segment, EURAF segment and MEAP segment. The segments were identified using the “management approach,” which designates the internal organization that is used by the CEO, who is also the Company’s Chief Operating Decision Maker (“CODM”), for making decisions about the allocation of resources and assessing performance. Further information regarding the Company’s reportable segments can be found in Note 18, “Segments,” to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

In Management’s Discussion and Analysis, unless otherwise indicated, references to “Manitowoc” and the “Company” refer to The Manitowoc Company, Inc. and its consolidated subsidiaries.

All dollar amounts are in millions throughout the tables included in Management’s Discussion and Analysis of Financial Conditions and Results of Operations unless otherwise indicated.

Segment Operating Performance

Americas

Americas net sales increased 21.0% in 2021 to $757.6 million from $626.1 million in 2020. The increase was primarily due to favorable product mix and pricing actions taken during the year. While demand for cranes was higher year over year, supply chain constraints impacted the Company's ability to produce and ship certain products. The acquisitions of Aspen Equipment Company ("Aspen") and the crane business of H&E Equipment Services, Inc. ("H&E") contributed to the increase of net sales by $26.7 million. However, the acquisitions generated $74.2 million of net sales during the period on a standalone basis.

Americas operating income increased 78.5% in 2021 to $57.3 million from $32.1 million in 2020. The increase was primarily due to higher net sales, favorable product mix and the impact of pricing actions taken during the year. This was partially offset by unfavorable impacts from higher material and transportation costs, increased short-term incentive compensation costs and a $1.9 million asset impairment charge to write-down the value of one of the Company's Brazil entities to its expected sale price.

Americas net sales decreased 35.4% in 2020 to $626.1 million from $969.7 million in 2019. The decrease was primarily related to lower crane shipments as a result of entering the year with lower backlog coupled with the impacts from the COVID-19 pandemic, which significantly reduced demand in most of the Company’s end markets.

Americas operating income decreased 71.7% in 2020 to $32.1 million from $113.4 million in 2019. This change was mainly due to the decrease in net sales and under absorption of facility costs. This was partially offset by decreases of $4.3 million in engineering, selling and administrative expenses and $1.8 million in restructuring expense. Lower engineering, selling and administrative expenses were driven by lower discretionary spend in response to the COVID-19 pandemic.

EURAF

EURAF net sales increased 13.1% in 2021 to $677.0 million from $598.7 million in 2020. The increase was primarily due to higher shipments of cranes compared to the year ended December 31, 2020, which was negatively impacted by the COVID-19

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pandemic. While demand for cranes was higher year over year, supply chain constraints impacted the ability to produce and ship certain products. EURAF net sales were favorably impacted by approximately $20.9 million from changes in foreign currency exchange rates.

EURAF operating income decreased in 2021 to $8.9 million from $12.0 million in 2020. The decrease was primarily due to higher material and transportation costs and engineering, selling and administrative expenses including short-term incentive compensation costs. This was partially offset by higher net sales. Operating income was favorably impacted by approximately $2.4 million from changes in foreign currency exchange rates.

EURAF net sales decreased 7.2% in 2020 to $598.7 million from $644.9 million in 2019. The decrease was primarily related to lower crane shipments as a result of the COVID-19 pandemic, which significantly reduced demand in most of the Company’s end markets. This was partially offset by $10.4 million from favorable changes in foreign currency exchange rates.

EURAF operating income increased in 2020 to $12.0 million from $3.8 million in 2019. The increase was primarily related to favorable sales mix, $6.6 million of lower engineering, selling and administrative expenses and $2.6 million of lower restructuring expense. Lower engineering, selling and administrative expenses were driven by lower discretionary spend in response to the COVID-19 pandemic. This was partially offset by the decrease in net sales. In addition, operating income was impacted by $1.4 million from favorable changes in foreign currency exchange rates.

MEAP

MEAP net sales increased 30.6% in 2021 to $285.6 million from $218.6 million in 2020. The increase was primarily due to higher crane shipments compared to the year ended December 31, 2020, which was negatively impacted by the COVID-19 pandemic. MEAP net sales were favorably impacted by approximately $10.0 million from changes in foreign currency exchange rates.

