Quarterly Report (10-q)

Date : 04/03/2018 @ 5:28PM
Source : Edgar (US Regulatory)
Stock : Manitex International, Inc. (MNTX)
Quote : 11.07  -0.29 (-2.55%) @ 4:00PM

Quarterly Report (10-q)

 

 

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 September 30, 2017  

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)

 

 

 

9725 Industrial Drive, Bridgeview, Illinois

 

60455

(Address of Principal Executive Offices)

 

(Zip Code)

(708) 430-7500

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes       No  

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

 

Large accelerated filer

 

  

 

Accelerated filer

 

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

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

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

The number of shares of the registrant’s common stock, no par, outstanding at February 10, 2018 was 16,662,386

 

 


MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES

 

GENERAL

 

This Quarterly Report on Form 10-Q filed by Manitex International, Inc. speaks as of September 30, 2017 unless specifically noted otherwise.  Unless otherwise indicated, Manitex International, Inc., together with its consolidated subsidiaries, is hereinafter referred to as “Manitex,” the “Registrant,” “us,” “we,” “our” or the “Company.”

 

Forward-Looking Information

 

Certain information in this Quarter 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, believes, 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 express 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 2016 Annual Report on Form 10-K/A for the fiscal year ended December 31, 2016, in the section entitled “Item 1A. Risk Factors”:

 

a future substantial deterioration in economic conditions, especially in the United States and Europe;

government spending, fluctuations 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;

the cyclical nature of the markets we operate in;

the impact that the restatement of our previously issued financial statements could have on our business reputation and relations with our customers and suppliers;

increase in interest rates;

our increasingly international operations expose us to additional risks and challenges associated with conducting business internationally;

our customers’ diminished liquidity and credit availability;

the performance of our competitors;

shortages in supplies and raw materials or the increase in costs of materials;

potential losses under residual value guarantees;

product liability claims, intellectual property claims, and other liabilities;

the volatility of our stock price;

future sales of our common stock;

the willingness of our stockholders and directors to approve mergers, acquisitions, and other business transactions;

currency transaction (foreign exchange) risks and the risk related to forward currency contracts;

compliance with changing laws and regulations;

a substantial portion of our revenues are attributed to limited number of customers which may decrease or cease purchasing any time;

1


Impairment in the carrying value of goodwill could negatively affect our operating results;

difficulties in implementing new systems, integrating acquired businesses, managing anticipated growth, and responding to technological change;

a disruption or breach in our information technology systems;

certain provisions of the Michigan Business Corporation Act and the Company’s Articles of Incorporation, as amended, Amended and Restated Bylaws, and the Company’s Preferred Stock Purchase Rights may discourage or prevent a change in control of the Company;

Potential negative effect related to the SEC inquiry into our Company;

Potential risk of being delisted if we are unable to file our Annual Report and Quarterly Reports in a timely manner; and

other factors.

The risks described in our Annual Report on Form 10-K/A, for the fiscal year ended December 31, 2016, 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.

2


MANITEX INTERNATIONAL, INC.

FORM 10-Q INDEX

TABLE OF CONTENTS

 

 

 

 

 

 

PART I:

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1:     Financial Statements

 

7

 

 

 

 

 

 

 

Consolidated Balance Sheets (unaudited) as of September 30, 2017 and December 31, 2016

 

7

 

 

 

 

 

 

 

Consolidated Statements of Operations (unaudited) for the Three and Nine Month Periods Ended September 30, 2017 and 2016

 

8

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (loss) (unaudited) for the Three and Nine Month Periods Ended September 30, 2017 and 2016

 

9

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2017 and 2016

 

10

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

11

 

 

 

ITEM 2:    M anagement ’s D iscussion A nd A nalysis O f F inancial C ondition A nd R esults O f O perations

 

42

 

 

 

ITEM 3:    Q uantitative A nd Q ualitative D isclosures A bout M arket R isk

 

51

 

 

 

ITEM 4:     C ontrols A nd P rocedures

 

51

 

 

 

 

 

PART II:

 

OTHER INFORMATION

 

 

 

 

 

ITEM 1:     legal proceedings

 

52

 

 

 

ITEM 1A: R isk F actors

 

52

 

 

 

ITEM 2:    U nregistered S ales O f E quity S ecurities A nd U se O f P roceeds

 

52

 

 

 

ITEM 3:    D efaults U pon S enior S ecurities

 

53

 

 

 

ITEM 4:    M ine S afety D isclosures

 

53

 

 

 

ITEM 5:    O ther I nformation

 

53

 

 

 

ITEM 6:    E xhibits

 

53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3


EXPLANATORY NOTE

 

The corrections contained in these financial statements restated for the prior comparative period, which we refer to herein as the “Restatement,” were prepared following an independent review by the Audit Committee (the “Audit Committee”) of the Company’s Board of Directors into certain accounting matters, which is further described herein.

