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| MNTX > SEC Filings for MNTX > Form 10-Q on 13-Aug-2009 | All Recent SEC Filings |
13-Aug-2009
Quarterly Report
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements relating
to future events and the future performance of Manitex International, Inc. (the
"Company") within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including, without
limitation, statements regarding the Company's expectations, beliefs, intentions
or future strategies that are signified by the words "expects," "anticipates,"
"intends," "believes" or similar language. Our actual results may differ
materially from information contained in these forward looking-statements for
many reasons, including those described below and in our 2008 Annual Report on
Form 10-K in the section entitled "Item 1A. Risk Factors,"
(1) substantial deterioration in economic conditions, especially in the United States and Europe;
(2) our customers' diminished liquidity and credit availability;
(3) difficulties in implementing new systems, integrating acquired businesses, managing anticipated growth, and responding to technological change;
(4) our ability to negotiate extensions of our credit agreements and to obtain additional debt or equity financing when needed.
(5) the cyclical nature of the markets we operate in;
(6) increases in interest rates;
(8) the performance of our competitors;
(9) shortages in supplies and raw materials or the increase in costs of materials;
(10) our level of indebtedness and our ability to meet financial covenants required by our debt agreements;
(11) product liability claims, intellectual property claims, and other liabilities;
(12) the volatility of our stock price;
(13) future sales of our common stock;
(14) the willingness of our stockholders and directors to approve mergers, acquisitions, and other business transactions;
(15) currency transactions (foreign exchange) risks and the risks related to forward currency contracts;
(16) certain provisions of the Michigan Business Corporation Act and the Company's Articles of Incorporation, as amended, Amended and Restated Bylaws, and the Company's Preferred Stock Purchase Rights may discourage or prevent a change in control of the Company; and
(17) NASDAQ may cease to list our Common Stock.
The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. We do not undertake, and expressly disclaim, any obligation to update this forward-looking information, except as required under applicable law. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto of the Company appearing elsewhere within.
OVERVIEW
The Company is a leading provider of engineered lifting solutions. The Company designs, manufactures and distributes a diverse group of products that serve different functions and are used in a variety of industries. Through its Manitex subsidiary, the Company markets a comprehensive line of boom trucks and sign cranes. Manitex's boom trucks and crane products are primarily used for industrial projects, energy exploration and infrastructure development, including, roads, bridges and commercial construction. Through its Manitex Liftking subsidiary and its Schaeff Lift Truck division, the Company also sells a complete line of rough terrain forklifts, a line of stand-up electric forklifts, cushioned tired forklifts with lifting capacities from 18 thousand to 40 thousand pounds, and special mission oriented vehicles, as well as other specialized carriers, heavy material handling transporters and steel mill equipment. Manitex Liftking's rough terrain forklifts are used in both commercial and military applications. Specialty mission oriented vehicles and specialized carriers are designed and built to meet the Company's unique customer needs and requirements. The Company's specialized lifting equipment has met the particular needs of customers in various industries that include the utility, ship building and steel mill industries. The foregoing operations comprise the Company's Lifting Equipment segment.
In October 2008, the Company began operating a crane dealership located in Bridgeview, Illinois that distributes Terex rough terrain and truck cranes, Fuchs material handlers, Manitex boom trucks and sky cranes. We treat these operations as a separate reporting segment entitled "Equipment Distribution." Our Equipment Distribution segment also supplies repair parts for a wide variety of medium to heavy duty construction equipment sold both domestically and internationally. Our crane products are used primarily for infrastructure development and commercial constructions, applications include road and bridge construction, general contracting, roofing, scrap handling and sign construction and maintenance.
At June 30, 2009, two customers each individually accounted for 10% of the Company's accounts receivable. As of December 31, 2008 four customers accounted for 20%, 12%, 10% and 10%, respectively of Company accounts receivables.
For the three and six months ended June 30, 2009, no customer accounted for 10 % or more of total Company revenues. For the three and six months ended June 30, 2008 one customer accounted for 12% of total Company revenues. The Company did not have a single supplier who exceeded 10% of the total Company purchases for the three and six months ended June 30, 2009. One supplier accounted for 11% of total purchases for three and six months ended June 30, 2008
Discontinued Operations
On March 29, 2007, the Company's Board of Directors approved a plan to sell the Company's Testing & Assembly Equipment segment in order to focus management's attention and financial resources on the Company's Lifting Equipment segment. The plan to sell the Testing & Assembly Equipment segment followed a strategic review made by the Company triggered by a history of significant operating losses by the Testing & Assembly Equipment segment.
