UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20212022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-32401
MANITEX INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
Michigan |
| 42-1628978 |
(State or Other Jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification Number) |
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9725 Industrial Drive, Bridgeview, Illinois |
| 60455 |
(Address of Principal Executive Offices) |
| (Zip Code) |
(708) 430-7500
(Registrant’s Telephone Number, Including Area Code)
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 | MNTX | The NASDAQ Stock Market LLC |
Preferred Share Purchase Rights | N/A | The NASDAQ Stock Market LLC |
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 |
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| Accelerated filer |
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Non-accelerated filer |
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| Smaller reporting company |
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| Emerging growth company |
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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 ☒
The number of shares of the registrant’s common stock, no par, outstanding at May 3, 20212, 2022 was 19,900,790.20,027,814.
MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES
GENERAL
This Quarterly Report on Form 10-Q filed by Manitex International, Inc. speaks as of March 31, 20212022 unless specifically noted otherwise. Unless otherwise indicated, Manitex International, Inc., together with its consolidated subsidiaries, is hereinafter referred to as “Manitex,” Inc” the “Registrant,” “us,” “we,” “our” or the “Company.”
Forward-Looking Information
Certain information in this Quarterly Report includes forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995). These statements relate to, among other things, the Company’s expectations, beliefs, intentions, future strategies, future events or future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In addition, when included in this Quarterly Report or in documents incorporated herein by reference the words “may,” “expects,” “should,” “intends,” “anticipates,” “believes,” “plans,” “projects,” “estimates” and the negatives thereof and analogous or similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statement is not forward-looking. We have based these forward-looking statements on current expectations and projections about future events. These statements are not guarantees of future performance. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Such risks and uncertainties, many of which are beyond our control, include, without limitation, those described below and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, in the section entitled “Item 1A. Risk Factors”:
• | a future substantial deterioration in economic conditions, especially in the United States and Europe; |
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• | the reliance of our customers on government spending, fluctuations in activity levels in the construction industry, and capital expenditures in the oil and gas industry; |
• | our level of indebtedness and our ability to meet financial covenants required by our debt agreements; |
• | our ability to negotiate extensions of our credit agreements and to obtain additional debt or equity financing when needed; |
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| the cyclical nature of the markets we operate in; |
• | an increase in interest rates; |
• | our increasingly international operations expose us to additional risks and challenges associated with conducting business internationally, including currency exchange |
• | difficulties in implementing new systems, integrating acquired businesses, managing anticipated growth, and responding to technological change; |
• | the availability of the third-party financing that some of our customers rely on to purchase our products; |
• | our operations are in a highly competitive industry and the Company is particularly subject to the risks of such competition; |
• | our dependency upon third-party suppliers makes us vulnerable to supply shortages; |
• | price increases in materials could reduce our profitability; |
• | the Company faces product liability claims and other liabilities due to the nature of its business; |
• | the Company’s success depends upon the continued protections of its trademarks and the Company may be forced to incur substantial costs to maintain, defend, protect and enforce its intellectual property rights; |
• | the volatility of our stock price; |
• | our ability to access the capital markets to raise funds and provide liquidity; |
• | the willingness of our shareholders and directors to approve mergers, acquisitions, and other business transactions; |
• | compliance with changing laws and regulations; |
• | a substantial portion of our revenues are attributed to a limited number of customers which may decrease or cease purchasing at any time; |
• | a disruption or breach in our information technology systems; |
• | our reliance on the management and leadership skills of our senior executives; |
• | impairment in the carrying value of goodwill and/or other intangible assets could negatively affect our operating results; |
• | certain provisions of the Michigan Business Corporation Act and the Company’s Articles of Incorporation, as amended, Amended and Restated Bylaws, and the Rights Agreement related to the Company’s Preferred Stock |
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• | the cost of compliance with Section 404 of the Sarbanes-Oxley Act of 2002; |
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• | other factors. |
The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 and in this Quarterly Report on Form 10-Q are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. We do not undertake, and expressly disclaim, any obligation to update this forward-looking information, except as required under applicable law.
MANITEX INTERNATIONAL, INC.
FORM 10-Q INDEX
TABLE OF CONTENTS
PART I: |
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| Condensed Consolidated Balance Sheets as of March 31, |
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ITEM 2: Management’s Discussion And Analysis Of Financial Condition And Results Of Operations |
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ITEM 3: Quantitative And Qualitative Disclosures About Market Risk |
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PART II: |
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ITEM 2: Unregistered Sales Of Equity Securities And Use Of Proceeds |
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PART 1—FINANCIAL INFORMATION
Item 1—Financial Statements
MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
|
| March 31, 2021 |
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| December 31, 2020 |
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| March 31, 2022 |
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| December 31, 2021 |
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ASSETS |
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Current assets |
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Cash |
| $ | 15,839 |
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| $ | 17,161 |
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| $ | 15,524 |
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| $ | 21,359 |
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Cash – restricted |
|
| 236 |
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| 240 |
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| 221 |
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| 222 |
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Trade receivables (net) |
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| 33,565 |
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| 30,418 |
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| 35,171 |
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| 30,515 |
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Other receivables |
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| 1,289 |
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| 179 |
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| 1,110 |
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| 2,039 |
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Inventory (net) |
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| 58,853 |
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| 56,055 |
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| 68,511 |
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| 64,965 |
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Prepaid expense and other current assets |
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| 3,712 |
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| 2,218 |
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| 3,548 |
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| 2,436 |
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Assets held for sale |
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| 1,069 |
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Total current assets |
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| 113,494 |
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| 106,271 |
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| 125,154 |
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| 121,536 |
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Total fixed assets, net of accumulated depreciation of $17,599 and $17,444 at March 31, 2021 and December 31, 2020, respectively |
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| 17,777 |
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| 18,723 |
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Total fixed assets, net of accumulated depreciation of $17,011 and $18,662 at March 31, 2022 and December 31, 2021, respectively |
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| 15,235 |
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| 16,460 |
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Operating lease assets |
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| 3,752 |
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| 4,068 |
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| 3,524 |
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| 3,563 |
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Intangible assets (net) |
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| 14,633 |
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| 15,671 |
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| 11,157 |
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| 11,946 |
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Goodwill |
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| 26,729 |
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| 27,472 |
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| 24,629 |
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| 24,949 |
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Other long-term assets |
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| 1,143 |
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| 1,143 |
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| 1,168 |
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| 1,143 |
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Deferred tax assets |
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| 247 |
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| 247 |
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| 178 |
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| 178 |
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Total assets |
| $ | 177,775 |
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| $ | 173,595 |
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| $ | 181,045 |
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| $ | 179,775 |
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LIABILITIES AND EQUITY |
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Current liabilities |
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Accounts payable |
| $ | 38,846 |
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| $ | 32,429 |
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| $ | 46,935 |
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| $ | 44,136 |
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Accrued expenses |
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| 8,650 |
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| 7,909 |
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| 10,366 |
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| 10,539 |
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Related party payables |
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| 34 |
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| 52 |
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Related party payables (net) |
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| 198 |
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| 203 |
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Notes payable |
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| 16,995 |
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| 16,510 |
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| 20,388 |
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| 18,401 |
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Current portion of finance lease obligations |
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| 344 |
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| 344 |
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| 450 |
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| 399 |
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Current portion of operating lease obligations |
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| 1,009 |
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| 1,167 |
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| 1,112 |
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| 1,064 |
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Customer deposits |
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| 1,771 |
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| 2,363 |
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| 4,677 |
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| 7,121 |
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Deferred income liability |
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| 3,747 |
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| 3,747 |
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Total current liabilities |
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| 71,396 |
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| 64,521 |
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| 84,126 |
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| 81,863 |
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Long-term liabilities |
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Revolving term credit facilities |
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| 12,644 |
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| 12,606 |
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Revolving term credit facilities (net) |
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| 12,730 |
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| 12,717 |
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Notes payable (net) |
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| 13,067 |
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| 13,625 |
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| 9,938 |
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| 10,089 |
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Finance lease obligations (net of current portion) |
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| 4,128 |
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| 4,221 |
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| 3,775 |
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| 3,822 |
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Non-current operating lease obligations |
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| 2,743 |
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| 2,901 |
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Non-current operating lease obligations (net of current portion) |
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| 2,412 |
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| 2,499 |
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Deferred gain on sale of property |
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| 567 |
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| 587 |
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| 487 |
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| 507 |
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Deferred tax liability |
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| 1,317 |
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| 1,333 |
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| 910 |
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| 1,074 |
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Other long-term liabilities |
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| 4,723 |
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| 4,892 |
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| 4,162 |
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| 4,389 |
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Total long-term liabilities |
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| 39,189 |
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| 40,165 |
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| 34,414 |
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| 35,097 |
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Total liabilities |
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| 110,585 |
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| 104,686 |
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| 118,540 |
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| 116,960 |
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Commitments and contingencies |
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Equity |
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Preferred Stock—Authorized 150,000 shares, 0 shares issued or outstanding at March 31, 2021 and December 31, 2020 |
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| — |
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| — |
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Common Stock—no par value 25,000,000 shares authorized, 19,900,790 and 19,821,090 shares issued and outstanding at March 31, 2021, and December 31, 2020, respectively |
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| 131,991 |
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| 131,455 |
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Preferred Stock—Authorized 150,000 shares, 0 shares issued or outstanding at March 31, 2022 and December 31, 2021 |
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| — |
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| — |
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Common Stock—no par value 25,000,000 shares authorized, 20,027,814 and 19,940,487 shares issued and outstanding at March 31, 2022, and December 31, 2021, respectively |
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| 132,803 |
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| 132,206 |
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Paid in capital |
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| 2,740 |
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| 3,025 |
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| 2,762 |
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| 3,264 |
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Retained deficit |
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| (64,635 | ) |
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| (63,863 | ) |
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| (68,206 | ) |
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| (68,436 | ) |
Accumulated other comprehensive loss |
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| (2,906 | ) |
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| (1,708 | ) |
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| (4,854 | ) |
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| (4,219 | ) |
Total equity |
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| 67,190 |
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| 68,909 |
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| 62,505 |
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| 62,815 |
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Total liabilities and equity |
| $ | 177,775 |
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| $ | 173,595 |
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| $ | 181,045 |
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| $ | 179,775 |
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The accompanying notes are an integral part of these financial statements
MANITEX INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share amounts)
(Unaudited)
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| Three Months Ended March 31, |
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| 2021 |
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| 2020 |
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Net revenues |
| $ | 47,168 |
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| $ | 48,733 |
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Cost of sales |
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| 38,363 |
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| 38,486 |
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Gross profit |
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| 8,805 |
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| 10,247 |
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Operating expenses |
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Research and development costs |
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| 785 |
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| 687 |
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Selling, general and administrative expenses |
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| 7,744 |
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| 8,039 |
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Impairment of intangibles |
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| — |
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| 6,722 |
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Total operating expenses |
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| 8,529 |
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| 15,448 |
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Operating income (loss) |
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| 276 |
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| (5,201 | ) |
Other (expense) income |
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Interest expense |
|
| (525 | ) |
|
| (1,084 | ) |
Interest income |
|
| 4 |
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| 60 |
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Foreign currency transaction loss |
|
| (215 | ) |
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| (418 | ) |