 

The Company’s Current Report on Form 8-K filed on November 6, 2017, in 2016 the Company sold 39 cranes for total sales revenues of approximately $15 million to a single broker customer in a series of transactions (the “Transactions”) that were each structured as a customary “bill and hold” arrangement. The revenue for the Transactions was originally recognized in 2016. Ten of these units that were sold for an aggregate value of approximately $3 million were returned during 2016 (and were subsequently sold to other customers), such that for 2016, a net of 29 cranes were sold for approximately $12 million. In addition, the Company made various payments to the broker and its wholly-owned subsidiary that were expensed in 2016 and 2017. Furthermore, the debt taken on by the broker customer to purchase the cranes was effectively guaranteed by the Company pursuant to certain related agreements. In connection with its review of its financial results for the quarter ended September 30, 2017, the Company became aware that the prior accounting treatment for the Transactions was not correct. Specifically, the Company has concluded that the relationship with the Broker and its wholly-owned subsidiary qualified as a Variable Interest Entity (“VIE”) and should therefore have resulted in a different accounting treatment resulting in the debt of the VIE being reflected in the Company’s consolidated balance sheet. The Company has concluded that the revenue recognition criteria for 2016 sales were not met and payments to the Broker were not expenses of the Company. In addition, disclosures were incomplete.

 

In connection with the foregoing matters, on November 2, 2017, the Audit Committee of the Board of Directors of the Company, in consultation with the Company’s management and UHY LLP, the Company’s independent registered public accounting firm, determined that the Company’s previously issued financial statements for the quarters ended March 31, June 30 and September 30, 2016, year ended December 31, 2016 and quarters ended March 31 and June 30, 2017 included in the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q for such periods and together with all three, six and nine-month financial information contained therein (collectively, the “Non-Reliance Periods”) can no longer be relied upon.

 

Description of the Restatement related to SVW

 

When the earlier “Explanatory Note” refers to a broker and its wholly-owned subsidiary, the reference is to SVW Crane & Equipment Company and its wholly owned subsidiary Rental Consulting Service Company (collectively “SVW”)

 

The following describes the impact of corrections that affect the three and nine months ended September 30, 2016. Information concerning 2016 impact is discussed in the Company’s amended 10-K/A for the year ended December 31, 2016.

 

Effect of Recording SVW Debt

 

As disclosed in Note 11, SVW has five notes outstanding with four financial institutions, each of which was effectively guaranteed by the Company. At September 30, 2017 the value of these notes totaled $6.3 million, net of debt issuance costs of $.2 million. Given SVW’s treatment as a VIE, and the fact that the Company effectively guaranteed it, this debt has been consolidated into the restated financial statement.

 

Effect of Recording Sales to Third Party

 

Recognizing sales when SVW related inventory was sold to third parties.

 

Effect of Recording Crane Rentals

 

Income on the rental of SVW related inventory to third parties has been recorded as revenues for the corresponding.

 

Effect of Treating Funds Sent to SVW’s Wholly-Owned Subsidiary as Advances

 

During the three and nine months ended September 30, 2017 there were no payments that the Company had originally classified as expenses paid to SVW’s wholly-owned subsidiary. Given SVW’s treatment as a VIE prior payments have been reclassified as intercompany advances.

 

4


Recording of Payments Made by SVW to Lenders

 

The balance sheet table in Note 2, Restatement of Previously Issued Financial Statements, shows the impact of payments made in connection with the aforementioned SVW debt.

 

Cumulative Income Tax Effect

 

This includes the impact on the income taxes for the three and nine months ended September 30, 2017 related to the discontinued operations and SVW restatements discussed above.

 

Description of the Restatement not related to SVW

 

Other

 

The Company disclosed a partial residual value guarantee to support a customer’s financing of equipment purchased from the Company that was previously not disclosed (see Note 15). A residual value guarantee involves a guarantee that a piece of equipment will have a minimum fair market value at a future date if certain conditions are met by the customer. The Company has issued partially residual guarantees that have maximum exposure of approximately $1.6 million. The Company, however, does not have any reason to believe that any exposure from such a guarantee is either probable or estimable at this time, as such, no liability has been recorded. The Company’s ability to recover losses from its guarantees may be affected by economic conditions in used equipment markets at the time of loss.

 

This also includes minor rounding and reclassification adjustments not included in previous categories.

