MTW » Topics » Market Conditions and Outlook

These excerpts taken from the MTW 10-K filed Mar 2, 2009.

Market Conditions and Outlook

 

During 2009, we will strive to successfully execute our long-term strategy of building market-leadership positions in our two core markets: Cranes and related products and Foodservice equipment.  In addition, since we have divested our Marine segment we are now focusing all resources and management efforts on expanding our competitive position within our two remaining segments.  As a

 

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result of the global economic slowdown, we have taken actions and will make additional changes to our businesses as market dynamics continue to unfold in 2009.  We intend to build on our leadership positions during this slowdown and emerge as an even stronger competitor.

 

Looking ahead to 2009, we have forecasted consolidated revenue of approximately $4.9 billion.  This is based on estimated revenue of $3.2 billion in the Crane segment and $1.7 billion in the Foodservice segment.  We have forecasted operating margins in the low double digit range for both segments.  Based on these assumptions, we expect earnings per share in the range of $1.35 to $1.60 per share, excluding special items, such as further restructuring costs.  Other financial expectations for 2009 include capital expenditures not to exceed $120 million, depreciation and amortization of $135 million, and an effective tax rate in the mid-20% range.  Finally, we have set a year-end debt reduction target of $1 billion since funding the Enodis acquisition in November of 2008.  Due to continuing weak market conditions and continued global economic uncertainty, we cannot be assurred of meeting these forecasts and actual results may differ materially from these estimates.

 

Cranes and Related Products

Market
Conditions and Outlook



 



During 2009, we will
strive to successfully execute our long-term strategy of building
market-leadership positions in our two core markets: Cranes and related
products and Foodservice equipment.  In
addition, since we have divested our Marine segment we are now focusing all
resources and management efforts on expanding our competitive position within
our two remaining segments.  As a



 



26
















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result of the global
economic slowdown, we have taken actions and will make additional changes to
our businesses as market dynamics continue to unfold in 2009.  We intend to build on our leadership
positions during this slowdown and emerge as an even stronger competitor.



 



Looking ahead to 2009, we
have forecasted consolidated revenue of approximately $4.9 billion.  This is based on estimated revenue of $3.2
billion in the Crane segment and $1.7 billion in the Foodservice segment.  We have forecasted operating margins in the low
double digit range for both segments. 
Based on these assumptions, we expect earnings per share in the range of
$1.35 to $1.60 per share, excluding special items, such as further
restructuring costs.  Other financial
expectations for 2009 include capital expenditures not to exceed $120 million,
depreciation and amortization of $135 million, and an effective tax rate in the
mid-20% range.  Finally, we have set a
year-end debt reduction target of $1 billion since funding the Enodis
acquisition in November of 2008.  Due to continuing
weak market conditions and continued global economic uncertainty, we cannot be
assurred of meeting these forecasts and actual results may differ materially
from these estimates.



 



Cranes and Related Products

These excerpts taken from the MTW 10-K filed Feb 29, 2008.

Market Conditions and Outlook

 

During 2008, we will strive to protect our market shares in a profitable manner, improve our cost structures, and continue to invest in new product development.  Because of our global Crane businesses and our continued global growth in our Foodservice businesses, during 2007 we were affected more than ever by non-U.S. world economies.  The economies of Europe and Asia, in particular, affect our performance.

 

Our diversified business model, global presence, and broad product offerings proved beneficial to us in 2007 and we believe will continue to provide stability to our company into the future.  Product line and geographic diversification within our segments also historically have proved to be beneficial.

 

Cranes and Related Products

Market
Conditions and Outlook



 



During 2008, we will
strive to protect our market shares in a profitable manner, improve our cost
structures, and continue to invest in new product development.  Because of
our global Crane businesses and our continued global growth in our Foodservice
businesses, during 2007 we were affected more than ever by non-U.S. world
economies.  The economies of Europe and Asia, in particular, affect our
performance.



 



Our diversified business
model, global presence, and broad product offerings proved beneficial to us in
2007 and we believe will continue to provide stability to our company into the
future.  Product line and geographic diversification within our segments
also historically have proved to be beneficial.



 



Cranes and Related Products

This excerpt taken from the MTW 10-K filed Feb 28, 2006.

Market Conditions and Outlook

 

During 2006, we will strive to protect our market shares, improve our cost structures, and continue to invest in new product development.  Because of our global Crane businesses and our continued focus to become more global in our Foodservice businesses, we are affected now more than ever by non-domestic world economies.  The economies of Europe and Asia, in particular, affect our performance.