Other (expense) income |
|
| (20 | ) |
|
| 3 |
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Total other (expense) income |
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| (756 | ) |
|
| (1,439 | ) |
Loss before income taxes from continuing operations |
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| (480 | ) |
|
| (6,640 | ) |
Income tax expense from continuing operations |
|
| 292 |
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|
| 404 |
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Net loss from continuing operations |
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| (772 | ) |
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| (7,044 | ) |
Discontinued operations |
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Loss from operations of discontinued operations |
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| — |
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| (388 | ) |
Income tax expense |
|
| — |
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|
| 44 |
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Loss from discontinued operations |
|
| — |
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|
| (432 | ) |
Net loss |
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| (772 | ) |
|
| (7,476 | ) |
Loss per share |
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Basic |
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Loss from continuing operations |
| $ | (0.04 | ) |
| $ | (0.36 | ) |
Loss from discontinued operations |
| $ | - |
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| $ | (0.02 | ) |
Net loss |
| $ | (0.04 | ) |
| $ | (0.38 | ) |
Diluted |
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Loss from continuing operations |
| $ | (0.04 | ) |
| $ | (0.36 | ) |
Loss from discontinued operations |
| $ | - |
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| $ | (0.02 | ) |
Net loss |
| $ | (0.04 | ) |
| $ | (0.38 | ) |
Weighted average common shares outstanding |
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Basic |
|
| 19,845,064 |
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|
| 19,733,772 |
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Diluted |
|
| 19,845,064 |
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| 19,733,772 |
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| Three Months Ended March 31, |
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| 2022 |
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| 2021 |
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Net revenues |
| $ | 60,420 |
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| $ | 47,168 |
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Cost of sales |
|
| 50,295 |
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|
| 38,363 |
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Gross profit |
|
| 10,125 |
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|
| 8,805 |
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Operating expenses |
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|
|
|
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Research and development costs |
|
| 716 |
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|
| 785 |
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Selling, general and administrative expenses |
|
| 8,759 |
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|
| 7,744 |
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Total operating expenses |
|
| 9,475 |
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|
| 8,529 |
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Operating income (loss) |
|
| 650 |
|
|
| 276 |
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Other income (expense) |
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|
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Interest expense |
|
| (505 | ) |
|
| (525 | ) |
Interest income |
|
| 2 |
|
|
| 4 |
|
Foreign currency transaction loss |
|
| (49 | ) |
|
| (215 | ) |
Other income (expense) |
|
| 264 |
|
|
| (20 | ) |
Total other income (expense) |
|
| (288 | ) |
|
| (756 | ) |
Income (loss) before income taxes |
|
| 362 |
|
|
| (480 | ) |
Income tax expense (benefit) |
|
| 132 |
|
|
| 292 |
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Net income (loss) |
| $ | 230 |
|
| $ | (772 | ) |
Income (loss) per share |
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Basic |
| $ | 0.01 |
|
| $ | (0.04 | ) |
Diluted |
| $ | 0.01 |
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| $ | (0.04 | ) |
Weighted average common shares outstanding |
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Basic |
|
| 19,961,785 |
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|
| 19,845,064 |
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Diluted |
|
| 20,014,180 |
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|
| 19,845,064 |
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The accompanying notes are an integral part of these financial statements
MANITEX INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSINCOME (LOSS)
(In thousands)
(Unaudited)
|
| Three Months Ended March 31, |
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|
| 2021 |
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| 2020 |
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Net loss: |
| $ | (772 | ) |
| $ | (7,476 | ) |
Other comprehensive loss |
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Foreign currency translation adjustments |
|
| (1,198 | ) |
|
| (508 | ) |
Total other comprehensive loss |
|
| (1,198 | ) |
|
| (508 | ) |
Total comprehensive loss |
| $ | (1,970 | ) |
| $ | (7,984 | ) |
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| Three Months Ended March 31, |
| |||||
|
| 2022 |
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| 2021 |
| ||
Net income (loss) |
| $ | 230 |
|
| $ | (772 | ) |
Other comprehensive income (loss): |
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|
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Foreign currency translation adjustments |
|
| (635 | ) |
|
| (1,198 | ) |
Total other comprehensive income (loss) |
|
| (635 | ) |
|
| (1,198 | ) |
Total comprehensive income (loss) |
| $ | (405 | ) |
| $ | (1,970 | ) |
The accompanying notes are an integral part of these financial statements
MANITEX INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
|
| Outstanding shares |
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| Common Stock |
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| APIC |
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| Retained Deficit |
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| AOCI (Loss) |
|
| Total |
| ||||||||||||||||||||||||||||||
Balance at December 31, 2021 |
|
| 19,940,487 |
|
| $ | 132,206 |
|
| $ | 3,264 |
|
| $ | (68,436 | ) |
| $ | (4,219 | ) |
| $ | 62,815 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 230 |
|
|
| — |
|
|
| 230 |
| ||||||||||||||||||||||||
Loss on foreign currency translation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (635 | ) |
|
| (635 | ) | ||||||||||||||||||||||||
Employee incentive plan grant |
|
| 104,681 |
|
|
| 734 |
|
|
| (734 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Repurchase to satisfy withholding and cancelled shares |
|
| (17,354 | ) |
|
| (137 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (137 | ) | ||||||||||||||||||||||||
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 232 |
|
|
| — |
|
|
| — |
|
|
| 232 |
| ||||||||||||||||||||||||
Balance at March 31, 2022 |
|
| 20,027,814 |
|
| $ | 132,803 |
|
| $ | 2,762 |
|
| $ | (68,206 | ) |
| $ | (4,854 | ) |
| $ | 62,505 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| Outstanding shares |
|
| Common Stock |
|
| APIC |
|
| Retained Deficit |
|
| AOCI (Loss) |
|
| Total |
|
| Outstanding shares |
|
| Common Stock |
|
| APIC |
|
| Retained Deficit |
|
| AOCI (Loss) |
|
| Total |
| ||||||||||||
Balance at December 31, 2020 |
|
| 19,821,090 |
|
| $ | 131,455 |
|
| $ | 3,025 |
|
| $ | (63,863 | ) |
| $ | (1,708 | ) |
| $ | 68,909 |
|
|
| 19,821,090 |
|
| $ | 131,455 |
|
| $ | 3,025 |
|
| $ | (63,863 | ) |
| $ | (1,708 | ) |
| $ | 68,909 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (772 | ) |
|
| — |
|
|
| (772 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (772 | ) |
|
| — |
|
|
| (772 | ) |
Loss on foreign currency translation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,198 | ) |
|
| (1,198 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,198 | ) |
|
| (1,198 | ) |
Employee 2004 and 2019 incentive plan grant |
|
| 85,883 |
|
|
| 584 |
|
|
| (584 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Repurchase to satisfy withholding and cancelled |
|
| (6,183 | ) |
|
| (48 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (48 | ) | ||||||||||||||||||||||||
Employee incentive plan grant |
|
| 85,883 |
|
|
| 584 |
|
|
| (584 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Repurchase to satisfy withholding and cancelled shares |
|
| (6,183 | ) |
|
| (48 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (48 | ) | ||||||||||||||||||||||||
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 299 |
|
|
| — |
|
|
| — |
|
|
| 299 |
|
|
| — |
|
|
| — |
|
|
| 299 |
|
|
| — |
|
|
| — |
|
|
| 299 |
|
Balance at March 31, 2021 |
|
| 19,900,790 |
|
| $ | 131,991 |
|
| $ | 2,740 |
|
| $ | (64,635 | ) |
| $ | (2,906 | ) |
| $ | 67,190 |
|
|
| 19,900,790 |
|
| $ | 131,991 |
|
| $ | 2,740 |
|
| $ | (64,635 | ) |
| $ | (2,906 | ) |
| $ | 67,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| Outstanding shares |
|
| Common Stock |
|
| APIC |
|
| Retained Deficit |
|
| AOCI (Loss) |
|
| Total |
| ||||||||||||||||||||||||||||||
Balance at December 31, 2019 |
|
| 19,713,185 |
|
| $ | 130,710 |
|
| $ | 2,793 |
|
| $ | (50,253 | ) |
| $ | (3,700 | ) |
| $ | 79,550 |
| ||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,476 | ) |
|
| — |
|
|
| (7,476 | ) | ||||||||||||||||||||||||
Loss on foreign currency translation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (508 | ) |
|
| (508 | ) | ||||||||||||||||||||||||
Employee 2004 and 2019 incentive plan grant |
|
| 49,884 |
|
|
| 352 |
|
|
| (352 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Repurchase to satisfy withholding and cancelled |
|
| (2,949 | ) |
|
| (13 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (13 | ) | ||||||||||||||||||||||||
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 222 |
|
|
| — |
|
|
| — |
|
|
| 222 |
| ||||||||||||||||||||||||
Balance at March 31, 2020 |
|
| 19,760,120 |
|
| $ | 131,049 |
|
| $ | 2,663 |
|
| $ | (57,729 | ) |
| $ | (4,208 | ) |
| $ | 71,775 |
|
The accompanying notes are an integral part of these financial statements
MANITEX INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
| Three months ended March 31, |
|
| Three months ended March 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (772 | ) |
| $ | (7,476 | ) | ||||||||
Adjustments to reconcile net loss to cash used for operating activities: |
|
|
|
|
|
|
|
| ||||||||
Net income (loss) |
| $ | 230 |
|
| $ | (772 | ) | ||||||||
Adjustments to reconcile net income (loss) to cash used for operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 1,130 |
|
|
| 1,082 |
|
|
| 1,144 |
|
|
| 1,130 |
|
Changes in allowances for doubtful accounts |
|
| 80 |
|
|
| 37 |
|
|
| 24 |
|
|
| 80 |
|
Changes in inventory reserves |
|
| 106 |
|
|
| 270 |
|
|
| (436 | ) |
|
| 106 |
|
Deferred income taxes |
|
| 32 |
|
|
| (70 | ) |
|
| (146 | ) |
|
| 32 |
|
Amortization of deferred debt issuance costs |
|
| 38 |
|
|
| 104 |
|
|
| 13 |
|
|
| 38 |
|
Amortization of debt discount |
|
| 33 |
|
|
| 167 |
|
|
| 24 |
|
|
| 33 |
|
Write down of intangibles |
|
| — |
|
|
| 137 |
| ||||||||
Write down of goodwill |
|
| — |
|
|
| 6,585 |
| ||||||||
Gain on forward currency contract |
|
| (356 | ) |
|
| — |
| ||||||||
Share-based compensation |
|
| 299 |
|
|
| 222 |
|
|
| 232 |
|
|
| 299 |
|
Adjustment to deferred gain on sales and lease back |
|
| (20 | ) |
|
| — |
|
|
| (20 | ) |
|
| (20 | ) |
Reserves for uncertain tax provisions |
|
| — |
|
|
| (88 | ) | ||||||||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in accounts receivable |
|
| (3,286 | ) |
|
| (356 | ) |
|
| (4,793 | ) |
|
| (3,286 | ) |
Increase in other receivable |
|
| (1,139 | ) |
|
| (1,631 | ) | ||||||||
Decrease (increase) in other receivables |
|
| 901 |
|
|
| (1,139 | ) | ||||||||
Increase in inventory |
|
| (3,967 | ) |
|
| (7,283 | ) |
|
| (3,758 | ) |
|
| (3,967 | ) |
Increase in prepaid expenses |
|
| (1,586 | ) |
|
| (399 | ) |
|
| (1,142 | ) |
|
| (1,586 | ) |
Increase in other assets |
|
| (47 | ) |
|
| — |
|
|
| (48 | ) |
|
| (47 | ) |
Increase in accounts payables and related party payables |
|
| 7,532 |
|
|
| 8,530 |
|
|
| 3,475 |
|
|
| 7,532 |
|
Increase (decrease) in accrued expenses |
|
| 966 |
|
|
| (111 | ) | ||||||||
Increase in accrued expenses |
|
| 300 |
|
|
| 966 |
| ||||||||
Decrease in other current liabilities |
|
| (525 | ) |
|
| (327 | ) |
|
| (2,374 | ) |
|
| (525 | ) |
(Decrease) increase in other long-term liabilities |
|
| (29 | ) |
|
| 4 |
| ||||||||
Decrease in other long-term liabilities |
|
| (162 | ) |
|
| (29 | ) | ||||||||
Net cash used in operating activities |
|
| (1,155 | ) |
|
| (603 | ) |
|
| (6,892 | ) |
|
| (1,155 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Purchase of property and equipment |
|
| (157 | ) |
|
| (406 | ) |
|
| (536 | ) |
|
| (157 | ) |
Investment in intangible assets |
|
| (64 | ) |
|
| — |
| ||||||||
Net cash used in investing activities |
|
| (157 | ) |
|
| (406 | ) |
|
| (600 | ) |
|
| (157 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings on revolving term credit facility |
|
| — |
|
|
| 6,000 |
| ||||||||
Payments on convertible debt |
|
| — |
|
|
| (7,000 | ) | ||||||||
Net borrowings on working capital facilities |
|
| 713 |
|
|
| 1,201 |
|
|
| 2,166 |
|
|
| 713 |
|
New borrowings—other |
|
| 748 |
|
|
| — |
|
|
| 903 |
|
|
| 748 |
|
Note payments |
|
| (369 | ) |
|
| (109 | ) |
|
| (577 | ) |
|
| (369 | ) |
Shares repurchased for income tax withholding on share-based compensation |
|
| (48 | ) |
|
| (13 | ) |
|
| (137 | ) |
|
| (48 | ) |
Payments on capital lease obligations |
|
| (92 | ) |
|
| (114 | ) |
|
| (93 | ) |
|
| (92 | ) |
Net cash provided by (used in) financing activities |
|
| 952 |
|
|
| (35 | ) | ||||||||
Net cash provided by financing activities |
|
| 2,262 |
|
|
| 952 |
| ||||||||
Net decrease in cash and cash equivalents |
|
| (360 | ) |
|
| (1,044 | ) |
|
| (5,230 | ) |
|
| (360 | ) |
Effect of exchange rate changes on cash |
|
| (966 | ) |
|
| (213 | ) |
|
| (606 | ) |
|
| (966 | ) |
Cash and cash equivalents at the beginning of the year |
|
| 17,401 |
|
|
| 23,577 |
|
|
| 21,581 |
|
|
| 17,401 |
|
Cash and cash equivalents at end of period |
| $ | 16,075 |
|
| $ | 22,320 |
|
| $ | 15,745 |
|
| $ | 16,075 |
|
See Note 1 for supplemental cash flow disclosures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
1. Nature of Operations and Basis of Presentation
The unaudited Condensed Consolidated Balance Sheets at March 31, 20212022 and December 31, 20202021 and the related Condensed Consolidated Statements of Operations, Condensed Consolidated Statement of Comprehensive Loss,Income (Loss), Condensed Consolidated Statements of Shareholders’ Equity, and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 20212022 and 20202021 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations and cash flows of the Company for the interim periods. Interim results may not be indicative of results to be realized for the entire year. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2021. The Condensed Consolidated Balance Sheet as of December 31, 20202021 was derived from our audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”).
The Company is a leading provider of engineered lifting solutions. The Company reports in a single business segment and has 4 operating segments, under which there are 5 reporting units. The Company designs, manufactures and distributes a diverse group of products that serve different functions and are used in a variety of industries.
Manitex Inc. (“Manitex”) markets a comprehensive line of boom trucks, truck cranes and sign cranes. Manitex’s boom trucks and crane products are primarily used for industrial projects, energy exploration and infrastructure development, including roads, bridges and commercial construction.
Badger Equipment Company (“Badger”) is a manufacturer of specialized rough terrain cranes and material handling products. Badger primarily serves the needs of the construction, municipality and railroad industries.
PM and Oil and Steel S.p.A. (“PM” or “PM Group”), formerly known as PM Group S.p.A., is a leading Italian manufacturer of truck- mounted hydraulic knuckle boom cranes with a 50-year history of technology and innovation, and a product range spanning more than 50 models. PM is also a manufacturer of truck-mounted aerial platforms with a diverse product line and an international client base. Through its consolidated subsidiaries, PM Group has locations in Modena, Italy; Valencia, Spain; Arad, Romania; Chassieu, France; Buenos Aires, Argentina; Santiago, Chile; Singapore and Querétaro, Mexico.
Manitex Valla S.r.L. (“Valla”) produces a full range of precision pick and carry industrial cranes using electric, diesel, and hybrid power options. Its cranes offer wheeled or tracked, and fixed or swing boom configurations, with special applications designed specifically to meet the needs of its customers. These products are sold internationally through dealers and into the rental distribution channel.
Crane and Machinery, Inc. (“C&M”) is a distributor of the Company’s products as well as other cranes.products. Crane and Machinery Leasing, Inc. (“C&M Leasing”) rents equipment manufactured by the Company as well as a limited amount of equipment manufactured by third parties. Although C&M is a distributor of Terex Corporation’s (“Terex”) cranes, C&M’s primary business is the distribution of products manufactured by the Company.
COVID-19 Pandemic
We are continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it is impacting our customers, employees, supply chain, and distribution network, as well as the demand for our products in the industries and markets that we serve. Our first priority is the health and safety of our employees, customers, and business partners and we believe that we have taken the necessary steps to keep our facilities clean and safe during the COVID-19 pandemic. While COVID-19 has had a material impact on our past financial results, we are unable to predict the ultimate impact that it may have on our business, future results of operations, financial position or cash flows. The extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the ultimate severity and duration of the outbreak (including the spread and impact of new COVID-19 variants) and actions by government authorities to contain the outbreak or treat its impact. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown.
The Company is continuing to closely monitorexperience supply chain disruptions and related logistical bottlenecks that have impacted our ability to meet strong industrial demand and have also, increased costs related to shipping, warehousing, and working capital management. While the spreadCompany is actively working to mitigate these expenses and the associated timing issues, certain segments – such as truck chassis – have been more impacted than others. Where appropriate and feasible, we have implemented pricing adjustments to protect
margins and, in tandem, continue to build inventory to meet our customer requirements. In addition, the Company is actively managing costs and working to further streamline operations where needed. Furthermore, the Company has modified its business practices to manage expenses (including practices regarding employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences). We continue to take steps intended to minimize the negative impact of the COVID-19 pandemic and is continually assessing its potential effects on our business and our financial performance as well asto protect the businessessafety of our employees and customers, and vendors, including the impact thatbut we may experience if and when the pandemic subsides. The Company cannot predict the duration or severity of the ongoing COVID-19 pandemic and we cannotor reasonably estimate the financial impact the COVID-19 outbreakthat it will have on our results and significant estimates going forward.
Supplemental Cash Flow Information
Transactions for the periods ended March 31, 20212022 and 20202021 are as follows:
|
| Three months ended March 31, |
|
| Three months ended March 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Interest received in cash |
| $ | 4 |
|
| $ | 60 |
|
| $ | 2 |
|
| $ | 4 |
|
Interest paid in cash |
|
| 553 |
|
|
| 1,693 |
|
|
| 464 |
|
|
| 553 |
|
Income tax payments in cash |
|
| 18 |
|
|
| 96 |
|
|
| 28 |
|
|
| 18 |
|
Discontinued Operations
On August 21, 2020, the Company entered into an Asset Purchase Agreement to sell Manitex Sabre, Inc. to an affiliate of Super Steel, LLC for cash proceeds of $1.5 million, subject to certain adjustments based on closing date accounts receivable and inventory. Accordingly, Manitex Sabre, Inc. is reported as a discontinued operation for 2020.
In addition to the cash proceeds from sale of $1.5 million in cash received, the Company may receive a maximum royalty and earnout payments of approximately $2.9 million for years 2021 thru 2023 if certain revenue criteria are met. The Company will account for the contingent consideration as a gain in accordance with ASC 450. Under this approach, we will recognize the contingent consideration in earnings after the contingency is resolved. See Note 17 for additional discussion related to the sale of Sabre’s business and assets.
2. Significant Accounting Policies and New Accounting Pronouncements
The summary of the Company’s significant accounting policies is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all short-term securities purchased with maturity dates of three months or less to be cash equivalents. The cash in the Company'sCompany’s U.S. banks (primarily CIBC) is not fully insured by the FDIC due to the statutory limit of $250.
Restricted Cash
Certain of the Company’s lending arrangements require the Company to post collateral or maintain minimum cash balances in escrow. These cash amounts are reported as current assets on the balance sheets based on when the cash will be contractually released. Total restricted cash was $236$221 and $240$222 at March 31, 20212022 and December 31, 2020,2021, respectively.
Revenue Recognition
Revenue is recognized when obligations under the terms of the contract with our customer are satisfied; generally, this occurs with the transfer of control of our equipment, parts or installation services (typically completed within one day), which occurs at a point in time. Equipment can be redirected during the manufacturing phase such that over time revenue recognition is not appropriate. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Our contracts are non-cancellable and returns are only allowed in limited instances. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. The expected costs associated with our base warranties continue to be recognized as expense when the products are sold and do not constitute a separate performance obligation.
For instances where equipment and installation services are sold together, the Company accounts for the equipment and installation services separately. The consideration (including any discounts) is allocated between the equipment and installation services based on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells the equipment.