MEAP operating income increased 1.6% in 2021 to $30.9 million from $30.4 million in 2020. The increase was primarily due to higher net sales. This was partially offset by higher material and transportation costs, engineering, selling and administrative expenses including short-term incentive compensation costs and a $3.6 million loss from a write-off of a long-term note receivable resulting from the 2014 divestiture of the Company’s Chinese joint venture. MEAP operating income was favorably impacted by approximately $0.3 million from changes in foreign currency exchange rates.

MEAP net sales decreased 0.4% in 2020 to $218.6 million from $219.5 million in 2019. Net sales were impacted favorably by project driven demand in the Middle East, offset by lower crane shipments as a result of the COVID-19 pandemic. MEAP net sales were favorably impacted by $2.4 million from changes in foreign currency exchange rates.

MEAP operating income increased 34.5% in 2020 to $30.4 million from $22.6 million in 2019. The increase was primarily due to $7.1 million of lower engineering, selling and administrative expenses and $1.9 million of lower restructuring expense compared to 2019. Lower engineering, selling and administrative expenses were driven by lower discretionary spend in response to the COVID-19 pandemic.

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Results of Operations for the Years Ended December 31, 2021, 2020 and 2019

Orders and Backlog

Backlog represents the dollar value of orders which are expected to be recognized in net sales in the future. Orders are included in backlog when an executed binding contract has been received but has not been recognized in net sales. Orders and backlog are not measures defined by accounting principles generally accepted in the United States of America (“GAAP”) and our methodology for determining orders and backlog may vary from the methodology used by other companies.

Management uses orders and backlog for capacity and resource planning. We believe this information is useful to investors to provide an indication of our future revenues.

Orders for the year ended December 31, 2021 increased 43.4% to $2,166.6 million from $1,511.4 million for the same period in 2020 of which $55.4 million was from the acquisitions. The increase was primarily related to higher global demand as the year ended December 31, 2020 was significantly impacted by the COVID-19 pandemic. Orders were favorably impacted by approximately $31.7 million from changes in foreign currency exchange rates.

The Company’s backlog as of December 31, 2021, 2020, and 2019, was $1,010.9 million, $543.2 million and $475.1 million, respectively, of which $39.3 million as of December 31, 2021 was from the acquisitions. Backlog increased across all segments and was unfavorably impacted by $39.5 million from changes in foreign currency exchange rates.

Net Sales

Consolidated net sales for the year ended December 31, 2021 increased 19.2% to $1,720.2 million from $1,443.4 million for the same period in 2020. The increase was primarily from higher crane shipments due to increased demand as compared to the year ended December 31, 2020, which was negatively impacted by the COVID-19 pandemic. While demand for cranes was higher year over year, supply chain constraints negatively impacted the Company's ability to produce and ship certain products. The acquisitions of Aspen and the crane business of H&E contributed to the increase of net sales by $26.7 million. However, the acquisitions generated $74.2 million of net sales during the period on a standalone basis. Net sales were favorably impacted by approximately $31.0 million from changes in foreign currency exchange rates.

Consolidated net sales decreased 21.3% in 2020 compared to 2019. The decrease was primarily related to lower crane shipments as a result of entering the year with lower backlog in the Americas segment as well as the impacts from the COVID-19 pandemic, which significantly reduced demand in most of the Company’s end markets. This was partially offset by $12.4 million from favorable changes in foreign currency exchange rates.

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Gross Profit

Gross profit for the year ended December 31, 2021 increased 20.6% to $307.2 million compared to $254.7 million for the year ended December 31, 2020. The increase was primarily due to the increase in net sales, partially offset by increases in material and transportation costs. Gross profit was favorably impacted by approximately $7.1 million from changes in foreign currency exchange rates.

Gross profit percentage in 2021 was 17.9% compared to 17.6% in 2020, or relatively flat year over year.

Gross profit for the year ended December 31, 2020 decreased by 26.0% to $254.7 million compared to $344.1 million for the year ended December 31, 2019. This decrease was primarily due to the decrease in net sales and an increase in costs due to under absorption of facility costs from lower utilization of the Company’s manufacturing facilities due to the COVID-19 pandemic. Gross profit was favorably impacted by $3.0 million from changes in foreign currency exchange rates.