 

We believe that our diversified business model, global presence, and broad product offerings proved beneficial to us in 2005 and will continue to provide stability to our company into the future.  Product line and geographic diversification within our segments also proved beneficial.

 

Cranes and Related Products – The global Crane market continued its recovery in 2005.  This increase benefited most of our regional and product end-markets.    This included the beginning of the upturn in the domestic crawler crane business late in 2005.   Material costs continued to escalate throughout 2005, but at a rate lower than in 2004.  Product pricing continued to increase during the year as the industry passed along these costs to the end markets.   The Crane segment also offset these price increases with other material and manufacturing cost reductions.  Price increases to recover material cost increases and other manufacturing cost reductions have contributed to the improved gross margins in the Crane segment.   In 2006,   we expect to see some minor escalation of material costs which we anticipate the industry will again offset with pricing actions.

 

During 2005, we grew market share within most product categories globally.    We have responded to significant increases in demand in Asia by undertaking the construction of a new crane manufacturing facility in China.  The improvement in overall market share is partially a reflection of continued significant investment in new products, which included the introduction of 11 new products in 2005.  We will continue to invest in new products and product support in 2006.

 

Looking ahead, we expect volumes to increase significantly in North America for all products as a result of the cyclical crane recovery, the impact of market share increases and the overall market conditions.   We believe the construction equipment market has now entered the second year of the growth phase of the cycle, which is typically several years in duration.   Further, the domestic crawler market, which tends to lag the overall crane market, appears to be recovering with greater growth expected in 2006. We expect Asia will continue to grow, driven by the China expansion and general recovery of Asian economies.  In addition we expect to see commodity costs rise in 2006, but at a lower level than the last two years.  We have developed strategies to help us adapt to these conditions.  In this environment we plan to protect our market share by providing our customers with what we believe is the best value in the industry.  We will work to grow our market share globally by leveraging the strength of our brand names, product service and support, and expanded product offerings.

 

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In 2006, we plan to introduce 19 new crane models.  We will continue to expand our global reach.   One way to achieve this expansion is through the strategic positioning of our sales and product support infrastructure in Asia. In addition, our global sales force is cross selling our entire product line.  Our past acquisitions have given us a broad product offering and worldwide distribution and product support.  We believe these factors along with new product introductions will help us continue to grow market share in 2006.  We believe that our growth strategy is solid and supported by the diversification of our global manufacturing and distribution presence.  We will continue to attack our markets geographically, rather than by product line.

 

Foodservice Equipment –  In 2005, the Foodservice segment introduced more than 25 new products for the fourth consecutive year.  These new product introductions contributed to a market share gain in ice machines and steady sales in our other product categories.  The domestic foodservice industry got off to a strong start in 2005, but weakened in the early spring due to abnormally cool and wet conditions in some areas of the U.S.  After a late start to the ultimately hot summer weather, foodservice equipment sales picked up mid-year and remained quite strong through the fall and early winter.

 

The dramatic rise in commodity costs throughout 2004 and early 2005, offset by price increases in 2004, presented challenges for us in 2005.  In most of our businesses we reacted to soft sales trends partially caused by those price increases with calculated pricing actions.  Those actions were taken selectively on particular product models or features to gain a competitive edge.  The impact of these price adjustments were off set by volume increases.

 

We expect that the same factors that drove our strong operating performance in 2005 will continue to drive our business in 2006.  We expect that the market will grow in 2006 at approximately the same rate than it did in 2005, and we believe we are positioned to outperform the industry due to our wide range of new products that were introduced in the past 4 years and will be introduced in 2006.

 

We also will continue to invest in foreign markets during 2006.  With the completion of our new manufacturing and engineering center in Hangzhou, China, we are poised to expand our sales and marketing presence in the region.  The increased presence will leverage our brand strength in the fastest growing foodservice equipment market in the world.  Although we are presently only manufacturing ice machines and beverage equipment in this facility, we plan to expand manufacturing to other foodservice products for this region as well.

 

Marine  – 2005 was a busy year for the Marine segment.  The 2005 winter repair season was strong, with 18 vessels in the shipyard from January to April.  We completed the final Staten Island Ferry along with the first release of the Improved Naval Lighterage System (INLS).  Three petroleum tank barges were completed at various times throughout the year, with construction of an additional tank barge started.  The Marine segment also started the design phase of a tank barge contract awarded late in the year.  At year-end, work was near completion on a self-unloading cement barge, and construction was in full swing on the prototype Littoral Combat Ship. We delivered the Great Lakes Icebreaker Mackinaw to the Coast Guard late in the year.  Lingering cost issues on three specific projects carried over into 2005 from 2004, adversely affecting margins. We have implemented various measures to mitigate these issues in new and future contracts.

