MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
1. Nature of Operations and Basis of Presentation
The unaudited Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021 and the related Condensed Consolidated Statements of Operations, Condensed Consolidated Statement of Comprehensive Income (Loss), Condensed Consolidated Statements of Shareholders’ Equity, and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations and cash flows of the Company for the interim periods. Interim results may not be indicative of results to be realized for the entire year. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The Condensed Consolidated Balance Sheet as of December 31, 2021 was derived from our audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”).
The Company is a leading provider of engineered lifting solutions. The Company reports in a single business segment and has four operating segments, under which there are five reporting units. The Company designs, manufactures and distributes a diverse group of products that serve different functions and are used in a variety of industries.
Manitex markets a comprehensive line of boom trucks, truck cranes and sign cranes. Manitex’s boom trucks and crane products are primarily used for industrial projects, energy exploration and infrastructure development, including roads, bridges and commercial construction.
Badger is a manufacturer of specialized rough terrain cranes and material handling products.
PM and Oil and Steel S.p.A. (“PM” or “PM Group”) is a leading Italian manufacturer of truck- mounted hydraulic knuckle boom cranes with a 50-year history of technology and innovation, and a product range spanning more than 50 models. PM is also a manufacturer of truck-mounted aerial platforms with a diverse product line and an international client base. Through its consolidated subsidiaries, PM Group has locations in Modena, Italy; Valencia, Spain; Arad, Romania; Chassieu, France; Buenos Aires, Argentina; Santiago, Chile; Singapore and Querétaro, Mexico.
Manitex Valla S.r.L. (“Valla”) produces a full range of precision pick and carry industrial cranes using electric, diesel, and hybrid power options. Its cranes offer wheeled or tracked, and fixed or swing boom configurations, with special applications designed specifically to meet the needs of its customers. These products are sold internationally through dealers and into the rental distribution channel.
Crane and Machinery, Inc. (“C&M”) is a distributor of the Company’s products. Crane and Machinery Leasing, Inc. rents equipment manufactured by the Company as well as a limited amount of equipment manufactured by third parties.
COVID-19 Pandemic
We are continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it is impacting our customers, employees, supply chain, and distribution network, as well as the demand for our products in the industries and markets that we serve. Our first priority is the health and safety of our employees, customers, and business partners and we believe that we have taken the necessary steps to keep our facilities clean and safe during the COVID-19 pandemic. While COVID-19 has had a material impact on our past financial results, we are unable to predict the ultimate impact that it may have on our business, future results of operations, financial position or cash flows. The extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the ultimate severity and duration of the outbreak (including the spread and impact of new COVID-19 variants) and actions by government authorities to contain the outbreak or treat its impact. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown.
The Company is continuing to experience supply chain disruptions and related logistical bottlenecks that have impacted our ability to meet strong industrial demand and have also, increased costs related to shipping, warehousing, and working capital management. While the Company is actively working to mitigate these expenses and the associated timing issues, certain segments – such as truck chassis – have been more impacted than others. Where appropriate and feasible, we have implemented pricing adjustments to protect
9
margins and, in tandem, continue to build inventory to meet our customer requirements. In addition, the Company is actively managing costs and working to further streamline operations where needed. Furthermore, the Company has modified its business practices to manage expenses (including practices regarding employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences). We continue to take steps intended to minimize the negative impact of the COVID-19 pandemic on our business and to protect the safety of our employees and customers, but we cannot predict the duration or severity of the ongoing COVID-19 pandemic or reasonably estimate the financial impact that it will have on our results and significant estimates going forward.
Supplemental Cash Flow Information
Transactions for the periods ended March 31, 2022 and 2021 are as follows:
|
|
Three months ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Interest received in cash |
|
$ |
2 |
|
|
$ |
4 |
|
Interest paid in cash |
|
|
464 |
|
|
|
553 |
|
Income tax payments in cash |
|
|
28 |
|
|
|
18 |
|
2. Significant Accounting Policies and New Accounting Pronouncements
The summary of the Company’s significant accounting policies is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all short-term securities purchased with maturity dates of three months or less to be cash equivalents. The cash in the Company’s U.S. banks is not fully insured by the FDIC due to the statutory limit of $250.
Restricted Cash
Certain of the Company’s lending arrangements require the Company to post collateral or maintain minimum cash balances in escrow. These cash amounts are reported as current assets on the balance sheets based on when the cash will be contractually released. Total restricted cash was $221 and $222 at March 31, 2022 and December 31, 2021, respectively.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at invoiced amount and do not bear interest. Allowance for doubtful accounts is the Company’s estimate of current expected credit losses on its existing accounts receivable and determined based on historical customer assessments and current financial conditions. Account balances are charged off against the allowance when the Company determines the receivable will not be recovered. There can be no assurance that the Company’s estimate of accounts receivable collection will be indicative of future results. The Company established an allowance for bad debt of $2,408 and $2,432 at March 31, 2022 and December 31, 2021. The Company also has, in some instances, a security interest in its accounts receivable until payment is received.
Property, Equipment and Depreciation
Property and equipment are stated at cost or the fair market value at the date of acquisition for property and equipment acquired in connection with the acquisition of a company. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation of property, and equipment is calculated using the straight-line method over the estimated useful lives of the assets. Depreciation expense for the three months ended March 31, 2022 and 2021 was $462 and $551, respectively.
