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, ~~2022~~2023

☐	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

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, ~~2022,~~2023, the registrant had ~~20,532,691~~20,392,594 shares of common stock, no par value per share, outstanding.

Table of Contents

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	2321

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3029

Item 4.	Controls and Procedures	3129

PART II.	OTHER INFORMATION	3331

Item 1.	Legal Proceedings	3331

Items 1A.	Risk Factors	3331

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3331

Item 5.	Other Information	31

Item 6.	Exhibits	3432

Signatures		3533

Table of Contents

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, ~~2021,~~2022, filed with the Securities and Exchange Commission (the SEC) on March ~~2, 2022,~~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:

●

~~the negative impacts~~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 ~~has~~have had, and ~~will~~may continue to have, a negative impact on our business, financial condition, cash flows and results of operations and supply chain, including the supply chain issues encountered by our original equipment manufacturer customers, the current inflationary pressures on wages, benefits, components, and manufacturing supplies and(including future uncertain ~~impacts;~~impacts);

●

risks relating to developments in the industries in which our customers operate;

●

risks related to scheduling production accurately and maximizing efficiency;

●

~~failure to compete successfully in our markets;~~

●

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;

Table of Contents

●

~~political~~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.

~~Table of Contents~~

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.

Table of Contents

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,		June 30,		December 31,
	2022		2021		2023		2022
ASSETS
Cash and cash equivalents	$	105	$	118	$	90,125	$	127
Receivables, net of allowances for doubtful accounts of $799 at June 30, 2022 and $631 at December 31, 2021		71,223		55,417
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		74,103		70,157		66,828		71,708
Tooling in progress		5,317		3,950		7,827		7,938
Prepaid expenses and other current assets		4,580		2,924		4,360		3,529
Total current assets		155,328		132,566		238,206		141,303
Property, plant and equipment, net		129,509		120,746		141,326		145,771
Assets held for sale		1,288		—		81		83
Goodwill		71,535		71,535		71,535		71,535
Intangible assets, net		47,285		50,761		40,333		43,809
Operating lease assets		37,842		—		33,929		36,073
Other long-term assets		3,497		3,865		3,192		2,007
Total assets	$	446,284	$	379,473	$	528,602	$	440,581
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	58,679	$	50,119	$	52,354	$	53,735
Current portion of operating lease obligation		4,803		—		5,017		4,857
Accrued liabilities:
Salaries, wages, and payroll taxes		9,670		8,684		8,229		7,288
Profit sharing and bonus		6,329		5,289		1,499		6,860
Current portion of deferred compensation		17,531		—		273		18,062
Other current liabilities		13,495		13,280		11,333		11,646
Total current liabilities		110,507		77,372		78,705		102,448
Bank revolving credit notes		76,063		67,610		177,943		72,236
Operating lease obligation, less current maturities		33,531		—		29,745		31,891
Deferred compensation, less current portion		2,949		25,117		3,446		3,132
Deferred income tax liability		11,040		8,641		12,710		11,818
Other long-term liabilities		1,725		2,462		684		1,189
Total liabilities	$	235,815	$	181,202	$	303,233	$	222,714
Commitments and contingencies (see Note 8)
Common shares, 0 par value, 75,000,000 authorized, 21,645,193 shares issued at June 30, 2022 and 21,386,382 at December 31, 2021		—		—
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		199,899		197,186		203,423		200,945
Retained earnings		17,298		7,547		30,459		26,274
Treasury shares at cost, 1,112,502 shares at June 30, 2022 and 1,050,448 at December 31, 2021		(6,728)		(6,462)
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		210,469		198,271		225,369		217,867
Total	$	446,284	$	379,473	$	528,602	$	440,581

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

Table of Contents

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,


2022

2021

2022

2021
Net sales

$
138,337

$
120,213

$
274,589

$
232,833
Cost of sales

120,079

103,933

241,449

201,777
Amortization of intangible assets

1,738

2,677

3,476

5,353
Profit sharing, bonuses, and deferred compensation

1,208

3,210

3,755

6,074
Employee stock ownership plan expense

1,330

228

1,820

701
Other selling, general and administrative expenses

6,396

5,362

12,121

10,059
Impairment of long-lived assets and gain on contracts

(906)

—

(2,089)

—
Income from operations

8,492

4,803

14,057

8,869
Interest expense

(765)

(504)

(1,332)

(1,036)
Income before taxes

7,727

4,299

12,725

7,833
Income tax expense

1,798

1,007

2,974

1,996
Net income and comprehensive income

$
5,929

$
3,292

$
9,751

$
5,837

Earnings per share:








Basic

$
0.29

$
0.16

$
0.48

$
0.29
Diluted

$
0.29

$
0.16

$
0.47

$
0.28

Weighted average shares outstanding:






Basic

20,581,945

20,454,541

20,490,944

20,316,936
Diluted

20,650,551

20,864,531

20,807,677

20,685,741


	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.

Table of Contents

Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Six Months Ended

June 30,


2022

2021
CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$
9,751

$
5,837
Adjustments to reconcile net income to net cash provided by operating activities:


Depreciation

10,975

10,236
Amortization

3,476

5,353
Allowance for doubtful accounts

168

49
Inventory excess and obsolescence reserve

87

(589)
Stock-based compensation expense

2,714

2,588
Loss (gain) on disposal of property, plant and equipment

(625)

66
Impairment of long-lived assets and gain on contracts

(2,089)

—
Deferred compensation

(4,637)

(170)
Non-cash lease expense

2,482

—
Other non-cash adjustments

176

151
Changes in operating assets and liabilities – net of effects of acquisition:

Accounts receivable

(15,973)

(16,331)
Inventories

(4,033)

(8,984)
Tooling in progress

(1,367)

1,033
Prepaids and other current assets

(1,561)

(1,094)
Accounts payable

9,275

14,324
Deferred income taxes

2,504

1,484
Operating lease obligations

(2,270)

—
Accrued liabilities

6,631

4,277
Net cash provided by operating activities

15,684

18,230
CASH FLOWS FROM INVESTING ACTIVITIES




Purchase of property, plant and equipment

(26,351)

(16,986)
Proceeds from sale of property, plant and equipment

5,228

414
Net cash used in investing activities

(21,123)

(16,572)
CASH FLOWS FROM FINANCING ACTIVITIES




Proceeds from bank revolving credit notes

218,867

157,388
Payments on bank revolving credit notes

(210,414)

(158,791)
Repayments of other long-term debt

(547)

—
Purchase of treasury stock

(2,323)

—
Payments on finance leases

(157)

(310)
Proceeds from the exercise of stock options

—

80
Other financing activities

—

(27)
Net cash provided by (used in) financing activities

5,426

(1,660)
Net decrease in cash and cash equivalents

(13)

(2)
Cash and cash equivalents at beginning of period

118

121
Cash and cash equivalents at end of period

$
105

$
119
Supplemental disclosure of cash flow information:




Cash paid for interest

$
999

$
1,077
Cash paid for taxes

$
450

$
716
Non-cash construction in progress in accounts payable

$
5,633

$
2,994


	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.

Table of Contents

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, 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

Shareholders' Equity

Additional

Treasury

Retained


Paid-in-Capital

Shares

Earnings

Total
Balance as of December 31, 2020

$
190,793

$
(4,934)

$
14,998

$
200,857
Net income

—

—

2,545

2,545
401(k) plan contribution

1,319

625

—

1,944
Stock-based compensation

1,200

—

—

1,200
Balance as of March 31, 2021

$
193,312

$
(4,309)

$
17,543

$
206,546
Net income

—

—

3,292

3,292
Stock-based compensation

1,388

—

—

1,388
Stock options exercised

54

—

—

54
Balance as of June 30, 2021

$
194,754

$
(4,309)

$
20,835

$
211,280


	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.

Table of Contents

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, ~~2021,~~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 ~~2021~~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 ~~that provides~~providing a ~~broad range~~full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, ~~production~~ 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 ~~manufacturers~~manufacturer (OEM) customers with leading positions in their respective markets. The Company operates 2022 facilities ~~of which 19 are in operation,~~ 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 1one 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.

The COVID-19 pandemic has had and will continue to have a negative impact on our business, financial condition, cash flows, results of operations, supply chain, and raw material availability, although the full extent is still uncertain.

