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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission File Number: 001-38894

Mayville Engineering Company, Inc.

(Exact Name of Registrant as Specified in its Charter)

Wisconsin

39-0944729

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

715 South Street

Mayville, Wisconsin

53050

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (920) 387-4500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

   

Trading

Symbol(s)

   

Name of each exchange

on which registered

Common Stock, no par value

MEC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of July 28, 2023, the registrant had 20,392,594 shares of common stock, no par value per share, outstanding.

Table of Contents

Page

PART  I.

FINANCIAL INFORMATION

5

Item 1.

Financial Statements (Unaudited)

5

Condensed Consolidated Balance Sheets

5

Condensed Consolidated Statements of Comprehensive Income

6

Condensed Consolidated Statements of Cash Flows

7

Condensed Consolidated Statements of Shareholders’ Equity

8

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

31

Item 1.

Legal Proceedings

31

Items 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 5.

Other Information

31

Item 6.

Exhibits

32

Signatures

33

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements related to future events, business strategy, future performance, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek,” “anticipate,” “plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “potential,” “targeting,” “intend,” “could,” “might,” “should,” “believe” and similar expressions or their negative. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on management’s belief, based on currently available information, as to the outcome and timing of future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed in such forward-looking statements. Mayville Engineering Company, Inc. (MEC, the Company, we, our, us or similar terms) believes the expectations reflected in the forward-looking statements contained in this Quarterly Report on Form 10-Q are reasonable, but no assurance can be given that these expectations will prove to be correct. Forward-looking statements should not be unduly relied upon.

Important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to, those described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the SEC) on March 1, 2023, as such may be amended or supplemented in Part II, Item 1A of our subsequently filed Quarterly Reports on Form 10-Q (including this report) and the following:

Macroeconomic conditions, including inflation, rising interest rates and recessionary concerns, as well as ongoing supply chain challenges, labor availability and cost pressures, and the COVID-19 pandemic have had, and may continue to have, a negative impact on our business, financial condition, cash flows and results of operations (including future uncertain impacts);
risks relating to developments in the industries in which our customers operate;
risks related to scheduling production accurately and maximizing efficiency;
our ability to realize net sales represented by our awarded business;
failure to compete successfully in our markets;
our ability to maintain our manufacturing, engineering and technological expertise;
the loss of any of our large customers or the loss of their respective market shares;
risks related to entering new markets;
our ability to recruit and retain our key executive officers, managers and trade-skilled personnel;
volatility in the prices or availability of raw materials critical to our business;
manufacturing risks, including delays and technical problems, issues with third-party suppliers, environmental risks and applicable statutory and regulatory requirements;
our ability to successfully identify or integrate acquisitions;
our ability to develop new and innovative processes and gain customer acceptance of such processes;
risks related to our information technology systems and infrastructure;

3

geopolitical and economic developments, including foreign trade relations and associated tariffs;
results of legal disputes, including product liability, intellectual property infringement and other claims;
risks associated with our capital-intensive industry;
risks related to our treatment as an S Corporation prior to the consummation of our initial public offering of common stock (IPO); and
risks related to our employee stock ownership plan’s treatment as a tax-qualified retirement plan.

These factors are not necessarily all of the important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements. Other unknown or unpredictable factors could also cause actual results or events to differ materially from those expressed in the forward-looking statements. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements after the date on which any such statement is made, whether as a result of new information, future events or otherwise, except as required by federal securities laws.

4

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

(unaudited)

    

June 30, 

    

December 31, 

2023

2022

ASSETS

  

  

Cash and cash equivalents

$

90,125

$

127

Receivables, net of allowances for doubtful accounts of $551 at June 30, 2023
and $545 at December 31, 2022

 

69,066

 

58,001

Inventories, net

 

66,828

 

71,708

Tooling in progress

 

7,827

 

7,938

Prepaid expenses and other current assets

 

4,360

 

3,529

Total current assets

 

238,206

 

141,303

Property, plant and equipment, net

 

141,326

 

145,771

Assets held for sale

81

83

Goodwill

 

71,535

 

71,535

Intangible assets, net

 

40,333

 

43,809

Operating lease assets

33,929

36,073

Other long-term assets

 

3,192

 

2,007

Total assets

$

528,602

$

440,581

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

 

  

Accounts payable

$

52,354

$

53,735

Current portion of operating lease obligation

5,017

4,857

Accrued liabilities:

 

 

Salaries, wages, and payroll taxes

 

8,229

 

7,288

Profit sharing and bonus

 

1,499

 

6,860

Current portion of deferred compensation

273

18,062

Other current liabilities

 

11,333

 

11,646

Total current liabilities

 

78,705

 

102,448

Bank revolving credit notes

 

177,943

 

72,236

Operating lease obligation, less current maturities

29,745

31,891

Deferred compensation, less current portion

 

3,446

 

3,132

Deferred income tax liability

 

12,710

 

11,818

Other long-term liabilities

 

684

 

1,189

Total liabilities

$

303,233

$

222,714

Commitments and contingencies (see Note 8)

 

  

 

  

Common shares, no par value, 75,000,000 authorized, 21,829,453 shares issued at
June 30, 2023 and 21,645,193 at December 31, 2022

 

 

Additional paid-in-capital

 

203,423

 

200,945

Retained earnings

 

30,459

 

26,274

Treasury shares at cost, 1,458,655 shares at June 30, 2023 and 1,472,447 at
December 31, 2022

 

(8,513)

 

(9,352)

Total shareholders’ equity

 

225,369

 

217,867

Total

$

528,602

$

440,581

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5

Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(in thousands, except share amounts and per share data)

(unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

    

2022

    

2023

    

2022

Net sales

$

138,980

$

138,337

$

281,626

$

274,589

Cost of sales

 

122,885

 

120,079

 

249,154

 

241,449

Amortization of intangible assets

 

1,738

 

1,738

 

3,476

 

3,476

Profit sharing, bonuses, and deferred compensation

 

2,688

 

1,208

 

5,690

 

3,755

Employee stock ownership plan expense

 

 

1,330

 

 

1,820

Other selling, general and administrative expenses

 

7,396

 

6,396

 

14,363

 

12,121

Impairment of long-lived assets and gain on contracts

(906)

(2,089)

Income from operations

 

4,273

 

8,492

 

8,943

 

14,057

Interest expense

 

(1,968)

 

(765)

 

(3,626)

 

(1,332)

Loss on extinguishment of debt

(216)

(216)

Income before taxes

 

2,089

 

7,727

 

5,101

 

12,725

Income tax expense

 

475

 

1,798

 

916

 

2,974

Net income and comprehensive income

$

1,614

$

5,929

$

4,185

$

9,751

Earnings per share:

 

  

 

  

 

  

 

  

Basic

$

0.08

$

0.29

$

0.21

$

0.48

Diluted

$

0.08

$

0.29

$

0.20

$

0.47

Weighted average shares outstanding:

 

  

 

  

 

 

Basic

 

20,494,437

 

20,581,945

 

20,405,383

 

20,490,944

Diluted

 

20,827,728

 

20,650,551

 

20,789,175

 

20,807,677

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

6

Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Six Months Ended

June 30, 

    

2023

    

2022

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

4,185

$

9,751

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

Depreciation

 

12,415

10,975

Amortization

 

3,476

3,476

Allowance for doubtful accounts

 

6

168

Inventory excess and obsolescence reserve

 

41

87

Stock-based compensation expense

 

2,420

2,714

Gain on disposal of property, plant and equipment

 

(135)

(625)

Impairment of long-lived assets and gain on contracts

 

(2,089)

Deferred compensation

 

(17,475)

(4,637)

Loss on extinguishment of debt

216

Non-cash lease expense

2,144

2,482

Other non-cash adjustments

 

184

176

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

(11,071)

(15,973)

Inventories

 

4,839

(4,033)

Tooling in progress

 

111

(1,367)

Prepaids and other current assets

 

(897)

(1,561)

Accounts payable

 

(3,061)

9,275

Deferred income taxes

 

638

2,504

Operating lease obligations

(1,986)

(2,270)

Accrued liabilities

 

(1,915)

6,631

Net cash provided by (used in) operating activities

 

(5,865)

 

15,684

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

  

Purchase of property, plant and equipment

 

(6,320)

(26,351)

Proceeds from sale of property, plant and equipment

 

153

5,228

Net cash used in investing activities

 

(6,167)

 

(21,123)

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Proceeds from bank revolving credit notes

 

347,324

218,867

Payments on bank revolving credit notes

 

(241,618)

(210,414)

Repayments of other long-term debt

 

(575)

(547)

Payments of financing costs

 

(1,248)

Purchase of treasury stock

 

(1,661)

(2,323)

Payments on finance leases

 

(192)

(157)

Net cash provided by financing activities

 

102,030

 

5,426

Net increase (decrease) in cash and cash equivalents

 

89,998

 

(13)

Cash and cash equivalents at beginning of period

 

127

 

118

Cash and cash equivalents at end of period

$

90,125

$

105

Supplemental disclosure of cash flow information:

 

  

 

  

Cash paid for interest

$

3,383

$

999

Cash paid for taxes

$

278

$

450

Non-cash 401(k) contribution of treasury stock

$

2,500

$

Non-cash property, plant & equipment, net

$

2,283

$

5,633

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(in thousands)

(unaudited)

Shareholders' Equity

Additional 

Treasury 

Retained 

    

Paid-in-Capital

    

Shares

    

Earnings

    

Total

Balance as of December 31, 2022

$

200,945

$

(9,352)

$

26,274

$

217,867

Net income

2,571

2,571

401(k) plan contribution

 

2,500

 

2,500

Purchase of treasury stock

(661)

(661)

Stock-based compensation

 

1,066

 

1,066

Balance as of March 31, 2023

$

202,011

$

(7,513)

$

28,845

$

223,343

Net income

 

 

 

1,614

 

1,614

Purchase of treasury stock

(1,000)

(1,000)

Stock-based compensation

 

1,354

 

 

 

1,354

Stock options exercised

58

58

Balance as of June 30, 2023

$

203,423

$

(8,513)

$

30,459

$

225,369

Shareholders' Equity

Additional 

Treasury 

Retained 

    

Paid-in-Capital

    

Shares

    

Earnings

    

Total

Balance as of December 31, 2021

$

197,186

$

(6,462)

$

7,547

$

198,271

Net income

3,822

3,822

401(k) plan contribution

 

2,057

 

 

2,057

Purchase of treasury stock

(2,323)

(2,323)

Stock-based compensation

 

1,257

 

 

 

1,257

Balance as of March 31, 2022

$

198,443

$

(6,728)

$

11,369

$

203,084

Net income

 

 

 

5,929

 

5,929

Stock-based compensation

 

1,456

 

 

 

1,456

Balance as of June 30, 2022

$

199,899

$

(6,728)

$

17,298

$

210,469

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

8

Mayville Engineering Company, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands except share amounts, per share data, years and ratios)

(unaudited)

Note 1. Basis of presentation

The interim unaudited condensed consolidated financial statements of Mayville Engineering Company, Inc. and subsidiaries (MEC, the Company, we, our, us or similar terms) presented here have been prepared in accordance with the accounting principles generally accepted in the United States of America (GAAP) and with instructions to Form 10-Q and Article 10 of Regulation S-X. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and financial position for the interim unaudited periods presented. All intercompany balances and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These interim unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K. A summary of the Company’s significant accounting policies is included in the Company’s 2022 financial statements in the Annual Report on Form 10-K. The Company followed these policies in preparation of the interim unaudited Condensed Consolidated Financial Statements except for new accounting pronouncements adopted as described below.

Nature of Operations

MEC is a leading U.S.-based, vertically-integrated, value-added manufacturing partner providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. Founded in 1945 and headquartered in Mayville, Wisconsin, we are a leading Tier I U.S. supplier of highly engineered components to original equipment manufacturer (OEM) customers with leading positions in their respective markets. The Company operates 22 facilities located in Arkansas, Michigan, Mississippi, Ohio, Pennsylvania, Virginia, and Wisconsin. Our engineering expertise and technical know-how allow us to add value through every product redevelopment cycle (generally every three to five years for our customers).

Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes Accounting Standards Codification (ASC) 326, Financial Instruments – Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. For as long as the Company remains an emerging growth company (EGC), the new guidance is effective for annual reporting periods beginning after December 15, 2022. The Company adopted the new standard as of January 1, 2023. As our customer base is principally made of blue-chip OEMs with high credit ratings and our trade receivables are due within one year or less, the adoption of this standard did not have a material impact on our consolidated financial statements.

Note 2. Select balance sheet data

Inventory

Inventories are stated at the lower of cost, determined on the first-in, first-out method, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Work-in-process and finished goods are valued at production costs consisting of material, labor, and overhead.

9

Inventories as of June 30, 2023 and December 31, 2022 consist of:

June 30, 

December 31, 

    

2023

    

2022

Finished goods and purchased parts

$

31,069

$

44,728

Raw materials

 

26,998

 

17,003

Work-in-process

 

8,761

 

9,977

Total

$

66,828

$

71,708

Property, plant and equipment

Property, plant and equipment as of June 30, 2023 and December 31, 2022 consist of:

    

Useful Lives

    

June 30, 

    

December 31, 

 Years

2023

2022

Land

Indefinite

$

1,030

$

1,030

Land improvements

15-39

3,169

3,169

Building and building improvements

 

15-39

 

65,487

 

59,664

Machinery, equipment and tooling

 

3-10

 

264,307

 

250,110

Vehicles

 

5

 

4,360

 

4,359

Office furniture and fixtures

 

3-7

 

20,453

 

19,585

Construction in progress

 

N/A

 

13,091

 

26,435

Total property, plant and equipment, gross

 

371,897

 

364,352

Less accumulated depreciation

 

230,571

 

218,581

Total property, plant and equipment, net

$

141,326

$

145,771

Depreciation expense was $6,273 and $5,507 for the three months ended June 30, 2023 and 2022, respectively, and $12,415 and $10,975 for the six months ended June 30, 2023 and 2022, respectively.

At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company received a notification from the former fitness customer in February 2022 resulting in a change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company had committed to purchase, to meet obligations under the agreement with the former fitness customer as of December 31, 2021. As a result, at December 31, 2021, the Company recorded a long-lived asset impairment of $12,875.

During the three and six months ended June 30, 2022, the Company was able to cancel $906 and $2,089 respectively, of purchase commitments for property, plant and equipment relating to the former fitness customer that had previously been recorded in the Consolidated Statements of Comprehensive Income as an impairment of long-lived assets and loss on contracts as of December 31, 2021. The cancellation of loss contracts has resulted in the reversal of these amounts from other current liabilities in the Condensed Consolidated Balance Sheets and recorded in the Condensed Consolidated Statements of Comprehensive Income as an impairment of long-lived assets and gain on contracts for the three and six months ended June 30, 2022.

The Company adopted ASC 842 on January 1, 2022, classifying finance leases of $914 and $1,103 in property, plant and equipment on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively. Please refer to Note 4 – Leases for additional information.

Goodwill

There were no changes to the goodwill balance of $71,535 between December 31, 2022 and June 30, 2023.

10

Intangible Assets

The following is a listing of intangible assets, the useful lives in years (amortization period) and accumulated amortization as of June 30, 2023 and December 31, 2022:

Useful Lives 

June 30, 

December 31, 

    

Years

    

2023

    

2022

Amortizable intangible assets:

Customer relationships and contracts

9-12

$

78,340

$

78,340

Trade name

 

10

 

14,780

 

14,780

Non-compete agreements

 

5

 

8,800

 

8,800

Patents

 

19

 

24

 

24

Accumulated amortization

 

 

(65,422)

 

(61,946)

Total amortizable intangible assets, net

 

 

36,522

 

39,998

Non-amortizable brand name

 

 

3,811

 

3,811

Total intangible assets, net

$

40,333

$

43,809

Non-amortizable brand name is tested annually during the fourth quarter for impairment, or more frequently if triggering events occur indicating there may be impairment.

Changes in intangible assets between December 31, 2022 and June 30, 2023 consist of:

Balance as of December 31, 2022

    

$

43,809

Amortization expense

 

(3,476)

Balance as of June 30, 2023

$

40,333

Amortization expense was $1,738 for the three months ended June 30, 2023, and 2022, and $3,476 for the six months ended June 30, 2023 and 2022.

Future amortization expense is expected to be as followed:

Year ending December 31, 

    

2023 (remainder)

$

3,390

2024

$

5,192

2025

$

5,192

2026

$

5,192

2027

$

5,192

Thereafter

$

12,364

Note 3. Bank revolving credit notes

On June 28, 2023, we entered into an amended and restated credit agreement (the Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, as administrative agent (the Agent). The Credit Agreement provides for a $250,000 revolving credit facility, with a letter of credit sub-facility, and a swingline facility in an aggregate amount of $25,000. The Credit Agreement also provides the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month trailing Consolidated EBITDA through an accordion feature. All amounts borrowed under the credit agreement mature on June 28, 2028.

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale leaseback transactions; and exceed the limits on annual capital expenditures. The Credit Agreement also requires us to satisfy certain

11

financial covenants, including a minimum consolidated interest coverage ratio of 3.00 to 1.00 as well as a consolidated total leverage ratio not to exceed 3.50 to 1.00, although such leverage ratio can be increased in connection with certain acquisitions.