10
Accrued Warranties
Warranty costs are accrued at the time revenue is recognized. The Company’s products are typically sold with a warranty covering defects that arise during a fixed period of time. The specific warranty offered is a function of customer expectations and competitive forces.
A liability for estimated warranty claims is accrued at the time of sale. The liability is established using historical warranty claim experience. The current provision may be adjusted to take into account unusual or non-recurring events in the past or anticipated changes in future warranty claims. Adjustments to the initial warranty accrual are recorded if actual claim experience indicates that adjustments are necessary.
As of March 31, 2022 and December 31, 2021, accrued warranties were $1,725 and $1,578, respectively.
Advertising
Advertising costs are expensed as incurred and were $110 and $128 for the three months ended March 31, 2022 and 2021, respectively
Adoption of Highly Inflationary Accounting in Argentina
GAAP guidance requires the use of highly inflationary accounting for countries whose cumulative three-year inflation exceeds 100 percent. Under highly inflationary accounting, PM Argentina’s functional currency became the Euro (its parent company’s reporting currency), and its income statement and balance sheet have been measured in Euros using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings in other (income) and expense, net and was not material. As of March 31, 2022, PM Argentina had an insignificant net peso monetary position. Net sales of PM Argentina were less than 5% of our consolidated net sales for the three months ended March 31, 2022 and year ended December 31, 2021.
3. Revenue Recognition
The following table disaggregates our revenue for the three months ended March 31, 2022 and 2021:
|
|
Three Months Ended
March 31, |
|
|
|
2022 |
|
|
2021 |
|
Equipment sales |
|
$ |
52,631 |
|
|
$ |
39,159 |
|
Part sales |
|
|
6,772 |
|
|
|
6,560 |
|
Services |
|
|
1,017 |
|
|
|
1,449 |
|
Total Revenue |
|
$ |
60,420 |
|
|
$ |
47,168 |
|
The Company attributes revenue to different geographic areas based on where items are shipped to or services are performed. The following table provides detail of revenues by geographic area for the three months ended March 31, 2022 and 2021:
|
|
Three Months Ended
March 31, |
|
|
|
2022 |
|
|
2021 |
|
United States |
|
$ |
30,884 |
|
|
$ |
19,004 |
|
Italy |
|
|
6,673 |
|
|
|
5,147 |
|
Canada |
|
|
4,088 |
|
|
|
2,875 |
|
France |
|
|
3,677 |
|
|
|
3,766 |
|
Chile |
|
|
2,452 |
|
|
|
3,220 |
|
Other |
|
|
12,646 |
|
|
|
13,156 |
|
Total Revenue |
|
$ |
60,420 |
|
|
$ |
47,168 |
|
11
Total Company Revenues by Sources
The sources of the Company’s revenues are summarized below for the three months ended March 31, 2022 and 2021:
|
|
Three Months Ended
March 31, |
|
|
|
2022 |
|
|
2021 |
|
Boom trucks, knuckle boom & truck cranes |
|
$ |
37,631 |
|
|
$ |
27,161 |
|
Aerial platforms |
|
|
8,325 |
|
|
|
6,575 |
|
Part sales |
|
|
6,772 |
|
|
|
6,560 |
|
Services |
|
|
1,017 |
|
|
|
1,449 |
|
Rough terrain cranes |
|
|
162 |
|
|
|
140 |
|
Other equipment and rentals |
|
|
6,513 |
|
|
|
5,283 |
|
Total Revenue |
|
$ |
60,420 |
|
|
$ |
47,168 |
|
Customer Deposits
At times, the Company may require an upfront deposit related to its contracts. In instances where an upfront deposit has been received by the Company and the revenue recognition criteria have not yet been met, the Company records a contract liability in the form of a customer deposit, which is classified as a short-term liability on the Condensed Consolidated Balance Sheets. That customer deposit is revenue that is deferred until the revenue recognition criteria have been met, at which time, the customer deposit is recognized into revenue.
