Quarterly Report (10-q)

Date : 05/07/2019 @ 11:04AM
Source : Edgar (US Regulatory)
Stock : Manitex International Inc (MNTX)
Quote : 6.04  0.0 (0.00%) @ 1:00AM

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 March 31, 2019    

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)

 

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

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

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

 

Large accelerated filer

 

  

 

Accelerated filer

 

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

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

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

 

 

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

The number of shares of the registrant’s common stock, no par, outstanding at May 1, 2019 was 19,682,713

 

 


 

MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES

 

GENERAL

 

This Quarterly Report on Form 10-Q filed by Manitex International, Inc. speaks as of March 31, 2019 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 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 2018 Annual Report on Form 10-K for the fiscal year ended December 31, 2018, 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 impact that the restatement of our previously issued financial statements could have on our business reputation and relations with our customers and suppliers;

the cyclical nature of the markets we operate in;

increase in interest rates;

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

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

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;

1


 

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;

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;

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

a disruption or breach in our information technology systems;

our reliance on the management and leadership skills of our senior executives;

the cost of compliance with Section 404 of the Sarbanes-Oxley Act of 2002;

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

potential negative effects related to the SEC investigation into our Company; and

other factors.

The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 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 INTERNATIO NAL, INC.

FORM 10-Q INDEX

TABLE OF CONTENTS

 

PART I:

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1:     Financial Statements (Unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2019 and 2018

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2019 and 2018

 

7

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018

 

8

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

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

 

32

 

 

 

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

 

37

 

 

 

ITEM 4:     C ontrols A nd P rocedures

 

37

 

 

 

 

 

PART II:

 

OTHER INFORMATION

 

39

 

 

 

ITEM 1:     L egal Proceedings

 

39

 

 

 

ITEM 1A: R isk F actors

 

39

 

 

 

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

 

39

 

 

 

ITEM 3:    D efaults U pon S enior S ecurities

 

40

 

 

 

ITEM 4:    M ine S afety D isclosures

 

40

 

 

 

ITEM 5:    O ther I nformation

 

40

 

 

 

ITEM 6:    E xhibits

 

40

 

3


 

PART 1—FINANCIA L INFORMATION

Item 1—Financial Statements

MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

March 31,

2019

 

 

December 31,

2018

 

 

 

Unaudited

 

 

Unaudited

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash

 

$

20,889

 

 

$

22,103

 

Cash - restricted

 

 

234

 

 

 

245

 

Marketable equity securities

 

 

2,970

 

 

 

2,160

 

Trade receivables (net)

 

 

47,099

 

 

 

45,448

 

Other receivables

 

 

2,528

 

 

 

2,374

 

Inventory (net)

 

 

64,073

 

 

 

58,024

 

Prepaid expense and other

 

 

4,259

 

 

 

1,639

 

Total current assets

 

 

142,052

 

 

 

131,993

 

Total fixed assets, net of accumulated depreciation of $15,238 and $14,826

   at March 31, 2019 and December 31, 2018, respectively

 

 

20,193

 

 

 

20,249

 

Operating lease assets

 

 

2,911

 

 

 

 

Intangible assets (net)

 

 

23,818

 

 

 

24,773

 

Goodwill

 

 

35,808

 

 

 

36,298

 

Other long-term assets

 

 

1,313

 

 

 

1,570

 

Deferred tax asset

 

 

2,366

 

 

 

2,366

 

Total assets

 

$

228,461

 

 

$

217,249

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Notes payable

 

$

23,835

 

 

$

22,706

 

Current portion of capital lease obligations

 

 

436

 

 

 

422

 

Current portion of operating lease liabilities

 

 

1,013

 

 

 

 

Accounts payable

 

 

44,128

 

 

 

36,896

 

Accounts payable related parties

 

 

1,493

 

 

 

1,371

 

Accrued expenses

 

 

9,282

 

 

 

9,249

 

Customer deposits

 

 

2,312

 

 

 

2,310

 

Total current liabilities

 

 

82,499

 

 

 

72,954

 