Gross profit percentage decreased in 2020 to 17.6% from 18.8% in 2019 primarily due to under absorption of facility costs from lower utilization of the Company’s manufacturing facilities due to the COVID-19 pandemic.

Engineering, Selling and Administrative Expenses

Engineering, selling and administrative expenses for the year ended December 31, 2021 increased $49.7 million to $258.5 million. The increase was primarily due to a $13.9 million charge related to a legal matter with the U.S. Environmental Protection Agency, higher employee-related costs, inclusive of short-term incentive compensation costs, a $3.6 million loss from a write-off of a long-term note receivable resulting from the 2014 divestiture of the Company’s Chinese joint venture and acquisition related costs. This was partially offset by lower tradeshow costs from the triennial ConExpo trade show in March 2020. Engineering, selling and administrative expenses were unfavorably impacted by approximately $4.4 million from changes in foreign currency exchange rates.

Engineering, selling and administrative expenses for the year ended December 31, 2020 decreased $16.8 million to $208.8 million. The decrease was primarily due to lower short-term incentive compensation costs, reduced discretionary spending in response to the COVID-19 pandemic and a decrease in compensation and benefits due to cost reduction actions primarily in North America. This was partially offset by a $8.9 million benefit recorded in 2019 related to the settlement of a legal matter. Engineering, selling and administrative expenses were also unfavorably impacted by $1.1 million from changes in foreign currency exchange rates.

Asset Impairment Expense

During the year ended December 31, 2021, the Company recorded an asset impairment of $1.9 million to write-down the value of one of the Company's Brazil entities to its expected sale price.

There were no asset impairments for the years ended December 31, 2020 and 2019.

Restructuring (Income) Expense

Restructuring (income) expense for the year ended December 31, 2021 totaled $1.1 million of income compared to $7.0 million of expense in 2020. Restructuring income for 2021 primarily related to adjustments of previously recorded costs associated with a lease write-off in the Americas and headcount reductions in Europe. In addition, the Company recorded income on the sale of previously expensed Brazilian tax credits.

Restructuring expense for the year ended December 31, 2020 totaled $7.0 million compared to $9.8 million in 2019. Expenses in 2020 related primarily to costs associated with headcount reductions in Europe and North America, partially offset by $2.5 million of income from the forfeiture of equity compensation awards associated with employee separation agreements.

Interest Expense

Interest expense remained flat for the year ended December 31, 2021 at $28.9 million compared to $29.1 million for the year ended December 31, 2020. Refer to Note 12, “Debt” to the Consolidated Financial Statements.

Interest expense for the year ended December 31, 2020 totaled $29.1 million versus $32.7 million for the year ended December 31, 2019. This decrease was primarily due to a reduction of the average effective interest rate from 10.1% in 2019 to 9.0% in 2020. The decrease in the average effective interest rate was primarily due to the refinancing of the Company’s senior secured

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high yield notes that occurred in the first quarter of 2019 as well as the reduction in interest rates on the Company’s variable rate debt.

Loss on Debt Extinguishment

During the year ended December 31, 2019, the Company recorded a $25.0 million charge associated with the refinancing of the Company’s prior credit facility and notes. The charge is composed of $16.6 million of call premium on the prior notes, $5.3 million of unamortized discount on the prior notes and $3.1 million of unamortized debt issuance costs.

Other income (expense) – Net

Other income (expense) - net for the year ended December 31, 2021 was $1.0 million of income and was primarily composed of $1.1 million of net foreign currency gains.

Other income (expense) - net for the year ended December 31, 2020 was $10.0 million of expense and was primarily composed of $3.9 million of net foreign currency losses, $3.7 million charge related to the settlement of a legal matter and $1.6 million of pension benefit costs.

Other income (expense) - net for the year ended December 31, 2019 was $9.8 million of income and was primarily composed of a $15.5 million benefit related to a settlement of a legal matter and a $3.5 million gain on the sale of the Company’s Manitowoc, Wisconsin manufacturing facility. This was partially offset by $4.4 million of pension benefit costs and $5.5 million of net foreign currency losses.

Income Taxes

During the year ended December 31, 2021, 2020 and 2019 the Company recorded income tax expense of $6.1 million, $17.1 million and $12.4 million respectively.