The following table summarizes changes in customer deposits for the three months ended March 31 as follows:
|
|
March 31,
2022 |
|
|
March 31,
2021 |
|
Customer deposits |
|
$ |
7,121 |
|
|
$ |
2,363 |
|
Additional customer deposits received where revenue has not yet been recognized |
|
|
2,078 |
|
|
|
1,359 |
|
Revenue recognized from customer deposits |
|
|
(4,444 |
) |
|
|
(1,874 |
) |
Effect of change in exchange rates |
|
|
(78 |
) |
|
|
(77 |
) |
Total customer deposits |
|
$ |
4,677 |
|
|
$ |
1,771 |
|
4. Fair Value Measurements
The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 by level within the fair value hierarchy. As required by ASC 820-10, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The following is summary of items that the Company measures at fair value on a recurring basis:
|
|
Fair Value at March 31, 2022 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency exchange contracts |
|
$ |
— |
|
|
$ |
136 |
|
|
$ |
— |
|
|
$ |
136 |
|
Total recurring liabilities at fair value |
|
$ |
— |
|
|
$ |
136 |
|
|
$ |
— |
|
|
$ |
136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at December 31, 2021 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency exchange contracts |
|
$ |
— |
|
|
$ |
75 |
|
|
$ |
— |
|
|
$ |
75 |
|
Total current assets at fair value |
|
$ |
— |
|
|
$ |
75 |
|
|
$ |
— |
|
|
$ |
75 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valla contingent consideration |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
207 |
|
|
$ |
207 |
|
Total liabilities at fair value |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
207 |
|
|
$ |
207 |
|
12
|
|
Fair Value
Measurements
Using
Significant
Unobservable
Inputs
(Level 3) |
|
|
|
|
Valla
Contingent
Consideration |
|
|
Liabilities: |
|
|
|
|
|
Balance at January 1, 2022 |
|
$ |
207 |
|
|
Change in contingent liability consideration |
|
|
(202 |
) |
|
Effect of changes in exchange rates |
|
|
(5 |
) |
|
Balance at March 31, 2022 |
|
$ |
— |
|
|
Fair Value Measurements
ASC 820-10 classifies the inputs used to measure fair value into the following hierarchy:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
Fair value of the forward currency contracts is determined on the last day of each reporting period using observable inputs, which are supplied to the Company by the foreign currency trading operation of its bank and are Level 2 items.
5. Derivative Financial Instruments
The Company’s risk management objective is to use the most efficient and effective methods available to us to minimize, eliminate, reduce or transfer the risks which are associated with fluctuation of exchange rates between the Euro, Chilean peso and the U.S. dollar.
Forward Currency Contracts
The Company enters into forward currency exchange contracts such that the exchange gains and losses on the assets and liabilities denominated in other than the reporting units’ functional currency would be offset by the changes in the market value of the forward currency exchange contracts it holds. The forward currency exchange contracts that the Company has to offset existing assets and liabilities denominated in other than the reporting units’ functional currency have been determined not to be considered a hedge under ASC 815-10. The Company records the forward currency exchange contracts at its market value with any associated gain or loss being recorded in current earnings. Both realized and unrealized gains and losses related to forward currency contracts are included in current earnings and are reflected in the Condensed Consolidated Statements of Operations in the other income (expense) section on the line titled foreign currency transaction loss. Items denominated in other than a reporting unit functional currency include certain intercompany receivables due from the Company’s Italian subsidiaries and accounts receivable and accounts payable of our Italian subsidiaries and their subsidiaries.
PM Group has an intercompany receivable denominated in Euros from its Chilean subsidiary. At March 31, 2022, the Company had entered into a forward currency exchange contract that matures on April 29, 2022. Under the contract the Company is obligated to sell 2,200,000 Chilean pesos for 2,392 Euros. The purpose of the forward contract is to mitigate the income effect related to this intercompany receivable that results with a change in exchange rate between the Euro and the Chilean peso.
The following table provides the location and fair value amounts of derivative instruments that are reported in the Condensed Consolidated Balance Sheet as of March 31, 2022:
13
Total derivatives NOT designated as a hedge instrument
|
|
|
|
Fair Value |
|
|
|
Balance Sheet Location |
|
March 31,
2022 |
|
|
December 31,
2021 |
|
Asset Derivatives |
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contract |
|
Prepaid expense and other current assets |
|
$ |
— |
|
|
$ |
75 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities Derivatives |
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contract |
|
Accrued expenses |
|
$ |
136 |
|
|
$ |
— |
|
The following tables provide the effect of derivative instruments on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021:
|
|
|
|
Gain (loss) |
|
|
|
Location of gain or
(loss) recognized
in Statement of Operations |
|
Three Months Ended
March 31, |
|
|
|
|
|
2022 |
|
|
2021 |
|
Derivatives Not Designated
as Hedge Instruments |
|
|
|
|
|
|
|
|
|
|
Forward currency contracts |
|
Foreign currency
transaction gains (losses) |
|
$ |
(356 |
) |
|
$ |
(91 |
) |
|
|
|
|
$ |
(356 |
) |
|
$ |
(91 |
) |
During the three months ended March 31, 2022 and 2021, there were no forward currency contracts designated as cash flow hedges. As such, all gains and loss related to forward currency contracts during the three months ended March 31, 2022 and 2021 were recorded in current earnings and did not impact other comprehensive income.
6. Inventory, net
The components of inventory are as follows:
|
|
March 31,
2022 |
|
|
December 31,
2021 |
|
Raw materials and purchased parts, net |
|
$ |
48,021 |
|
|
$ |
42,983 |
|
Work in process, net |
|
|
5,961 |
|
|
|
3,938 |
|
Finished goods, net |
|
|
14,529 |
|
|
|
18,044 |
|
Inventory, net |
|
$ |
68,511 |
|
|
$ |
64,965 |
|
The Company has established reserves for obsolete and excess inventory of $9,414 and $9,884 as of March 31, 2022 and December 31, 2021, respectively.
