MNTX » Topics » Liquidity and Capital Resources

This excerpt taken from the MNTX 10-Q filed May 13, 2009.

Liquidity and Capital Resources

Cash and cash equivalents were $0.1 million at March 31, 2009 compared to $0.4 million at December 31, 2008.

On April 28, 2009, the bank notified the Company that it had approved the renewal of both its U.S and Canadian revolving credit facilities and its term loan. The maturities will be extended from April 1, 2010 to April 1, 2012. The Bank and the Company are currently working on finalizing the necessary amendments to the credit facilities.

As of March 31, 2009, the Company had approximately $3.0 million available to borrow under its credit facility with Comerica Bank. The interest rate on this facility was equal to prime plus .25 % (prime was 3.25% at March 31, 2009). The Company’s revolving credit agreement contains customary limitations, including limitations on acquisitions, dividends, repurchases of the Company’s stock and capital expenditures. It also requires the Company to have on the last date of the quarter a minimum “Tangible Effective Net Worth”, which is defined in the agreement as equity plus subordinated debt minus intangible assets and related party receivables. See Note 14 to our consolidated financial statements for additional information on the terms and conditions of our credit facilities. This credit facility currently matures on April 1, 2010.

Additionally, the Company’s Manitex Liftking subsidiary has a credit facility which allows for borrowings of up to CDN $4.5 million as of March 31, 2009. At March 31, 2009, the Company had approximately US $2.2 million available to borrow under this Canadian facility. This facility bears interest at Canadian prime rate plus 1.5% (Canadian prime was 2.5% at March 31, 2009). The maximum amount outstanding is limited to the sum of (1) 80% of eligible receivables plus (2) the lesser of 30% of eligible work-in-process inventory or CDN $500 plus (3) the lesser of 50% of eligible inventory less work-in-process inventory or CDN $3.0 million. The indebtedness is collateralized by substantially all of Manitex Liftking ULC’s assets. This credit facility matures on April 1, 2010.

At March 31, 2009, the Company has a $1.7 million note payable to a bank. The note payable to the bank was assumed in connection with the QVM acquisition. The note is due on April 1, 2010. The note has an interest rate of prime plus 1% until maturity. On the first day of each month, the Company is required to pay interest and to make a $0.05 million principal payment. The note is secured by substantially all the assets of the Company’s Manitex subsidiary.

In connection with the Company’s acquisition of Liftking Industries’, the Company issued a note payable to the seller for CDN $3.2 million, or approximately US $3.2 million. The note bears interest at the prime rate of interest charged by Comerica Bank for Canadian dollar loans plus 1%. The note requires quarterly principal payments of CDN $0.2 million plus interest commencing on April 1, 2008. The note payable is subject to a general security agreement which subordinates the seller’s security interest to the interest of the Company’s senior secured credit facility, but shall otherwise rank ahead of the seller’s other secured creditors. The note has a remaining unpaid balance as of March 31, 2009 of CDN $1.6 million or approximately US $1.3 million.

At March 31, 2009, the Company has a note payable to Terex Corporation for $1.8 million. The note which had an original principal amount of $2.0 Million, was issued in connection with the purchase of substantially all of the domestic assets of Crane & Machinery, Inc. and Schaeff Lift Truck, Inc.. The Company is required to make annual principal payments to Terex of $0.25 million commencing on March 1, 2009 and on each year thereafter through March 1, 2016. So long as the Company’s common stock is listed for trading on NASDAQ or another national stock exchange, the Company may opt to pay up to $0.15 million of each annual principal payment in shares of the Company’s common stock having a market value of $0.15 million calculated as set forth in the note. Accrued interest under the note is payable quarterly commencing on January 1, 2009.

On March 31, 2009, the Company has a $1.7 million note payable to a finance company. Under the floorplan agreement the Company may borrow up to $2.0 million for equipment financing and are secured by all inventory financed by or leased from the Lender and the proceeds therefrom. The terms and conditions of any loans, including interest rate, commencement date, and maturity date shall be determined by the Lender upon its receipt of the Company’s request for an extension of credit. The rate, however, may be increased upon the Lender giving five days written notice to the Company. Since the initial borrowing, the lender has agreed to several interest rate reductions. At March 31, 2009, the interest rate on both borrowings was reduced to 7% and subsequently reduced to 6%. For twelve months, the Company is only required to make interest payments, followed by 48 equal monthly payments of principal and interest. As of March 31, 2009, approximately $0.1 million of the note payable is classified as a short-term note. The loan may be repaid at anytime and is not subject to any prepayment penalty.

 

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The Company has a twelve year lease which expires in April 2018 that provides for monthly lease payments of $0.07 million for its Georgetown, Texas facility. The lease has been classified as a capital lease under the provisions of FASB Statement No. 13. The capitalized lease obligation related to aforementioned lease as of March 31, 2009 is $4.4 million.

At March 31, 2009, the Company has two notes payable to a bank with a total remaining principal balance of $0.4 million. The notes have fixed interest rates of 4.35% and 4.25%. The first note requires monthly payment of $8 thousand and will be paid in full by August 2009. The second note requires monthly interest payment of $50 thousand and will be paid off by October 2009. The proceeds from the notes were used to pay annual premiums for certain insurance policies carried by the Company. The holder of the note has a security interest in such insurance policies and has the right upon default to cancel these policies and receive any unearned premiums.

The Company’s ability to meet its commitments and contractual obligations is dependent on the Company’s ability to either negotiate extensions of its current credit agreements, replace the existing credit agreements with a new credit agreement with acceptable terms or to raise additional equity or debt financing. As stated above, the Company has been notified by its lender that it has approved the renewal of both the Company’s U.S and Canadian revolving credit facilities and its term loan. The maturities will be extended from April 1, 2010 to April 1, 2012. The Bank and the Company are currently working to finalize the necessary amendments. The Company expects that the amendments will be completed and executed before the end of the second quarter of 2009.

The Company needs cash to meet its working capital needs as the business grows, to acquire capital equipment, and to fund acquisitions and debt repayment. We intend to use cash flows from operations and existing availability under the current revolving credit facilities to fund anticipated levels of operations for approximately the next 12 months. We will likely need to raise additional capital through debt or equity financings to support our growth strategy, which may include additional acquisitions. There is no assurance that such financing will be available or, if available, on acceptable terms.

2009

Operating activities generated cash of $2.5 million for the three months ended March 31, 2009 comprised of net income of $0.1 million, non-cash items that totaled $0.6 million and changes in assets and liabilities, which generated $1.8 million. The principal non-cash items are depreciation and amortization of $0.6 million. A decrease in accounts receivable of $7.8 million was offset by increases in inventory of $0.3 million, an increase in prepaid expenses of $0.5 million and a decrease in accounts payable, accruals and other current liabilities of $4.3 million, $0.8 million and $0.2 million, respectively

The decrease in accounts receivable and accounts payable is due to the decrease in revenues. The increase in prepaid expenses is primarily related to an increase in the prepaid insurance balance. The prepaid balance has increased as payments were made in January 2009 for insurance policies that renewed on December 30, 2008. The decrease in accrued expense is due to a lower balance in reserves for several items, including vacation, warranty and commissions. The decreases are attributed to lower revenues and reductions in the workforce. The decrease in other current liabilities is due to a decrease in customer deposits.

Cash flows related to investing activities were immaterial for the three months ended March 31, 2009.

Financing activities consumed $2.7 million in cash for the three months ended March 31, 2009. A decrease in borrowings under the Company’s credit facilities, note payments, and capital lease payments consumed $3.0 million, $0.6 million and $0.1 million of cash, respectively. The reduction in borrowing under the credit facilities and notes payment was offset by $0.9 million in new borrowings. During the quarter ended March 31, 2009, note payments of $0.2 million, $0.2 million $0.1 million and $0.1 were made on the Liftking Industries note, notes to finance insurance premiums, the Terex note and the term loan. During the quarter ended March 31, 2009, the Company borrowed $0.5 million to finance insurance premiums and $0.4 million under the floorplan financing agreement to finance the purchase of a crane.