Recent Accounting Pronouncements

In ~~February~~June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2016-02,~~ ~~Leases~~, creating Accounting Standard Codification (ASC) 842. Under the new guidance, lessees are required to recognize a right-of-use (ROU) asset and a lease liability for substantially all leases. When measuring ROU assets and lease liabilities, a lessee should include amounts related to option terms, such as the option of extending or terminating the lease or purchasing the underlying asset, that are reasonably certain to be exercised. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition. For finance leases, a lessee will recognize the interest on a lease liability separate from amortization of the ROU asset. In addition, repayments of principal will be presented within financing activities, and interest payments will be presented within operating activities in the statement of cash flows. For operating leases, a lessee will recognize a single lease cost on a straight-line basis and classify all cash payments within operating activities in the statement of cash flows. Entities have the option to adopt the new guidance through a cumulative effect adjustment to retained earnings applied either to the beginning of the earliest period presented (modified retrospective approach) or to the beginning of the period of adoption (effective date approach) whereby the comparative periods are unchanged. For public companies, this guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For as long as the Company remained an emerging growth company (EGC), the new guidance was effective for annual reporting periods beginning after December 15, 2022, and interim periods within fiscal years beginning after December 15, 2022. Early adoption was permitted. The Company adopted the

~~Table of Contents~~

~~annual reporting guidance as of January 1, 2022 using the effective date approach. The Company early adopted the interim reporting guidance during the period ended March 31, 2022.~~

The new guidance provides a number of optional practical expedients in transition. The Company elected the "package of practical expedients", which allows it to not reassess under the new guidance its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight practical expedient. In addition, the new guidance provides accounting policy elections for an entity’s ongoing lessee accounting. The Company has elected to not separate lease and non-lease components for certain of its real estate leases. The Company has elected the short-term lease recognition exemption for all leases that qualify which means that it will not recognize ROU assets or lease liabilities for those leases with a term of 12 months or less.

~~In June 2016, the FASB issued ASU~~ No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes ~~ASC~~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. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to ASC 326, Financial Instruments – Credit Losses. This ASU clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC 326. This ASU provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to ASC 326, Financial Instruments – Credit Losses. The ASU clarifies the treatment of expected recoveries for amounts previously written off on purchased receivables, provides transition relief for troubled debt restructuring, and allows for certain disclosure simplifications of accrued interest. For as long as the Company remains an ~~EGC,~~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 ~~evaluating~~principally made of blue-chip OEMs with high credit ratings and our trade receivables are due within one year or less, the ~~potential effects~~adoption of this standard did not have a material impact on ~~the~~our consolidated financial statements.

~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes~~, creating ASC 740, which removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. For public companies, this guidance will be effective for fiscal years beginning after December 15, 2020. For as long as the Company remains an EGC, the new guidance is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. During the period ended March 31, 2021, the Company adopted this guidance. This adoption had no impact on the consolidated financial statements.

A summary of the Company’s evaluation of other recent accounting pronouncements is included in the Company’s 2021 financial statements in its Annual Report on Form 10-K for the year ended December 31, 2021.

Note 2. Select balance sheet data

Inventory

Inventories are stated at the lower of cost, determined on the first-in, first-out method, ~~and~~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, 2022 and December 31, 2021 consist of:~~

June 30,

December 31,

2022

2021
Finished goods and purchased parts

$
42,828

$
41,041
Raw materials

19,500

18,905
Work-in-process

11,775

10,211
Total

$
74,103

$
70,157

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 had committed to purchase, to meet obligations under the

109

Table of Contents

~~agreement with the former fitness customer~~Inventories as ~~of December 31, 2021. As a result, at December 31, 2021, the Company recorded an inventory impairment of $700, of which $661 was due to loss contacts recorded in other current liabilities and a $39~~ ~~decrease to inventories. As~~ of June 30, 2023 and December 31, 2022 ~~there was a balance of~~ consist of:

~~$329 of loss contract liabilities recorded in other current liabilities on the Condensed Consolidated Balance Sheets.~~


	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, ~~2022~~2023 and December 31, ~~2021~~2022 consist of:


	Useful Lives		June 30,		December 31,		Useful Lives		June 30,		December 31,
	Years		2022		2021		Years		2023		2022
Land		Indefinite	$	1,033	$	1,033		Indefinite	$	1,030	$	1,030
Land improvements		15-39		3,169		3,169		15-39		3,169		3,169
Building and building improvements		15-39		57,971		56,243		15-39		65,487		59,664
Machinery, equipment and tooling		3-10		230,803		222,202		3-10		264,307		250,110
Vehicles		5		3,947		3,943		5		4,360		4,359
Office furniture and fixtures		3-7		18,785		17,960		3-7		20,453		19,585
Construction in progress		N/A		22,919		15,443		N/A		13,091		26,435
Total property, plant and equipment, gross				338,627		319,993				371,897		364,352
Less accumulated depreciation				209,118		199,247				230,571		218,581
Total property, plant and equipment, net			$	129,509	$	120,746			$	141,326	$	145,771

Depreciation expense was ~~$5,507~~$6,273 and ~~$5,161~~$5,507 for the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$10,975~~$12,415 and ~~$10,236~~$10,975 for the six months ended June 30, ~~2022~~2023 and ~~2021,~~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 ~~Condensed~~ 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 ~~this amount~~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 ~~current period.~~

~~Throughout the~~ three and six months ended June 30, 2022, the Company sold $4,971 of machinery and equipment originally intended to support production for the former fitness customer, resulting in a gain on sale of the assets of $520, which is classified in cost of sales on the Condensed Consolidated Statements of Comprehensive Income as of June 30, 2022. ~~As a result of the previously mentioned impairment, these assets had been written down to fair value as of December 31, 2021.~~

~~As of June 30, 2022, $1,288 of property, plant and equipment has been reclassified within the Condensed Consolidated Balance Sheets as assets held for sale.~~

The Company adopted ASC 842 on January 1, 2022, classifying finance leases of ~~$981~~$914 and $1,103 in property, plant and equipment on the Condensed Consolidated Balance Sheets as of June 30, ~~2022.~~2023 and December 31, 2022, respectively. Please refer to Note 4 – Leases for additional information. ~~Due~~

Goodwill

There were no changes to the ~~adoption, the Company reclassified net capital leases~~goodwill balance of ~~$1,136 to property, plant and equipment on the Condensed Consolidated Balance Sheets as of~~$71,535 between December 31, ~~2021.~~2022 and June 30, 2023.

1110

Table of Contents

~~Goodwill~~

~~Changes in goodwill between December 31, 2021 and June 30, 2022 consist of:~~

Balance as of December 31, 2021

$
71,535
Impairment

0
Balance as of June 30, 2022

$
71,535

Intangible Assets

The following is a listing of intangible assets, the useful lives in years (amortization period) and accumulated amortization as of June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


	Useful Lives		June 30,		December 31,		Useful Lives		June 30,		December 31,
	Years		2022		2021		Years		2023		2022
Amortizable intangible assets:
Customer relationships and contracts		9-12	$	78,340	$	78,340		9-12	$	78,340	$	78,340
Trade name		10		14,780		14,780		10		14,780		14,780
Non-compete agreements		5		8,800		8,800		5		8,800		8,800
Patents		19		24		24		19		24		24
Accumulated amortization				(58,470)		(54,994)				(65,422)		(61,946)
Total amortizable intangible assets, net				43,474		46,950				36,522		39,998
Non-amortizable brand name				3,811		3,811				3,811		3,811
Total intangible assets, net			$	47,285	$	50,761			$	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, ~~2021~~2022 and June 30, ~~2022~~2023 consist of:


Balance as of December 31, 2021	$	50,761
Balance as of December 31, 2022			$	43,809
Amortization expense		(3,476)		(3,476)
Balance as of June 30, 2022	$	47,285
Balance as of June 30, 2023			$	40,333

Amortization expense was $1,738 ~~and $2,677~~ for the three months ended June 30, 2023, and 2022, and ~~2021, respectively, and~~ $3,476 ~~and $5,353~~ for the six months ended June 30, ~~2022~~2023 and ~~2021, respectively.~~2022.