 

As in the past two years, we expect that 2006 will prove to be busy, based on the volume of work in backlog at December 31, 2005.

 

Construction efforts will continue on the Littoral Combat Ship, as will work on additional units of INLS.  Also, we will commence work on the design award phase of the Navy’s radar ship replacement program for the Cobra Judy.  We believe mid-sized shipyards such as Manitowoc Marine have an opportunity to play an increasing larger role in the future military and government vessel procurements.

 

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Commercial work for 2006 includes the completion of a self-unloading cement barge, one double-hull tank barge, and one articulated tug and barge (AT/B) unit.  In addition, work will commence on another double-hull tank barge and a second AT/B unit, with deliveries schedule for late in 2007.  Significant market activity in recent months has provided the Marine segment with good opportunities to build a solid backlog.

 

Finally, we expect that the 2006 Great Lakes winter repair season will at least equal that of 2005. Lake activity is governed primarily by two factors: (i) the health of the coal and iron ore freight market; and (ii) the cycle of the required regulatory inspections.

 

This excerpt taken from the MTW 10-K filed Mar 16, 2005.

Market Conditions and Outlook

 

During 2004 a significant portion of our Crane segment and consolidated net sales were from international markets.  While penetration in global markets is helpful to us, it also adds complexity and exposure to global risks and issues.  Specifically, the issues of the strengthening Euro versus the U.S. Dollar throughout 2003 and 2004, and the impact of worldwide steel market activities on the costs of steel for our manufacturing processes, impacted us during the year and will continue to provide challenges and opportunities in 2005.  Certain markets are now available to us that were not available in past years, but continued unrest in Iraq and the Middle East in general has stymied significant immediate growth in that region.  During 2004 we saw signs of recovery in the U.S., and certain European and Asian economies appear to be strengthening as well.

 

Since signs appear to be favorable, we are cautiously optimistic about global economic recovery.  This optimism is tempered by continued concerns over rising commodity costs.  During 2005, we will strive to protect our market shares, improve our cost structures, and continue to invest in new product development.  Because of our efforts to become more global in our Crane and Foodservice businesses, we continue to be affected now more than ever by non-domestic world economies.  The economies of Europe and Asia, in particular, affect our performance.

 

We believe that our diversified business model, global presence, and broad product offerings proved beneficial to us in 2004 and will continue to provide stability to our company into the future.  Diversification within our segments also proved beneficial.  In our Crane segment, stronger international performance, particularly in some parts of Europe and Asia, helped to lessen the continued impact of a weak North American crawler crane market.

 

Cranes and Related Products – We believe the Crane market began a cyclical recovery in 2004.  With the exception of the North American crawler crane market, most of our global markets were up in 2004.  The market increase benefited most of our regional and product end markets.  Material costs accelerated rapidly in 2004, driven by steel and other raw materials. Product pricing increased during the year as the industry tried to pass along the material cost increases. In general, the industry was not completely successful in passing on the cost increases, and gross margins declined as a result.  As we head into 2005, however, we expect that the price increases will hold, material costs will stabilize, and the industry will continue to strive to raise prices or improved procurement efforts to further offset these cost increases.

 

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During 2004, we grew market share in most product segments in North America and Europe.  In addition, we grew market share in many of our Asian markets and made inroads in South America.  We are investing in infrastructure in Asia so that we can continue to grow faster in that market place, and we recently announced that we are building a new crane manufacturing facility in China.  In 2004, we introduced 15 new products in the Crane segment, which is the most that the Crane segment has introduced in one year.  We will continue to invest in new products and product support in 2005.

 

Looking ahead, we expect volumes will increase modestly in North America in 2005 and remain flat or decline slightly in Europe.  We expect that Asia will continue to grow, driven by China expansion and general recovery of Asian economies. We believe that the construction equipment market has entered the growth phase of the cycle, which is typically several years in duration. However, we have yet to see any signs of a pick-up in the North American crawler crane market, which is an important market for our Crane segment. In addition, we expect to see a relatively strong Euro through 2005, as well as continued high costs of some commodities such as steel.  We have developed strategies to adapt to these conditions.  In this environment we plan to protect our market share by providing our customers with what we believe is the best value in the industry.  We will also work to grow our market share globally by leveraging the strength of our brand names, product service and support, and expanded product offerings.