2008

Operating activities consumed cash of $1.7 million for the three months ended March 31, 2008. Net income of $0.7 million and non-cash items that totaled $0.1 million were offset by changes in assets and liabilities, which consumed $2.4 million. The principal non-cash items are depreciation and amortization of $0.5 million and stock based deferred compensation of $0.1 million which is offset by $0.5 increase in a deferred tax asset. An increase in accounts receivable of $0.3 million, an increase in inventory of $2.3 million, an increase in prepaid expenses of $0.2 million and a decrease in accruals of $0.8 million in total consumed $3.6 million of cash. Other changes, principally an increase in accounts payable of $1.0 million generated cash of $1.2 million.

The increase in inventory is principally split between an increase in raw materials and an increase in work in process and finished goods. Certain raw materials have long lead time. Raw material increased as delivery dates on certain customer orders were delayed and materials for these orders were already in house. The Company is currently building a specialized

 

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piece of equipment with a long lead time. As a result, work in process has increase significantly, which is a significant factor in the total increase in work in process and finished goods. The decrease in accrued expenses is related to decrease in accrued bonuses and accrued product liability. Certain bonuses accrued at December 31, 2007 were paid during the first quarter. The decrease in accrued product liability is principally the result of making settlement payments against amounts which were also accrued at December 31. 2007. The increase in accounts payable is related to the increase in raw material inventory purchases.

Cash flows related to investing activities were not significant for the three months ended March 31, 2008.

Financing activities generated $1.4 million in cash for the three months ended March 31, 2008. An increase of $1.8 million in borrowings under the Company’s credit facilities was a source of cash. The increase borrowings were offset by note payments and a reduction of capital lease obligations that totaled $0.4 million.

This excerpt taken from the MNTX 10-Q filed Nov 13, 2008.

Liquidity and Capital Resources

Cash and cash equivalents were $0.2 million at September 30, 2008 compared to $0.6 million at December 31, 2007. As of September 30, 2008, the Company had approximately $3.9 million available to borrow under its credit facility with Comerica Bank. The interest rate on this facility was equal to prime plus .25 % (prime was 5.0% at September 30, 2008). The Company’s revolving credit agreement contains customary limitations, including limitations on acquisitions, dividends, repurchases of the Company’s stock and capital expenditures. It also requires the Company to have on the last date of the quarter a minimum “Tangible Effective Net Worth”, which is defined in the agreement, and 1.2 to 1 Debt Service Coverage Ratio, also defined in the agreement. (See Note 13 to our consolidated financial statements for a more detailed on the terms and conditions of our credit facilities) This credit facility matures on April 1, 2010.

Additionally, the Company’s Manitex Liftking subsidiary has a credit facility which allows for borrowings of up to $4.5 (CDN) million as of September 30, 2008. At September 30, 2008, the Company had approximately $1.5 million available to borrow under this Canadian facility. This credit facility allows the Company to borrow in either US or Canadian dollars. Canadian dollar borrowings bear interest at Canadian prime rate plus 1.5% (Canadian prime was 4.75% at September 30, 2008. Any borrowings under the facility in US dollars bears interest at the US prime rate (prime was 5.00% at September 30, 2008) plus .25%. For the purposes of determining availability under the credit line, borrowings in U.S. dollars are converted to Canadian dollar based on the most favorable spot exchange rate determined by the bank to be available to it at the relevant time.

The maximum amount outstanding is limited to the sum of 80% of eligible receivables and the lesser of 50% of eligible inventory or CDN $2.5 million. The indebtedness is collateralized by substantially all of Manitex Liftking ULC’s assets. This credit facility matures on April 1, 2010.

In connection with the Company’s acquisition of Liftking Industries’, the Company issued a note payable to the seller for CDN $3.2 million, or approximately USD $3.0 million. The note bears interest at the prime rate of interest charged by Comerica Bank for Canadian dollar loans plus 1%. The note requires quarterly principal payments of CDN $0.2 million plus interest commencing on April 1, 2007. The note is collateralized by a second priority security interest in substantially all of the assets of the Company’s Manitex Liftking subsidiary, which is subordinated to the security interest held by the Company’s senior secured lender, Comerica Bank. The note has remaining unpaid balance as of September 30, 2008 of CDN $1.8 million.

At September 30, 2008, the Company had a $2.0 million note payable to Comerica Bank. This note was assumed by the Company in connection with its acquisition of Manitex. This note bears interest at the rate of prime plus 1% and matures on April 1, 2010. Until June 30, 2008 the Company was not required to make principal payments, but was required to make interest payments on the first day of each month. Commencing on July 1, 2008, the Company is also required to make monthly principal payments of $0.05 million on the first day of each month. The bank has been granted security interest in substantially all the assets of the Company’s Manitex subsidiary.

Subsequent to September 30, 2008 both the U.S. and the Canadian prime rates were lowered twice. The U.S. prime rate which was 5.0% at September 30, 2008 was lowered to 4.5% on October 8, 2008 and again to 4.0% on October 29, 2008. The Canadian prime rate which was 4.75% at September 30, 2008 was lowered to 4.25% on October 15,

 

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2008 and again to 4.0% on October 22, 2008. Assuming interest rates are unchanged through December 31, 2008 and debt levels where the same as those outstanding at September 30, 2008 interest expense for the three months December 31, 2008 would decrease by approximately $0.04 million from the prior quarter.

The Company’s ability to meet its commitments and contractual obligations is dependent on the Company’s ability to either negotiate extensions of its current credit agreements, replace the existing credit agreements with a new credit agreement with acceptable terms or to raise additional equity or debt financing. There is no assurance that the Company will be successful in renegotiating its current credit facilities or consummating additional financing transactions.

The Company needs cash to meet its working capital needs as the business grows, to acquire capital equipment, and to fund acquisitions and debt repayment. We intend to use cash flows from operations and existing availability under the current revolving credit facilities to fund anticipated levels of operations for approximately the next 12 months. We will likely need to raise additional capital through debt or equity financings to support our growth strategy, which may include additional acquisitions. There is no assurance that such financing will be available or, if available, on acceptable terms.

2008

Operating activities consumed cash of $2.6 million for the nine months ended September 30, 2008. Net income of $1.9 million and non-cash items that totaled $1.2 million were offset by changes in assets and liabilities, which consumed $5.6 million. The principal non-cash items are depreciation and amortization of $1.5 million and stock based deferred compensation of $0.2 million which is offset by $0.5 increase in a deferred tax asset. An increase in accounts receivable of $2.9 million, an increase in inventory of $5.5 million, and a decrease in accruals of $1.5 million in total consumed $9.9 million of cash. Discontinued operations consumed an additional $0.1 million of cash, the result of the reversal of accrual for contract terminations. Other changes, principally an increase in accounts payable of $4.2 million generated cash of $4.4 million.

The increase in accounts receivable is due to an increase in sales between the third quarter 2008 and fourth quarter 2007 of $1.3 million and because days outstanding has increased by approximately two days. The increase in inventory (including the impact that changes in foreign currency exchange rates has on inventory at our Canadian subsidiary) is related to increases of $2.4 million, $0.2 million and $2.9 million for raw materials, work in process and finished goods, respectively. Certain raw materials have long lead time. Raw material inventory increased as delivery dates on certain customer orders were delayed and materials for these orders were already in house or on order. The raw material inventory on hand on September 30, 2008 has also increased as a result of recent supplier price increases. Although the Company builds nearly all of its cranes against firm customer orders, it has and continues to build a few lower capacity cranes as well as sky cranes for stock. Traditionally these cranes have sold from inventory shortly after they were completed. The period to sell stock cranes has lengthened and as a result this inventory has increases since December 31, 2007. The Company also includes inventories of bare chassis as a component of finished goods. The chassis inventory has increased approximately $1.3 million as the number of chassis in inventory has increased. The Company builds cranes on chassis supplied by the customer or by the Company. The increase in chassis inventory is largely the result of a substantial sales increase to a particular distributor, who has elected to have Manitex supply the chassis. The Company expects the chassis inventory to decline substantially in the fourth quarter. The Company is also reducing the number of cranes it is building for stock to further reduce inventory levels.