Due to the Company’s historic losses, impacts from U.S. tax reform and full valuation allowances in certain jurisdictions, the effective annual tax rate is not a meaningful measure of the Company’s cash tax position or performance of the business.

The 2021 effective tax rate was favorably impacted primarily by the release of an unrecognized tax benefits reserve of $2.8 million and a $2.7 million partial release of a Chinese valuation allowance. The rate was unfavorably impacted by the jurisdictional mix of the financial results which includes recognition of additional valuation allowances in certain jurisdictions.

The 2020 effective tax rate was favorably impacted primarily by the passing of The Coronavirus Aid, Relief and Economic Security Act by $3.7 million that allowed the Company to implement certain U.S. tax planning strategies. The rate was unfavorably impacted primarily by additional valuation allowances recorded during the year and the jurisdictional mix of the financial results.

The 2019 effective tax rate equaled the U.S. statutory rate of 21%. The rate was favorably impacted primarily by manufacturing and research incentives and non-U.S. income taxed at a rate other than the U.S. statutory rate. The rate was unfavorably impacted primarily by additional valuation allowances recorded during the year and U.S. tax reform.

See further detail at Note 14, “Income Taxes” to the Consolidated Financial Statements.

Financial Condition

Cash Flows

The table below shows a summary of cash flows for the years ended December 31, 2021, 2020 and 2019:

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Cash Flows From Operating Activities

Cash flows provided by operating activities in 2021 were $76.2 million and were primarily driven by net income and a net decrease in operating assets and liabilities of $3.1 million. The decrease in operating assets and liabilities was primarily due to an increase in accounts payable and accrued expenses of $83.2 million, partially offset by an increase in inventories of $68.3 million and accounts receivable of $5.2 million from December 31, 2020.

Cash flows used for operating activities in 2020 were $35.1 million and were primarily driven by increases in working capital. Working capital increases were primarily from higher accounts receivable and lower accounts payable and accrued expenses and other liabilities.

Cash flows used for operating activities in 2019 were $53.3 million and were primarily driven by trade receivables sold to the prior accounts receivable securitization program resulting in $126.3 million of cash flows being reported in cash provided by investing activities and $75.0 million of purchases of accounts receivable previously sold to the prior accounts receivable securitization program. This was partially offset by a $124.0 million increase in net income excluding adjustments to reconcile net income (loss) to operating cash flows from operating activities, a $24.0 million net reduction in working capital since December 31, 2018 and $24.4 million of net cash received from the settlement of a legal matter.

Cash Flows From Investing Activities

Cash flows used for investing activities were $226.3 million in 2021. Cash flows used for investing activities in 2021 consisted primarily of $186.2 million related to the acquisitions of Aspen and the crane business of H&E and $40.4 million of capital expenditures.

Cash flows used for investing activities were $25.8 million in 2020. Cash flows provided by investing activities in 2020 primarily consisted of $26.3 million of capital expenditures offset by $0.5 million of cash proceeds on the sale of property, plant and equipment.

Cash flows provided by investing activities were $108.4 million in 2019. Cash flows provided by investing activities in 2019 primarily consisted of $126.3 million of cash collections on accounts receivable sold to the Company’s securitization program and $17.2 million of cash proceeds on the sale of property, plant and equipment. This was partially offset by capital expenditures of $35.1 million.

Cash Flows From Financing Activities

Cash flows provided by financing activities during 2021 totaled $100.9 million and consisted primarily of $100.0 million of borrowings on the ABL Revolving Credit Facility to fund the acquisitions.

Cash flows used for financing activities during 2020 totaled $14.8 million and consisted primarily of $12.0 million for the repurchase of the Company’s common stock and $2.9 million of payments on other debt.

Cash flows provided by financing activities during 2019 totaled $3.7 million and consisted primarily of $300.0 million of proceeds from the issuance of new high-yield notes (i.e., the 2026 Notes), partially offset by payments of $276.6 million to terminate the prior high-yield notes, $8.3 million of debt issuance costs on the ABL Revolving Credit Facility and 2026 Notes, $7.4 million from the repurchase of the Company’s common stock and $4.4 million of payments on other debt.