Future amortization expense is expected to be as followed:


Year ending December 31,
2022 (remainder)	$	3,476
2023	$	6,866
2023 (remainder)			$	3,390
2024	$	5,192	$	5,192
2025	$	5,192	$	5,192
2026	$	5,192	$	5,192
2027			$	5,192
Thereafter	$	17,556	$	12,364

Note 3. Bank revolving credit notes

On ~~September 26, 2019, and as last amended on March 31, 2022,~~June 28, 2023, we entered into an amended and restated credit agreement ~~(Credit~~(the Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, as administrative agent (the Agent). The Credit Agreement provides for a ~~$200,000~~$250,000 revolving credit facility, ~~(the Revolving Loan),~~ 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.~~$25,000. The Credit Agreement also provides ~~for an~~

~~Table~~the availability of ~~Contents~~

~~additional~~incremental facilities to the greater of $100,000 and 125% of ~~debt capacity~~the Company’s twelve month trailing Consolidated EBITDA through an accordion feature. All amounts borrowed under the ~~Credit Agreement~~credit agreement mature on ~~September 26, 2024.~~June 28, 2028.

Table of Contents

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 ~~3.25~~3.50 to 1.00, although such leverage ratio can be increased in connection with certain acquisitions.

~~In order to provide a means~~The Company incurred deferred financing costs of ~~insurance against future macroeconomic events, we entered into an amendment (Second Amendment) to~~$1,248 associated with executing the Credit Agreement, ~~on June 30, 2020. The Second Amendment provided~~which has been recorded as an other long-term asset in the ~~Company with temporary changes to~~Condensed Consolidated Balance Sheets and will be amortized over the total leverage ratio covenant for the period from June 30, 2020, through December 31, 2021, or such earlier date as the Company may elect (Covenant Relief Period), in return for certain increases in interest rates, fees and restrictions on certain activitiesduration of the Company, including capital expenditures, acquisitions, dividends and share repurchases. New pricing, which took effect for the quarters ending on and after September 30, 2020, includes interest at a fluctuating London Interbank Offered Rate (LIBOR) (at a floor of 75 basis points), plus 1.00% to 2.75%, along with the commitment fee ranging from 20 to 50 basis points.

During the Covenant Relief Period, the required ceiling on the Company’s total leverage ratio was 4.25 to 1.00 for quarters ending June 30, 2020 through and including December 31, 2020, and declined in quarterly increments to 3.25 to 1.00 through the quarter ending December 31, 2021.

~~We entered into an amendment (Third Amendment) to the Credit Agreement on March 31, 2021 which allowed the Company to incur up to $70,000 of capital expenditures in 2021, as opposed to $35,000.~~

We entered into an amendment (Fourth Amendment) to the Credit Agreement on March 31, 2022 which allows the Company to incur up to $65,000 of capital expenditures in 2022, as opposed to $35,000, and revises the definition of Consolidated EBITDA to include certain restructuring and impairment charges.agreement.

At June 30, ~~2022,~~2023 our consolidated ~~total leverage ratio was 1.52 to 1.00 as compared to a covenant maximum of 3.25 to 1.00 in accordance with the Credit Agreement.~~

~~At June 30, 2022, our~~ interest coverage ratio was ~~18.34~~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 ~~LIBOR~~secured overnight financing rate (SOFR) plus an applicable margin based on the current ~~funded indebtedness to adjusted EBITDA~~consolidated total leverage ratio. The interest rate was ~~2.06%~~7.69% and ~~1.75%~~5.69% as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Additionally, the agreement has a fee on the average daily unused portion of the aggregate unused revolving commitments. This fee was ~~0.20%~~0.30% and 0.25% as of June 30, ~~2022~~2023 and December 31, ~~2021.~~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, ~~2022~~2023 and December 31, ~~2021.~~2022. The amount borrowed on the revolving credit notes was ~~$76,063~~$177,943 and ~~$67,610~~$72,236 as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Note 4. Leases

~~In February 2016, the FASB issued ASU 2019-02,~~ ~~Leases~~, creating ASC 842. For public companies, this guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For as long as the Company remained an EGC, the new guidance was effective for annual reporting periods beginning after December 15, 2022, and interim periods within fiscal years beginning after December 15, 2022. Early adoption was permitted. The Company adopted the annual

~~Table of Contents~~

~~reporting guidance as of January 1, 2022 using the effective date approach. The Company early adopted the interim reporting guidance during the period ended March 31, 2022.~~

~~The most significant judgements and impacts related to the application of the new guidance include the following:~~

●

In evaluating contracts to determine if they qualify as a lease, the Company considers factors such as if the Company has obtained or transferred substantially all of the rights to the underlying asset through exclusivity, if the Company can transfer or has transferred the ability to direct the use of the asset by making decisions about how and for what purpose the asset will be used and if the lessor has substantive substitution rights.

●

The Company made judgements regarding lease terms for certain of its leases that were in month-to-month status or that contained auto-renewal clauses. The Company estimated a lease end date based on the required length of usage of the property and calculated a ROU asset and lease liability based on the resulting estimated lease term.

●

The Company has recognized ROU assets and lease liabilities for operating leases that have not previously been recorded. The lease liability for operating leases is based on the net present value of future minimum lease payments.

●

~~The ROU asset for operating leases is based on the initial calculated lease liability as adjusted for the reclassification of certain balance sheet amounts such as deferred rent.~~

●

In determining the discount rate used to measure the ROU assets and lease liabilities, the Company uses the rate implicit in the lease, or if not readily available, the Company uses the Company’s incremental borrowing rate. The base rate used to establish the Company’s incremental borrowing rate is based on a Prime Rate (or LIBOR fallback option) plus fixed basis points methodology pursuant to the Company’s revolving credit facility (as amended from time to time). Certain required adjustments were then made to this base rate to arrive at an estimated incremental borrowing rate.

●

The Company’s real property leases vary in terms of up to ten years, including options for renewal periods that are considered reasonably certain to be exercised. The Company’s personal property leases vary in terms of up to~~seven years, including options for renewal periods that are considered reasonably certain to be exercised.~~

●

Upon adoption of the new guidance at January 1, 2022, the Company established a ROU asset of $37,908 and a lease liability of $38,185 related to its real property operating leases and established a ROU asset of $2,415 and a lease liability of $2,418 related to its personal property operating leases. Additionally, the impact on retained earnings was immaterial. The January 1, 2022, balances associated with the Company’s personal property finance leases will be reclassified in the financial statements from capital lease, net to property, plant and equipment, net, from current portion of capital lease obligation to other current liabilities, and from capital lease obligation, less current maturities to other long-term liabilities on the Condensed Consolidated Balance Sheets.

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 ~~ROU~~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 ~~a vehicle.~~three vehicles. The Company recognizes aan 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

~~Table of Contents~~

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, 2022

June 30, 2022
Finance lease cost:

Amortization of finance lease assets

$
78

$
157
Interest on finance lease liabilities

11

22
Total finance lease expense

89

179
Operating lease expense

1,512

3,034
Short-term lease expense

139

318
Variable lease expense

61

108
Sublease income ⁽¹⁾

(146)

(146)
Total lease expense

$
1,655

$
3,493

~~(1)~~

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

~~Total rent expense for the three and six months ended June 30, 2021 was $1,081 and $2,165, respectively.~~

~~Supplemental information related to leases was as follows:~~

Balance Sheet Classification

June 30, 2022
Assets:

Finance lease assets

Property, plant and equipment, net

$
981
Operating lease assets

Operating lease assets

37,842
Total lease assets

$
38,823

Current liabilities:

Current finance lease liabilities

Other current liabilities

$
323
Current operating lease liabilities

Current portion of operating lease obligation

4,803
Noncurrent liabilities:

Long-term finance lease liabilities

Other long-term liabilities

730
Long-term operating lease liabilities

Operating lease obligation, less current maturities

33,531
Total lease liabilities

$
39,387


	~~June 30, 2022~~
~~Weighted average remaining lease term (in years)~~
~~Finance leases~~	~~3.1~~
~~Operating leases~~	~~8.0~~

~~Weighted average discount rate~~
~~Finance leases~~	~~4.00~~	%
~~Operating leases~~	~~2.46~~	%