The decrease in accrued expenses is related to a decrease in accrued bonuses of $1.0, accrued product liability of $0.3 million and accrued warranty of $0.2 million. The accrual for bonuses decreased as bonuses accrued at December 31, 2007 were paid during the first quarter and because the provision for 2008 bonuses is significantly lower than the prior year provision. The decrease in accrued product liability is principally the result of making settlement payments against amounts which were also accrued at December 31, 2007. The decrease in accrued warranty is in part due to benefits derived from new quality improvement process instituted during the year. As a result defects are prevented or are identified and corrected before shipment occurs and which in turn lowers warranty expenses. Additionally, a disputed warranty claim which was previously accrued for $0.1 million was settled and paid. The increase in accounts payable is due to both an increase in inventory purchases and an increase in accounts payable days outstanding.

Cash flows related to investing activities consumed $0.3 million for the nine months ended September 30, 2008. Capital expenditures of $0.4 million were offset by proceeds on the sale of fixed assets of $0.1 million. During the nine months the Company purchased and installed consolidation software which cost $0.1 million. In addition, a number of fixed assets, none of which were individually significant, were purchased.

 

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Financing activities generated $2.4 million in cash for the nine months ended September 30, 2008. An increase of $4.0 million in borrowings under the Company’s credit facilities was a source of cash. The increase borrowings were offset by note payments and a reduction of capital lease obligations that totaled $1.5 million.

2007

Operating activities generated cash of $0.4 million for the nine months ended September 30, 2007. Net income of $0.2 million and non-cash items that totaled $2.0 million both sources of cash were partially offset by changes in assets and liabilities, which consumed $1.9 million. The principal non-cash items are depreciation and amortization of $1.6 million and an increase in inventory reserves of $0.4 million. An increase in accounts receivable of $1.1 million, a decrease in accounts payable of $2.9 million, an increase in prepaid expense of $0.2 million and a decrease in other current liabilities of $0.4 million, in total consumed $4.6 million of cash. A decrease in inventory of $1.9 million (excluding inventory acquired in the Noble Product Line acquisition) and an increase in accrued expense of $0.8 million generated cash of $2.5 million. The increase in accounts receivable is the result of higher sales in the third quarter of 2007 versus the fourth quarter of 2006.

The decrease in inventory is principally related to a decrease in inventory at Manitex Liftking. Manitex Liftking had acquired inventory at year end to support the manufacture a number of large transporters, which were shipped during the second quarter. Although a decrease in inventory contributed to the decrease in accounts payable, the more significant cause for the decrease relates to the timing of payments. An improved cash position, allowed the Company to pay its vendors more promptly.

Investing activities generated $1.1 million for the nine months ended September 30, 2007, which principally represents the proceeds from sale of the assets of the discontinued Testing and Assembly Equipment segment. The acquisition of Noble Product Line “(Noble”) assets was a non-cash transaction, in which the Company acquired the Noble assets in exchange for the forgiveness of $4.2 million that GT Distribution owed the Company. As a non-cash transaction, the assets acquired and the forgiveness of the liability are both excluded from the cash flow statement. See Note 4 to the consolidated financial statements.

Financing activities consumed $0.8 million in cash for the nine months ended September 30, 2007. An increase of $0.8 million in borrowings under the Company’s credit facilities, $1.9 million from the exercise of warrants and $8.3 million from the issuance of stock and warrants generated $11.0 million of cash. Total debt was reduced by $11.8 million as the note payable to the bank was reduced by $11.5 million along with a decrease in capital lease obligations of $0.3 million. The $10.1 million from exercise of warrants and the issuance of stock and warrants and the $1.1 million of proceeds received on the sale of assets of discontinued operations were the principal sources of funds used to pay down the bank note.

This excerpt taken from the MNTX 10-Q filed Aug 7, 2008.

Liquidity and Capital Resources

Cash and cash equivalents were $1.0 million at June 30, 2008 compared to $0.6 million at December 31, 2007. As of June 30, 2008, the Company had approximately $3.0 million available to borrow under its credit facility with Comerica Bank. The interest rate on this facility was equal to prime plus .25 % (prime was 5.00 at June 30, 2008). The Company’s revolving credit agreement contains customary limitations, including limitations on acquisitions, dividends, repurchases of the Company’s stock and capital expenditures. It also requires the Company to have on the last date of the quarter a minimum “Tangible Effective Net Worth”, which is defined in the agreement, and 1.2 to 1 Debt Service Coverage Ratio, also defined in the agreement. See Note 13 to our consolidated financial statements for a more detailed on the terms and conditions of our credit facilities. This credit facility matures on April 1, 2010.

Additionally, the Company’s Manitex Liftking subsidiary has a credit facility which allows for borrowings of up to $4.5 (CDN) million as of June 30, 2008. At June 30, 2008, the Company had approximately $1.7 million available to borrow

 

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under this Canadian facility. This credit facility allows the Company to borrow in either US or Canadian dollars. Canadian dollar borrowings bear interest at Canadian prime rate plus 1.5% (Canadian prime was 4.75% at June 30, 2008. Any borrowings under the facility in US dollars bears interest at the US prime rate (prime was 5.00% at June 30, 2008) plus .25%. For the purposes of determining availability under the credit line, borrowings in U.S. dollars are converted to Canadian dollar based on the most favorable spot exchange rate determined by the bank to be available to it at the relevant time.

The maximum amount outstanding is limited to the sum of 80% of eligible receivables and the lesser of 50% of eligible inventory or CDN $2.5 million. The indebtedness is collateralized by substantially all of Manitex Liftking ULC’s assets. This credit facility matures on April 1, 2010.

In connection with the Company’s acquisition of Liftking Industries’, the Company issued a note payable to the seller for CDN $3.2 million, or approximately USD $3.2 million. The note bears interest at the prime rate of interest charged by Comerica Bank for Canadian dollar loans plus 1%. The note requires quarterly principal payments of CDN $0.2 million plus interest commencing on April 1, 2007. The note is collateralized by a second priority security interest in substantially all of the assets of the Company’s Manitex Liftking subsidiary, which is subordinated to the security interest held by the Company’s senior secured lender, Comerica Bank. The note has remaining unpaid balance as of June 30, 2008 of CDN $2.2 million.

At June 30, 2008, the Company had a $2.1 million note payable to Comerica Bank. This note was assumed by the Company in connection with its acquisition of Manitex. This note bears interest at the rate of prime plus 1% and matures on April 1, 2010. Until June 30, 2008 the Company was not required to make principal payments, but was required to make interest payments on the first day of each month. Commencing on July 1, 2008, the Company is also required to make monthly principal payments of $0.05 million on the first day of each month. The bank has been granted security interest in substantially all the assets of the Company’s Manitex subsidiary.

At June 30, 2008, the Company had a note payable to a Bank Direct Capital Finance with a total remaining principal balance of $0.2 million. The note has a fixed interest rates of 5.99%. The note requires monthly payment of $54 thousand with the last payment becoming due in September 2008. The proceeds from the notes were used to pay annual premiums for certain insurance policies carried by the Company. The holder of the note has a security interest in the insurance policies it financed and has the right upon default to cancel these policies and receive any unearned premiums.

The Company’s ability to meet its commitments and contractual obligations is dependent on the Company’s ability to either negotiate extensions of its current credit agreements, replace the existing credit agreements with a new credit agreement with acceptable terms or to raise additional equity or debt financing. There is no assurance that the Company will be successful in renegotiating its current credit facilities or consummating additional financing transactions.

The Company needs cash to meet its working capital needs as the business grows, to acquire capital equipment, and to fund acquisitions and debt repayment. We intend to use cash flows from operations and existing availability under the current revolving credit facilities to fund anticipated levels of operations for approximately the next 12 months. We will likely need to raise additional capital through debt or equity financings to support our growth strategy, which may include additional acquisitions. There is no assurance that such financing will be available or, if available, on acceptable terms.

2008

Operating activities consumed cash of $1.0 million for the six months ended June 30, 2008. Net income of $1.6 million and non-cash items that totaled $0.6 million were offset by changes in assets and liabilities, which consumed $3.2 million. The principal non-cash items are depreciation and amortization of $1.0 million and stock based deferred compensation of $0.1 million which is offset by $0.5 increase in a deferred tax asset. An increase in accounts receivable of $0.9 million, an increase in inventory of $3.8 million, an increase in prepaid expenses of $0.3 million, and a decrease in accruals of $1.4 million in total consumed $6.5 million of cash. Discontinued operations consumed an additional $0.1 million of cash, the result of the reversal of accrual for contract terminations. Other changes, principally an increase in accounts payable of $3.3 million generated cash of $3.4 million.