7. Goodwill and Intangible Assets
Intangible assets and accumulated amortization by category as of March 31, 2022 is as follows:
|
|
Weighted Average |
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Amortization |
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
Period (in years) |
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Patented and unpatented technology |
|
3 |
|
$ |
16,702 |
|
|
$ |
(14,004 |
) |
|
$ |
2,698 |
|
Customer relationships |
|
3 |
|
|
17,868 |
|
|
|
(13,262 |
) |
|
|
4,606 |
|
Trade names and trademarks |
|
9 |
|
|
4,269 |
|
|
|
(2,638 |
) |
|
|
1,631 |
|
Software |
|
5 |
|
|
224 |
|
|
|
(19 |
) |
|
|
205 |
|
Indefinite lived trade names |
|
|
|
|
2,017 |
|
|
|
|
|
|
|
2,017 |
|
Total intangible assets, net |
|
|
|
|
|
|
|
|
|
|
|
$ |
11,157 |
|
14
Intangible assets and accumulated amortization by category as of December 31, 2021 is as follows:
|
|
Weighted Average |
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Amortization |
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
Period (in years) |
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Patented and unpatented technology |
|
3 |
|
$ |
16,848 |
|
|
$ |
(13,845 |
) |
|
$ |
3,003 |
|
Customer relationships |
|
3 |
|
|
18,077 |
|
|
|
(13,017 |
) |
|
|
5,060 |
|
Trade names and trademarks |
|
10 |
|
|
4,269 |
|
|
|
(2,595 |
) |
|
|
1,674 |
|
Software |
|
5 |
|
|
160 |
|
|
|
(8 |
) |
|
|
152 |
|
Indefinite lived trade names |
|
|
|
|
2,057 |
|
|
|
|
|
|
|
2,057 |
|
Total intangible assets, net |
|
|
|
|
|
|
|
|
|
|
|
$ |
11,946 |
|
Amortization expense for intangible assets was $683 and $579 for the three months ended March 31, 2022 and 2021, respectively.
Estimated amortization expense for the next five years for the period ending March 31 and subsequent is as follows:
|
|
Amount |
|
2023 |
|
$ |
2,701 |
|
2024 |
|
|
2,701 |
|
2025 |
|
|
2,193 |
|
2026 |
|
|
509 |
|
2027 |
|
|
272 |
|
And subsequent |
|
|
764 |
|
Total intangibles currently to be amortized |
|
|
9,140 |
|
Intangibles with indefinite lives not amortized |
|
|
2,017 |
|
Total intangible assets |
|
$ |
11,157 |
|
Changes in goodwill for the three months ended March 31 are as follows:
|
|
2022 |
|
|
2021 |
|
Balance January 1, |
|
$ |
24,949 |
|
|
$ |
27,472 |
|
Effect of change in exchange rates |
|
|
(320 |
) |
|
|
(743 |
) |
Balance March 31, |
|
$ |
24,629 |
|
|
$ |
26,729 |
|
The Company performed an impairment assessment as of December 31, 2021. No additional triggers for an interim impairment test have been identified. While there was $1.1 million of goodwill impairment recognized as a result of the 2021 annual impairment test to fully impair the Valla business unit, a reasonably possible unexpected deterioration in financial performance or adverse change in earnings may result in a further impairment in the other business units.
8. Accrued Expenses
|
|
March 31,
2022 |
|
|
December 31,
2021 |
|
Accrued payroll and benefits |
|
$ |
3,724 |
|
|
$ |
3,524 |
|
Accrued vacation |
|
|
1,730 |
|
|
|
1,701 |
|
Accrued warranty |
|
|
1,725 |
|
|
|
1,578 |
|
Accrued income tax and other taxes |
|
|
1,245 |
|
|
|
2,473 |
|
Accrued professional fees |
|
|
1,027 |
|
|
|
524 |
|
Accrued expenses—other |
|
|
915 |
|
|
|
739 |
|
Total accrued expenses |
|
$ |
10,366 |
|
|
$ |
10,539 |
|
15
9. Accrued Warranty
A liability for estimated warranty claims is accrued at the time of sale and the expense is recorded in the Condensed Consolidated Statement of Operations in Cost of Sales. The liability is established using historical warranty claim experience. The current provision may be adjusted to take into account unusual or non-recurring events in the past or anticipated changes in future warranty claims. Adjustments to the warranty accrual are recorded if actual claim experience indicates that adjustments are necessary. Warranty reserves are reviewed to ensure critical assumptions are updated for known events that may impact the potential warranty liability.
The following table summarizes the changes in product warranty liability:
|
|
For the three months ended |
|
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
Balance January 1, |
|
$ |
1,578 |
|
|
$ |
1,292 |
|
Provision for warranties issued during the year |
|
|
660 |
|
|
|
886 |
|
Warranty services provided |
|
|
(503 |
) |
|
|
(917 |
) |
Foreign currency translation |
|
|
(10 |
) |
|
|
(20 |
) |
Balance March 31, |
|
$ |
1,725 |
|
|
$ |
1,241 |
|
10. Credit Facilities and Debt
Debt is summarized as follows:
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
U.S. Credit Facilities |
|
$ |
12,800 |
|
|
$ |
12,800 |
|
Italy Short-Term Working Capital Borrowings |
|
|
17,507 |
|
|
|
15,676 |
|
Italy Group Term Loan |
|
|
12,224 |
|
|
|
12,472 |
|
Other |
|
|
595 |
|
|
|
342 |
|
Total debt |
|
|
43,126 |
|
|
|
41,290 |
|
Less: Debt issuance costs |
|
|
(70 |
) |
|
|
(83 |
) |
Debt net of issuance costs |
|
$ |
43,056 |
|
|
$ |
41,207 |
|
U.S. Credit Facilities
At March 31, 2022, the Company and its U.S. subsidiaries were parties to a Loan and Security Agreement, as amended (the “Loan Agreement”) with CIBC Bank USA (“CIBC”). The Loan Agreement provided a revolving credit facility with a maturity date of July 20, 2023 in an aggregate amount of $30 million. At March 31, 2022, the Company had $12.8 million in borrowings (less $0.1 million in debt issuance cost for a net debt of $12.7 million). At December 31, 2021, the Company had $12.8 million in borrowings (less $0.1 million in debt issuance cost for a net debt of $12.7 million). The indebtedness under the Loan Agreement was collateralized by substantially all of the Company’s assets, except for certain assets of the Company’s subsidiaries. On April 11, 2022, the Company repaid in full all outstanding indebtedness and other amounts outstanding under the Loan Agreement, and terminated all related commitments and obligations. See Note 18 – Subsequent Events.