The Company incurred deferred financing costs of $1,248 associated with executing the Credit Agreement, which has been recorded as an other long-term asset in the Condensed Consolidated Balance Sheets and will be amortized over the duration of the agreement.

At June 30, 2023 our consolidated interest coverage ratio was 5.93 to 1.00 as compared to a covenant minimum of 3.00 to 1.00 under the Credit Agreement.

At June 30, 2023, our consolidated total leverage ratio was 1.61 as compared to a covenant maximum of 3.50 to 1.00 under the Credit Agreement.

Under the Credit Agreement, interest is payable quarterly at the adjusted secured overnight financing rate (SOFR) plus an applicable margin based on the current consolidated total leverage ratio. The interest rate was 7.69% and 5.69% as of June 30, 2023 and December 31, 2022, respectively. Additionally, the agreement has a fee on the average daily unused portion of the aggregate unused revolving commitments. This fee was 0.30% and 0.25% as of June 30, 2023 and December 31, 2022, respectively.

Prior to June 28, 2023, the Company maintained a credit agreement (Former Credit Agreement) with certain lenders and the Agent. The Former Credit Agreement provided for a $200,000 revolving credit facility, with a letter of credit sub-facility in an aggregate amount not to exceed $5,000, and a swingline facility in an aggregate amount of $20,000. The Former Credit Agreement also provided for an additional $100,000 of debt capacity through an accordion feature.

The Company was in compliance with all financial covenants of its credit agreements as of June 30, 2023 and December 31, 2022. The amount borrowed on the revolving credit notes was $177,943 and $72,236 as of June 30, 2023 and December 31, 2022, respectively.

Note 4. Leases

The Company has real property operating leases for office and light manufacturing space. Operating leases for the Company’s personal property consist of leases for office equipment, vehicles, forklifts and storage tanks for bulk gases. The Company recognizes a right-of-use (ROU) asset and a lease liability for operating leases based on the net present value of future minimum lease payments. Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term, including renewal periods that are considered reasonably certain.

The Company has finance leases for two laser cutting systems and three vehicles. The Company recognizes an ROU asset and a lease liability for finance leases based on the net present value of future minimum lease payments. Lease expense for the Company’s finance leases is comprised of the amortization of the ROU asset and interest expense recognized based on the effective interest method.

Variable lease expense is related to certain of the Company’s real property leases and personal property leases, and it generally consists of property tax and insurance components that are for the benefit of the lessor (real property leases) and variable overage fees (personal property leases) that are remitted as part of the Company’s lease payments.

12

The components of lease expense were as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

2022

2023

2022

Finance lease cost:

Amortization of finance lease assets

$

94

$

78

$

188

$

157

Interest on finance lease liabilities

10

 

11

21

 

22

Total finance lease expense

104

89

209

179

Operating lease expense

1,321

1,512

2,607

3,034

Short-term lease expense

131

139

270

318

Variable lease expense

48

 

61

117

 

108

Sublease income (1)

(404)

(146)

(1,035)

(146)

Total lease expense

$

1,200

$

1,655

$

2,168

$

3,493

(1)The Company subleased a portion of its Hazel Park, MI facility starting in June 2022.

Lease related supplemental cash flow information:

Six Months Ended

June 30, 

2023

    

2022

Cash paid for amounts included in the measurement of lease liabilities for finance leases:

Operating cash flows

$

21

$

22

Financing cash flows

$

192

$

157

Cash paid for amounts included in the measurement of lease liabilities for operating leases:

Operating cash flows

$

2,891

$

2,837

 

 

Right-of-use assets obtained in exchange for recorded lease obligations:

Operating leases

$

363

$

106

Finance leases

$

$

Note 5. Employee stock ownership plan

Under the Mayville Engineering Company, Inc. Employee Stock Ownership Plan (the ESOP), the Company can make annual discretionary contributions to the trust for the benefit of eligible employees in the form of cash or shares of common stock of the Company subject to the Board of Directors’ approval. For the three months ended June 30, 2023 and 2022, the Company’s estimated ESOP expense was $0 and $1,330, respectively. For the six months ended June 30, 2023 and 2022 the Company’s estimated ESOP expense was $0 and $1,820, respectively.

As of January 1, 2023, the Company amended the plan reducing the distribution period from five years to three years.

At various times following death, disability, retirement, termination of employment or the exercise of diversification rights, an ESOP participant is entitled to receive their ESOP account balance in accordance with various distribution methods as permitted under the policies adopted by the ESOP.

As of June 30, 2023 and December 31, 2022, the ESOP shares consisted of 4,062,583 and 5,684,879 in allocated shares, respectively.

Note 6. Retirement plans

The Mayville Engineering Company Inc. 401(k) Plan (the 401(k) Plan) covers substantially all employees meeting certain eligibility requirements. The 401(k) Plan is a defined contribution plan and is intended for eligible employees to defer tax-free

13

contributions to save for retirement. Employees may contribute up to 50% of their eligible compensation to the 401(k) Plan, subject to the limits of Section 401(k) of the Internal Revenue Code.

As of January 1, 2023, the Company implemented an employer match program to the 401(k) Plan. The Company now provides a 50% match for employee contributions, up to 6%. For the three and six months ended June 30, 2023, the Company’s employer match expense was $770 and $1,644, respectively. Additionally, the 401(k) Plan provides for employer discretionary profit-sharing contributions and the Board of Directors may authorize discretionary profit-sharing contributions (which are usually approved at the end of each calendar year). For the three months ended June 30, 2023 and 2022, the Company’s estimated discretionary profit-sharing expense was $0 and $1,083, respectively. For the six months ended June 30, 2023 and 2022, the Company’s estimated discretionary profit-sharing expense was $0 and $1,474, respectively.

Note 7. Income taxes

On a quarterly basis, the Company estimates its effective tax rate for the full fiscal year and records a quarterly income tax provision based on the anticipated rate. As the year progresses, the Company will refine its estimate based on facts and circumstances by each tax jurisdiction.

Income tax expense was $475 and $916, and the effective tax rate (ETR) was 22.73% and 17.96% for the three and six months ended June 30, 2023, respectively. Our ETR is different from the expected tax rate due to state taxes, non-deductible items, research and development credits and benefit from excess tax deductions related to share based compensation items.

For the three and six months ended June 30, 2022, income tax expense was estimated at $1,798 and $2,974 the ETR was 23.27% and 23.37%, respectively.

Uncertain Tax Positions

Based on the Company’s evaluation, it has been concluded that there is one tax position related to the research and development tax credit requiring recognition in the Company’s financial statements as of June 30, 2023. The Company does not anticipate that there will be a material change in the balance of the unrecognized tax benefits in the next 12 months. Any interest and penalties related to uncertain tax positions are recorded in income tax expense. No amounts have been recorded as tax expense for interest and penalties for the three and six months ended June 30, 2023, as the amount for the utilized portion for the research and development credit on the Wisconsin return is considered to be immaterial. At June 30, 2023 and December 31, 2022, a total of $429 and $384, respectively, of unrecognized tax benefits would, if recognized, impact the Company’s ETR.

The Company files income tax returns in the United States federal jurisdiction and in various state and local jurisdictions. Federal tax returns for tax years beginning January 1, 2019, and state tax returns beginning January 1, 2018, are open for examination.

Note 8. Contingencies

On August 4, 2022, the Company filed a lawsuit against Peloton Interactive, Inc. (“Peloton”) in the Supreme Court of the State of New York, New York County. The lawsuit arises from a March 2021 “Supply Agreement” between the parties, pursuant to which MEC was to manufacture and supply custom component parts for Peloton’s exercise bikes (the “Manufacturing Project”). In the lawsuit, the Company originally asserted two claims (1) breach and anticipatory repudiation of contract and (2) breach of the duty of good faith and fair dealing (pleaded in the alternative). In January 2023, in response to Peloton’s motion to dismiss, the court allowed the first claim to proceed and dismissed the alternative claim. In the remaining claim, MEC asserts that Peloton breached and anticipatorily repudiated the Supply Agreement by unilaterally cancelling the Manufacturing Project and refusing to pay MEC certain monthly fixed revenue payments owed under the terms of the Supply Agreement. The total amount for damages claimed is substantial but the amount and timing of the ultimate recovery is uncertain. As a result, any recovery from this litigation or settlement of this claim is a contingent gain and will be recognized if, and when, realized or realizable.

From time to time, the Company may be involved in various claims and lawsuits, both for and against the Company, arising in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, in management’s opinion, either the likelihood of loss is remote, or any reasonably possible loss associated with the resolution of such proceedings is not expected to have a material adverse impact on the consolidated financial statements.

14

Note 9. Deferred compensation

The Mayville Engineering Company Deferred Compensation Plan is available for certain employees designated to be eligible to participate by the Company and approved by the Board of Directors. Eligible employees may elect to defer a portion of his or her compensation for any plan year and the deferral cannot exceed 50% of the participant’s base salary and may include the participant’s annual short-term cash incentive up to 100%. The participant’s election must be made prior to the first day of the plan year.

An employer contribution will be made for each participant to reflect the amount of any reduced allocations to the ESOP and/or 401(k) employer contributions due solely to the participant’s deferral amounts, as applicable. In addition, a discretionary amount may be awarded to a participant by the Company.

Deferrals are assumed to be invested in an investment vehicle based on the options made available to the participant (which does not include Company stock).

The deferred compensation plan provides benefits payable upon separation of service or death. Payments are to be made 30 or 180 days after date of separation from service, either in a lump-sum payment or up to five annual installments as elected by the participant when the participant first elects to defer compensation.

The deferred compensation plan is non-funded, and all future contributions are unsecured in that the employees have the status of a general unsecured creditor of the Company and the agreements constitute a promise by the Company to make benefit payments in the future. During the three and six months ended June 30, 2023, eligible employees elected to defer compensation of $80 and $316, respectively. Eligible employees elected to defer compensation of $0 for the three and six months ended June 30, 2022. As of June 30, 2023 and December 31, 2022, the short-term portion accrued for all benefit years less than 12 months under this plan was $273 and $18,062, respectively. As of June 30, 2023 and December 31, 2022, the long-term portion accrued for all benefit years greater than 12 months under this plan was $3,446 and $3,132. These amounts include the initial deferral of compensation and were adjusted for changes in the value of investment options chosen by the participants. Total expense (credit) for the deferred compensation plan for the three months ended June 30, 2023 and 2022 was $169 and $(2,461), respectively. Total expense (credit) for the deferred compensation plan for the six months ended June 30, 2023 and 2022 was $729 and $(3,589), respectively. These expenses (credits) are included in profit-sharing, bonuses and deferred compensation on the Condensed Consolidated Statements of Comprehensive Income. Additionally, the Company made cash distributions of $17,562 and $1,048 for the six months ended June 30, 2023 and 2022, respectively.

Note 10. Self-Funded insurance

The Company is self-funded for the medical benefits provided to its employees and their dependents. Healthcare costs are expensed as incurred and are based upon actual claims paid, reinsurance premiums, administration fees, and estimated unpaid claims. Since March 31, 2020, the Company has an aggregate stop loss limit to mitigate risk. Expenses related to this were $5,133 and $3,388 for the three months ended June 30, 2023 and 2022, respectively, and $9,768 and $8,148 for the six months ended June 30, 2023 and 2022, respectively. An estimated accrued liability of $996 and $900 was recorded as of June 30, 2023 and December 31, 2022, respectively, for estimated unpaid claims and is included within other current liabilities on the Condensed Consolidated Balance Sheets.

Note 11. Segments

The Company applies the provisions of ASC 280, Segment Reporting. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete financial information is available. Based on the provisions of ASC 280, the Company has determined it has one operating segment. The Company does not earn revenues or have long-lived assets located in foreign countries.

Note 12. Fair value of financial instruments

Fair value provides information on what the Company may realize if certain assets were sold or might pay to transfer certain liabilities based upon an exit price. Financial assets and liabilities that are measured and reported at fair value are classified into a three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within the

15

valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data. Long-term debt is classified as a Level 2 fair value input.
Level 3 – Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be the Company’s own data and judgements about assumptions that market participants would use in pricing the asset or liability.

The following table lists the Company’s financial assets and liabilities accounted for at fair value by the fair value hierarchy:

Balance at

Fair Value Measurements at

June 30, 

Report Date Using

    

2023

    

(Level 1)

    

(Level 2)

    

(Level 3)

Deferred compensation liability

$

3,719

$

3,719

$

$

Total

$

3,719

$

3,719

$

$

Balance at

Fair Value Measurements at

December 31, 

Report Date Using

    

2022

    

(Level 1)

    

(Level 2)

    

(Level 3)

Deferred compensation liability

$

21,194

$

21,194

$

$

Total

$

21,194

$

21,194

$

$

Fair value measurements for the Company’s cash and cash equivalents are classified based upon Level 1 measurements because such measurements are based upon quoted market prices in active markets for identical assets.

Accounts receivable, accounts payable, long-term debt and accrued liabilities are recorded in the Condensed Consolidated Balance Sheets at cost and approximate fair value.

Deferred compensation liabilities are recorded at amounts due to participants at the time of deferral. Deferrals are invested in an investment vehicle based on the options made available to the participant, considered to be Level 1 and Level 2 on the fair value hierarchy, with the current balance all as Level 1. The change in fair value is recorded in the profit-sharing, bonuses, and deferred compensation line item on the Condensed Consolidated Statements of Comprehensive Income. The short-term and long-term balances due to participants are reflected on the current portion of deferred compensation and deferred compensation, less current portion, line items, respectively, on the Condensed Consolidated Balance Sheets.

The Company’s non-financial assets such as goodwill, intangible assets and property, plant, and equipment are re-measured at fair value when there is an indication of impairment and adjusted only when an impairment charge is recognized.

Note 13. Earnings Per Share

The Company computes earnings per share in accordance with ASC Topic 260, Earnings per Share. In accordance with ASC 260, outstanding options will be considered to have been exercised and outstanding as of the beginning of the period if the average market price of the common stock during the period exceeds the exercise price of the options (they are “in the money”), and the assumed exercise of the options do not have an anti-dilutive impact on earnings per share.

16

A reconciliation of basic and diluted net income per share attributable to the Company were as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2023

2022

2023

2022

Net income attributable to MEC

$

1,614

$

5,929

$

4,185

$

9,751

Average shares outstanding

20,494,437

20,581,945

20,405,383

20,490,944

Basic income per share

$

0.08

$

0.29

$

0.21

$

0.48

Average shares outstanding

20,494,437

20,581,945

20,405,383

20,490,944

Effect of dilutive share-based compensation

333,291

68,606

383,792

316,733

Total potential shares outstanding

20,827,728

20,650,551

20,789,175

20,807,677

Diluted income per share

$

0.08

$

0.29

$

0.20

$

0.47

Options in the money that were not included in the computation of diluted earnings per share because they would have had an anti-dilutive impact on earnings per share were as follows:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

    

2023

    

2022

Stock options

219,885

247,278

Note 14. Revenue Recognition

Contract Assets and Contract Liabilities

The Company has contract assets and contract liabilities, which are included in tooling in progress and other current liabilities on the Condensed Consolidated Balance Sheets, respectively. Contract assets include products where the Company has satisfied its performance obligation, but receipt of payment is contingent upon delivery. Contract liabilities include deferred tooling revenue, where the performance obligation was not met. The performance obligation is satisfied when the tooling is completed and the customer signs off through the Product Part Approval Process or other documented customer acceptance. Cost of goods sold is recognized and released from the balance sheet when control of the tooling promised under contract is transferred to the customer.

The Company’s contracts with customers are short-term in nature; therefore, revenue is typically recognized, billed and collected within a 12-month period. The following table reflects the changes in our contract assets and liabilities during the six months ended June 30, 2023:

Contract

Contract

    

Assets

    

Liabilities

As of December 31, 2022

$

7,938

$

6,141

Net activity

(111)

(600)

As of June 30, 2023

$

7,827

$

5,541

17

Disaggregated Revenue

The following tables represent a disaggregation of revenue by product category and end market:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Product Category

    

2023

    

2022

    

2023

    

2022

Outdoor sports

$

2,379

$

2,522

$

4,684

$

5,049

Fabrication

84,172

83,038

171,174

165,271

Performance structures

26,846

28,197

53,521

57,157

Tube

19,468

19,488

39,820

37,796

Tank

11,070

8,915

22,189

17,464

Total

143,935

142,160

291,388

282,737

Intercompany sales elimination

(4,955)

(3,823)

(9,762)

(8,148)

Total, net sales

$

138,980

$

138,337

$

281,626

$

274,589

Three Months Ended

Six Months Ended

June 30, 

June 30, 

End Market

2023

2022

2023

2022

Commercial vehicle

$

56,075

$

55,130

$

115,230

$

105,995

Construction & access

 

26,522

29,388

53,029

59,132

Powersports

 

23,995

22,379

48,093

44,954

Agriculture

 

13,444

15,367

27,895

30,615

Military

8,910

5,363

17,479

10,534

Other

10,033

10,710

19,899

23,360

Total, net sales

$

138,980

$

138,337

$

281,626

$

274,589

Note 15. Concentration of major customers

The following customers accounted for 10% or greater of the Company’s recorded net sales or net trade receivables:

Net Sales

Net Sales

Accounts Receivable

Three Months Ended

Six Months Ended

As of

As of

June 30, 

June 30, 

June 30, 

December 31, 

    

2023

    

2022

    

2023

    

2022

    

2023

    

2022

Customer

A

 

15.6

%

18.3

%  

15.6

%

18.2

%  

12.7

%  

11.0

%  

 

B

 

11.5

%

11.9

%  

11.8

%

11.5

%  

10.0

%  

<10

%  

 

C

 

15.6

%

16.1

%  

15.5

%

15.9

%  

10.4

%  

<10

%  

 

D

 

<10

%

<10

%  

<10

%

<10

%  

10.2

%  

12.6

%  

 

E

<10

%

<10

%  

<10

%

<10

%  

10.0

%  

<10

%  

Note 16. Stock based compensation

The Mayville Engineering Company, Inc. 2019 Omnibus Incentive Plan provides the Company the ability to grant monetary payments based on the value of its common stock, up to 2,000,000 shares.