The increase in accounts receivable is due to the fact that sales for the quarter ended June 28, 2008 were skewed toward the last month of the quarter and because days outstanding has increased by approximately four days. The increase in inventory is related to increases of $2.0 million, $0.8 million and $0.7 million for raw materials, work in process and finished goods, respectively. Certain raw materials have long lead time. Raw material inventory increased as delivery dates on certain customer orders were delayed and materials for these orders were already in house or on order. The raw material inventory on hand on June 30, 2008 has also increased as a result of recent supplier price increases. The Company is currently building a specialized carrier with a long lead time. As a result, work in process has increased. This specialized carrier is expected to be shipped in the third quarter of 2008. Although the Company builds nearly all of its cranes against firm customer orders, it has and continues to build a few lower capacity cranes for stock. Traditionally these cranes have sold from inventory shortly after they were completed. The period to sell stock cranes has lengthened and as a result the Company had a few stock crane units in finished goods inventory.

 

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The decrease in accrued expenses is related to a decrease in accrued bonuses and accrued product liability. Certain bonuses accrued at December 31, 2007 were paid during the first quarter. The decrease in accrued product liability is principally the result of making settlement payments against amounts which were also accrued at December 31, 2007. The increase in accounts payable is due to both an increase in inventory purchases and an increase in accounts payable days outstanding.

Cash flows related to investing activities consumed $0.2 million for the six months ended June 30, 2008. Capital expenditures of $0.3 million were offset by proceeds on the sale of fixed assets of $0.1 million. During the six months the Company purchased and installed consolidation software which cost $0.1 million. In addition, a number of fixed assets, none of which were individually significant, were purchased.

Financing activities generated $1.6 million in cash for the six months ended June 30, 2008. An increase of $2.3 million in borrowings under the Company’s credit facilities was a source of cash. The increase borrowings were offset by note payments and a reduction of capital lease obligations that totaled $0.7 million.

2007

Operating activities consumed cash of $2.4 million for the six months ended June 30, 2007. A net loss of $0.7 million and a change in assets and liabilities, which consumed $3.2 million, was partially offset by non-cash items that totaled $1.5 million. An increase in accounts receivable of $3.4 million, a decrease in accounts payable of $1.7 million, an increase in prepaid expense of $0.1 million and a decrease in other current liabilities of $0.2 million, in total consumed $5.4 million of cash. A decrease in inventory of $1.5 million, an increase in accrued expense of $0.6 million and a change in assets and liabilities of discontinued operations of $0.2 million generated cash of $2.3 million. The increase in accounts receivable is the result of higher sales in the second quarter of 2007. Inventory, which was increased in the first quarter in anticipation of higher sales in the second quarter, decreased as a result of higher sales in the second quarter of 2007. Accounts payable decreased to a large extent as invoices related to the previous inventory build became due and were paid. Non-cash items are principally comprised of $1.1 million of amortization and depreciation and a $0.5 million increase in inventory reserves.

Cash flows for investing activities for the six months ended June 30, 2007 were not significant.

Financing activities contributed $2.0 million in cash for the six months ended June 30, 2007. An increase of $2.3 million in borrowings under the Company’s credit facilities and $0.8 million generated from the exercise of warrants was off set by $0.2 million decrease in capital lease obligations and a reduction in notes payable of $0.9 million. The $0.8 million in cash received on the exercise of warrants was used to reduce the note payable to the bank.

This excerpt taken from the MNTX 10-Q filed May 13, 2008.

Liquidity and Capital Resources

Cash and cash equivalents were $0.3 million at March 31, 2008 compared to $0.4 million at December 31, 2007. As of March 31, 2008, the Company had approximately $3.2 million available to borrow under its credit facility with Comerica Bank. The interest rate on this facility was equal to prime plus .25 % (prime was 5.25% at March 31, 2008). The Company’s revolving credit agreement contains customary limitations, including limitations on acquisitions, dividends, repurchases of the Company’s stock and capital expenditures. It also requires the Company to have on the last date of the quarter a minimum “Tangible Effective Net Worth”, which is defined in the agreement as equity plus subordinated debt minus intangible assets and related party receivables. See Note 13 to our consolidated financial statements for a more detailed on the terms and conditions of our credit facilities. This credit facility matures on April 1, 2009. The Company is, however, currently working with the bank and expects to extend the maturity date of this credit facility.

 

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Additionally, the Company’s Manitex Liftking subsidiary has a credit facility which allows for borrowings of up to $4.5 (US) million as of March 31, 2008. At March 31, 2008, the Company had approximately CDN $1.9 million available to borrow under this Canadian facility. This facility bears interest at Canadian prime rate plus 1.5% (Canadian prime was 5.25% at March 31, 2008). The maximum amount outstanding is limited to the sum of 80% of eligible receivables and the lesser of 50% of eligible inventory or CDN $2,500. The indebtedness is collateralized by substantially all of Manitex Liftking ULC’s assets. This credit facility matures on April 1, 2009. The Company is, however, currently working with the bank and expects to extend the maturity date of this credit facility.

In connection with the Company’s acquisition of Manitex it issued a note to the former members of QVM for approximately $1.1 million. The note bears interest at the prime rate announced by Comerica Bank at its Detroit office on the last business day immediately preceding the applicable interest payment date. Interest is payable on the first day of each calendar quarter, commencing on September 1, 2007. The note matures on the earlier of (1) July 2, 2009, (2) a change in control as defined in the note, or (3) the Company’s receipt of cash proceeds of at least $25.0 million from the sale of its common stock or securities convertible or exchange for its common stock.

In connection with the Company’s acquisition of Liftking Industries’, the Company issued a note payable to the seller for CDN $3.2 million, or approximately USD $3.2 million. The note bears interest at the prime rate of interest charged by Comerica Bank for Canadian dollar loans plus 1%. The note requires quarterly principal payments of CDN $0.2 million plus interest commencing on April 1, 2008. The note payable is subject to a general security agreement which subordinates the seller’s security interest to the interest of the Company’s senior secured credit facility, but shall otherwise rank ahead of the seller’s other secured creditors. The note has remaining unpaid balance as of March 31, 2008 of CDN $2.2 million or approximately US $2.1 million.

At March 31, 2008, the Company had a $2.2 million note payable to Comerica Bank. This note was assumed by the Company in connection with its acquisition of Manitex. This note bears interest at the rate of prime plus 1% and matures on April 1, 2009. Interest is payable the first day of each month. The loan is secured by substantially all the assets of the Company’s Manitex subsidiary. The former members of QVM guaranteed the note until October 18, 2007 when the bank released the former members of QVM from their guarantees.

At March 31, 2008, the Company has two notes payable to a bank with a total remaining principal balance of $0.4 million. The notes have fixed interest rates of 6.25% and 5.99%. The first note requires monthly payment of $14 thousand and will be paid in full by June 2008. The second note requires monthly interest payment of $54 thousand and will be paid off by September 2008. The proceeds from the notes were used to pay annual premiums for certain insurance policies carried by the Company. The holder of the note has a security interest the insurance policies it financed and has the right upon default to cancel these policies and receive any unearned premiums.

The Company’s ability to meet its commitments and contractual obligations is dependent on the Company’s ability to either negotiate extensions of its current credit agreements, replace the existing credit agreements with a new credit agreement with acceptable terms or to raise additional equity or debt financing. There is no assurance that the Company will be successful in renegotiating its current credit facilities or consummating additional financing transactions.

The Company needs cash to meet its working capital needs as the business grows, to acquire capital equipment, and to fund acquisitions and debt repayment. We intend to use cash flows from operations and existing availability under the current revolving credit facilities to fund anticipated levels of operations for approximately the next 12 months. We will likely need to raise additional capital through debt or equity financings to support our growth strategy, which may include additional acquisitions. There is no assurance that such financing will be available or, if available, on acceptable terms.