Long-term liabilities

 

 

 

 

 

 

 

 

Notes payable (net)

 

 

22,639

 

 

 

23,134

 

Capital lease obligations (net of current portion)

 

 

4,947

 

 

 

5,061

 

Non-current operating lease liabilities

 

 

1,913

 

 

 

 

Convertible note related party (net)

 

 

7,199

 

 

 

7,158

 

Convertible note (net)

 

 

14,587

 

 

 

14,530

 

Deferred gain on sale of property

 

 

727

 

 

 

842

 

Deferred tax liability

 

 

93

 

 

 

92

 

Other long-term liabilities

 

 

5,423

 

 

 

5,474

 

Total long-term liabilities

 

 

57,528

 

 

 

56,291

 

Total liabilities

 

 

140,027

 

 

 

129,245

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

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

   March 31, 2019 and December 31, 2018

 

 

 

 

 

 

Common Stock—no par value 25,000,000 shares authorized, 19,682,713 and 19,645,773

   shares issued and outstanding at March 31 2019, and December 31, 2018, respectively

 

 

130,492

 

 

 

130,260

 

Paid in capital

 

 

2,582

 

 

 

2,674

 

Retained deficit

 

 

(40,851

)

 

 

(41,761

)

Accumulated other comprehensive loss

 

 

(3,789

)

 

 

(3,169

)

Total equity

 

 

88,434

 

 

 

88,004

 

Total liabilities and equity

 

$

228,461

 

 

$

217,249

 

 

The accompanying notes are an integral part of these financial statements

4


 

MANITEX INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

 

 

Three Months Ended

March 31,

 

 

 

2019

 

 

2018

 

 

 

Unaudited

 

 

Unaudited

 

Net revenues

 

$

57,420

 

 

$

56,675

 

Cost of sales

 

 

45,472

 

 

 

45,575

 

Gross profit

 

 

11,948

 

 

 

11,100

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development costs

 

 

687

 

 

 

652

 

Selling, general and administrative expenses

 

 

9,496

 

 

 

9,986

 

Total operating expenses

 

 

10,183

 

 

 

10,638

 

Operating income

 

 

1,765

 

 

 

462

 

Other (expense) income

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,131

)

 

 

(1,553

)

Interest income

 

 

69

 

 

 

 

Change in fair value of securities held

 

 

810

 

 

 

187

 

Foreign currency transaction loss

 

 

(433

)

 

 

(119

)

Other expense

 

 

(20

)

 

 

(354

)

Total other expense

 

 

(705

)

 

 

(1,839

)

Income (loss) before income taxes and loss in equity

   interest

 

 

1,060

 

 

 

(1,377

)

Income tax expense (benefit)

 

 

150

 

 

 

(301

)

Loss on equity investments (including loss on sale of shares)

 

 

 

 

 

(409

)

Net income (loss)

 

 

910

 

 

 

(1,485

)

Earnings (loss) Per Share

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

 

$

(0.09

)

Diluted

 

$

0.05

 

 

$

(0.09

)

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

19,678,081

 

 

 

16,666,937

 

Diluted

 

 

19,694,973

 

 

 

16,666,937

 

 

The accompanying notes are an integral part of these financial statements

5


 

MANITEX INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

 

 

 

Three Months Ended

March 31,

 

 

 

2019

 

 

2018

 

 

 

Unaudited

 

 

Unaudited

 

Net income (loss):

 

$

910

 

 

$

(1,485

)

Other comprehensive (loss) income

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(620

)

 

 

636

 

Total other comprehensive (loss) income

 

 

(620

)

 

 

636

 

Comprehensive income (loss)

 

 

290

 

 

 

(849

)

Total comprehensive income (loss)

 

$

290

 

 

$

(849

)

 

The accompanying notes are an integral part of these financial statements

6


 

MANITEX INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

 

 

 

Three months ended

March 31,

 

 

 

2019

 

 

2018

 

 

 

Unaudited

 

 

Unaudited

 

Number of common shares outstanding

 

 

 

 

 

 

 

 