 

Effect of Reclassifying ASV to Discontinued Operations

 

For the three and nine months ended September 30, 2016, the Company owned a 51% interest in ASV Holdings, Ins., which was formerly known as A.S.V., LLC (“ASV Holdings”).  On May 11, 2017, in anticipation of an initial public offering, ASV Holdings converted from an LLC to a C-Corporation and the Company’s 51% interest was converted to 4,080,000 common shares of ASV Holdings.  On May 17, 2017, in connection within its initial public offering, ASV Holdings sold 1,800,000 of its own shares and the Company sold 2,000,000 shares of ASV Holdings common stock. The Company held a 21.2% i nterest in ASV Holdings, but no longer has a controlling interest in ASV holdings.  ASV Holdings was deconsolidated during the quarter ended June 30, 2017 and is recorded as an equity investment starting with quarter ended June 30, 2017.  Since this 10-Q/A is being filed after the above described events, prior period financial statements included in this 10-Q/A have been restated to reflect ASV Holdings as a discontinued operation.

 

Additional entries not related to SVW

 

Adjustments were made to reverse a sale transaction, adjust a deferred gain, increase an inventory reserve and to record additional rent expense and other corrections and reclassification. These adjustments were identified in prior periods but were immaterial for recording at that time. As the Company has identified the restatement adjustments for recording in prior periods, management made the determination that it would also record these previously passed adjustments as part of the restatement of the financial statements.

 

See Note 2 to the consolidated financial statements which details the impact of the restatement on the Consolidated Statement of Operations for the three and nine months ended September 30, 2016, and Consolidated Statement of Cash Flow for the nine months ended September 30, 2016.

 

Internal Control and Disclosure Controls Considerations

 

Our Chief Executive Officer has determined that there were deficiencies in our internal control over financial reporting that constitute material weaknesses, as defined by SEC regulations, at September 30, 2017, with respect to procedures for:

 

1.We did not maintain an adequate process for the intake of new contracts, customers and vendors, particularly for contracts involving unique transaction structures or unusual obligations on the part of the Company, to ensure that all contracts are appropriately reviewed and approved, and the associated financial reporting requirements associated with such contracts and transactions structures are properly identified and complied with in accordance with Generally Accepted Accounting Principles.

 

5


2. We did not maintain adequate entity-level controls with respect to ensuring adequate supporting documentation of journal entries and proper review and approval of journal entries and disbursements that were unusual in nature and of significant amounts.

 

3.We did not maintain an adequate review process with respect to the accounting of bill-and-hold transactions and ensure proper revenue recognition.

 

4.We did not maintain a formal and consistent policy for establishing inventory reserves for excess and obsolete inventory.

 

5.We did not maintain an adequate communication policy with respect to compliance with the Company’s Code of Ethics

and availability of the Company’s whistleblower hotline to report compliance issues

 

Accordingly, our Chief Executive Officer has concluded that our internal control over financial reporting and disclosure controls and procedures, as defined by SEC regulations, were not effective at September 30, 2017, as discussed in Part I, Item 4 of this Form 10-Q.

 

 

6


PART 1—FINANCIA L INFORMATION

Item 1—Financial Statements

MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

 

 

 

 

As Restated

 

 

 

September 30,

2017

 

 

December 31,

2016

 

 

 

Unaudited

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash

 

$

2,968

 

 

$

4,541

 

Cash - restricted

 

 

352

 

 

 

773

 

Trade receivables (net)

 

 

44,800

 

 

 

32,982

 

Other receivables

 

 

2,508

 

 

 

1,082

 

Inventory (net)

 

 

63,422

 

 

 

69,487

 

Prepaid expense and other

 

 

4,322

 

 

 

4,624

 

Current assets of discontinued operations

 

 

 

 

 

46,645

 

Total current assets

 

 

118,372

 

 

 

160,134

 

Total fixed assets (net)

 

 

22,287

 

 

 

21,839

 

Intangible assets (net)

 

 

31,247

 

 

 

30,985

 

Goodwill

 

 

43,014

 

 

 

39,669

 

Equity investment in ASV Holdings, Inc.

 

 

14,844

 

 

 

 

Other long-term assets

 

 

1,548

 

 

 

1,605

 

Deferred tax asset

 

 

545

 

 

 

545

 

Long-term assets of discontinued operations

 

 

 

 

 

72,177

 

Total assets

 

$

231,857

 

 

$

326,954

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Notes payable

 

$

31,967

 

 

$

26,204

 

Current portion of capital lease obligations

 

 

362

 

 

 

338

 

Accounts payable

 

 

36,455

 

 

 

33,801

 

Accounts payable related parties

 

 

1,569

 

 

 

2,098

 

Accrued expenses

 

 

10,372

 

 

 

10,278

 

Other current liabilities

 

 

2,635

 

 

 

2,150

 

Current liabilities of discontinued operations

 

 

 

 

 

23,631

 

Total current liabilities

 

 

83,360

 

 

 

98,500

 

Long-term liabilities

 

 

 

 

 

 

 

 

Revolving term credit facilities

 

 

12,575

 

 

 

19,957

 

Notes payable (net)

 

 

29,724

 

 

 

32,832

 

Capital lease obligations, (net of current portion)

