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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Research and development costs
|
|
|
1,238
|
|
|
|
(513
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
725
|
|
Selling, general and administrative expenses
|
|
|
11,378
|
|
|
|
(2,403
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
|
|
|
8,985
|
|
Total operating expenses
|
|
|
12,616
|
|
|
|
(2,916
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
|
|
|
9,710
|
|
Operating (loss) income
|
|
|
(961
|
)
|
|
|
(2,078
|
)
|
|
|
(353
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
224
|
|
|
|
(3,168
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense)
|
|
|
(2,667
|
)
|
|
|
1,399
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,384
|
)
|
Interest expense related to write off of debt
issuance costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Foreign currency transaction loss
|
|
|
(103
|
)
|
|
|
22
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(82
|
)
|
Other income
|
|
|
2
|
|
|
|
278
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
281
|
|
Total other income (expense)
|
|
|
(2,768
|
)
|
|
|
1,699
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,185
|
)
|
(Loss) income before income taxes and loss in
non- marketable equity interest from
continuing operations
|
|
|
(3,729
|
)
|
|
|
(379
|
)
|
|
|
(353
|
)
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
—
|
|
|
|
224
|
|
|
|
(4,353
|
)
|
Income tax (benefit) expense from continuing
operations
|
|
|
(3,813
|
)
|
|
|
543
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,579
|
|
|
|
—
|
|
|
|
(691
|
)
|
Loss in non-marketable equity interest, net of taxes
|
|
|
(5,673
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,673
|
)
|
Net (loss) income from
continuing operations
|
|
|
(5,589
|
)
|
|
|
(922
|
)
|
|
|
(353
|
)
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
(2,579
|
)
|
|
|
224
|
|
|
|
(9,335
|
)
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations of
discontinued operations
|
|
|
(9,987
|
)
|
|
|
379
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,608
|
)
|
Income tax expense
|
|
|
4,688
|
|
|
|
(543
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,145
|
|
(Loss) income on discontinued operations
|
|
|
(14,675
|
)
|
|
|
922
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13,753
|
)
|
Net (loss) income
|
|
|
(20,264
|
)
|
|
|
—
|
|
|
|
(353
|
)
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
(2,579
|
)
|
|
|
224
|
|
|
|
(23,088
|
)
|
Net loss (income) attributable to noncontrolling
interest
|
|
|
(294
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(294
|
)
|
Net (loss) income attributable to
shareholders of Manitex
International, Inc.
|
|
$
|
(20,558
|
)
|
|
$
|
—
|
|
|
$
|
(353
|
)
|
|
$
|
—
|
|
|
$
|
(116
|
)
|
|
$
|
(2,579
|
)
|
|
$
|
224
|
|
|
$
|
(23,382
|
)
|
Earnings (loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing
operations attributable to
shareholders of Manitex
International, Inc.
|
|
$
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.58
|
)
|
Loss from discontinued operations
attributable to shareholders of
Manitex International, Inc.
|
|
$
|
(0.91
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.87
|
)
|
(Loss) earnings attributable to
shareholders of Manitex
International, Inc.
|
|
$
|
(1.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
(Loss) earnings from continuing
operations attributable to
shareholders of Manitex
International, Inc.
|
|
$
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.58
|
)
|
Loss from discontinued operations
attributable to shareholders of
Manitex International, Inc.
|
|
$
|
(0.91
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.87
|
)
|
(Loss) earnings attributable to
shareholders of Manitex
International, Inc.
|
|
$
|
(1.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,127,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,127,346
|
|
Diluted
|
|
|
16,127,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,127,346
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine 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
|
|
$
|
272,769
|
|
|
$
|
(127,541
|
)
|
|
$
|
(13,123
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
132,106
|
|
Cost of sales
|
|
|
225,824
|
|
|
|
(106,796
|
)
|
|
|
(10,388
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
|
|
108,658
|
|
Gross profit
|
|
|
46,945
|
|
|
|
(20,745
|
)
|
|
|
(2,735
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(17
|
)
|
|
|
23,448
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development costs
|
|
|
4,091
|
|
|
|
(1,888
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,203
|
|
Selling, general and administrative expenses
|
|
|
38,574
|
|
|
|
(11,111
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
|
|
|
27,473
|
|
Total operating expenses
|
|
|
42,665
|
|
|
|
(12,999
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10
|
|
|
|
29,676
|
|
Operating (loss) income
|
|
|
4,280
|
|
|
|
(7,746
|
)
|
|
|
(2,735
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(27
|
)
|
|
|
(6,228
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense)
|
|
|
(9,407
|
)
|
|
|
4,865
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,658
|
)
|
Interest expense related to write off of
debt issuance costs
|
|
|
(1,439
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,439
|
)
|
Foreign currency transaction loss
|
|
|
(580
|
)
|
|
|
(410
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(991
|
)
|
Other income (loss)
|
|
|
2,834
|
|
|
|
(1,952
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
883
|
|
Total other income (expense)
|
|
|
(8,592
|
)
|
|
|
2,503
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,205
|
)
|
(Loss) income before income taxes and loss
in non- marketable equity interest from
continuing operations
|
|
|
(4,312
|
)
|
|
|
(5,243
|
)
|
|
|
(2,735
|
)
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
—
|
|
|
|
(27
|
)
|
|
|
(12,433
|
)
|
Income tax (benefit) expense from
continuing operations
|
|
|
(4,421
|
)
|
|
|
3,428
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
34
|
|
|
|
1
|
|
|
|
(958
|
)
|
Loss in non-marketable equity interest, net of taxes
|
|
|
(5,752
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,752
|
)
|
Net (loss) income from
continuing operations
|
|
|
(5,643
|
)
|
|
|
(8,671
|
)
|
|
|
(2,735
|
)
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
(34
|
)
|
|
|
(28
|
)
|
|
|
(17,227
|
)
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations of
discontinued operations
|
|
|
(9,987
|
)
|
|
|
5,242
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,745
|
)
|
Income tax expense
|
|
|
4,688
|
|
|
|
(3,429
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,259
|
|
(Loss) income on discontinued
operations
|
|
|
(14,675
|
)
|
|
|
8,671
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,004
|
)
|
Net (loss) income
|
|
|
(20,318
|
)
|
|
|
—
|
|
|
|
(2,735
|
)
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
(34
|
)
|
|
|
(28
|
)
|
|
|
(23,231
|
)
|
Net loss (income) attributable to
noncontrolling interest
|
|
|
(566
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(566
|
)
|
Net (loss) income attributable to
shareholders of Manitex
International, Inc.
|
|
$
|
(20,884
|
)
|
|
$
|
—
|
|
|
$
|
(2,735
|
)
|
|
$
|
—
|
|
|
$
|
(116
|
)
|
|
$
|
(34
|
)
|
|
$
|
(28
|
)
|
|
$
|
(23,797
|
)
|
Earnings (loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing
operations attributable to
shareholders of Manitex
International, Inc.
|
|
$
|
(0.38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1.07
|
)
|
Loss from discontinued operations
attributable to shareholders of Manitex
International, Inc.
|
|
$
|
(0.91
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.41
|
)
|
(Loss) earnings attributable to
shareholders of Manitex
International, Inc.
|
|
$
|
(1.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
(Loss) earnings from continuing
operations attributable to
shareholders of Manitex
International, Inc.
|
|
$
|
(0.38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1.07
|
)
|
Loss from discontinued
operations attributable to
shareholders of Manitex
International, Inc.
|
|
$
|
(0.91
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.41
|
)
|
(Loss) earnings attributable to
shareholders of Manitex International, Inc.
|
|
$
|
(1.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,119,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,119,578
|
|
Diluted
|
|
|
16,119,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,119,578
|
|
16
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
I
|
|
|
J
|
|
|
K
|
|
|
L
|
|
|
M
|
|
|
|
As
Previously
Reported on
Form 10-Q
|
|
|
Impact of SVW
Related
Corrections (1)
|
|
|
Income Tax
Impact
|
|
|
Other
Corrections
and
Reclasifications
Including
Discontinued
Operations
|
|
|
As
Restated
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(20,318
|
)
|
|
|
(2,851
|
)
|
|
|
(35
|
)
|
|
|
(27
|
)
|
|
|
(23,231
|
)
|
Adjustments to reconcile net income to cash (used) provide by for operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Depreciation and amortization
|
|
|
8,886
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,575
|
)
|
|
|
5,311
|
|
Loss (gain) on sale of discontinued operations
|
|
|
9,050
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,760
|
)
|
|
|
7,290
|
|
Changes in allowances for doubtful accounts
|
|
|
117
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(115
|
)
|
|
|
2
|
|
Loss (gain) on disposal of assets
|
|
|
(2,236
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
2,223
|
|
|
|
(13
|
)
|
Changes in inventory reserves
|
|
|
920
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(350
|
)
|
|
|
570
|
|
Deferred income taxes
|
|
|
(193
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
(190
|
)
|
Amortization of deferred financing cost
|
|
|
2,333
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(430
|
)
|
|
|
1,903
|
|
Revaluation of contingent acquisition liability
|
|
|
(915
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(915
|
)
|
Write down of goodwill
|
|
|
275
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
275
|
|
Amortization of debt discount
|
|
|
405
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
404
|
|
Change in value of interest rate swaps
|
|
|
(778
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(778
|
)
|
Loss in non-marketable equity interest
|
|
|
-
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Share-based compensation
|
|
|
900
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
900
|
|
Deferred gain on sale and lease back
|
|
|
(124
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(17
|
)
|
|
|
(141
|
)
|
Reserves for uncertain tax provisions
|
|
|
48
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(16
|
)
|
|
|
32
|
|
(Earnings) loss from equity investment
|
|
|
5,752
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,752
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
|
|
(11,622
|
)
|
|
|
1,844
|
|
|
|
—
|
|
|
|
8,589
|
|
|
|
(1,189
|
)
|
(Increase) decrease in inventory
|
|
|
(4,410
|
)
|
|
|
(10,387
|
)
|
|
|
—
|
|
|
|
7,314
|
|
|
|
(7,483
|
)
|
(Increase) decrease in prepaid expenses
|
|
|
884
|
|
|
|
(143
|
)
|
|
|
35
|
|
|
|
203
|
|
|
|
979
|
|
(Increase) decrease in other assets
|
|
|
194
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
194
|
|
Increase (decrease) in accounts payable
|
|
|
(5,270
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(241
|
)
|
|
|
(5,511
|
)
|
Increase (decrease) in accrued expense
|
|
|
(3,111
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
400
|
|
|
|
(2,711
|
)
|
Increase (decrease) in other current liabilities
|
|
|
2,379
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,744
|
)
|
|
|
(365
|
)
|
Increase (decrease) in other long-term liabilities
|
|
|
(251
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
(250
|
)
|
Discontinued operations - cash provided by (used) for operating
activities
|
|
|
1,509
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,407
|
)
|
|
|
(6,898
|
)
|
Net cash (used) for provided by operating activities
|
|
|
(15,576
|
)
|
|
|
(11,537
|
)
|
|
|
—
|
|
|
|
1,050
|
|
|
|
(26,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of businesses, net of cash acquired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Sale of intellectual property
|
|
|
2,205
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Proceeds from the sale of fixed assets
|
|
|
187
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
187
|
|
Purchase of property and equipment
|
|
|
(1,611
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
665
|
|
|
|
(946
|
)
|
Investment in intangibles other than goodwill
|
|
|
(103
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(103
|
)
|
Proceeds from the sale of discontinued operations
|
|
|
14,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,000
|
|
Discontinued operations - cash used for investing activities
|
|
|
157
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,531
|
|
|
|
1,688
|
|
Net cash provided by for investing activities
|
|
|
14,835
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,196
|
|
|
|
14,826
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings—2014 term loan
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Repayment of 2014 term loan
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net proceeds from stock offering
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
New borrowings—convertible notes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Payments on revolving term credit facilities
|
|
|
(10,709
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,978
|
)
|
|
|
(13,687
|
)
|
Net borrowings (repayments) on working capital facilities
|
|
|
13,255
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,074
|
)
|
|
|
7,181
|
|
Investment received from noncontrolling interest
|
|
|
2,450
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,450
|
)
|
|
|
—
|
|
New borrowings—except 2014 term loan
|
|
|
757
|
|
|
|
12,204
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,961
|
|
Note payments
|
|
|
(10,980
|
)
|
|
|
(335
|
)
|
|
|
—
|
|
|
|
6,046
|
|
|
|
(5,269
|
)
|
Bank fees and cost related to new financing
|
|
|
(981
|
)
|
|
|
(332
|
)
|
|
|
—
|
|
|
|
107
|
|
|
|
(1,206
|
)
|
Shares repurchased for income tax withholding on share-based compensation
|
|
|
(55
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(55
|
)
|
Proceeds from stock offering
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Proceeds from sale and leaseback
|
|
|
4,080
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,080
|
|
Excess tax benefits related to vesting of restricted stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Proceeds from capital leases
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Payments on capital lease obligations
|
|
|
(417
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(417
|
)
|
Discontinued operations - cash used for financing activities
|
|
|
(919
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
5,341
|
|
|
|
4,422
|
|
Net cash (used) for provided by financing activities
|
|
|
(3,519
|
)
|
|
|
11,537
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
8,010
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(4,260
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
3,238
|
|
|
|
(3,227
|
)
|
Effect of exchange rate changes on cash
|
|
|
1,701
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(342
|
)
|
|
|
1,359
|
|
Cash and cash equivalents at the beginning of the year
|
|
|
8,578
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,660
|
)