Balance at December 31

 

 

19,645,773

 

 

 

16,617,932

 

Repurchase to satisfy withholding and cancelled

 

 

(2,882

)

 

 

(8,892

)

Shares issued under ATM program

 

 

39,822

 

 

 

59,946

 

Balance at March 31

 

 

19,682,713

 

 

 

16,668,986

 

Common Stock

 

 

 

 

 

 

 

 

Balance at December 31

 

$

130,260

 

 

$

97,661

 

Employee 2004 incentive plan grant

 

 

251

 

 

 

504

 

Repurchase to satisfy withholding and cancelled

 

 

(19

)

 

 

(84

)

Balance at March 31

 

$

130,492

 

 

$

98,081

 

Paid in Capital

 

 

 

 

 

 

 

 

Balance at December 31

 

$

2,674

 

 

$

2,802

 

Proportional share of increase in equity investments' paid in capital

 

 

159

 

 

 

137

 

Employee 2004 incentive plan grant

 

 

(251

)

 

 

(481

)

Balance at March 31

 

$

2,582

 

 

$

2,458

 

Retained Deficit

 

 

 

 

 

 

 

 

Deficit at December 31

 

$

(41,761

)

 

$

(28,583

)

Net income

 

 

910

 

 

 

(1,485

)

Deficit at March 31

 

$

(40,851

)

 

$

(30,068

)

Accumulated Other Comprehensive Loss

 

 

 

 

 

 

 

 

Deficit at December 31

 

$

(3,169

)

 

$

(1,035

)

Loss on foreign currency translation

 

 

(620

)

 

 

636

 

Deficit at March 31

 

$

(3,789

)

 

$

(399

)

 

The accompanying notes are an integral part of these financial statements

7


 

MANITEX INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

Three Months Ended

March 31,

 

 

 

2019

 

 

2018

 

 

 

Unaudited

 

 

Unaudited

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

910

 

 

$

(1,485

)

Adjustments to reconcile net income (loss) to cash used for operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,183

 

 

 

1,293

 

Loss on sale of discontinued operations

 

 

 

 

 

87

 

Changes in allowances for doubtful accounts

 

 

122

 

 

 

15

 

Changes in inventory reserves

 

 

264

 

 

 

(148

)

Revaluation of contingent acquisition liability

 

 

 

 

 

345

 

Deferred income taxes

 

 

(34

)

 

 

(70

)

Amortization of deferred debt issuance costs

 

 

50

 

 

 

80

 

Amortization of debt discount

 

 

104

 

 

 

123

 

Change in value of interest rate swaps

 

 

(1

)

 

 

(1

)

Loss income from equity investments

 

 

 

 

 

204

 

Change in value of securities held

 

 

(810

)

 

 

(187

)

Share-based compensation

 

 

159

 

 

 

146

 

Adjustment to deferred gain on sales and lease back

 

 

(95

)

 

 

(12

)

Loss (gain) on disposal of assets

 

 

21

 

 

 

(3

)

Reserves for uncertain tax provisions

 

 

46

 

 

 

22

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Increase in accounts receivable

 

 

(2,480

)

 

 

(3,792

)

Increase in inventory

 

 

(6,769

)

 

 

(9,098

)

Increase in prepaid expenses

 

 

(2,644

)

 

 

(722

)

(Increase) decrease in other assets

 

 

208

 

 

 

25

 

Increase in accounts payable

 

 

7,860

 

 

 

8,608

 

Increase (decrease) in accrued expense

 

 

147

 

 

 

(67

)

Increase (decrease) in other current liabilities

 

 

181

 

 

 

(323

)

(Increase) decrease in other long-term liabilities

 

 

(19

)

 

 

(526

)

Net cash used for operating activities

 

 

(1,597

)

 

 

(5,486

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from the sale of partial interest in equity investment

 

 

 

 

 

7,000

 

Proceeds from the sale of fixed assets

 

 

 

 

 

3

 

Purchase of property and equipment

 

 

(782

)

 

 

(85

)

Investment in intangibles other than goodwill

 