1512

Table of Contents

The ~~table below represents ROU asset balances by type of lease:~~

June 30, 2022
Real estate leases

$
35,706
Equipment leases

2,874
Vehicle leases

243
Total lease assets

$
38,823

~~Maturities~~components of lease ~~liabilities at June 30, 2022 and minimum lease payments under ASC 842 having initial or remaining non-cancellable terms in excess of one year~~expense were as follows:

Operating

Finance

Year ending December 31,

Leases

Leases

Total
2022 (remainder)

$
2,837

$
179

$
3,016
2023

5,704

359

6,063
2024

5,667

357

6,024
2025

4,837

223

5,060
2026

4,656

—

4,656
Thereafter

18,771

—

18,771
Total lease payments

42,472

1,118

43,590
Less: lease modification not yet commenced

—

—

—
Less: imputed interest

(4,138)

(65)

(4,203)
Total lease obligations

$
38,334

$
1,053

$
39,387

~~At June 30, 2021, future minimum lease payments under ASC 840 were as follows:~~

Operating

Finance

Year ending December 31,

Leases

Leases

Total
2021 (remainder)

$
2,647

$
367

$
3,014
2022

5,528

734

6,262
2023

5,521

734

6,255
2024

4,786

514

5,300
2025

4,282

226

4,508
Thereafter

21,912

—

21,912
Total minimum lease payments

$
44,676

$
2,575

$
47,251


	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
	Six Months Ended		June 30,
	June 30, 2022		2023		2022
Cash paid for amounts included in the measurement of lease liabilities for finance leases:
Operating cash flows	$	22	$	21	$	22
Financing cash flows	$	157	$	192	$	157

Cash paid for amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows	$	2,837	$	2,891	$	2,837

Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases	$	106	$	363	$	106
Finance leases	$	—	$	—	$	—

~~Table of Contents~~

ROU assets are assessed for impairment in accordance with the Company’s long-lived asset policy. The Company reassesses lease classification and remeasures ROU assets and lease liabilities when a lease is modified, and that modification is not accounted for as a separate new lease or upon certain other events that require reassessment in accordance with ASC 842.

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, ~~2022~~2023 and ~~2021,~~2022, the Company’s estimated ESOP expense was ~~$1,330~~$0 and ~~$228,~~$1,330, respectively. For the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022 the Company’s estimated ESOP expense ~~amounted~~was $0 and $1,820, respectively.

As of January 1, 2023, the Company amended the plan reducing the distribution period from five years to ~~$1,820 and $701, respectively.~~three years.

At various times following death, disability, retirement, or 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, ~~2022,~~2023 and December 31, ~~2021,~~2022, the ESOP shares ~~excluding safe harbor shares held in the Company’s 401(k) Plan,~~ consisted of ~~5,684,879~~4,062,583 and ~~7,292,392~~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

Table of Contents

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 ~~also~~ 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 ~~$1,798~~$475 and ~~$2,974,~~$916, and the effective tax rate (ETR) was ~~23.27%~~22.73% and ~~23.37%~~17.96% for the three and six months ended June 30, ~~2022,~~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, ~~2021,~~2022, income tax expense was estimated at ~~$1,007~~$1,798 and ~~$1,996 and~~$2,974 the ETR was ~~23.43%~~23.27% and ~~25.48%~~23.37%, respectively.

~~The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in these jurisdictions. ASC 740,~~ ~~Income Taxes~~, states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of technical merits.

The Company’s policy for recording interest and penalties associated with potential income tax audits is to record such expense as a component of income tax expense. There were 0 amounts for penalties or interest recorded as of June 30, 2022. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its positions.

~~Table of Contents~~

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, ~~2022.~~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. ~~NaN~~No amounts have been recorded as tax expense for interest and penalties for the three and six months ended June 30, ~~2022,~~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, ~~2022~~2023 and December 31, ~~2021,~~2022, a total of ~~$394~~$429 and ~~$314,~~$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, ~~2018,~~2019, and state tax returns beginning January 1, ~~2017,~~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.

Table of Contents

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, ~~2022 and 2021,~~2023, eligible employees elected to defer compensation of ~~$0.~~$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, ~~2022~~2023 and December 31, ~~2021,~~2022, the short-term portion accrued for all benefit years less than 12 months under this plan was ~~$17,531~~$273 and ~~$0,~~$18,062, respectively. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the long-term portion accrued for all benefit years greater than 12 months under this plan was ~~$2,949~~$3,446 and ~~$25,117.~~$3,132. These amounts include the initial deferral of compensation asand were adjusted for ~~(a) subsequent~~ changes in the ~~share~~ value of ~~the Company stock or (b) in the~~ 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 ~~2021 was~~ $(2,461) ~~and $575,~~, respectively. Total expense (credit) for the deferred compensation plan for the six months ended June 30, 2023 and 2022 was $729 and ~~2021 amounted to~~ $(3,589) ~~and $405,~~, respectively. These expenses (credits) are included in ~~profit sharing,~~profit-sharing, bonuses and deferred compensation on the Condensed Consolidated Statements of Comprehensive Income. Additionally, the Company made cash distributions of ~~$1,048~~$17,562 and ~~$575~~$1,048 for the six months ended June 30, 2023 and 2022, ~~and 2021,~~ respectively.

~~Table of Contents~~

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. ~~Expense~~Expenses related to this ~~is approximately~~were $5,133 and $3,388 ~~and $3,290~~ for the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$8,148~~$9,768 and ~~$7,011~~$8,148 for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. An estimated accrued liability of ~~approximately $1,421~~$996 and ~~$1,471~~$900 was recorded as of June 30, ~~2022~~2023 and December 31, ~~2021,~~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 1one 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

Table of Contents

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						Balance at		Fair Value Measurements at
	June 30,		Report Date Using						June 30,		Report Date Using
	2022		(Level 1)		(Level 2)		(Level 3)		2023		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	20,480	$	20,480	$	—	$	—	$	3,719	$	3,719	$	—	$	—
Total	$	20,480	$	20,480	$	—	$	—	$	3,719	$	3,719	$	—	$	—


	Balance at		Fair Value Measurements at						Balance at		Fair Value Measurements at
	December 31,		Report Date Using						December 31,		Report Date Using
	2021		(Level 1)		(Level 2)		(Level 3)		2022		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	25,117	$	22,272	$	2,845	$	—	$	21,194	$	21,194	$	—	$	—
Total	$	25,117	$	22,272	$	2,845	$	—	$	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.

~~Table of Contents~~

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,~~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.

Table of Contents

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


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Net income attributable to MEC	$	5,929	$	3,292	$	9,751	$	5,837	$	1,614	$	5,929	$	4,185	$	9,751
Average shares outstanding		20,581,945		20,454,541		20,490,944		20,316,936		20,494,437		20,581,945		20,405,383		20,490,944
Basic per share	$	0.29	$	0.16	$	0.48	$	0.29
Basic income per share									$	0.08	$	0.29	$	0.21	$	0.48

Average shares outstanding		20,581,945		20,454,541		20,490,944		20,316,936		20,494,437		20,581,945		20,405,383		20,490,944
Effect of dilutive share-based compensation		68,606		409,990		316,733		368,805		333,291		68,606		383,792		316,733
Total potential shares outstanding		20,650,551		20,864,531		20,807,677		20,685,741		20,827,728		20,650,551		20,789,175		20,807,677
Diluted per share	$	0.29	$	0.16	$	0.47	$	0.28
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,

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Stock options

—

300,510

—

300,510

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 ~~(PPAP).~~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