 

 

5,589

 

 

 

6,004

 

Convertible note related party (net)

 

 

6,968

 

 

 

6,862

 

Convertible note (net)

 

 

14,257

 

 

 

14,098

 

Deferred gain on sale of property

 

 

1,001

 

 

 

1,058

 

Deferred tax liability

 

 

3,559

 

 

 

3,242

 

Other long-term liabilities

 

 

3,737

 

 

 

4,127

 

Long-term liabilities of discontinued operations

 

 

 

 

 

42,645

 

Total long-term liabilities

 

 

77,410

 

 

 

130,825

 

Total liabilities

 

 

160,770

 

 

 

229,325

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Preferred Stock—Authorized 150,000 shares, no shares issued or outstanding at

   September 30, 2017 and December 31, 2016

 

 

 

 

 

 

Common Stock—no par value 25,000,000 shares authorized, 16,585,062 and 16,200,294 shares issued and

   outstanding at September 30, 2017 and December 31, 2016, respectively

 

 

97,468

 

 

 

94,324

 

Paid in capital

 

 

2,743

 

 

 

2,918

 

Retained deficit

 

 

(27,761

)

 

 

(20,505

)

Accumulated other comprehensive loss

 

 

(1,363

)

 

 

(4,272

)

Equity attributable to shareholders of Manitex International, Inc.

 

 

71,087

 

 

 

72,465

 

Equity attributable to noncontrolling interests

 

 

 

 

 

25,164

 

Total equity

 

 

71,087

 

 

 

97,629

 

Total liabilities and equity

 

$

231,857

 

 

$

326,954

 

 

The accompanying notes are an integral part of these financial statements

7


MANITEX INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for share and per share amounts)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

 

 

 

 

As Restated

 

 

 

 

 

 

As Restated

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

Unaudited

 

 

Unaudited

 

 

Unaudited

 

 

Unaudited

 

Net revenues

 

$

56,464

 

 

$

39,131

 

 

$

148,634

 

 

$

132,106

 

Cost of sales

 

 

46,591

 

 

 

32,589

 

 

 

121,965

 

 

 

108,658

 

Gross profit

 

 

9,873

 

 

 

6,542

 

 

 

26,669

 

 

 

23,448

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development costs

 

 

619

 

 

 

725

 

 

 

1,902

 

 

 

2,203

 

Selling, general and administrative expenses

 

 

8,282

 

 

 

8,985

 

 

 

25,797

 

 

 

27,473

 

Total operating expenses

 

 

8,901

 

 

 

9,710

 

 

 

27,699

 

 

 

29,676

 

Operating income (loss)

 

 

972

 

 

 

(3,168

)

 

 

(1,030

)

 

 

(6,228

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,716

)

 

 

(1,384

)

 

 

(4,498

)

 

 

(4,658

)

Interest expense related to write off of debt issuance costs

 

 

 

 

 

 

 

 

 

 

 

(1,439

)

Foreign currency transaction loss

 

 

(799

)

 

 

(82

)

 

 

(1,138

)

 

 

(991

)

Other income

 

 

18

 

 

 

281

 

 

 

361

 

 

 

883

 

Total other expense

 

 

(2,497

)

 

 

(1,185

)

 

 

(5,275

)

 

 

(6,205

)

Income (loss) before income taxes and income (loss) in equity interest

   from continuing operations

 

 

(1,525

)

 

 

(4,353

)

 

 

(6,305

)

 

 

(12,433

)

Income tax  expense (benefit) from continuing operations

 

 

281

 

 

 

(691

)

 

 

416

 

 

 

(958

)

Income (loss) from equity investments, net of taxes

 

 

284

 

 

 

(5,673

)

 

 

284

 

 

 

(5,752

)

Net loss from continuing operations

 

 

(1,522

)

 

 

(9,335

)

 

 

(6,437

)

 

 

(17,227

)

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations of discontinued operations (including

   loss on disposal for the  nine months 2017 of $1,133 and

   losses on disposal of $9,502 and $7,290 for the three and nine

   months 2016, respectively)

 

 

 

 

 

(9,608

)

 

 

(573

)

 

 

(4,745

)

Income tax expense (benefit)

 

 

(15

)

 

 

4,145

 

 

 

(28

)

 

 

1,259

 

Loss from discontinued operations

 

 

15

 

 

 

(13,753

)

 

 

(545

)

 

 

(6,004

)

Net loss

 

 

(1,507

)

 

 

(23,088

)

 

 

(6,982

)

 

 

(23,231

)

Net (income) attributable to noncontrolling interest from discontinued

   operations

 

 

 

 

 

(294

)

 

 

(274

)

 

 

(566

)

Net loss attributable to shareholders of

   Manitex International, Inc.