In some instances, the Company fulfills its obligations and bills the customer for the work performed but does not ship the goods until a later date. These arrangements are considered bill-and-hold transactions. In order to recognize revenue on the bill-and-hold transactions, the Company ensures the customer has requested the arrangement, the product is identified separately as belonging to the customer, the product is ready for shipment to the customer in its current form, and the Company does not have the ability to direct the product to a different customer. A portion of the transaction price is not allocated to the custodial services due to the immaterial value assigned to that performance obligation.
Payment terms offered to customers are defined in contracts and purchase orders and do not include a significant financing component. At times, the Company may offer discounts which are considered variable consideration however, the Company applies the constraint guidance when determining the transaction price to be allocated to the performance obligations.
Accounts Receivable and Allowance for Doubtful Accounts
AccountsTrade accounts receivable are statedrecorded at the amounts the Company’s customers are invoiced amount and do not bear interest. The Company has adopted a policy consistent with U.S. GAAP for the periodic review of its accounts receivable to determine whether the establishment of an allowanceAllowance for doubtful accounts is warrantedthe Company’s estimate of current expected credit losses on its existing accounts receivable and determined based on historical customer assessments and current financial conditions. Account balances are charged off against the allowance when the Company determines the receivable will not be recovered. There can be no assurance that the Company’s assessmentestimate of the collectabilityaccounts receivable collection will be indicative of the accounts.future results. The Company established an allowance for bad debt of $2.6 million$2,408 and $2,432 at March 31, 20212022 and December 31, 2020, respectively.2021. The Company also has, in some instances, a security interest in its accounts receivable until payment is received.
Property, Equipment and Depreciation
Property and equipment are stated at cost or the fair market value at the date of acquisition for property and equipment acquired in connection with the acquisition of a company. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation of property, and equipment is calculated using the straight-line method over the estimated useful lives of the assets. Depreciation expense for the years ended March 31, 2021 and 2020 was $551 and $498, respectively.
Other Intangible Assets
The Company capitalizes certain costs related to patent technology. Additionally, a substantial portion of the purchase price related to the Company’s acquisitions has been assigned to patents or unpatented technology, trade name, customer backlog, and customer relationships. Under the guidance, Other Intangible Assets with definite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are tested annually for impairment. The Company recognized $0.1 million in impairment related to tradenames during the three months ended March 31, 2020. NaN impairment expense2022 and 2021 was recognized for the three months ended March 31, 2021.
Goodwill
The Company’s methodology for allocating the purchase price of acquisitions is based on established valuation techniques that reflect the consideration of a number of factors, including valuations performed by third-party appraisers when appropriate. Goodwill is measured as the excess of the cost of an acquired entity over the fair value assigned to identifiable assets acquired$462 and liabilities assumed.
The Company annually tests goodwill for impairment on the first day of its fiscal fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company also performs an interim review for indicators of impairment each quarter to assess whether an interim impairment review is required for any reporting unit. As part of its interim reviews, management analyzes potential changes in the value of individual reporting units based on each reporting unit’s operating results for the period compared to expected results as of the prior year’s annual impairment test. In addition, management considers how other key assumptions, including discount rates and expected long-term growth rates, used in the last annual impairment test, could be impacted by changes in market conditions and economic events.
The Company recognized $6.6 million in impairment related to goodwill during the three months ended March 31, 2020. NaN impairment expense was recognized for the three months ended March 31, 2021.
$551, respectively.
Inventory, net
Inventory consists of stock materials and equipment stated at the lower of cost (first in, first out) or net realizable value. All equipment classified as inventory is available for sale. The Company records excess and obsolete inventory reserves. The estimated reserve is based upon specific identification and/or historical experience of excess or obsolete inventories. Selling, general and administrative expenses are expensed as incurred and are not capitalized as a component of inventory.
Accrued Warranties
Warranty costs are accrued at the time revenue is recognized. The Company’s products are typically sold with a warranty covering defects that arise during a fixed period of time. The specific warranty offered is a function of customer expectations and competitive forces.
A liability for estimated warranty claims is accrued at the time of sale. The liability is established using historical warranty claim experience. The current provision may be adjusted to take into account unusual or non-recurring events in the past or anticipated changes in future warranty claims. Adjustments to the initial warranty accrual are recorded if actual claim experience indicates that adjustments are necessary.
As of March 31, 20212022 and December 31, 2020,2021, accrued warranties were $1,241$1,725 and $1,292, respectively.
Accounting for Paycheck Protection Program Loan
The Company has elected to account for the Paycheck Protection Program (PPP) loan of $3.7 million as a government grant and as such, the loan was recorded as a deferred income liability on the balance sheet. The Company has applied for forgiveness of the loan. The offset will be recorded against the related expense on the income statement, when it is probable that the grant income will be realized, likely after approval from the Small Business Administration (“SBA”).
Foreign Currency Translation and Transactions
The financial statements of the Company’s non-U.S. subsidiaries are translated using the current exchange rate for assets and liabilities and the weighted-average exchange rate for the year for income and expense items. Resulting translation adjustments are recorded to accumulated other comprehensive income (OCI) as a component of shareholders’ equity.
The Company converts receivables and payables denominated in other than the Company’s functional currency at the exchange rate as of the balance sheet date. The resulting transaction exchange gains or losses, except for certain transaction gains or loss related to intercompany receivable and payables, are included in other income and expense. Transaction gains and losses related to intercompany receivables and payables not anticipated to be settled in the foreseeable future are excluded from the determination of net income and are recorded as a translation adjustment (with consideration to the tax effect) to accumulated other comprehensive income (OCI) as a component of shareholders’ equity.
Derivatives—Forward Currency Exchange Contracts
When the Company enters into forward currency exchange contracts it does so such that the exchange gains and losses on the assets and liabilities that are being hedged, which are denominated in a currency other than the reporting units’ functional currency, would be offset by the changes in the market value of the forward currency exchange contracts it holds. The forward currency exchange contracts that the Company has to offset existing assets and liabilities denominated in other than the reporting units’ functional currency have been determined not to be considered a hedge. The Company records the forward currency exchange contracts at its market value with any associated gain or loss being recorded in current earnings. Both realized and unrealized gains and losses related to forward currency contracts are included in current earnings and are reflected in the Condensed Consolidated Statements of Operations in the other income expense section on the line titled foreign currency transaction loss.
Research and Development Expenses
The Company expenses research and development costs, as incurred. For the periods ended March 31, 2021 and 2020 expenses were $785 and $687,$1,578, respectively.
Advertising
Advertising costs are expensed as incurred and were $128$110 and $165$128 for the periodsthree months ended March 31, 2022 and 2021, and 2020, respectively.
Retirement Benefit Costs and Termination Benefits
Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. Employees in Italy are entitled to Trattamento di Fine Rapporto (“TFR”), commonly referred to as an employee leaving indemnity, which represents deferred compensation for employees in the private sector. Under Italian law, an entity is obligated to accrue for TFR on an individual employee basis payable to each individual upon termination of employment (including both voluntary and involuntary dismissal). The expense is recognized in the personnel costs (SG&A or COGS) in the Condensed Consolidated Statements of Operations and the accrual is recorded in other long-term liabilities in the Condensed Consolidated Balance Sheets.
Litigation Claims
In determining whether liabilities should be recorded for pending litigation claims, the Company must assess the allegations and the likelihood that it will successfully defend itself. When the Company believes it is probable that it will not prevail in a particular matter, it will then record an estimate of the amount of liability based, in part, on advice of legal counsel.
Income Taxes
The Company accounts for income taxes under the provisions of ASC 740 “Income Taxes,” which requires recognition of income taxes based on amounts payable with respect to the current year and the effects of deferred taxes for the expected future tax consequences of events that have been included in the Company’s financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial accounting and tax basis of assets and liabilities, as well as for operating losses and tax credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets when it is more-likely-than-not a tax benefit will not be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income prior to the expiration of any net operating loss carryforwards. See Note 12, Income Taxes, for further details.
The Jobs Act also establishes Global Intangible Low-Taxed Income (“GILTI”) provisions that impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company has elected to recognize GILTI as a period cost as incurred, therefore there are no deferred taxes recognized for basis differences that are expected to impact the amount of the GILTI inclusion upon reversal.
ASC 740 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company records interest and penalties related to income tax matters in the provision for income taxes.
Comprehensive Income
Comprehensive income includes, in addition to net earnings, other items that are reported as direct adjustments to shareholders’ equity. Currently, the comprehensive income adjustment required for the Company is a foreign currency translation adjustment, the result of consolidating its foreign subsidiary.
Shipping and Handling
The Company records the amount of shipping and handling costs billed to customers as revenue. The cost incurred for shipping and handling is included in the cost of sales.respectively
Debt Issuance Costs
Debt issuance costs incurred in securing the Company’s financing arrangements are capitalized and amortized over the term of the associated debt. Deferred financing costs associated with long-term debt are presented in the balance sheet as direct deduction from the carrying amount of that debt liability, consistent with debt discount. Deferred financing costs associated with revolving lines of credit are included with other long-term assets on the Company’s Condensed Consolidated Balance Sheets.
Sale and Leaseback
In accordance with ASC 842-10 Sales-Leaseback Transactions, the Company has recorded a deferred gain in relationship to the sale and leaseback of one of the Company’s operating facilities. As such, the gains have been deferred and are being amortized on a straight- line basis over the life of the leases.
Computation of EPS
Basic Earnings per Share (“EPS”) was computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period.
The number of shares related to options, warrants, restricted stock, convertible debt and similar instruments included in diluted EPS (“EPS”) is based on the “Treasury Stock Method” prescribed in ASC 260-10, Earnings per Share. This method assumes the theoretical repurchase of shares using proceeds of the respective stock option or warrant exercised, and for restricted stock, the amount of compensation cost attributed to future services which has not yet been recognized, and the amount of current and deferred tax benefit, if any, that would be credited to additional paid in capital upon the vesting of the restricted stock, at a price equal to the issuer’s average stock price during the related earnings period. Accordingly, the number of shares includable in the calculation of EPS in respect of the stock options, warrants, restricted stock, convertible debt, and similar instruments is dependent on this average stock price and will increase as the average stock price increases.
Stock Based Compensation
In accordance with ASC 718 Compensation-Stock Compensation, share-based payments to employees, including grants of restricted stock units, are measured at fair value as of the date of grant and are expensed in the Condensed Consolidated Statements of Operation over the service period (generally the vesting period).
Adoption of Highly Inflationary Accounting in Argentina
GAAP guidance requires the use of highly inflationary accounting for countries whose cumulative three-year inflation exceeds 100 percent. In the second quarter of 2018, published inflation indices indicated that the three-year cumulative inflation in Argentina exceeded 100 percent, and as of July 1, 2018, we elected to adopt highly inflationary accounting for our subsidiary in Argentina (“PM Argentina”). Under highly inflationary accounting, PM Argentina’s functional currency became the Euro (its parent company’s reporting currency), and its income statement and balance sheet have been measured in Euros using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings in other (income) and expense, net and was not material. As of March 31, 2021,2022, PM Argentina had a smallan insignificant net peso monetary position. position. Net sales of PM Argentina were less than 5 percent5% of our consolidated net sales for the yearsthree months ended March 31, 20212022 and year ended December 31, 2020, respectively.
Recently Issued Pronouncements - Not Yet Adopted
In March 2020, the FASB issued guidance under ASC 848, Reference Rate Reform. This guidance provides optional expedients and exceptions to account for debt, leases, contracts, hedging relationships and other transactions that reference LIBOR or another reference rate if certain criteria are met. The guidance is effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We are currently evaluating the potential effects of the adoption of this guidance on our Consolidated Financial Statements.
In January 2021, the FASB issued ASU 2021-01,1 which refines the scope of ASC 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate reform activities. The ASU permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest (PAI) in connection with reference rate reform activities under way in global financial markets (the “discounting transition”). We are currently evaluating the potential effects of the adoption of this guidance on our Consolidated Financial Statements.
There have been no other accounting pronouncements issued but not yet adopted by us which are expected to have a material impact on our Condensed Consolidated Financial Statements.
Recently Adopted Accounting Guidance
In December 2019, the FASB issued ASU 2019-12, “Income Taxes Topic 740-Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740. The effective date for ASU 2019-12 will be the first quarter of fiscal year 2021 and early adoption is permitted. The Company adopted this guidance as of January 1, 2021. The adoption of this guidance did not have a significant impact on our operating results.
3. Revenue Recognition
The following table disaggregates our revenue for the three months ended March 31, 20212022 and 2020:2021:
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Equipment sales |
| $ | 38,832 |
|
| $ | 40,875 |
|
| $ | 52,631 |
|
| $ | 39,159 |
|
Part sales |
|
| 7,203 |
|
|
| 7,168 |
|
|
| 6,772 |
|
|
| 6,560 |
|
Installation services |
|
| 1,133 |
|
|
| 690 |
| ||||||||
Services |
|
| 1,017 |
|
|
| 1,449 |
| ||||||||
Total Revenue |
| $ | 47,168 |
|
| $ | 48,733 |
|
| $ | 60,420 |
|
| $ | 47,168 |
|
The Company attributes revenue to different geographic areas based on where items are shipped to or services are performed. The following table provides detail of revenues by geographic area for the three months ended March 31, 20212022 and 2020:2021:
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
United States |
|
| 17,438 |
|
| $ | 24,473 |
|
| $ | 30,884 |
|
| $ | 19,004 |
|
Italy |
|
| 6,713 |
|
|
| 5,333 |
|
|
| 6,673 |
|
|
| 5,147 |
|
Canada |
|
| 4,088 |
|
|
| 2,875 |
| ||||||||
France |
|
| 3,766 |
|
|
| 2,783 |
|
|
| 3,677 |
|
|
| 3,766 |
|
Chile |
|
| 3,220 |
|
|
| 2,085 |
|
|
| 2,452 |
|
|
| 3,220 |
|
Canada |
|
| 2,875 |
|
|
| 2,480 |
| ||||||||
Other |
|
| 13,156 |
|
|
| 11,579 |
|
|
| 12,646 |
|
|
| 13,156 |
|
|
| $ | 47,168 |
|
| $ | 48,733 |
| ||||||||
Total Revenue |
| $ | 60,420 |
|
| $ | 47,168 |
|
Total Company Revenues by Sources
The sources of the Company’s revenues are summarized below for the three months ended March 31, 20212022 and 2020:2021:
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Boom trucks, knuckle boom & truck cranes |
| $ | 33,226 |
|
| $ | 34,787 |
|
| $ | 37,631 |
|
| $ | 27,161 |
|
Aerial platforms |
|
| 8,325 |
|
|
| 6,575 |
| ||||||||
Part sales |
|
| 7,203 |
|
|
| 7,168 |
|
|
| 6,772 |
|
|
| 6,560 |
|
Other equipment |
|
| 3,568 |
|
|
| 2,954 |
| ||||||||
Services |
|
| 1,017 |
|
|
| 1,449 |
| ||||||||
Rough terrain cranes |
|
| 2,038 |
|
|
| 3,134 |
|
|
| 162 |
|
|
| 140 |
|
Installation services |
|
| 1,133 |
|
|
| 690 |
| ||||||||
Other equipment and rentals |
|
| 6,513 |
|
|
| 5,283 |
| ||||||||
Total Revenue |
| $ | 47,168 |
|
| $ | 48,733 |
|
| $ | 60,420 |
|
| $ | 47,168 |
|
Customer Deposits
At times, the Company may require an upfront deposit related to its contracts. In instances where an upfront deposit has been received by the Company and the revenue recognition criteria have not yet been met, the Company records a contract liability in the form of a
customer deposit, which is classified as a short-term liability on the balance sheet.Condensed Consolidated Balance Sheets. That customer deposit is revenue that is deferred until the revenue recognition criteria have been met, at which time, the customer deposit is recognized into revenue.