2017

Table of Contents

Contract

Contract

Assets

Liabilities
As of December 31, 2021

$
3,950

$
2,718
Net activity

1,367

2,598
As of June 30, 2022

$
5,317

$
5,316

Disaggregated Revenue

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


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2022		2021		2022		2021
Product Category									2023		2022		2023		2022
Outdoor sports	$	2,522	$	3,006	$	5,049	$	5,677	$	2,379	$	2,522	$	4,684	$	5,049
Fabrication		83,038		78,318		165,271		147,689		84,172		83,038		171,174		165,271
Performance structures		28,197		18,753		57,157		39,208		26,846		28,197		53,521		57,157
Tube		19,488		15,760		37,796		30,647		19,468		19,488		39,820		37,796
Tank		8,915		5,622		17,464		12,413		11,070		8,915		22,189		17,464
Total		142,160		121,459		282,737		235,634		143,935		142,160		291,388		282,737
Intercompany sales elimination		(3,823)		(1,246)		(8,148)		(2,801)		(4,955)		(3,823)		(9,762)		(8,148)
Total, net sales	$	138,337	$	120,213	$	274,589	$	232,833	$	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								Accounts Receivable				Net Sales				Net Sales				Accounts Receivable
	Three Months Ended				Six Months Ended				As of		As of		Three Months Ended				Six Months Ended				As of		As of
	June 30,				June 30,				June 30,		December 31,		June 30,				June 30,				June 30,		December 31,
	2022		2021		2022		2021		2022		2021		2023		2022		2023		2022		2023		2022
Customer
A	18.3	%	16.7	%	18.2	%	16.2	%	15.1	%	10.2	%	15.6	%	18.3	%	15.6	%	18.2	%	12.7	%	11.0	%
B	11.9	%	10.3	%	11.5	%	11.1	%	<10	%	<10	%	11.5	%	11.9	%	11.8	%	11.5	%	10.0	%	<10	%
C	<10	%	<10	%	<10	%	10.8	%	<10	%	<10	%	15.6	%	16.1	%	15.5	%	15.9	%	10.4	%	<10	%
D	16.1	%	15.2	%	15.9	%	14.3	%	10.2	%	<10	%	<10	%	<10	%	<10	%	<10	%	10.2	%	12.6	%
E	<10	%	<10	%	<10	%	<10	%	12.7	%	11.2	%	<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-based instrument. For units, fair value is equivalent to the stock price at the date of grant. The Black-Scholes option pricing model is utilized to determine fair value for options.~~share-

2118

Table of Contents

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,~~2022.

During the six months ended June ~~3, 2021, May 12, 2021, April 20, 2021, February 28, 2021, May 12, 2020, February 27, 2020 and May 8, 2019. There were no stock awards granted prior to this.~~

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 ~~weighted average~~ strike price of $9.18. ~~During the six months ended June 30, 2021, 314,902 units vested. For the same period, 484,661 options vested with a strike price of $11.23.~~

As of June 30, ~~2022, 1,107,714~~2023, 1,299,713 options remained outstanding with a weighted average strike price of ~~$10.31~~$10.51 and a weighted average contractual life of ~~7.73~~6.97 years remaining.

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


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Unit awards	$	874	$	849	$	1,626	$	1,568		874		874	$	1,589	$	1,626
Option awards		582		539		1,088		1,020		480		582		831		1,088
Stock based compensation expense, net of tax	$	1,456	$	1,388	$	2,714	$	2,588	$	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, ~~2022~~2023 will be expensed over the remaining requisite service period from which individual award values relate, up to ~~April~~July 19, ~~2023.~~2025.


	Units		Options		Total		Units		Options		Total
Balance as of December 31, 2021	$	1,676	$	1,537	$	3,213
Balance as of December 31, 2022							$	1,739	$	1,050	$	2,789
Grants		3,007		2,573		5,580		3,560		2,585		6,145
Forfeitures		(39)		—		(39)		(211)		(83)		(294)
Expense		(751)		(506)		(1,257)		(715)		(351)		(1,066)
Balance as of March 31, 2022	$	3,893	$	3,604	$	7,497
Balance as of March 31, 2023							$	4,373	$	3,201	$	7,574
Grants		750		—		750		785		—		785
Forfeitures		—		—		—		(48)		—		(48)
Expense		(874)		(582)		(1,456)		(874)		(480)		(1,354)
Balance as of June 30, 2022	$	3,769	$	3,022	$	6,791
Balance as of June 30, 2023							$	4,236	$	2,721	$	6,957

Table of Contents

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 ~~17.~~18. Subsequent events

The Company has evaluated subsequent events since June 30, ~~2022,~~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.~~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.

2220

Table of Contents

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, ~~2021~~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, ~~2021~~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

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.

~~COVID-19 Impact~~Macroeconomic Conditions

The ~~COVID-19 pandemic has had and will continue~~broader market dynamics over the past few years have resulted in impacts to ~~have a negative impact on our business, financial condition, cash flows, results of operations, supply chain, and raw material availability, although~~ the ~~full extent is still uncertain.~~

~~For the three and six months ended June 30, 2022 and 2021, net sales reflected the ongoing~~Company, including supply chain constraints ~~impacting many~~affecting some of our ~~customers. Additionally, we continue to experience~~customers, material cost inflation and inflationary pressures on wages ~~benefits, materials,~~ and ~~manufacturing supplies~~benefits due to ~~a higher level~~labor availability. The Company expects some of ~~competition for employees~~these dynamics to continue in 2023 and ~~materials. We are unable~~could continue to ~~predict the future impact of the labor and supply chain shortages and inflation, and the resulting~~have an impact on ~~our Company’s business, financial condition, cash flows~~demand, material costs and ~~results of operations.~~labor.

The future financial effects of the continuing COVID-19 pandemic are unknown due to many factors. These factors include uncertainty related to Delta, Omicron and other variants, uncertainty of the effectiveness of governmental actions to address the pandemic, including health, monetary and fiscal policies, the effect of elevated levels of sovereign and state debt, capital market disruptions, changes in demand and pricing, trade agreements, other geopolitical events, and the availability and volatility in the price of raw materials and other commodities. As a result, predicting the Company’s forecasted financial performance is difficult and subject to many assumptions.

The Company’s first priority has been to safeguard the health and well-being of its employees while fulfilling its obligations as an essential business serving its customer base. This proactive approach has kept employees safe and production facilities operational based on customer demand. Our goal is to continue to successfully manage through the effects of the COVID-19 pandemic and strengthen our position serving customers in the future.

~~Table of Contents~~

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 ~~COVID-19 pandemic,~~current macroeconomic conditions, several factors affect our net sales in any given period, including ~~general economic conditions,~~ 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.

Table of Contents

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.

~~Table of Contents~~

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.

Table of Contents

Three Months Ended

Six Months Ended

June 30,

June 30,


2022


2021


2022


2021

Net income and comprehensive income

$
5,929

$
3,292

$
9,751

$
5,837

Interest expense

765

504

1,332

1,036

Provision for income taxes

1,798

1,007

2,974

1,996

Depreciation and amortization

7,245

7,838

14,451

15,589

EBITDA

15,737

12,641

28,508

24,458

Hazel Park transition costs due to former fitness customer

1,889

—

3,816

—

Stock based compensation expense

1,456

1,388

2,714

2,588

Impairment of long-lived assets and gain on contracts

(906)

—

(2,089)

—

Adjusted EBITDA

$
18,176

$
14,029

$
32,949

$
27,046

Net sales

$
138,337

$
120,213

$
274,589

$
232,833

EBITDA Margin

11.4
%

10.5
%

10.4
%

10.5
%
Adjusted EBITDA Margin

13.1
%

11.7
%

12.0
%

11.6
%

(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, ~~2022~~2023 Compared to Three Months Ended June 30, ~~2021~~2022