Liquidity and Capital Resources

Liquidity

The Company’s liquidity position as of December 31, 2021 and 2020 is summarized as follows:

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The Company’s revolving credit facility, or other future facilities, may be used for working capital requirements, capital expenditures, funding future acquisitions (within the Company’s debt limitations), and other operating, investing and financing needs. The Company believes its liquidity and expected cash flows from operations should be sufficient to meet expected working capital, capital expenditures, contractual obligations and other ongoing operational needs for the subsequent twelve months.

Cash Sources

The Company has historically relied primarily on cash flows from operations, borrowings under revolving credit facilities, issuances of notes and other forms of debt financing as its sources of cash. From time to time, we opportunistically look at the credit and debt markets for new sources of capital or to reduce our cost of capital.

The maximum availability under the Company’s current ABL Revolving Credit Facility is $275.0 million. The borrowing capacity under the ABL Revolving Credit Facility is based on the value of inventory, accounts receivable and fixed assets of the Loan Parties as defined in the ABL Credit Agreement.

In addition to the ABL Revolving Credit Facility, the Company has access to non-committed overdraft facilities to fund working capital in Europe and China. There are six facilities, of which four are denominated in Euros totaling €28.0 million, one denominated in U.S. dollars totaling $9.5 million and one denominated in Chinese Yuan totaling ¥30.0 million. During the year ended 2021, the Company borrowed ¥30.0 million, or approximately $4.7 million on its Chinese Yuan facility. Total availability as of December 31, 2021 for the six overdraft facilities is $47.2 million with $4.7 million outstanding.

Debt

On March 25, 2019, the Company and certain subsidiaries of the Company (the “Loan Parties”) entered into the ABL Credit Agreement with JP Morgan Chase Bank, N.A as administrative and collateral agent, and certain financial institutions party thereto as lenders, providing for the ABL Revolving Credit Facility of up to $275.0 million. The borrowing capacity under the ABL Revolving Credit Facility is based on the value of inventory, accounts receivable and fixed assets of the Loan Parties. The Loan Parties’ obligations under the ABL Revolving Credit Facility are secured on a first-priority basis, subject to certain exceptions and permitted liens, by substantially all of the personal property and fee-owned real property of the Loan Parties. The liens securing the ABL Revolving Credit Facility are senior in priority to the second-priority liens securing the obligations under the 2026 Notes and the related guarantees. The ABL Revolving Credit Facility has a term of five years and includes a $75.0 million letter of credit sub-facility, $10.0 million of which is available to the Company’s German subsidiary that is a borrower under the ABL Revolving Credit Facility.

On June 17, 2021 the Company amended its ABL Credit Agreement to adjust certain negative covenants reducing restrictions on the Company's ability to expand its rental business.

Borrowings under the ABL Revolving Credit Facility bear interest at a variable rate using either the Alternative Base Rate or the Eurodollar and Overnight London Interbank Offer Rate (“LIBOR”). The variable interest rate is based upon the average availability as of the most recent determination date as follows:

As of December 31, 2021, the Company had other indebtedness outstanding of $10.3 million with a weighted-average interest rate of approximately 3.4%. This debt includes balances on local credit lines and capital lease obligations.

As of December 31, 2021, the Company had $100.0 million of borrowings outstanding under the ABL Revolving Credit Facility and no borrowings outstanding as of December 31, 2020. During the year ended December 31, 2021, the highest daily borrowing under the ABL Revolving Credit Facility was $100.0 million and the average borrowing was $26.0 million, while the weighted-average annual interest rate was 1.4%. During the year ended December 31, 2020, the highest daily borrowing under the ABL Revolving Credit Facility was $50.0 million and the average borrowing was $13.3 million, while the

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weighted-average annual interest rate was 1.8%. The interest rate of the ABL Revolving Credit Facility fluctuates based on excess availability. During the year ended December 31, 2021, the spreads for LIBOR and Eurodollar, and Alternative Base Rate borrowings were 1.25% and 0.25%, respectively. Excess availability as of December 31, 2021 was $136.3 million, which represents revolver borrowing capacity of $239.3 million less $100.0 million in borrowings outstanding and U.S. letters of credit outstanding of $3.0 million.