The Loan Agreement has a Letter of Credit facility of $3 million. As of March 31, 2022, there was no outstanding Letters of Credit which offset availability under the revolving facility.
PM Group Short-Term Working Capital Borrowings
At March 31, 2022 and December 31, 2021, respectively, PM Group had established demand credit and overdraft facilities with five banks in Italy, one bank in Spain and twelve banks in South America. Under the facilities, as of March 31, 2022 and December 31, 2021 respectively, PM Group can borrow up to $20,964 and $21,449 for advances against invoices, letter of credit and bank overdrafts. These facilities are divided into two types: working capital facilities and cash facilities. For the year ended March 31, 2022 and December 31, 2021, respectively, interest on the Italian working capital facilities is charged at the 3-month Euribor plus 175, 200, or 270 basis points and 3-month Euribor plus 450 basis points, respectively. Interest on the South American facilities is charged at a flat rate of points for advances on invoices ranging from 8% - 55%. During June 2021, the loan agreement was renewed removing the existing expiration date.
16
At March 31, 2022, the Italian banks had advanced PM Group $17,014. There were no advances to PM Group from the Spanish bank, and the South American banks had advanced PM Group $174. At December 31, 2021, the Italian banks had advanced PM Group $14,874. There were no advances to PM Group from the Spanish bank, and the South American banks had advanced PM Group $463.
Valla Short-Term Working Capital Borrowings
At March 31, 2022 and December 31, 2021, respectively, Valla had established demand credit and overdraft facilities with two Italian banks. Under the facilities, Valla can borrow up to $621 for advances against orders, invoices and bank overdrafts. Interest on the Italian working capital facilities is charged at a flat percentage rate for advances on invoices and orders ranging from 1.67% - 5.75% for both 2022 and 2021. At March 31, 2022 and December 31, 2021, the Italian banks had advanced Valla $319 and $339.
PM Group Term Loans
At March 31, 2022 and December 31, 2021, respectively, PM Group has a $5,812 and $5,930 term loan that is split into a note and a balloon payment and is secured by PM Group’s common stock. The term loan is charged interest at a fixed rate of 3.5% and has annual principal payments of approximately $600 per year and a balloon payment of $3,330 in 2026.
At March 31, 2022 and December 31, 2021, respectively, PM Group has unsecured borrowings totaling $6,412 and $6,542, respectively. The borrowings have a fixed rate of interest of 3.5%.
Annual payments of $1,603 are payable ending in 2025.
11. Leases
The Company leases certain warehouses, office space, machinery, vehicles, and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The Company is not aware of any variable lease payments, residual value guarantees, covenants or restrictions imposed by the leases. Most leases include one or more options to renew, with renewal terms that can extend the lease term. The exercise of lease renewal options is at our sole discretion. The depreciable life of assets is limited by the expected lease term for finance leases.
If there was a rate explicit in the lease, this was the discount rate used. For those leases with no explicit or implicit interest rate, an incremental borrowing rate was used. The weighted average remaining useful life for operating and finance leases was 4 and 6 years, respectively. The weighted average discount rate for operating and finance leases was 5.0% and 12.5% respectively.