	Three Months Ended June 30,												Three Months Ended June 30,
	2022				2021				Increase (Decrease)				2023				2022				Increase (Decrease)
			% of Net				% of Net		Amount						% of Net				% of Net		Amount
	Amount		Sales		Amount		Sales		Change		% Change		Amount		Sales		Amount		Sales		Change		% Change
Net sales	$	138,337	100.0	%	$	120,213	100.0	%	$	18,124	15.1	%	$	138,980	100.0	%	$	138,337	100.0	%	$	643	0.5	%
Cost of sales		120,079	86.8	%		103,933	86.5	%		16,146	15.5	%		122,885	88.4	%		120,079	86.8	%		2,806	2.3	%
Manufacturing margins		18,258	13.2	%		16,280	13.5	%		1,978	12.1	%		16,095	11.6	%		18,258	13.2	%		(2,163)	(11.8)	%
Amortization of intangibles		1,738	1.3	%		2,677	2.2	%		(939)	(35.1)	%
Amortization of intangible assets														1,738	1.3	%		1,738	1.3	%		—	—	%
Profit sharing, bonuses and deferred compensation		1,208	0.9	%		3,210	2.7	%		(2,002)	(62.4)	%		2,688	1.9	%		1,208	0.9	%		1,480	122.5	%
Employee stock ownership plan expense		1,330	1.0	%		228	0.2	%		1,102	483.3	%		—	—	%		1,330	1.0	%		(1,330)	N/A
Other selling, general and administrative expenses		6,396	4.6	%		5,362	4.5	%		1,034	19.3	%		7,396	5.3	%		6,396	4.6	%		1,000	15.6	%
Impairment of long-lived assets and gain on contracts		(906)	(0.7)	%		—	0.0	%		(906)	N/A			—	—	%		(906)	(0.7)	%		906	N/A
Income from operations		8,492	6.1	%		4,803	4.0	%		3,689	76.8	%		4,273	3.1	%		8,492	6.1	%		(4,219)	(49.7)	%
Interest expense		(765)	0.6	%		(504)	0.4	%		261	51.8	%		(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		1,798	1.3	%		1,007	0.8	%		791	78.6	%		475	0.3	%		1,798	1.3	%		(1,323)	(73.6)	%
Net income and comprehensive income	$	5,929	4.3	%	$	3,292	2.7	%	$	2,637	80.1	%	$	1,614	1.2	%	$	5,929	4.3	%	$	(4,315)	(72.8)	%
EBITDA	$	15,737	11.4	%	$	12,641	10.5	%	$	3,096	24.5	%	$	12,068	8.7	%	$	15,737	11.4	%	$	(3,669)	(23.3)	%
Adjusted EBITDA	$	18,176	13.1	%	$	14,029	11.7	%	$	4,147	29.6	%	$	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, ~~as compared~~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 ~~$120,213~~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, ~~2021, an increase of $18,124, or 15.1%. This increase was primarily driven by contractual raw material price pass-throughs~~2023 as compared to ~~customers, commercial pricing increases, and improved volumes.~~

~~Manufacturing Margins.~~ ~~Manufacturing margins were~~ $18,258 for the three months ended June 30, 2022, ~~as compared to $16,280~~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, ~~2021, an increase of $1,978, or 12.1%. The increase was driven by the impact of increased commercial pricing and greater demand, offset by Hazel Park transition costs of $1,875 in the current quarter.~~

~~Manufacturing margin percentages were~~2023, as compared to 13.2% for the three months ended June 30, 2022, ~~as compared to 13.5% for the three months ended June 30, 2021,~~ a decrease of ~~0.3%~~1.6%. The decrease was ~~mainly~~ attributable to the ~~dilutive impact of material price pass-throughs to our customers that increase sales but do not impact margin dollars and Hazel Park transition costs~~items discussed ~~above.~~in the preceding paragraph.

~~Table of Contents~~

Amortization of Intangibles Assets. Amortization of intangible assets were $1,738 for the three months ended June 30, ~~2022 as compared to $2,677 for the three months ended June 30, 2021, a decrease of $939, or 35.1%. The decrease is due to the full amortization of certain intangible assets.~~2023 and 2022.

Profit Sharing, Bonuses and Deferred Compensation Expenses. ~~Profit sharing,~~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, ~~as compared to $3,210 for the three months ended June 30, 2021, a decrease~~an increase of ~~$2,002,~~$1,480, or ~~62.4%~~122.5%. The ~~decrease~~increase was primarily ~~related~~due to ~~a decrease in~~lower deferred compensation expense ~~due~~during the prior year period related to fluctuations within the financial ~~markets, offset by moderate increases in expected annual discretionary retirement benefit contributions and bonus expense aligning with business performance.~~markets.

Table of Contents

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 ~~compared~~the Company transitioned to ~~$228 for the three months ended June 30, 2021, an increase of $1,102, or 483.3%. The change is due to the discretionary nature of contributions to the ESOP plan to align with business performance.~~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, ~~as compared to $5,362 for the three months ended June 30, 2021,~~ an increase of ~~$1,034,~~$1,000, or ~~19.3%~~15.6%. The increase was predominantly attributable to ~~higher consulting,~~ professional ~~and director~~ fees ~~wages and benefits, information technology and travel and entertainment expenses.~~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. ~~Consequently,~~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.~~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, ~~as compared to $504 for the three months ended June 30, 2021,~~ an increase of ~~$261,~~$1,203, or ~~51.8%~~157.3%. The change is due to higher ~~average debt levels as compared to the prior year period.~~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 as compared~~2022. The decrease of $1,323 is primarily due to ~~$1,007 for~~higher net income and comprehensive income in the ~~three months ended June 30, 2021.~~prior year period. Please reference Note 7 – Income Taxes of the Condensed Consolidated Financial Statements for ~~more specifics.~~further details.

Due to the factors described in the preceding paragraphs, net income, comprehensive income, EBITDA, EBITDA ~~margin, adjusted~~Margin, Adjusted EBITDA and ~~adjusted EBIDTA margin increased~~Adjusted EBITDA Margin decreased during the three months ended June 30, ~~2022~~2023 as compared to the three months ended June 30, ~~2021.~~2022.

2624

Table of Contents

Six Months Ended June 30, ~~2022~~2023 Compared to Six Months Ended June 30, ~~2021~~2022


	Six Months Ended June 30,												Six Months Ended June 30,
	2022				2021				Increase (Decrease)				2023				2022				Increase (Decrease)
			% of Net				% of Net		Amount						% of Net				% of Net		Amount
	Amount		Sales		Amount		Sales		Change		% Change		Amount		Sales		Amount		Sales		Change		% Change
Net sales	$	274,589	100.0	%	$	232,833	100.0	%	$	41,756	17.9	%	$	281,626	100.0	%	$	274,589	100.0	%	$	7,037	2.6	%
Cost of sales		241,449	87.9	%		201,777	86.7	%		39,672	19.7	%		249,154	88.5	%		241,449	87.9	%		7,705	3.2	%
Manufacturing margins		33,140	12.1	%		31,056	13.3	%		2,084	6.7	%		32,472	11.5	%		33,140	12.1	%		(668)	(2.0)	%
Amortization of intangibles		3,476	1.3	%		5,353	2.3	%		(1,877)	(35.1)	%
Amortization of intangible assets														3,476	1.2	%		3,476	1.3	%		—	—	%
Profit sharing, bonuses and deferred compensation		3,755	1.4	%		6,074	2.6	%		(2,319)	(38.2)	%		5,690	2.0	%		3,755	1.4	%		1,935	51.5	%
Employee stock ownership plan expense		1,820	0.7	%		701	0.3	%		1,119	159.6	%		—	—	%		1,820	0.7	%		(1,820)	N/A
Other selling, general and administrative expenses		12,121	4.4	%		10,059	4.3	%		2,062	20.5	%		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)	%		—	0.0	%		(2,089)	N/A			—	—	%		(2,089)	(0.8)	%		2,089	N/A
Income from operations		14,057	5.1	%		8,869	3.8	%		5,188	58.5	%		8,943	3.2	%		14,057	5.1	%		(5,114)	36.4	%
Interest expense		(1,332)	0.5	%		(1,036)	0.4	%		296	28.6	%		(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		2,974	1.1	%		1,996	0.9	%		978	49.0	%		916	0.3	%		2,974	1.1	%		(2,058)	69.2	%
Net income and comprehensive income	$	9,751	3.6	%	$	5,837	2.5	%	$	3,914	67.1	%	$	4,185	1.5	%	$	9,751	3.6	%	$	(5,566)	57.1	%
EBITDA	$	28,508	10.4	%	$	24,458	10.5	%	$	4,050	16.6	%	$	24,618	8.7	%	$	28,508	10.4	%	$	(3,890)	(13.6)	%
Adjusted EBITDA	$	32,949	12.0	%	$	27,046	11.6	%	$	5,903	21.8	%	$	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 ~~as compared to $232,833~~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, ~~2021 for an increase of $41,756, or 17.9%. This change is primarily attributed~~2023 as compared to ~~contractual raw material price pass-throughs to customers, commercial pricing increases, and improved volume.~~

~~Manufacturing Margin.~~ ~~Manufacturing margins were~~ $33,140 for the six months ended June 30, 2022, ~~as compared to $31,056~~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, 2021, an increase of $2,084, or 6.7%. This increase was driven by the impact of increased commercial pricing and greater demand, offset by Hazel Park transition costs of $3,805 in the first half of the year.