 

$

(1,507

)

 

$

(23,382

)

 

$

(7,256

)

 

$

(23,797

)

Earnings (loss) Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations attributable to

   shareholders of Manitex International, Inc.

 

$

(0.09

)

 

$

(0.58

)

 

$

(0.39

)

 

$

(1.07

)

Loss from discontinued operations attributable to

   shareholders of Manitex International, Inc.

 

$

0.00

 

 

$

(0.87

)

 

$

(0.05

)

 

$

(0.41

)

Net earnings (loss) attributable to shareholders of

   Manitex International, Inc.

 

$

(0.09

)

 

$

(1.45

)

 

$

(0.44

)

 

$

(1.48

)

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations attributable to

   shareholders of Manitex International, Inc.

 

$

(0.09

)

 

$

(0.58

)

 

$

(0.39

)

 

$

(1.07

)

Loss from discontinued operations attributable to

   shareholders of Manitex International, Inc.

 

$

0.00

 

 

$

(0.87

)

 

$

(0.05

)

 

$

(0.41

)

Net earnings (loss) attributable to shareholders of

   Manitex International, Inc.

 

$

(0.09

)

 

$

(1.45

)

 

$

(0.44

)

 

$

(1.48

)

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

16,573,927

 

 

 

16,127,346

 

 

 

16,532,683

 

 

 

16,119,578

 

Diluted

 

 

16,573,927

 

 

 

16,127,346

 

 

 

16,532,683

 

 

 

16,119,578

 

 

The accompanying notes are an integral part of these financial statements

8


MANITEX INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

 

 

 

 

As Restated

 

 

 

 

 

 

As Restated

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

Unaudited

 

 

Unaudited

 

 

Unaudited

 

 

Unaudited

 

Net loss:

 

$

(1,507

)

 

$

(23,088

)

 

$

(6,982

)

 

$

(23,231

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

795

 

 

 

1,481

 

 

 

2,909

 

 

 

2,569

 

Total other comprehensive income

 

 

795

 

 

 

1,481

 

 

 

2,909

 

 

 

2,569

 

Comprehensive loss

 

 

(712

)

 

 

(21,607

)

 

 

(4,073

)

 

 

(20,662

)

Comprehensive (income) attributed to noncontrolling interest

 

 

 

 

 

(294

)

 

 

(274

)

 

 

(566

)

Total comprehensive loss attributable to shareholders of

   Manitex International, Inc.

 

$

(712

)

 

$

(21,901

)

 

$

(4,347

)

 

$

(21,228

)

 

The accompanying notes are an integral part of these financial statements

9


MANITEX INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

Nine Months Ended

September 30,

 

 

 

 

 

 

 

As Restated

 

 

 

2017

 

 

2016

 

 

 

Unaudited

 

 

Unaudited

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(6,982

)

 

$

(23,231

)

Adjustments to reconcile net loss to cash used for operating activities:

 

 

 

 

 

.

 

Depreciation and amortization

 

 

3,908

 

 

 

5,311

 

Loss on sale of discontinued operations

 

 

1,133

 

 

 

7,290

 

Changes in allowances for doubtful accounts

 

 

41

 

 

 

2

 

Changes in inventory reserves

 

 

(449

)

 

 

570

 

Revaluation of contingent acquisition liability

 

 

(346

)

 

 

(915

)

Write down of goodwill

 

 

 

 

 

275

 

Deferred income taxes

 

 

(10

)

 

 

(190

)

Amortization and write off of deferred debt issuance costs

 

 

402

 

 

 

1,903

 

Amortization of debt discount

 

 

388

 

 

 

404

 

Change in value of interest rate swaps

 

 

(421

)

 

 

(778

)

(Earnings) loss from equity investments

 

 

(284

)

 

 

5,752

 

Share-based compensation

 

 

517

 

 

 

900

 

Adjustment to deferred gain on sales and lease back

 

 

 

 

 

(141

)

Loss (gain) on disposal of assets

 

 

160

 

 

 

(13

)

Reserves for uncertain tax provisions

 

 

54

 

 

 

32

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable

 

 

(10,401

)

 

 

(1,189

)

(Increase) decrease in inventory

 

 

9,323

 

 

 

(7,483

)

(Increase) decrease in prepaid expenses

 

 

356

 

 

 

979

 

(Increase) decrease in other assets

 

 

66

 

 

 

194

 

Increase (decrease) in accounts payable

 

 

(845

)

 

 

(5,511

)

Increase (decrease) in accrued expense

 

 

(642

)

 

 

(2,711

)

Increase (decrease) in other current liabilities

 

 

247

 

 

 

(365

)

Increase (decrease) in other long-term liabilities

 

 

(382

)

 

 

(250

)

Discontinued operations - cash provided by (used for) operating activities

 

 

3,665

 

 

 

(6,898

)

Net cash used for operating activities

 

 

(502

)

 

 