Leases |
|
Classification |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
Operating lease assets |
|
Operating lease assets |
|
$ |
3,524 |
|
|
$ |
3,563 |
|
Financing lease assets |
|
Fixed assets, net |
|
|
2,309 |
|
|
|
2,303 |
|
Total leased assets |
|
|
|
$ |
5,833 |
|
|
$ |
5,866 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
Operating |
|
Current liabilities |
|
$ |
1,112 |
|
|
$ |
1,064 |
|
Financing |
|
Current liabilities |
|
|
450 |
|
|
|
399 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current |
|
|
|
|
|
|
|
|
|
|
Operating |
|
Non-current liabilities |
|
|
2,412 |
|
|
|
2,499 |
|
Financing |
|
Non-current liabilities |
|
|
3,775 |
|
|
|
3,822 |
|
Total lease liabilities |
|
|
|
$ |
7,749 |
|
|
$ |
7,784 |
|
17
|
|
|
|
Three months ended March 31, |
|
Lease Cost |
|
Classification |
|
2022 |
|
|
2021 |
|
Operating lease costs |
|
Operating lease assets |
|
$ |
296 |
|
|
$ |
304 |
|
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
Amortization of
leased assets |
|
Amortization |
|
|
91 |
|
|
|
91 |
|
Interest on lease liabilities |
|
Interest expense |
|
|
131 |
|
|
|
141 |
|
Lease cost |
|
|
|
$ |
518 |
|
|
$ |
536 |
|
|
|
Three months ended March 31, |
|
|
Other Information |
|
2022 |
|
|
2021 |
|
|
Cash paid for amounts included in the
measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
Operating cash flows from operating
leases |
|
$ |
296 |
|
|
$ |
332 |
|
|
Operating cash flows from finance
leases |
|
$ |
131 |
|
|
$ |
76 |
|
|
Financing cash flows from finance
leases |
|
$ |
93 |
|
|
$ |
141 |
|
|
Future principal minimum lease payments period ending March 31 are:
|
|
Operating Leases |
|
|
Capital Leases |
|
2023 |
|
$ |
1,234 |
|
|
$ |
943 |
|
2024 |
|
|
943 |
|
|
|
970 |
|
2025 |
|
|
647 |
|
|
|
998 |
|
2026 |
|
|
406 |
|
|
|
996 |
|
2027 |
|
|
255 |
|
|
|
1,026 |
|
And subsequent |
|
|
195 |
|
|
|
1,145 |
|
Total undiscounted lease payments |
|
|
3,680 |
|
|
|
6,078 |
|
Less interest |
|
|
(156 |
) |
|
|
(1,853 |
) |
Total liabilities |
|
$ |
3,524 |
|
|
$ |
4,225 |
|
Less current maturities |
|
|
(1,112 |
) |
|
|
(450 |
) |
Non-current lease liabilities |
|
$ |
2,412 |
|
|
$ |
3,775 |
|
12. Income Taxes
For the three months ended March 31, 2022, the Company recorded an income tax provision of $132, which includes a discrete income tax expense of $19. The calculation of the overall income tax provision for the three months ended March 31, 2022 primarily consists of foreign income taxes and a discrete income tax expense primarily for the accrual of interest related to unrecognized tax benefits. For the three months ended March 31, 2021, the Company recorded an income tax provision of $292, which includes a discrete income tax benefit of $45. The calculation of the overall income tax provision for the three months ended March 31, 2021 primarily consists of foreign income taxes and a discrete income tax benefit related to the expiration of the statute of limitations for various state and foreign jurisdictions partially offset by an accrual of interest related to unrecognized tax benefits.
The effective tax rate for the three months ended March 31, 2022 was an income tax provision of 36.5% on pretax income of $362 compared to an income tax provision of 60.9% on a pretax loss of $480 in the comparable prior period. The effective tax rate for the three months ended March 31, 2022 differs from the U.S. statutory rate of 21% primarily due to a valuation allowance in the U.S. and a partial valuation allowance in Italy, nondeductible foreign permanent differences, income taxed in foreign jurisdictions at varying tax rates, and an accrual of interest related to unrecognized tax benefits.
The Company’s total unrecognized tax benefits as of March 31, 2022 and 2021 were approximately $3.0 million and $3.5 million, respectively. Included in the unrecognized tax benefits is a liability for the disputed Romania income tax audit assessment for tax years 2012-2016. Depending on the final resolution of the audit, the uncertain tax position liability could be higher or lower than the amount recorded at March 31, 2022.
18
13. Net Earnings (Loss) per Common Share
Basic net earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Details of the calculations are as follows:
|
|
Three Months Ended
March 31, |
|
|
|
2022 |
|
|
2021 |
|
Net income (loss) |
|
$ |
230 |
|
|
$ |
(772 |
) |
|
|
|
|
|
|
|
|
|
Income (loss) per share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.01 |
|
|
$ |
(0.04 |
) |
Diluted |
|
$ |
0.01 |
|
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
19,961,785 |
|
|
|
19,845,064 |
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
Basic |
|
|
19,961,785 |
|
|
|
19,845,064 |
|
Dilutive effect of restricted stock units and stock options |
|
|
52,395 |
|
|
|
— |
|
Basic and Dilutive |
|
|
20,014,180 |
|
|
|
19,845,064 |
|
|
|
As of March 31, |
|
|
|
2022 |
|
|
2021 |
|
Unvested restricted stock units |
|
|
178,505 |
|
|
|
285,658 |
|
Options to purchase common stock |
|
|
97,437 |
|
|
|
97,437 |
|
|
|
|
275,942 |
|
|
|
383,095 |
|
14. Equity
Stock Issued to Employees and Directors