On April 20, 2021, shareholders of the Company approved an amendment to the 2019 Omnibus Incentive Plan increasing the number of shares of common stock authorized for issuance by 2,500,000 shares.

The Company recognizes stock-based compensation using the fair value provisions prescribed by ASC 718, Compensation – Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-

18

based instrument. For units, fair value is equivalent to the adjusted closing stock price at the date preceding the date of grant. The Black-Scholes option pricing model is utilized to determine fair value for options.

Cancellations and forfeitures are accounted for as incurred.

Stock awards were granted on June 26, 2023, April 18, 2023, March 13, 2023, February 28, 2023, January 25, 2023, July 19, 2022, April 19, 2022 and February 28, 2022.

During the six months ended June 30, 2023, 219,343 units vested. For the same period, 195,264 options vested with a weighted average strike price of $11.67. During the six months ended June 30, 2022, 271,992 units vested. For the same period, 512,927 options vested with a strike price of $9.18.

As of June 30, 2023, 1,299,713 options remained outstanding with a weighted average strike price of $10.51 and a weighted average contractual life of 6.97 years remaining.

The Company’s stock-based compensation expense by award type is summarized as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

    

2022

    

2023

    

2022

Unit awards

874

874

$

1,589

$

1,626

Option awards

 

480

 

582

 

831

 

1,088

Stock based compensation expense, net of tax

$

1,354

$

1,456

$

2,420

$

2,714

A roll-forward of unrecognized stock-based compensation expense is displayed in the table below. Unrecognized stock-based compensation expense as of June 30, 2023 will be expensed over the remaining requisite service period from which individual award values relate, up to July 19, 2025.

    

Units

    

Options

    

Total

Balance as of December 31, 2022

$

1,739

$

1,050

$

2,789

Grants

3,560

2,585

6,145

Forfeitures

(211)

(83)

(294)

Expense

(715)

(351)

(1,066)

Balance as of March 31, 2023

$

4,373

$

3,201

$

7,574

Grants

785

785

Forfeitures

(48)

(48)

Expense

(874)

(480)

(1,354)

Balance as of June 30, 2023

$

4,236

$

2,721

$

6,957

19

Note 17. Common Equity

At June 30, 2023 the authorized stock of the Company consisted of 75,000,000 shares of common stock without par value.

Changes in outstanding common shares are summarized as follows:

Shares

Outstanding

Shares as of December 31, 2021

20,335,934

Treasury stock purchases

(200,000)

Common stock issued (including share-based compensation impact)

396,757

Balance as of June 30, 2022

20,532,691

Shares

Outstanding

Balance as of December 31, 2022

20,172,746

Treasury stock purchases

(100,726)

Common stock issued (including share-based compensation impact)

298,778

Balance as of June 30, 2023

20,370,798

Note 18. Subsequent events

The Company has evaluated subsequent events since June 30, 2023, the date of these financial statements. There were no material events or transactions discovered during this evaluation that requires recognition or disclosure in the financial statements, except as set forth below.

On July 1, 2023, the Company acquired 100% of the equity interests of Mid-States Aluminum (MSA) for $95,945, subject to adjustments for the amount of cash, indebtedness, net working capital and certain expenses of MSA as of the closing. MSA is a leading manufacturer of custom aluminum extrusion and fabrications that also offers related services including design, engineering, anodizing and finishing, assembly and packaging. At the closing of the acquisition, the Company applied an estimate of the adjustments and paid total net consideration of $90,002 which was held in escrow at the current period end. The Company financed the acquisition by borrowing under its Credit Agreement. See Note 3 – Bank Revolving Credit Notes for additional details. Following the closing, the parties will determine the actual adjustments as of the closing and reconcile the resulting final purchase price with the estimated purchase price. The Company has incurred one-time transaction related costs of $899 as of June 30, 2023, related to this acquisition. These costs were associated with legal and professional services and were recognized as other selling, general and administrative expenses on the Condensed Consolidated Statements of Comprehensive Income. The Company is in the process of completing the initial accounting for these acquisitions, and as such, required disclosures will be presented in future periods.

20

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in the understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance. This discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Such statements involve risks and uncertainties. Our actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors, including those set forth in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 and “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in Part II Item 1A. of this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 and our unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item I of this Quarterly Report on Form 10-Q. In this discussion, we use certain non-GAAP financial measures. Explanation of these non-GAAP financial measures and reconciliation to the most directly comparable GAAP financial measures are included in this Management Discussion and Analysis of Financial Condition and Results of Operations. Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.

All amounts are presented in thousands except share amounts, per share data, years and ratios.

Overview

MEC is a leading U.S.-based, vertically-integrated, value-added manufacturing partner providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. We have developed long-standing relationships with our blue-chip customers based upon a high level of experience, trust and confidence.

Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.

Macroeconomic Conditions

The broader market dynamics over the past few years have resulted in impacts to the Company, including supply chain constraints affecting some of our customers, material cost inflation and inflationary pressures on wages and benefits due to labor availability. The Company expects some of these dynamics to continue in 2023 and could continue to have an impact on demand, material costs and labor.

How We Assess Performance

Net Sales. Net sales reflect sales of our components and products net of allowances for returns and discounts. In addition to the current macroeconomic conditions, several factors affect our net sales in any given period, including weather, timing of acquisitions and the production schedules of our customers. Net sales are recognized at the time of shipment or at delivery to the customer.

Manufacturing Margins. Manufacturing margins represent net sales less cost of sales. Cost of sales consists of all direct and indirect costs used in the manufacturing process, including raw materials, labor, equipment costs, depreciation, lease expenses, subcontract costs and other directly related overhead costs. Our cost of sales is directly affected by the fluctuations in commodity prices, primarily sheet steel and aluminum, but these changes are largely mitigated by contractual agreements with our customers that allow us to pass through these price variations based upon certain market indexes.

Depreciation and Amortization. We carry property, plant and equipment on our balance sheet at cost, net of accumulated depreciation. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the asset. The periodic expense related to leasehold improvements and intangible assets is depreciation and amortization expense, respectively. Leasehold improvements are depreciated over the lesser of the life of the underlying asset or the remaining lease term. Our intangible assets were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets.

21

Other Selling, General, and Administrative Expenses. Other selling, general and administrative expenses consist primarily of salaries and personnel costs for our sales and marketing, finance, human resources, information systems, administration and certain other managerial employees and certain corporate level administrative expenses such as incentive compensation, audit, accounting, legal and other consulting and professional services, travel, and insurance.

Other Key Performance Indicators

EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin

EBITDA represents net income before interest expense, provision for income taxes, depreciation and amortization. EBITDA Margin represents EBITDA as a percentage of net sales for each period.

Adjusted EBITDA represents EBITDA before stock-based compensation expense, MSA acquisition related costs, loss on extinguishment of debt, field replacement claim, Hazel Park transition and legal costs due to the former fitness customer and impairment charges on long-lived assets and inventory and gain on contracts specifically purchased to meet obligations under the agreement with our former fitness customer. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of net sales for each period. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. We present EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin as management uses these measures as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.

Our calculation of EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to the similarly named measures reported by other companies. Potential differences between our measures of EBITDA and Adjusted EBITDA compared to other similar companies’ measures of EBITDA and Adjusted EBITDA may include differences in capital structure and tax positions.

The following table presents a reconciliation of net income and comprehensive income, the most directly comparable measure calculated in accordance with GAAP, to EBITDA and Adjusted EBITDA, and the calculation of EBITDA Margin and Adjusted EBITDA Margin for each of the periods presented.

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

    

2022

    

    

2023

    

2022

    

Net income and comprehensive income

$

1,614

$

5,929

$

4,185

$

9,751

Interest expense

 

1,968

 

765

 

 

3,626

 

1,332

 

Provision for income taxes

 

475

 

1,798

 

 

916

 

2,974

 

Depreciation and amortization

 

8,011

 

7,245

 

 

15,891

 

14,451

 

EBITDA

 

12,068

 

15,737

 

 

24,618

 

28,508

 

Loss on extinguishment of debt (1)

 

216

 

 

 

216

 

 

MSA acquisition related costs (2)

 

899

 

 

 

899

 

 

Stock-based compensation expense (3)

 

1,354

 

1,456

 

 

2,420

 

2,714

 

Field replacement claim (4)

490

490

Hazel Park transition and legal costs due to former fitness customer (5)

 

272

 

1,889

 

 

495

 

3,816

 

Impairment of long-lived assets and gain on contracts (6)

 

 

(906)

 

 

 

(2,089)

 

Adjusted EBITDA

$

15,299

$

18,176

$

29,138

$

32,949

Net sales

$

138,980

$

138,337

$

281,626

$

274,589

EBITDA Margin

 

8.7

%  

 

11.4

%  

 

8.7

%  

 

10.4

%  

Adjusted EBITDA Margin

 

11.0

%  

 

13.1

%  

 

10.3

%  

 

12.0

%  

(1)Unamortized debt issue costs written off from the prior five-year credit agreement attributable to lenders that are no longer included in the amended and restated credit agreement or decreased their capacity in the amended and restated credit agreement.
(2)Transaction costs, primarily legal and professional services, related to the acquisition of MSA.

22

(3)Non-cash employee compensation based on the value of common stock issued pursuant to the 2019 Omnibus Incentive Plan.
(4)Represents a one-time charge related to a COVID related sourcing issue that caused the company to change suppliers and ultimately lead to a product being produced outside of customer specifications. These costs are not expected to be incurred on an ongoing basis and therefore are not indicative of ongoing operations.
(5)Costs incurred to re-purpose the Hazel Park facility from products for the former fitness customer use to general use for the time period through July 31, 2022, and legal costs associated with the enforcement of the Company’s supply contract with the former fitness customer.
(6)Gain on the sale of fixed assets that were previously impaired as a result of the change in forecast of our former fitness customer.

Consolidated Results of Operations

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Three Months Ended June 30, 

 

2023

2022

Increase (Decrease)

 

% of Net 

% of Net 

Amount

 

    

Amount

    

Sales

    

Amount

    

Sales

    

Change

    

% Change

Net sales

$

138,980

100.0

%  

$

138,337

100.0

%  

$

643

0.5

%

Cost of sales

122,885

88.4

%  

120,079

86.8

%  

2,806

2.3

%

Manufacturing margins

16,095

11.6

%  

18,258

13.2

%  

(2,163)

(11.8)

%

Amortization of intangible assets

 

1,738

 

1.3

%  

1,738

 

1.3

%  

 

%

Profit sharing, bonuses and deferred compensation

 

2,688

 

1.9

%  

1,208

 

0.9

%  

1,480

 

122.5

%

Employee stock ownership plan expense

%

1,330

1.0

%

(1,330)

N/A

Other selling, general and administrative expenses

 

7,396

 

5.3

%  

6,396

 

4.6

%  

1,000

 

15.6

%

Impairment of long-lived assets and gain on contracts

 

 

%  

(906)

 

(0.7)

%  

906

 

N/A

Income from operations

 

4,273

 

3.1

%  

8,492

 

6.1

%  

(4,219)

 

(49.7)

%

Interest expense

 

(1,968)

 

1.4

%  

(765)

 

0.6

%  

1,203

 

157.3

%

Loss on extinguishment of debt

(216)

0.2

%  

%

(216)

N/A

Provision for income taxes

 

475

 

0.3

%  

1,798

 

1.3

%  

(1,323)

 

(73.6)

%

Net income and comprehensive income

$

1,614

 

1.2

%  

$

5,929

 

4.3

%  

$

(4,315)

 

(72.8)

%

EBITDA

$

12,068

 

8.7

%  

$

15,737

 

11.4

%  

$

(3,669)

 

(23.3)

%

Adjusted EBITDA

$

15,299

 

11.0

%  

$

18,176

 

13.1

%  

$

(2,877)

 

(15.8)

%

Net Sales. Net sales were $138,980 for the three months ended June 30, 2023 as compared to $138,337 for the three months ended June 30, 2022, an increase of $643, or 0.5%. This increase was primarily driven by a combination of increased sales volumes within our commercial vehicle, powersports and military end markets and continued price discipline, partially offset by supply chain challenges affecting some of our customers, lower material price pass-throughs to customers and softening demand in our construction and small agriculture end markets.

Manufacturing Margins. Manufacturing margins were $16,095 for the three months ended June 30, 2023 as compared to $18,258 for the three months ended June 30, 2022, a decrease of $2,163, or 11.8%. The decrease was primarily driven by unabsorbed fixed costs associated with new project launches, a one-time field replacement claim, higher employee healthcare expenses and lower scrap income.

Manufacturing margin percentages were 11.6% for the three months ended June 30, 2023, as compared to 13.2% for the three months ended June 30, 2022, a decrease of 1.6%. The decrease was attributable to the items discussed in the preceding paragraph.

Amortization of Intangibles Assets. Amortization of intangible assets were $1,738 for the three months ended June 30, 2023 and 2022.

Profit Sharing, Bonuses and Deferred Compensation Expenses. Profit-sharing, bonuses, and deferred compensation expenses were $2,688 for the three months ended June 30, 2023 as compared to $1,208 for the three months ended June 30, 2022, an increase of $1,480, or 122.5%. The increase was primarily due to lower deferred compensation expense during the prior year period related to fluctuations within the financial markets.

23

Employee Stock Ownership Plan Expense. Employee stock ownership plan estimated expense was $0 for the three months ended June 30, 2023 as compared to $1,330 for the three months ended June 30, 2022, a decrease of $1,330 as the Company transitioned to a 401(k) company match beginning January 1, 2023.

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses were $7,396 for the three months ended June 30, 2023 as compared to $6,396 for the three months ended June 30, 2022, an increase of $1,000, or 15.6%. The increase was predominantly attributable to professional fees related to the Company acquiring MSA.

Impairment of Long-Lived Assets and Gain on Contracts. At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company received a notification from this customer in February 2022 resulting in a change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company committed to purchase, to meet obligations under the agreement with the former fitness customer as December 31, 2021. The notification informed the Company that it did not forecast any demand for any products or parts that were the subject of the agreement between the Company and the customer for the remainder of the agreement’s term, which ends in March 2026. Given the circumstances, GAAP required the Company to assess whether the assets were impaired. As a result of this assessment, the Company recorded an impairment on the assets specifically purchased to meet obligations under the agreement with the former fitness customer. As a result, the Company recorded an impairment of long-lived assets and loss on contracts of $16,151 in the fourth quarter of 2021.

During the three months ended June 30, 2022, the Company was able to cancel $906 of purchase commitments for property, plant and equipment relating to the former fitness customer that had previously been recorded as an impairment of long-lived assets and loss on contracts at December 31, 2021. The cancellation of purchase commitments resulted in the reversal of this amount and the recording of a gain on contracts.

Interest Expense. Interest expense was $1,968 for the three months ended June 30, 2023 as compared to $765 for the three months ended June 30, 2022, an increase of $1,203, or 157.3%. The change is due to higher interest rates and an increase in borrowings.

Provision for Income Taxes. Income tax expense was $475 for the three months ended June 30, 2023 as compared to $1,798 for the three months ended June 30, 2022. The decrease of $1,323 is primarily due to higher net income and comprehensive income in the prior year period. Please reference Note 7 – Income Taxes of the Condensed Consolidated Financial Statements for further details.