|
|
|
5,918
|
|
Cash and cash equivalents at end of period
|
|
$
|
6,019
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
236
|
|
|
$
|
4,050
|
|
17
3. New Significant Accounting Policy 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.
Although the Company does not have an ownership interest in S.V.W. Crane & Equipment Company and its wholly owned subsidiary Rental Consulting Services Corporation (collectively “SVW”), the Company has the power to direct the activities of SVW that most significantly impact its economic performance and is absorbing the losses. As such, the Company has determined that SVW is a VIE that requires consolidation. SVW has obtained financing and has remitted the proceeds to the Company using inventory (cranes) owned by the Company as collateral. The finance companies that hold the loans have a perfected security interest in the inventory and therefore have recourse against this specific inventory. Furthermore, the debt taken on by the SVW was effectively guaranteed by the Company pursuant to certain related agreements.
The Company eliminates from the Company’s financial results all significant intercompany transactions, including the intercompany transactions with consolidated VIEs.
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 $8 and $7 at September 30, 2017 and December 31, 2016, 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 Valuation
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.
18
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 segment 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.
A liability for estimated warranty claims is accrued at the time of sale. The liability is established using historical 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. Adjustments 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 liability.
Revenue Recognition
Revenue and related costs are recognized when title passes and risk of loss passes to our customers which generally occurs upon shipment depending upon the terms of the contract. Under certain contracts with our customers title passes to the customers when the units are completed. The units are segregated from our inventory and identified as belonging to the customer, the customer is notified that the units are complete and awaiting pick up or delivery as specified by the customer before income is recognized. Additionally, the customer is requested to sign an “Invoice Authorization Form” which acknowledges the contract terms and acknowledges that the customer has economic ownership and control over the unit. It also acknowledges that we are going to invoice the unit per terms of the contract. The Company insures any custodial risk that it may retain.
For FOB contracts, customers may be invoiced prior to the time customers take physical possession. Revenue is recognized in such cases only when the customer has a fixed commitment to purchase the units, the units have been completed, tested and made available to the customer for pickup or delivery, and the customer has authorized in writing that we hold the units for pickup or delivery at a time specified by the customer. In such cases, the units are invoiced under our customary billing terms, title to the units and risks of ownership pass to the customer upon invoicing, the units are segregated from our inventory and identified as belonging to the customer and we have no further obligations under the order. The Company insures any custodial risk that it may retain.
In addition, our policy requires in all instances certain minimum criteria be met in order to recognize revenue, specifically:
a)
|
Persuasive evidence that an arrangement exists;
|
b)
|
The price to the buyer is fixed or determinable;
|
c)
|
Collectability is reasonably assured; and
|
d)
|
We have no significant obligations for future performance.
|
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 hedging 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.
19
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.
Reclassification
Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation.
Accounting for Equity Investments
The Company is accounting for its 21.2% investment in ASV Holdings under the equity method of accounting. Under the equity method, the Company’s share of the net income (loss) of ASV Holdings is recognized as income (loss) in the Company’s statement of operations and added to the investment account, and dividends received from ASV Holdings are treated as a reduction of the investment account. ASV Holdings’ earnings are recorded on a one quarter lag as ASV Holdings may not report earnings in time to be included in the Company’s financial statements for any given reporting period.
On May 17, 2017, the Company’s investment in ASV Holdings exceeded the proportional share of ASV Holdings’ net assets. Under current applicable guidance, assets and liabilities of the investee (ASV Holdings) are valued at fair market value on the date of the investment. The Company investment, however, is not adjusted for the difference between the Company’s proportional share of the net assets and the fair value of the assets that existed on the date that the investment was made. The differences are accounted for on a memo basis. The differences can be either of temporary nature or permanent differences. Adjustment to inventory and identifiable intangible assets with finite lives are temporary differences. Fair market adjustments to land and goodwill are examples of permanent differences. Differences related to temporary items are amortized over their lives. Earnings recognized are the proportional share of investee’s income for the period adjusted for reversal of any timing differences or additional amortization related to the memo fair market adjustments of identifiable intangible assets that have finite lives.
Recently Issued Pronouncements – Not Adopted
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. The update is effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is in the process of evaluating the impact of this update on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment. The effective date will be the first quarter of fiscal year 2020, with early adoption permitted in 2017. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements.
20
Recently Adopted Accounting Guidance
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, “Deferral of the Effective Date”, which amends ASU 2014-09. As a result, the effective date is the first quarter of 2018, with early adoption permitted. The Company has adopted this guidance during the quarter ended March 31, 2018 on a modified retrospective basis. The adoption of this guidance did not have a significant impact on the operating results when adopted.
In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” (“ASU 2015-11”). ASU 2015-11 requires inventory be measured at the lower of cost and net realizable value and options that currently exist for market value be eliminated. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company has adopted this guidance during the quarter ended March 31, 2017 on a prospective basis. The adoption of this guidance did not have a significant impact on the operating results when adopted.
In January 2016, the FASB issued ASU 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." The amendments in ASU 2016-01, among other things, require equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes
in fair value recognized in net income; requires public business entities to use the exit price notion when measuring fair value of financial
instruments for disclosure purposes; requires separate presentation of financial assets and financial liabilities by measurement category and form of
financial asset (i.e., securities or loans and receivables); and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost. The effective date will be the first quarter of fiscal year 2018. The Company has adopted this guidance during the quarter ended March 31, 2018. The adoption of this guidance did not have a significant impact on the operating results when adopted.
In March 2016, the FASB issued ASU 2016-05, “Derivatives and Hedging (Topic 815),” (“ASU 2016-05”). ASU 2016-05 provides guidance clarifying that novation of a derivative contract (i.e. a change in counterparty) in a hedge accounting relationship does not, in and of itself, require designation of that hedge accounting relationship. The Company adopted this guidance during the quarter ended March 31, 2017. The adoption of this guidance did not have an impact on the operating results when adopted.
In March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (Topic 815),” (“ASU 2016-06”). ASU 2016-06 simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by clarifying that an exercise contingency does not need to be evaluated to determine whether it relates to interest rates and credit risk in an embedded derivative analysis. The effective date will be the first quarter of fiscal year 2017, with early adoption permitted. The Company has adopted this guidance during the quarter ended March 31, 2017. The adoption of this guidance did not have an impact on the operating results when adopted.
In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606) Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” (“ASU 2016-08”). ASU 2016-08 further clarifies principal and agent relationships within ASU 2014-09. Similar to ASU 2014-09, the effective date will be the first quarter of fiscal year 2018 with early adoption permitted in the first quarter of fiscal year 2017. The Company has adopted this guidance during the quarter ended March 31, 2018. The adoption of this guidance did not have a significant impact on the operating results when adopted.
In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting,” (“ASU 2016-09”). ASU 2016-09 is intended to simplify several aspects of accounting for share-based payment awards. The effective date will be the first quarter of fiscal year 2017, with early adoption permitted. The Company has adopted the guidance for the year ended December 31, 2017. The adoption of this guidance did not have an impact on the operating results when adopted.
In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing” (“ASU 2016-10”). The amendments in ASU 2016-10 are expected to reduce the cost and complexity of applying the guidance on identifying promised goods or services in contracts with customers and to improve the operability and understandability of licensing implementation guidance related to the entity's intellectual property. Similar to ASU 2014-09, the
21
effective date will be the first
quarter
of fiscal year 2018 with early adoption permitted in the first quarter of fiscal year 2017.
The Company has adopted this guidance during the quarter ended March 31, 2018 on a modified retrospective basis.
Th
e adoption of this guidance did not have a significant impact on the operating results when adopted.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments,” (“ASU 2016-15”). ASU 2016-15 reduces the existing diversity in practice in financial reporting by clarifying existing principles in ASC 230, “Statement of Cash Flows,” and provides specific guidance on certain cash flow classification issues. The effective date for ASU 2016-15 will be the first quarter of fiscal year 2018 with early adoption permitted. The Company made an election to use the “Cumulative Earning Approach” to classify distributions received from equity investments. Other than the aforementioned election (which may have a future impact), the adoption of this guidance during the quarter ended March 31, 2018, did not have an impact on the Company’s Statement of Cash Flows.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740) - Intra-Entity Transfer of Assets Other than Inventory,” (“ASU 2016-16”). ASU 2016-16 requires recognition of current and deferred income taxes resulting from an intra-entity transfer of any asset (excluding inventory) when the transfer occurs. This is a change from existing GAAP which prohibits recognition of current and deferred income taxes until the asset is sold to a third party. The effective date for ASU 2016-16 will be the first quarter of fiscal year 2018 with early adoption permitted. The Company has adopted this guidance during the quarter ended March 31, 2018. The adoption of this guidance did not have a significant impact on the operating results when adopted.