On July 5, 2007, the Company entered into an Asset Purchase Agreement with EuroMaint. Under the terms of the Asset Purchase Agreement, the Company agreed to sell and EuroMaint agreed to purchase certain assets of the Company used in connection with the Company's diesel engine testing equipment business. This transaction was completed on August 1, 2007. As of August 31, 2007, all operations of the Company's Testing & Assembly Equipment segment had ceased.
Summary of Recent Acquisitions
On October 6, 2008, the Company completed the acquisition of substantially all of the domestic assets of Schaeff Lift Truck Inc. ("Schaeff") and Crane & Machinery, Inc. ("Crane") pursuant to an asset purchase agreement with Schaeff, Crane, and their parent company, GT Distribution ("GT"). The Company did not acquire Schaeff's Bulgarian subsidiary SL Industries in this transaction. Mr. Langevin, the Company's Chairman and Chief Executive Officer owned 38.8% of the membership interests of GT. Due to the related-party aspects of this transaction, the asset purchase agreement and the transactions contemplated thereby were approved by a committee of the Company's independent directors (the "Special Committee") and the Audit Committee of the Company's Board of Directors. The Special Committee also received a fairness opinion from an independent financial advisory firm that the consideration to be paid by the Company for the assets of Schaeff and GT was fair to the shareholders of the Company from a financial point of view. In January 2009, Mr. Langevin assigned his ownership interest in GT to Bob Litchev, a Senior Vice President of Manitex International, Inc. Located in Bridgeview, Illinois, Crane is a distributor of Terex rough terrain and truck cranes and Manitex boom trucks and sign cranes and is being treated as a separate reporting segment entitled "Equipment Distribution." The Equipment Distribution segment has a long-standing dealer relationship with Terex Corporation and is the authorized Terex rough terrain and truck crane dealer for Cook County, Illinois. Truck cranes differ from boom trucks in that they are built on a specialized chassis and, though road-worthy, are neither licensed or titled but instead are considered a piece of construction equipment. Rough terrain cranes are designed to operate on unpaved, unfinished construction sites and must be delivered by a freight hauler.
Factors Affecting Revenues and Gross Profit
The Company derives most of its revenue from purchase orders from dealers and distributors. The demand for the Company's products depends upon the general economic conditions of the markets in which the Company competes. The Company's sales depend in part upon its customers' replacement or repair cycles. Adverse economic conditions, including a decrease in commodity prices, may cause customers to forego or postpone new purchases in favor of repairing existing machinery. Additionally, our Manitex Liftking subsidiary revenues are impacted by the timing of orders received for military forklifts and residential housing starts.
Gross profit varies from period to period. Factors that affect gross profit include product mix, production levels and cost of raw materials. Margins tend to increase when production is skewed towards larger capacity cranes, special mission oriented vehicles, specialized carriers and heavy material transporters.
Current Economic Conditions
Beginning in September of 2008, the United States and world financial markets came under unprecedented stress. The immediate impact was a dramatic decrease in liquidity and credit availability throughout the world. An incredibly rapid and significant deterioration in economic conditions, especially in the United States and Europe followed. These events had an immediate significant adverse impact on the Company, including a very dramatic curtailment of new orders, requests to delay deliveries and, in some cases to cancel existing orders.
In response to the impact of economic conditions and longer sales cycles, it was determined that swift management action was necessary to ensure that operating activity was balanced with current demand levels. Since the end of the third quarter 2008, we have implemented across the board cost reduction activities that we estimate will yield approximately $6 million in annual expense reductions. The specific actions taken to achieve these cost reductions comprise headcount reductions of salaried and hourly employees, virtual elimination of overtime, suspension of additional hires and merit increases, reduction in executive and salaried pay, bonus and benefits and the introduction of shortened workweeks. Management believes that these actions, although difficult, are required to enable the Company to adjust to current conditions and position it to respond quickly when the market recovers. Certain of the aforementioned actions were implemented before December 31, 2008. Significant additional steps were implemented shortly after year end.