2008

Operating activities consumed cash of $1.7 million for the three months ended March 31, 2008. Net income of $0.7 million and non-cash items that totaled $0.1 million were offset by changes in assets and liabilities, which consumed $2.4 million. The principal non-cash items are depreciation and amortization of $0.5 million and stock based deferred compensation of $0.1 million which is offset by $0.5 increase in a deferred tax asset. An increase in accounts receivable of $0.3 million, an increase in inventory of $2.3 million, an increase in prepaid expenses of $0.2 million and a decrease in accruals of $0.8 million in total consumed $3.6 million of cash. Other changes, principally an increase in accounts payable of $1.0 million generated cash of $1.2 million.

The increase in inventory is principally split between an increase in raw materials and an increase in work in process and finished goods. Certain raw materials have long lead time. Raw material increased as delivery dates on certain customer orders were delayed and materials for these orders were already in house. The Company is currently building a specialized piece of equipment with a long lead time. As a result, work in process has increase significantly, which is a significant factor in the total increase in work in process

 

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and finished goods. The decrease in accrued expenses is related to decrease in accrued bonuses and accrued product liability. Certain bonuses accrued at December 31, 2007 were paid during the first quarter. The decrease in accrued product liability is principally the result of making settlement payments against amounts which were also accrued at December 31. 2007. The increase in accounts payable is related to the increase in raw material inventory purchases.

Cash flows related to investing activities were not significant for the three months ended March 31, 2008.

Financing activities generated $1.4 million in cash for the three months ended March 31, 2008. An increase of $1.8 million in borrowings under the Company’s credit facilities was a source of cash. The increase borrowings were offset by note payments and a reduction of capital lease obligations that totaled $0.4 million.

2007

Operating activities consumed cash of $3.1 million for the quarter ended March 31, 2007. A net loss of $1.0 million and a change in assets and liabilities, which consumed $2.9 million, was partially offset by non-cash items that totaled $0.8 million. An increase of $1.3 million in inventory, a decrease of $1.5 million in accounts payable was offset by a change in assets and liabilities of discontinued operations that generated $0.4 million. Inventory increased in anticipation of increased sales. The change in assets and liabilities of discontinued operations is primarily accounted for by a $0.4 million increase in an accrual established in the quarter for costs related to sales of the discontinued operation. Non-cash items are principally comprised of $0.6 million of amortization and depreciation and a $0.3 million increase in inventory reserves.

Financing activities contributed $2.9 million in cash for the quarter ended March 31, 2007. An increase of $3.0 million in borrowings under the Company’s credit facilities off set by $0.1 million decrease in capital lease obligations account for the change.

This excerpt taken from the MNTX 10-K filed Mar 27, 2008.

Liquidity and Capital Resources

Cash and cash equivalents were $0.6 million at December 31, 2007 and December 31, 2006. As of December 31, 2007, the Company had approximately $4.8 million available to borrow under its merged credit facility. Additionally, the Company’s Manitex Liftking subsidiary had a credit facility which had approximately $2.6 of borrowing availability on December 31, 2007.

During 2007, the Company decreased its existing debt (including lines of credit, capital lease obligations and the current portion of notes payable and capital lease obligations) by $12.0 million. Total debt decreased from $37.0 million at December 31, 2006 to $25.0 million at December 31, 2007.

The Company was able to pay down debt as it:

 

   

Generated $8.2 million from the sale of stock and warrants in the 2007 private placement.

 

   

Generated $1.9 million from the exercise of warrants that existed at December 31, 2006,

 

   

Generated $1.1 million from the sale of discontinued unprofitable operations, and

 

   

Generated $1.1 million from operations, including the operating results of the unprofitable discontinued operation.

The Company needs cash to meet its working capital needs as the business grows, to acquire capital equipment, and to fund acquisitions and debt repayment. Cash flows from operations and existing availability under the current revolving credit facilities are available when the Company needs cash in the future. The maturity date for its merged credit facility, the Manitex Liftking credit facility and the note payable to the bank is April 1, 2009.

The Company’s revolving credit facility dated December 15, 2003, had an original maturity date of January 2, 2005. The maturity date has been extended numerous times in various increments and the maturity date is currently April 1, 2009. The agreement contains the customary limitations including, limitations on acquisitions, dividends, repurchase of the Company’s stock and capital expenditures. It also requires the Company to have on the last date of the quarter a minimum “Tangible Effective Net Worth”, which is defined in the agreement as equity plus subordinated debt minus intangible assets and related party receivables. The Company also has a $2.3 million note payable to Comerica Bank, which was due on September 10, 2006. The maturity date has been extended; the note is now due on April 1, 2009.

The Company’s ability to meet its commitments and contractual obligations is dependent on the Company’s ability to either negotiate extensions of its current credit agreements, replace the existing credit agreements with a new credit agreement with acceptable terms or to raise additional equity capital. Although management believes it has the ability to negotiate the necessary extension, to find new financing with acceptable terms, or to raise additional equity capital, there is no assurance that the Company will be successful in raising the necessary capital.

2007

Operating activities generated cash of $1.1 million for the year ended December 31, 2007, comprised of net earnings of $1.0 million, non-cash items totaling $2.4 million offset by an increase in working capital of $2.2 million. The non-cash items are principally composed of amortization and depreciation of $2.1 million, an increase in inventory reserves of $0.1 million, an increase of $0.1 million in a reserve for uncertain tax positions, and a $0.1 million non-cash expense for stock based compensation. The increase in working capital results primarily from an increase in accounts receivables of $1.8 million and a decrease in accounts payable of $4.7 million offset by a decrease in inventory of $3.4 million and an increase in accrued expense of $1.4 million. The increase in receivables is attributed to an increase in sales. Sales of $27.3 for the quarter ended December 31, 2007 were $6.7 million higher than the $20.6 million reported for the quarter ended December 31, 2006. The

 

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decrease in accounts payable correlates with the decrease in inventory. A faster payment cycle for accounts payable was a secondary factor which contributed to the decrease in accounts payable. Most of the decrease in inventory occurred in Manitex Liftking facility, located in Woodbridge, Ontario. Manitex Liftking at December 31, 2006 had purchased inventory and incurred labor and overhead costs for several large long-term specialized lifting equipment projects that had a longer manufacturing cycle. Inventory decreased in 2007, when the projects were completed and the items were shipped. The increase in accrued expense is primarily related to increases of $1.0 million, $0.2 million and $0.1 million in accrued bonuses, vacation and warranty, respectively.

Investing activities generated cash of $0.9 million. The sale of discontinued operations generated $1.1 million of cash. The Company spent $0.3 million to purchase equipment. The purchase of a semi-automatic multi-head welder is the only significant piece of equipment purchased in 2007.

Financing activities consumed $2.1 million. The sale of stock and warrants in the 2007 private placement provided $8.2 million. The exercise of warrants that were outstanding at December 31, 2006 provided another $1.9 million. The proceeds generated by the sale of stock, the exercise of warrants, the sales of discontinued operations and cash provided by operations was used to make principal payments of $11.7 million against notes payable. As a result of these principal payments, the note payable balance, including the current portion, decrease from $17.8 million at December 31, 2006 to $6.1 million at December 31, 2007. An additional $0.3 million was used to reduce capital lease obligations.

2006

Operating activities generated cash of $0.4 million for the year ended December 31, 2006. The Company’s net loss of $8.9 million was more than offset by non-cash items of $5.7 million, and a change in working capital of $3.7 million including $4.5 million related to discontinued operations. The non-cash items are principally composed of amortization and depreciation of $1.1 million and an impairment charge of $6.0 million offset by an increase in deferred taxes of $1.4 million, net of a valuation allowance. The increase in deferred taxes is principally related to $1.3 million tax benefit recorded in connection with the current year’s net loss. Against the background of the operating losses generated in recent history by the now discontinued Testing and Assembly Equipment segment operations based at Wixom, Michigan, the Company conducted a strategic review of these operations. In connection with the preparation of our 2006 year-end financial statements, the Board determined that certain assets used in connection with the former Testing & Assembly Equipment segment were impaired. Accordingly, the Company recorded an impairment loss of $6.6 million, which represents the excess of the carrying values of the assets over their fair values, less cost to sell. The impairment charge includes a $5.9 million non cash component relating to the write down of property, plant and equipment and patents. The decrease in working capital is principally related to discontinued operations, which generated $4.5 million of cash. The funds generated by discontinued operations was primarily the result of a lower accounts receivable balance at December 31, 2006 and $2.2 million decrease in cost in excess of billings. The decreases are related to the decline in revenues in the former Testing & Assembly equipment segment.