 

(7

)

 

 

(27

)

Net cash (used for) provided by investing activities

 

 

(789

)

 

 

6,891

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings on revolving term credit facility

 

 

 

 

 

35,600

 

Payments on revolving term credit facility

 

 

 

 

 

(36,013

)

Net borrowings (repayment) on working capital facilities (See Note 11)

 

 

1,200

 

 

 

(3,120

)

New borrowings—other

 

 

481

 

 

 

74

 

Debt issuance costs incurred

 

 

 

 

 

(50

)

Note payments

 

 

(159

)

 

 

(525

)

Shares repurchased for income tax withholding on share-based compensation

 

 

(19

)

 

 

(84

)

Payments on capital lease obligations

 

 

(101

)

 

 

(90

)

Net cash provided by (used for) financing activities

 

 

1,402

 

 

 

(4,208

)

Net decrease in cash and cash equivalents

 

 

(984

)

 

 

(2,803

)

Effect of exchange rate changes on cash

 

 

(241

)

 

 

(61

)

Cash and cash equivalents at the beginning of the year

 

 

22,348

 

 

 

5,366

 

Cash and cash equivalents at end of period

 

$

21,123

 

 

$

2,502

 

 

 

 

 

 

 

 

 

 

See Note 1 for supplemental cash flow disclosures

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

8


 

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 Sheets at March 31, 2019 and December 31, 2018 and the related Condensed Consolidated Statements of Operations, Comprehensive Income (Loss), Condensed Consolidated Statement of Shareholders’ Equity, and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 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 for the fiscal year ended December 31, 2018.  The Condensed Consolidated Balance Sheet as of December 31, 2018 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.

 

The Company is a leading provider of engineered lifting solutions and operates as a single reportable segment with five operating segments.  Operating activities are conducted through the following wholly-owned subsidiaries: Manitex, Inc. (“Manitex”), Badger Equipment Company (“Badger”), PM Oil and Steel S.p.A., formerly known as PM Group S.p.A, and its subsidiaries (“PM” or “PM Group”), Manitex Valla S.r.l. (“Valla”), Manitex Sabre, Inc. (“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.  

 

Supplemental Cash Flow Information

 

Transactions for the periods ended March 31, 2019 and 2018 are as follows:

 

 

 

Three Months Ended

March 31,

 

 

 

2019

 

 

2018

 

Interest received in cash

 

$

69

 

 

$

-

 

Interest paid in cash

 

 

1,528

 

 

 

1,541

 

Income tax payments in cash

 

 

3

 

 

 

11

 

 

 

 

 

 

 

 

 

 

Proportional share of increase in equity investments' paid in capital

 

 

 

 

 

14

 

 

Equity Investment

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”).  On May 11, 2017, in anticipation of an initial public offering, ASV converted from an LLC to a C-Corporation and the Company’s 51% interest was converted to 4,080,000 common shares of ASV.  On May 17, 2017, in connection with its initial public offering, ASV sold 1,800,000 of its own shares and the Company sold 2,000,000 shares of ASV common stock and reduced its investment in ASV to a 21.2% interest. ASV was deconsolidated and was recorded as an equity investment starting with the quarter ended June 30, 2017.  In February 2018, the Company sold an additional 1,000,000 shares of ASV that it held which reduced the Company’s investment in ASV to approximately 11.0%.  The Company ceased accounting for its investment in ASV under the equity method and now accounts for its investment as a marketable equity security.    See Notes 8 and 19 for additional discussion related to the accounting treatment of the investment in ASV after the sale of the additional shares.

 

9


 

2. Significant Accounting Policies and New Accounting Pronouncements  

Principles of Consolidation

The Company consolidates all entities that we control by ownership of a majority voting interest. Additionally, there are situations in which consolidation is required even though the usual condition of consolidation (ownership of a majority voting interest) does not apply. Generally, this occurs when an entity holds an interest in another business enterprise that was achieved through arrangements that do not involve voting interests, which results in a disproportionate relationship between such entity's voting interests in, and its exposure to the economic risks and potential rewards of, the other business enterprise. This disproportionate relationship results in what is known as a variable interest, and the entity in which we have this interest is referred to as a Variable Interest Entity (“VIE”).  An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company eliminates from the Company’s financial results all significant intercompany transactions.