The following table summarizes changes in customer deposits for the three months ended March 31 as follows:
|
| March 31, 2021 |
|
| March 31, 2020 |
|
| March 31, 2022 |
|
| March 31, 2021 |
| ||||
Customer deposits |
| $ | 2,363 |
|
| $ | 1,493 |
|
| $ | 7,121 |
|
| $ | 2,363 |
|
Additional customer deposits received where revenue has not yet been recognized |
|
| 1,359 |
|
|
| 1,146 |
|
|
| 2,078 |
|
|
| 1,359 |
|
Revenue recognized from customer deposits |
|
| (1,874 | ) |
|
| (1,388 | ) |
|
| (4,444 | ) |
|
| (1,874 | ) |
Effect of change in exchange rates |
|
| (77 | ) |
|
| (42 | ) |
|
| (78 | ) |
|
| (77 | ) |
|
| $ | 1,771 |
|
| $ | 1,209 |
| ||||||||
Total customer deposits |
| $ | 4,677 |
|
| $ | 1,771 |
|
4. Fair Value Measurements
The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 20212022 and December 31, 20202021 by level within the fair value hierarchy. As required by ASC 820-10, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The following is summary of items that the Company measures at fair value on a recurring basis:
|
| Fair Value at March 31, 2021 |
|
| Fair Value at March 31, 2022 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valla contingent consideration |
| $ | — |
|
| $ | — |
|
| $ | 215 |
|
| $ | 215 |
| ||||||||||||||||
Forward currency exchange contracts |
|
| — |
|
|
| 131 |
|
|
| — |
|
|
| 131 |
|
| $ | — |
|
| $ | 136 |
|
| $ | — |
|
| $ | 136 |
|
Total recurring liabilities at fair value |
| $ | — |
|
| $ | 131 |
|
| $ | 215 |
|
| $ | 346 |
|
| $ | — |
|
| $ | 136 |
|
| $ | — |
|
| $ | 136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value at December 31, 2020 |
|
| Fair Value at December 31, 2021 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Forward currency exchange contracts |
| $ | — |
|
| $ | 75 |
|
| $ | — |
|
| $ | 75 |
| ||||||||||||||||
Total current assets at fair value |
| $ | — |
|
| $ | 75 |
|
| $ | — |
|
| $ | 75 |
| ||||||||||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valla contingent consideration |
| $ | — |
|
| $ | — |
|
| $ | 224 |
|
| $ | 224 |
|
| $ | — |
|
| $ | — |
|
| $ | 207 |
|
| $ | 207 |
|
Forward currency exchange contracts |
|
| — |
|
|
| 267 |
|
|
| — |
|
|
| 267 |
| ||||||||||||||||
Total liabilities at fair value |
| $ | — |
|
| $ | 267 |
|
| $ | 224 |
|
| $ | 491 |
|
| $ | — |
|
| $ | — |
|
| $ | 207 |
|
| $ | 207 |
|
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
| ||
|
| Valla Contingent Consideration |
| |
Liabilities: |
|
|
|
|
Balance at January 1, 2021 |
| $ | 224 |
|
Effect of change in exchange rates |
|
| (9 | ) |
Balance at March 31, 2021 |
| $ | 215 |
|
|
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
|
| |
|
| Valla Contingent Consideration |
|
| |
Liabilities: |
|
|
|
|
|
Balance at January 1, 2022 |
| $ | 207 |
|
|
Change in contingent liability consideration |
|
| (202 | ) |
|
Effect of changes in exchange rates |
|
| (5 | ) |
|
Balance at March 31, 2022 |
| $ | — |
|
|
Fair Value Measurements
ASC 820-10 classifies the inputs used to measure fair value into the following hierarchy:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
Fair value of the forward currency contracts is determined on the last day of each reporting period using observable inputs, which are supplied to the Company by the foreign currency trading operation of its bank and are Level 2 items.
5. Derivative Financial Instruments
The Company’s risk management objective is to use the most efficient and effective methods available to us to minimize, eliminate, reduce or transfer the risks which are associated with fluctuation of exchange rates between the Euro, Chilean peso and the U.S. dollar.
Forward Currency Contracts
The Company enters into forward currency exchange contracts such that the exchange gains and losses on the assets and liabilities denominated in other than the reporting units’ functional currency would be offset by the changes in the market value of the forward currency exchange contracts it holds. The forward currency exchange contracts that the Company has to offset existing assets and liabilities denominated in other than the reporting units’ functional currency have been determined not to be considered a hedge under ASC 815-10. The Company records the forward currency exchange contracts at its market value with any associated gain or loss being recorded in current earnings. Both realized and unrealized gains and losses related to forward currency contracts are included in current earnings and are reflected in the Condensed Consolidated Statements of Operations in the other income expense(expense) section on the line titled foreign currency transaction gains (losses).loss. Items denominated in other than a reporting unit functional currency include certain intercompany receivables due from the Company’s Italian subsidiaries and accounts receivable and accounts payable of our Italian subsidiaries and their subsidiaries.
PM Group has an intercompany receivable denominated in Euros from its Chilean subsidiary. At March 31, 2021,2022, the Company had entered into a forward currency exchange contract that matures on May 5, 2021.April 29, 2022. Under the contract the Company is obligated to sell 2,290,0002,200,000 Chilean pesos for 2,598 euros.2,392 Euros. The purpose of the forward contract is to mitigate the income effect related to this intercompany receivable that results with a change in exchange rate between the Euro and the Chilean peso.
The following table provides the location and fair value amounts of derivative instruments that are reported in the Condensed Consolidated Balance Sheet as of March 31, 2021:2022:
Total derivatives NOT designated as a hedge instrument
|
|
|
| Fair Value |
|
|
|
| Fair Value |
| ||||||||||
|
| Balance Sheet Location |
| March 31, 2022 |
|
| December 31, 2021 |
| ||||||||||||
Asset Derivatives |
|
|
|
|
|
|
|
|
|
| ||||||||||
Foreign currency exchange contract |
| Prepaid expense and other current assets |
| $ | — |
|
| $ | 75 |
| ||||||||||
|
| Balance Sheet Location |
| March 31, 2021 |
|
| December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
| ||
Liabilities Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contract |
| Accrued expense |
| $ | 131 |
|
| $ | 267 |
|
| Accrued expenses |
| $ | 136 |
|
| $ | — |
|
The following tables provide the effect of derivative instruments on the Condensed Consolidated Statements of Operations for the three months ended March 31, 20212022 and 2020:2021:
|
|
|
| Gain (loss) |
|
|
|
| Gain (loss) |
| ||||||||||
|
| Location of gain or (loss) recognized in the Statement of Operations |
| Three Months Ended March 31, |
|
| Location of gain or (loss) recognized in Statement of Operations |
| Three Months Ended March 31, |
| ||||||||||
|
|
|
| 2021 |
|
| 2020 |
|
|
|
| 2022 |
|
| 2021 |
| ||||
Derivatives Not Designated as Hedge Instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency contracts |
| Foreign currency transaction gains |
| $ | 136 |
|
| $ | 388 |
|
| Foreign currency transaction gains (losses) |
| $ | (356 | ) |
| $ | (91 | ) |
|
|
|
| $ | 136 |
|
| $ | 388 |
|
|
|
| $ | (356 | ) |
| $ | (91 | ) |
During the three months ended March 31, 20212022 and 2020,2021, there were 0 forward currency contracts designated as cash flow hedges. As such, all gains and loss related to forward currency contracts during the three months ended March 31, 20212022 and 20202021 were recorded in current earnings and did not impact other comprehensive income.
6. Inventory, net
The components of inventory are as follows:
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||
Raw materials and purchased parts, net |
| $ | 35,608 |
|
| $ | 33,172 |
|
| $ | 48,021 |
|
| $ | 42,983 |
|
Work in process, net |
|
| 4,417 |
|
|
| 3,845 |
|
|
| 5,961 |
|
|
| 3,938 |
|
Finished goods, net |
|
| 18,828 |
|
|
| 19,038 |
|
|
| 14,529 |
|
|
| 18,044 |
|
Inventory, net |
| $ | 58,853 |
|
| $ | 56,055 |
|
| $ | 68,511 |
|
| $ | 64,965 |
|
The Company has established reserves for obsolete and excess inventory of $8,475$9,414 and $8,451$9,884 as of March 31, 20212022 and December 31, 2020,2021, respectively.
7. Goodwill and Intangible Assets
Intangible assets and accumulated amortization by category as ofMarch 31, 20212022 is as follows:
|
| Weighted Average |
| Gross |
|
|
|
|
|
| Net |
|
| Weighted Average |
| Gross |
|
|
|
|
|
| Net |
| ||||
|
| Amortization |
| Carrying |
|
| Accumulated |
|
| Carrying |
|
| Amortization |
| Carrying |
|
| Accumulated |
|
| Carrying |
| ||||||
|
| Period (in years) |
| Amount |
|
| Amortization |
|
| Amount |
|
| Period (in years) |
| Amount |
|
| Amortization |
|
| Amount |
| ||||||
Patented and unpatented technology |
| 6 |
| $ | 18,313 |
|
| $ | (14,611 | ) |
| $ | 3,702 |
|
| 3 |
| $ | 16,702 |
|
| $ | (14,004 | ) |
| $ | 2,698 |
|
Customer relationships |
| 5 |
|
| 19,091 |
|
|
| (12,820 | ) |
|
| 6,271 |
|
| 3 |
|
| 17,868 |
|
|
| (13,262 | ) |
|
| 4,606 |
|
Trade names and trademarks |
| 11 |
|
| 4,829 |
|
|
| (2,726 | ) |
|
| 2,103 |
|
| 9 |
|
| 4,269 |
|
|
| (2,638 | ) |
|
| 1,631 |
|
Software |
| 5 |
|
| 224 |
|
|
| (19 | ) |
|
| 205 |
| ||||||||||||||
Indefinite lived trade names |
|
|
|
| 2,557 |
|
|
|
|
|
|
| 2,557 |
|
|
|
|
| 2,017 |
|
|
|
|
|
|
| 2,017 |
|
Total intangible assets, net |
|
|
|
|
|
|
|
|
|
|
| $ | 14,633 |
|
|
|
|
|
|
|
|
|
|
|
| $ | 11,157 |
|
Intangible assets and accumulated amortization by category as of December 31, 20202021 is as follows:
|
| Weighted Average |
| Gross |
|
|
|
|
|
| Net |
|
| Weighted Average |
| Gross |
|
|
|
|
|
| Net |
| ||||
|
| Amortization |
| Carrying |
|
| Accumulated |
|
| Carrying |
|
| Amortization |
| Carrying |
|
| Accumulated |
|
| Carrying |
| ||||||
|
| Period (in years) |
| Amount |
|
| Amortization |
|
| Amount |
|
| Period (in years) |
| Amount |
|
| Amortization |
|
| Amount |
| ||||||
Patented and unpatented technology |
| 6 |
| $ | 18,643 |
|
| $ | (14,587 | ) |
| $ | 4,056 |
|
| 3 |
| $ | 16,848 |
|
| $ | (13,845 | ) |
| $ | 3,003 |
|
Customer relationships |
| 5 |
|
| 19,552 |
|
|
| (12,753 | ) |
|
| 6,799 |
|
| 3 |
|
| 18,077 |
|
|
| (13,017 | ) |
|
| 5,060 |
|
Trade names and trademarks |
| 11 |
|
| 4,829 |
|
|
| (2,677 | ) |
|
| 2,152 |
|
| 10 |
|
| 4,269 |
|
|
| (2,595 | ) |
|
| 1,674 |
|
Software |
| 5 |
|
| 160 |
|
|
| (8 | ) |
|
| 152 |
| ||||||||||||||
Indefinite lived trade names |
|
|
|
| 2,664 |
|
|
|
|
|
|
| 2,664 |
|
|
|
|
| 2,057 |
|
|
|
|
|
|
| 2,057 |
|
Total intangible assets, net |
|
|
|
|
|
|
|
|
|
|
| $ | 15,671 |
|
|
|
|
|
|
|
|
|
|
|
| $ | 11,946 |
|
Amortization expense for intangible assets was $579$683 and $540$579 for the three months ended March 31, 20212022 and 2020,2021, respectively.
Estimated amortization expense for the next five years for the period ending March 31 and subsequent is as follows:
|
| Amount |
| |
2022 |
| $ | 2,233 |
|
2023 |
|
| 2,233 |
|
2024 |
|
| 2,216 |
|
2025 |
|
| 2,169 |
|
2026 |
|
| 1,714 |
|
And subsequent |
|
| 1,511 |
|
Total intangibles currently to be amortized |
|
| 12,076 |
|
Intangibles with indefinite lives not amortized |
|
| 2,557 |
|
Total intangible assets |
| $ | 14,633 |
|
|
| Amount |
| |
2023 |
| $ | 2,701 |
|
2024 |
|
| 2,701 |
|
2025 |
|
| 2,193 |
|
2026 |
|
| 509 |
|
2027 |
|
| 272 |
|
And subsequent |
|
| 764 |
|
Total intangibles currently to be amortized |
|
| 9,140 |
|
Intangibles with indefinite lives not amortized |
|
| 2,017 |
|
Total intangible assets |
| $ | 11,157 |
|
Changes in goodwill for the three months ended March 31 2021 are as follows:
|
| Total |
| |
Balance January 1, 2021 |
| $ | 27,472 |
|
Effect of change in exchange rates |
|
| (743 | ) |
Goodwill impairment |
|
| - |
|
Balance March 31, 2021 |
| $ | 26,729 |
|
|
| 2022 |
|
| 2021 |
| ||
Balance January 1, |
| $ | 24,949 |
|
| $ | 27,472 |
|
Effect of change in exchange rates |
|
| (320 | ) |
|
| (743 | ) |
Balance March 31, |
| $ | 24,629 |
|
| $ | 26,729 |
|
The Company performed an impairment assessment as of December 31, 2020.2021. No additional triggers for an interim impairment test have been identified. While there was no additional impairment$1.1 million of goodwill impairment recognized as a result of the 20202021 annual impairment test to fully impair the Valla business unit, a reasonably possible unexpected deterioration in financial performance or adverse change in earnings may result in a further impairment.impairment in the other business units.
8. Accrued Expenses
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||
Accrued payroll and benefits |
| $ | 3,724 |
|
| $ | 3,524 |
| ||||||||
Accrued vacation |
|
| 1,730 |
|
|
| 1,701 |
| ||||||||
Accrued warranty |
|
| 1,725 |
|
|
| 1,578 |
| ||||||||
Accrued income tax and other taxes |
|
| 1,623 |
|
|
| 1,127 |
|
|
| 1,245 |
|
|
| 2,473 |
|
Accrued vacation |
|
| 1,516 |
|
|
| 1,398 |
| ||||||||
Accrued payroll |
|
| 1,390 |
|
|
| 1,306 |
| ||||||||
Accrued warranty |
|
| 1,241 |
|
|
| 1,292 |
| ||||||||
Accrued employee benefits |
|
| 947 |
|
|
| 910 |
| ||||||||
Accrued interest |
|
| 216 |
|
|
| 244 |
| ||||||||
Accrued professional fees |
|
| 1,027 |
|
|
| 524 |
| ||||||||
Accrued expenses—other |
|
| 1,717 |
|
|
| 1,632 |
|
|
| 915 |
|
|
| 739 |
|
Total accrued expenses |
| $ | 8,650 |
|
| $ | 7,909 |
|
| $ | 10,366 |
|
| $ | 10,539 |
|
9. Accrued Warranty
A liability for estimated warranty claims is accrued at the time of sale.sale and the expense is recorded in the Condensed Consolidated Statement of Operations in Cost of Sales. The liability is established using historical warranty claim experience. The current provision may be adjusted to take into account unusual or non-recurring events in the past or anticipated changes in future warranty claims. Adjustments to the warranty accrual are recorded if actual claim experience indicates that adjustments are necessary. Warranty reserves are reviewed to ensure critical assumptions are updated for known events that may impact the potential warranty liability.