The Company used cash in investing activities of $4.0 million for year ended December 31, 2006. In 2006, the Company used $3.3 million to purchase Manitex and Manitex Liftking and also invested an additional $0.6 million in capital assets and patents which included $0.5 million related to discontinued operations.

Financing activities contributed $2.0 million in cash for the year ended December 31, 2006. Approximately $10.3 million was generated by the issuance of the Company stock through a sale of stock and warrants to institutional investors in a private placement. Cash available from the prior year’s initial public offering and funds raised in the private placement was used to reduce the Company’s line of credit by approximately $2.0 million and to reduce the $20.0 million bank note by $6.0 million to $14.0 million and to reduce capital lease obligations by $0.2 million.

 

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This excerpt taken from the MNTX 10-Q filed Nov 14, 2007.

Liquidity and Capital Resources

On September 10, 2007, the Company closed a $9.0 million private placement of its common stock (the “2007 Private Placement”) pursuant to the terms of a securities purchase agreement entered into among the Company and certain institutional investors on August 30, 2007 (the “2007 Securities Purchase Agreement”). Pursuant to the 2007 Securities Purchase Agreement, the Company issued 1,500,000 shares of its common stock. The Company also issued warrants to purchase 105,000 shares of the Company’s common stock to the investment banker who acted as its exclusive placement agent for the 2007 Private Placement. In connection with the 2007 Private Placement, the Company incurred investment banking fees of $0.6 million and legal fees and expenses of approximately $0.1 million. The Company’s net cash proceeds after fees and expenses were $8.3 million with $8.0 million and $0.2 million being allocated to common stock and warrants, respectively.

In July of 2007, the Company issued (a) an aggregate of 1,000 shares of its common stock to The Mitchell W. Howard Trust upon the exercise of a Series A Warrant, having an exercise price of $4.05 per share, issued to The Mitchell W. Howard Trust on November 15, 2006; (b) an aggregate of 1,000 shares of its common stock to The Mitchell W. Howard Trust upon the exercise of a Series B Warrant, having an exercise price of $4.25 per share, issued to The Mitchell W. Howard Trust on November 15, 2006; and (c) an aggregate of 246,000 shares of its common stock to three JLF entities upon the exercise of Series B Warrants, having an exercise price of $4.25 per share, issued to these JLF entities on November 15, 2006. Net proceeds from these warrant exercises were approximately $1.1 million.

Cash and cash equivalents were $1.3 million at September 30, 2007 compared to $0.6 million at December 31, 2006. As of September 30, 2007, the Company had approximately $2.5 million available to borrow under its credit facility with Comerica Bank. The interest rate on this facility was equal to prime plus .75 % at September 30, 2007 but decreased to prime plus .25% on October 18, 2007 (prime was 7.75% at September 30, 2007). On October 18, 2007, the Bank also increased the Company’s credit line to $18.5 million from $16.5 million which in turn increased the Company’s borrowing availability under its credit line. The Company’s revolving credit agreement contains customary limitations, including limitations on acquisitions, dividends, repurchases of the Company’s stock and capital expenditures. It also requires the Company to have on the last date of the quarter a minimum “Tangible Effective Net Worth”, which is defined in the agreement as equity plus subordinated debt minus intangible assets and related party receivables. See Note 13 to our consolidated financial statements for a more detailed on the terms and conditions of our credit facilities. In August of 2007, the Company reached an agreement with its bank to extend the maturity of this credit facility to April 1, 2009.

Additionally, the Company’s Manitex Liftking subsidiary has a credit facility which allows for borrowings of up to $4.5 (US) million as of September 30, 2007. At September 30, 2007, the Company had approximately CDN $2.7 million available to borrow under this Canadian facility. This facility bears interest at Canadian prime rate plus 2% at September 30, 2007 but decreased to at Canadian prime rate plus 1.5% on October 18, 2007 (Canadian prime was 6.25% at September 30, 2007).

 

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The maximum amount outstanding is limited to the sum of 80% of eligible receivables and the lesser of 50% of eligible inventory or CDN $2,500. The indebtedness is collateralized by substantially all of Manitex Liftking ULC’s assets. Effective August 9, 2007 the Company entered into Amendment No. 1 to this facility, which extended the maturity date until April 1, 2009.

In connection with the Company’s acquisition of Manitex it issued a note to the former members of QVM for approximately $1.1 million. The note bears interest at the prime rate announced by Comerica Bank at its Detroit office on the last business day immediately preceding the applicable interest payment date. Interest is payable on the first day of each calendar quarter, commencing on September 1, 2006. The note matures on the earlier of (1) July 2, 2009, (2) a change in control as defined in the note, or (3) the Company’s receipt of cash proceeds of at least $25.0 million from the sale of its common stock or securities convertible or exchange for its common stock.

In connection with the Company’s acquisition of Liftking Industries’, the Company issued a note payable to the seller for CDN $3.2 million, or approximately USD $3.2 million. The note bears interest at the prime rate of interest charged by Comerica Bank for Canadian dollar loans plus 1%. The note requires quarterly principal payments of CDN $0.2 million plus interest commencing on April 1, 2007. The note payable is subject to a general security agreement which subordinates the seller’s security interest to the interest of the Company’s senior secured credit facility, but shall otherwise rank ahead of the seller’s other secured creditors. The note has remaining unpaid balance as of September 30, 2007 of CDN $2.6 million or approximately US $2.6 million.

At September 30, 2007, the Company had a $2.6 million note payable to Comerica Bank. This note was assumed by the Company in connection with its acquisition of Manitex. This note bears interest at the rate of prime plus 1% and matures on April 1, 2009, pursuant to Amendment No. 3 to the note, which was effective August 9, 2007. Interest is payable the first day of each month. The loan is secured by substantially all the assets of the Company’s Manitex subsidiary. The former members of QVM guaranteed the note until October 18, 2007 when the bank released the former members of QVM from their guarantees.

The Company’s ability to meet its commitments and contractual obligations is dependent on the Company’s ability to either negotiate extensions of its current credit agreements, replace the existing credit agreements with a new credit agreement with acceptable terms or to raise additional equity or debt financing. There is no assurance that the Company will be successful in renegotiating its current credit facilities or consummating additional financing transactions.

The Company needs cash to meet its working capital needs as the business grows, to acquire capital equipment, and to fund acquisitions and debt repayment. We intend to use cash flows from operations and existing availability under the current revolving credit facilities to fund anticipated levels of operations for approximately the next 12 months. We will likely need to raise additional capital through debt or equity financings to support our growth strategy, which may include additional acquisitions. There is no assurance that such financing will be available or, if available, on acceptable terms.

2007

Operating activities generated cash of $0.4 million for the nine months ended September 30, 2007. Net income of $0.2 million and non-cash items that totaled $2.0 million both sources of cash were partially offset by changes in assets and liabilities, which consumed $1.9 million. The principal non-cash items are depreciation and amortization of $1.6 million and an increase in inventory reserves of $0.4 million. An increase in accounts receivable of $1.1 million, a decrease in accounts payable of $2.9 million, an increase in prepaid expense of $0.2 million and a decrease in other current liabilities of $0.4 million, in total consumed $4.6 million of cash. A decrease in inventory of $1.9 million (excluding inventory acquired in the Noble Product Line acquisition) and an increase in accrued expense of $0.8 million generated cash of $2.5 million. The increase in accounts receivable is the result of higher sales in the third quarter of 2007 versus the fourth quarter of 2006.

The decrease in inventory is principally related to a decrease in inventory at Manitex Liftking. Manitex Liftking had acquired inventory at year end to support the manufacture a number of large transporters, which were shipped during the second quarter. Although a decrease in inventory contributed to the decrease in accounts payable, the more significant cause for the decrease relates to the timing of payments. An improved cash position, allowed the Company to pay its vendors more promptly.

