Maxim Crane Works has renegotiated its financial covenants and reiterated its intention to trade its way out of its financial difficulties.

North America’s largest crane hire company has a debt mountain which stood at $810.9m on 31 December 2001, has failed to make a net profit in the past three years, and last year experienced a 17.2% drop in earnings before interest, taxes, depreciation and amortisation (Ebitda).

For the year to 31 December 2001 total revenues increased 4.1% to $420.1m. Revenues from equipment rentals increased 7.8% to $394.4m, primarily due to acquisitions. Revenues from equipment sales fell 31.8% to $25.7m, mainly due to a decrease in sales volume for both new and used equipment sold as part of the company’s fleet management programme, as well as softer pricing.

As a percent of equipment rental revenues, gross profit from equipment rentals fell from 37.5% for 2000 to 30.5% for 2001. This decrease in gross profit margins was attributed by the company to increased operating costs, including labour costs and associated benefit costs, repair and maintenance costs and other direct operating costs, as well as higher depreciation expense on rental equipment. At the same time, decreases in equipment utilisation and soft industrial markets further resulted in the decreased gross margin, the company said.

Selling, general and administrative expenses (SG&A) increased 12.9% to $92.1m, with rising insurance costs in the second half of the year cited as a factor. As a percent of revenues, SG&A expenses increased to 21.9% for 2001 compared to 20.2% for 2000.

Ebitda decreased 17.2% to $100.2m. Ebitda from equipment rentals fell 15.6% to $98.7m.

Maxim also reports that it earned $800,000 from its AVS heavy lift joint venture with Mammoet. In 2000 it earned $300,000 from AVS.

The bottom line is that Maxim made a net loss of $42.2m in 2001, more than double the 2000 figure of $19.7m, and 1999’s $15.7m net loss.

Maxim’s capital expenditure on new equipment and acquisitions in 2001 was $50.1m, compared with $72.6m in 2000 and $139.6m in 1999. Of this, expenditure on cranes and equipment for hire was $45.3m in 2001, compared to $45.0m in 2000 and $117.8m in 1999. Proceeds from the sale of fixed assets, including rental equipment, were $13.6m in 2001, $10.2m in 2000 and $16.5m in 1999.

Despite its high debt level, the company was still in compliance with its financial covenants at the end of the year time but expected to breach them in the months ahead. It has renegotiated its debt and implemented a financial restructuring programme. This includes an amendment and modification to the senior credit facilities, the receipt of $8.0m from the issuance of paid-in-kind debt to Bain Capital during the second quarter of 2002 and a plan to reduce both direct and indirect costs combined with a reduction in the level of capital expenditures. The deal includes a reduction in the amount available under the revolving credit facility from $425m to $300m and tighter conditions on spending.

The company said that it intends to fund its working capital needs, capital expenditures and debt service requirements through cash flows generated from operations and borrowings under the senior credit facilities.