As a result of the aforementioned actions, the Company remained profitable even though revenues for three months ended March 31, 2009 were 40% below revenues for the three months ended March 31, 2008. The sales decline that occurred during the three months ended June 30, 2009 was even more severe with sales declining approximately 55% from the corresponding quarter in the prior year. As a result, the Company had a modest loss for the three months ended June 30, 2009.
Currently, the commercial markets that we serve continue to be severely depressed. The actions of the United States and other world governments to stimulate the world economy have been unprecedented. The United States stimulus package includes very significant appropriations for improving the country's infrastructure, which could be a significant benefit to the Company. The ultimate success of governmental actions and the resulting benefits that the Company may see, however, remain unknown. Presently, it is not possible to predict when a recovery in the markets we serve will take place.
The Company has, however, recently received several large orders for specialized forklifts for U.S. and international armed forces and an international agency. The recent orders, including a three year contract, total approximately $12.6 million. The Company expects to ship approximately $6.0 million related to these orders during the fourth quarter 2009. It is expected that these sales will be a strong contributor to our fourth quarter financial results.
RESULTS OF OPERATIONS
The following discussion considers:
• Net (loss) income for the three and six month periods ended June 30, 2009 and 2008.
• Results of the continuing operations for the three and month periods ended June 30, 2009 and 2008.
• Results of the discontinued operations for the three and six month period ended June 30, 2008.
Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008
Net (loss) income for the three month periods ended June 30, 2009 and 2008
For the three months ended June 30, 2009, the Company had a net loss of $(0.1) million. The net income of $0.9 million reported for the three month period ended June 30, 2008 consisted of net income from continuing operations of $0.7 million and income from discontinued operations of $0.2 million, predominately a gain on the sale of discontinued operation.
Results of the continuing operations for the three month periods ended June 30, 2009 and 2008
For the three months ended June 30, 2009, the net loss from continuing operations was $(0.1) million, which consisted of revenue of $11.8 million, cost of sales of $9.4 million, research and development costs of $0.1 million, SG&A costs excluding corporate expenses of $1.8 million, corporate SG&A expenses of $0.5 million, interest expense of $0.4 million, a foreign currency transaction gain of $0.1 million and an income tax benefit of $0.2 million
For the three months ended June 30, 2008, net income from continuing operations was $0.7 million, which consists of revenue of $26.5 million, cost of sales of $22.0 million, research and development costs of $0.2 million, SG&A costs excluding corporate expenses of $2.2 million, corporate SG&A expenses of $0.8 million, net interest expense of $0.5 million and income tax of $0.1 million.
Net Revenues and Gross Profit - For the three months ended June 30, 2009, net revenues and gross profit were $11.8 million and $2.5 million, respectively. Gross profit as a percent of revenues was 20.9% for the three months ended June 30, 2009. For the three months ended June 30, 2008 net revenues and gross profit were $26.5 million and $4.5 million, respectively. Gross profit as a percent of sales was 16.8% for the three months ended June 30, 2008.
Net revenues decreased $14.6 million to $11.8 million for the three months ended June 30, 2009 from $26.5 million for the comparable period in 2008. Without the Schaeff and Crane acquisitions revenues would have decreased $15.8 million, as Schaeff and Crane had revenues of $0.3 million and $0.9 million for the three months ended June 30, 2009, respectively. The decrease in revenues is attributed to the unprecedented stress in the world financial markets and the significant deterioration in economic conditions, especially in the United States and Europe that followed. The Company has experienced significant decreases in revenues across all product lines. The overall decrease in revenues is overwhelmingly due to a decrease in unit sales of the Company's heavy equipment products. Part sales (which traditionally accounts for approximately 18% of total revenues) have been adversely impacted but not nearly to the same extent.
Our gross profit as percent of net revenues increased by 4.1% to 20.9% for the three months ended June 30, 2009 from 16.8% for the three months ended June 30, 2008. Compared to the prior year the margins for crane products improved modestly. This improvement is attributed to restructuring activities that occurred during the fourth quarter 2008 and the first quarter 2009. Gross margin as a percent of revenue for our forklift/specialized carrier products showed a significant improvement. The improvement in forklift/specialized carrier margin percent is due to the impact of restructuring activities that occurred during the second half of 2008 and during the first quarter 2009, a weakening of the Canadian dollar, and a favorable product mix (the result of increased military business) . The acquisition of Schaeff and Crane also had a favorable impact as these two divisions had a higher gross margin percent. Crane and Schaeff margins were high as part sales accounted for a very significant portion of their second quarter's revenue. Part sales across all product lines have higher margins.