Due to the factors described in the preceding paragraphs, net income, comprehensive income, EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin decreased during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

24

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Six Months Ended June 30, 

 

2023

2022

Increase (Decrease)

 

% of Net 

% of Net 

Amount

 

    

Amount

    

Sales

    

Amount

    

Sales

    

Change

    

% Change

Net sales

$

281,626

100.0

%  

$

274,589

100.0

%  

$

7,037

2.6

%

Cost of sales

249,154

88.5

%  

241,449

87.9

%  

7,705

3.2

%

Manufacturing margins

32,472

11.5

%  

33,140

12.1

%  

(668)

(2.0)

%

Amortization of intangible assets

 

3,476

 

1.2

%  

3,476

 

1.3

%  

 

%

Profit sharing, bonuses and deferred compensation

 

5,690

 

2.0

%  

3,755

 

1.4

%  

1,935

 

51.5

%

Employee stock ownership plan expense

%

1,820

0.7

%

(1,820)

N/A

Other selling, general and administrative expenses

 

14,363

 

5.1

%  

12,121

 

4.4

%  

2,242

 

18.5

%

Impairment of long-lived assets and gain on contracts

 

 

%  

(2,089)

 

(0.8)

%  

2,089

 

N/A

Income from operations

 

8,943

 

3.2

%  

14,057

 

5.1

%  

(5,114)

 

36.4

%

Interest expense

 

(3,626)

 

1.3

%  

(1,332)

 

0.5

%  

2,294

 

172.2

%

Loss on extinguishment of debt

(216)

0.1

%  

%  

216

N/A

Provision for income taxes

 

916

 

0.3

%  

2,974

 

1.1

%  

(2,058)

 

69.2

%

Net income and comprehensive income

$

4,185

 

1.5

%  

$

9,751

 

3.6

%  

$

(5,566)

 

57.1

%

EBITDA

$

24,618

 

8.7

%  

$

28,508

 

10.4

%  

$

(3,890)

 

(13.6)

%

Adjusted EBITDA

$

29,138

 

10.3

%  

$

32,949

 

12.0

%  

$

(3,811)

 

(11.6)

%

Net Sales. Net sales were $281,626 for the six months ended June 30, 2023 as compared to $274,589 for the six months ended June 30, 2022 for an increase of $7,037, or 2.6%. The increase was primarily driven by a combination of increased sales volume within our commercial vehicle, powersports and military end markets and continued price discipline, partially offset by supply chain challenges impacting some of our customers and softening demand in our construction and small agriculture end markets.

Manufacturing Margin. Manufacturing margins were $32,472 for the six months ended June 30, 2023 as compared to $33,140 for the six months ended June 30, 2022, an decrease of $668, or 2.0%. This decrease was driven by unabsorbed fixed costs associated with new project launches, a one-time field replacement claim, higher employee healthcare expenses and lower scrap income, slightly offset by the above-mentioned volume growth and commercial price actions.

Manufacturing margin percentages were 11.5% for the six months ended June 30, 2023 as compared to 12.1% for the six months ended June 30, 2022, a decrease of 0.6%. The decrease was attributable to the items discussed in the preceding paragraph.

Amortization of Intangibles Assets. Amortization of intangible assets were $3,476 for the six months ended June 30, 2023 and 2022.

Profit Sharing, Bonuses and Deferred Compensation Expenses. Profit-sharing, bonuses, and deferred compensation expenses were $5,690 for the six months ended June 30, 2023 as compared to $3,755 for the six months ended June 30, 2022, an increase of $1,935, or 51.5%. The increase was primarily due to less deferred compensation expense during the prior year period due to fluctuations within the financial markets, slightly offset by the Company’s 401(k) company match program being higher than the prior year period discretionary 401(k) accrual.

Employee Stock Ownership Plan Expense. Employee stock ownership plan estimated expense was $0 for the six months ended June 30, 2023 as compared to $1,820 for the six months ended June 30, 2022, a decrease of $1,820 as the Company transitioned to a 401(k) company match as of January 1, 2023.

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses were $14,363 for the six months ended June 30, 2023 as compared to $12,121 for the six months ended June 30, 2022, an increase of $2,242 or 18.5%. The increase was predominantly attributable to increasing salaries, wages and benefits, recruiting fees and higher professional fees related

25

to the Company preparing to be Sarbanes-Oxley Act Section 404(b) compliant for 2024 and the transaction costs related to the acquisition of MSA.

Impairment of Long-Lived Assets and Gain on Contracts. At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company received a notification from this customer in February 2022 resulting in a change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company committed to purchase, to meet obligations under the agreement with the former fitness customer as December 31, 2021. The notification informed the Company that it did not forecast any demand for any products or parts that were the subject of the agreement between the Company and the customer for the remainder of the agreement’s term, which ends in March 2026. Given the circumstances, GAAP required the Company to assess whether the assets were impaired. As a result of this assessment, the Company recorded an impairment on the assets specifically purchased to meet obligations under the agreement with the former fitness customer. Consequently, the Company recorded an impairment of long-lived assets and loss on contracts of $16,151 in the fourth quarter of 2021.

During the six months ended June 30, 2022, the Company was able to cancel $2,089 of purchase commitments for property, plant and equipment relating to the former fitness customer that had previously been recorded as an impairment of long-lived assets and loss on contracts at December 31, 2021. The cancellation of purchase commitments resulted in the reversal of this amount and the recording of a gain on contracts.

Interest Expense. Interest expense was $3,626 for the six months ended June 30, 2023 as compared to $1,332 for the six months ended June 30, 2022, an increase of $2,294, or 172.2%. The change is due to higher interest rates and average debt levels as compared to the prior year period.

Provision for Income Taxes. Income tax expense was $916 for the six months ended June 30, 2023 as compared to $2,974 for the six months ended June 30, 2022. The decrease of $2,058 is primarily due to higher net income and comprehensive income in the prior year period. Please reference Note 7 – Income Taxes of the Condensed Consolidated Financial Statements for more specifics. As of June 30, 2023, our federal NOL carryforward was $21,210 driven by the pretax losses incurred in prior years. The NOL does not expire and will be used to offset future pretax income. We estimate our long-term effective tax rate to be approximately 27%, based on current tax regulations.

Due to the factors described in the preceding paragraphs, net income, comprehensive income, EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin decreased during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

Liquidity and Capital Resources

Cash Flows Analysis

Six Months Ended

June 30, 

Increase (Decrease)

    

2023

    

2022

    

$ Change

    

% Change

    

Net cash provided by (used in) operating activities

$

(5,865)

$

15,684

(21,549)

(137)

%

Net cash used in investing activities

 

(6,167)

 

(21,123)

 

14,956

71

%

 

Net cash provided by financing activities

 

102,030

 

5,426

 

96,604

1,780

%

 

Net change in cash

$

89,998

$

(13)

$

90,011

692,392

%

Operating Activities. Cash used by operating activities was $5,865 for the six months ended June 30, 2023, as compared to cash provided by of $15,684 for the six months ended June 30, 2022. Of the $21,549 decrease in operating cash flows, $17,562 is due to a payout of deferred compensation to a retired Company executive. The remaining decrease of $3,987 as compared to the prior year period is largely driven by a decrease in accounts payable, resulting from reduced spend on capital expenditures, partially offset by accounts receivable and inventory decreasing due to strong cash collections and lower raw material pricing, respectively, as compared to the prior year period. Additionally, a decrease in accrued liabilities due to the Company implementing a match program in the 401(k) Plan requiring the employer contribution to be paid concurrently with payroll. In the prior year period, a discretionary employer contribution was accrued throughout the year and paid after the year ended December 31, 2022.

26

Investing Activities. Cash used in investing activities was $6,167 for the six months ended June 30, 2023, as compared to $21,123 for the six months ended June 30, 2022. The $14,956 decrease in cash used in investing activities was mainly driven by the completion of the capital investment in the Company’s Hazel Park, MI facility, at the end of 2022.

Financing Activities. Cash provided by financing activities was $102,030 for the six months ended June 30, 2023, as compared to $5,426 for the six months ended June 30, 2022. The $96,604 increase was mainly due to the withdrawal of funds used to purchase MSA which was held in escrow as of the end of the current period. Additionally, under our share repurchase program, the Company purchased $1,661 of common stock in the first six months of 2023 as compared to $2,323 of its common stock in the first six months of 2022. The Company’s decision to repurchase additional shares in 2023 will depend on business conditions, free cash flow generation, other cash requirements and stock price. See Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information regarding share repurchases.

Amended and Restated Credit Agreement

On June 28, 2023, we entered into an amended and restated credit agreement (the Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, the Agent. The Credit Agreement provides for a $250,000 revolving credit facility, with a letter of credit sub-facility, and a swingline facility in an aggregate amount of $25,000. The Credit Agreement also provides for the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month trailing Consolidated EBITDA through an accordion feature. All amounts borrowed under the credit agreement mature on June 28, 2028.

Borrowings under the Credit Agreement bear interest at a fluctuating SOFR plus an applicable margin based on the current consolidated total leverage ratio (which may be adjusted for certain reserve requirements), plus 1.25% to 2.75% depending on the current Consolidated Total Leverage Ratio (as defined in the Credit Agreement). Under certain circumstances, we may not be able to pay interest based on SOFR. If that happens, we will be required to pay interest at the Base Rate, which is the sum of (a) the higher of (i) the Prime Rate (as publicly announced by the Agent from time to time), (ii) the Federal Funds Rate plus 0.50%, and (iii) Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.00%. The Credit Agreement also includes provisions for determining a replacement rate when SOFR is no longer available.

At June 30, 2023, the interest rate on outstanding borrowings under the Revolving Loan was 7.69%. We had availability of $72,057 under the revolving credit facility at June 30, 2023.

We must pay a commitment fee of 0.20% to 0.35% per annum on the average daily unused portion of the aggregate unused revolving commitments under the Credit Agreement. We must also pay fees as specified in the Fee Letter (as defined in the Credit Agreement) and with respect to any letters of credit issued under the Credit Agreement.

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale leaseback transactions; and exceed the limits on annual capital expenditures. The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00. At June 30, 2023, our interest coverage ratio was 5.93 to 1.00. The Credit Agreement also requires us to maintain a consolidated total leverage ratio not to exceed 3.50 to 1.00, although such leverage ratio can be increased in connection with certain acquisitions. As of June 30, 2023, our consolidated total leverage ratio was 1.61 to 1.00.

The Credit Agreement includes customary events of default, including, among other things, payment default, covenant default, breach of representation or warranty, bankruptcy, cross-default, material ERISA events, material money judgments, and failure to maintain subsidiary guarantees. If an event of default occurs, the Agent will be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement, termination of the credit facility, and all other actions permitted to be taken by a secured creditor.

27

Capital Requirements and Sources of Liquidity

During the six months ended June 30, 2023 and 2022, our cash and cash equivalents were $90,125 and $127, respectively. The increase of $89,998 was primarily due to the withdrawal of funds which are being held in an escrow account to be used for the MSA acquisition that consummated on July 1, 2023.

During the six months ended June 30, 2023 and 2022, our capital expenditures were $6,320 and $26,351, respectively. The decrease of $20,031 was driven by the completion of the capital investment in the Company’s Hazel Park, MI facility at the end of 2022. Capital expenditure expectations for the full year 2023 are expected to be between $15,000 and $20,000.

We have historically relied upon cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth. At June 30, 2023, we had immediate availability of $72,057 through our revolving credit facility and the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month trailing Consolidated EBITDA through an accordion feature under our Credit Agreement, subject to the covenants under the Credit Agreement. We regularly monitor potential capital sources, including equity and debt financings, in an effort to meet our planned capital expenditures and liquidity requirements. Our future success will be highly dependent on our ability to access outside sources of capital. We will continue to have access to the availability currently provided under the Credit Agreement as long as we remain compliant with the financial covenants. Based on our estimates at this time, we expect to be in compliance with these financial covenants through 2023 and the foreseeable future.

We believe that our operating cash flow and available borrowings under the Credit Agreement are sufficient to fund our operations for 2023 and beyond when taking into consideration the estimated impacts of the current macroeconomic conditions based on the information we have available at this time. However, future cash flows are subject to a number of variables, and additional capital expenditures will be required to conduct our operations. There can be no assurance that operations and other capital resources will provide cash in sufficient amounts to maintain planned or future levels of capital expenditures. In the event we make one or more additional acquisitions and the amount of capital required is greater than the amount we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital. If we seek additional capital, we may do so through borrowings under the Credit Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means. We cannot guarantee that this additional capital will be available on acceptable terms or at all. If we are unable to obtain the funds we need, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations.

Contractual Obligations

The following table presents our obligations and commitments to make future payments under contracts and contingent commitments at June 30, 2023:

Payments Due by Period

    

Total

    

2023 (Remainder)

    

2024 – 2025

    

2026 – 2027

    

Thereafter

    

Long-term debt principal payment obligations (1)

$

177,943

$

$

$

$

177,943

Equipment financing agreements (2)

1,217

908

309

Forecasted interest on debt payment obligations (3)

35,876

5,997

14,154

12,400

3,325

Finance lease obligations (4)

 

1,028

 

213

 

717

 

98

 

 

Operating lease obligations (4)

 

38,294

 

2,911

 

10,696

 

9,530

 

15,157

 

Total

$

254,358

$

10,029

$

25,876

$

22,028

$

196,425

(1)Principal payments under the Company’s Credit Agreement, which expires in 2028.
(2)Financing agreements entered into to purchase manufacturing equipment. Current and long-term portions are classified in other current liabilities and other long-term liabilities, respectively, on the Condensed Consolidated Balance Sheets.
(3)Forecasted interest on debt obligations are based on the debt balance, interest rate, and unused fee of the Company’s revolving credit facility, and the debt balances and interest rates of the Company’s equipment finance agreements as of June 30, 2023.
(4)See Note 4 – Leases in the Notes to Condensed Consolidated Financial Statements for additional information.

28

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk from changes in customer forecasts, interest rates, and to a lesser extent, commodities. To reduce such risks, we selectively use financial instruments and other proactive management techniques.

Customer Forecasts

The use and consumption of our components, products and services fluctuates depending on order forecasts we receive from our customers. These order forecasts can change dramatically from quarter-to-quarter dependent upon the respective markets that our customers provide products in.

Interest Rate Risk

We are exposed to interest rate risk on certain of our short- and long-term debt obligations used to finance our operations and acquisitions. We have SOFR-based floating rate borrowings under the Credit Agreement, which exposes us to variability in interest payments due to changes in the referenced interest rates.

The amount borrowed under the revolving credit facility under the Credit Agreement was $177.9 million with an interest rate of 7.69% as of June 30, 2023. Please see “Liquidity and Capital Resources – Amended and Restated Credit Agreement” in Part I, Item 2 and Note 3 in the Notes to the Unaudited Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for more specifics.

A hypothetical 100-basis-point increase in interest rates would have resulted in an additional $0.6 million of interest expense based on our variable rate debt at June 30, 2023. We do not use derivative financial instruments to manage interest risk or to speculate on future changes in interest rates. A rise in interest rates could negatively affect our cash flow.

Commodity Risk

We source a wide variety of materials and components from a network of suppliers. Commodity raw materials, such as steel, aluminum, copper, paint and paint chemicals, and other production costs are subject to price fluctuations, which could have a negative impact on our results. We strive to pass along such commodity price increases to customers to avoid profit margin erosion and in many cases utilize contracts with those customers to mitigate the impact of commodity raw material price fluctuations. As of June 30, 2023, we did not have any commodity hedging instruments in place.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

29

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

30

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be a party to litigation and subject to claims incident to the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Also see Note 8 – Contingencies in the Notes to the Consolidated Financial Statements for additional information.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 1, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The table below sets forth information with respect to purchases we made of shares of our common stock during the quarter ended June 30, 2023:

Total Number 

Dollar Value of 

of Shares 

Shares that 

Total 

Purchased as 

May Yet Be 

Number 

Part of Publicly 

Purchased 

of Shares 

Average Price 

Announced Plans 

Under the Plans 

Period

    

Purchased

    

Paid per Share

    

or Programs (1)

    

or Programs (1)

April 2023

$

$

18,552,679

May 2023

100,726

$

9.93

100,726

$

17,552,686

June 2023

$

$

17,552,686

Total

 

 

 

 

  

(1)On October 19, 2021, the Board of Directors approved a share repurchase program of up to $25 million of shares through 2023.

Item 5. Other Information

(c) Not applicable.

31

Item 6. Exhibits.

The exhibits listed in the Exhibit Index below are filed as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX

Exhibit

Number

Description

2

Unit Purchase Agreement, dated as of June 19, 2023, among Mayville Engineering Company, Inc. and the shareholders of Mid-States Aluminum Corp. (incorporated by reference to Exhibit 2 to the Current Report on Form

8-K filed on June 21st, 2023).*

10

Amended and Restated Credit Agreement, dated as of June 28, 2023, by and among Mayville Engineering Company, Inc., certain subsidiaries of Mayville Engineering Company, as guarantors, the lenders from time-to-time party thereto, and Wells Fargo Bank, National Association, as Administrative Agent for the lenders. (incorporated by reference to Exhibit 10 on the Current Report on Form 8-K filed on June 29, 2023).

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

* The disclosure schedules and similar attachments to this agreement are not being filed herewith. The registrant agrees to furnish supplementally a copy of any such schedules or attachments to the Securities and Exchange Commission upon request.

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MAYVILLE ENGINEERING COMPANY, INC.