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” (“ASU 2017-01”). ASU 2017-01 provides guidance in ascertaining whether a collection of assets and activities is considered a business. The effective date will be the first quarter of fiscal year 2018, with prospective application. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements. The Company has adopted this guidance during the quarter ended March 31, 2018. The adoption of this guidance did not have an impact on the operating results when adopted.
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.
4. Financial Instruments—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 September 30, 2017 and December 31, 2016 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 September 30, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency exchange contracts
|
|
$
|
—
|
|
|
$
|
94
|
|
|
$
|
—
|
|
|
$
|
94
|
|
Interest rate swap contracts
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
7
|
|
Valla contingent consideration
|
|
|
—
|
|
|
|
—
|
|
|
|
216
|
|
|
|
216
|
|
Total recurring liabilities at fair value
|
|
$
|
—
|
|
|
$
|
101
|
|
|
$
|
216
|
|
|
$
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at December 31, 2016
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency exchange contracts
|
|
$
|
—
|
|
|
$
|
159
|
|
|
$
|
—
|
|
|
$
|
159
|
|
Interest rate swap contracts
|
|
|
—
|
|
|
|
405
|
|
|
|
—
|
|
|
|
405
|
|
PM contingent liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
316
|
|
|
|
316
|
|
Valla contingent consideration
|
|
|
—
|
|
|
|
—
|
|
|
|
193
|
|
|
|
193
|
|
Total liabilities at fair value
|
|
$
|
—
|
|
|
$
|
564
|
|
|
$
|
509
|
|
|
$
|
1,073
|
|
22
|
|
Fair Value Measurements Using Significant Unobservable Inputs (level 3)
|
|
|
|
PM
Contingent
Consideration
|
|
|
Valla
Contingent
Consideration
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
316
|
|
|
$
|
193
|
|
|
$
|
509
|
|
Effect of change in exchange rates
|
|
|
—
|
|
|
|
23
|
|
|
|
23
|
|
Change in fair value during the period
|
|
|
(316
|
)
|
|
|
—
|
|
|
|
(316
|
)
|
Balance at September 30, 2017
|
|
$
|
—
|
|
|
$
|
216
|
|
|
$
|
216
|
|
Fair Value Measurements
ASC 820-10 classifies the inputs used to measure fair value into the following hierarchy:
Level 1
|
|
—
|
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
|
|
|
|
|
Level 2
|
|
—
|
|
Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
|
|
|
|
|
|
Level 3
|
|
—
|
|
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
|
Fair value of the forward currency contracts are determined on the last day of each reporting period using observable inputs, which are supplied to the Company by the foreign currency trading operation of its bank and are Level 2 items.
5. Derivatives Financial Instruments
The Company’s risk management objective is to use the most efficient and effective methods available to us to minimize, eliminate, reduce or transfer the risks which are associated with fluctuation of exchange rates between the Euro, Chilean Peso and the U.S. dollar.
Forward Currency Contracts
When the Company receives a significant order in a currency other than the operating unit’s functional currency, management may evaluate different options that are available to mitigate future currency exchange risks. As of September 30, 2017, the Company had no outstanding forward currency contracts that were in place to hedge future sales. Therefore, there are currently no unrealized pre-tax gains or losses which will reclassified from other comprehensive income into earnings during the next 12 months.
In addition, the Company enters into forward currency exchange contracts in relationship such that the exchange gains and losses on the assets and liabilities denominated in a currency other than the reporting units’ functional currency would be offset by the changes in the market value of the forward currency exchange contracts it holds. PM Group has an intercompany receivable denominated in Euros from its Chilean subsidiary. At September 30, 2017, the Company had entered into a forward currency exchange contract that matured on January 29, 2018. Under the contract the Company is obligated to sell 2,500,000 Chilean pesos for 3,201 euros. The purpose of the forward contract is to mitigate the income effect related to this intercompany receivable that results with a change in exchange rate between the Euro and the Chilean peso.
Interest Rate Swap Contracts
A contract was signed by PM Group, for an original notional amount of € 482 (€ 569 at September 30, 2017), maturing on October 1, 2020 with interest paid monthly. PM pays interest at a rate of 3.90% and receives from the counterparties interest at the “Euribor” rate for the period in question if greater than 0.90%.
23
As of September 30, 2017, the Company had the following forward currency contracts an
d interest rate swaps:
Nature of Derivative
|
|
Currency
|
|
Amount
|
|
|
Type
|
Forward currency sales
contracts
|
|
Chilean peso
|
|
|
2,500,000
|
|
|
Not designated as hedge instrument
|
Interest rate swap contract
|
|
Euro
|
|
|
482
|
|
|
Not designated as hedge instrument
|
The following table provides the location and fair value amounts of derivative instruments that are reported in the Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016:
Total derivatives NOT designated as a hedge instrument
|
|
|
|
Fair Value
|
|
|
|
Balance Sheet Location
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Liabilities Derivatives
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contract
|
|
Accrued expense
|
|
$
|
94
|
|
|
$
|
159
|
|
Interest rate swap contracts
|
|
Notes payable
|
|
|
7
|
|
|
|
405
|
|
Total liabilities
|
|
|
|
$
|
101
|
|
|
$
|
564
|
|
The following tables provide the effect of derivative instruments on the Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016:
|
|
|
|
Gain or (loss)
|
|
|
|
Location of gain or (loss)
recognized in
Income Statement
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Derivatives Not designated
as Hedge Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency contracts
|
|
Foreign currency
transaction gains (losses)
|
|
$
|
37
|
|
|
$
|
(22
|
)
|
|
$
|
133
|
|
|
$
|
(332
|
)
|
Interest rate swap contracts
|
|
Interest expense
|
|
|
(1
|
)
|
|
|
392
|
|
|
|
355
|
|
|
|
787
|
|
Forward currency contracts
|
|
Income from operations of
discontinued operations
|
|
|
—
|
|
|
|
(32
|
)
|
|
|
—
|
|
|
|
54
|
|
|
|
|
|
$
|
36
|
|
|
$
|
338
|
|
|
$
|
488
|
|
|
$
|
509
|
|
The counterparty to each of the currency exchange forward contracts is a major financial institution with credit ratings of investment grade or better and no collateral is required. Management continues to monitor counterparty risk and believes the risk of incurring losses on derivative contracts related to credit risk is unlikely.
6. Inventory
The components of inventory are as follows:
|
|
|
|
|
|
As Restated
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Raw materials and purchased parts, net
|
|
$
|
36,988
|
|
|
$
|
35,855
|
|
Work in process
|
|
|
3,425
|
|
|
|
4,231
|
|
Finished goods
|
|
|
23,009
|
|
|
|
29,401
|
|
Inventory, net
|
|
$
|
63,422
|
|
|
$
|
69,487
|
|
The Company has established reserves for obsolete and excess inventory of $3,454 and $1,886 as of September 30, 2017 and December 31, 2016, respectively.
24
7. Goodwill and Intangible Assets
Intangible assets and accumulated amortization by category as of September 30, 2017 is as follows:
|
|
|
|
Gross
|
|
|
|
|
|
|
Net
|
|
|
|
Useful
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
lives
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
Patented and unpatented technology
|
|
7-10 years
|
|
$
|
18,317
|
|
|
$
|
(11,762
|
)
|
|
$
|
6,555
|
|
Customer relationships
|
|
10-20 years
|
|
|
23,639
|
|
|
|
(9,518
|
)
|
|
|
14,121
|
|
Trade names and trademarks
|
|
25 years-indefinite
|
|
|
12,607
|
|
|
|
(2,041
|
)
|
|
|
10,566
|
|
Non-competition agreements
|
|
2-5 years
|
|
|
50
|
|
|
|
(45
|
)
|
|
|
5
|
|
Customer backlog
|
|
<1 year
|
|
|
371
|
|
|
|
(371
|
)
|
|
|
—
|
|
Total intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
$
|
31,247
|
|
Intangible assets and accumulated amortization by category as of December 31, 2016 is as follows:
|
|
|
|
Gross
|
|
|
|
|
|
|
Net
|
|
|
|
Useful
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
lives
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
Patented and unpatented technology
|
|
7-10 years
|
|
$
|
17,409
|
|
|
$
|
(11,004
|
)
|
|
$
|
6,405
|
|
Customer relationships
|
|
10-20 years
|
|
|
22,444
|
|
|
|
(7,870
|
)
|
|
|
14,574
|
|
Trade names and trademarks
|
|
25 years-indefinite
|
|
|
11,892
|
|
|
|
(1,894
|
)
|
|
|
9,998
|
|
Non-competition agreements
|
|
2-5 years
|
|
|
50
|
|
|
|
(42
|
)
|
|
|
8
|
|
Customer backlog
|
|
<1 year
|
|
|
370
|
|
|
|
(370
|
)
|
|
|
—
|
|
Total Intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,985
|
|
Amortization expense for intangible assets was $609 and $1,204 for the three months, and $2,121 and $3,324 for the nine months ended September 30, 2017 and 2016, respectively.
Changes in goodwill for the nine months ended September 30, 2017 are as follows:
|
|
Total
|
|
Balance January 1, 2017
|
|
$
|
39,669
|
|
Effect of change in exchange rates
|
|
|
3,345
|
|
Balance September 30, 2017
|
|
$
|
43,014
|
|
8. Equity Method Investments
ASV Holdings
- The Company is accounting for its 21.2% investment in ASV Holdings under the equity method of accounting. Under the equity method, the Company’s share of the net income (loss) of the ASV Holdings is recognized as income (loss) in the Company’s statement of operations and added to investment account, and dividends received from ASV Holdings are treated as a reduction of the investment account. ASV Holdings’ earnings are recorded on a one quarter lag as ASV Holdings may not report earnings in time to be included in the Company’s financial statements for any given reporting period.
On May 17, 2017, the Company’s investment in ASV Holdings exceeded the proportional share of ASV Holdings’ net assets by $862. The following table provides details of fair market adjustment made to reconcile this difference and subsequent amortization of the fair market adjustments:
|
|
|
|
Balance as of
|
|
|
|
|
|
|
Balance as of
|
|
|
|
Amortization
|
|
May 17,
|
|
|
Cumulative
|
|
|
September 30,
|
|
|
|
Period
|
|
2017
|
|
|
Amortization
|
|
|
2017
|
|
Inventory
|
|
1 year
|
|
$
|
75
|
|
|
$
|
9
|
|
|
$
|
66
|
|
Intangibles other than goodwill
|
|
10 to 25 years
|
|
|
787
|
|
|
|
9
|
|
|
|
778
|
|
|
|
|
|
$
|
862
|
|
|
$
|
18
|
|
|
$
|
844
|
|
The Company owned 2,080,000 Common Shares of ASV Holdings, which had a market value on September 30, 2017 of $16,910 based on a closing price of $8.13.