(26,063

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from the sale of discontinued operations (Note 18)

 

 

12,892

 

 

 

14,000

 

Proceeds from the sale of fixed assets

 

 

15

 

 

 

187

 

Purchase of property and equipment

 

 

(761

)

 

 

(946

)

Investment in intangibles other than goodwill

 

 

(64

)

 

 

(103

)

Discontinued operations - cash (used for) provided by investing activities

 

 

(84

)

 

 

1,688

 

Net cash provided by investing activities

 

 

11,998

 

 

 

14,826

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments on revolving term credit facilities

 

 

(7,382

)

 

 

(13,687

)

Net borrowings on working capital facilities

 

 

4,198

 

 

 

7,181

 

New borrowings—other

 

 

754

 

 

 

12,961

 

Debt issuance costs incurred

 

 

(50

)

 

 

(1,206

)

Note payments

 

 

(8,451

)

 

 

(5,269

)

Shares repurchased for income tax withholding on share-based compensation

 

 

(128

)

 

 

(55

)

Proceeds from stock offering

 

 

2,426

 

 

 

 

Proceeds from sale and lease back

 

 

896

 

 

 

4,080

 

Payments on capital lease obligations

 

 

(793

)

 

 

(417

)

Discontinued operations - cash (used for) provided by financing activities

 

 

(5,058

)

 

 

4,422

 

Net cash used for financing activities

 

 

(13,588

)

 

 

8,010

 

Net decrease  in cash and cash equivalents

 

 

(2,092

)

 

 

(3,227

)

Effect of exchange rate changes on cash

 

 

98

 

 

 

1,359

 

Cash and cash equivalents at the beginning of the year

 

 

5,314

 

 

 

5,918

 

Cash and cash equivalents at end of period

 

$

3,320

 

 

$

4,050

 

 

 

 

 

 

 

 

 

 

See Note 1 for supplemental cash flow disclosures

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

10


MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(In thousands, except share and per share data)

 

1. Nature of Operations and Basis of Presentation

The Condensed Consolidated Balance Sheet at September 30, 2017 and the related Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2017 and 2016 (as restated) and Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2017 and 2016 (as restated) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments (consisting only of normal recurring 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/A for the year ended December 31, 2016.  The Condensed Consolidated Balance Sheet as of December 31, 2016 (as restated) was derived from our audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”).  Certain amounts for prior periods have been reclassified to conform to the current period financial statement presentation. All references in this report to financial results of periods ending prior to the third quarter of 2017 reflect such results as restated pursuant to the previously announced restatement of such periods.

 

The Company is a leading provider of engineered lifting solutions and operates as a single business segment.  Operating activities are conducted through the following wholly-owned subsidiaries: Manitex, Inc. (“Manitex”), Badger Equipment Company (“Badger”), PM Group S.pA. and Subsidiaries (“PM Group”), Manitex Valla S.r.l (“Valla”), Sabre Manufacturing, LLC (“Sabre”), Crane and Machinery, Inc. (“C&M”), and Crane and Machinery Leasing, Inc. (“C&M Leasing”).

 

The condensed consolidated financial statements include the accounts of Manitex International, Inc. and subsidiaries in which it has a greater than 50% voting interest (collectively, the “Company”).  All significant intercompany accounts, profits and transactions have been eliminated in consolidation.  

 

Consolidated Variable Interest Entity

 

Even though it has no ownership interest in SVW Crane & Equipment Company (together with its wholly owned subsidiary, Rental Consulting Service Company, “SVW”), the Company has the power to direct the activities that most significantly impact SVW’s economic performance. Additionally, the Company was the primary beneficiary of the SVW relationship. SVW obtained third party financing, which was effectively guaranteed by the Company, on specific cranes the Company manufactured and remitted the loan proceeds to the Company. Other than its business transactions described herein, SVW had no other substantial business operations. The Company has determined that SVW is a Variable Interest Entity (“VIE”) that under current accounting guidance needs to consolidate in the Company’s financial results.

 

Non-Cash Transactions

 

Non-cash transactions for the periods ended September 30, 2017 and 2016 are as follows:

 

 

 

Nine Months Ended

September 30,

 

 

 

 

 

 

 

As Restated

 

 

 

2017

 

 

2016

 

Non cash transactions

 

 

 

 

 

 

 

 

Issuance of common stock in connection with Terex

   note repayment

 

$

 

 

$

150

 

Equipment held for sale financed on a capital lease

 

 

896

 

 

 

 

Stock issued to purchase Winona facility

 

 

154

 

 

 

 

 

Discontinued Operations

ASV Segment

ASV is located in Grand Rapids, Minnesota and manufactures a line of high quality compact track and skid steer loaders. The products are used in site clearing, general construction, forestry, golf course maintenance and landscaping industries, with general construction being the largest.  