Date: August 2, 2023

 

By:

/s/ Jagadeesh A. Reddy

 

Jagadeesh A. Reddy

 

President & Chief Executive Officer

 

By:

/s/ Todd M. Butz

 

Todd M. Butz

 

Chief Financial Officer

33

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jagadeesh A. Reddy, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of Mayville Engineering Company, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 2, 2023

By:

/s/ Jagadeesh A. Reddy

Jagadeesh A. Reddy

President & Chief Executive Officer


Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Todd M. Butz, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of Mayville Engineering Company, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 2, 2023

By:

/s/ Todd M. Butz

Todd M. Butz

Chief Financial Officer


Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Mayville Engineering Company, Inc. (the “Company”) for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jagadeesh A. Reddy, as President and Chief Executive Officer of the Company, and Todd M. Butz, as Chief Financial Officer of the Company, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2023

By:

/s/ Jagadeesh A. Reddy

Jagadeesh A. Reddy

President & Chief Executive Officer

By:

/s/ Todd M. Butz

Todd M. Butz

Chief Financial Officer


v3.23.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2023
Jul. 28, 2023
Document and Entity Information    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2023  
Document Transition Report false  
Entity File Number 001-38894  
Entity Registrant Name Mayville Engineering Company, Inc.  
Entity Incorporation, State or Country Code WI  
Entity Tax Identification Number 39-0944729  
Entity Address, Address Line One 715 South Street  
Entity Address, City or Town Mayville  
Entity Address, State or Province WI  
Entity Address, Postal Zip Code 53050  
City Area Code 920  
Local Phone Number 387-4500  
Title of 12(b) Security Common Stock, no par value  
Trading Symbol MEC  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   20,392,594
Entity Central Index Key 0001766368  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q2  
Amendment Flag false  
v3.23.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
ASSETS    
Cash and cash equivalents $ 90,125 $ 127
Receivables, net of allowances for doubtful accounts of $551 at June 30, 2023 and $545 at December 31, 2022 69,066 58,001
Inventories, net 66,828 71,708
Tooling in progress 7,827 7,938
Prepaid expenses and other current assets 4,360 3,529
Total current assets 238,206 141,303
Property, plant and equipment, net 141,326 145,771
Assets held for sale 81 83
Goodwill 71,535 71,535
Intangible assets, net 40,333 43,809
Operating lease assets 33,929 36,073
Other long-term assets 3,192 2,007
Total assets 528,602 440,581
LIABILITIES AND SHAREHOLDERS' EQUITY    
Accounts payable 52,354 53,735
Current portion of operating lease obligation 5,017 4,857
Accrued liabilities:    
Salaries, wages, and payroll taxes 8,229 7,288
Profit sharing and bonus 1,499 6,860
Current portion of deferred compensation 273 18,062
Other current liabilities 11,333 11,646
Total current liabilities 78,705 102,448
Bank revolving credit notes 177,943 72,236
Operating lease obligation, less current maturities 29,745 31,891
Deferred compensation, less current portion 3,446 3,132
Deferred income tax liability 12,710 11,818
Other long-term liabilities 684 1,189
Total liabilities 303,233 222,714
Commitments and contingencies (see Note 8)
Common shares, no par value, 75,000,000 authorized, 21,829,453 shares issued at June 30, 2023 and 21,645,193 at December 31, 2022
Additional paid-in-capital 203,423 200,945
Retained earnings 30,459 26,274
Treasury shares at cost, 1,458,655 shares at June 30, 2023 and 1,472,447 at December 31, 2022 (8,513) (9,352)
Total shareholders' equity 225,369 217,867
Total $ 528,602 $ 440,581
v3.23.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Condensed Consolidated Balance Sheets    
Allowances for doubtful accounts $ 551 $ 545
Common Stock, No Par Value $ 0 $ 0
Common Stock, Shares Authorized 75,000,000 75,000,000
Common Stock, Shares, Issued 21,829,453 21,645,193
Treasury stock at cost 1,458,655 1,472,447
v3.23.2
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Condensed Consolidated Statements of Comprehensive Income        
Net sales $ 138,980 $ 138,337 $ 281,626 $ 274,589
Cost of sales 122,885 120,079 249,154 241,449
Amortization of intangible assets 1,738 1,738 3,476 3,476
Profit sharing, bonuses, and deferred compensation 2,688 1,208 5,690 3,755
Employee stock ownership plan expense   1,330   1,820
Other selling, general and administrative expenses 7,396 6,396 14,363 12,121
Impairment of long-lived assets and gain on contracts   (906)   (2,089)
Income from operations 4,273 8,492 8,943 14,057
Interest expense (1,968) (765) (3,626) (1,332)
Loss on extinguishment of debt (216)   (216)  
Income before taxes 2,089 7,727 5,101 12,725
Income tax expense 475 1,798 916 2,974
Net income and comprehensive income $ 1,614 $ 5,929 $ 4,185 $ 9,751
Earnings per share:        
Basic $ 0.08 $ 0.29 $ 0.21 $ 0.48
Diluted $ 0.08 $ 0.29 $ 0.20 $ 0.47
Weighted average shares outstanding:        
Basic 20,494,437 20,581,945 20,405,383 20,490,944
Diluted 20,827,728 20,650,551 20,789,175 20,807,677
v3.23.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income $ 4,185 $ 9,751
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Depreciation 12,415 10,975
Amortization 3,476 3,476
Allowance for doubtful accounts 6 168
Inventory excess and obsolescence reserve 41 87
Stock-based compensation expense 2,420 2,714
Gain on disposal of property, plant and equipment (135) (625)
Impairment of long-lived assets and gain on contracts   (2,089)
Deferred compensation (17,475) (4,637)
Loss on extinguishment of debt 216  
Non-cash lease expense 2,144 2,482
Other non-cash adjustments 184 176
Changes in operating assets and liabilities    
Accounts receivable (11,071) (15,973)
Inventories 4,839 (4,033)
Tooling in progress 111 (1,367)
Prepaids and other current assets (897) (1,561)
Accounts payable (3,061) 9,275
Deferred income taxes 638 2,504
Operating lease obligations (1,986) (2,270)
Accrued liabilities (1,915) 6,631
Net cash provided by (used in) operating activities (5,865) 15,684
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchase of property, plant and equipment (6,320) (26,351)
Proceeds from sale of property, plant and equipment 153 5,228
Net cash used in investing activities (6,167) (21,123)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from bank revolving credit notes 347,324 218,867
Payments on bank revolving credit notes (241,618) (210,414)
Repayments of other long-term debt (575) (547)
Payments of financing costs (1,248)  
Purchase of treasury stock (1,661) (2,323)
Payments on finance leases (192) (157)
Net cash provided by financing activities 102,030 5,426
Net increase (decrease) in cash and cash equivalents 89,998 (13)
Cash and cash equivalents at beginning of period 127 118
Cash and cash equivalents at end of period 90,125 105
Supplemental disclosure of cash flow information:    
Cash paid for interest 3,383 999
Cash paid for taxes 278 450
Non-cash 401(k) contribution of treasury stock 2,500  
Non-cash property, plant & equipment, net $ 2,283 $ 5,633
v3.23.2
Condensed Consolidated Statements of Shareholders' Equity - USD ($)
$ in Thousands
Additional Paid-in-Capital [Member]
Treasury Shares [Member]
Retained Earnings [Member]
Total
Beginning, Balance at Dec. 31, 2021 $ 197,186 $ (6,462) $ 7,547 $ 198,271
Net income     3,822 3,822
401(k) plan contribution   2,057   2,057
Purchase of treasury stock   (2,323)   (2,323)
Stock-based compensation 1,257     1,257
Ending, Balance at Mar. 31, 2022 198,443 (6,728) 11,369 203,084
Beginning, Balance at Dec. 31, 2021 197,186 (6,462) 7,547 198,271
Net income       9,751
Ending, Balance at Jun. 30, 2022 199,899 (6,728) 17,298 210,469
Beginning, Balance at Mar. 31, 2022 198,443 (6,728) 11,369 203,084
Net income     5,929 5,929
Stock-based compensation 1,456     1,456
Ending, Balance at Jun. 30, 2022 199,899 (6,728) 17,298 210,469
Beginning, Balance at Dec. 31, 2022 200,945 (9,352) 26,274 217,867
Net income     2,571 2,571
401(k) plan contribution   2,500   2,500
Purchase of treasury stock   (661)   (661)
Stock-based compensation 1,066     1,066
Ending, Balance at Mar. 31, 2023 202,011 (7,513) 28,845 223,343
Beginning, Balance at Dec. 31, 2022 200,945 (9,352) 26,274 217,867
Net income       4,185
Ending, Balance at Jun. 30, 2023 203,423 (8,513) 30,459 225,369
Beginning, Balance at Mar. 31, 2023 202,011 (7,513) 28,845 223,343
Net income     1,614 1,614
Purchase of treasury stock   (1,000)   (1,000)
Stock-based compensation 1,354     1,354
Stock options exercised 58     58
Ending, Balance at Jun. 30, 2023 $ 203,423 $ (8,513) $ 30,459 $ 225,369
v3.23.2
Basis of presentation
6 Months Ended
Jun. 30, 2023
Basis Of presentation  
Basis of presentation

Note 1. Basis of presentation

The interim unaudited condensed consolidated financial statements of Mayville Engineering Company, Inc. and subsidiaries (MEC, the Company, we, our, us or similar terms) presented here have been prepared in accordance with the accounting principles generally accepted in the United States of America (GAAP) and with instructions to Form 10-Q and Article 10 of Regulation S-X. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and financial position for the interim unaudited periods presented. All intercompany balances and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These interim unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K. A summary of the Company’s significant accounting policies is included in the Company’s 2022 financial statements in the Annual Report on Form 10-K. The Company followed these policies in preparation of the interim unaudited Condensed Consolidated Financial Statements except for new accounting pronouncements adopted as described below.

Nature of Operations

MEC is a leading U.S.-based, vertically-integrated, value-added manufacturing partner providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. Founded in 1945 and headquartered in Mayville, Wisconsin, we are a leading Tier I U.S. supplier of highly engineered components to original equipment manufacturer (OEM) customers with leading positions in their respective markets. The Company operates 22 facilities located in Arkansas, Michigan, Mississippi, Ohio, Pennsylvania, Virginia, and Wisconsin. Our engineering expertise and technical know-how allow us to add value through every product redevelopment cycle (generally every three to five years for our customers).

Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes Accounting Standards Codification (ASC) 326, Financial Instruments – Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. For as long as the Company remains an emerging growth company (EGC), the new guidance is effective for annual reporting periods beginning after December 15, 2022. The Company adopted the new standard as of January 1, 2023. As our customer base is principally made of blue-chip OEMs with high credit ratings and our trade receivables are due within one year or less, the adoption of this standard did not have a material impact on our consolidated financial statements.

v3.23.2
Select balance sheet data
6 Months Ended
Jun. 30, 2023
Select balance sheet data  
Select balance sheet data

Note 2. Select balance sheet data

Inventory

Inventories are stated at the lower of cost, determined on the first-in, first-out method, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Work-in-process and finished goods are valued at production costs consisting of material, labor, and overhead.

Inventories as of June 30, 2023 and December 31, 2022 consist of:

June 30, 

December 31, 

    

2023

    

2022

Finished goods and purchased parts

$

31,069

$

44,728

Raw materials

 

26,998

 

17,003

Work-in-process

 

8,761

 

9,977

Total

$

66,828

$

71,708

Property, plant and equipment

Property, plant and equipment as of June 30, 2023 and December 31, 2022 consist of:

    

Useful Lives

    

June 30, 

    

December 31, 

 Years

2023

2022

Land

Indefinite

$

1,030

$

1,030

Land improvements

15-39

3,169

3,169

Building and building improvements

 

15-39

 

65,487

 

59,664

Machinery, equipment and tooling

 

3-10

 

264,307

 

250,110

Vehicles

 

5

 

4,360

 

4,359

Office furniture and fixtures

 

3-7

 

20,453

 

19,585

Construction in progress

 

N/A

 

13,091

 

26,435

Total property, plant and equipment, gross

 

371,897

 

364,352

Less accumulated depreciation

 

230,571

 

218,581

Total property, plant and equipment, net

$

141,326

$

145,771

Depreciation expense was $6,273 and $5,507 for the three months ended June 30, 2023 and 2022, respectively, and $12,415 and $10,975 for the six months ended June 30, 2023 and 2022, respectively.

At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company received a notification from the former fitness customer in February 2022 resulting in a change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company had committed to purchase, to meet obligations under the agreement with the former fitness customer as of December 31, 2021. As a result, at December 31, 2021, the Company recorded a long-lived asset impairment of $12,875.

During the three and six months ended June 30, 2022, the Company was able to cancel $906 and $2,089 respectively, of purchase commitments for property, plant and equipment relating to the former fitness customer that had previously been recorded in the Consolidated Statements of Comprehensive Income as an impairment of long-lived assets and loss on contracts as of December 31, 2021. The cancellation of loss contracts has resulted in the reversal of these amounts from other current liabilities in the Condensed Consolidated Balance Sheets and recorded in the Condensed Consolidated Statements of Comprehensive Income as an impairment of long-lived assets and gain on contracts for the three and six months ended June 30, 2022.

The Company adopted ASC 842 on January 1, 2022, classifying finance leases of $914 and $1,103 in property, plant and equipment on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively. Please refer to Note 4 – Leases for additional information.

Goodwill

There were no changes to the goodwill balance of $71,535 between December 31, 2022 and June 30, 2023.

Intangible Assets

The following is a listing of intangible assets, the useful lives in years (amortization period) and accumulated amortization as of June 30, 2023 and December 31, 2022:

Useful Lives 

June 30, 

December 31, 

    

Years

    

2023

    

2022

Amortizable intangible assets:

Customer relationships and contracts

9-12

$

78,340

$

78,340

Trade name

 

10

 

14,780

 

14,780

Non-compete agreements

 

5

 

8,800

 

8,800

Patents

 

19

 

24

 

24

Accumulated amortization

 

 

(65,422)

 

(61,946)

Total amortizable intangible assets, net

 

 

36,522

 

39,998

Non-amortizable brand name

 

 

3,811

 

3,811

Total intangible assets, net

$

40,333

$

43,809

Non-amortizable brand name is tested annually during the fourth quarter for impairment, or more frequently if triggering events occur indicating there may be impairment.

Changes in intangible assets between December 31, 2022 and June 30, 2023 consist of:

Balance as of December 31, 2022

    

$

43,809

Amortization expense

 

(3,476)

Balance as of June 30, 2023

$

40,333

Amortization expense was $1,738 for the three months ended June 30, 2023, and 2022, and $3,476 for the six months ended June 30, 2023 and 2022.

Future amortization expense is expected to be as followed:

Year ending December 31, 

    

2023 (remainder)

$

3,390

2024

$

5,192

2025

$

5,192

2026

$

5,192

2027

$

5,192

Thereafter

$

12,364

v3.23.2
Bank revolving credit notes
6 Months Ended
Jun. 30, 2023
Bank revolving credit notes.  
Bank revolving credit notes

Note 3. Bank revolving credit notes

On June 28, 2023, we entered into an amended and restated credit agreement (the Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, as administrative agent (the Agent). The Credit Agreement provides for a $250,000 revolving credit facility, with a letter of credit sub-facility, and a swingline facility in an aggregate amount of $25,000. The Credit Agreement also provides the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month trailing Consolidated EBITDA through an accordion feature. All amounts borrowed under the credit agreement mature on June 28, 2028.

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale leaseback transactions; and exceed the limits on annual capital expenditures. The Credit Agreement also requires us to satisfy certain

financial covenants, including a minimum consolidated interest coverage ratio of 3.00 to 1.00 as well as a consolidated total leverage ratio not to exceed 3.50 to 1.00, although such leverage ratio can be increased in connection with certain acquisitions.

The Company incurred deferred financing costs of $1,248 associated with executing the Credit Agreement, which has been recorded as an other long-term asset in the Condensed Consolidated Balance Sheets and will be amortized over the duration of the agreement.

At June 30, 2023 our consolidated interest coverage ratio was 5.93 to 1.00 as compared to a covenant minimum of 3.00 to 1.00 under the Credit Agreement.

At June 30, 2023, our consolidated total leverage ratio was 1.61 as compared to a covenant maximum of 3.50 to 1.00 under the Credit Agreement.

Under the Credit Agreement, interest is payable quarterly at the adjusted secured overnight financing rate (SOFR) plus an applicable margin based on the current consolidated total leverage ratio. The interest rate was 7.69% and 5.69% as of June 30, 2023 and December 31, 2022, respectively. Additionally, the agreement has a fee on the average daily unused portion of the aggregate unused revolving commitments. This fee was 0.30% and 0.25% as of June 30, 2023 and December 31, 2022, respectively.

Prior to June 28, 2023, the Company maintained a credit agreement (Former Credit Agreement) with certain lenders and the Agent. The Former Credit Agreement provided for a $200,000 revolving credit facility, with a letter of credit sub-facility in an aggregate amount not to exceed $5,000, and a swingline facility in an aggregate amount of $20,000. The Former Credit Agreement also provided for an additional $100,000 of debt capacity through an accordion feature.

The Company was in compliance with all financial covenants of its credit agreements as of June 30, 2023 and December 31, 2022. The amount borrowed on the revolving credit notes was $177,943 and $72,236 as of June 30, 2023 and December 31, 2022, respectively.

v3.23.2
Leases
6 Months Ended
Jun. 30, 2023
Leases  
Leases

Note 4. Leases

The Company has real property operating leases for office and light manufacturing space. Operating leases for the Company’s personal property consist of leases for office equipment, vehicles, forklifts and storage tanks for bulk gases. The Company recognizes a right-of-use (ROU) asset and a lease liability for operating leases based on the net present value of future minimum lease payments. Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term, including renewal periods that are considered reasonably certain.