25
The following tables present ASV Holding’s summary financial information:
|
|
June 30,
2017 (2)
|
|
|
December 31,
2016
|
|
Current Assets
|
|
$
|
43,497
|
|
|
$
|
47,556
|
|
Non-Current Assets
|
|
|
70,880
|
|
|
|
72,176
|
|
Current Liabilities
|
|
|
21,767
|
|
|
|
23,654
|
|
Non-Current Liabilities
|
|
$
|
26,651
|
|
|
$
|
42,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
|
|
|
|
June 30, (2)
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
Net sales
|
|
$
|
62,250
|
|
|
|
|
|
Gross profit
|
|
|
9,660
|
|
|
|
|
|
Net income
|
|
|
1,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the Company
(1)
|
|
|
302
|
|
|
|
|
|
Amortization of FMV adjustment
|
|
|
(18
|
)
|
|
|
|
|
Income recognized by the Company
|
|
$
|
284
|
|
|
|
|
|
__________________
|
|
|
|
|
|
|
|
|
(1) Represents 21.22% of ASV Holdings earnings from May 17, 2017 to September 30, 2017
|
|
|
|
|
|
|
|
|
(2) The Company's policy is to record our earnings based on a one quarter lag. As of September 30, 2017, the best available information to us was for June 30, 2017
|
|
|
|
|
|
|
|
|
Over the period from February 26 to 28, 2018, the Company sold an aggregate of 1,000,000 shares of ASV Holdings, Inc. in privately-negotiated transactions with institutional purchasers. All such shares were sold for $7.00 per share. Following such sale transactions, the Company owns an aggregate of 1,080,000 shares of ASV Holdings, Inc., which equates to the Company owning approximately 11.0% percent of ASV. After this transaction, the investment in ASV Holdings, Inc. will no longer be accounted for under the equity method.
Lift Ventures -
On December 16, 2014, Manitex International, Inc. (the “Company”), BGI USA Inc. (“BGI”), Movedesign SRL and R & S Advisory S.r.l., entered into an operating agreement (the “Operating Agreement”) for Lift Ventures LLC (“Lift Ventures”), a joint venture entity. The purposes for which Lift Ventures is organized are the manufacturing and selling of certain products and components, including the
Schaeff
line of electric forklifts and certain
LiftKing
products. Pursuant to the Operating Agreement, the Company was granted a 25% equity stake in Lift Ventures in exchange for the contribution of inventory totaling $5,951 and a license of certain intellectual property related to the Company’s products.
This investment was a non-marketable equity investment made in a privately-held company accounted for under the equity method.
In 2016, the Company determined its investment in Lift Ventures was impaired and has recognized an impairment charge of $5,647 to write off its entire investment in Lift Ventures LLC.
26
9. Accrued Expenses
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
|
|
As Restated
|
|
Accrued payroll
|
|
$
|
2,192
|
|
|
$
|
914
|
|
Accrued employee benefits
|
|
|
748
|
|
|
|
1,215
|
|
Accrued bonuses
|
|
|
60
|
|
|
|
401
|
|
Accrued vacation
|
|
|
989
|
|
|
|
979
|
|
Accrued interest
|
|
|
981
|
|
|
|
1,753
|
|
Accrued commissions
|
|
|
478
|
|
|
|
351
|
|
Accrued expenses—other
|
|
|
524
|
|
|
|
1,052
|
|
Accrued warranty
|
|
|
1,669
|
|
|
|
1,568
|
|
Accrued income taxes
|
|
|
465
|
|
|
—
|
|
Accrued taxes other than income taxes
|
|
|
1,862
|
|
|
|
1,950
|
|
Accrued product liability and workers compensation claims
|
|
|
404
|
|
|
|
95
|
|
Total accrued expenses
|
|
$
|
10,372
|
|
|
$
|
10,278
|
|
10. Accrued Warranty
The accrued warranty liability is established using historical warranty claim experience; however, the current provision may be adjusted to take into consideration unusual or non-recurring events in the past or anticipated changes in future warrant claims.
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Balance January 1,
|
|
$
|
1,568
|
|
|
$
|
1,328
|
|
Accrual for warranties issued during the period
|
|
|
1,390
|
|
|
|
1,182
|
|
Warranty services provided
|
|
|
(1,322
|
)
|
|
|
(1,269
|
)
|
Changes in estimate
|
|
|
(1
|
)
|
|
|
103
|
|
Foreign currency translation
|
|
|
34
|
|
|
|
26
|
|
Balance September 30,
|
|
$
|
1,669
|
|
|
$
|
1,370
|
|
11.
Credit Facilities and Debt
U.S. Credit Facilities
At September 30, 2017, the Company and its U.S. subsidiaries have a Loan and Security Agreement, as amended, (the “Loan Agreement”) with The CIBC Bank USA (“CIBC”), formally known as “The Private Bank and Trust Company”. The Loan Agreement provides a revolving credit facility with a maturity date of July 20, 2019. The aggregate amount of the facility is $25,000.
The maximum borrowing available to the Company under the Loan Agreement is limited to: (1) 85% of eligible receivables; plus (2) 50% of eligible inventory valued at the lower of cost or net realizable value subject to a $17,500 limit; plus (3) 80% of eligible used equipment, as defined, valued at the lower of cost or market subject to a $2,000 limit. At September 30, 2017, the maximum the Company could borrow based on available collateral was $25,000. At September 30, 2017, the Company had borrowed $12,575 under this facility. The Company’s collateral is subject to a
$5,000 reserve until the Fixed Charge Coverage ratio exceeds 1.10 to 1.00. The indebtedness under the Loan Agreement is collateralized by substantially all of the Company’s assets, except for the certain assets of the Company’s subsidiaries.
The Loan Agreement provides that the Company can opt to pay interest on the revolving credit at either a base rate plus a spread, or a LIBOR rate plus a spread. The base rate spread ranges from 0.25% to 1.00% depending on the Senior Leverage Ratio (as defined in the Loan Agreement). The LIBOR spread ranges from 2.25% to 3.00% also depending on the Senior Leverage Ratio. At September 30, 2017, the base rate and LIBOR spreads were 1.00% and 3.00%, respectively. Funds borrowed under the LIBOR option can be borrowed for periods of one, two, or three months and are limited to four LIBOR contracts outstanding at any time.
27
The underlying reference rate for our base rated borrowings at September 30, 2017 was 4.25%. At September 30, 2017, the Company had four outstanding advances with interest tied to LIBOR. The contracts had an underlying LIBOR rate of 1.27%. In addit
ion, CIBC assesses a 0.50% unused line fee that is payable monthly.
The Loan Agreement subjects the Company and its domestic subsidiaries to a quarterly EBITDA covenant (as defined). The quarterly EBITDA covenant (as defined) are $(1,000) for the quarter ended at March 31, 2017, $0 for the quarter ended June 30, 2017, and $2,000 for all quarters starting with the quarter ended September 30, 2017 through the end of the agreement. Additionally, the Company and its domestic subsidiaries are subject to a Fixed Charge Coverage ratio of 1.05 to 1.00 measured on an annual basis beginning December 31, 2017, followed by a Fixed Charge Coverage ratio of 1.15 to 1.00 measured quarterly starting March 31, 2018 (based on a trailing twelve month basis) through the term of the agreement. The Loan Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company’s ability to, among other things, incur additional indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, pay dividends or make distributions, repurchase stock, in each case subject to customary exceptions for a credit facility of this size.
The Loan Agreement has a Letter of Credit facility of $3,000, which is fully reserved against availability.
Note Payable—Bank
At September 30, 2017, the Company has a $73 term note payable to a bank. The Company is required to make eleven monthly payments of $37 that began on January 30, 2017. The note dated January 18, 2017 had an original principal amount of $400 and an annual interest rate of 2.75%. Proceeds from the note were used to pay annual premiums for certain insurance policies carried by the Company. The holder of the note has a security interest in the insurance policies it financed and has the right upon default to cancel these policies and receive any unearned premiums.
Note Payable—Winona Facility Purchase
At September 30, 2017, Badger has balance on note payable to Avis Industrial Corporation of $486. Badger is required to make 60 monthly payments of $10 that began on August 1, 2017. The note dated July 26, 2017, had an original principal amount of $500 and annual interest rate of 8.00%. The note is guaranteed by the Company.
Notes Payable – SVW
At September 30, 2017, SVW has
four
loans outstanding with
four
financial institutions. The Company is not a loan party, but has included the debt associated with these loans in its consolidated financial statements as SVW was determined to be a VIE that requires consolidation (see Note 1). SVW obtained financing using cranes that are included in the Company’s inventory as collateral because of SVW's status as a VIE. The funds borrowed by SVW been have remitted to the Company. The finance companies that hold the loans have a perfected security interest in the inventory and therefore have recourse against this specific inventory. For accounting purposes, the Company did not recognize a sale and continues to include these cranes in its inventory. However, the finance company has taken legal title to the cranes used as collateral for the borrowings. The Company has entered into agreements to repurchase the cranes from the lenders in the event that SVW defaults on any of these loans. A
dditionally, the SVW debt was also effectively guaranteed by the Company pursuant to certain related agreements.
28
The following table summarizes the principal terms of the borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Element
|
|
Lending Institutions
|
|
Equify
|
|
|
|
Evolve
|
|
|
Heartland
|
|
|
Loan 1
|
|
Balance as of September 30, 2017
|
|
$
|
1,880
|
|
|
|
$
|
1,147
|
|
|
$
|
1,412
|
|
|
$
|
2,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan origination date
|
|
June 27, 2016
|
|
|
|
July 8, 2016
|
|
|
July 16, 2016
|
|
|
July 28, 2016
|
|
Amount borrowed
|
|
$
|
3,009
|
|
|
|
$
|
2,710
|
|
|
$
|
1,648
|
|
|
$
|
2,941
|
|
Approximate Interest rate
|
|
|
8.07
|
%
|
|
|
|
6.75
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment penalty
|
|
At stipulated vaules
|
|
|
|
3% decreasing to 2%
after 24 months
|
|
|
Not applicable
|
|
|
1% per for each remaining year
no penalty if equipment is sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Required payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First payment stream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frequencies of payment
|
|
Monthly
|
|
|
|
Monthly
|
|
|
Monthly
|
|
|
Monthly
|
|
Remaining payments
|
|
22
|
|
|
|
21
|
|
|
58
|
|
|
47
|
|
Date of first payment
|
|
August 1, 2016
|
|
|
|
August 8, 2016
|
|
|
September 1, 2016
|
|
|
September 1, 2016
|
|
Payment amount
|
|
$
|
33
|
|
|
|
$
|
17
|
|
|
$
|
29
|
|
|
$
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final balloon payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of payment
|
|
August 1, 2019
|
|
|
|
July 9, 2019
|
|
|
August 1, 2022
|
|
|
December 1, 2021
|
|
Payment amount
|
|
$
|
1,391
|
|
|
|
$
|
918
|
|
|
$
|
39
|
|
|
$
|
1
|
|
The September 30, 2017, balances on the above table total $6,455. Total SVW debt on the balance sheet is $6,260 the difference is deferred finance costs of $195 which is netted against the gross debt.