11


Prior to the quarter ended June 30, 2017, the Company owned a 51% interest in ASV Holdings, Inc., which was formerly known as A.S.V., LLC (“ASV Holdings”).  On May 11, 2017, in anticipation of an initial public offering, ASV Holdings converted from an LLC to a C-Corporation and the Company’s 51% interest was converted to 4,080,000 common shares of ASV Holdings.  On May 17, 2017, in connection within its initial public offering, ASV Holdings sold 1,800,000 of its own shares and the Company sold 2,000,000 shares of ASV Holdings common stock.  As of September 30, 2017, the Company held a 21.2% interest in ASV Holdings, but no longer had a controlling interest in ASV Holdings.  ASV Holdings was deconsolidated during the quarter ended June 30, 2017 and is recorded as an equity investment starting with quarter ended June 30, 2017.  Periods ending before June 30, 2017 reflect ASV as discontinued operation. Subsequent to September 30, 2017, the Company sold additional shares of ASV. See Note 18 for additional discussion related to the accounting treatment of the investment in ASV after the sale of the additional shares.

 

Sales of Subsidiaries

During the year ended December 31, 2016, the Company sold two of its wholly owned subsidiaries: CVS Ferrari, S.r.L (“CVS”) and Manitex Liftking ULC (“Manitex Liftking” or “Liftking”).  CVS was sold on December 22, 2016 and Liftking was sold on September 30, 2016, and each are presented as a discontinued operation.  

Change in Reporting Segments

Prior to the quarter ended June 30, 2017, the Company reported its operations in three segments: the Lifting Equipment segment, the ASV segment and the Equipment Distribution segment.  Since 2015, the Company has sought to redefine itself strategically and operationally, including through a series of divestitures.  The most recent such divestiture occurred in May 2017, with the sale of a portion of the Company’s investment in ASV Holdings.  As a result of this sale, the Company has deconsolidated ASV Holdings from its financial reporting, and ASV Holdings is no longer a reporting segment.  

 

The previously reported Equipment Distribution operations was comprised of C&M and C&M Leasing.  C&M was acquired by the Company in 2008 and at that time operated primarily as a distributor of Terex Corporation (“Terex”) rough terrain and truck cranes.   Subsequent to 2008, C&M added a used equipment business, which involved buying both lifting and non-lifting construction equipment and then refurbishing and remarketing that equipment.  Recently, the C&M operations evolved and the used equipment sales operations were discontinued.

  

C&M remains a distributor of Terex rough terrain and truck cranes; however C&M’s primary business is the distribution of products manufactured by the Company.  C&M Leasing’s primary business is the facilitation of sales of products manufactured by the Company through its rent to own program.  As C&M and C&M Leasing’s primary business is the facilitation of Company manufactured product sales, discrete financial information is not available.  Further, the Company’s Chief Operating Decision Maker (“CODM”) reviews C&M and C&M Leasing operations only to determine their impact on the entire Company. As such, the operations of C&M and C&M Leasing no longer constitute a separate reporting segment.  

 

 

2. Restatement of Previously issued financial statements

 

The Company has restated its quarterly Consolidated Statements of Operations, Statement of Comprehensive Income (Loss) and the Statements of Cash Flows for the three and nine months ended September 30, 2016. In addition, the Company has restated the Balance Sheets for the periods ended December 31, 2016. See the Company’s restated 10-K/A for the restated balance sheet as of December 31, 2016.

 

Background

 

As previously described in the Company’s Current Report on Form 8-K filed on November 6, 2017, in 2016 the Company sold 39 cranes for total sales revenues of approximately $15 million to a single broker customer in a series of transactions (the “Transactions”) that were each structured as a customary “bill and hold” arrangement. The revenue for the Transactions was originally recognized in 2016. Ten of these units that were sold for an aggregate value of approximately $3 million were returned during 2016 (and were subsequently sold to other customers), such that for 2016, a net of 29 cranes were sold for approximately $12 million. In addition, the Company made various payments that were expensed in 2016 and 2017 to the broker and its wholly-owned subsidiary. Furthermore, the debt taken on by the Broker customer to purchase the cranes was affectively guaranteed by the Company pursuant to certain related agreements. In connection with its review of its financial results for the quarter ended September 30, 2017, the Company became aware that the prior accounting treatment for the Transactions was not correct. Specifically, the Company has concluded that the relationship with the Broker and its wholly-owned subsidiary qualified as a Variable Interest Entity (“VIE”) and should therefore have resulted in a different accounting treatment. The Company has concluded that the revenue recognition criteria for 2016 sales were not met and payments to the Broker were not expenses of the Company. In addition, disclosures were incomplete.

12


 

Description of the Restatement related to SVW

 

The following describes the impact of corrections that affect the three and nine months ended September 30, 2016. Information concerning 2016 impact is discussed in the Company’s amended 10-K/A for the year ended December 31, 2016.