 

In 2005, we plan to introduce 11 new crane models.  We will also continue to expand our global reach.  One way to achieve this expansion is through the strategic positioning of our sales and product support infrastructure in Asia.  In addition, our global sales force is cross selling our entire product line.  Our past acquisitions of Potain and Grove have given us a broad product offering and worldwide distribution and product support.  We believe these factors will help us continue to grow market share in 2005.  We believe that our growth strategy is solid and supported by the diversification of our global manufacturing and distribution presence.  We will continue to attack our markets geographically, rather than by product line.

 

Foodservice Equipment – In 2004, the Foodservice segment introduced more than 25 new products for the third consecutive year.  These new product introductions led to a market share gain in ice machines and steady sales in our other product categories during a difficult equipment purchasing environment.  The industry got off to a strong start but weakened in the second half of the year. It’s difficult to determine whether this was a result of softening in consumer confidence, the cool and wet summer or pre-election jitters, but we did see the recovery resume, post-election.

 

The dramatic rise in commodity costs presented additional challenges for the group.  In most of our businesses, we were effective in passing price increases through the sales channel to partially offset the impact.

 

Positive trends in year-over-year, same-store sales in our customer segments, including the quick-serve segment, were not consistent until later in the year, but we expect those trends in foodservice, lodging and convenience stores to continue into 2005. The recovery in the institution market is also picking up the pace.  With those positive industry indicators, experts are conservatively predicting a three to five percent growth in foodservice equipment and supply sales for 2005.

 

We expect that the same factors that drove our strong operating performance in 2004 will continue to drive our business in 2005.  As the market improves, we believe we are positioned to outperform the industry on the top line due to our wide range of new products that were introduced in 2004 and that continue to be rolled out in 2005.

 

We also will continue to invest in foreign markets during 2005.  In the third quarter we will complete construction of our new manufacturing and engineering center in Hangzhou, China. The increased presence will leverage our brand strength in the fastest growing foodservice equipment market in the world.  Initially, we will manufacture ice machines and beverage equipment in this facility, but plan to expand manufacturing of other products for this region.

 

Marine  – The Marine segment had a challenging year in 2004.  Unlike prior years, where the book of business was scarce, the Marine segment entered 2004 with a full backlog.  All three elements of revenue, including government new construction, commercial new construction and marine repair, were strong.  The segment’s main challenge was to efficiently execute all of the work to be done.  Entering 2004, scheduled deliveries included two Staten Island Ferries, the initial INLS system, two WLB buoy tenders, three double-hulled petroleum barges and one tug boat.  All deliveries were made with the exception of the INLS system and one of the double-hulled petroleum barges.  Delivery of the INLS system was pushed into the second quarter of 2005 due to a customer change order.  The one petroleum barge that did not make the scheduled delivery was being built at Toledo.  That yard had not seen a new construction project in nearly 20 years, and as discussed above was moved for completion to Marinette, Wisconsin.

 

Even though the majority of scheduled deliveries were made, costs were much higher than anticipated, especially with the commercial new construction projects.  Significant increases were seen in material, labor hours and labor rate.  Material increases

 

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were driven by the sudden and sharp increase in steel, the impact of which was not able to be passed on to the customer.  Labor hours went over budget on certain projects due to the tight schedule and high complexity of the projects.  The labor rate was driven up due to the shortage of local employees, which necessitated the use of higher rate, sub-contracted laborers.  Steps are being taken to ensure that future contracts do not experience these types of cost overruns.

 

The marked increase in new construction bid activity that was first seen in late 2003 is continuing into 2005.  The segment was successful in landing a new commercial construction project for delivery of a self-unloading cement barge in the second quarter of 2006.  In 2005 deliveries, include one Staten Island Ferry, INLS system, one Great Lakes Ice Breaker and four double-hulled petroleum barges.  In addition, the segment was awarded the prototype vessel of the Navy’s Littoral Combat Ship (LCS) to be delivered in late 2006.  Our partners on this project include Lockheed Martin, Gibbs & Cox and Bollinger Shipyards.  We are also one of the finalists in bidding for a 180-vessel Response Boat Medium (RBM) contract, which the US Coast Guard is expected to award in mid-2005.