~~Manufacturing margin percentages were~~2023 as compared to 12.1% for the six months ended June 30, 2022, ~~as compared to 13.3% for the six months ended June 30, 2021,~~ a decrease of ~~1.2%~~0.6%. The decrease was ~~mainly due~~attributable to the ~~dilutive impact of material price pass-throughs to our customers that increase sales but do not impact margin dollars and Hazel Park transition costs~~items discussed ~~above.~~in the preceding paragraph.

Amortization of Intangibles Assets. Amortization of intangible assets were $3,476 for the six months ended June 30, ~~2022 as compared to $5,353 for the six months ended June 30, 2021, a decrease of $1,877, or 35.1%. The decrease is due to the full amortization of certain intangible assets.~~2023 and 2022.

Profit Sharing, Bonuses and Deferred Compensation Expenses. ~~Profit sharing,~~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, ~~as compared to $6,074 for the six months ended June 30, 2021, a decrease~~an increase of ~~$2,319,~~$1,935, or ~~38.2%~~51.5%. The ~~decrease~~increase was primarily ~~related~~due to ~~a decrease in~~less deferred compensation expense during the prior year period due to fluctuations within the financial markets, slightly offset by ~~moderate increases in expected annual~~the Company’s 401(k) company match program being higher than the prior year period discretionary ~~retirement benefit contributions and bonus expense aligning with business performance.~~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 ~~compared~~the Company transitioned to ~~$701 for the six months ended June 30, 2021, an increase~~a 401(k) company match as of ~~$1,119, or 159.6%. The change is due to the discretionary nature of contributions to the ESOP plan to align with business performance.~~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, ~~as compared to $10,059 for the six months ended June 30, 2021,~~ an increase of ~~$2,062,~~$2,242 or ~~20.5%~~18.5%. The increase was predominantly attributable to ~~higher consulting, professional and director fees,~~increasing salaries, wages and benefits, ~~information technology~~recruiting fees and ~~travel~~higher professional fees related

Table of Contents

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

~~Table of Contents~~

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.~~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, ~~as compared to $1,036 for the six months ended June 30, 2021,~~ an increase of ~~$296,~~$2,294, or ~~28.6%~~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 as compared~~2022. The decrease of $2,058 is primarily due to ~~$1,996 for~~higher net income and comprehensive income in the ~~six months ended June 30, 2021.~~prior year period. Please reference Note 7 – Income Taxes of the Condensed Consolidated Financial Statements for more specifics. As of June 30, ~~2022,~~2023, our federal NOL carryforward was ~~$18,466~~$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 increased, and~~ EBITDA margin decreased during the six months ended June 30, ~~2022~~2023 as compared to the six months ended June 30, ~~2021.~~2022.

Liquidity and Capital Resources

Cash Flows Analysis


	Six Months Ended								Six Months Ended
	June 30,				Increase (Decrease)				June 30,				Increase (Decrease)
	2022		2021		$ Change		% Change		2023		2022		$ Change		% Change
Net cash provided by operating activities	$	15,684	$	18,230		(2,546)	(14.0)	%
Net cash provided by (used in) operating activities									$	(5,865)	$	15,684		(21,549)	(137)	%
Net cash used in investing activities		(21,123)		(16,572)		(4,551)	(27.5)	%		(6,167)		(21,123)		14,956	71	%
Net cash provided by (used in) financing activities		5,426		(1,660)		7,086	426.9	%
Net cash provided by financing activities										102,030		5,426		96,604	1,780	%
Net change in cash	$	(13)	$	(2)	$	(11)	(550.0)	%	$	89,998	$	(13)	$	90,011	692,392	%

Operating Activities. Cash ~~provided~~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, as compared to $18,230 for~~2022. Of the ~~six months ended June 30, 2021. The $2,546 reduction~~$21,549 decrease in operating cash flows, ~~primarily correlates~~$17,562 is due to ~~the adverse changes in net working capital offset by higher net income reported during the current period. Specifically on the working capital changes, inventory and accounts payable increased, but by~~ a ~~lesser amount than the prior year,~~payout of deferred compensation to a retired Company executive. The remaining decrease of $3,987 as ~~production levels rebounded during~~compared to the prior year period is largely driven by a decrease in accounts payable, resulting from ~~COVID-19 lows~~reduced spend on capital expenditures, partially offset by accounts receivable and inventory decreasing due to strong cash collections and lower raw material pricing, ~~stabilized in~~respectively, as compared to the ~~current~~prior year period. Additionally, ~~unfavorable changes~~a decrease in accrued liabilities due to the Company implementing a ~~variety of other asset and liability categories used cash for~~match program in the ~~current~~401(k) Plan requiring the employer contribution to be paid concurrently with payroll. In the prior year period, ~~as well.~~

~~Investing Activities.~~ ~~Cash used in investing activities~~a discretionary employer contribution was $21,123 for the six months ended June 30, 2022, as compared to $16,572 for the six months ended June 30, 2021. The $4,551 increase in cash used in investing activities was driven by the ongoing investments in new technology and automation and the repurposing of assets at the Company’s Hazel Park, MI facility, which is expected to continueaccrued throughout the ~~remainder of~~year and paid after the year ended December 31, 2022. ~~This was slightly offset by the additional proceeds from the sale of property, plant and equipment which was originally intended to support production for the former fitness customer.~~

~~Financing Activities.~~ Cash provided by financing activities was $5,426 for the six months ended June 30, 2022, as compared to cash used of $1,660 for the six months ended June 30, 2021. The $7,086 increase was primarily driven by higher borrowings in excess of debt repayments in the current period as the Company continues investing in new technology and automation and its Hazel Park,

2826

Table of Contents

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.~~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, ~~the Company repurchased 200,000 shares of its common stock during the first half of 2022~~ under our share repurchase program, ~~at a total cost~~the Company purchased $1,661 of ~~$2,323. The Company did not repurchase any of our~~ common stock ~~during~~in the ~~prior year period.~~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 ~~for the remainder of the current fiscal year~~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 ~~September 26, 2019, and as last amended as of March 31, 2022,~~June 28, 2023, we entered into ~~the~~an amended and restated credit agreement (the Credit ~~Agreement~~Agreement) with certain lenders and Wells Fargo Bank, National Association, the Agent. The Credit Agreement provides for a ~~$200,000 Revolving Loan,~~$250,000 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.~~$25,000. The Credit Agreement also provides for ~~an additional~~the availability of incremental facilities to the greater of $100,000 and 125% of ~~capacity~~the Company’s twelve month trailing Consolidated EBITDA through an accordion feature. All amounts borrowed under the ~~Credit Agreement~~credit agreement mature on ~~September 26, 2024.~~

Our obligations under the Credit Agreement are secured by first priority security interests in substantially all of our personal property and guaranteed by, and secured by first priority security interests in, substantially all of the personal property of, our direct and indirect subsidiaries: Center Manufacturing, Inc., Center Manufacturing Holdings, Inc., Center—Moeller Products LLC, Defiance Metal Products Co., Defiance Metal Products of Arkansas, Inc., Defiance Metal Products of PA., Inc. and Defiance Metal Products of WI, Inc.June 28, 2028.

Borrowings under the Credit Agreement bear interest at a fluctuating ~~LIBOR~~SOFR plus an applicable margin based on the current consolidated total leverage ratio (which may be adjusted for certain reserve requirements), plus ~~1.00%~~1.25% to ~~2.00%~~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 ~~LIBOR.~~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) ~~and~~, (ii) the Federal Funds Rate plus 0.50%, and (iii) Adjusted Term SOFR for a one-month tenor in effect on such day plus ~~(b) 0.00% to~~ 1.00%~~, depending on the current Total Consolidated Leverage Ratio.~~. The Credit Agreement also includes provisions for determining a replacement rate when ~~LIBOR~~SOFR is no longer available.