The following table summarizes the changes in product warranty liability:
|
| For the three months ended |
|
| For the three months ended |
| ||||||||||
|
| March 31, |
|
| March 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Balance January 1, |
| $ | 1,292 |
|
| $ | 1,604 |
|
| $ | 1,578 |
|
| $ | 1,292 |
|
Provision for warranties issued during the year |
|
| 886 |
|
|
| 538 |
|
|
| 660 |
|
|
| 886 |
|
Warranty services provided |
|
| (917 | ) |
|
| (462 | ) |
|
| (503 | ) |
|
| (917 | ) |
Changes in estimate |
|
| - |
|
|
| (133 | ) | ||||||||
Foreign currency translation |
|
| (20 | ) |
|
| (8 | ) |
|
| (10 | ) |
|
| (20 | ) |
Balance March 31, |
| $ | 1,241 |
|
| $ | 1,539 |
|
| $ | 1,725 |
|
| $ | 1,241 |
|
10. Credit Facilities and Debt
Debt is summarized as follows:
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
U.S. Credit Facilities |
| $ | 12,800 |
|
| $ | 12,800 |
|
Italy Short-Term Working Capital Borrowings |
|
| 17,507 |
|
|
| 15,676 |
|
Italy Group Term Loan |
|
| 12,224 |
|
|
| 12,472 |
|
Other |
|
| 595 |
|
|
| 342 |
|
Total debt |
|
| 43,126 |
|
|
| 41,290 |
|
Less: Debt issuance costs |
|
| (70 | ) |
|
| (83 | ) |
Debt net of issuance costs |
| $ | 43,056 |
|
| $ | 41,207 |
|
U.S. Credit Facilities
At March 31, 2021,2022, the Company and its U.S. subsidiaries havewere parties to a Loan and Security Agreement, as amended (the “Loan Agreement”) with CIBC Bank USA (“CIBC”), formerly known as “The Private Bank and Trust Company”. The Loan Agreement providesprovided a revolving credit facility with a maturity date of July 20, 2023. The2023 in an aggregate amount of the facility is $30 million.
The maximum borrowing available to the Company under the Loan Agreement is limited to: (1) 85% of eligible receivables; plus (2) 50% of eligible inventory valued at the lower of cost or net realizable value subject to a $20 million limit; plus (3) 80% of eligible used equipment, as defined, valued at the lower of cost or market subject to a $2 million limit; plus (4) 50% of eligible Mexico receivables (as defined) valued at the lower of cost or net realizable value subject to a $0.4 million limit. At March 31, 2021 and December 31, 2020, the maximum2022, the Company could borrow based on available collateral was $22.8had $12.8 million and $21.9in borrowings (less $0.1 million respectively.in debt issuance cost for a net debt of $12.7 million). At MarchDecember 31, 2021, the Company had $12.8 million in borrowings (less $0.2$0.1 million in debt issuance cost for a net debt of $12.6$12.7 million) with $10.0 million available to borrow under its revolving credit facility. At December 31, 2020, the Company had $12.8 million in borrowings (less $0.2 million in debt issuance cost for a net debt of $12.6 million) with $9.1 million available to borrow under its revolving credit facility.. Theindebtedness under the Loan Agreement iswas collateralized by substantially all of the Company’s assets, except for certain assets of the Company’s subsidiaries.
The Loan Agreement provides thatOn April 11, 2022, the Company can opt to pay interest on the revolving credit at either a base rate plus a spread, or a LIBOR rate plus a spread. The base raterepaid in full all outstanding indebtedness and the LIBOR rate are subject to a floor of 0.50%. The LIBOR spread ranges from 1.75% to 2.25% depending on the Adjusted Excess Availability. Funds borrowedother amounts outstanding under the LIBOR option can be borrowed for periods of one, two, or three months and are limited to 4 LIBOR contracts outstanding at any time. In addition, a fee of 0.375% is applied for the unused portion of the revolving facility and is payable monthly. In March of 2021, the Company amended the Loan Agreement, to include a Hedging Agreement for interest rate protection with respect to LIBOR Loans. The Company was in compliance with its covenants as of March 31, 2021.and terminated all related commitments and obligations. See Note 18 – Subsequent Events.
The Loan Agreement has a Letter of Credit facility of $3 million, which is fully reserved against availability.million. As of March 31, 2021, the2022, there was 0 outstanding Letters of Credit were $0.2 million which is offset against availability under the revolving facility.
Notes Payable—Bank
At March 31, 2021, the Company has a $547 term note payable to a bank. The note dated January 6, 2021 had an original principal amount of $748 and an annual interest rate of 3.49%. Proceeds from the note were used to pay annual premiums for certain insurance policies carried by the Company. The holder of the note has a security interest in the insurance policies it financed and has the right upon default to cancel these policies and receive any unearned premiums. There are 8 remaining monthly payments of $69 on this note.
At March 31, 2021, the Company has a $159 term note payable to a bank. The note dated November 13, 2020 had an original principal amount of $289 and an annual interest rate of 5.81%. Proceeds from the note were used to pay annual premiums for certain insurance policies carried by the Company. The holder of the note has a security interest in the insurance policies it financed and has the right upon default to cancel these policies and receive any unearned premiums. There are 6 remaining monthly payments of $26 on this note.
Note Payable—Winona Facility Purchase
At March 31, 2021 and December 31, 2020, Badger has a balance on a note payable to Avis Industrial Corporation of $153 and $180, respectively. Badger is required to make 60 monthly payments of $10 that began on August 1, 2017. The note dated July 26, 2017, had an original principal amount of $500 and annual interest rate of 8.00%. The note matures on July 1, 2022 and is guaranteed by the Company.
PM Group Short-Term Working Capital Borrowings
At March 31, 20212022 and December 31, 2020,2021, respectively, PM Group had established demand credit and overdraft facilities with 5 banks in Italy, 1 bank in Spain and 1112 banks in South America. Under the facilities, as of March 31, 20212022 and December 31, 20202021 respectively, PM Group can borrow up to approximately €21,377 ($25,103)$20,964 and €20,550 ($25,133)$21,449 for advances against invoices, letter of credit and bank overdrafts. These facilities are divided into two types: working capital facilities and cash facilities. AtFor the year ended March 31, 20212022 and December 31, 2020,2021, respectively, interest on the Italian working capital facilities is charged at the 3-month Euribor plus 175, 200, or 200270 basis points and 3-month Euribor plus 350450 basis points, respectively. Interest on the South American facilities is charged at a flat rate of points for advances on invoices ranging from 8% - 55%. During June 2021, the loan agreement was renewed removing the existing expiration date.
At March 31, 2021,2022, the Italian banks had advanced PM Group €11,322 ($13,295).$17,014. There were 0 advances to PM Group from the Spanish bank, and the South American banks had advanced PM Group €89 ($104).$174. At December 31, 2020,2021, the Italian banks had advanced PM Group €10,551 ($12,904).$14,874. There were 0 advances to PM Group from the Spanish bank, and the South American banks had advanced PM Group €98 ($120).
PM Group Term Loans
At March 31, 2021 and December 31, 2020, PM Group has a €5,752 ($6,755) and €5,752 ($7,035) term loan with Davy Global Fund Management, an Irish fund that purchased the debt from BPER, an Italian bank. The term loan is split into a note and a balloon payment and is secured by PM Group’s common stock. The term loan is charged interest at a fixed rate of 3.5%. The note is payable in annual installments of principal, €513 for 2021, €531 for 2022, €549 for 2023, €569 for 2024, and €588 for 2025. The balloon payment is payable in a single payment of €3,002 in 2026.
An adjustment in the purchase accounting to value the non-interest- bearing debt at its fair market value was made. At March 6, 2018 it was determined that the fair value of the debt was €480 or $550 less than the book value. This reduction is not reflected in the above descriptions of PM debt. This discount is being amortized over the life of the debt and being charged to interest expense. As of March 31, 2021 and December 31, 2020, the remaining balance was €86 ($101) and €114 ($140), respectively, and has been offset to the debt.
At March 31, 2021 and December 31, 2020, PM Group has unsecured borrowings with an Italian bank (MPS) and an Irish fund (Davy Global Fund Management) totaling €7,225 ($8,485) and €7,225 ($8,836), respectively. The borrowings have a fixed rate of interest of 3.5%.
Annual payments of €1,445 are payable ending in 2025.
PM Group is subject to certain financial covenants including maintaining (1) Net debt to EBITDA, (2) Net debt to equity, and (3) EBITDA to net financial charges ratios. The covenants are measured on a semi-annual basis as of June 30 and December 31 of each year. The Company was in compliance with the loan covenants at December 31, 2020.
At March 31, 2021 and December 31, 2020, Autogru PM had a term note with an outstanding principal balance of €90 ($106) and €116 ($142), respectively. The note is payable in monthly installments and matures in December 2021. The note is charged interest at the 1-month Euribor plus 250 basis points, for an effective rate of 2.50% at March 31, 2021 and December 31, 2020.
Autogru PM had another term note with an outstanding principal balance of €146 ($172) and €164 ($201) at March 31, 2021 and December 31, 2020, respectively. The note is divided in three parts: the first part is payable in 60 monthly installments of €1 ($1) plus interest at the 6-month Euribor plus 275 basis points, for an effective rate of 2.75% at March 31, 2021 and December 31, 2020, maturing in February 2023; the second part is payable in 60 monthly installments of €4 ($5) plus interest at the 6-month Euribor plus 275 basis points, for an effective rate of 2.75% at March 31, 2021 and December 31, 2020, maturing in April 2023; the third part is payable in 60 monthly installments of €1 ($1) plus interest at the 6-month Euribor plus 275 basis points, for an effective rate of 2.75% at March 31, 2021 and December 31, 2020, maturing in September 2023.$463.
Valla Short-Term Working Capital Borrowings
At March 31, 20212022 and December 31, 2020,2021, respectively, Valla had established demand credit and overdraft facilities with 2 Italian banks. Under the facilities, Valla can borrow up to approximately €660 ($775)$621 for advances against orders, invoices and bank overdrafts. Interest on the Italian working capital facilities is charged at a flat percentage rate for advances on invoices and orders ranging from 1.67% - 4.75% at5.75% for both 2022 and 2021. At March 31, 20212022 and December 31, 2020. At March 31, 2021, and December 31, 2020, the Italian banks had advanced Valla €305 ($358)$319 and €474 ($579).$339.
Valla
PM Group Term Loans
Valla had a term loan with Carisbo that was payable in quarterly principal installments beginning on October 30, 2017 of €8 ($10), plus interest at the 3-month Euribor plus 470 basis points, for an effective rate of 4.36% at December 31, 2020. The note matured on January 31, 2021. At March 31, 20212022 and December 31, 2020, the outstanding principal balance of the note was €0 ($0) and €8 ($10), respectively.
Valla2021, respectively, PM Group has a $5,812 and $5,930 term loan with BPER that is payable in monthly principal installments beginning on July 10, 2022 of €0.5 ($1), plussplit into a note and a balloon payment and is secured by PM Group’s common stock.The term loan is charged interest at an effectivea fixed rate of 1.45% at3.5% and has annual principal payments of approximately $600 per year and a balloon payment of $3,330 in 2026.
At March 31, 20212022 and December 31, 2020.2021, respectively, PM Group has unsecured borrowings totaling $6,412 and $6,542, respectively. The note maturesborrowings have a fixed rate of interest of 3.5%.
Annual payments of $1,603 are payable ending in December 2025. At March 31, 2021 and December 31, 2020, the outstanding principal balance of the note was €25 ($29) and €25 ($31), respectively.2025.
11. Leases
The Company leases certain warehouses, office space, machinery, vehicles, and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The Company is not aware of any variable lease payments, residual value guarantees, covenants or restrictions imposed by the leases. Most leases include one or more options to renew, with renewal terms that can extend the lease term. The exercise of lease renewal options is at our sole discretion. The depreciable life of assets is limited by the expected lease term for finance leases.
If there was a rate explicit in the lease, this was the discount rate used. For those leases with no explicit or implicit interest rate, an incremental borrowing rate was used. The weighted average remaining useful life for operating and finance leases was 54 and 76 years, respectively. The weighted average discount rate for operating and finance leases was 5.2%5.0% and 12.5% respectively.
Leases (thousands) |
| Classification |
| March 31, 2021 |
|
| December 31, 2020 |
| ||||||||||||
Leases |
| Classification |
| March 31, 2022 |
|
| December 31, 2021 |
| ||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease assets |
| Operating lease assets |
| $ | 3,752 |
|
| $ | 4,068 |
|
| Operating lease assets |
| $ | 3,524 |
|
| $ | 3,563 |
|
Financing lease assets |
| Fixed assets, net |
|
| 2,576 |
|
|
| 2,847 |
|
| Fixed assets, net |
|
| 2,309 |
|
|
| 2,303 |
|
Total leased assets |
|
|
| $ | 6,328 |
|
| $ | 6,915 |
|
|
|
| $ | 5,833 |
|
| $ | 5,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
| Current liabilities |
| $ | 1,009 |
|
| $ | 1,167 |
|
| Current liabilities |
| $ | 1,112 |
|
| $ | 1,064 |
|
Financing |
| Current liabilities |
|
| 344 |
|
|
| 344 |
|
| Current liabilities |
|
| 450 |
|
|
| 399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
| Non-current liabilities |
|
| 2,743 |
|
|
| 2,901 |
|
| Non-current liabilities |
|
| 2,412 |
|
|
| 2,499 |
|
Financing |
| Non-current liabilities |
|
| 4,128 |
|
|
| 4,221 |
|
| Non-current liabilities |
|
| 3,775 |
|
|
| 3,822 |
|
Total lease liabilities |
|
|
| $ | 8,224 |
|
| $ | 8,633 |
|
|
|
| $ | 7,749 |
|
| $ | 7,784 |
|
|
|
|
| Three months ended March 31, |
|
|
|
| Three months ended March 31, |
| ||||||||||
Lease Cost (thousands) |
| Classification |
| 2021 |
|
| 2020 |
| ||||||||||||
Lease Cost |
| Classification |
| 2022 |
|
| 2021 |
| ||||||||||||
Operating lease costs |
| Operating lease assets |
| $ | 304 |
|
| $ | 262 |
|
| Operating lease assets |
| $ | 296 |
|
| $ | 304 |
|
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation/amortization of leased assets |
| Depreciation |
|
| 91 |
|
|
| 114 |
| ||||||||||
Amortization of leased assets |
| Amortization |
|
| 91 |
|
|
| 91 |
| ||||||||||
Interest on lease liabilities |
| Interest expense |
|
| 141 |
|
|
| 151 |
|
| Interest expense |
|
| 131 |
|
|
| 141 |
|
Lease cost |
|
|
| $ | 536 |
|
| $ | 527 |
|
|
|
| $ | 518 |
|
| $ | 536 |
|
|
| Three months ended March 31, |
|
| |||||
Other Information (thousands) |
| 2021 |
|
| 2020 |
|
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
| $ | 332 |
|
| $ | 253 |
|
|
Operating cash flows from finance leases |
| $ | 76 |
|
| $ | 113 |
|
|
Financing cash flows from finance leases |
| $ | 141 |
|
| $ | 151 |
|
|
|
| Three months ended March 31, |
|
| |||||
Other Information |
| 2022 |
|
| 2021 |
|
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
| $ | 296 |
|
| $ | 332 |
|
|
Operating cash flows from finance leases |
| $ | 131 |
|
| $ | 76 |
|
|
Financing cash flows from finance leases |
| $ | 93 |
|
| $ | 141 |
|
|
Future principal minimum lease payments period ending March 31 are:
|
| Operating Leases |
|
| Capital Leases |
|
| Operating Leases |
|
| Capital Leases |
| ||||
2022 |
| $ | 1,176 |
|
| $ | 872 |
| ||||||||
2023 |
|
| 917 |
|
|
| 897 |
|
| $ | 1,234 |
|
| $ | 943 |
|
2024 |
|
| 683 |
|
|
| 925 |
|
|
| 943 |
|
|
| 970 |
|
2025 |
|
| 487 |
|
|
| 952 |
|
|
| 647 |
|
|
| 998 |
|
2026 |
|
| 392 |
|
|
| 981 |
|
|
| 406 |
|
|
| 996 |
|
2027 |
|
| 255 |
|
|
| 1,026 |
| ||||||||
And subsequent |
|
| 713 |
|
|
| 2,675 |
|
|
| 195 |
|
|
| 1,145 |
|
Total undiscounted lease payments |
|
| 4,368 |
|
|
| 7,302 |
|
|
| 3,680 |
|
|
| 6,078 |
|
Less interest |
|
| (616 | ) |
|
| (2,830 | ) |
|
| (156 | ) |
|
| (1,853 | ) |
Total liabilities |
| $ | 3,752 |
|
| $ | 4,472 |
|
| $ | 3,524 |
|
| $ | 4,225 |
|
Less current maturities |
|
| (1,009 | ) |
|
| (344 | ) |
|
| (1,112 | ) |
|
| (450 | ) |
Non-current lease liabilities |
| $ | 2,743 |
|
| $ | 4,128 |
|
| $ | 2,412 |
|
| $ | 3,775 |
|
Bridgeview Facility
Beginning on January 1, 2021, the Company leases its 40,000 sq. ft. Bridgeview facility from an unaffiliated third party. Until December 31, 2020 the property was owned by an entity controlled by Mr. David J. Langevin, the Company’s Executive Chairman.
