Morris Material Handling has engaged financial advisers to explore how the business can be turned around or whether it should be sold.
Drastic measures were called for after the company announced a net loss of $98m for the year to 31 October 1999 on net sales down 7% to $294m. Demand and prices achievable are both depressed, the company said, but the key problem is the crippling debt burden inherited by new owners Chartwell Investments when it bought the company from Harnischfeger Industries in April 1998. Harnischfeger has since filed for Chapter 11 bankruptcy protection.
The net loss included $1.3m of one-off charges as Morris tries to turn itself around. However, the underlying scene looks problematic: the fall in sales, while not in itself drastic, follows a 10% fall in the previous year. Operating income collapsed to $8.4m, compared with $26.7m in the year to 31 October 1998 and $35m in 1997.
The company secured an extension on its credit facilities last year but patience now appears to be running out. The company anticipates defaulting on its bank credit agreement “for the foreseeable future” and has won a reprieve until 29 March only, to give it time to secure more borrowings.
Donaldson, Lufkin & Jenrette Securities Corp. has been asked to review what options lie ahead for Morris, one of the largest EOT crane manufacturers in the world.
A further sale – the second in three years – is not ruled out.