Investing activities generated $1.1 million for the nine months ended September 30, 2007, which principally represents the proceeds from sale of the assets of the discontinued Testing and Assembly Equipment segment. The acquisition of Noble Product Line “(Noble”) assets was a non-cash transaction, in which the Company acquired the Noble assets in exchange for the forgiveness of $4.2 million that GT Distribution owed the Company. As a non-cash transaction, the assets acquired and the forgiveness of the liability are both excluded from the cash flow statement. See Note 4

 

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Financing activities consumed $0.8 million in cash for the nine months ended September 30, 2007. An increase of $0.8 million in borrowings under the Company’s credit facilities, $1.9 million from the exercise of warrants and $8.3 million from the issuance of stock and warrants generated $11.0 million of cash. Total debt was reduced by $11.8 million as the note payable to the bank was reduced by $11.5 million along with a decrease in capital lease obligations of $0.3 million. The $10.1 million from exercise of warrants and the issuance of stock and warrants and the $1.1 million of proceeds received on the sale of assets of discontinued operations were the principal sources of funds used to pay down the bank note.

2006

In the nine months ended September 30, 2006, the Company consumed $2.0 million of cash. Operating activities generated cash of $1.8 million for the nine months ended September 30, 2006 which is primarily comprised of $1.4 million net loss, offset by non-cash items of $0.6 million and by changes in assets and liabilities that generated $2.6 million. An increase in deferred taxes is the principal non-cash item. A decrease in inventory of $1.3 million, a decrease in customer deposits of $0.1 million, an increase in accrued expenses of $0.2 million and a decrease in assets of the discontinued operation of $3.6 million in total generated $5.3 million of cash. An increase in accounts receivable of $1.8 million, an increase in prepaid expenses of $0.5 million and a decrease in accounts payable of $0.5 million in total consumed $2.7 million of cash.

A sales increase in the third quarter at Manitex was the cause for the increase in accounts receivable and the decrease in inventory. The $3.6 million decrease in assets of the discontinued operations is principally attributed to a $1.7 million decrease in accounts receivable and $2.0 million decrease in cost and estimated earnings in excess of billings. The decline in receivables and cost and estimated earnings in excess of billing is the result of decreased sales volume at the Testing and Assembly Equipment segment. The decrease in sale volume resulted in the Company decision to sell this segment in March of 2007.

Investing activities consumed $0.6 million for the nine months ended September 30, 2006. The Company invested $0.1 million in capital equipment and $0.1 million in patents and drawings. The $0.4 million remaining represents principally the purchase of capital assets in its now discontinued Testing and Assembly Equipment segment.

Cash flows from financing activities consumed $3.2 million of cash, as debt assumed in the Manitex acquisition was reduced by $3.2 million.

This excerpt taken from the MNTX 10-Q filed Aug 14, 2007.

Liquidity and Capital Resources

Cash and cash equivalents were $0.2 million at June 30, 2007 compared to $0.6 million at December 31, 2006. As of June 30, 2007, the Company had approximately $1.3 million available to borrow under its credit facility with Comerica Bank. The interest rate on this facility is equal to prime plus 1% (prime was 8.25% at June 30, 2007). The Company’s revolving credit agreement contains customary limitations, including limitations on acquisitions, dividends, repurchases of the Company’s stock and capital expenditures. It also requires the Company to have on the last date of the quarter a minimum “Tangible Effective Net Worth”, which is defined in the agreement as equity plus subordinated debt minus intangible assets and related party receivables. See Note 13 to our consolidated financial statements for a more detailed on the terms and conditions of our credit facilities. In August of 2007, the Company reached an agreement with its bank to extend the maturity of this credit facility to April 1, 2009.

Additionally, the Company’s Manitex Liftking subsidiary has a credit facility which allows for borrowings of up to CDN $3.5 million as of June 30, 2007. At June 30, 2007, the Company had approximately CDN $2.0 million available to borrow under this Canadian facility. This facility bears interest at Canadian prime rate plus 2%. The maximum amount outstanding is limited to the sum of 80% of eligible receivables and the lesser of 50% of eligible inventory or CDN$2,500. The indebtedness is collateralized by substantially all of Manitex Liftking ULC’s assets Effective as of August 9, 2007 the Company entered into Amendment No. 1 to this facility, which extended the maturity date until April 1, 2009 and increased the amount the Company can borrow under this facility to CDN $4.5 million.

In connection with the Company’s acquisition of Manitex it issued a note to the former members of QVM for approximately $1.1 million. The note bears interest at the prime rate announced by Comerica Bank at its Detroit office on the last business day immediately preceding the applicable interest payment date. Interest is payable on the first day of each calendar quarter, commencing on September 1, 2006. The note matures on the earlier of (1) July 2, 2009, (2) a change in control as defined in the note, or (3) the Company’s receipt of cash proceeds of at least $25.0 million from the sale of its common stock or securities convertible or exchange for its common stock.

In connection with the Company’s acquisition of Liftking Industries’, the Company issued a note payable to the seller for CDN$3.2 million, or approximately USD$3.0 million. The note bears interest at the prime rate of interest charged by Comerica Bank for Canadian dollar loans plus 1%. The note requires quarterly principal payments of CDN $200,000 plus interest commencing on April 1, 2007. The note payable is subject to a general security agreement which subordinates the seller’s security interest to the interest of the Company’s senior secured credit facility, but shall otherwise rank ahead of the seller’s other secured creditors. The note has remaining unpaid balance as of June 30, 2007 of CDN $2.8 million or approximately US $ 2.6 million.

At June 30, 2007, the Company had a $13.2 million note payable to Comerica Bank. This note was assumed by the Company in connection with its acquisition of Manitex. This note bears interest at the rate of prime plus 1% and matures on April 1, 2009, pursuant to Amendment No. 3 to the note, which was effective August 9, 2007. Interest is payable the first day of each month. The loan is secured by substantially all the assets of the Company’s Manitex subsidiary. The former members of QVM guaranteed the note.

The Company’s ability to meet its commitments and contractual obligations is dependent on the Company’s ability to either negotiate extensions of its current credit agreements, replace the existing credit agreements with a new credit agreement with acceptable terms or to raise additional equity or debt financing. There is no assurance that the Company will be successful in renegotiating its current credit facilities or consummating additional financing transactions.

The Company needs cash to meet its working capital needs as the business grows, to acquire capital equipment, and to fund acquisitions and debt repayment. We intend to use cash flows from operations and existing availability under the current revolving credit facilities to fund anticipated levels of operations for approximately the next 12 months. We will likely need to raise additional capital through debt or equity financings to support our growth strategy, which may include additional acquisitions. There is no assurance that such financing will be available or, if available, on acceptable terms.

2007

Operating activities consumed cash of $2.4 million for the six months ended June 30, 2007. A net loss of $0.7 million and a change in assets and liabilities, which consumed $3.2 million, was partially offset by non-cash items that totaled $1.5 million. An increase in accounts receivable of $3.4, a decrease in accounts payable of $1.7 million, an increase in prepaid expense of $0.1 and a decrease in other current liabilities of $0.2, in total consumed $5.4 million of cash. A decrease in inventory of $1.5 million, an increase in accrued expense of $0.6 million and a change in assets and liabilities of discontinued operations of $0.2 million generated cash of $2.3 million. The increase in accounts receivable is the result of higher sales in the second quarter of 2007. Inventory, which was increased in the first quarter in anticipation of higher sales in the second quarter, decreased as a result of higher sales in the second quarter of 2007. Accounts payable decreased to a large extent as invoices related to the previous inventory build became due and were paid. Non-cash items are principally comprised of $1.1 million of amortization and depreciation and a $0.5 million increase in inventory reserves.

Cash flows for investing activities for the six months ended June 30, 2007 were not significant.

 

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Financing activities contributed $2.0 million in cash for the six months ended June 30, 2007. An increase of $2.3 million in borrowings under the Company’s credit facilities and $0.8 million generated from the exercise of warrants was off set by $0.2 million decrease in capital lease obligations and a reduction in notes payable of $0.9 million. The $0.8 million in cash received on the exercise of warrants was used to reduce the note payable to the bank.

2006

In the six months ended June 30, 2006, the Company consumed $1.5 million of cash. Operating activities consumed cash of $1.1 million for the six months ended June 30, 2006 which is primarily comprised of $0.8 million net loss, and a $0.4 million increase in deferred taxes, a non-cash item. Investing activities consumed $0.3 million in the six months ended June 30, 2006. The now discontinued Testing and Assembly segment invested $0.3 million in capital equipment in the six months ended June 30, 2006.