On March 25, 2019, the Company and certain of its subsidiaries entered into an indenture with U.S. Bank National Association as trustee and notes collateral agent, pursuant to which the Company issued $300.0 million aggregate principal amount of the 2026 Notes with an annual coupon rate of 9.000%. Interest on the 2026 Notes is payable in cash semi-annually in arrears on April 1 and October 1 of each year. The 2026 Notes are fully and unconditionally guaranteed on a senior secured second lien basis, jointly and severally, by each of the Company’s existing and future domestic subsidiaries that is either a guarantor or a borrower under the ABL Revolving Credit Facility or that guarantees certain other debt of the Company or a guarantor. The 2026 Notes and the related guarantees are secured on a second-priority basis, subject to certain exceptions and permitted liens, by pledges of capital stock and other equity interests and other security interests in substantially all of the personal property and fee-owned real property of the Company and of the guarantors that secure obligations under the ABL Revolving Credit Facility.

Both the ABL Revolving Credit Facility and the 2026 Notes include customary covenants which include, without limitation, restrictions on the Company’s ability and the ability of the Company’s restricted subsidiaries to incur, assume or guarantee additional debt or issue certain preferred shares, pay dividends on or make other distributions in respect of the Company’s capital stock or make other restricted payments, make certain investments, sell or transfer certain assets, create liens on certain assets to secure debt, consolidate, merge, sell, or otherwise dispose of all or substantially all of the Company’s assets, enter into certain transactions with affiliates and designate the Company’s subsidiaries as unrestricted. Both the ABL Revolving Credit Facility and the 2026 Notes also include customary events of default. The ABL Revolving Credit Facility has customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in the Company’s business or financial condition since December 31, 2018.

Additionally, the ABL Revolving Credit Facility contains a covenant requiring the Company to maintain a minimum fixed charge coverage ratio under certain circumstances set forth in the ABL Credit Agreement.

The aggregate scheduled future maturities of outstanding debt obligations as of December 31, 2021 is as follows:

The table of scheduled maturities above does not agree to the Company’s total debt as of December 31, 2021 as shown on the Consolidated Balance Sheet and in Note 12, “Debt” to the Consolidated Financial Statements due to $3.1 million of deferred financing costs related to the 2026 Notes.

As of December 31, 2021, the Company was in compliance with all affirmative and negative covenants in its debt instruments, inclusive of the financial covenants pertaining to the ABL Revolving Credit Facility and 2026 Notes. Based upon management’s current plans and outlook, the Company believes it will be able to comply with these covenants during the subsequent twelve months.

Other Financing Arrangements

The Company has two non-U.S. accounts receivable financing programs with maximum availability of €55.0 million and one U.S. accounts receivable financing program with maximum availability of $40.5 million. Under these financing programs, the Company has the ability to sell eligible receivables up to the maximum limit and can sell additional receivables as previously sold receivables are collected. As of the year ended December 31, 2021, the Company sold receivables and received cash of $228.6 million. Transactions under the U.S. and non-U.S. accounts receivable financing programs are accounted for as sales in accordance with Accounting Standards Codification ("ASC") Topic 860.

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See further details at Note 13, “Accounts Receivable Factoring” to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements

The Company's disclosures concerning transactions, arrangements and other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity or the availability of or requirements for capital resources are as follows:

•
The Company has disclosed its buyback commitments in Note 20, “Guarantees,” to the Consolidated Financial Statements.

•
The Company has disclosed its accounts receivable securitization arrangement in Note 13, “Accounts Receivable Factoring” to the Consolidated Financial Statements.

Contractual Obligations and Commercial Commitments

A summary of the Company's significant contractual obligations as of December 31, 2021 is as follows:

•
Unrecognized tax benefits totaling $18.4 million as of December 31, 2021, excluding related interest and penalties, are not included in the table because the timing of their resolution cannot be estimated. See Note 14, “Income Taxes,” to the Consolidated Financial Statements for disclosures surrounding uncertain income tax positions under ASC Topic 740 “Income Taxes.”

As of December 31, 2021, the Company had buyback commitments with a balance outstanding of $36.4 million. This amount is not reduced for amounts the Company would recover from the repossession and subsequent resale of collateral. The Company is committed to pay $27.0 million of annual interest on the 2026 Notes. Additionally, the Company's debt outstanding under the ABL Revolving Credit Facility is subject to variable interest based on prevailing rates.