 

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 $234 and $245 at March 31, 2019 and December 31, 2018, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are stated at the amounts the Company’s customers are invoiced and do not bear interest. Accounts receivable is reduced by an allowance for amounts that may become uncollectible in the future. The Company’s estimate for the allowance for doubtful accounts related to trade receivables includes evaluation of specific accounts where the Company has information that the customer may have an inability to meet its financial obligations. The Company had allowances for doubtful accounts of $157 and $37 at March 31, 2019 and December 31, 2018, respectively.

 

Guarantees

 

The Company has issued partial residual guarantees to financial institutions related to a customer financing of equipment purchased by the customer.  The Company must assess the probability of losses if the fair market value is less than the guaranteed residual value.

 

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 incurred under the guarantees may be affected by economic conditions in used equipment markets at the time of loss.

 

The Company records a liability for the estimated fair value of guarantees issued pursuant to ASC 460.  The Company recognizes a loss under a guarantee when its obligation to make payment under the guarantee is probable and the amount of the loss can be estimated.  A loss would be recognized if the Company’s payment obligation under the guarantee exceeds the value it can expect to recover to offset such payment, primarily through the sale of the equipment underlying the guarantee.

 

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 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. The Equipment Distribution division does not accrue for warranty costs at the time of sales, as they are reimbursed by the manufacturers for any warranty that they provide to their customers.

10


 

A liability for estimated warranty claims is accrued at the time of sale. The liability is established using historic al warranty claim experience. Historical warranty experience is, however, reviewed by management. 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. Adjus tments to the initial 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 liabi lity.

 

Interest Rate Swap Contracts

 

The Company enters into derivative instruments to manage its exposure to interest rate risk related to certain foreign term loans. Derivatives are initially recognized at fair value at the date the contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in current earnings immediately unless the derivative is designated and effective as a hedging instrument, in which case the effective portion of the gain or loss is recognized and is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged instrument affects earnings (date of sale). The Company’s interest rate swap contracts are held by the PM Group and are intended to manage the exposure to interest rate risk related to certain term loans that PM Group has with certain financial institutions in Italy. These contracts have been determined not to be hedge instruments under ASC 815-10.

 

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 make an estimate of the amount of liability based, in part, on the advice of legal counsel.

 

Income Taxes

 

The Company’s provision for income taxes consists of U.S. and foreign taxes in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that the Company expects to achieve for the full year. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. The effective tax rate is based upon the Company’s anticipated earnings both in the U.S. and in foreign jurisdictions.

 

Comprehensive Income

 

Reporting “Comprehensive Income” requires reporting and displaying comprehensive income and its components. Comprehensive income includes, in addition to net earnings, other items that are reported as direct adjustments to stockholder’s equity. Currently, the comprehensive income adjustment required for the Company consists of a foreign currency translation adjustment, which is the result of consolidating its foreign subsidiaries.

 

Accounting for Equity Investments

Beginning with the quarter ended June 30, 2017, the Company accounted for its 21.2% investment in ASV under the equity method of accounting.  Under the equity method, the Company’s share of the net income (loss) of ASV was recognized as income (loss) in the Company’s statement of operations and added to the investment account, and dividends received from ASV were treated as a reduction of the investment account. The Company reported ASV’s earnings on a one quarter lag as there was no assurance ASV would report earnings in time to be included in the Company’s financial statements for any given reporting period.  

Between February 26 and 28, 2018, the Company sold 1,000,000 shares of ASV stock, reducing the Company’s investment in ASV to approximately 11.0%. See Notes 8 and 19. During the quarter ended March 31, 2018, the Company:  

 

 

Recognized its proportional share of ASV loss for the three months ended December 31, 2017,  

 

Recorded a loss on the sale of shares,

 

Ceased accounting for ASV as an equity investment, and

 

Valued its remaining investment in ASV at its current market value.