Selling, general and administrative expense - Selling, general and administrative expense for the three months ended June 30, 2009 was $2.3 million compared to $3.0 million for the comparable period in 2008. Selling, general and administrative expense for the three months ended June 30, 2009 are comprised of corporate expense of $0.5 million and $1.8 million related to operating companies. Selling, general and administrative expense for the three months ended June 30, 2008 were comprised of corporate expense of $0.8 million and $2.2.million related to operating companies.
Selling, general and administrative expense, excluding corporate expenses, decreased $0.4 million to $1.8 million for the three months ended June 30, 2009 from $2.2 million for the comparable three month period in 2008. Selling, general and administrative expenses for the three months ended June 30, 2009 also includes approximately $0.5 million related to the Crane and Schaeff acquisition. Without the Crane and Schaeff acquisition selling, general and administrative expense would have been $0.9 million below the prior year. The decrease in selling, general and administrative expense is attributed to headcount reductions of salaried and hourly employees, virtual elimination of overtime, suspension of additional hires and merit increases, reduction in salaried pay, bonus and benefits and the introduction of shortened workweeks.
Corporate expenses decreased $0.3 million to $0.5 million for the three months ended June 30, 2009 from the $0.8 million for the comparable 2008 three month period. The decrease is principally due to a temporary decrease in executive base salaries, suspension of bonuses and reduction in certain benefits.
Operating income - Operating income from continuing operations of $0.03 million for the three months ended June 30, 2009 was equivalent to 0.3% of net revenues compared to an operating income of $1.2 million for the three months ended June 30, 2008 or 4.6% of net revenues. The decrease in operating income and operating income as a percent of revenue is due to the very significant decrease in revenues, which was partially offset by a higher gross margin percent and significant reductions in selling, general and administrative expenses.
Interest expense - Interest expense was $0.4 million and $0.5 million for the three months ended June 30, 2009 and 2008, respectively. The decrease in interest is due to lower interest rates. The Company benefits from lower interest rates as a significant portion of our debt is indexed to the prime rate. The prime rate decreased from 5.00% at June 30, 2008 to 3.25% at June 30, 2009
Foreign currency transaction gains - The Company attempts to purchase forward currency exchange contracts such that the exchange gains and losses on the assets and liabilities denominated in other than the reporting units' functional currency will be offset by the changes in the market value of the forward currency exchange contracts it holds. In accordance with FAS No. 52, the Company records at the balance sheet date the forward currency exchange contracts at their market value with any associated gain or loss being recorded in current earnings as a currency gain or loss.
For the three months ended June 30, 2009, the Company had a foreign currency transaction gain of $0.1 million. Foreign currency gains and losses for the three months ended June 30, 2008 were insignificant.
Income tax (benefit) - Income tax benefit for the three months ended June 30, 2009 was $0.2 million compared to a tax provision $0.1 million for the three months ended June 30, 2008. The 2009 effective tax rate differs from the federal statutory rate due to the current utilization of prior year losses for which no benefit was previously received and discrete items related to the quarterly FIN 48 adjustment and a partial reversal of the valuation allowance related to the Texas Temporary Margin Tax Credit.
Net (loss) income from continuing operations - The net loss from continuing operations for the three months ended June 30, 2009 was ($0.1) million. This compares with a net income from continuing operations for the three months ended June 30, 2008 of $0.7 million. The Company recorded a loss for three months ended June 30, 2009 compared to a profit for the comparable period in 2008 for the reasons described above.
Discontinued operations of the Testing and Assembly Equipment segment for the three month periods ended June 30, 2008
For the three months ended June 30, 2008, discontinued operations reported net income of $0.2 million, as the Company had a gain on the sale of discontinued operations of $0.2 million. This gain was a result of reversing a reserve for contracts terminations as it was determined not to be needed.
Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
Net (loss) income for the six month periods ended June 30, 2009 and 2008
For the six months ended June 30, 2009, the Company had a net loss of $(0.1) million. The net income of $1.6 million reported for the six month period ended June 30, 2008 consisted of net income from continuing operations of $1.2 million and income from discontinued operations of $0.4 million.
