This excerpt taken from the MNTX 10-K filed Mar 25, 2009.
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 it markets a comprehensive line of boom trucks and sign cranes. Manitexs 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 Liftkings 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 Companys unique customer needs and requirements. The Companys specialized lifting equipment has met the particular needs of customers in various industries that include utility, ship building and steel mill industries. The foregoing operations comprise the Companys 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.
The Companys predecessor was founded in 1993. In October 2003, our predecessor company was purchased by Veri-Tek International, Corp., formerly known as Quantum-Veri-Tek, Inc., a Michigan corporation incorporated on October 17, 2003, and an affiliate of Quantum Value Partners, LP, pursuant to an asset purchase agreement. Following the acquisition of Quantum-Veri-Tek in 2003, the Companys single line of business was to design, develop, and build specialty Testing & Assembly Equipment for the automotive and heavy equipment industries that identifies defects through the use of signature analysis and in-process verification. We refer to this operation as our Testing & Assembly Equipment segment. On March 29, 2007, our Board of Directors approved a plan to sell our Testing & Assembly Equipment segments operating assets including its inventory, machinery, equipment and patents. On August 1, 2007, the assets used in connection with the Companys diesel engine testing equipment were sold to EuroMaint Industry, Inc., a Delaware corporation (EuroMaint). As of August 31, 2007, all operations of the former Testing & Assembly Equipment segment had ceased.
The period since 2006 has been a period of significant strategic change for the Company. In fiscal 2006, we completed two acquisitions that introduced boom trucks, sign cranes and lifting equipment into our operations as a new business segment. On July 31, 2007, the Company further expanded its Lifting Equipment segment by purchasing the Noble Forklift product line. The Noble Forklift product line is comprised of four rough terrain forklifts in several configurations, and is being produced in the Companys existing facilities located in
Woodbridge, Ontario and Georgetown, Texas. Although the revenues for the Noble Forklift product line were not significant in 2007, the Company believes that the acquisition will allow the Company to increase its market penetration in the future.
On May 27, 2008, Veri-Tek International, Corp. filed a Certificate of Amendment to its Articles of Incorporation changing its name to Manitex International, Inc. The name change was effective as of May 28, 2008.
On March 29, 2007, the Companys Board of Directors approved a plan to sell the Companys Testing & Assembly Equipment segment in order to focus managements attention and financial resources on the Companys 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.
In connection with the preparation of our 2006 year-end financial statements, the Board determined that certain assets used in connection with our Testing & Assembly Equipment segment were impaired. Accordingly, we recorded an impairment charge of $6.6 million (See Note 24 to our consolidated financial statements).
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 Companys diesel engine testing equipment business. EuroMaint also assumed and agreed to pay, perform and discharge when due certain obligations of the Company arising in connection with the operation of the Companys diesel engine testing equipment business. In addition to the assumption of those certain assumed liabilities, EuroMaint agreed to pay to the Company the aggregate purchase price of $1.1 million. This transaction was completed on August 1, 2007. As of August 31, 2007, all operations of the Companys Testing & Assembly Equipment segment operations had ceased. The Testing & Assembly Equipment segment operated from a leased facility. The lease termination date for this facility was August 31, 2007 (See Note 4 to our consolidated financial statements).
As a result of the Companys decision to sell the Testing & Assembly Equipment segment, the results of this operation have been reported as a discontinued operation for all periods presented in the Consolidated Financial Statements in accordance with FAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. As a result of discontinuing our Testing & Assembly Equipment segment, the Company operated in only a single business segment, Lifting Equipment until October 6, 2008. On that date, the Company determined that operations of its newly acquired crane distributor would be reported as a separate segment.