 

 

Accounting for Marketable Equity Securities

 

Marketable equity securities are valued at fair market value based on the closing price of the stock on the date of the balance sheet.  Gains and loss related fair value adjustments related to marketable equity securities are recorded into income each reporting period.

 

11


 

Shipping and Handling

 

The Company records the amount of shipping and handling costs billed to customers as revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment costs and are included in cost of sales.

 

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, 2019, PM Argentina had a small net peso monetary position. Net sales of PM Argentina were less than 5 and 10 percent of our consolidated net sales for the three months ended March 31, 2019 and 2018.

 

Recently Adopted Accounting Guidance

 

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” (“ASU 2018-2”). ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from H.R. 1 “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (commonly known as the “Tax Cuts and Jobs Act” (the “Jobs Act”)). The Company has adopted this guidance as of January 1, 2019. The adoption of this guidance did not have a significant impact on our operating results.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” (“ASU 2016-02”), which requires lessees to recognize assets and liabilities for leases with lease terms of more than 12 months and disclose key information about leasing arrangements. Consistent with current U.S. GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease.  Subsequently, the FASB issued the following standards related to ASU 2016-02: ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,” ASU 2018-10, “Codification Improvements to Topic 842, Leases”, ASU 2018-11, “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”) and ASU 2018-20, “Narrow-Scope Improvements for Lessors”, which provided additional guidance and clarity to ASU 2016-02 (collectively, the “New Lease Standard”). The Company adopted this guidance as of January 1, 2019. The transition method allows an entity to initially apply the requirements of the New Lease Standard at the adoption date, versus at the beginning of the earliest period presented, and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The New Lease Standard provides a number of optional practical expedients in transition. The Company elected the transition package of practical expedients, the practical expedient to not separate lease and non-lease components for all of its leases, and the short-term lease recognition exemption for all of its leases that qualify for it. The adoption of this guidance resulted in an addition of $3,166 of total operating assets and $3,184 of total operating lease liabilities as of January 1, 2019.

 

Except as noted above, the guidance issued by the FASB during the current year is not expected to have a material effect on the Company’s consolidated financial statements.

 

3. 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 through Crane & Machinery, Inc.  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 .

12


 

In some instances, the Company fulfills its obligati ons 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 custom er 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 custo mer.  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.

The Company generates revenue through its principal subsidiaries:

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 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. Its largest subsidiary, Oil & Steel (“O&S”), is a manufacturer of truck-mounted aerial platforms with a diverse product line and an international client base.

Manitex Valla S.r.l.’s (“Valla”) product line of industrial cranes is a full range of precision pick and carry 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.

Manitex Sabre, Inc. (“Sabre”) manufactures a comprehensive line of specialized mobile tanks for liquid and solid storage and containment solutions with capacities from 8,000 to 21,000 gallons. Its mobile tanks are sold to specialized independent tank rental companies and through the Company’s existing dealer network. The tanks are used in a variety of end markets such as petrochemical, waste management and oil and gas drilling.  

Crane and Machinery, Inc. (“C&M”) is a distributor of the Company’s products as well as Terex Corporation’s (“Terex”) rough terrain and truck cranes.  Crane and Machinery Leasing, Inc.’s (“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 rough terrain and truck cranes, C&M’s primary business is the distribution of products manufactured by the Company.  

For each of the subsidiaries, various products may be sold separately or together with installation services.  Further, equipment sales come with a standard warranty that is not sold separately.   Additionally, each of the subsidiaries sells parts to its customers.

The following table disaggregates our revenue for the three months ended March 31:

 

 

 

Three Months Ended

March 31,

 

 

 

2019

 

 

2018

 

Equipment sales

 

$

49,373

 

 

$

48,430

 

Part sales

 

 

7,302

 

 

 

7,087

 

Installation services

 

 

745

 

 

 

1,158

 

Total Revenue

 

$

57,420

 

 

$

56,675

 

 

The Company attributes revenue to different geographic areas based on where items are shipped to or services are performed.