 

The improving US economy is helping buoy our shipbuilding business.  We are beginning to see more impact on ship construction demand due to the OPA-90 legislation, as all current US waterway oil hauling vessels have begun to be phased out, and must be replaced with double-hull vessels by 2015.  Another positive sign is that charter rates are beginning to increase worldwide, which means additional revenue for commercial customers that can be used to build new vessels.  In addition, the markets for our traditional Great Lakes ship repair customers have picked up significantly.  Nearly all the Great Lakes’ freighters are in service and are having difficulty keeping up with demand.  This means more dollars available for repairs that have been delayed from prior years.  Based upon this activity, we anticipate increased repair revenue for the next several years.  Our Marine segment plans to continue to pursue new construction activities, provide superior repair and maintenance support to our customers, and work with other shipyards to provide integrated solutions to our mutual customers as the need arises.

 

This excerpt taken from the MTW 10-K filed Mar 14, 2005.

Market Conditions and Outlook

 

During 2003, nearly 70 percent of our Crane segment revenues and 40 percent of our consolidated net sales were from international markets.  The increases were the result of strategies to diversify our geographic base and product offering during the continued downturn in the U.S. crane market, especially for the crawler crane products.  While penetration in global markets is helpful to us, it also adds complexity and susceptability to global risks and issues.  Specifically, the issues of the strengthening Euro versus the U.S. Dollar throughout 2003, and the impact of worldwide steel market activities on the costs of steel for our manufacturing processes, impacted us during the year and will continue to provide challenges and opportunities in 2004.  With the end of the war in Iraq, certain markets have now become available to us that were not available in past years, but continued unrest in Iraq and the Middle East in general, have stymied significant immediate growth in that region.  The U.S. economy appears to have hit the bottom in our end markets. We are seeing preliminary signs of recovery in the U.S., while certain European and Asian economies also appear to be strengthening.

 

Although the signs appear to be favorable, we are cautiously optimistic about the strength and significance of the U.S. or any global economic recovery.  We have not planned for any significant recoveries in 2004 and we will continue to protect our market shares and improve our cost structures so that we increase our benefits when the economies do rebound. Because of our efforts to become more global in our Crane and Foodservice businesses, we continue to be affected now more than ever by non-domestic world economies.  The economies of Europe and Asia, in particular, affect our international performance.

 

We believe that our diversified business model in terms of global presence and broad product offerings proved beneficial to us in 2003 and will continue to provide stability to our company into the future.  The strength of our Foodservice segment performance in 2003 helped to offset relatively weaker performances in our Crane and Marine segments.  Diversification within our segments also proves beneficial.  In our Crane segment, stronger international performance, particularly in some parts of Europe and Asia, helped to lessen the continued impact of a weak North American crawler crane market.

 

Cranes and Related Products — The Crane market continued its decline during 2003.  With the exception of the Chinese market, most of our global markets were down in 2003.  The continued decline in the North American crane market was most pronounced, especially the crawler crane market, which declined by over 50 percent from 2002.  Pricing has been competitive on a global basis.  Declining market prices accelerated in the second half of 2003.  As we head into 2004.  However, we believe that the decline in volumes and prices, in general, has now stabilized.

 

During 2003, we grew market share in most product segments in North America and Europe.  In addition, we grew market share in many of our Asian markets and made inroads in South America.  We are investing in infrastructure in Asia so that we can continue to grow faster in that market place.  During 2003, we also formed an alliance with Kobelco Construction Machinery Company, a large Japanese construction equipment manufacturer.  We continue to invest in new products and product support.  In 2003, we introduced 15 new products in the Crane segment, which is the most that the Crane segment has introduced in one year.

 

Looking into 2004, we expect volumes to be flat to slightly up from 2003 on worldwide basis.  We believe that we have seen the bottom of the market, but at this point we are not seeing any significant signs of a recovery.  In addition, we believe we will continue to see a relatively strong Euro through 2004, as well as increased costs of some commodities such as steel.  We have plans to adapt to these conditions.  In this environment we plan to protect our market share by providing our customers with what we believe is the best value in the industry.  We will also work to grow our market share globally by leveraging the strength of our brand names and expanded product offering.