The Company has finance leases for two laser cutting systems and three vehicles. The Company recognizes an ROU asset and a lease liability for finance leases based on the net present value of future minimum lease payments. Lease expense for the Company’s finance leases is comprised of the amortization of the ROU asset and interest expense recognized based on the effective interest method.

Variable lease expense is related to certain of the Company’s real property leases and personal property leases, and it generally consists of property tax and insurance components that are for the benefit of the lessor (real property leases) and variable overage fees (personal property leases) that are remitted as part of the Company’s lease payments.

The components of lease expense were as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

2022

2023

2022

Finance lease cost:

Amortization of finance lease assets

$

94

$

78

$

188

$

157

Interest on finance lease liabilities

10

 

11

21

 

22

Total finance lease expense

104

89

209

179

Operating lease expense

1,321

1,512

2,607

3,034

Short-term lease expense

131

139

270

318

Variable lease expense

48

 

61

117

 

108

Sublease income (1)

(404)

(146)

(1,035)

(146)

Total lease expense

$

1,200

$

1,655

$

2,168

$

3,493

(1)The Company subleased a portion of its Hazel Park, MI facility starting in June 2022.

Lease related supplemental cash flow information:

Six Months Ended

June 30, 

2023

    

2022

Cash paid for amounts included in the measurement of lease liabilities for finance leases:

Operating cash flows

$

21

$

22

Financing cash flows

$

192

$

157

Cash paid for amounts included in the measurement of lease liabilities for operating leases:

Operating cash flows

$

2,891

$

2,837

 

 

Right-of-use assets obtained in exchange for recorded lease obligations:

Operating leases

$

363

$

106

Finance leases

$

$

v3.23.2
Employee stock ownership plan
6 Months Ended
Jun. 30, 2023
Employee stock ownership plan  
Employee stock ownership plan

Note 5. Employee stock ownership plan

Under the Mayville Engineering Company, Inc. Employee Stock Ownership Plan (the ESOP), the Company can make annual discretionary contributions to the trust for the benefit of eligible employees in the form of cash or shares of common stock of the Company subject to the Board of Directors’ approval. For the three months ended June 30, 2023 and 2022, the Company’s estimated ESOP expense was $0 and $1,330, respectively. For the six months ended June 30, 2023 and 2022 the Company’s estimated ESOP expense was $0 and $1,820, respectively.

As of January 1, 2023, the Company amended the plan reducing the distribution period from five years to three years.

At various times following death, disability, retirement, termination of employment or the exercise of diversification rights, an ESOP participant is entitled to receive their ESOP account balance in accordance with various distribution methods as permitted under the policies adopted by the ESOP.

As of June 30, 2023 and December 31, 2022, the ESOP shares consisted of 4,062,583 and 5,684,879 in allocated shares, respectively.

v3.23.2
Retirement plans
6 Months Ended
Jun. 30, 2023
Retirement plans  
Retirement Plans

Note 6. Retirement plans

The Mayville Engineering Company Inc. 401(k) Plan (the 401(k) Plan) covers substantially all employees meeting certain eligibility requirements. The 401(k) Plan is a defined contribution plan and is intended for eligible employees to defer tax-free

contributions to save for retirement. Employees may contribute up to 50% of their eligible compensation to the 401(k) Plan, subject to the limits of Section 401(k) of the Internal Revenue Code.

As of January 1, 2023, the Company implemented an employer match program to the 401(k) Plan. The Company now provides a 50% match for employee contributions, up to 6%. For the three and six months ended June 30, 2023, the Company’s employer match expense was $770 and $1,644, respectively. Additionally, the 401(k) Plan provides for employer discretionary profit-sharing contributions and the Board of Directors may authorize discretionary profit-sharing contributions (which are usually approved at the end of each calendar year). For the three months ended June 30, 2023 and 2022, the Company’s estimated discretionary profit-sharing expense was $0 and $1,083, respectively. For the six months ended June 30, 2023 and 2022, the Company’s estimated discretionary profit-sharing expense was $0 and $1,474, respectively.

v3.23.2
Income taxes
6 Months Ended
Jun. 30, 2023
Income taxes  
Income taxes

Note 7. Income taxes

On a quarterly basis, the Company estimates its effective tax rate for the full fiscal year and records a quarterly income tax provision based on the anticipated rate. As the year progresses, the Company will refine its estimate based on facts and circumstances by each tax jurisdiction.

Income tax expense was $475 and $916, and the effective tax rate (ETR) was 22.73% and 17.96% for the three and six months ended June 30, 2023, respectively. Our ETR is different from the expected tax rate due to state taxes, non-deductible items, research and development credits and benefit from excess tax deductions related to share based compensation items.

For the three and six months ended June 30, 2022, income tax expense was estimated at $1,798 and $2,974 the ETR was 23.27% and 23.37%, respectively.

Uncertain Tax Positions

Based on the Company’s evaluation, it has been concluded that there is one tax position related to the research and development tax credit requiring recognition in the Company’s financial statements as of June 30, 2023. The Company does not anticipate that there will be a material change in the balance of the unrecognized tax benefits in the next 12 months. Any interest and penalties related to uncertain tax positions are recorded in income tax expense. No amounts have been recorded as tax expense for interest and penalties for the three and six months ended June 30, 2023, as the amount for the utilized portion for the research and development credit on the Wisconsin return is considered to be immaterial. At June 30, 2023 and December 31, 2022, a total of $429 and $384, respectively, of unrecognized tax benefits would, if recognized, impact the Company’s ETR.

The Company files income tax returns in the United States federal jurisdiction and in various state and local jurisdictions. Federal tax returns for tax years beginning January 1, 2019, and state tax returns beginning January 1, 2018, are open for examination.

v3.23.2
Contingencies
6 Months Ended
Jun. 30, 2023
Contingencies  
Contingencies

Note 8. Contingencies

On August 4, 2022, the Company filed a lawsuit against Peloton Interactive, Inc. (“Peloton”) in the Supreme Court of the State of New York, New York County. The lawsuit arises from a March 2021 “Supply Agreement” between the parties, pursuant to which MEC was to manufacture and supply custom component parts for Peloton’s exercise bikes (the “Manufacturing Project”). In the lawsuit, the Company originally asserted two claims (1) breach and anticipatory repudiation of contract and (2) breach of the duty of good faith and fair dealing (pleaded in the alternative). In January 2023, in response to Peloton’s motion to dismiss, the court allowed the first claim to proceed and dismissed the alternative claim. In the remaining claim, MEC asserts that Peloton breached and anticipatorily repudiated the Supply Agreement by unilaterally cancelling the Manufacturing Project and refusing to pay MEC certain monthly fixed revenue payments owed under the terms of the Supply Agreement. The total amount for damages claimed is substantial but the amount and timing of the ultimate recovery is uncertain. As a result, any recovery from this litigation or settlement of this claim is a contingent gain and will be recognized if, and when, realized or realizable.

From time to time, the Company may be involved in various claims and lawsuits, both for and against the Company, arising in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, in management’s opinion, either the likelihood of loss is remote, or any reasonably possible loss associated with the resolution of such proceedings is not expected to have a material adverse impact on the consolidated financial statements.

v3.23.2
Deferred compensation
6 Months Ended
Jun. 30, 2023
Deferred compensation  
Deferred compensation

Note 9. Deferred compensation

The Mayville Engineering Company Deferred Compensation Plan is available for certain employees designated to be eligible to participate by the Company and approved by the Board of Directors. Eligible employees may elect to defer a portion of his or her compensation for any plan year and the deferral cannot exceed 50% of the participant’s base salary and may include the participant’s annual short-term cash incentive up to 100%. The participant’s election must be made prior to the first day of the plan year.

An employer contribution will be made for each participant to reflect the amount of any reduced allocations to the ESOP and/or 401(k) employer contributions due solely to the participant’s deferral amounts, as applicable. In addition, a discretionary amount may be awarded to a participant by the Company.

Deferrals are assumed to be invested in an investment vehicle based on the options made available to the participant (which does not include Company stock).

The deferred compensation plan provides benefits payable upon separation of service or death. Payments are to be made 30 or 180 days after date of separation from service, either in a lump-sum payment or up to five annual installments as elected by the participant when the participant first elects to defer compensation.

The deferred compensation plan is non-funded, and all future contributions are unsecured in that the employees have the status of a general unsecured creditor of the Company and the agreements constitute a promise by the Company to make benefit payments in the future. During the three and six months ended June 30, 2023, eligible employees elected to defer compensation of $80 and $316, respectively. Eligible employees elected to defer compensation of $0 for the three and six months ended June 30, 2022. As of June 30, 2023 and December 31, 2022, the short-term portion accrued for all benefit years less than 12 months under this plan was $273 and $18,062, respectively. As of June 30, 2023 and December 31, 2022, the long-term portion accrued for all benefit years greater than 12 months under this plan was $3,446 and $3,132. These amounts include the initial deferral of compensation and were adjusted for changes in the value of investment options chosen by the participants. Total expense (credit) for the deferred compensation plan for the three months ended June 30, 2023 and 2022 was $169 and $(2,461), respectively. Total expense (credit) for the deferred compensation plan for the six months ended June 30, 2023 and 2022 was $729 and $(3,589), respectively. These expenses (credits) are included in profit-sharing, bonuses and deferred compensation on the Condensed Consolidated Statements of Comprehensive Income. Additionally, the Company made cash distributions of $17,562 and $1,048 for the six months ended June 30, 2023 and 2022, respectively.

v3.23.2
Self-Funded insurance
6 Months Ended
Jun. 30, 2023
Self-Funded insurance  
Self-Funded insurance

Note 10. Self-Funded insurance

The Company is self-funded for the medical benefits provided to its employees and their dependents. Healthcare costs are expensed as incurred and are based upon actual claims paid, reinsurance premiums, administration fees, and estimated unpaid claims. Since March 31, 2020, the Company has an aggregate stop loss limit to mitigate risk. Expenses related to this were $5,133 and $3,388 for the three months ended June 30, 2023 and 2022, respectively, and $9,768 and $8,148 for the six months ended June 30, 2023 and 2022, respectively. An estimated accrued liability of $996 and $900 was recorded as of June 30, 2023 and December 31, 2022, respectively, for estimated unpaid claims and is included within other current liabilities on the Condensed Consolidated Balance Sheets.

v3.23.2
Segments
6 Months Ended
Jun. 30, 2023
Segments  
Segments

Note 11. Segments

The Company applies the provisions of ASC 280, Segment Reporting. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete financial information is available. Based on the provisions of ASC 280, the Company has determined it has one operating segment. The Company does not earn revenues or have long-lived assets located in foreign countries.

v3.23.2
Fair value of financial instruments
6 Months Ended
Jun. 30, 2023
Fair value of financial instruments  
Fair value of financial instruments

Note 12. Fair value of financial instruments

Fair value provides information on what the Company may realize if certain assets were sold or might pay to transfer certain liabilities based upon an exit price. Financial assets and liabilities that are measured and reported at fair value are classified into a three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within the

valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data. Long-term debt is classified as a Level 2 fair value input.
Level 3 – Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be the Company’s own data and judgements about assumptions that market participants would use in pricing the asset or liability.

The following table lists the Company’s financial assets and liabilities accounted for at fair value by the fair value hierarchy:

Balance at

Fair Value Measurements at

June 30, 

Report Date Using

    

2023

    

(Level 1)

    

(Level 2)

    

(Level 3)

Deferred compensation liability

$

3,719

$

3,719

$

$

Total

$

3,719

$

3,719

$

$

Balance at

Fair Value Measurements at

December 31, 

Report Date Using

    

2022

    

(Level 1)

    

(Level 2)

    

(Level 3)

Deferred compensation liability

$

21,194

$

21,194

$

$

Total

$

21,194

$

21,194

$

$

Fair value measurements for the Company’s cash and cash equivalents are classified based upon Level 1 measurements because such measurements are based upon quoted market prices in active markets for identical assets.

Accounts receivable, accounts payable, long-term debt and accrued liabilities are recorded in the Condensed Consolidated Balance Sheets at cost and approximate fair value.

Deferred compensation liabilities are recorded at amounts due to participants at the time of deferral. Deferrals are invested in an investment vehicle based on the options made available to the participant, considered to be Level 1 and Level 2 on the fair value hierarchy, with the current balance all as Level 1. The change in fair value is recorded in the profit-sharing, bonuses, and deferred compensation line item on the Condensed Consolidated Statements of Comprehensive Income. The short-term and long-term balances due to participants are reflected on the current portion of deferred compensation and deferred compensation, less current portion, line items, respectively, on the Condensed Consolidated Balance Sheets.

The Company’s non-financial assets such as goodwill, intangible assets and property, plant, and equipment are re-measured at fair value when there is an indication of impairment and adjusted only when an impairment charge is recognized.

v3.23.2
Earnings per share
6 Months Ended
Jun. 30, 2023
Earnings per share  
Earnings per share

Note 13. Earnings Per Share

The Company computes earnings per share in accordance with ASC Topic 260, Earnings per Share. In accordance with ASC 260, outstanding options will be considered to have been exercised and outstanding as of the beginning of the period if the average market price of the common stock during the period exceeds the exercise price of the options (they are “in the money”), and the assumed exercise of the options do not have an anti-dilutive impact on earnings per share.

A reconciliation of basic and diluted net income per share attributable to the Company were as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2023

2022

2023

2022

Net income attributable to MEC

$

1,614

$

5,929

$

4,185

$

9,751

Average shares outstanding

20,494,437

20,581,945

20,405,383

20,490,944

Basic income per share

$

0.08

$

0.29

$

0.21

$

0.48

Average shares outstanding

20,494,437

20,581,945

20,405,383

20,490,944

Effect of dilutive share-based compensation

333,291

68,606

383,792

316,733

Total potential shares outstanding

20,827,728

20,650,551

20,789,175

20,807,677

Diluted income per share

$

0.08

$

0.29

$

0.20

$

0.47

Options in the money that were not included in the computation of diluted earnings per share because they would have had an anti-dilutive impact on earnings per share were as follows:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

    

2023

    

2022

Stock options

219,885

247,278

v3.23.2
Revenue recognition
6 Months Ended
Jun. 30, 2023
Revenue recognition  
Revenue recognition

Note 14. Revenue Recognition

Contract Assets and Contract Liabilities

The Company has contract assets and contract liabilities, which are included in tooling in progress and other current liabilities on the Condensed Consolidated Balance Sheets, respectively. Contract assets include products where the Company has satisfied its performance obligation, but receipt of payment is contingent upon delivery. Contract liabilities include deferred tooling revenue, where the performance obligation was not met. The performance obligation is satisfied when the tooling is completed and the customer signs off through the Product Part Approval Process or other documented customer acceptance. Cost of goods sold is recognized and released from the balance sheet when control of the tooling promised under contract is transferred to the customer.

The Company’s contracts with customers are short-term in nature; therefore, revenue is typically recognized, billed and collected within a 12-month period. The following table reflects the changes in our contract assets and liabilities during the six months ended June 30, 2023:

Contract

Contract

    

Assets

    

Liabilities

As of December 31, 2022

$

7,938

$

6,141

Net activity

(111)

(600)

As of June 30, 2023

$

7,827

$

5,541

Disaggregated Revenue

The following tables represent a disaggregation of revenue by product category and end market:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Product Category

    

2023

    

2022

    

2023

    

2022

Outdoor sports

$

2,379

$

2,522

$

4,684

$

5,049

Fabrication

84,172

83,038

171,174

165,271

Performance structures

26,846

28,197

53,521

57,157

Tube

19,468

19,488

39,820

37,796

Tank

11,070

8,915

22,189

17,464

Total

143,935

142,160

291,388

282,737

Intercompany sales elimination

(4,955)

(3,823)

(9,762)

(8,148)

Total, net sales

$

138,980

$

138,337

$

281,626

$

274,589

Three Months Ended

Six Months Ended

June 30, 

June 30, 

End Market

2023

2022

2023

2022

Commercial vehicle

$

56,075

$

55,130

$

115,230

$

105,995

Construction & access

 

26,522

29,388

53,029

59,132

Powersports

 

23,995

22,379

48,093

44,954

Agriculture

 

13,444

15,367

27,895

30,615

Military

8,910

5,363

17,479

10,534

Other

10,033

10,710

19,899

23,360

Total, net sales

$

138,980

$

138,337

$

281,626

$

274,589

v3.23.2
Concentration of major customers
6 Months Ended
Jun. 30, 2023
Concentration of major customers  
Concentration of major customers

Note 15. Concentration of major customers

The following customers accounted for 10% or greater of the Company’s recorded net sales or net trade receivables:

Net Sales

Net Sales

Accounts Receivable

Three Months Ended

Six Months Ended

As of

As of

June 30, 

June 30, 

June 30, 

December 31, 

    

2023

    

2022

    

2023

    

2022

    

2023

    

2022

Customer

A

 

15.6

%

18.3

%  

15.6

%

18.2

%  

12.7

%  

11.0

%  

 

B

 

11.5

%

11.9

%  

11.8

%

11.5

%  

10.0

%  

<10

%  

 

C

 

15.6

%

16.1

%  

15.5

%

15.9

%  

10.4

%  

<10

%  

 

D

 

<10

%

<10

%  

<10

%

<10

%  

10.2

%  

12.6

%  

 

E

<10

%

<10

%  

<10

%

<10

%  

10.0

%  

<10

%  

v3.23.2
Stock based compensation
6 Months Ended
Jun. 30, 2023
Stock based compensation  
Stock based compensation

Note 16. Stock based compensation

The Mayville Engineering Company, Inc. 2019 Omnibus Incentive Plan provides the Company the ability to grant monetary payments based on the value of its common stock, up to 2,000,000 shares.