The Company issued shares of common stock to employees and Directors as restricted stock units issued under the Company’s 2004 and 2019 Incentive Plan vested. Upon issuance entries were recorded to increase common stock and decrease paid in capital for the amounts shown below. The following is a summary of stock issuances that occurred during the period:
Date of Issue |
|
Employees or
Director |
|
Shares Issued |
|
|
Value of
Shares Issued |
|
January 1, 2022 |
|
Employee |
|
|
3,300 |
|
|
$ |
6.36 |
|
March 6, 2022 |
|
Directors |
|
|
8,160 |
|
|
|
8.06 |
|
March 6, 2022 |
|
Employees |
|
|
23,866 |
|
|
|
8.06 |
|
March 8, 2022 |
|
Directors |
|
|
12,000 |
|
|
|
7.82 |
|
March 8, 2022 |
|
Employee |
|
|
29,262 |
|
|
|
7.82 |
|
March 13, 2022 |
|
Directors |
|
|
10,200 |
|
|
|
7.71 |
|
March 13, 2022 |
|
Employees |
|
|
17,893 |
|
|
|
7.71 |
|
|
|
|
|
|
104,681 |
|
|
$ |
7.83 |
|
19
Stock Repurchases
The Company purchases shares of Common Stock from certain employees at the closing share price on the date of purchase. The stock is purchased from the employees to satisfy employees’ withholding tax obligations related to stock issuances described above. The below table summarizes shares repurchased from employees during the current year through March 31, 2022:
Date of Purchase |
|
Shares
Purchased |
|
|
Closing Price
on Date of
Purchase |
|
March 6, 2022 |
|
|
6,035 |
|
|
$ |
8.06 |
|
March 8, 2022 |
|
|
7,395 |
|
|
$ |
7.82 |
|
March 13, 2022 |
|
|
3,924 |
|
|
$ |
7.71 |
|
|
|
|
17,354 |
|
|
|
|
|
Restricted Stock Awards
The following table contains information regarding restricted stock units:
|
|
March 31,
2022 |
|
Outstanding on January 1, 2022 |
|
|
286,227 |
|
Units granted during the period |
|
|
- |
|
Vested and issued |
|
|
(87,327 |
) |
Vested-issued and repurchased for income tax withholding |
|
|
(17,354 |
) |
Forfeited |
|
|
(3,041 |
) |
Outstanding on March 31, 2022 |
|
|
178,505 |
|
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 $228 and $290, for the three months ended March 31, 2022 and 2021, respectively. Additional compensation expense related to restricted stock units will be $504, $364, and $94 for the remainder of 2022, 2023, and 2024, respectively.
Stock Options
On September 1, 2019, 50,000 stock options were granted at $5.62 per share and vest ratably on each of the first three anniversary dates. Compensation expense related to stock options were $4 for the three months ended March 31, 2022 compared to $10 for the comparable period. Additional compensation expense will be $6 the remainder of 2022.
15. Legal Proceedings and Other Contingencies
The Company is involved in various legal proceedings, including product liability, employment related issues, and workers’ compensation matters which have arisen in the normal course of operations. The Company has product liability insurance with self-insurance retention that range from $50 to $500.
When it is probable that a loss has been incurred and it’s possible to make a reasonable estimate of the Company’s liability with respect to such matters, a provision is recorded for the amount of such estimate that is most likely to occur. Certain cases are at a preliminary stage, and it is not possible to estimate the amount or timing of any cost to the Company for these cases. However, the Company does not believe that these contingencies, in the aggregate, will have a material adverse effect on the Company.
The Company has been named as a defendant in several multi-defendant asbestos related product liability lawsuits. In certain instances, the Company is indemnified by a former owner of the product line in question. In the remaining cases the plaintiff has, to date, not been able to establish any exposure by the plaintiff to the Company’s products. The Company is uninsured with respect to these claims but believes that it will not incur any material liability with respect to these claims.
On May 5, 2011, Company entered into two separate settlement agreements with two plaintiffs. As of March 31, 2022, the Company has a remaining obligation under the agreements to pay the plaintiffs $950 without interest in 10 annual installments of $95 on or before May 22 of each year. The Company has recorded a liability for the net present value of the liability. The difference between the net present value and the total payment will be charged to interest expense over the payment period.
20
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.
16. Transactions between the Company and Related Parties
In the course of conducting its business, the Company has entered into certain related party transactions.
C&M conducts business with RAM P&E LLC for the purposes of obtaining parts business as well as buying, selling, and renting equipment. In 2022, less than $0.1 million was invoiced by C&M through government parts contracts awarded to RAM P&E LLC.
C&M is a distributor of Terex rough terrain and truck cranes. As such, C&M purchases cranes and parts from Terex.
PM is a manufacturer of cranes. PM sold cranes, parts, and accessories to Tadano during 2022 and 2021.