13


 

The following table provides detail of revenues by geographic area for the three months ended March 31, 2019 :

 

 

 

Three Months Ended

March 31,

 

 

 

2019

 

 

2018

 

United States

 

$

29,890

 

 

$

26,473

 

Canada

 

 

6,020

 

 

 

7,339

 

Italy

 

 

4,923

 

 

 

5,607

 

Argentina

 

 

1,867

 

 

 

4,151

 

Chile

 

 

2,383

 

 

 

1,922

 

Other

 

 

1,874

 

 

 

2,235

 

France

 

 

1,946

 

 

 

1,954

 

United Kingdom

 

 

1,590

 

 

 

682

 

Spain

 

 

1,059

 

 

 

1,204

 

Germany

 

 

1,347

 

 

 

275

 

Finland

 

 

1,178

 

 

 

951

 

Czech Republic

 

 

333

 

 

 

506

 

Netherlands

 

 

236

 

 

 

460

 

Mexico

 

 

544

 

 

 

280

 

Peru

 

 

458

 

 

 

83

 

Qatar

 

 

 

 

 

127

 

United Arab Emirates

 

 

17

 

 

 

12

 

Malaysia

 

 

 

 

 

370

 

Hong Kong

 

 

446

 

 

 

54

 

Israel

 

 

437

 

 

 

428

 

Indonesia

 

 

28

 

 

 

78

 

Denmark

 

 

62

 

 

 

220

 

Ireland

 

 

317

 

 

 

259

 

Ukraine

 

 

 

 

 

148

 

Kuwait

 

 

1

 

 

 

10

 

China

 

 

2

 

 

 

21

 

Romania

 

 

165

 

 

 

88

 

Martinique

 

 

12

 

 

 

76

 

Belgium

 

 

26

 

 

 

150

 

South Africa

 

 

3

 

 

 

213

 

Saudi Arabia

 

 

24

 

 

 

39

 

Turkey

 

 

63

 

 

 

58

 

Russia

 

 

17

 

 

 

35

 

Bahrain

 

 

52

 

 

 

62

 

Morocco

 

 

 

 

 

38

 

Singapore

 

 

92

 

 

 

1

 

Puerto Rico

 

 

8

 

 

 

10

 

Thailand

 

 

 

 

 

56

 

 

 

$

57,420

 

 

$

56,675

 

 

 

14


 

Total Company Revenues by Sources

The sources of the Company’s revenues are summarized below for the three months ended March 31, 2019:

 

 

 

Three Months Ended

March 31,

 

 

 

2019

 

 

2018

 

Boom trucks, knuckle boom & truck cranes

 

$

39,571

 

 

$

41,550

 

Rough terrain cranes

 

 

1,413

 

 

 

1,979

 

Mobile tanks

 

 

2,987

 

 

 

1,484

 

Installation services

 

 

745

 

 

 

1,158

 

Other equipment

 

 

5,402

 

 

 

3,417

 

Part sales

 

 

7,302

 

 

 

7,087

 

Total Revenue

 

$

57,420

 

 

$

56,675

 

 

Contract Balances

Applying the practical expedient, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in selling, general, and administrative expenses.

 

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.  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, 2019:

 

Customer deposits at January 1, 2019

 

$

2,310

 

Revenue recognized from customer deposits

 

 

(1,211

)

Additional customer deposits received where revenue has not

   yet been recognized

 

 

1,279

 

Effect of change in exchange rates

 

 

(66

)

Customer deposits at March 31, 2019

 

$

2,312

 

 

 

15


 

4 . Financial Instruments— Marketable Securities, Forward Currency Exchange Contracts and Interest Rate Swap Contracts

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, 2019 and December 31, 2018 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, 2019

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Asset:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

$

2,970

 

 

$

 

 

$

 

 

$

2,970

 

Forward currency exchange contracts

 

 

 

 

 

46

 

 

 

 

 

 

46

 

Total current assets at fair value

 

$

2,970

 

 

$

46

 

 

$

 

 

$

3,016