12. Income Taxes
On
For the three months ended March 27, 2020,31, 2022, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was enacted.Company recorded an income tax provision of $132, which includes a discrete income tax expense of $19. The CARES Act, among other things, includes provisions relating to net operating loss carrybacks, alternative minimumcalculation of the overall income tax credit refunds, a modification toprovision for the net interest deduction limitationsthree months ended March 31, 2022 primarily consists of foreign income taxes and a technical correctiondiscrete income tax expense primarily for the accrual of interest related to unrecognized tax depreciation methods for qualified improvement property. The Cares Act did not have a material impact on the Company’s consolidated financial statements.
benefits. For the three months ended March 31, 2021, the Company recorded an income tax provision of $292, which includes a discrete income tax benefit of $45. The calculation of the overall income tax provision for the three months ended March 31, 2021 primarily consists of foreign income taxes and a discrete income tax benefit related to the expiration of the statute of limitations for various state and foreign jurisdictions partially offset by an accrual of interest related to unrecognized tax benefits. For the three months ended March 31, 2020, the Company recorded an income tax provision of $404, which includes a discrete income tax benefit of $316 related to a decrease in the valuation allowance, an expiration of the statute of limitations for various state and foreign jurisdictions partially offset by an accrual of interest related to unrecognized tax benefits.
The effective tax rate for the three months ended March 31, 20212022 was an income tax provision of 36.5% on pretax income of $362 compared to an income tax provision of 60.9% on pretax loss of $480 compared to an income tax provision of 6.1% on a pretax loss of $6,640$480 in the comparable prior period. The effective tax rate for the three months ended March 31, 20212022 differs from the U.S. statutory rate of 21% primarily due to a valuation allowance in the U.S. and a partial valuation allowance in Italy, nondeductible foreign permanent differences, income taxed in foreign jurisdictions at varying tax rates, and a decrease inan accrual of interest related to unrecognized tax benefits related to the expiration of the statute of limitations for various state and foreign jurisdictions.benefits.
The Company’s total unrecognized tax benefits as of March 31, 20212022 and 20202021 were approximately $3.5$3.0 million and $4.0$3.5 million, respectively. Included in the unrecognized tax benefits is a liability for the disputed Romania income tax audit assessment for tax years 2012-2016 and the disputed Italy audit assessment for tax year 2016.2012-2016. Depending on the final resolution of the audits,audit, the uncertain tax position liability could be higher or lower than the amount recorded at March 31, 2021.2022.
13. Net Earnings (Loss) Earnings per Common Share
Basic net earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Details of the calculations are as follows:
|
| Three Months Ended March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net loss from continuing operations |
| $ | (772 | ) |
| $ | (7,044 | ) |
Loss from operations of discontinued operations, net of income taxes |
|
| — |
|
|
| (432 | ) |
Net loss |
| $ | (772 | ) |
| $ | (7,476 | ) |
|
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
Net loss from continuing operations |
| $ | (0.04 | ) |
| $ | (0.36 | ) |
Loss from operations of discontinued operations, net of income taxes |
| $ | — |
|
| $ | (0.02 | ) |
Net loss |
| $ | (0.04 | ) |
| $ | (0.38 | ) |
Diluted |
|
|
|
|
|
|
|
|
Net loss from continuing operations |
| $ | (0.04 | ) |
| $ | (0.36 | ) |
Loss from operations of discontinued operations, net of income taxes |
| $ | — |
|
| $ | (0.02 | ) |
Net loss |
| $ | (0.04 | ) |
| $ | (0.38 | ) |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
Basic and Dilutive |
|
| 19,845,064 |
|
|
| 19,733,772 |
|
The following securities were not included in the computation of diluted earnings per share as their effect would have been antidilutive:
|
| As of March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Unvested restricted stock units |
|
| 285,658 |
|
|
| 266,383 |
|
Options to purchase common stock |
|
| 97,437 |
|
|
| 97,437 |
|
Convertible subordinated notes |
|
| — |
|
|
| 1,549,451 |
|
|
|
| 383,095 |
|
|
| 1,913,271 |
|
|
| Three Months Ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Net income (loss) |
| $ | 230 |
|
| $ | (772 | ) |
|
|
|
|
|
|
|
|
|
Income (loss) per share |
|
|
|
|
|
|
|
|
Basic |
| $ | 0.01 |
|
| $ | (0.04 | ) |
Diluted |
| $ | 0.01 |
|
| $ | (0.04 | ) |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
| 19,961,785 |
|
|
| 19,845,064 |
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
Basic |
|
| 19,961,785 |
|
|
| 19,845,064 |
|
Dilutive effect of restricted stock units and stock options |
|
| 52,395 |
|
|
| — |
|
Basic and Dilutive |
|
| 20,014,180 |
|
|
| 19,845,064 |
|
|
| As of March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Unvested restricted stock units |
|
| 178,505 |
|
|
| 285,658 |
|
Options to purchase common stock |
|
| 97,437 |
|
|
| 97,437 |
|
|
|
| 275,942 |
|
|
| 383,095 |
|
14. Equity
Stock Issued to Employees and Directors
The Company issued shares of common stock to employees and Directors as restricted stock units issued under the Company’s 2004 and 2019 Incentive Plan vested. Upon issuance entries were recorded to increase common stock and decrease paid in capital for the amounts shown below. The following is a summary of stock issuances that occurred during the period:
Date of Issue |
| Employees or Director |
| Shares Issued |
|
| Value of Shares Issued |
| ||
January 1, 2021 |
| Employee |
|
| 3,300 |
|
| $ | 5.16 |
|
March 6, 2021 |
| Directors |
|
| 7,920 |
|
|
| 7.43 |
|
March 6, 2021 |
| Employees |
|
| 24,923 |
|
|
| 7.43 |
|
March 8, 2021 |
| Directors |
|
| 12,000 |
|
|
| 7.73 |
|
March 8, 2021 |
| Employee |
|
| 2,000 |
|
|
| 7.73 |
|
March 13, 2021 |
| Directors |
|
| 18,060 |
|
|
| 8.29 |
|
March 13, 2021 |
| Employees |
|
| 17,680 |
|
|
| 8.29 |
|
|
|
|
|
| 85,883 |
|
| $ | 7.80 |
|
Date of Issue |
| Employees or Director |
| Shares Issued |
|
| Value of Shares Issued |
| ||
January 1, 2022 |
| Employee |
|
| 3,300 |
|
| $ | 6.36 |
|
March 6, 2022 |
| Directors |
|
| 8,160 |
|
|
| 8.06 |
|
March 6, 2022 |
| Employees |
|
| 23,866 |
|
|
| 8.06 |
|
March 8, 2022 |
| Directors |
|
| 12,000 |
|
|
| 7.82 |
|
March 8, 2022 |
| Employee |
|
| 29,262 |
|
|
| 7.82 |
|
March 13, 2022 |
| Directors |
|
| 10,200 |
|
|
| 7.71 |
|
March 13, 2022 |
| Employees |
|
| 17,893 |
|
|
| 7.71 |
|
|
|
|
|
| 104,681 |
|
| $ | 7.83 |
|
Stock RepurchaseRepurchases
The Company purchases shares of Common Stock from certain employees at the closing share price on the date of purchase. The stock is purchased from the employees to satisfy employees’ withholding tax obligations related to stock issuances described above. The below table summarizes shares repurchased from employees during the current year through March 31, 2021:2022:
Date of Purchase |
| Shares Purchased |
|
| Closing Price on Date of Purchase |
| ||
March 6, 2021 |
|
| 2,779 |
|
| $ | 7.43 |
|
March 8, 2021 |
|
| 692 |
|
| $ | 7.73 |
|
March 13, 2021 |
|
| 2,712 |
|
| $ | 8.29 |
|
|
|
| 6,183 |
|
|
|
|
|
Date of Purchase |
| Shares Purchased |
|
| Closing Price on Date of Purchase |
| ||
March 6, 2022 |
|
| 6,035 |
|
| $ | 8.06 |
|
March 8, 2022 |
|
| 7,395 |
|
| $ | 7.82 |
|
March 13, 2022 |
|
| 3,924 |
|
| $ | 7.71 |
|
|
|
| 17,354 |
|
|
|
|
|
Restricted Stock Awards
The following table contains information regarding restricted stock units:
|
| March 31,
|
| |
Outstanding on January 1, |
|
|
|
|
Units granted during the period |
|
|
|
|
Vested and issued |
|
| ( | ) |
Vested-issued and repurchased for income tax withholding |
|
| ( | ) |
Forfeited |
|
| ( | ) |
Outstanding on March 31, |
|
|
|
|
The value of the restricted stock is being charged to compensation expense over the vesting period. Compensation expense includes expense related to restricted stock units of $290$228 and $ 201$290, for the three months ended March 31, 20212022 and 2020 ,2021, respectively. Additional compensation expense related to restricted stock units will be $667, $654$504, $364, and $306$94 for the remainder of 2021, 2022, 2023, and 2023,2024, respectively.
Stock Options
On September 1, 2019, 50,000 stock options were granted at $5.62 per share and vest ratably on each of the first three anniversary dates. Compensation expense related to stock options were $10$4 for the three months ended March 31, 20212022 compared to $21$10 for the comparable period. Additional compensation expense will be $21 and $10 for$6 the remainder of 2021 and 2022, respectively.2022.
15. Legal Proceedings and Other Contingencies
The Company is involved in various legal proceedings, including product liability, employment related issues, and workers’ compensation matters which have arisen in the normal course of operations. The Company has product liability insurance with self- insuranceself-insurance retention limits that range from $50 to $500.
When it is probable that a loss has been incurred and it’s possible to make a reasonable estimate of the Company’s liability with respect to such matters, a provision is recorded for the amount of such estimate that is most likely to occur. Certain cases are at a preliminary stage, and it is not possible to estimate the amount or timing of any cost to the Company for these cases. However, the Company does not believe that these contingencies, in the aggregate, will have a material adverse effect on the Company.
The Company has been named as a defendant in several multi-defendant asbestos related product liability lawsuits. In certain instances, the Company is indemnified by a former owner of the product line in question. In the remaining cases the plaintiff has, to date, not been able to establish any exposure by the plaintiff to the Company’s products. The Company is uninsured with respect to these claims but believes that it will not incur any material liability with respect to these claims.
For claims originated in 2020, the Company changed its insurance coverage for worker’s compensation and no longer has a deductible obligation. The Company is fully insured for any amount on any individual claim that exceeds the deductible and for any additional amounts of all claims once the aggregate is reached. The Company currently has several workers’ compensation claims related to injuries that occurred after December 31, 2011 and therefore are subject to a deductible. The Company does not believe that the contingencies associated with these workers’ compensation claims in aggregate will have a material adverse effect on the Company.
On May 5, 2011, the Company entered into 2 separate settlement agreements with 2 plaintiffs. As of March 31, 2021,2022, the Company has a remaining obligation under the agreements to pay the plaintiffs an aggregate of $1,045$950 without interest in 1110 annual installments of $95 on or before May 22 of each year. The Company has recorded a liability for the net present value of the liability. The difference between the net present value and the total payment will be charged to interest expense over the payment period.
When it is probable that a loss has been incurred and possible to make a reasonable estimate of the Company’s liability with respect to such matters, a provision is recorded for the amount of such estimate to estimate the amount within the range that is most likely to occur. Certain cases are at a preliminary stage, and it is not possible to estimate the amount or timing of any cost to the Company. However, the Company does not believe that these contingencies, in the aggregate, will have a material adverse effect on the Company.
It is reasonably possible that the “Estimated Reserveestimated reserve for Product Liability Claims”product liability claims may change within the next 12 months. A change in estimate could occur if a case is settled for more or less than anticipated, or if additional information becomes known to the Company.
16. Transactions between the Company and Related Parties
In the course of conducting its business, the Company has entered into certain related party transactions.
C&M conducts business with RAM P&E LLC for the purposes of obtaining parts business as well as buying, selling, and renting equipment. In 2021,2022, less than $0.1 million was invoiced by Crane and Machinery, Inc.C&M through government parts contracts awarded to RAM P&E LLC.
C&M is a distributor of Terex rough terrain and truck cranes. As such, C&M purchases cranes and parts from Terex.
PM is a manufacturer of cranes. PM sold cranes, parts, and accessories to Tadano during 20202022 and 2021.
As of March 31, 20212022 and December 31, 2020,2021, the Company had accounts receivable and payable with related parties as shown below:
|
|
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||
Accounts Receivable |
| Tadano |
| $ | 113 |
|
| $ | 62 |
|
|
| RAM P&E (2) |
| 54 |
|
|
| 13 |
| |
|
|
|
| $ | 167 |
|
| $ | 75 |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable |
| Terex |
| $ | 65 |
|
| $ | 47 |
|
|
| Tadano |
|
| 136 |
|
|
| 80 |
|
|
|
|
| $ | 201 |
|
| $ | 127 |
|
Net Related Party Accounts Payable |
|
|
| $ | 34 |
|
| $ | 52 |
|
|
|
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
Accounts Receivable |
| Terex |
| $ | 39 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable |
| Terex |
|
| 98 |
|
|
| 23 |
|
|
| Tadano |
|
| 139 |
|
|
| 180 |
|
|
|
|
| $ | 237 |
|
| $ | 203 |
|
Net Related Party Accounts Payable |
|
|
| $ | 198 |
|
| $ | 203 |
|
The following is a summary of the amounts attributable to certain related party transactions as described in the footnotes to the table, for the periods indicated:
|
|
|
| Three Months Ended March 31, 2021 |
|
| Three Months Ended March 31, 2020 |
|
|
|
| Three Months Ended March 31, 2022 |
|
| Three Months Ended March 31, 2021 |
| ||||
Rent paid: |
| Bridgeview Facility (1) |
| $ | — |
|
| $ | 69 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to: |
| Terex |
| $ | 13 |
|
| $ | 14 |
|
| Terex (1) |
| $ | 39 |
|
| $ | 13 |
|
|
| Tadano |
|
| 128 |
|
|
| 550 |
|
| Tadano (2) |
|
| 13 |
|
|
| 128 |
|
|
| RAM P&E (2) |
|
| 54 |
|
|
| — |
|
| RAM P&E (3) |
|
| 27 |
|
|
| 54 |
|
Total Sales |
|
|
| $ | 195 |
|
| $ | 564 |
|
|
|
| $ | 79 |
|
| $ | 195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases from: |
| Terex |
| $ | 116 |
|
| $ | 147 |
|
| Terex (1) |
| $ | 69 |
|
| $ | 116 |
|
|
| Tadano |
|
| 61 |
|
|
| — |
|
| Tadano (2) |
|
| 130 |
|
|
| 61 |
|
Total Purchases |
|
|
| $ | 177 |
|
| $ | 147 |
|
|
|
| $ | 199 |
|
| $ | 177 |
|
| (1) |
|
| (2) | Tadano is a significant shareholder of the Company and conducts business with the Company in the ordinary course of business. |
(3) | RAM P&E is owned by |
Note 17. Discontinued Operations
Assets and Liabilities Classified as Held for SaleRestructuring
On August 21, 2020,January 12, 2022, the Company entered into an Asset Purchase Agreementannounced a restructuring plan (the “Restructuring”) that will result in the closure of its Badger Equipment facility in Winona, Minnesota. As part of the Restructuring, the Company intends to sell Manitex Sabre, Inc.move the manufacturing of its straight mast boom cranes and aerial platforms now produced in Winona to an affiliate of Super Steel, LLC for cash proceeds of $1.5 million, subjectits Georgetown, Texas facility. The Restructuring is expected to certain adjustments based on closing date accounts receivable and inventory. Accordingly, Manitex Sabre, Inc. is reported as a discontinued operation for 2020.be completed during Q2 2022.