PM Group Short-Term Working Capital Borrowings
At September 30, 2017, PM Group had established demand credit and overdraft facilities with seven Italian banks and six banks in South America. Under the facilities, PM Group can borrow up to approximately €25,507 ($30,131) for advances against invoices, and letter of credit and bank overdrafts. Interest on the Italian working capital facilities is charged at the 3-month or 6-month Euribor plus 200 basis points, while interest on overdraft facilities is charged at the 3month Euribor plus 350 basis points. Interest on the South American facilities is charged at a flat rate of points for advances on invoices ranging from 9%-24%.
At September 30, 2017, the Italian banks had advanced PM Group €20,746 ($24,507), at variable interest rates, which currently range from 1.42% to 1.67%. At September 30, 2017, the South American banks had advanced PM Group €591 ($698). Total short-term borrowings for PM Group were €21,337 ($25,205) at September 30, 2017.
PM Group Term Loans
At September 30, 2017, PM Group has a €10,842 ($12,808) (net of debt issuance costs) term loan with two Italian banks, BPER and Unicredit. The term loan is split into three separate notes and is secured by PM Group’s common stock. Debt issuance costs offset against these term loans totaled €358 ($423) at September 30, 2017.
The first note has an outstanding principal balance of €3,595 ($4,247), which is net of unamortized debt issuance costs of €358 ($423) is charged interest at the 6-month Euribor plus 236 basis points, effective rate of 2.09% at September 30, 2017. The note is payable in semi-annual installments beginning June 2017 and ending December 2021. The second note has an outstanding principal balance of €4,394 ($5,191), is charged interest at the 6-month Euribor plus 286 basis points, effective rate of 2.59% at September 30, 2017. The note is payable in semi-annual installments beginning June 2017 and ending December 2021. The third note has an outstanding principal balance of €2,853 ($3,370) and is non-interest bearing. The note is payable in semi-annual installments beginning June 2016 and ending December 2017 with a final balloon payment of €2,500 in March 2022.
The Company acquired PM Group in January 2015 and at acquisition it was determined that the fair value of the term notes described above was €1,460 or $1,725 less than the book value. This reduction is not reflected in the above descriptions of PM debt. As of September 30, 2017, the remaining balance was €665 or $786 and has been offset to the debt.
29
PM Group is subject to certain financial covenants as defined by the debt restructuring agreement with BPER and Unicredit including maintaining (1) Net debt to EBITDA, (2) Net debt to equity, and (3) EBITDA to net financial charges ratios. The cov
enants are measured on a semi-annual basis.
At September 30, 2017, PM Group has unsecured borrowings with four Italian banks totaling €13,015 ($15,375). Interest on the unsecured notes is charged at the 3-month Euribor plus 250 basis points, effective rate of 2.17% at September 30, 2017. Principal payments are due on a semi-annual basis beginning June 2019 and ending December 2021. Accrued interest on these borrowings through the date of acquisition at January 15, 2015, totaled €358 ($423) and is payable in semi-annual installments beginning June 2019 and ending December 2019.
At September 30, 2017, Autogru PM RO, a subsidiary of PM Group, has two notes. The first note is payable in 60 monthly principal installments of €8 ($9), plus interest at the 1-month Euribor plus 300 basis points, effective rate of 3.00% at September 30, 2017, maturing October 2020. At September 30, 2017, the outstanding principal balance of the note was €313 ($370). The second note is payable in monthly installments of €6 ($7) beginning on October 1, 2017, increasing to €9 ($11) on January 1, 2018 with a final payment of €395 ($467) due on March 7, 2018 and is charged interest at the 1-month Euribor plus 250 basis points, effective rate of 2.50% at September 30, 2017. At September 30, 2017, the outstanding principal balance of the note was €440 ($520).
PM has an interest rate swap with a fair market value at September 30, 2017 of €6 or $7 which has been included in debt.
PM Debt Restructuring
On March 6, 2018, PM Group and Oil & Steel S.p.A. (PM Group’s subsidiary) entered into a Debt Restructuring Agreement (the “Restructuring Agreement”) with Banca Monte dei Paschi di Siena S.p.A., Banca Nazionale del Lavoro S.p.A., BPER Banca S.p.A., Cassa di Risparmio in Bologna S.p.A. and Unicredit S.p.A. (collectively the “Lenders”), and Loan Agency Services S.r.l. (the “Agent”). The Restructuring Agreement, which replaces the previous debt restructuring agreement with the Lenders entered into in 2014, provides for, among other things:
|
•
|
The provision of subordinated shareholders’ loans by the Company to PM Group, consisting of (i) conversion of an existing trade receivable in the amount of €3.1 million into a loan; (ii) an additional subordinated shareholders’ loan in the aggregate maximum amount of up to €2.4 million, to be made currently; and (iii) a further loan of €1.8 million to be made by December 31, 2018, in each case to be used to repay a portion of PM Group’s outstanding obligations to the Lenders;
|
|
•
|
Amendments to the 2014 put and call options agreement with BPER to, among other things, extend the exercise of the options until the approval of PM Group’s financial statements for the 2021 fiscal year and permit the assignment of certain subordinated receivables to the Company; and
|
|
•
|
New amortization and repayment schedules for amounts owed by PM Group to the Lenders under the various outstanding tranches of indebtedness, along with revised interest rates and financial covenants. Under the Restructuring agreement term debt is repaid over a nine-year period starting in 2018 and ending in 2026 (2022 prior to Debt Restructuring Agreement).
|
|
•
|
The effect of PM not meeting its December 31, 2017 financial covenants was cured by the Debt Restructuring Agreement
|
Valla Short-Term Working Capital Borrowings
At September 30, 2017, Valla had established demand credit and overdraft facilities with three Italian banks. Under the facilities, Valla can borrow up to approximately €1,343 ($1,586) for advances against orders, invoices and bank overdrafts. Interest on the Italian working capital facilities is charged at a flat percentage rate for advances on invoices and orders ranging from 4.50% - 4.75%. At September 30, 2017, the Italian banks had advanced Valla €694 ($820).
Valla Term Loans
At September 30, 2017, Valla has a term loan with Carisbo. The note is payable in quarterly principal installments beginning on October 30, 2017 of €8 ($9), plus interest at the 3-month Euribor plus 470 basis points, effective rate of 4.37% at September 30, 2017. The note matures on January 2021. At September 30, 2017, the outstanding principal balance of the note was €110 ($130)
30
Capital leases
Georgetown facility
The Company leases its Georgetown facility under a capital lease that expires on April 30, 2028. The monthly rent is currently $66 and is increased by 3% annually on September 1 during the term of the lease. At September 30, 2017, the outstanding capital lease obligation is $5,225.
Equipment
The Company has entered into a lease agreement with a bank pursuant to which the Company is permitted to borrow 100% of the cost of new equipment with 60 months repayment periods. At the conclusion of the lease period, for each piece of equipment the Company is required to purchase that piece of leased equipment for one dollar.
The equipment, which is acquired in ordinary course of the Company’s business, is available for sale and rental prior to sale.
Under the lease agreement the Company can elect to exercise an early buyout option at any time, and pay the bank the present value of the remaining rental payments discounted by a specified Index Rate established at the time of leasing. The early buyout option results in a prepayment penalty which progressively decreases during the term of the lease. Alternatively, under the like-kind provisions in the agreement, the Company can elect to replace or substitute different equipment in place of equipment subject to the early buyout without incurring a penalty.
The following is a summary of amounts financed under equipment capital lease agreements:
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
Balance as of
|
|
|
|
Amount
Borrowed
|
|
|
Repayment
Period
|
|
|
Amount of
Monthly Payment
|
|
|
September 30,
2017
|
|
New equipment
|
|
$
|
896
|
|
|
|
42
|
|
|
$
|
18
|
|
|
$
|
709
|
|
As of September 30, 2017, the Company has two additional capital leases with total capitalized lease obligations of $17.
12. Convertible Notes
Related Party
On December 19, 2014, the Company issued a subordinated convertible debenture with a $7,500 face amount payable to Terex, a related party. The convertible debenture, is subordinated, carries a 5% per annum coupon, and is convertible into Company common stock at a conversion price of $13.65 per share or a total of 549,451 shares, subject to customary adjustment provisions. The debenture has a December 19, 2020 maturity date.
From and after the third anniversary of the original issuance date, the Company may redeem the convertible debenture in full (but not in part) at any time that the last reported sale price of the Company’s common stock equals at least 130% of the Conversion Price (as defined in the debenture) for at least 20 of any 30 consecutive trading days. Following an election by the holder to convert the debenture into common stock of the Company in accordance with the terms of the debenture, the Company has the discretion to deliver to the holder either (i) shares of common stock, (ii) a cash payment, or (iii) a combination of cash and stock.
As of September 30, 2017, the note had a remaining principal balance of $6,968 and an unamortized discount of $532.
Perella Notes
On January 7, 2015, the Company entered into a Note Purchase Agreement (the “Perella Note Purchase Agreement”) with MI Convert Holdings LLC (which is owned by investment funds constituting part of the Perella Weinberg Partners Asset Based Value Strategy) and Invemed Associates LLC (together, the “Investors”), pursuant to which the Company agreed to issue $15,000 in aggregate principal amount of convertible notes due January 7, 2021 (the “Perella Notes”) to the Investors. The Notes are subordinated, carry a 6.50% per annum coupon, and are convertible, at the holder’s option, into shares of Company common stock, based on an initial conversion price of $15.00 per share, subject to customary adjustments. Following an election by the holder to convert the debenture into common stock of the Company in accordance with the terms of the debenture, the Company has the discretion to deliver to the holder either (i) shares of common stock, (ii) a cash payment, or (iii) a combination of cash and stock. Upon the occurrence of certain fundamental corporate changes, the Perella Notes are redeemable at the option of the holders of the Perella Notes. The Perella Notes are not redeemable at the Company’s option prior to the maturity date, and the payment of principal is subject to acceleration upon an
31
event of default. The issuance of the Perella Notes by the Company
was made in reliance upon the exemptions from registration provided by Rule 506 and Section 4(a)(2) of the Securities Act of 1933.
In accordance with a Registration Rights Agreement with the Investors dated January 7, 2015, the Company agreed to register the resale of the shares of common stock issuable upon conversion of the Perella Notes. The Registration Statement on Form S-3 filed by the Company was declared effective on February 23, 2015.
As of September 30, 2017, the note had a remaining principal balance of $14,257, net of debt issuance costs of $318, and an unamortized discount of $318.