On April 20, 2021, shareholders of the Company approved an amendment to the 2019 Omnibus Incentive Plan increasing the number of shares of common stock authorized for issuance by 2,500,000 shares.

The Company recognizes stock-based compensation using the fair value provisions prescribed by ASC 718, Compensation – Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-

based instrument. For units, fair value is equivalent to the adjusted closing stock price at the date preceding the date of grant. The Black-Scholes option pricing model is utilized to determine fair value for options.

Cancellations and forfeitures are accounted for as incurred.

Stock awards were granted on June 26, 2023, April 18, 2023, March 13, 2023, February 28, 2023, January 25, 2023, July 19, 2022, April 19, 2022 and February 28, 2022.

During the six months ended June 30, 2023, 219,343 units vested. For the same period, 195,264 options vested with a weighted average strike price of $11.67. During the six months ended June 30, 2022, 271,992 units vested. For the same period, 512,927 options vested with a strike price of $9.18.

As of June 30, 2023, 1,299,713 options remained outstanding with a weighted average strike price of $10.51 and a weighted average contractual life of 6.97 years remaining.

The Company’s stock-based compensation expense by award type is summarized as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

    

2022

    

2023

    

2022

Unit awards

874

874

$

1,589

$

1,626

Option awards

 

480

 

582

 

831

 

1,088

Stock based compensation expense, net of tax

$

1,354

$

1,456

$

2,420

$

2,714

A roll-forward of unrecognized stock-based compensation expense is displayed in the table below. Unrecognized stock-based compensation expense as of June 30, 2023 will be expensed over the remaining requisite service period from which individual award values relate, up to July 19, 2025.

    

Units

    

Options

    

Total

Balance as of December 31, 2022

$

1,739

$

1,050

$

2,789

Grants

3,560

2,585

6,145

Forfeitures

(211)

(83)

(294)

Expense

(715)

(351)

(1,066)

Balance as of March 31, 2023

$

4,373

$

3,201

$

7,574

Grants

785

785

Forfeitures

(48)

(48)

Expense

(874)

(480)

(1,354)

Balance as of June 30, 2023

$

4,236

$

2,721

$

6,957

v3.23.2
Common equity
6 Months Ended
Jun. 30, 2023
Common equity.  
Common equity

Note 17. Common Equity

At June 30, 2023 the authorized stock of the Company consisted of 75,000,000 shares of common stock without par value.

Changes in outstanding common shares are summarized as follows:

Shares

Outstanding

Shares as of December 31, 2021

20,335,934

Treasury stock purchases

(200,000)

Common stock issued (including share-based compensation impact)

396,757

Balance as of June 30, 2022

20,532,691

Shares

Outstanding

Balance as of December 31, 2022

20,172,746

Treasury stock purchases

(100,726)

Common stock issued (including share-based compensation impact)

298,778

Balance as of June 30, 2023

20,370,798

v3.23.2
Subsequent events
6 Months Ended
Jun. 30, 2023
Subsequent events  
Subsequent events

Note 18. Subsequent events

The Company has evaluated subsequent events since June 30, 2023, the date of these financial statements. There were no material events or transactions discovered during this evaluation that requires recognition or disclosure in the financial statements, except as set forth below.

On July 1, 2023, the Company acquired 100% of the equity interests of Mid-States Aluminum (MSA) for $95,945, subject to adjustments for the amount of cash, indebtedness, net working capital and certain expenses of MSA as of the closing. MSA is a leading manufacturer of custom aluminum extrusion and fabrications that also offers related services including design, engineering, anodizing and finishing, assembly and packaging. At the closing of the acquisition, the Company applied an estimate of the adjustments and paid total net consideration of $90,002 which was held in escrow at the current period end. The Company financed the acquisition by borrowing under its Credit Agreement. See Note 3 – Bank Revolving Credit Notes for additional details. Following the closing, the parties will determine the actual adjustments as of the closing and reconcile the resulting final purchase price with the estimated purchase price. The Company has incurred one-time transaction related costs of $899 as of June 30, 2023, related to this acquisition. These costs were associated with legal and professional services and were recognized as other selling, general and administrative expenses on the Condensed Consolidated Statements of Comprehensive Income. The Company is in the process of completing the initial accounting for these acquisitions, and as such, required disclosures will be presented in future periods.

v3.23.2
Basis of presentation (Policies)
6 Months Ended
Jun. 30, 2023
Basis Of presentation  
Nature of Operations

Nature of Operations

MEC is a leading U.S.-based, vertically-integrated, value-added manufacturing partner providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. Founded in 1945 and headquartered in Mayville, Wisconsin, we are a leading Tier I U.S. supplier of highly engineered components to original equipment manufacturer (OEM) customers with leading positions in their respective markets. The Company operates 22 facilities located in Arkansas, Michigan, Mississippi, Ohio, Pennsylvania, Virginia, and Wisconsin. Our engineering expertise and technical know-how allow us to add value through every product redevelopment cycle (generally every three to five years for our customers).

Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes Accounting Standards Codification (ASC) 326, Financial Instruments – Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. For as long as the Company remains an emerging growth company (EGC), the new guidance is effective for annual reporting periods beginning after December 15, 2022. The Company adopted the new standard as of January 1, 2023. As our customer base is principally made of blue-chip OEMs with high credit ratings and our trade receivables are due within one year or less, the adoption of this standard did not have a material impact on our consolidated financial statements.

v3.23.2
Select balance sheet data (Tables)
6 Months Ended
Jun. 30, 2023
Select balance sheet data  
Schedule of Inventories

June 30, 

December 31, 

    

2023

    

2022

Finished goods and purchased parts

$

31,069

$

44,728

Raw materials

 

26,998

 

17,003

Work-in-process

 

8,761

 

9,977

Total

$

66,828

$

71,708

Schedule of Property, Plant and Equipment

    

Useful Lives

    

June 30, 

    

December 31, 

 Years

2023

2022

Land

Indefinite

$

1,030

$

1,030

Land improvements

15-39

3,169

3,169

Building and building improvements

 

15-39

 

65,487

 

59,664

Machinery, equipment and tooling

 

3-10

 

264,307

 

250,110

Vehicles

 

5

 

4,360

 

4,359

Office furniture and fixtures

 

3-7

 

20,453

 

19,585

Construction in progress

 

N/A

 

13,091

 

26,435

Total property, plant and equipment, gross

 

371,897

 

364,352

Less accumulated depreciation

 

230,571

 

218,581

Total property, plant and equipment, net

$

141,326

$

145,771

Schedule of Listing of Intangible Assets

Useful Lives 

June 30, 

December 31, 

    

Years

    

2023

    

2022

Amortizable intangible assets:

Customer relationships and contracts

9-12

$

78,340

$

78,340

Trade name

 

10

 

14,780

 

14,780

Non-compete agreements

 

5

 

8,800

 

8,800

Patents

 

19

 

24

 

24

Accumulated amortization

 

 

(65,422)

 

(61,946)

Total amortizable intangible assets, net

 

 

36,522

 

39,998

Non-amortizable brand name

 

 

3,811

 

3,811

Total intangible assets, net

$

40,333

$

43,809

Schedule of Changes In Intangible Assets

Balance as of December 31, 2022

    

$

43,809

Amortization expense

 

(3,476)

Balance as of June 30, 2023

$

40,333

Schedule of Future Amortization Expense

Year ending December 31, 

    

2023 (remainder)

$

3,390

2024

$

5,192

2025

$

5,192

2026

$

5,192

2027

$

5,192

Thereafter

$

12,364

v3.23.2
Leases (Tables)
6 Months Ended
Jun. 30, 2023
Leases  
Summary of components of lease expense

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

2022

2023

2022

Finance lease cost:

Amortization of finance lease assets

$

94

$

78

$

188

$

157

Interest on finance lease liabilities

10

 

11

21

 

22

Total finance lease expense

104

89

209

179

Operating lease expense

1,321

1,512

2,607

3,034

Short-term lease expense

131

139

270

318

Variable lease expense

48

 

61

117

 

108

Sublease income (1)

(404)

(146)

(1,035)

(146)

Total lease expense

$

1,200

$

1,655

$

2,168

$

3,493

(1)The Company subleased a portion of its Hazel Park, MI facility starting in June 2022.
Schedule of Supplemental cash flow information

Six Months Ended

June 30, 

2023

    

2022

Cash paid for amounts included in the measurement of lease liabilities for finance leases:

Operating cash flows

$

21

$

22

Financing cash flows

$

192

$

157

Cash paid for amounts included in the measurement of lease liabilities for operating leases:

Operating cash flows

$

2,891

$

2,837

 

 

Right-of-use assets obtained in exchange for recorded lease obligations:

Operating leases

$

363

$

106

Finance leases

$

$

v3.23.2
Fair value of financial instruments (Tables)
6 Months Ended
Jun. 30, 2023
Fair value of financial instruments  
Schedule of Financial Assets and Liabilities Accounted for at Fair Value by Fair Value Hierarchy

The following table lists the Company’s financial assets and liabilities accounted for at fair value by the fair value hierarchy:

Balance at

Fair Value Measurements at

June 30, 

Report Date Using

    

2023

    

(Level 1)

    

(Level 2)

    

(Level 3)

Deferred compensation liability

$

3,719

$

3,719

$

$

Total

$

3,719

$

3,719

$

$

Balance at

Fair Value Measurements at

December 31, 

Report Date Using

    

2022

    

(Level 1)

    

(Level 2)

    

(Level 3)

Deferred compensation liability

$

21,194

$

21,194

$

$

Total

$

21,194

$

21,194

$

$

v3.23.2
Earnings per share (Tables)
6 Months Ended
Jun. 30, 2023
Earnings per share  
Schedule of earnings per share

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2023

2022

2023

2022

Net income attributable to MEC

$

1,614

$

5,929

$

4,185

$

9,751

Average shares outstanding

20,494,437

20,581,945

20,405,383

20,490,944

Basic income per share

$

0.08

$

0.29

$

0.21

$

0.48

Average shares outstanding

20,494,437

20,581,945

20,405,383

20,490,944

Effect of dilutive share-based compensation

333,291

68,606

383,792

316,733

Total potential shares outstanding

20,827,728

20,650,551

20,789,175

20,807,677

Diluted income per share

$

0.08

$

0.29

$

0.20

$

0.47

Schedule of Antidilutive Securities Excluded from Computation of Diluted Earnings Per Share

Options in the money that were not included in the computation of diluted earnings per share because they would have had an anti-dilutive impact on earnings per share were as follows:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

    

2023

    

2022

Stock options

219,885

247,278

v3.23.2
Revenue recognition (Tables)
6 Months Ended
Jun. 30, 2023
Revenue recognition  
Schedule of Changes in Contract Assets and Liabilities The following table reflects the changes in our contract assets and liabilities during the six months ended June 30, 2023:

Contract

Contract

    

Assets

    

Liabilities

As of December 31, 2022

$

7,938

$

6,141

Net activity

(111)

(600)

As of June 30, 2023

$

7,827

$

5,541

Schedule of Disaggregation of Revenue by Product Category and End Market

The following tables represent a disaggregation of revenue by product category and end market:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Product Category

    

2023

    

2022

    

2023

    

2022

Outdoor sports

$

2,379

$

2,522

$

4,684

$

5,049

Fabrication

84,172

83,038

171,174

165,271

Performance structures

26,846

28,197

53,521

57,157

Tube

19,468

19,488

39,820

37,796

Tank

11,070

8,915

22,189

17,464

Total

143,935

142,160

291,388

282,737

Intercompany sales elimination

(4,955)

(3,823)

(9,762)

(8,148)

Total, net sales

$

138,980

$

138,337

$

281,626

$

274,589

Three Months Ended

Six Months Ended

June 30, 

June 30, 

End Market

2023

2022

2023

2022

Commercial vehicle

$

56,075

$

55,130

$

115,230

$

105,995

Construction & access

 

26,522

29,388

53,029

59,132

Powersports

 

23,995

22,379

48,093

44,954

Agriculture

 

13,444

15,367

27,895

30,615

Military

8,910

5,363

17,479

10,534

Other

10,033

10,710

19,899

23,360

Total, net sales

$

138,980

$

138,337

$

281,626

$

274,589

v3.23.2
Concentration of major customers (Tables)
6 Months Ended
Jun. 30, 2023
Concentration of major customers  
Schedules of Major Customer Concentrations

Net Sales

Net Sales

Accounts Receivable

Three Months Ended

Six Months Ended

As of

As of

June 30, 

June 30, 

June 30, 

December 31, 

    

2023

    

2022

    

2023

    

2022

    

2023

    

2022

Customer

A

 

15.6

%

18.3

%  

15.6

%

18.2

%  

12.7

%  

11.0

%  

 

B

 

11.5

%

11.9

%  

11.8

%

11.5

%  

10.0

%  

<10

%  

 

C

 

15.6

%

16.1

%  

15.5

%

15.9

%  

10.4

%  

<10

%  

 

D

 

<10

%

<10

%  

<10

%

<10

%  

10.2

%  

12.6

%  

 

E

<10

%

<10

%  

<10

%

<10

%  

10.0

%  

<10

%  

v3.23.2
Stock based compensation (Tables)
6 Months Ended
Jun. 30, 2023
Stock based compensation  
Summary of Stock-based Compensation Expenses

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2023

    

2022

    

2023

    

2022

Unit awards

874

874

$

1,589

$

1,626

Option awards

 

480

 

582

 

831

 

1,088

Stock based compensation expense, net of tax

$

1,354

$

1,456

$

2,420

$

2,714

Schedule of Unrecognized Stock-based Compensation Expense

    

Units

    

Options

    

Total

Balance as of December 31, 2022

$

1,739

$

1,050

$

2,789

Grants

3,560

2,585

6,145

Forfeitures

(211)

(83)

(294)

Expense

(715)

(351)

(1,066)

Balance as of March 31, 2023

$

4,373

$

3,201

$

7,574

Grants

785

785

Forfeitures

(48)

(48)

Expense

(874)

(480)

(1,354)

Balance as of June 30, 2023

$

4,236

$

2,721

$

6,957

v3.23.2
Common equity (Tables)
6 Months Ended
Jun. 30, 2023
Common equity.  
Schedule of Common Stock Outstanding Roll Forward [Table Text Block]

Shares

Outstanding

Shares as of December 31, 2021

20,335,934

Treasury stock purchases

(200,000)

Common stock issued (including share-based compensation impact)

396,757

Balance as of June 30, 2022

20,532,691

Shares

Outstanding

Balance as of December 31, 2022

20,172,746

Treasury stock purchases

(100,726)

Common stock issued (including share-based compensation impact)