This excerpt taken from the MNTX 10-Q filed Jun 1, 2007.

Liquidity and Capital Resources

Cash and cash equivalents were $0.4 million at March 31, 2007 compared to $0.6 million at December 31, 2006. As of March 31, 2007, the Company had approximately $1.2 million available to borrow under its credit facility with Comerica Bank. Additionally, the Company’s Manitex Liftking subsidiary has a credit facility which allows for borrowings of up to $3.5 million CAD. At March 31, 2007, the Company had approximately CAD $1.4 million available to borrow under this Canadian facility.

The Company needs cash to meet its working capital needs as the business grows, to acquire capital equipment, and to fund acquisitions and debt repayment. We intend to use cash flows from operations and existing availability under the current revolving credit facilities to fund anticipated levels of operations for approximately the next 12 months. We will likely need to raise additional capital through debt or equity financings to support our growth strategy, which may include additional acquisitions. There is no assurance that such financing will be available or, if available, on acceptable terms.

In the December 2006, the Company reached an agreement with its bank to extend the maturity of the Company’s $16.5 million credit facility and our $14.0 million note payable to April 1, 2008. The Company is currently in negotiations with its bank to further extend the due date of its credit facilities and note payable. The Company’s revolving credit agreement contains the customary limitations including limitations on acquisitions, dividends, repurchase of the Company’s stock and capital expenditures. It also requires the Company to have on the last date of the quarter a minimum “Tangible Effective Net Worth”, which is defined in the agreement as equity plus subordinated debt minus intangible assets and related party receivables. See Note 13 to our consolidated financial statements for a more detailed on the terms and conditions of our credit facilities.

The Company’s ability to meet its commitments and contractual obligations is dependent on the Company’s ability to either negotiate extensions of its current credit agreements, replace the existing credit agreements with a new credit agreement with acceptable terms or to raise additional equity or debt financing. There is no assurance that the Company will be successful in renegotiating its current credit facilities or consummating additional financing transactions.

2007

Operating activities consumed cash of $3.1 million for the quarter ended March 31, 2007. A net loss of $1.0 million and a change in assets and liabilities, which consumed $2.9 million, was partially offset by non-cash items that totaled $0.8 million. An increase of $1.8 million in inventory, a decrease of $1.6 million in accounts payable was offset by a change in assets and liabilities of discontinued operations that generated $0.4 million. Inventory increased in anticipation of increased sales. The change in assets and liabilities of discontinued operations is primarily accounted for by a $0.4 million increase in an accrual established in the quarter for costs related to sales of the discontinued operation. Non-cash items are principally comprised of $0.6 million of amortization and depreciation and a $0.3 million increase in inventory reserves.

Financing activities contributed $2.9 million in cash for the quarter ended March 31, 2007. An increase of $3.0 million in borrowings under the Company’s credit facilities off set by $0.1 million decrease in capital lease obligations account for the change.

2006

In the quarter ended March 31, 2006, the Company consumed $1.1 million of cash.

Operating activities consumed cash of $0.8 million for the quarter ended March 31, 2006 which is comprised of $0.4 million net loss, a $0.2 increase in deferred taxes, a non-cash item, and a consumption of $0.3 million of cash by discontinued operations.

Investing activities consumed $0.3 million in the quarter ended March 31, 2006. The now discontinued Testing and Assembly segment invested $0.3 million in capital equipment in the quarter ended March 31, 2007.

 

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This excerpt taken from the MNTX 10-K filed May 17, 2007.

Liquidity and Capital Resources

Cash and cash equivalents were $0.6 million at December 31, 2006 compared to $2.0 million at December 31, 2005. The decrease in cash and cash equivalents is principally attributed to the use of cash to reduce Manitex’s revolving credit facility. As of December 31, 2006, the Company had approximately $2.4 million available to borrow under its merged credit facility. Additionally, the Company’s Manitex Liftking subsidiary had credit facility which allows for borrowings up to $3.5 million CAD. At December 31, 2006, there were no outstanding borrowings against the Canadian facility.

The Company needs cash to meet its working capital needs as the business grows, to acquire capital equipment, and to fund acquisitions and debt repayment. Cash flows from operations and existing availability under the current revolving credit facilities are available when the Company needs cash in the future. In the December 2006, the Company reached an agreement with its bank to extend the maturity of the Company’s $16.5 million credit facility and our $14.0 million note payable to April 1, 2008.

The Company’s revolving credit facility dated December 15, 2003, had an original maturity date of January 2, 2005. The maturity date has been extended numerous times in various increments and the maturity date is currently April 1, 2008. The agreement contains the customary limitations including, but not limitations on acquisitions, dividends, repurchase of the Company’s stock and capital expenditures. It also requires the Company to have on the last date of the quarter a minimum “Tangible Effective Net Worth”, which is defined in the agreement as equity plus subordinated debt minus intangible assets and related party receivables. The Company also has a $14 million note payable to Comerica Bank, which was due on September 10, 2006. The maturity date has been extended; the note is now due on April 1, 2008.

The Company’s ability to meet its commitments and contractual obligations is dependent on the Company’s ability to either negotiate extensions of its current credit agreements, replace the existing credit agreements with a new credit agreement with acceptable terms or to raise additional equity capital. Although management believes it has the ability to negotiate the necessary extension, to find new financing with acceptable terms, or to raise additional equity capital, there is no assurance that the Company will be successful in raising the necessary capital.

 

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2006

Operating activities generated cash of $0.4 million for the year ended December 31, 2006. The Company’s net loss of $8.9 million was more than offset by non-cash items of $6.7 million, and a change in working capital of $2.7 million. The non-cash items are principally composed of amortization and depreciation of $1.6 million and an impairment charge of $6.6 million offset by an increase in deferred taxes of $1.4 million, net of a valuation allowance. The increase in deferred taxes is principally related to $1.3 million tax benefit recorded in connection with the current year’s net loss. In March 2007, the Company adopted a plan to dispose of the Testing & Assembly segment operations based in Wixom, Michigan and expects that the final sale and disposal of the assets will be completed in the year 2007. The Company determined that the carrying values of some of the underlying assets exceeded their fair values. Consequently, the Company recorded an impairment loss of $6.6 million, which represents the excess of the carrying values of the assets over their fair values, less cost to sell. (See note 26 to the consolidated financial statements) The decrease in working capital is principally the result of decreases of $2.2 million in cost in excess of billings. The decrease is related to the decline in revenues in the Testing & Assembly equipment segment.

The Company used cash in investing activities of $4.0 million for year ended December 31, 2006. In 2006, the Company used $3.3 million to purchase Manitex and Manitex Liftking and also invested an additional $0.6 million in capital assets and patents.

Financing activities contributed $2.0 million in cash for the year ended December 31, 2006. Approximately $10.3 million was generated by the issuance of the Company stock through a sale of stock and warrants to institutional investors in a private placement. Cash available from the prior year’s initial public offering and funds raised in the private placement was used to reduce the Company’s line of credit by approximately $2.0 million and to reduce the $20.0 million bank note by $6.0 million to $14.0 million and to reduce capital lease obligations by $0.2 million.

2005

The Company used cash in operations of $4.3 million for the year ended December 31, 2005. Net cash used by continuing operations in the 2005 period was primarily the result of increases in accounts receivable, costs and estimated earnings in excess of billings, inventories and our loss from operations.

The Company used cash in investing activities of $1.7 million for the year ended December 31, 2005. This was primarily the result of costs capitalized by us as we built a series of driveshaft assembly equipment with the intention to own and operate in support of our business plan to commence manufacturing of precision driveshafts.

Cash provided by financing activities of $8.1 million for the year ended December 31, 2005, was the result of our successful initial public offering which raised $15.1 million net of investment banking fees and expenses. Additionally, the Company generated approximately $1.0 million by borrowing against the line of credit. Approximately $8.0 million of the offering proceeds was used in repayment of the revolving credit facility. In conjunction with our 2005 initial public offering, subordinated debt totaling approximately $7.2 million was converted into 1,195,900 shares of common stock at $6.00 per share.

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