13. Income Taxes
For the three months ended September 30, 2017, the Company recorded an income tax provision of $281, which included a discrete income tax provision of $15. For the three months ended September 30, 2016, the Company recorded an income tax provision (benefit) of $(691). The calculation of the overall income tax provision for the three months ended September 30, 2017 primarily consists of a foreign income tax expense and a domestic income tax provision resulting from state and local taxes, and an increase in deferred tax liabilities related to indefinite-lived intangible assets.
The Company recorded an income tax provision (benefit) of $416 and $(958) for the nine months ended September 30, 2017 and 2016, respectively. The calculation of the overall income tax provision for the nine months ended September 30, 2017 primarily consists of a foreign tax income provision and a domestic income tax provision resulting from state and local taxes, and an increase in deferred tax liabilities related to indefinite-lived intangible assets.
The effective tax rate for the three months ended September 30, 2017 was an income tax provision of 33.4% compared to an income tax benefit of 7.0% in the comparable prior period. The effective tax rate for the nine months ended September 30, 2017 was an income tax provision of 8.3% compared to an income tax benefit of 5.3% in the comparable period. The effective tax rate for the three and nine months ended September 30, 2017 differs from the U.S. statutory rate of 35% primarily due to the mix of domestic and foreign earnings, nondeductible foreign permanent differences, state and local taxes, and an increase in deferred tax liabilities related to indefinite-lived intangible assets.
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 tax 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 for changes in estimate as necessary. The 2017 estimated annual effective tax rate inclusive of a valuation allowance is based upon the Company’s anticipated earnings both in the U.S. and in foreign jurisdictions.
The Company’s total unrecognized tax benefits as of September 30, 2017 and 2016 were approximately $741 and $715 which, if recognized, would affect the Company’s effective tax rate. Included in the unrecognized tax benefits is a liability for the PM Group’s potential IRES and IRAP audit adjustments for the tax years 2009 – 2013. In July, 2017, the Company received notification from the Internal Revenue Service that its tax return for the year ended December 31, 2015 has been selected for examination. Favorable resolution of an unrecognized tax benefit could be recognized as a reduction in tax provision and effective tax rate in the period of resolution. Unfavorable settlement of an unrecognized tax benefit could increase the tax provision and effective tax rate and may require the use of cash in the period of resolution.
32
14. Net Earnings (Loss) per Common Shar
e
Basic net earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of convertible debt and restricted stock units. Details of the calculations are as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
|
|
As Restated
|
|
|
|
|
|
|
As Restated
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net income (loss) attributable to shareholders of Manitex
International, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations attributable to
shareholders of Manitex International, Inc.
|
|
$
|
(1,522
|
)
|
|
$
|
(9,335
|
)
|
|
$
|
(6,437
|
)
|
|
$
|
(17,227
|
)
|
(Loss) income from operations of discontinued operations,
net of income taxes
|
|
|
(15
|
)
|
|
|
(999
|
)
|
|
|
532
|
|
|
|
3,228
|
|
Less: (income) attributable to noncontrolling interest from
discontinued operations
|
|
|
—
|
|
|
|
(294
|
)
|
|
|
(274
|
)
|
|
|
(566
|
)
|
(Loss) income from operations of discontinued operations
attributable to shareholders of Manitex International,
Inc., net of income taxes
|
|
|
(1,537
|
)
|
|
|
(1,293
|
)
|
|
|
(6,179
|
)
|
|
|
2,662
|
|
Income (Loss) on sale of discontinued operations, net of
income taxes
|
|
|
30
|
|
|
|
(12,754
|
)
|
|
|
(1,077
|
)
|
|
|
(9,232
|
)
|
Net loss attributable to shareholders of
Manitex International, Inc.
|
|
$
|
(1,507
|
)
|
|
$
|
(23,382
|
)
|
|
$
|
(7,256
|
)
|
|
$
|
(23,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to shareholders
of Manitex International, Inc.
|
|
$
|
(0.09
|
)
|
|
$
|
(0.58
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(1.07
|
)
|
(Loss) earnings from operations of discontinued operations
attributable to shareholders of Manitex International, Inc.,
net of income taxes
|
|
$
|
(0.09
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
0.17
|
|
Loss on sale of discontinued operations attributable to
shareholders of Manitex International, Inc.,
net of income taxes
|
|
$
|
—
|
|
|
$
|
(0.79
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.57
|
)
|
Earnings (loss) attributable to shareholders of
Manitex International, Inc.
|
|
$
|
(0.09
|
)
|
|
$
|
(1.45
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(1.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable
to shareholders of Manitex International, Inc.
|
|
$
|
(0.09
|
)
|
|
$
|
(0.58
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(1.07
|
)
|
(Loss) earnings from operations of discontinued operations
attributable to shareholders of Manitex International, Inc.,
net of income taxes
|
|
$
|
(0.09
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
0.17
|
|
Loss on sale of discontinued operations attributable to
shareholders of Manitex International, Inc.,
net of income taxes
|
|
$
|
—
|
|
|
$
|
(0.79
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.57
|
)
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,573,927
|
|
|
|
16,127,346
|
|
|
|
16,532,683
|
|
|
|
16,119,578
|
|
Dilutive effect of restricted stock units
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
16,573,927
|
|
|
|
16,127,346
|
|
|
|
16,532,683
|
|
|
|
16,119,578
|
|
33
There are
186,778 and
215,842 restricted stock units which are anti-dilutive and therefore not included in the average number of diluted shares shown above for the three and nine months ended September 30, 2017, respectively. There are 267,577 and 267,891 restricted stock uni
ts which are anti-dilutive and therefore not included in the average number of diluted shares shown above for the three and nine months ended September 30, 2016, respectively.
15. Equity
Stock Issued to Employees and Directors
The Company issued shares of common stock to employees and Directors as restricted stock units issued under the Company’s 2004 Incentive Plan vested. Upon issuance entries were recorded to increase common stock and decrease paid in capital for the amounts shown below. The following is a summary of stock issuances that occurred during the period:
Date of Issue
|
|
Employees or
Director
|
|
Shares Issued
|
|
|
Value of
Shares Issued
|
|
January 1, 2017
|
|
Directors
|
|
|
4,290
|
|
|
$
|
54
|
|
January 1, 2017
|
|
Employees
|
|
|
20,932
|
|
|
|
266
|
|
January 4, 2017
|
|
Directors
|
|
|
7,675
|
|
|
|
47
|
|
January 4, 2017
|
|
Employees
|
|
|
42,533
|
|
|
|
258
|
|
June 1, 2017
|
|
Employees
|
|
|
4,493
|
|
|
|
32
|
|
September 15, 2017
|
|
Directors
|
|
|
6,600
|
|
|
|
35
|
|
|
|
|
|
|
86,523
|
|
|
$
|
692
|
|
On June 1, 2017, the Company paid a portion of employees’ bonuses in stock. This resulted in an issuance of 4,493 shares with an aggregate value of $32.
Stock Repurchase
The Company purchases shares of Common Stock from certain employees at the closing share price on the date of purchase. The stock is purchased from the employees to satisfy employees’ withholding tax obligations related to stock issuances described above. The below table summarized shares repurchased from employees during the current year through September 30, 2017:
Date of Purchase
|
|
Shares
Purchased
|
|
|
Closing Price
on Date of
Purchase
|
|
|
January 1, 2017
|
|
|
6,312
|
|
|
$
|
6.86
|
|
|
January 4, 2017
|
|
|
11,750
|
|
|
$
|
7.27
|
|
|
|
|
|
18,062
|
|
|
|
|
|
|
Equity was decreased by $129, the aggregated value of the shares reflected in the table above.
2004 Equity Incentive Plan
In 2004, the Company adopted the 2004 Equity Incentive Plan and subsequently amended and restated the plan on September 13, 2007, May 28, 2009, June 5, 2013 and June 2, 2016. The maximum number of shares of common stock reserved for issuance under the plan is 1,329,364 shares. The total number of shares reserved for issuance however, can be adjusted to reflect certain corporate transactions or changes in the Company’s capital structure. The Company’s employees and members of the board of directors who are not our employees or employees of our affiliates are eligible to participate in the plan. The plan is administered by a committee of the board comprised of members who are outside directors. The plan provides that the committee has the authority to, among other things, select plan participants, determine the type and amount of awards, determine award terms, fix all other conditions of any awards, interpret the plan and any plan awards. Under the plan, the committee can grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units, except Directors may not be granted stock appreciation rights, performance shares and performance units. During any calendar year, participants are limited in the number of grants they may receive under the plan. In any year, an individual may not receive options for more than 15,000 shares, stock appreciation rights with respect to more than 20,000 shares, more than 20,000 shares of restricted stock and/or an award for more than 10,000 performance shares or restricted stock units or performance units. The plan requires that the exercise price for stock options and stock appreciation rights be not less than fair market value of the Company’s common stock on date of grant.
34
Restricted stock units are subject to the same conditions as the restricted stock awards except the restricted stock units will not have voting rights and the
common stock will not be issued until the vesting criteria are satisfied.
Restricted Stock Awards
The following table contains information regarding restricted stock units:
|
|
September 30,
2017
|
|
Outstanding on January 1, 2017
|
|
|
342,004
|
|
Units granted during the period
|
|
|
4,493
|
|
Vested and issued
|
|
|
(86,523
|
)
|
Forfeited
|
|
|
(73,196
|
)
|
Outstanding on September 30, 2017
|
|
|
186,778
|
|
The value of the restricted stock is being charged to compensation expense over the vesting period. Compensation expense includes expense related to restricted stock units of $160 and $334 for the three and $517 and $900 for the nine months ended September 30, 2017 and 2016, respectively. Additional compensation expense related to restricted stock units will be $162, $405 and $155 for the remainder of 2017, 2018 and 2019, respectively.
At the Market Program
On January 23, 2017, Manitex International Inc. entered into a Controlled Equity Offering Sales Agreement (“Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) pursuant to which the Company may offer and sell shares of its common stock, no par value per share, having an aggregate offering price up to $20,000 through Cantor. The Company thought it prudent to put a mechanism in place by which supplemental liquidity can be provided to address working capital requirements or other capital requirements that may arise in conjunction with production requirements. Under the program, the Company’s stock is issued at the current market price and the Company pays a 7% commission to Cantor.
The following table contains information regarding stock issued under the program:
Date of Issue
|
|
Shares
Issued
|
|
|
Shares
Price
|
|
|
Value of
Shares
Issued
|
|
|
Commissions
|
|
|
Net
Proceeds
|
|
January 25, 2017
|
|
|
247,604
|
|
|
$
|
8.8750
|
|
|
$
|
2,197
|
|
|
$
|
154
|
|
|
$
|
2,043
|
|
January 27, 2017
|
|
|
27,120
|
|
|
$
|
8.8376
|
|
|
$
|
240
|
|
|
$
|
17
|
|
|
$
|
223
|
|
January 30, 2017
|
|
|
1,100
|
|
|
$
|
8.6464
|
|
|
$
|
10
|
|
|
$
|
1
|
|
|
$
|
9
|
|
January 31, 2017
|
|
|
18,700
|
|
|
$
|
8.6451
|
|
|
$
|
162
|
|
|
$
|
11
|
|
|
$
|
151
|
|
|
|
|
294,524
|
|
|
|
|
|
|
$
|
2,609
|
|
|
$
|
183
|
|
|
$
|
2,426
|
|
Winona Plant Purchase
On July 25, 2017, the Company issued 21,783 shares of common stock with a value of $154 to Avis Industrial Corporation. The shares were issued as part of the consideration paid to purchase the Winona manufacturing facility and to pay past due rent.