At June 30, ~~2022,~~2023, the interest rate on outstanding borrowings under the Revolving Loan was ~~2.06%~~7.69%. ~~At June 30, 2022, we~~We had availability of ~~$123,937~~$72,057 under the ~~Revolving Loan.~~revolving credit facility at June 30, 2023.

We must pay a commitment fee ~~at a rate~~ 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,~~indebtedness; create, incur, assume or ~~incur liens,~~suffer to exist liens; make certain ~~investments,~~investments; allow our subsidiaries to merge or consolidate with another ~~entity,~~entity; make certain asset ~~dispositions,~~dispositions; pay certain dividends or other distributions to ~~shareholders,~~shareholders; enter into transactions with ~~affiliates,~~affiliates; enter into sale leaseback ~~transactions or make~~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, ~~2022,~~2023, our interest coverage ratio was ~~18.34~~5.93 to 1.00. The Credit Agreement also requires us to maintain a consolidated total leverage ratio not to exceed ~~3.25~~3.50 to 1.00, although such leverage ratio can be increased in connection with certain acquisitions. As of June 30, ~~2022,~~2023, our consolidated total leverage ratio was ~~1.52~~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.

On June 30, 2020, March 31, 2021 and March 31, 2022, the Company entered into amendments to the Credit Agreement. Please refer to Note 3 – Bank Revolving Credit Notes in the Notes to the Consolidated Financial Statements for a more detailed discussion.

2927

Table of Contents

Capital Requirements and Sources of Liquidity

During the six months ended June 30, 2023 and 2022, our cash and ~~2021,~~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 ~~$26,351~~$6,320 and ~~$16,986,~~$26,351, respectively. The ~~increase~~decrease of ~~$9,365~~$20,031 was driven by ~~our ongoing~~the completion of the capital investment ~~in new technology and automation along with the repurposing of assets~~ in the Company’s Hazel Park, MI facility ~~which is expected to continue through~~at the end of 2022. Capital ~~expenditures~~expenditure expectations for the full year ~~2022~~2023 are expected to be between ~~$55,000~~$15,000 and ~~$65,000.~~$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, ~~2022,~~2023, we had immediate availability of ~~$123,937~~$72,057 through our ~~Revolving Loan~~revolving credit facility and ~~another~~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 ~~of the impact of the COVID-19 pandemic~~ at this time, we expect to be in compliance with these financial covenants through ~~2022~~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 ~~2022~~2023 and beyond when taking into consideration the estimated impacts of the ~~pandemic~~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, ~~2022:~~2023:


			Payments Due by Period										Payments Due by Period
	Total		2022 (Remainder)		2023 – 2024		2025 – 2026		Thereafter		Total		2023 (Remainder)		2024 – 2025		2026 – 2027		Thereafter
Long-term debt principal payment obligations ⁽¹⁾	$	76,063	$	—	$	76,063	$	—	$	—	$	177,943	$	—	$	—	$	—	$	177,943
Equipment financing agreements ⁽²⁾		2,125		605		1,520		—		—		1,217		908		309		—		—
Forecasted interest on debt payment obligations ⁽³⁾		4,183		953		3,230		—		—		35,876		5,997		14,154		12,400		3,325
Finance lease obligations ⁽⁴⁾		1,118		179		716		223		—		1,028		213		717		98		—
Operating lease obligations ⁽⁴⁾		42,472		2,837		11,371		9,493		18,771		38,294		2,911		10,696		9,530		15,157
Total	$	125,961	$	4,574	$	92,900	$	9,716	$	18,771	$	254,358	$	10,029	$	25,876	$	22,028	$	196,425

~~(1)~~

~~Principal payments under the Company’s Credit Agreement, which expires in 2024.~~

(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~~Sheets.

(3)	Forecasted interest on debt obligations are based on the debt balance, interest rate, and unused fee of the Company’s ~~revolver~~revolving credit facility, and the debt balances and interest rates of the Company’s equipment finance agreements as of June 30, ~~2022.~~2023.

(4)	See Note 4 – Leases in the Notes to Condensed Consolidated Financial Statements for additional information.

Table of Contents

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.

~~Table of Contents~~

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 ~~LIBOR-based~~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 Loan~~revolving credit facility under the Credit Agreement was ~~$76.1~~$177.9 million with an interest rate of 7.69% as of June 30, ~~2022. The interest rate was 2.06% as of June 30, 2022.~~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 ~~$0.4~~$0.6 million of interest expense based on our variable rate debt at June 30, ~~2022.~~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. ~~While such materials are generally available from numerous suppliers, the COVID-19 pandemic has resulted in availability delays at times. In addition, commodity~~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, ~~2022,~~2023, we did not have any commodity hedging instruments in ~~place.~~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.

Table of Contents

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, with the exception of those changes related to the adoption of ASC 842 Leases that occurred during the quarter ended March 31, 2022 that have materially affected or are reasonably~~

~~Table of Contents~~

~~likely to materially affect the Company’s internal control over financial~~ reporting. The adoption of this guidance resulted in policy, process and related internal control changes to conform with the requirements of the new standard including the implementation of new software and related internal controls. Please refer to Note 4 – Leases of the Notes to the Condensed Consolidated Financial Statements for additional information regarding the impact of ASC 842 ~~Leases~~ ~~on the Company.~~

3230

Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

~~We are not currently a party to any material litigation proceedings.~~ From time to time, ~~however,~~ 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, ~~2021,~~2022, which was filed with the SEC on March ~~2, 2022.~~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, ~~2022:~~2023:


				Total Number	Dollar Value of					Total Number	Dollar Value of
				of Shares	Shares that					of Shares	Shares that
	Total			Purchased as	May Yet Be		Total			Purchased as	May Yet Be
	Number			Part of Publicly	Purchased		Number			Part of Publicly	Purchased
	of Shares	Average Price		Announced Plans	Under the Plans		of Shares	Average Price		Announced Plans	Under the Plans
Period	Purchased	Paid per Share		or Programs⁽¹⁾	or Programs⁽¹⁾		Purchased	Paid per Share		or Programs⁽¹⁾	or Programs⁽¹⁾
April 2022	—	$	—	—	$	21,176,679
May 2022	—	$	—	—	$	21,176,679
June 2022	—	$	—	—	$	21,176,679
April 2023							—	$	—	—	$	18,552,679
May 2023							100,726	$	9.93	100,726	$	17,552,686
June 2023							—	$	—	—	$	17,552,686
Total	—			—			—			—

(1)

~~October 28, 2019, our Board of Directors approved an increase of our prior share repurchase program from $4 million to $25 million of shares of our common stock through 2021.~~ On October 19, 2021, the Board of Directors approved a ~~new~~ share repurchase program of up to $25 million of shares through 2023. ~~The new share repurchase program replaced the prior program.~~

Item 5. Other Information

3331

Table of Contents

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 21^st, 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.

3432

Table of Contents

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 ~~3, 2022~~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

3533


Balance as of December 31, 2021	$	71,535
Impairment		0
Balance as of June 30, 2022	$	71,535


	Balance Sheet Classification	June 30, 2022
Assets:
Finance lease assets	Property, plant and equipment, net	$	981
Operating lease assets	Operating lease assets		37,842
Total lease assets		$	38,823

Current liabilities:
Current finance lease liabilities	Other current liabilities	$	323
Current operating lease liabilities	Current portion of operating lease obligation		4,803
Noncurrent liabilities:
Long-term finance lease liabilities	Other long-term liabilities		730
Long-term operating lease liabilities	Operating lease obligation, less current maturities		33,531
Total lease liabilities		$	39,387


	June 30, 2022
Real estate leases	$	35,706
Equipment leases		2,874
Vehicle leases		243
Total lease assets	$	38,823


	Operating		Finance
Year ending December 31,	Leases		Leases		Total
2022 (remainder)	$	2,837	$	179	$	3,016
2023		5,704		359		6,063
2024		5,667		357		6,024
2025		4,837		223		5,060
2026		4,656		—		4,656
Thereafter		18,771		—		18,771
Total lease payments		42,472		1,118		43,590
Less: lease modification not yet commenced		—		—		—
Less: imputed interest		(4,138)		(65)		(4,203)
Total lease obligations	$	38,334	$	1,053	$	39,387