In addition to the proceeds from sale of $1.5 million in cash received, the Company may receive a maximum royalty and earnout payments of approximately $2.9 million for years 2021 thru 2023 if certain revenue criteria are met. The Company will account for the contingent consideration as a gain in accordance with ASC 450. Under this approach, we will recognize the contingent consideration in earnings after the contingency is resolved. Restructuring
ForDuring the three months ended March 31, 2020, cash flows used in operating2022, the Company recorded less than $0.1 million of restructuring expense related to severance and travel expenses.
The following is a summary of the Company’s restructuring activities was $125, this consisted of depreciation expense of $45, 0 purchases of fixed assets and 0 amortization expense.for the three months ended March 31, 2022:
|
| For the Three Months Ended March 31, |
| |
|
| 2020 |
| |
Net revenues |
| $ | 1,499 |
|
Cost of sales |
|
| 1,555 |
|
Selling, general and administrative expenses |
|
| 313 |
|
Interest expense |
|
| 24 |
|
Other income |
|
| 5 |
|
Net loss of discontinued operations before income tax |
|
| (388 | ) |
Income tax expense related to discontinued operations |
|
| 44 |
|
Net loss on discontinued operations |
| $ | (432 | ) |
|
| For the Three Months Ended March 31, |
| |
|
| 2022 |
| |
Balance at beginning of period |
| $ | — |
|
Restructuring expense |
|
| 29 |
|
Balance at end of period |
| $ | 29 |
|
Assets held for sale
As of March 31, 2022, the Company had $1.1 million classified as other current assets in the Condensed Consolidated Balance Sheets. These amounts relate to land, building, and machinery & equipment in Winona, Minnesota, that are held for sale in connection with the Restructuring. The land and building were sold during April 2022 for approximately $1.8 million.
Note 18. Subsequent Events
Acquisition of Rabern Rentals
On April 11, 2022, Manitex International, Inc. (the “Company”) entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”), with Rabern Rentals, LLC (“Rabern”). Pursuant to the Purchase Agreement, the Company acquired a 70% membership interest in Rabern for a purchase price of $25.9 million (the “Transaction”), subject to the various adjustments, escrows and other provisions of the Purchase Agreement. The Transaction closed on April 11, 2022. A total of $5 million of the purchase price will be held in escrow for various purposes, as described in the Purchase Agreement. Rabern is a construction equipment rental provider primarily servicing Northern Texas, which was established in 1984. The president and founder of Rabern will retain a 30% ownership interest and continue to run the operation as a stand-alone division of the Company.
Amarillo National Bank Financing
On April 11, 2022, the Company entered into a Commercial Credit Agreement (the “Credit Agreement”), by and among the Company, the Company’s domestic subsidiaries and Amarillo National Bank. The Credit Agreement provides for a $40,000 revolving credit facility that matures on April 11, 2024, a $30,000 revolving credit facility that matures on April 11, 2024, and a $15,000 term loan that matures on October 11, 2029. Borrowings under the revolving credit facilities and the term loan bear interest at a floating rate equal to the Prime Rate plus 0.5%. The revolving credit facilities require monthly interest payments with the full principal balance coming due at maturity, and the $30,000 revolving credit facility alone requires quarterly payments in the amount of 3% of the outstanding balance thereunder on a quarterly basis beginning on January 1, 2023. The term loan requires monthly interest payments with quarterly amortization payments beginning on November 11, 2022, and the remaining principal balance coming due at maturity. The unused balance of the revolving credit facilities incurs a 0.125% fee that is payable semi-annually.
The Credit Agreement requires the Company to maintain a debt service coverage ratio of at least 1.25:1.00 measured on the last day of each calendar quarter, beginning June 30, 2022, and each measurement will be based on a rolling 12-month basis. The Credit Agreement also requires the Borrower to maintain a U.S. net worth of at least $80,000 measured as of the last day of each calendar quarter, beginning June 30, 2022.
CIBC Loan Agreement payoff
In connection with the Transaction and the entry by the Company into the Credit Agreement, on April 11, 2022, the Company repaid in full all outstanding indebtedness and other amounts outstanding, and terminated all commitments and obligations under, its prior Loan Agreement with CIBC. The Company’s payment to the lenders was approximately $12.8 million, which satisfied all of the Company’s debt obligations under the Loan Agreement. The Company was not required to pay any pre-payment premiums as a result of the repayment of indebtedness under the Loan Agreement. In connection with the repayment of such outstanding indebtedness by the Company, all security interests, mortgages, liens and encumbrances granted to the lenders under the Loan Agreement were terminated and released.
Appointment and departure of certain officers
Effective as of April 11, 2022, the Company appointed Michael Coffey as Chief Executive Officer of the Company. In connection with Mr. Coffey’s appointment as Chief Executive Officer, the Company announced that Steve Filipov, who has served as the Company’s Chief Executive Officer since September 2019, will transition into the role of Special Advisor to the Company, effective as of April 11, 2022.
Effective as of April 14, 2022, Steve Kiefer departed as President and Chief Operating Officer of the Company. Mr. Kiefer’s departure was not the result of any disagreement with respect to the Company’s operations, policies or practices.
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Recent Developments
Impact of COVID-19
We are continuing to closely monitor the impact of theThe COVID-19 pandemic on all aspects ofhas significantly impacted our business, including how itability to meet demand for the Company’s products. While these impacts began to subside in 2021 and continue to decrease in 2022, the Company experienced, and is impacting our customers, employees,still experiencing, supply chain and distribution network, as well as the demand for ourlogistic constraints and increased costs that negatively impact its ability to manufacture and ship products in the industries and markets that we serve. Our first priority is the health and safety of our employees, customers, and business partners and we believe that we have taken every necessary step to keep our facilities clean and safe during the COVID-19 pandemic. While COVID-19 has had a material impact on our past financial results, we are unable to predict the ultimate impact that it may have on our business, future results of operations, financial position or cash flows. The extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the ultimate severity and duration of the outbreak and actions by government authorities to contain the outbreak or treat its impact. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown.
The Company has experienced and may continue to experience disruptions or delays in its supply chain, which would result in higher supply chain costs to the Company in order to maintain the supply of materials and components for its products. In addition, the Company has modified its business practices (including practices regarding employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences). We continue to take steps to minimize the negative impact of the COVID-19 pandemic on our business and to protect the safety of our employees and customers.meet customer requirements.
Business Overview
The following management’s discussion and analysis of financial condition and results of continuing operations should be read in conjunction with the Company’s financial statements and notes, and other information included elsewhere in this Report.Quarterly Report on Form 10-Q.
Backlog
The Company’s backlog was approximately $84$206 million and $68$189 million at March 31, 20212022 and December 31, 2020,2021, respectively.
Acquisition of Rabern Rentals
On April 11, 2022, the Company entered into a Membership Interest Purchase Agreement to acquire a 70% membership interest in Rabern Rentals, LLC (“Rabern”), which acquisition also closed on April 11, 2022 (the “Transaction”). Rabern rents heavy duty and light duty commercial construction equipment, mainly to commercial contractors on a short-term rental basis. The company also rents equipment to homeowners for do-it-yourself projects. Rabern’s rental fleet of equipment is complementary to our own product lines but does not overlap with any of Manitex’s current products. Rabern had approximately $21 million in net sales during FY 2021. Rabern’s results are not included in our results for the quarter ended March 31, 2022, as the Transaction closed on April 11, 2022.
Amarillo National Bank Financing
Also on April 11, 2022, the Company entered into a Commercial Credit Agreement, by and among the Company, the Company’s domestic subsidiaries and Amarillo National Bank, which provides for a $40,000,000 revolving credit facility that matures on April 11, 2024, a $30,000,000 revolving credit facility that matures on April 11, 2024, and a $15,000,000 term loan that matures on October 11, 2029. This new banking facility provided the funds for the Rabern Transaction and working capital facilities for both the Manitex and Rabern businesses.
CIBC Loan Agreement Payoff
In connection with the Transaction and the entry by the Company into the Credit Agreement, on April 11, 2022, the Company repaid in full all outstanding indebtedness and other amounts outstanding, and terminated all commitments and obligations under, its prior Loan Agreement with CIBC. The Company’s payment to the lenders was approximately $12.8 million, which satisfied all of the Company’s debt obligations under the Loan Agreement. The Company was not required to pay any pre-payment premiums as a result of the repayment of indebtedness under the Loan Agreement. In connection with the repayment of such outstanding indebtedness by the Company, all security interests, mortgages, liens and encumbrances granted to the lenders under the Loan Agreement were terminated and released.
Appointment and Departure of Certain Officers
Effective as of April 11, 2022, the Company appointed Michael Coffey as Chief Executive Officer of the Company. In connection with Mr. Coffey’s appointment as Chief Executive Officer, the Company announced that Steve Filipov, who has served as the Company’s Chief Executive Officer since September 2019, will transition into the role of Special Advisor to the Company, effective as of April 11, 2022.
Effective as of April 14, 2022, Steve Kiefer departed as President and Chief Operating Officer of the Company. Mr. Kiefer’s departure was not the result of any disagreement with respect to the Company’s operations, policies or practices.
Results of Condensed Consolidated Operations
MANITEX INTERNATIONAL, INC.
(In thousands)
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| Three Months Ended March 31, |
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| Three Months Ended March 31, |
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| 2021 |
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| 2020 |
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| $ Change |
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| 2022 |
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| 2021 |
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| $ Change |
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| % Change |
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Net revenues |
| $ | 47,168 |
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| $ | 48,733 |
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| $ | (1,565 | ) |
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| (3.2 | )% |
| $ | 60,420 |
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| $ | 47,168 |
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| $ | 13,252 |
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| 28.1 | % |
Cost of sales |
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| 38,363 |
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| 38,486 |
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| (123 | ) |
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| (0.3 | )% |
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| 50,295 |
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| 38,363 |
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| 11,932 |
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| 31.1 |
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Gross profit |
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| 8,805 |
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| 10,247 |
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| (1,442 | ) |
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| (14.1 | )% |
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| 10,125 |
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| 8,805 |
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| 1,320 |
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| 15.0 |
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Operating expenses |
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Research and development costs |
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| 785 |
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| 687 |
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| 98 |
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| 14.3 | % |
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| 716 |
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| 785 |
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| (69 | ) |
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| (8.8 | ) |
Selling, general and administrative expenses |
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| 7,744 |
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| 8,039 |
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| (295 | ) |
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| (3.7 | )% |
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| 8,759 |
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| 7,744 |
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| 1,015 |
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| 13.1 |
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Impairment of intangibles |
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| — |
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| 6,722 |
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| (6,722 | ) |
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| (100.0 | )% | ||||||||||||||||
Total operating expenses |
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| 8,529 |
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| 15,448 |
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| (6,919 | ) |
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| (44.8 | )% |
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| 9,475 |
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| 8,529 |
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| 946 |
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| 11.1 |
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Operating income (loss) |
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| 276 |
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| (5,201 | ) |
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| 5,477 |
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| (105.3 | )% |
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| 650 |
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| 276 |
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| 374 |
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| 135.5 |
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Other (expense) income |
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Other income (expense) |
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Interest expense |
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| (525 | ) |
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| (1,084 | ) |
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| 559 |
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| (51.6 | )% |
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| (505 | ) |
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| (525 | ) |
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| 20 |
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| (3.8 | ) |
Interest income |
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| 4 |
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| 60 |
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| (56 | ) |
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| (93.3 | )% |
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| 2 |
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| 4 |
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| (2 | ) |
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| (50.0 | ) |
Foreign currency transaction loss |
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| (215 | ) |
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| (418 | ) |
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| 203 |
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| (48.6 | )% |
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| (49 | ) |
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| (215 | ) |
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| 166 |
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| (77.2 | ) |
Other (expense) income |
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| (20 | ) |
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| 3 |
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| (23 | ) |
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| (766.7 | )% | ||||||||||||||||
Total other (expense) income |
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| (756 | ) |
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| (1,439 | ) |
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| 683 |
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| (47.5 | )% | ||||||||||||||||
Loss before income taxes from continuing operations |
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| (480 | ) |
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| (6,640 | ) |
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| 6,160 |
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| (92.8 | )% | ||||||||||||||||
Income tax expense from continuing operations |
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| 292 |
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| 404 |
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| (112 | ) |
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| (27.7 | )% | ||||||||||||||||
Net loss from continuing operations |
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| (772 | ) |
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| (7,044 | ) |
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| 6,272 |
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| (89.0 | )% | ||||||||||||||||
Other income (expense) |
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| 264 |
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| (20 | ) |
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| 284 |
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| (1,420.0 | ) | ||||||||||||||||
Total other income (expense) |
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| (288 | ) |
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| (756 | ) |
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| 468 |
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| (61.9 | ) | ||||||||||||||||
Income (loss) before income taxes |
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| 362 |
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| (480 | ) |
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| 842 |
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| (175.4 | ) | ||||||||||||||||
Income tax expense (benefit) |
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| 132 |
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| 292 |
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| (160 | ) |
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| (54.8 | ) | ||||||||||||||||
Net income (loss) |
| $ | 230 |
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| $ | (772 | ) |
| $ | 1,002 |
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| (129.8 | )% |
Three Months Ended March 31, 20212022 Compared to Three Months Ended March 31, 20202021
Net loss from continuing operations for the three-month periods ended March 31, 2021 and 2020
For the three months ended March 31, 2021 and 2020 the Company had net losses of $0.8 million compared to $7.0 million, respectively.
Net revenues and gross profit —For the three months ended March 31, 2021, net revenues and gross profit were $47.2 million and $8.8 million, respectively. Gross profit as a percent of revenues was 18.7% for the three months ended March 31, 2021. For the three months ended March 31, 2020, net revenues and gross profit were $48.7 million and $10.2 million, respectively. Gross profit as a percent of revenues was 21.0% for the three months ended March 31, 2020.
Net revenues decreased $1.6increased $13.3 million or 3.2%28.1% to $47.2$60.4 million for the three months ended March 31, 2021 from $48.7$47.2 million for the comparable period in 2020.2021. The decreaseincrease in revenues is primarily due to decreasesincreases in sales of straight mast cranes and rough terrain cranes from the Company’s United States subsidiaries primarily dueand to a lesser extent aerial platforms from the impact ofCompany’s foreign subsidiaries, which was largely driven by the ongoing ofpartial recovery in the global market from the COVID-19 pandemic partially offset by an increase in revenues due to a favorable impact by a stronger Euro, which accounted for approximately $2.5 million.and market demand.
Our gross profit decreased $1.4increased $1.3 million to $8.8$10.1 million for the three months ended March 31, 20212022 from $10.2$8.8 million for the comparable period in 2020.2021. The decreaseincrease in gross profit is attributable to decreasesincreases in revenues product mix andpartially offset by higher material cost.costs and steel surcharges. The declinedecrease in gross profit percentage is primarily driven by product mix as lower margin products were sold and higher material cost forinflation due to disruptions in the three months ended March 31, 2021.supply chain.
Research and development —Research and development expense was $0.8$0.7 million for the three months ended March 31, 20212022 compared with $0.7to $0.8 million for the same period in 2020.2021. The Company’s research and development spending reflects our continued commitment to develop and introduce new products that give the Company a competitive advantage.
Selling, general and administrative expense —SG&A expense for the three months ended March 31, 20212022 was $7.7$8.8 million compared to $8.0$7.7 million for the comparable period in 2020, a decrease2021, an increase of $0.3$1.1 million. The decreasesincreases are primarily related to cost savings initiatives implemented during the second quarter of 2020 at our U.S. facilities resulting in permanenthigher professional fees, higher wages, and temporary layoffs
of employees and trade show expenses for the three months ended March 31, 2020 that did not recur in 2021, offset by an unfavorable impact of a stronger euro, which accounted for approximately $0.4 million.
Impairment of goodwill and intangibles- For the three months ended March 31, 2021, the Company had no impairment of goodwill or intangibles compared to $6.7 million for the three months ended March 31, 2020. The impairment in 2020 was driven by the COVID-19 pandemic which caused a decrease in the Company’s market capitalization causing a triggering event which resulted in a $6.6 million goodwill impairment charge and a $0.1 million tradename impairment charge during 2020.higher amortization expense.
Interest expense —Interest expense was $0.5 million for the three months ended March 31, 2021 compared to $1.1 million for the comparable period in 2020. The decrease in interest expense is due to lower debt driven by the pay-off of the convertible notes in December 2020 and principal payments made on the term debt in 2020.