16. Legal Proceedings and Other Contingencies
The Company is involved in various legal proceedings, including product liability, employment related issues, and workers’ compensation matters which have arisen in the normal course of operations. The Company has product liability insurance with self- insurance retention limits that range from $50 to $500.
The Company has been named as a defendant in several multi-defendant asbestos related product liability lawsuits. In certain instances, the Company is indemnified by a former owner of the product line in question. In the remaining cases the plaintiff has, to date, not been able to establish any exposure by the plaintiff to the Company’s products. The Company is uninsured with respect to these claims but believes that it will not incur any material liability with respect to these claims.
35
When it is probable that a loss has been incurred and possible to make a reasonable estimate of the Company’s liability with respect to such matters, a provision is recorded for the amount of such estimate or the minimum amount of a range of estimates when
it is not possible to estimate the amount within the range that is most likely to occur.
Additionally, beginning on December 31, 2011, the Company’s workmen’s compensation insurance policy has per claim deductible of $250 and annual aggregates that range from $1,000 to $1,875 depending on the policy year. The Company is fully insured for any amount on any individual claim that exceeds the deductible and for any additional amounts of all claims once the aggregate is reached. The Company does not believe that the contingencies associated with these worker compensation claims in aggregate will have a material adverse effect on the Company
On May 5, 2011, the Company entered into two separate settlement agreements with two plaintiffs. As of September 30, 2017, the Company has a remaining obligation under the agreements to pay the plaintiffs an aggregate of $1,330 without interest in 14 annual installments of $95 on or before May 22 of each year. On, February 3, 2016, the Company entered into another legal settlement with a single plaintiff for €640 ($756). The liability had been fully accrued and resulted in no gain or loss. As of September 30, 2017 the Company has a remaining obligation under the agreement to pay the plaintiff €20 ($24) without interest in monthly installments of €20 ($24). The Company has recorded a liability for the net present value of the liability. The difference between the net present value and the total payment will be charged to interest expense over payment period.
It is reasonably possible that the “Estimated Reserve for Product Liability Claims” may change within the next 12 months. A change in estimate could occur if a case is settled for more or less than anticipated, or if additional information becomes known to the Company.
Residual Value Guarantees
The Company issues residual value guarantees to support a customer’s financing of equipment purchased from the Company. 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 partial residual guarantees that have maximum exposure of approximately $1.6 million. The Company 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 experienced from its guarantees may be affected by economic conditions in used equipment markets at the time of loss.
17. Transactions between the Company and Related Parties
In the course of conducting its business, the Company has entered into certain related party transactions.
On December 16, 2014, Manitex International, Inc. (the “Company”), BGI USA Inc. (“BGI”), Movedesign SRL and R & S Advisory S.r.l., entered into an operating agreement (the “Operating Agreement”) for Lift Ventures LLC (“Lift Ventures”), a joint venture entity. The purposes for which Lift Ventures is organized are the manufacturing and selling of certain products and components, including the
Schaeff
line of electric forklifts and certain
LiftKing
products. Pursuant to the Operating Agreement, the Company was granted a 25% equity stake in the Lift Ventures in exchange for the contribution of certain inventory and a license of certain intellectual property related to the Company’s products.
As a result of the sale of Liftking in September of 2016 Lift Ventures LLC will no longer have the right to sell Schaeff and Liftking products in the future. Additionally, as a result of certain financial difficulties experienced by the partner, who was to contribute design services, it will not be able to provide such services. Given these events, the Company determined that its investment in Lift Ventures was impaired and recognized a full impairment charge in the third quarter of 2016.
The Company, through its subsidiaries, purchases and sells parts to BGI including BGI’s subsidiary SL Industries, Ltd (“SL”). Company’s former President of Manufacturing Operations is the majority owner of BGI.
The Company through its former Manitex Liftking subsidiary provided parts and services to LiftMaster, Ltd (“LiftMaster”) or purchased parts or services from LiftMaster. LiftMaster is owned by an individual who was a Vice President of Manitex Liftking ULC during the period that the Company owned this subsidiary and a relative of his.
C&M is a distributor of Terex rough terrain and truck cranes. As such, C&M purchases cranes and parts from Terex. Additionally, The Company has a convertible note with a face amount of $7,500 payable to Terex. See Note 11 for additional details.
The Company is accounting for its 21.2% investment in ASV Holdings under the equity method of accounting. During a transition period ASV Holdings remains on the Company’s fully insured health insurance plan, 401(k) plan and a self-fund short term disability
36
plan. ASV Holdings reimburses the Company for the actual costs incurred. After the transition period which is expected to end on or before Dece
mber 31, 2017, the Company does not expect to have any continuing related party transactions with ASV Holdings.
As of September 30, 2017, and December 31, 2016, the Company had accounts receivable and accounts payable with related parties as shown below:
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Accounts Receivable
|
|
SL Industries, Ltd.
|
|
$
|
28
|
|
|
$
|
47
|
|
|
|
Lift Ventures
|
|
|
—
|
|
|
|
22
|
|
|
|
ASV Holdings
|
|
|
36
|
|
|
|
—
|
|
|
|
|
|
$
|
64
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
BGI USA, Inc.
|
|
$
|
1,293
|
|
|
|
7
|
|
|
|
SL Industries, Ltd.
|
|
|
233
|
|
|
|
471
|
|
|
|
Lift Ventures
|
|
|
—
|
|
|
|
749
|
|
|
|
Terex
|
|
|
108
|
|
|
|
940
|
|
|
|
|
|
$
|
1,634
|
|
|
$
|
2,167
|
|
The following is a summary of the amounts attributable to certain related party transactions as described in the footnotes to the table, for the periods indicated:
|
|
|
|
Three Months Ended
September 30, 2017
|
|
|
Three Months Ended
September 30, 2016
|
|
|
Nine Months Ended
September 30, 2017
|
|
|
Nine Months Ended
September 30, 2016
|
|
Rent paid
|
|
Bridgeview Facility (1)
|
|
$
|
67
|
|
|
$
|
65
|
|
|
$
|
197
|
|
|
$
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to:
|
|
SL Industries, Ltd.
|
|
$
|
8
|
|
|
$
|
11
|
|
|
$
|
8
|
|
|
$
|
13
|
|
|
|
Lift Ventures
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
14
|
|
Total Sales
|
|
|
|
$
|
8
|
|
|
$
|
12
|
|
|
$
|
8
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases from:
|
|
BGI USA, Inc.
|
|
$
|
836
|
|
|
$
|
—
|
|
|
$
|
1,690
|
|
|
$
|
—
|
|
|
|
Lift Ventures
|
|
|
—
|
|
|
|
613
|
|
|
|
618
|
|
|
|
1,374
|
|
|
|
SL Industries, Ltd.
|
|
|
169
|
|
|
|
188
|
|
|
|
307
|
|
|
|
195
|
|
|
|
LiftMaster
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
Terex
|
|
|
158
|
|
|
|
1,625
|
|
|
|
560
|
|
|
|
1,853
|
|
Total Purchases
|
|
|
|
$
|
1,163
|
|
|
$
|
2,426
|
|
|
$
|
3,175
|
|
|
$
|
3,423
|
|
1.
|
The Company leases its 40,000 sq. ft. Bridgeview facility from an entity controlled by Mr. David Langevin, the Company’s Chairman and CEO. Pursuant to the terms of the lease, the Company makes monthly lease payments of $22. The Company is also responsible for all the associated operations expenses, including insurance, property taxes, and repairs. The lease will expire on June 30, 2020 and has a provision for six one year extension periods. The lease contains a rental escalation clause under which annual rent is increased during the initial lease term by the lesser of the increase in the Consumer Price Increase or 2.0%. Rent for any extension period shall however, be the then-market rate for similar industrial buildings within the market area. The Company has the option, to purchase the building by giving the Landlord written notice at any time prior to the date that is 180 days prior to the expiration of the lease or any extension period. The Landlord can require the Company to purchase the building if a change of Control Event, as defined in the agreement occurs by giving written notice to the Company at any time prior to the date that is 180 days prior to the expiration of the lease or any extension period. The purchase price regardless whether the purchase is initiated by the Company or the landlord will be the Fair Market Value as of the closing date of said sale.
|
Notes Payable to Terex
As of September 30, 2017, the Company had a convertible note payable, net of debt issuance costs totaling $6,968 payable to Terex. As of December 31, 2016, the Company had a note payable related to the ASV Holdings acquisition totaling $1,594 and a convertible
37
note payable, net of debt issuance costs totaling $6,862 payable to Terex. See Note 12 for additional details regarding the above convertible
note.
On March 4, 2016, CVS and Terex Operations Italy S.R.L. (“TOI”) entered into an agreement whereby TOI acquired certain inventories and intellectual property related to CVS’ terminal tractor line. The transaction totaled €2,839 ($3,119) inclusive of VAT taxes and resulted in a gain of €1,987 ($2,212). This gain was included in other income on the Consolidated Statement of Operations when the March 31, 2016 10-Q was filed. During the fourth quarter of 2016, it was reclassed to discontinued operations.
18. Discontinued Operations
The Company completed the sale of Liftking, CVS and a partial interest in ASV Holdings on September 30, 2016, December 22, 2016 and May 17, 2017, respectively.
Sale of Partial Interest in ASV Holdings
On May 17, 2017, the Company and ASV Holdings completed the previously announced underwritten initial public offering (the “Offering”) of 3,800,000 shares of ASV Holding’s common stock, including 2,000,000 shares sold by the Company. The Company received proceeds net of commissions of $13,020 from the Offering. Additionally, the Company had legal and other expense associated with transaction of $128. In conjunction with the sale, the Company recognized a pre-tax loss of $1,133 and recognized a $23 tax benefit.
Following the sale of the above referenced shares, the Company had significant continuing involvement with ASV in the form of an equity investment (21.2% ownership in ASV). At the time of the above transaction, the Company’s plans were to hold the remaining shares it owns in ASV for an indefinite period. Although the Company had no plans to sell additional shares, the sale of additional shares in the future remained an option. If the Company were to sell more than 117,600 shares, the Company would cease to account for its investment in ASV as an equity investment.
Over the period from February 26 to 28, 2018, the Company sold an aggregate of 1,000,000 shares of ASV Holdings, Inc. in privately-negotiated transactions with institutional purchasers. All such shares were sold for $7.00 per share. Following such sale transactions, the Company owns an aggregate of 1,080,000 shares of ASV Holdings, Inc., which equates to the Company owning approximately 11.0% percent of ASV. After this transaction, the investment in ASV Holdings, Inc. will no longer be accounted for under the equity method.