As of March 31, 2022 and December 31, 2021, the Company had accounts receivable and payable with related parties as shown below:
|
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
Accounts Receivable |
|
Terex |
|
$ |
39 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable |
|
Terex |
|
|
98 |
|
|
|
23 |
|
|
|
Tadano |
|
|
139 |
|
|
|
180 |
|
|
|
|
|
$ |
237 |
|
|
$ |
203 |
|
Net Related Party Accounts
Payable |
|
|
|
$ |
198 |
|
|
$ |
203 |
|
The following is a summary of the amounts attributable to certain related party transactions as described in the footnotes to the table, for the periods indicated:
|
|
|
|
Three Months Ended
March 31, 2022 |
|
|
Three Months Ended
March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Sales to: |
|
Terex (1) |
|
$ |
39 |
|
|
$ |
13 |
|
|
|
Tadano (2) |
|
|
13 |
|
|
|
128 |
|
|
|
RAM P&E (3) |
|
|
27 |
|
|
|
54 |
|
Total Sales |
|
|
|
$ |
79 |
|
|
$ |
195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases from: |
|
Terex (1) |
|
$ |
69 |
|
|
$ |
116 |
|
|
|
Tadano (2) |
|
|
130 |
|
|
|
61 |
|
Total Purchases |
|
|
|
$ |
199 |
|
|
$ |
177 |
|
|
(1) |
Terex is a significant shareholder of the Company and conducts business with the Company in the ordinary course of business. |
|
(2) |
Tadano is a significant shareholder of the Company and conducts business with the Company in the ordinary course of business. |
|
(3) |
RAM P&E is owned by the Company’s Executive Chairman’s daughter. |
21
Note 17. Restructuring
On January 12, 2022, the Company announced a restructuring plan (the “Restructuring”) that will result in the closure of its Badger Equipment facility in Winona, Minnesota. As part of the Restructuring, the Company intends to move the manufacturing of its straight mast boom cranes and aerial platforms now produced in Winona to its Georgetown, Texas facility. The Restructuring is expected to be completed during Q2 2022.
Restructuring
During the three months ended March 31, 2022, the Company recorded less than $0.1 million of restructuring expense related to severance and travel expenses.
The following is a summary of the Company’s restructuring activities for the three months ended March 31, 2022:
|
|
For the Three
Months
Ended March 31, |
|
|
|
2022 |
|
Balance at beginning of period |
|
$ |
— |
|
Restructuring expense |
|
|
29 |
|
Balance at end of period |
|
$ |
29 |
|
Assets held for sale
As of March 31, 2022, the Company had $1.1 million classified as other current assets in the Condensed Consolidated Balance Sheets. These amounts relate to land, building, and machinery & equipment in Winona, Minnesota, that are held for sale in connection with the Restructuring. The land and building were sold during April 2022 for approximately $1.8 million.
Note 18. Subsequent Events
Acquisition of Rabern Rentals
On April 11, 2022, Manitex International, Inc. (the “Company”) entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”), with Rabern Rentals, LLC (“Rabern”). Pursuant to the Purchase Agreement, the Company acquired a 70% membership interest in Rabern for a purchase price of $25.9 million (the “Transaction”), subject to the various adjustments, escrows and other provisions of the Purchase Agreement. The Transaction closed on April 11, 2022. A total of $5 million of the purchase price will be held in escrow for various purposes, as described in the Purchase Agreement. Rabern is a construction equipment rental provider primarily servicing Northern Texas, which was established in 1984. The president and founder of Rabern will retain a 30% ownership interest and continue to run the operation as a stand-alone division of the Company.
Amarillo National Bank Financing
On April 11, 2022, the Company entered into a Commercial Credit Agreement (the “Credit Agreement”), by and among the Company, the Company’s domestic subsidiaries and Amarillo National Bank. The Credit Agreement provides for a $40,000 revolving credit facility that matures on April 11, 2024, a $30,000 revolving credit facility that matures on April 11, 2024, and a $15,000 term loan that matures on October 11, 2029. Borrowings under the revolving credit facilities and the term loan bear interest at a floating rate equal to the Prime Rate plus 0.5%. The revolving credit facilities require monthly interest payments with the full principal balance coming due at maturity, and the $30,000 revolving credit facility alone requires quarterly payments in the amount of 3% of the outstanding balance thereunder on a quarterly basis beginning on January 1, 2023. The term loan requires monthly interest payments with quarterly amortization payments beginning on November 11, 2022, and the remaining principal balance coming due at maturity. The unused balance of the revolving credit facilities incurs a 0.125% fee that is payable semi-annually.
The Credit Agreement requires the Company to maintain a debt service coverage ratio of at least 1.25:1.00 measured on the last day of each calendar quarter, beginning June 30, 2022, and each measurement will be based on a rolling 12-month basis. The Credit Agreement also requires the Borrower to maintain a U.S. net worth of at least $80,000 measured as of the last day of each calendar quarter, beginning June 30, 2022.
22
CIBC Loan Agreement payoff
In connection with the Transaction and the entry by the Company into the Credit Agreement, on April 11, 2022, the Company repaid in full all outstanding indebtedness and other amounts outstanding, and terminated all commitments and obligations under, its prior Loan Agreement with CIBC. The Company’s payment to the lenders was approximately $12.8 million, which satisfied all of the Company’s debt obligations under the Loan Agreement. The Company was not required to pay any pre-payment premiums as a result of the repayment of indebtedness under the Loan Agreement. In connection with the repayment of such outstanding indebtedness by the Company, all security interests, mortgages, liens and encumbrances granted to the lenders under the Loan Agreement were terminated and released.
Appointment and departure of certain officers
Effective as of April 11, 2022, the Company appointed Michael Coffey as Chief Executive Officer of the Company. In connection with Mr. Coffey’s appointment as Chief Executive Officer, the Company announced that Steve Filipov, who has served as the Company’s Chief Executive Officer since September 2019, will transition into the role of Special Advisor to the Company, effective as of April 11, 2022.
Effective as of April 14, 2022, Steve Kiefer departed as President and Chief Operating Officer of the Company. Mr. Kiefer’s departure was not the result of any disagreement with respect to the Company’s operations, policies or practices.
23