Summary of Acquisitions
Effective July 3, 2006, the Company completed the purchase of Manitex, Inc. (Manitex subsidiary) via an acquisition of all of the membership interests in Quantum Value Management, LLC (an entity owned by certain stockholders of the Company). On November 30, 2006, the Company, through its wholly owned subsidiary, Manitex Liftking, ULC, an Alberta unlimited liability corporation (Manitex Liftking), completed the acquisition (the Liftking Acquisition) of all of the operating assets of Liftking Industries, Inc., an Ontario, Canada corporation (Liftking). As the result of these two acquisitions, the Company became a leading provider of engineered lifting solutions including boom truck cranes, rough terrain forklifts and special mission oriented vehicles. Through the Companys Manitex subsidiary, it markets a comprehensive line of boom trucks and sign cranes. The Companys boom trucks and crane products are primarily used for industrial projects, energy exploration and infrastructure development, including roads, bridges and commercial construction. Through the Companys Manitex Liftking subsidiary, it sells a complete line of rough terrain forklifts and special mission oriented vehicles, as well as other specialized carriers, heavy material handling transporters and steel mill equipment. Manitex Liftkings rough terrain forklifts are used in both commercial and military applications.
On July 31, 2007, the Company entered into an asset purchase agreement with GT Distribution, LLC (GT Distribution), a related party, pursuant to which the Company acquired its Noble product line. The Noble product line, which is comprised of four rough terrain forklifts in several configurations, is produced in our two current production facilities, which are located in Woodbridge, Ontario and Georgetown, Texas. The results for the Noble Forklift product line acquisition have been included in the accompanying consolidated statement of operations from the date of the acquisition.
On October 6, 2008, the Company completed the acquisition of substantially all of the 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). Mr. Langevin, the Companys 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 Companys independent directors (the Special Committee) and the Audit Committee of the Companys 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.
Recent events in the credit markets and changes in economic climate
Historically, the demand for the Companys products depended upon the general economic conditions of the markets in which the Company competes. The Companys sales depend in part upon its customers replacement or repair cycles. Adverse economic conditions, including a decrease in commodity prices, has caused customers in the past to forego or postpone new purchases in favor of repairing existing machinery.
The distress in the financial markets that occurred in the later part of 2008 is unprecedented. 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. The deterioration in economic conditions is ongoing and the ultimate extent of the current recession and the timing of the recovery is unknown. The actions of the United States and other world governments to stimulate the world economy are also unprecedented. The United States stimulus package includes very significant appropriations for improving the countrys 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.
The above described events had an immediate significant adverse impact on the Company, including a very dramatic curtailment of new orders, as well as requests to delay delivery and, in some cases, the cancellation of existing orders. Some of our dealers were not able to access their existing credits lines which delayed their payments. It appears that our dealers currently have access to their existing credit lines or have been able to replace them with new lines. The Company does not currently expect the distress in the credit markets to result in the Company incurring any significant uncollectible accounts. The depth and length of the recession is unknown, however, and could result in dealers being unable to stay in business. The Company retains a security interest in the cranes it sells in the United States until payment is received, which the Company expects will mitigate the financial impact to it of dealers going out of business.
Based on a significant reduction in our backlog and anticipating the impact of economic conditions and longer sales cycles, we determined that swift management action was necessary to ensure that we balance operating activity 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 $5 million in annual expense reductions. The cost of implementing our expense reduction initiative are expected to range between $0.2 million and $0.3 million with $0.1 million recognized in the fourth quarter of 2008 and the remainder to be recognized in the first quarter of 2009. The specific actions we took 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 work weeks. Management determined that these actions, although difficult, were required to enable the Company to adjust to current conditions and position us to respond quickly when the market recovers. We have increased our focus on several new North American and international sales initiatives and supply chain cost reductions, as we rigorously pursue continued market share gains, margin improvement and profitability.
General Corporate Information
The Companys principal executive offices are located at 7402 W. 100th Place, Bridgeview, Illinois 60455 and our telephone number is (708) 430-7500. The Companys website address is www.manitexinternational.com. Information contained on our website is not incorporated by reference into this report and such information should not be considered to be part of this report.