 

In 2004 we plan to introduce 16 new models.  We will also continue to expand our global reach.  One way to achieve this expansion is through the strategic positioning of our sales and product support infrastructure in Asia.  In addition, our global sales force is cross selling our entire product line.  Our recent acquisitions of Potain and Grove have given us a broad product offering and worldwide distribution and product support.  We believe these factors will help us grow market share in 2004.  In addition, we made great strides in 2003 to streamline our cost structure.  We have essentially completed the integration of Grove,

 

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including the rationalization of our AWP business, and the consolidation of our North American boom-truck production into our Shady Grove facility.  These consolidation and restructuring efforts have resulted in annual savings of $36 million over our 2002 cost base.  We believe that our growth strategy is solid and supported by the diversification of our global manufacturing and distribution presence.  We will continue to attack our markets geographically, rather than by product line.

 

Foodservice Equipment — In 2003, the Foodservice segment introduced more than 25 new products.  We believe these new product introductions helped us to outperform our industries during 2003 as we held sales steady in generally declining markets.  During 2003, we believe that our key markets hit the bottom of their cycles.  We believe these markets are beginning to improve.  During the last quarter of 2003, we experienced positive trends in year-over-year, same-store sales improvements in many of our customers’ segments, including the quick-serve segment.  In addition, we are seeing continued strengthening in the full-service and quick-casual dining segments, and rising lodging rates in the lodging industry.  Industry experts generally predict a two to two-and-a-half percent growth in foodservice equipment and supply sales for 2004.

 

The same factors that drove our strong operating performance in 2003 will continue to drive our business in 2004.  As the market improves, we expect to outperform the industry on the top line due to our wide range of new products that were introduced in 2003 and that continue to be rolled out in 2004.  Our strategy is to generate eighty percent of revenues from products introduced in the previous five years.  We also will continue to invest in foreign markets during 2004.  We plan to build a new engineering and manufacturing operations center in China.  Our plan is to relocate our existing operation to a new, larger and more high-tech facility, which will include manufacturing space, global procurement, and other global/regional centers of excellence.  Initially, we will manufacture ice machines and beverage equipment in this facility, but plan to expand to manufacture other products for this region.

 

Marine – The Marine segment had a difficult year in 2003 due to a number of factors, some of which were internal, but most of which were external.  One of the factors which hurt this segment during 2003 was the impact of the first quarter strike at Marinette Marine.  Although we believe that the outcome was favorable to all parties, the resolution took longer than we had hoped.  This labor action not only impacted our first quarter operating results, but had a ripple effect on our business through the remainder of 2003.  The larger issue that impacted the Marine segment in 2003 was the industry conditions that caused many of our customers to defer the award of major shipbuilding contracts until late in the year.  We believe the primary causes of these deferrals were our customers’ uncertainty about the state of the U.S. economy, as well as their inability to secure financing for these high dollar value projects.

 

Once our customers began to award new construction projects later in the year, our Marine segment won nearly all the major contracts that it bid on during the year.  Therefore, we go into 2004 with a full slate of work in our shipyards.  In addition, with a number of these contracts, we could land additional work through changes to the project scope and options for follow-on contracts.  Further more we bid on three new contracts in January 2004.  Even though we experienced the delay in contract awards through much of 2003, we are starting to see greater numbers of contracts out for bid at this point in 2004 as compared to the same period in 2003.  We are also working intently on two major contracts that will be announced in 2004.  One is the next phase of the U.S. Navy’s Littoral Combat Ship (LCS) project, which will involve construction of a prototype vessel, which we expect will be awarded in the second quarter of 2004.  We have been selected as a finalist, with our partners, Lockheed Martin, Gibbs & Cox, and Bollinger Shipyards, for the LCS project.  Furthermore, we are one of three companies in the running for a 180-vessel Response Boat Medium (RBM) contract, which the U.S. Coast Guard is expected to award in August 2004.

 

The improving U.S. economy is helping buoy our shipbuilding business.  We are beginning to see more impact on ship construction demand due to the OPA-90 legislation, as all current U.S. waterway oil hauling vessels will begin to be phased out in 2004, and must be replaced with double-hull vessels.  Another positive sign is that charter rates are beginning to increase worldwide, which means additional revenue for commercial customers that can be used to build new vessels.  Despite these positive economic indicators, however, there are two key issues which will impact our end markets in 2004.  The first issue continues to be the ability of our customers to find and secure adequate financing to support their new ship construction

 

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initiatives.  The second issue will be the financial strength of a portion of our non-governmental customer base, which is negatively impacted by the poor financial condition and outlook for U.S. steel manufacturers and customers in the supply chain for those companies.  Our Marine segment plans to continue to pursue new construction activities, provide superior repair and maintenance support to our customers, and work with other shipyards to provide integrated solutions to our mutual customers as the need arises.

 

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