Results of the continuing operations for the six month periods ended June 30, 2009 and 2008
For the six months ended June 30, 2009, the net loss from continuing operations was $(0.1) million, which consisted of revenue of $25.9 million, cost of sales of $20.4 million, research and development costs of $0.2 million, SG&A costs excluding corporate expenses of $3.6 million, corporate SG&A expenses of $1.0 million, restructuring expenses of $0.2 million, interest expense of $0.8 million, a foreign currency transaction gain of $0.1 million and an income tax benefit of $0.1 million
For the six months ended June 30, 2008, net income from continuing operations was $1.2 million, which consists of revenue of 50.0 million, cost of sales of $41.3 million, research and development costs of $0.5 million, SG&A costs excluding corporate expenses of $4.8 million, corporate SG&A expenses of $1.7 million, net interest expense of $1.0 million and an income tax benefit of $0.4 million.
Net Revenues and Gross Profit - For the six months ended June 30, 2009, net revenues and gross profit were $25.9 million and $5.5 million, respectively. Gross profit as a percent of revenues was 21.3% for the six months ended June 30, 2009. For the six months ended June 30, 2008, net revenues and gross profit were $50.0 million and $8.7 million, respectively. Gross profit as a percent of sales was 17.4% for the six months ended June 30, 2008.
Net revenues decreased $24.1 million to $25.9 million for the six months ended June 30, 2009 from $50.0 million for the comparable period in 2008. Without the Schaeff and Crane acquisitions revenues would have decreased $27.1 million, as Schaeff and Crane had revenues of $1.3 million and $1.8 million for the six months ended June 30, 2009, respectively. The decrease in revenues is attributed to the unprecedented stress in the world financial markets and the significant deterioration in economic conditions, especially in the United States and Europe that followed. The Company has experienced significant decreases in revenues across all product lines. The overall decrease in revenues is overwhelmingly due to a decrease in unit sales of the Company's heavy equipment products. Part sales (which traditionally accounts for approximately 18% of total revenues) have been adversely impacted but not nearly to the same extent.
Our gross profit as percent of net revenues increased by 3.9% to 21.3% for the six months ended June 30, 2009 from 17.4% for the six months ended June 30, 2008. Compared to the prior year the margins for crane products showed a modest improvement. This improvement is attributed to restructuring activities that occurred during the fourth quarter 2008 and the first quarter 2009. Gross margin as a percent of revenue for our forklift/specialized carrier products showed a significant improvement. The improvement in forklift/specialized carrier margin percent is due to restructuring activities that occurred during the second half of 2008 and during the first quarter 2009 to a weakening of the Canadian dollar, and a favorable product mix (the result of increased military business) .
The acquisition of Schaeff and Crane also had a favorable impact as these two divisions had a higher gross margin percent. Crane and Schaeff margins were high as part sales accounted for a very significant portion of their six month revenue. Part sales across all product lines have higher margins.
Selling, general and administrative expense - Selling, general and administrative expense for the six months ended June 30, 2009 was $4.6 million compared to $6.5 million for the comparable period in 2008. Selling, general and administrative expense for the six months ended June 30, 2009 are comprised of corporate expense of $1.0 million and $3.6 million related to operating companies. Selling, general and administrative expense for the six months ended June 30, 2008 were comprised of corporate expense of $1.7 million and $4.8 million related to operating companies.
Selling, general and administrative expense, excluding corporate expenses, decreased $1.2 million to $3.6 million for the six months ended June 30, 2009 from $4.8 million for the comparable six month period in 2008. Selling, general and administrative expenses for the six months ended June 30, 2009 also includes approximately $1.1 million related to the Crane and Schaeff acquisition. Without the Crane and Schaeff acquisition selling, general and administrative expense would have been $2.3 million below the prior year. The decrease in selling, general and administrative expense is attributed to headcount reductions of salaried and hourly employees, virtual elimination of overtime, suspension of additional hires and merit increases, reduction in salaried pay, bonus and benefits and the introduction of shortened workweeks. Selling expense for 2008 also included costs of approximately $0.3 million related to our participation in the Con Expo trade show in March 2008. The Con Expo show, which is held every three years, was held in Las Vegas from March 11 to March 15, 2008. This show is an international gathering place for the construction industries.
Corporate expenses decreased $0.7 million to $1.0 million for the six months . . .
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