298,778

Balance as of June 30, 2023

20,370,798

v3.23.2
Basis of presentation (Details)
6 Months Ended
Jun. 30, 2023
segment
facility
Basis Of presentation  
Number of facilities operated | facility 22
Number Of Operating Segments | segment 1
v3.23.2
Select balance sheet data - Schedule of Inventories (Details) - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Select balance sheet data    
Finished goods and purchased parts $ 31,069 $ 44,728
Raw materials 26,998 17,003
Work-in-process 8,761 9,977
Total $ 66,828 $ 71,708
v3.23.2
Select balance sheet data - Schedule of Property, Plant and Equipment (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Property, Plant and Equipment [Line Items]    
Total property, plant and equipment, gross $ 371,897 $ 364,352
Less accumulated depreciation 230,571 218,581
Total property, plant and equipment, net 141,326 145,771
Land [Member]    
Property, Plant and Equipment [Line Items]    
Total property, plant and equipment, gross $ 1,030 1,030
Property, plant and equipment useful lives Indefinite  
Land Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Total property, plant and equipment, gross $ 3,169 3,169
Land Improvements [Member] | Minimum [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment useful lives 15 years  
Land Improvements [Member] | Maximum [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment useful lives 39 years  
Building and Building Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Total property, plant and equipment, gross $ 65,487 59,664
Building and Building Improvements [Member] | Minimum [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment useful lives 15 years  
Building and Building Improvements [Member] | Maximum [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment useful lives 39 years  
Machinery, Equipment and Tooling [Member]    
Property, Plant and Equipment [Line Items]    
Total property, plant and equipment, gross $ 264,307 250,110
Machinery, Equipment and Tooling [Member] | Minimum [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment useful lives 3 years  
Machinery, Equipment and Tooling [Member] | Maximum [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment useful lives 10 years  
Vehicle Leases    
Property, Plant and Equipment [Line Items]    
Total property, plant and equipment, gross $ 4,360 4,359
Property, plant and equipment useful lives 5 years  
Office Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Total property, plant and equipment, gross $ 20,453 19,585
Office Furniture and Fixtures [Member] | Minimum [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment useful lives 3 years  
Office Furniture and Fixtures [Member] | Maximum [Member]    
Property, Plant and Equipment [Line Items]    
Property, plant and equipment useful lives 7 years  
Construction in Progress [Member]    
Property, Plant and Equipment [Line Items]    
Total property, plant and equipment, gross $ 13,091 $ 26,435
v3.23.2
Select balance sheet data - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2021
Dec. 31, 2022
Select Balance Sheet Data [Line Items]            
Depreciation $ 6,273 $ 5,507 $ 12,415 $ 10,975    
Purchase commitments for property, plant and equipment canceled   $ 906   $ 2,089    
Finance leases right of use assets 914   914     $ 1,103
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]   Property Plant And Equipment Net   Property Plant And Equipment Net    
Property, plant and equipment reclassified as held for sale. 81   81     $ 83
Amortization expense $ 1,738 $ 1,738 $ 3,476 $ 3,476    
Former Customer [Member]            
Select Balance Sheet Data [Line Items]            
Impairment of long-lived asset         $ 12,875  
Impairment, Long-Lived Asset, Held-for-Use, Statement of Income or Comprehensive Income [Extensible Enumeration]         Impairment Of Long Lived Assets And Gain Loss On Contracts To Be Disposed Of  
v3.23.2
Select balance sheet data - Schedule of Changes In Goodwill (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Select balance sheet data    
Goodwill $ 71,535 $ 71,535
Change in goodwill carrying amount $ 0  
v3.23.2
Select balance sheet data - Schedule of Listing of Intangible Assets (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Amortizable intangible assets [Abstract]    
Accumulated amortization $ (65,422) $ (61,946)
Total amortizable intangible assets, net 36,522 39,998
Total intangible assets, net 40,333 43,809
Customer relationships and contracts [Member]    
Amortizable intangible assets [Abstract]    
Amortizable intangible assets, gross $ 78,340 78,340
Trade name [Member]    
Amortizable intangible assets [Abstract]    
Intangible assets useful Lives 10 years  
Amortizable intangible assets, gross $ 14,780 14,780
Non-compete agreements [Member]    
Amortizable intangible assets [Abstract]    
Intangible assets useful Lives 5 years  
Amortizable intangible assets, gross $ 8,800 8,800
Patents [Member]    
Amortizable intangible assets [Abstract]    
Intangible assets useful Lives 19 years  
Amortizable intangible assets, gross $ 24 24
Non-amortizable Brand Name [Member]    
Amortizable intangible assets [Abstract]    
Total intangible assets, net $ 3,811 $ 3,811
Minimum [Member] | Customer relationships and contracts [Member]    
Amortizable intangible assets [Abstract]    
Intangible assets useful Lives 9 years  
Maximum [Member] | Customer relationships and contracts [Member]    
Amortizable intangible assets [Abstract]    
Intangible assets useful Lives 12 years  
v3.23.2
Select balance sheet data - Schedule of Changes In Intangible Assets (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Select balance sheet data        
Balance     $ 43,809  
Amortization expense $ (1,738) $ (1,738) (3,476) $ (3,476)
Balance $ 40,333   $ 40,333  
v3.23.2
Select balance sheet data - Schedule of Future Amortization Expense (Details)
$ in Thousands
Jun. 30, 2023
USD ($)
Select balance sheet data  
2023 (remainder) $ 3,390
2024 5,192
2025 5,192
2026 5,192
2027 5,192
Thereafter $ 12,364
v3.23.2
Bank revolving credit notes - Additional Information (Details) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 28, 2023
Jun. 30, 2023
Dec. 31, 2022
Jun. 27, 2023
Line Of Credit Facility [Line Items]        
Revolving credit notes   $ 177,943 $ 72,236  
A&R Credit Agreement [Member]        
Line Of Credit Facility [Line Items]        
Minimum interest coverage ratio 3.00% 3.00%    
Maximum consolidated leverage ratio 3.50% 3.50%    
Deferred financing costs   $ 1,248    
Consolidated leverage ratio   1.61%    
Interest coverage ratios   5.93%    
A&R Credit Agreement [Member] | The Agent [Member]        
Line Of Credit Facility [Line Items]        
Credit agreement additional borrowing capacity through accordion feature $ 100,000     $ 100,000
Line of credit facility additional borrowing capacity percentage through accordion feature 125.00%      
Line of credit facility additional borrowing capacity period through accordion feature 12 months      
Credit agreement maturity date Jun. 28, 2028      
Revolving Credit Facility [Member]        
Line Of Credit Facility [Line Items]        
Interest rate   7.69% 5.69%  
Revolving commitments fee percentage   0.30% 0.25%  
Revolving credit notes   $ 177,943 $ 72,236  
Revolving Credit Facility [Member] | A&R Credit Agreement [Member] | The Agent [Member]        
Line Of Credit Facility [Line Items]        
Credit agreement borrowing capacity $ 250,000     200,000
Letter of Credit Sub-facility [Member] | A&R Credit Agreement [Member] | The Agent [Member]        
Line Of Credit Facility [Line Items]        
Credit agreement borrowing capacity       5,000
Swingline Facility [Member] | A&R Credit Agreement [Member] | The Agent [Member]        
Line Of Credit Facility [Line Items]        
Credit agreement borrowing capacity $ 25,000     $ 20,000
v3.23.2
Leases - Components of lease expense (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Leases        
Amortization of finance lease assets $ 94 $ 78 $ 188 $ 157
Interest on finance lease liabilities 10 11 21 22
Total finance lease expense 104 89 209 179
Operating lease expense 1,321 1,512 2,607 3,034
Short-term lease expense 131 139 270 318
Variable lease expense 48 61 117 108
Sublease income (404) (146) (1,035) (146)
Total lease expense $ 1,200 $ 1,655 $ 2,168 $ 3,493
v3.23.2
Leases - Supplemental cash flow information (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Leases    
Cash paid for amounts included in the measurement of lease liabilities for finance leases: Operating cash flows $ 21 $ 22
Cash paid for amounts included in the measurement of lease liabilities for finance leases: Financing cash flows 192 157
Cash paid for amounts included in the measurement of lease liabilities for operating leases: Operating cash flows 2,891 2,837
Right-of-use assets obtained in exchange for recorded lease obligations: Operating leases $ 363 $ 106
v3.23.2
Employee stock ownership plan - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Jan. 01, 2023
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]            
Employee stock ownership plan (ESOP), (income) expense     $ 1,330   $ 1,820  
Distribution period 3 years         5 years
Shares in ESOP   4,062,583   4,062,583   5,684,879
Employee Stock Option [Member]            
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]            
Employee stock ownership plan (ESOP), (income) expense   $ 0 $ 1,330 $ 0 $ 1,820  
v3.23.2
Retirement plans - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Retirement plans        
Defined Contribution Plan Maximum Annual Contributions Per Employee Percent     50.00%  
Employer match percentage     50.00%  
Percent of employee contributions eligible for employer match     6.00%  
Employer match expense $ 770   $ 1,644  
Defined contribution plan, employer discretionary contribution amount $ 0 $ 1,083 $ 0 $ 1,474
v3.23.2
Income taxes - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Income taxes          
Income tax expense $ 475 $ 1,798 $ 916 $ 2,974  
Effective income tax rate 22.73% 23.27% 17.96% 23.37%  
Tax expense for interest and penalties $ 0   $ 0    
Unrecognized tax benefits that would impact effective tax rate $ 429   $ 429   $ 384
v3.23.2
Contingencies (Details)
Aug. 04, 2022
claim
Contingencies  
Number of claims 2
v3.23.2
Deferred compensation - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Deferred Compensation Arrangement With Individual Excluding Share Based Payments And Postretirement Benefits [Line Items]          
Description of deferred compensation arrangements     The Mayville Engineering Company Deferred Compensation Plan is available for certain employees designated to be eligible to participate by the Company and approved by the Board of Directors.    
Deferred compensation plan (Income) expense $ 2,688 $ 1,208 $ 5,690 $ 3,755  
Deferred compensation cash-based arrangements liability, Current 273   273   $ 18,062
Deferred compensation cash-based arrangements liability, Non current 3,446   3,446   $ 3,132
Deferred compensation, distributions paid     17,562 1,048  
Deferred Profit Sharing [Member]          
Deferred Compensation Arrangement With Individual Excluding Share Based Payments And Postretirement Benefits [Line Items]          
Deferred compensation plan (Income) expense 169 (2,461) 729 (3,589)  
Employees [Member]          
Deferred Compensation Arrangement With Individual Excluding Share Based Payments And Postretirement Benefits [Line Items]          
Deferred compensation plan (Income) expense $ 80 $ 0 $ 316 $ 0  
Maximum [Member]          
Deferred Compensation Arrangement With Individual Excluding Share Based Payments And Postretirement Benefits [Line Items]          
Deferred compensation arrangements     50.00%    
Annual short term cash incentive     100.00%    
v3.23.2
Self-Funded insurance - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Self-Funded insurance          
Reinsured limit of aggregate expense $ 5,133 $ 3,388 $ 9,768 $ 8,148  
Estimated accrued liability $ 996   $ 996   $ 900
v3.23.2
Segments - Additional Information (Details)
6 Months Ended
Jun. 30, 2023
segment
Segments  
Number of operating segments 1
v3.23.2
Fair value of financial instruments - Schedule of Financial Assets and Liabilities Accounted for at Fair Value by Fair Value Hierarchy (Details) - Fair Value, measurements, recurring - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
Fair value assets and liabilities measured on recurring and nonrecurring basis    
Total $ 3,719 $ 21,194
Fair Value, Inputs, Level 1    
Fair value assets and liabilities measured on recurring and nonrecurring basis    
Total 3,719 21,194
Deferred compensation liability    
Fair value assets and liabilities measured on recurring and nonrecurring basis    
Total 3,719 21,194
Deferred compensation liability | Fair Value, Inputs, Level 1    
Fair value assets and liabilities measured on recurring and nonrecurring basis    
Total $ 3,719 $ 21,194
v3.23.2
Earnings Per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Mar. 31, 2023
Jun. 30, 2022
Mar. 31, 2022
Jun. 30, 2023
Jun. 30, 2022
Earnings Per Share, Basic [Abstract]            
Net income attributable to MEC $ 1,614 $ 2,571 $ 5,929 $ 3,822 $ 4,185 $ 9,751
Average shares outstanding 20,494,437   20,581,945   20,405,383 20,490,944
Basic income per share $ 0.08   $ 0.29   $ 0.21 $ 0.48
Earnings Per Share, Diluted, Other Disclosures [Abstract]            
Average shares outstanding 20,494,437   20,581,945   20,405,383 20,490,944
Effect of dilutive share-based compensation 333,291   68,606   383,792 316,733
Total potential shares outstanding 20,827,728   20,650,551   20,789,175 20,807,677
Diluted income per share $ 0.08   $ 0.29   $ 0.20 $ 0.47
v3.23.2
Earnings per share - Schedule of Antidilutive Securities Excluded from Computation of Diluted Earnings Per Share (Details) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2023
Stock Options [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of diluted earnings per share 219,885 247,278
v3.23.2
Revenue recognition - Schedule of Changes in Contract Assets and Liabilities (Details)
$ in Thousands
6 Months Ended
Jun. 30, 2023
USD ($)
Revenue recognition  
Contract asset, beginning balance $ 7,938
Net activity (111)
Contract asset, ending balance 7,827
Contract liability, beginning balance 6,141
Net activity (600)
Contract liability, ending balance $ 5,541
v3.23.2
Revenue recognition - Schedule of Disaggregation of Revenue by Product Category (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Disaggregation Of Revenue [Line Items]        
Total, net sales $ 138,980 $ 138,337 $ 281,626 $ 274,589
Operating Segments        
Disaggregation Of Revenue [Line Items]        
Total, net sales 143,935 142,160 291,388 282,737
Intercompany sales elimination        
Disaggregation Of Revenue [Line Items]        
Total, net sales (4,955) (3,823) (9,762) (8,148)
Outdoor sports        
Disaggregation Of Revenue [Line Items]        
Total, net sales 2,379 2,522 4,684 5,049
Fabrication        
Disaggregation Of Revenue [Line Items]        
Total, net sales 84,172 83,038 171,174 165,271
Performance structures        
Disaggregation Of Revenue [Line Items]        
Total, net sales 26,846 28,197 53,521 57,157
Tube        
Disaggregation Of Revenue [Line Items]        
Total, net sales 19,468 19,488 39,820 37,796
Tank        
Disaggregation Of Revenue [Line Items]        
Total, net sales $ 11,070 $ 8,915 $ 22,189 $ 17,464
v3.23.2
Revenue recognition - Schedule of Disaggregation of Revenue by End Market (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Disaggregation Of Revenue [Line Items]        
Total, net sales $ 138,980 $ 138,337 $ 281,626 $ 274,589
Commercial Vehicle [Member]        
Disaggregation Of Revenue [Line Items]        
Total, net sales 56,075 55,130 115,230 105,995
Construction And Access [Member]        
Disaggregation Of Revenue [Line Items]        
Total, net sales 26,522 29,388 53,029 59,132
Powersports [Member]        
Disaggregation Of Revenue [Line Items]        
Total, net sales 23,995 22,379 48,093 44,954
Agriculture [Member]        
Disaggregation Of Revenue [Line Items]        
Total, net sales 13,444 15,367 27,895 30,615
Military [Member]        
Disaggregation Of Revenue [Line Items]        
Total, net sales 8,910 5,363 17,479 10,534
Other Market [Member]        
Disaggregation Of Revenue [Line Items]        
Total, net sales $ 10,033 $ 10,710 $ 19,899 $ 23,360
v3.23.2
Concentration of major customers - Schedule of Major Customer Concentrations (Details) - Customer Concentration Risk [Member]
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Customer A [Member] | Net Sales [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage 15.60% 18.30% 15.60% 18.20%  
Customer A [Member] | Accounts Receivable [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage     12.70%   11.00%
Customer B [Member] | Net Sales [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage 11.50% 11.90% 11.80% 11.50%  
Customer B [Member] | Accounts Receivable [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage     10.00%    
Concentration risk percentage         <10
Customer C [Member] | Net Sales [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage 15.60% 16.10% 15.50% 15.90%  
Customer C [Member] | Accounts Receivable [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage     10.40%    
Concentration risk percentage         <10
Customer D [Member] | Net Sales [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage <10 <10 <10 <10  
Customer D [Member] | Accounts Receivable [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage     10.20%   12.60%
Customer E [Member] | Net Sales [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage <10 <10 <10 <10  
Customer E [Member] | Accounts Receivable [Member]          
Concentration Risk [Line Items]          
Concentration risk percentage     10.00%    
Concentration risk percentage         <10
v3.23.2
Stock based compensation - Summary of Stock-based Compensation Expenses (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]        
Stock based compensation expense, net of tax $ 1,354 $ 1,456 $ 2,420 $ 2,714
Unit awards [Member]        
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]        
Stock based compensation expense, net of tax 874 874 1,589 1,626
Option awards [Member]        
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]        
Stock based compensation expense, net of tax $ 480 $ 582 $ 831 $ 1,088
v3.23.2
Stock based compensation - Schedule of Unrecognized Stock-based Compensation Expense (Details) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2023
Mar. 31, 2023
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]    
Beginning Balance $ 7,574 $ 2,789
Grants 785 6,145
Forfeitures (48) (294)
Expense (1,354) (1,066)
Ending Balance 6,957 7,574
Units [Member]    
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]    
Beginning Balance 4,373 1,739
Grants 785 3,560
Forfeitures (48) (211)
Expense (874) (715)
Ending Balance 4,236 4,373
Stock Options [Member]    
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]    
Beginning Balance 3,201 1,050
Grants   2,585
Forfeitures   (83)
Expense (480) (351)
Ending Balance $ 2,721 $ 3,201
v3.23.2
Stock based compensation - Additional Information (Details) - $ / shares
6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Apr. 20, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Options, outstanding number 1,299,713    
Weighted average exercise price $ 10.51    
Weighted average contractual life remaining 6 years 11 months 19 days    
Unrecognized stock-based compensation recognition period Jul. 19, 2025    
2019 Omnibus Incentive Plan [Member]      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Payments based on the value of its common stock 2,000,000    
Number of shares authorized     2,500,000
Restricted Stock Units [Member]      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Number of units, vested 219,343 271,992  
Employee Stock Option [Member]      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Number of units, vested 195,264 512,927  
Weighted average strike price $ 11.67 $ 9.18  
v3.23.2
Common equity (Details) - shares
Jun. 30, 2023
Dec. 31, 2022
Common equity.    
Common Stock, Shares Authorized 75,000,000 75,000,000
v3.23.2
Common equity - Changes in outstanding common shares (Details) - Common Stock [Member] - shares
6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Beginning balance 20,172,746 20,335,934
Treasury stock purchases (100,726) (200,000)
Common stock issued (including share-based compensation impact) 298,778 396,757
Ending balance 20,370,798 20,532,691
v3.23.2
Subsequent events - (Details) - Mid-States Aluminum - USD ($)
$ in Thousands
Jul. 01, 2023
Jun. 30, 2023
Subsequent Event [Line Items]    
Purchase Price of Aquisition $ 100  
Transaction Costs   $ 899
Subsequent Event [Member]    
Subsequent Event [Line Items]    
Purchase Price of Aquisition 95,945  
Net consideration paid $ 90,002  

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