38
The following is the detail of major classes of assets and liabilities of discontinued operations that were summarized on the Company’s Unaudited Consolidated
Balance Sheet as of December 31, 2016.
|
|
As of
|
|
|
|
December 31,
2016
|
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
Cash
|
|
$
|
573
|
|
Cash - restricted
|
|
|
535
|
|
Trade receivables (net)
|
|
|
13,603
|
|
Accounts receivable from related party
|
|
|
501
|
|
Inventory (net)
|
|
|
30,922
|
|
Prepaid expense and other
|
|
|
511
|
|
Total current assets of discontinued operations
|
|
|
46,645
|
|
Long-term assets
|
|
|
|
|
Total fixed assets (net)
|
|
|
15,402
|
|
Intangible assets (net)
|
|
|
25,824
|
|
Goodwill
|
|
|
30,579
|
|
Other long-term assets
|
|
|
372
|
|
Total long-term assets of discontinued operations
|
|
|
72,177
|
|
Total assets of discontinued operations
|
|
$
|
118,822
|
|
LIABILITIES
|
|
|
|
|
Current liabilities
|
|
|
|
|
Notes payable—short term
|
|
$
|
3,000
|
|
Accounts payable
|
|
|
11,976
|
|
Accounts payable related parties
|
|
|
2,275
|
|
Accrued expenses
|
|
|
6,380
|
|
Total current liabilities of discontinued operations
|
|
|
23,631
|
|
Long-term liabilities
|
|
|
|
|
Revolving term credit facilities
|
|
|
15,605
|
|
Notes payable (net)
|
|
|
26,267
|
|
Other long-term liabilities
|
|
|
773
|
|
Total long-term liabilities of discontinued operations
|
|
|
42,645
|
|
|
|
$
|
66,276
|
|
The following is the detail of major line items that constitute (loss) income from discontinued operations:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net revenues
|
|
$
|
—
|
|
|
$
|
37,825
|
|
|
$
|
38,357
|
|
|
$
|
130,860
|
|
Cost of sales
|
|
|
—
|
|
|
|
32,428
|
|
|
|
32,403
|
|
|
|
109,713
|
|
Research and development costs
|
|
|
—
|
|
|
|
604
|
|
|
|
694
|
|
|
|
1,979
|
|
Selling, general and administrative expenses
|
|
|
—
|
|
|
|
3,333
|
|
|
|
3,504
|
|
|
|
12,041
|
|
Interest expense
|
|
|
—
|
|
|
|
(1,148
|
)
|
|
|
(1,156
|
)
|
|
|
(4,614
|
)
|
Other (expense) income
|
|
|
—
|
|
|
|
(418
|
)
|
|
|
(40
|
)
|
|
|
32
|
|
(Loss) income from discontinued operations
before income taxes
|
|
|
—
|
|
|
|
(106
|
)
|
|
|
560
|
|
|
|
2,545
|
|
Loss on sale of discontinued operations before
income taxes
|
|
|
—
|
|
|
|
(9,502
|
)
|
|
|
(1,133
|
)
|
|
|
(7,290
|
)
|
Income tax (benefit) expense related to
discontinued operations
|
|
|
(15
|
)
|
|
|
4,145
|
|
|
|
(28
|
)
|
|
|
1,259
|
|
Net loss on discontinued operations
|
|
$
|
—
|
|
|
$
|
(13,753
|
)
|
|
$
|
(545
|
)
|
|
$
|
(6,004
|
)
|
39
19. Subsequent Events
The Tax Cuts and Jobs Acts
On December 22, 2017, the Tax Cuts and Jobs Acts was enacted into law. The new tax legislation represents a fundamental and dramatic shift in US taxation. The new legislation contains several key tax provisions that will impact the Company including the reduction of the corporate income tax
rate
to 21% effective January 1, 2018. The new legislation also includes a variety of other changes including a one-time repatriation tax on accumulated foreign earnings that were previously tax deferred, a limitation on the tax deductibility of interest expense, acceleration of business asset expensing, etc. The lower corporate income tax rate will require us to remeasure our US deferred tax assets, valuation allowance and deferred tax liabilities. ASC 740 requires us to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff issued SAB 118 which will allow us record provisional amounts during a measurement period which is similar to the measurement period used when accounting for business combinations. We will continue to assess the impact of the recently enacted tax law on our business, deferred tax amounts and consolidated financial statements, and will reflect the provisional impact of the tax law change in the fourth quarter of 2017.
The Company’s total unrecognized tax benefits as of September 30, 2017 and December 31, 2016 were approximately $741 and $741, which, if recognized, would affect the Company’s effective tax rate. Included in the unrecognized tax benefits is a liability for the PM Group’s potential IRES and IRAP audit adjustments for the tax years 2009-2013. As of December 31, 2017, the Italy IRES and IRAP audit is closed through 2012. The settlement with the taxing authorities is expected to reduce unrecognized tax benefits by approximately $456. The impact of the settlement on the Company’s effective tax rate is expected to be minimal. Depending on the final resolution of the PM Group’s audits, the ultimate tax liability could be higher or lower than the unrecognized tax benefits provided for in the consolidated financial statements.
SEC Inquiry
In December of 2017, the Company has received an informal inquiry from the SEC requesting certain information in connection with the Company’s previously announced restatement of prior financial statements, and is complying with such request.
Non-Compliance Letter from NASDAQ
On November 13, 2017, the Company received a letter notice from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) stating that because the Company had not yet filed its Quarterly Report on Form 10-Q for the period ended September 30, 2017, the Company was no longer in compliance with Nasdaq Listing Rule 5250(c)(1) for continued listing. Nasdaq Listing Rule 5250(c)(1) requires listed companies to timely file all required period financial reports with the SEC. The 119 Notice has no immediate effect on the listing or trading of the Company’s common stock on the Nasdaq Capital Market. The Company is working to regain compliance with the Nasdaq listing rules as expeditiously as possible.
Sale of Additional ASV Shares
Over the period from February 26 to 28, 2018, the Company sold an aggregate of 1,000,000 shares of ASV Holdings, Inc. in privately-negotiated transactions with institutional purchasers. All such shares were sold for $7.00 per share. Following such sale transactions, the Company owns an aggregate of 1,080,000 shares of ASV Holdings, Inc., which equates to the Company owning approximately 11.0% percent of ASV. After this transaction, the investment in ASV Holdings, Inc. will no longer be accounted for under the equity method.
PM Debt Restructuring
On March 6, 2018, PM Group and Oil & Steel S.p.A. (PM Group’s subsidiary) entered into a Debt Restructuring Agreement (the “Restructuring Agreement”) with Banca Monte dei Paschi di Siena S.p.A., Banca Nazionale del Lavoro S.p.A., BPER Banca S.p.A., Cassa di Risparmio in Bologna S.p.A. and Unicredit S.p.A. (collectively the “Lenders”), and Loan Agency Services S.r.l. (the “Agent”). The Restructuring Agreement, which replaces the previous debt restructuring agreement with the Lenders entered into in 2014, provides for, among other things:
|
•
|
|
The provision of subordinated shareholders’ loans by the Company to PM Group, consisting of (i) conversion of an existing trade receivable in the amount of €3.1 million into a loan; (ii) an additional subordinated shareholders’ loan in the aggregate maximum amount of up to €2.4 million, to be made currently; and (iii) a further loan of €1.8 million to be made by December 31, 2018, in each case to be used to repay a portion of PM Group’s outstanding obligations to the Lenders;
|
40
|
•
|
|
Amendments to the 2014 put and call options agreement with BPER to, among other things, extend the exercise of the
options until the approval of PM Group’s financial statements for the 2021 fiscal year and permit the assignment of certain subordinated rece
ivables to the Company; and
|
|
•
|
|
New amortization and repayment schedules for amounts owed by PM Group to the Lenders under the various outstanding tranches of indebtedness, along with revised interest rates and financial covenants. Under the Restructuring agreement term debt is repaid over a nine-year period starting in 2018 and ending in 2026 (2022 prior to Debt Restructuring Agreement).
|
|
•
|
|
The effect of PM not meeting its December 31, 2017 financial covenants was cured by the Debt Restructuring Agreement
|
Bank Amendment No. 6
As previously disclosed, on July 20, 2016, the Company and certain of its subsidiaries entered into a Loan and Security Agreement (as amended, the “Loan Agreement”) with The Private Bank and Trust Company, now known as CIBC Bank USA (“CIBC”). The Loan Agreement provides the Company with a revolving credit facility, which has a maturity date of July 20, 2019. The Loan Agreement was subsequently amended by a First Amendment dated as of August 2, 2016, a Second Amendment dated as of September 30, 2016, a Third Amendment dated as of November 8, 2016, a Fourth Amendment dated February 10, 2017 and a Fifth Amendment dated April 26, 2017. On March 9, 2018, the parties to the Loan Agreement entered into a sixth amendment to the Loan Agreement (the “Sixth Amendment”). The main modifications to the Loan Agreement resulting from the Sixth Amendment are as follows:
|
•
|
|
a consent to the intercompany loan in the amount of $1,500,000 made to PM Group, in December 2017;
|
|
•
|
|
a waiver of certain Defaults or Events of Default that may have been caused by the Company’s financial restatement;
|
|
•
|
|
amendments to the definitions of “EBITDA” and “Fixed Charges” to account for certain impacts arising from the financial restatement;
|
|
•
|
|
a consent to the sale by the Company of up to all of its equity interests in ASV, provided that the proceeds are used to repay outstanding revolving loans under the Loan Agreement;
|
|
•
|
|
a consent to an additional equity investment in, or intercompany loan to, PM Group from the Company, using all or a portion of the remaining proceeds from the sale of the Company’s equity interests in ASV; and
|
|
•
|
|
additional limitations on investments by the Company in foreign subsidiaries, other than the transactions with PM Group described above.
|
Promissory Note Waivers
Pursuant to a
Common Stock and Convertible Debenture Purchase Agreement by and between the Company and Terex Corporation (“Terex”), dated as of October 29, 2014, the Company previously issued a
Convertible Subordinated Promissory Note dated December 19, 2014 to Terex, which note remains outstanding as of the date hereof. In addition, the Company, MI Convert Holdings LLC and Invemed Associates LLC (together, the “Holders”) are parties to both a Note Purchase Agreement and a Registration Rights Agreement, each dated as of January 7, 2015, pursuant to which the Holders purchased certain notes from the Company. Each of the foregoing agreements included obligations on the part of the Company to timely file with the SEC its reports that are required to be filed pursuant to the Exchange Act. The Company has obtained waivers from each of Terex and the Holders with respect to any breaches, defaults or events of default that may have been or may be triggered in connection with (i) the Company’s failure to timely file its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, or its Annual Report on Form 10-K for the year ended December 31, 2017, and (ii) the amendment by the Company of its previously-filed Annual Report on Form 10-K for the year ended December 31, 2016, Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 and Quarterly Report on Form 10-Q for the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017.
41