Foreign currency transaction losses —For the three months ended March 31, 2021,2022, the Company had foreign currency losses of $0.2less than $0.1 million compared to $0.4$0.2 million for the comparable period in 2020.2021. A substantial portion of the losses relate to changes in the Chilean peso.
Other income (expense) —Other income was $0.3 million for the three months ended March 31, 2022 compared to other expense of less than ($0.1) million for the comparable period in 2021. The increase in other income is primarily due to the reversal of a previously recorded contingent liability consideration.
Income tax — On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was enacted. The CARES Act, among other things, includes provisions relating to net operating loss carrybacks, alternative minimum tax credit refunds, a modification to the net interest deduction limitations and a technical correction to tax depreciation methods for qualified improvement property. The CARES Act did not have a material impact on the Company’s condensed consolidated financial statements.
For the three months ended March 31, 2022, the Company recorded an income tax provision of $0.1 million, which includes a discrete income tax expense of less than $0.1 million. The calculation of the overall income tax provision for the three months ended March 31, 2022 primarily consists of foreign income taxes and a discrete income tax expense primarily for the accrual of interest related to unrecognized tax benefits. For the three months ended March 31, 2021, the Company recorded an income tax provision of $0.3 million, which includes a discrete income tax benefit of less than $0.1 million. The calculation of the overall income tax provision for the three months ended March 31, 2021 primarily consists of foreign income taxes and a discrete income tax benefit related to the expiration of the statute of limitations for various state and foreign jurisdictions partially offset by an accrual of interest related to unrecognized tax benefits. For the three months ended March 31, 2020, the Company recorded an income tax provision of $0.4 million, which includes a discrete income tax benefit of $0.3 million related to a decrease in the valuation allowance, an expiration of the statute of limitations for various state and foreign jurisdictions partially offset by an accrual of interest related to unrecognized tax benefits.
The effective tax rate for the three months ended March 31, 20212022 was an income tax provision of 60.9%36.5% on pretax lossincome of $0.5$0.4 million compared to an income tax provision of 6.1%60.9% on a pretax loss of $6.6$0.5 million in the comparable prior period. The effective tax rate for the three months ended March 31, 20212022 differs from the U.S. statutory rate of 21% primarily due to the valuation allowance in the U.S. and a partial valuation allowance in Italy, nondeductible permanent differences, income taxed in foreign jurisdictions at varying tax rates and a decrease inan accrual of interest related to unrecognized tax benefits related to the expiration of the statute of limitations for various state and foreign jurisdictions.benefits.
Liquidity and Capital Resources
The ultimate duration and severity of the COVID-19 pandemic remains highly uncertain at this time. Accordingly, its impact on the global economy generally and our customers and suppliers specifically, as well as the potential negative financial impact to our results of operations and liquidity position cannot be reasonably estimated at this time, but could be material. In the context of these uncertain conditions, we are actively managing the business to maintain cash flow and ensure that we have sufficient liquidity for a variety of scenarios. We believe that such strategy will allow us to meet our anticipated funding requirements.
Cash, cash equivalents and restricted cash were $16.1$15.7 millionand $21.6 million at March 31, 20212022 and $17.4 million at December 31, 2020.2021. In addition, the Company has a U.S. revolving credit facility with a maturity date of July 20, 2023. At March 31, 2021, The credit facilities of $12.8 million were repaid in full during April 2022. On April 11, 2022, the Company entered into a new $85 million credit facility with Amarillo National Bank. This new banking facility provided the funds for the Rabern acquisition and working capital facilities for both the Manitex and Rabern business. The Company had approximately $10.0$40 million available to borrow under its U.S. revolving credit facility.in total liquidity upon close.
At March 31, 2021,2022, the PM Group had established working capital facilities with five Italian, one Spanish and eleventwelve South American banks. Under these facilities, the PM Group can borrow $25.1$21.0 million against orders, invoices and letters of credit. At March 31, 2021,2022, the PM Group had availability under these facilities of $1.6$3.9 million. Future advances are dependent on having available collateral.
If our revenues were to increase significantly in the future, the provision limiting borrowing against accounts receivable and inventory would limit future borrowings. If this were to occur, we would attempt to negotiate higher inventory caps with our banks. There is, however, no assurance that the banks would agree to increase the caps. With the current cash position and additional borrowing capacity, this presently is not viewed to be a significant concern.
The Company expects cash flows from operations and existing availability under the current revolving credit and working capital facilities will be adequate to fund future operations. If in the future, we were to determine that additional funding is necessary, we believe that it would be available. There is, however, no assurance that such financing will be available or, if available, on acceptable terms.
At March 31, 2022, one customer accounted for approximately 11.0% of the Company's accounts receivable. At December 31, 2021, no customer accounted for 10% or more of the Company’s accounts receivable.
Cash flows for the three-month period ended March 31, 20212022 compared to the three-month period ended March 31, 20202021
Operating Activities - For the three months ended March 31, 2021,2022, cash flow used in operating activities was $1.2$6.9 million compared to $0.6cash used in operating activities of $1.2 million used for the same period in the prior year. Cash providedused by working capital was $0.3$5.1 million for the three months ended March 31, 20212022 compared to $0.9cash provided by working capital of $0.3 million for the same period in the prior year. Accounts receivable management used $3.3 million in cash for the three months ended March 31, 2021 compared to $0.4 million used in cash for the same period in the prior year. Effective accounts payable management generated $7.5 million in cash for the first three months of 2021 compared to $8.5 million for the same period in the prior year. Inventory represented a cash outflow of $4.0 million for the first three months of 2021 compared to $7.3 million for the same period in the prior year.
Investing Activities - Cash used in investing activities was $0.2$0.6 million in the first three months of 2021,2022, compared to $0.4$0.2 million used in investing activities in the same period a year ago. Cash used in both the three-month periodsperiod ended March 31, 2022 was related to cash payments for property and equipment and investment in intangible assets. Cash used in the three-month period ended March 31, 2021 was related to cash payments for property and equipment.
Financing Activities - Cash provided by financing activities was an inflow of $2.3 million for the three-months ended March 31, 2022 which included an increase in working capital borrowing of $2.2 million and borrowings for insurance agreements and finance leases of $0.9 million, offset by repayments of notes of $0.6 million. Cash provided by financing activities was an inflow of $1.0 million for the three months ended March 31, 2021 which included an increase in working capital borrowing of $0.7 million and borrowings for insurance agreements of $0.7 million partially offset by repayments of notes of $0.4 million. Cash used by financing activities was an outflow of less than $0.1 million for the three months ended March 31, 2020, which included an increase in working capital borrowing of $1.2 million, repayments of the convertible debt of $7.0 million and borrowings on the revolving credit facility of $6.0 million.
Off-Balance Sheet Arrangements
CIBC has issued 2 standby letters of credit at March 31, 2021. The first standby letter of credit is $0.2 million in favor of an insurance carrier to secure obligations which may arise in connection with future deductible payments that may be incurred under the Company’s worker’s compensation insurance policies. The second standby letter of credit is less than $0.1 million in favor of a governmental agency to secure obligations which may arise in connection with worker’s compensation claims.
Related Party Transactions
See Note 16, Transactions between the Company and Related Parties, in the accompanying Condensed Consolidated Financial Statements for a description of the Company’s related party transactions.
Critical Accounting Policies
The Company’s critical accounting policies have not materially changed since the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 was filed. See Item 7, Management’s Discussion and Analysis of Results of Operations and Financial Condition, in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 for a discussion of the Company’s critical accounting policies.
Impact of Recently Issued Accounting Standards
See Note 2, in the accompanying Condensed Consolidated Financial Statements for a summary of recently issued accounting standards.
Item 3—Quantitative and Qualitative Disclosures about Market Risk
The Company’s market risk disclosures have not materially changed since the Annual Report on Form 10-KNot required for the fiscal year ended December 31, 2020 was filed. The Company’s quantitative and qualitative disclosures about market risk are incorporated by reference from Part II, Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.Smaller Reporting Companies.
Item 4—Controls and Procedures
Disclosure Controls and Procedures
UnderWith the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) and under the supervision of and with the participation of management and the Audit Committee of the Board of Directors, the Companyour management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of March 31, 2021. The Company’s evaluation has identified certain material weaknesses in its internal control over financial reporting as further described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2022. Based on thethat evaluation, of these material weaknesses, the Company hasour Chief Executive Officer and Chief Financial Officer concluded that the Company’sour disclosure controls and procedures, were not effective as of March 31, 2021 to ensure2022, were effective and provided reasonable assurance that the information required to be disclosed by the Company in the reports that it fileswe file or submitssubmit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Despite the existence of these material weaknesses, we have concludedforms, and that the condensed consolidated financial statements in this Annual Report fairly present, in all material respects, our financial position, results of operationssuch information is accumulated and cash flowscommunicated to management as of the dates, and for the periods, presented, in conformity with GAAP.
Internal Control over Financial Reportingappropriate to allow timely decisions regarding required disclosure.
Our Chief Executive OfficerChanges in Internal Control Over Financial Reporting
The Company's management is responsible for establishing and Chief Financial Officer have determined that there were deficiencies in ourmaintaining adequate internal control over financial reporting, that constitute material weaknesses, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). During the period covered by SEC regulations, at March 31, 2021, with respect to procedures for:
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Accordingly, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting and disclosure controls and procedures, as defined by SEC regulations, were not effective at March 31, 2021.
Management’s Remediation Activities
During 2021, management continued to invest significant time and effort to remediate the remaining two material weaknesses identified in 2018. The Company continued to progress on implementing Enterprise Resource Planning (“ERP”) software in the U.S. subsidiary. In Italy, we hired a consultant to help with the implementation of a new ERP system. In addition,this report, the Company continued to progress on the remediation of the remaining control deficiencies.
Other than the changes disclosed above, there weremade no changes in internal control over financial reporting (as defined by Rules 13a-15 and 15d-15) that occurred during the three months ended March 31, 2021, that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting.
Plan for Remediation of the Material Weaknesses in Internal Control Over Financial Reporting
Management has been actively engaged in the planning for, and implementation of, remediation efforts to address the remaining material weaknesses, as well as other identified areas of risk. These remediation efforts, outlined below, are intended both to address
the identified material weaknesses and to enhance the Company’s overall financial control environment. Management’s ongoing actions and planned actions for fiscal year 2021 to further address these issues include:
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Management continues to execute on the plan that has been provided to the audit committee for the implementation of the foregoing remedial measures (to the extent not already completed) and the audit committee will continue to monitor the anticipated timetable. Management continues to monitor completion of actions as outlined in the plan and have been providing updates to the audit committee on a periodic basis.In addition, under the direction of the audit committee, management will continue to review and make necessary changes to the overall design of the Company’s internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting.
Management believes the measures described above will remediate the control deficiencies the Company has identified and strengthen its internal control over financial reporting. Management is committed to continuous improvement of the Company’s internal control processes and will continue to diligently review the Company’s financial reporting controls and procedures. As management continues to evaluate and work to improve internal control over financial reporting, the Company may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.
PART II—OTHER INFORMATION
Item 1—Legal Proceedings
The information set forth in Note 15 (Legal Proceedings and Other Contingencies) to the accompanying Condensed Consolidated Financial Statements included in Part I. Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q is incorporated herein by reference.
Item 1A—Risk Factors
AsExcept as set forth below, as of the date of this filing, there have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2020.2021.
Our increasingly international operations expose us to additional risks and challenges associated with conducting business internationally.
• | The international expansion of our business may expose us to risks inherent in conducting foreign operations. These risks include: |
• | challenges associated with managing geographically diverse operations, which require an effective organizational structure and appropriate business processes, procedures and controls; |
• | the increased cost of doing business in foreign jurisdictions, including compliance with international and U.S. laws and regulations that apply to our international operations; |
• | currency exchange and interest rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions, if we continue to do so in the future; |
• | cash requirements to finance business growth; |
• | potentially adverse tax consequences; |
• | complexities and difficulties in obtaining protection and enforcing our intellectual property; |
• | compliance with additional regulations and government authorities in a highly regulated business; |
• | general economic and political conditions internationally, including the ongoing war between Russia and Ukraine; and |
• | public health concerns, including the ongoing COVID-19 pandemic. |
Additionally, changes to the United States’ participation in, withdrawal from, renegotiation of certain international trade agreements or other major trade related issues including the non-renewal of expiring favorable tariffs granted to developing countries, tariff quotas, and retaliatory tariffs, trade sanctions, new or onerous trade restrictions, embargoes and other stringent government controls could have a material adverse effect on our business, results of operations and financial condition.
The reporting currency for our consolidated financial statements is the U.S. Dollar. Certain of our assets, liabilities, expenses, revenues and earnings are denominated in other countries’ currencies, including the Euro, Chilean Peso, and Argentinean Peso. Those assets, liabilities, expenses, revenues and earnings are translated into U.S. Dollars at the applicable exchange rates to prepare our consolidated financial statements. Therefore, increases or decreases in exchange rates between the U.S. Dollar and those other currencies affect the value of those items as reflected in our consolidated financial statements, even if their value remains unchanged in their original currency.
In connection with the ongoing war between Russia and Ukraine, the U.S. government has imposed enhanced export controls on certain products and sanctions on certain industry sectors and parties in Russia. The Company is not accepting orders from Russia at this time. This region does not represent a material portion of our international operations, and we do not rely on any material goods from suppliers in the region. However, the fluidity and continuation of the conflict may result in additional economic sanctions and other impacts which could have a negative impact on the Company’s financial condition, results of operations and cash flows. These include decreased sales; supply chain and logistics disruptions; volatility in foreign exchange rates and interest rates; inflationary pressures on raw materials and energy; and heightened cybersecurity threats.
The risks that the Company faces in its international operations may continue to intensify if the Company further develops and expands its international operations.
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds.
The Company’s credit agreement with CIBCAmarillo National Bank directly restricts the Company’s ability to declare or pay dividends without CIBC’sAmarillo’s consent. In addition, pursuant to the Company’s credit agreementCredit Agreement with CIBC and other lenders,Amarillo National Bank, the CompanyCompany’s U.S. subsidiaries must maintain a debt service coverage ratio of at least 1.25:1.00, and a net worth for U.S. entities of at least $80 million, each as specified inmeasured on the agreements certain fixed coverage ratios and debt to EBITDA ratios.last date of each calendar quarter, beginning June 30, 2022.
ISSUER PURCHASES OF EQUITY SECURITIES
Period |
| (a) Total Number of Shares (or Units) Purchased |
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| (b) Average Price Paid per Share (or Unit) |
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| (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |
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| (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
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January 1— January 31, 2021 |
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| $ | — |
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February 1—February 28, 2021 |
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March 1—March 31, 2021 |
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| 6,183 |
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| 7.86 |
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| — |
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| 6,183 |
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| $ | 7.86 |
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| — |
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| — |
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Period |
| (a) Total Number of Shares (or Units) Purchased |
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| (b) Average Price Paid per Share (or Unit) |
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| (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |
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| (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
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January 1— January 31, 2022 |
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| — |
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| $ | — |
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| — |
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February 1—February 28, 2022 |
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| — |
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| — |
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March 1—March 31, 2022 |
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| 17,354 |
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| 7.88 |
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| 17,354 |
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| $ | 7.88 |
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Item 3—Defaults Upon Senior Securities
NoneNone.
Item 4—Mine Safety Disclosures
Not applicable.
Item 5—Other Information
None.
Item 6—Exhibits
See the Exhibit Index set forth below for a list of exhibits included with this Quarterly Report on Form 10-Q.
EXHIBIT INDEX
Exhibit Number |
| Exhibit Description |
2.1 |
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10.1 |
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10.2 | ||
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31.1* |
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31.2* |
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32.1** |
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101.INS* |
| Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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104 |
| Cover Page Interactive Data File-The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
* | Filed herewith |
** | Furnished herewith |
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.
May 6, 20214, 2022
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| By: |
| /s/ |
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| Chief Executive Officer |
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| (Principal Executive Officer) |
May 6, 20214, 2022
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| By: |
| /s/ JOSEPH DOOLAN |
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| Joseph Doolan |
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| Chief Financial Officer (Principal Financial and Accounting Officer) |
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