Morris Industries Canada did not have enough cash to make payroll and meet its other obligations so its parent company the Morris Group applied to a Saskatoon Canada court to stave off any challenge from a bevy of creditors appointing a liquidator, and taking control of the company.
Court documents point to a raft of creditors that could apply to take control of Morris Industries with debts that include $26.6 million owed to secured creditors, another $10 million owed to other lenders, $4.4 millions of missed payments and $12.7 million to suppliers and various unsecured creditors.
More than $50 million is owed by Morris Industries at the initial count.
For a such well-known company manufacturing planter bars and air seeders, running since 1929, it’s a very disturbing turn of fortune.
Morris has a string of dealers selling their product range in the US and Canada, as well as Australia and Europe, but pointed in its court application to significant trading losses in recent years that has led to its current untenable situation.
Morris Industries was able to pinpoint a time-line where rising overheads and production costs occurred from an expansion program when introducing ShieldCore welding technology and the release of its Quantum Air Drill product line around 2018.
Morris Industries chief operating officer Kevin Adair said that initially the Quantum line was a big success for Morris in Canada and abroad.
However, the company revealed the Quantum drill openers developed problems, that in North America were dealt with through an upgrade program.
But in export markets – where the units came under more wear and tear with dryer soil conditions and a longer growing season – the problems called for changes to the design and eventually the complete replacement of the drill openers.
With the drill openers replacement cost accounting up to 40% of the original unit cost, it was this unexpectant expense that drained the company resources and led to a crisis point as to how the company could continue.
The resulting warranty issues called for “a significant capital investment far beyond any foreseeable estimates,” the company said.
The writing was on the wall by September 2019 when Morris implemented cost-cutting that included periodical shutdowns at their Yorkton SK, and Minnedosa MB Canadian plants, along with subsequent wage cuts to the assemblers workforce.
The situation was also compounded due to fewer orders flowing through as the in-paddock issues began scaring off new buyers, a company spokesperson said.
Morris was now at a stage where it had significant expenses tied up in completed equipment that required an additional 40% cost to replace the drill openers, as well as substantial work in progress and raw materials.
And the strength that allowed Morris to place product world-wide on floor plans for its dealers was now proving a weakness as carrying costs under this arrangement was adding up to further unplanned expense.
However, with the court action by Morris Industries staving off any immediate challenge, with an order granted to stay any proceedings until 27 March 2020.
This means the company can continue to operate in an effort to restructure and get the company’s finances in order.
In addition, the court also approved the Morris Group’s request for implementation of sales and investment solicitation process, implementation of a claims process, and for debtor in possession/interim financing.
A claims process was established to find out the amount of creditor claims against the companies as of January 8, 2020, which is the date of the initial order.
The company has advised all filed and admitted claims by March 2, 2020 will be considered under a potential plan of compromise and/or arrangement which the Morris Group may present to its creditors and stakeholders.
The Morris Group has been able to secure interim financing of $5.7 million from the Bank of Montreal.