 

Effect of Recording Sales to Third Party

 

Recognizing sales when SVW related inventory was sold to third parties.

(Statement of Operations – Column C)

 

Effect of Recording Crane Rentals

 

Income on the rental of SVW related inventory to third parties has been recorded as revenues for the corresponding.

(Statement of Operations – Column C)

 

Effect of Treating Funds Sent to SVW’s Wholly-Owned Subsidiary as Advances

 

During the three and nine months ended September 30, 2016 there were no payments that the Company had originally classified as expenses paid to SVW’s wholly-owned subsidiary. Given SVW’s treatment as a VIE these payments have been reclassified as intercompany advances. (Statement of Operations – Column D)

 

Recording of Payments Made by SVW to Lenders

 

This includes the impact of payments made in connection with the aforementioned SVW debt. (Statement of Operations – Column E)

 

Cumulative Income Tax Effect

 

This includes the impact on the income taxes for the quarter and nine months ended September 30, 2016 related to the discontinued operations and SVW restatements discussed above. (Statement of Operations – Column F)

 

Description of the Restatement not related to SVW

 

Other

 

The Company disclosed a partial residual value guarantee to support a customer’s financing of equipment purchased from the Company that was previously not disclosed (see Note 15). A residual value guarantee involves a guarantee that a piece of equipment will have a minimum fair market value at a future date if certain conditions are met by the customer. The Company has issued partially residual guarantees that have maximum exposure of approximately $1.6 million. The Company, however, does not have any reason to believe that any exposure from such a guarantee is either probable or estimable at this time, as such no liability has been recorded. The Company’s ability to recover any losses that may occur related its guarantees may be affected by economic conditions in used equipment markets at the time of loss.

 

This includes minor rounding and reclassification adjustments not included in previous categories.

(Statement of Operations – Column G)

 

Effect of Reclassifying ASV to Discontinued Operations

 

For the three and nine months ended September 30, 2016, the Company owned a 51% interest in ASV Holdings, Ins., which was formerly known as A.S.V., LLC (“ASV Holdings”).  On May 11, 2017, in anticipation of an initial public offering, ASV Holdings converted from an LLC to a C-Corporation and the Company’s 51% interest was converted to 4,080,000 common shares of ASV Holdings.  On May 17, 2017, in connection within its initial public offering, ASV Holdings sold 1,800,000 of its own shares and the Company sold 2,000,000 shares of ASV Holdings common stock.  The Company held a 21.2% interest in ASV Holdings, but no longer has a controlling interest in ASV holdings.  ASV Holdings was deconsolidated during the quarter ended June 30, 2017 and is recorded as an equity investment starting with quarter ended June 30, 2017.  Since this 10-Q/A is being filed after the above described events, prior period financial statements included in this 10-Q/A have been restated to reflect ASV Holdings as a discontinued operation. (Statement of Operations - Column B)

13


 

Additional entries not related to SVW

 

Adjustments were made to: reverse a sale transaction, adjust a deferred gain, increase an inventory reserve and to record additional rent expense and other corrections and reclassifications not related to SVW. These adjustments were identified in prior periods but were immaterial for recording at that time. As the Company has identified the restatement adjustments for recording in prior periods, management made the determination that it would also record these previously passed adjustments as part of the restatement of the financial statements. (Statement of Operations – Column G, Statement of Cash Flows – Column K)

 

See the Company’s Amended Annual Report for the year ended December 31, 2016 for the table that shows the impact that the restatement had on the Company’s Balance Sheet for the year ended December 31, 2016.

 

14


The following tables reflect adjustments (restatements) to correct errors identified in connection with the Company’s review of its financial results for the quarters ended September 30, 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except for share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

A

 

 

B

 

 

C

 

 

D

 

 

E

 

 

F

 

 

G

 

 

H

 

 

 

As

Previously

Reported on

Form 10-Q

 

 

Effect of Reclassifying

Entities into

Discontinued

Operations

 

 

Reversal of

Sales to SVW

 

 

Effect of  Treating

Funds Sent to

SVW as Advances

 

 

Recording Payments

Made by SVW

to Lenders

 

 

Cumulative

Income Tax

Effect

 

 

Other

 

 

As Restated

 

Net revenues

 

$

74,131

 

 

$

(34,506

)

 

$

(495

)

 

$

 

 

$

 

 

$

 

 

$

1

 

 

$

39,131

 

Cost of sales

 

 

62,476

 

 

 

(29,512

)

 

 

(142

)

 

 

 

 

 

 

 

 

 

 

 

(233

)

 

 

32,589

 

Gross profit

 

 

11,655

 

 

 

(4,994

)

 

 

(353

)

 

 

 

 

 

 

 

 

 

 

 

234

 

 

 

6,542

 

Operating expenses