The Company maintains defined benefit pension plans for some of the Company’s employees and retirees. The Board of Directors has established the Retirement Plan Committee to manage the operations and administration of all benefit plans and related trusts. For further information see Note 22, “Employee Benefit Plans,” to the Consolidated Financial Statements.

In 2021, cash contributions by the Company to defined benefit pension plans were $4.4 million, and the Company estimates that its contributions in 2022 will be approximately $3.9 million. Cash contributions to the Company’s 401(k) plan were $5.8 million in 2021.

Capital Expenditures

The Company funds capital expenditures that are intended to:

•
improve the cost structure of the Company’s business,

•
invest in new processes, products and technology,

•
maintain high-quality production standards and

•
maintain and expand the Company's rental fleet.

The Company paid a total of $40.4 million during 2021 for capital expenditures. For the year ended December 31, 2021, depreciation was $45.5 million. The Company anticipates that capital expenditures for fiscal year 2022 will be approximately $85.0 million, of which approximately $35.0 million will be funded from sales of the Company's existing rental fleet through rent to own programs and sales of older cranes. If the value of rental fleet sales is less than expected, capital expenditures will be proportionally reduced.

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Management also considers the following regarding liquidity and capital resources to identify trends, demands, commitments, events and uncertainties that require disclosure:

A. Our ABL Revolving Credit Facility and indenture governing the 2026 Notes require us to comply with certain financial ratios and tests. The Company was in compliance with these covenants as of December 31, 2021, the latest measurement date. The occurrence of any default of these covenants could result in acceleration of any outstanding balances under the ABL Revolving Credit Facility. Further, such acceleration would constitute an event of default under the indenture governing the Company's 2026 Notes and other debt and could trigger cross default provisions in other agreements.

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 credit rating, level of earnings, earnings per share, financial ratios, or collateral. The Company does not believe that these risk factors are reasonably likely to impair its ability to continue to engage in planned activities 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. The Company does not presently believe that events covered by these risk factors applicable to the business could materially affect its credit ratings or could adversely affect its ability to raise short-term or long-term financing.

D. The Company has disclosed information related to certain guarantees in Note 20, “Guarantees,” to the Consolidated Financial Statements.

E. Written options on non-financial assets (for example, real estate puts). The Company does not have any written options on non-financial assets.

Non-GAAP Measures

The Company uses EBITDA, adjusted EBITDA and adjusted operating income, which are financial measures that are not prepared in accordance with GAAP, as additional metrics to evaluate the Company’s performance.

The Company defines EBITDA as net income (loss) before interest, income taxes, depreciation and amortization. The Company defines adjusted EBITDA as EBITDA plus the addback of certain restructuring and other charges. The Company defines adjusted operating income as adjusted EBITDA excluding the addback of depreciation and amortization. The Company believes these non-GAAP measures provide important supplemental information to readers regarding business trends that can be used in evaluating its results of operations because these financial measures provide a consistent method of comparing financial performance and are commonly used by investors to assess performance. These non-GAAP financial measures should be considered together with, and are not substitutes for, the GAAP financial information provided herein.

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The reconciliation of net income (loss) to EBITDA, and further to adjusted EBITDA and to adjusted operating income and operating income is as follows:

(1)
Other non-recurring charges for the year ended December 31, 2021, relate to acquisition costs, certain purchase accounting impacts from the acquisitions, a write-off of a long-term note receivable resulting from the 2014 divestiture of the Company's Chinese joint venture and costs associated with a legal matter with the U.S. Environmental Protection Agency. Costs are included in engineering, selling and administrative expenses or cost of sales in the Consolidated Statement of Operations.

(2)
Other (income) expense – net includes net foreign currency gains (losses), other components of net periodic pension costs, costs associated with a legal matter and other miscellaneous items.

The Company uses adjusted operating cash flows and free cash flows, which are financial measures that are not prepared in accordance with GAAP, as additional metrics to evaluate the Company’s performance. Adjusted operating cash flows is defined as cash flows provided by (used for) operating activities plus cash receipts on sold accounts receivable to the terminated securitization program and other one-time items. Free cash flows are defined as adjusted operating cash flows less capital expenditures. The reconciliation of cash flows used for operating activities to adjusted operating cash flows and further to free cash flows for the year ended December 31, 2021, 2020 and 2019 are summarized as follows: