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What changed in Mayville Engineering Company, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Mayville Engineering Company, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+253 added−291 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-01)

Top changes in Mayville Engineering Company, Inc.'s 2023 10-K

253 paragraphs added · 291 removed · 192 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

64 edited+18 added−23 removed72 unchanged
Biggest changeImportant factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to, those described in “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K for the year ended December 31, 2022, as such may be amended or supplemented in Part II, Item 1A of our subsequently filed Quarterly Reports on Form 10-Q, and the following: ● Macroeconomic conditions, including inflation, rising interest rates and recessionary concerns, as well as ongoing supply chain challenges, labor availability and cost pressures, and the COVID-19 pandemic, have had, and may continue to have, a negative impact on our business, financial condition, cash flows and results of operations (including future uncertain impacts); ● risks relating to developments in the industries in which our customers operate; ● risks related to scheduling production accurately and maximizing efficiency; ● our ability to realize net sales represented by our awarded business; ● the COVID-19 pandemic continues to negatively affect our business, financial condition, cash flows, results of operations, supply chain (including the supply chain issues encountered by our original manufacturing customers), and raw material availability, as well as customer demand (including future uncertain effects); ● failure to compete successfully in our markets; ● our ability to maintain our manufacturing, engineering and technological expertise; ● the loss of any of our large customers or the loss of their respective market shares; ● risks related to entering new markets; ● our ability to recruit and retain our key executive officers, managers and trade-skilled personnel; ● volatility in the prices or availability of raw materials critical to our business; 1 Table of Contents ● manufacturing risks, including delays and technical problems, issues with third-party suppliers, environmental risks and applicable statutory and regulatory requirements; ● our ability to successfully identify or integrate acquisitions; ● our ability to develop new and innovative processes and gain customer acceptance of such processes; ● risks related to our information technology systems and infrastructure; ● geopolitical and economic developments, including foreign trade relations and associated tariffs; ● results of legal disputes, including product liability, intellectual property infringement and other claims; ● risks associated with our capital-intensive industry; ● risks related to our treatment as an S Corporation prior to the consummation of our initial public offering of common stock (IPO); and ● risks related to our employee stock ownership plan’s treatment as a tax-qualified retirement plan.
Biggest changeImportant factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to, those described in “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K for the year ended December 31, 2023, as such may be amended or supplemented in Part II, Item 1A of our subsequently filed Quarterly Reports on Form 10-Q, and the following: ● Macroeconomic conditions, including inflation, elevated interest rates and recessionary concerns, as well as continuing supply chain constraints affecting some of our customers, labor availability and material cost pressures, have had, and may continue to have, a negative impact on our business, financial condition, cash flows and results of operations (including future uncertain impacts); ● risks relating to developments in the industries in which our customers operate; ● risks related to scheduling production accurately and maximizing efficiency; ● our ability to realize net sales represented by our awarded business; ● failure to compete successfully in our markets; ● our ability to maintain our manufacturing, engineering and technological expertise; ● the loss of any of our large customers or the loss of their respective market shares; ● risks related to entering new markets; ● our ability to recruit and retain our key executive officers, managers and trade-skilled personnel; ● volatility in the prices or availability of raw materials critical to our business; ● manufacturing risks, including delays and technical problems, issues with third-party suppliers, environmental risks and applicable statutory and regulatory requirements; ● our ability to successfully identify or integrate acquisitions; ● our ability to develop new and innovative processes and gain customer acceptance of such processes; 1 Table of Contents ● risks related to our information technology systems and infrastructure; ● geopolitical and economic developments, including foreign trade relations and associated tariffs; ● results of legal disputes, including product liability, intellectual property infringement and other claims; ● risks associated with our capital-intensive industry; ● risks related to our treatment as an S Corporation prior to the consummation of our initial public offering of common stock (IPO); and ● risks related to our employee stock ownership plan’s treatment as a tax-qualified retirement plan.
Through our collaborative approach, we maintain a complete, and growing, set of sophisticated manufacturing capabilities to meet the diverse needs of our customers, including: ● Program Management ¾ We offer our customers a complete solution from concept to launch following the APQP (Advanced Product Quality Planning) process (planning, design for manufacturability and development, process design and improvement, product and process validation and continuous improvement). ● Engineering ¾ We collaborate with our customers and provide design for manufacturing, off-line programming (lasers, brake press, machining, robotic welding, coordinate measuring machines), value engineering and CI (continuous improvement). ● Tool Design and Build ¾ Our in-house tool design and tool room capability ensures quality from start to finish.
Through our collaborative approach, we maintain a complete, and growing, set of sophisticated manufacturing capabilities to meet the diverse needs of our customers, including: ● Program Management ¾ We offer our customers a complete solution from concept to launch following the Advanced Product Quality Planning (APQP) process (planning, design for manufacturability and development, process design and improvement, product and process validation and continuous improvement). ● Engineering ¾ We collaborate with our customers and provide design for manufacturing, off-line programming (lasers, brake press, machining, robotic welding, coordinate measuring machines), value engineering and continuous improvement (CI). ● Tool Design and Build ¾ Our in-house tool design and tool room capability ensures quality from start to finish.
The sales process typically takes 3 – 18 months and ultimately ends in the implementation of product lifecycle timelines and purchase orders under long-term customer arrangements. The sales team utilizes systems infrastructure that effectively track and manage backlogs, quotes and bookings information, strategic projects and call reports, all of which are reviewed at weekly sales team meetings.
The sales process typically takes 3 to 18 months and ultimately ends in the implementation of product lifecycle timelines and purchase orders under long-term customer arrangements. The sales team utilizes systems infrastructure that effectively track and manage backlogs, quotes and bookings information, strategic projects and call reports, all of which are reviewed at weekly sales team meetings.
While there can be instances of intense competition in specific end markets, we believe that we have been able to effectively compete, and maintain competitive advantages on the basis of our: ● scale and product offering with the ability to cross-sell and provide our customers with a one-stop solution; ● broad manufacturing capability and flexibility to fulfill requests that require complex solutions; ● customer service with our highly skilled and knowledgeable workforce able to provide consultative advice; and ● regionalized geographic focus provides a defensible position from both foreign and domestic competitors as our customers continue to take a regionalized approach to production, which provides a shorter supply chain with greater flexibility.
While there can be instances of intense competition in specific end markets, we believe that we have been able to effectively compete, and maintain competitive advantages on the basis of our: ● scale and product offering with the ability to cross-sell and provide our customers with a one-source solution; ● broad manufacturing capability and flexibility to fulfill requests that require complex solutions; ● customer service with our highly skilled and knowledgeable workforce able to provide consultative advice; and ● regionalized geographic focus provides a defensible position from both foreign and domestic competitors as our customers continue to take a regionalized approach to production, which provides a shorter supply chain with greater flexibility.
We make available free of charge (other than an investor’s own internet access charges) through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to these reports and our proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the United States Securities and Exchange Commission (the SEC). ​ ​ 13 Table of Contents
We make available free of charge (other than an investor’s own internet access charges) through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to these reports and our proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the United States Securities and Exchange Commission (the SEC). 12 Table of Contents
We have a track record of growth and are well-positioned to increase our market share and benefit from the growth in customer demand as well as the secular trends of reshoring and outsourcing across the end markets that we serve. To help pursue our strategic mission, we have approximately 2,300 employees who are tactically aligned around our core values.
We have a track record of growth and are well-positioned to increase our market share and benefit from the growth in customer demand as well as the secular trends of reshoring and outsourcing across the end markets that we serve. To help pursue our strategic mission, we have approximately 2,500 employees who are tactically aligned around our core values.
We maintain a full spectrum of capabilities across our 20 facilities to address a wide set of customer needs, including upfront product development advice and prototyping, unique manufacturing processes and capabilities across a variety of products and back-end finishing, assembly and aftermarket components representing a unique end-to-end offering.
We maintain a full spectrum of capabilities across our 23 facilities to address a wide set of customer needs, including upfront product development advice and prototyping, unique manufacturing processes and capabilities across a variety of products and back-end finishing, assembly and aftermarket components representing a unique end-to-end offering.
Information Systems We utilize standardized information technology systems across all areas of quoting and estimating, enterprise resource planning, materials resource planning, capacity planning and accounting for enhanced procurement of work, project execution and financial controls. We provide information technology oversight and support from our corporate headquarters in Mayville, WI.
Information Systems We utilize standardized information technology systems across all areas of quoting and estimating, enterprise resource planning, materials resource planning, capacity planning and accounting for enhanced procurement of work, project execution and financial controls. We provide information technology oversight and support from our corporate headquarters in Milwaukee, WI.
Founded as a corporation in 1945 and headquartered in Mayville, Wisconsin, we are a leading Tier I U.S. supplier of highly engineered components to original equipment manufacturer (OEM) customers with leading positions in their respective markets.
Founded as a corporation in 1945 and headquartered in Milwaukee, Wisconsin, we are a leading Tier I U.S. supplier of highly engineered components to original equipment manufacturer (OEM) customers with leading positions in their respective markets.
We are led by an experienced management team that has contributed to our growth by establishing deep and long-standing relationships with key customers and has worked to expand the customer base both organically and through strategic acquisitions. We maintain an established base of long-standing customers comprised of leading, blue-chip OEM manufacturers across the United States.
We are led by an experienced management team that has contributed to our growth by establishing deep and long-standing relationships with key customers and has worked to expand the customer base both organically and through strategic acquisitions. 2 Table of Contents We maintain an established base of long-standing customers comprised of leading, blue-chip OEM manufacturers across the United States.
Our philosophy on quality is based on Continuous Improvement with an IATF (international automotive task force) and ISO (international organization for standardization) foundation. Our skilled and experienced staff is highly trained in areas of quality planning, metrology, geometric dimensioning and tolerancing (ASME Y14.5M 1994), ISO, statistical techniques (SPC) and ISO 14001 certifications.
Our philosophy on quality is based on our commitment to precision and continuous improvement with an international automotive task force (IATF) and international organization for standardization (ISO) foundation. Our skilled and experienced staff is highly trained in areas of quality planning, metrology, geometric dimensioning and tolerancing (ASME Y14.5M 1994), ISO, statistical techniques (SPC) and ISO 14001 certifications.
Our depth of capabilities allows us to offer our customers: ● low volume production capability; ● customized and sophisticated solutions; ● unique engineering and manufacturing capabilities throughout the product lifecycle; ● critical scale to service large national and regional customers as well as local customers; and ● the ability to act as a single point of contact and offer seamless customer service.
Our depth of capabilities allows us to offer our customers: ● low volume production capability; 4 Table of Contents ● customized and sophisticated solutions; ● unique engineering and manufacturing capabilities throughout the product lifecycle; ● critical scale to service large national and regional customers as well as local customers; and ● the ability to act as a single point of contact and offer seamless customer service.
Our established and embedded relationships, breadth of capabilities and scalability will allow us to simplify the supply chain process for our customers by acting as a single point of contact in the supply chain.
Our established and embedded relationships, breadth of capabilities and scalability will allow us to streamline the supply chain process for our customers by acting as a single point of contact in the supply chain.
Our diversified profile today best positions us for stability and leading market performance through all phases of an economic cycle. 3 Table of Contents Our Industry We compete in the highly fragmented market of contract manufacturers, the majority of which are small local players that are limited in scale, capabilities and technology.
Our diversified profile today best positions us for stability and leading market performance through all phases of an economic cycle. Our Industry We compete in the highly fragmented market of contract manufacturers, the majority of which are small local players that are limited in scale, capabilities and technology.
This adaptable approach also decreases manufacturing costs, allows for faster order turnaround times and elimination of excess waste. We maintain an advanced machinery portfolio in our facilities allowing us to leverage our employee workforce with state-of-the-art capabilities and functionality.
This adaptable approach also decreases manufacturing costs, allows for faster order turnaround times and elimination of excess waste. 8 Table of Contents We maintain an advanced machinery portfolio in our facilities allowing us to leverage our employee workforce with state-of-the-art capabilities and functionality.
Our welding departments offer manual and robotic wire welding, including GMAW (Gas Metal Arc Welding and also known as MIG, or Metal Inert Gas), GTAW (Gas Tungsten Arc Welding) and also known as TIG (Tungsten Inert Gas), Heliarc, Fluxcore, Metalcore, Aluminum, Plasma Weld, Brazing and Pulse Heliarc. ● Coatings, Assembly and Logistics ¾ We provide premier full-service coating, assembly and logistics solutions.
Our welding departments offer manual and robotic wire welding, including Gas Metal Arc Welding (GMAW) and also known as Metal Inert Gas (MIA), Gas Tungsten Arc Welding (GTAW) and also known as Tungsten Inert Gas (TIG), Heliarc, Fluxcore, Metalcore, Aluminum, Plasma Weld, Brazing and Pulse Heliarc. ● Coatings, Assembly and Logistics ¾ We provide premier full-service coating, assembly and logistics solutions.
Further enhancing our benefit offerings, we provide an on-site healthcare team at certain facilities to treat work and non-work related injuries and assist employees with general wellness and overall well-being. Additionally, MEC has several initiatives centered around employee appreciation, which include: cookouts and holiday lunches, Fresh Market food program, appreciation gift cards and quarterly bonuses.
Further enhancing our benefit offerings, we provide an on-site healthcare team at certain facilities to treat work and non-work related injuries and assist employees with general wellness and overall well-being. Lastly, MEC has several initiatives centered around employee appreciation, which include: cookouts and holiday lunches, Fresh Market food program and quarterly bonuses.
Most recently, we have invested in multiple fiber laser systems and robotic brake presses with automation aimed at reducing labor content and optimizing floor space which allows us to generate more revenue with the same workforce and footprint.
Most recently, we have invested in multiple fiber laser systems, robotic brake presses and tube bending cells with automation aimed at reducing labor content and optimizing floor space which allows us to generate more revenue with the same workforce and footprint.
According to the Fabricator magazine, we have been ranked as the largest fabricator in the United States for the past twelve years in a row (2011 – 2022). The market is highly fragmented and characterized by high barriers to entry given the complex nature of the work, established relationships and high customer switching costs.
According to the Fabricator magazine, we have been ranked as the largest fabricator in the United States for the past 13 years in a row (2011 – 2023). The market is highly fragmented and characterized by high barriers to entry given the complex nature of the work, established relationships and high customer switching costs.
According to The Fabricator magazine, we have been ranked as the largest fabricator in the United States for the past twelve years in a row (2011 – 2022). Our customers’ complex products require a unique combination of our capabilities that allow us to achieve a customized offering to satisfy our customers’ desired outcomes.
According to The Fabricator magazine, we have been ranked as the largest fabricator in the United States for the past 13 years in a row (2011 – 2023). Our customers’ complex products require a unique combination of our capabilities that allow us to achieve a customized offering to satisfy our customers’ desired outcomes.
Through this expansion, with product shipping from multiple facilities, we have been able to deepen our relationship and expand our market position through each of their new product updates, solidifying us as a strategic partner. We serve customers through 20 strategically located U.S. facilities, across seven states, with approximately three million square feet of manufacturing capacity.
Through this expansion, with product shipping from multiple facilities, we have been able to deepen our relationship and expand our market position through each of their new product updates, solidifying us as a strategic partner. We serve our customers through 23 strategically located U.S. facilities, across seven states, with more than three million square feet of manufacturing capacity.
We strive to maintain operation alignment (and continuous re-alignment) with our customers’ strategy and production activities as they evolve, 4 Table of Contents allowing us to remain agile in response to market changes, while enabling our customers to be successful, and remain adaptable to changes to retain flexibility and adjust appropriately.
We strive to maintain operation alignment (and continuous re-alignment) with our customers’ strategy and production activities as they evolve, allowing us to remain agile in response to market changes, while enabling our customers to be successful, and remain adaptable to changes to retain flexibility and adjust appropriately.
Despite the recent market challenges in the hiring of trade-skilled employees, our continued investment in newer technologies and capabilities has allowed us to opportunistically re-train and redeploy certain roles that were previously human capital-intensive, and re-train and repurpose employees into other areas of the company.
Despite the recent market challenges in hiring trade-skilled employees, our continued investment in newer technologies and capabilities has allowed us to opportunistically re-train and redeploy employees from certain previously human capital-intensive roles into other areas of the Company.
This consolidation trend will allow us to grow and protects our cash flow as markets change and shift. We have also experienced, and benefitted from, OEM trends seeking to improve their strategy execution and simplify their business through outsourcing and reshoring.
This consolidation trend will allow us to grow and protects our cash flow as markets change and shift. 3 Table of Contents We have also experienced, and benefitted from, OEM trends seeking to improve their strategy execution and simplify their business through outsourcing and reshoring.
As part of MBX, we have established clear short- and long-term objectives, with the goal of outlining and adapting priorities and targets to improve operational and financial goals while creating a culture with a keen focus on continuous lean improvements in order to maintain a differentiated and defendable market-leading position.
As part of MBX, we have established clear short- and long-term objectives, with the goal of outlining and adapting priorities and targets to improve operational and financial goals while creating a culture with a keen focus on continuous lean improvements in order to maintain a differentiated and defendable market leading position. The key elements of MBX include: High-Performance Culture.
For example, our diverse manufacturing capabilities across product lines have contributed to us being selected the Largest Fabricator by The Fabricator magazine’s “FAB 40” listing in the desirable U.S. markets for the past twelve years in a row (2011 – 2022).
For example, our diverse manufacturing capabilities across product lines have contributed to us being selected the Largest Fabricator by The Fabricator magazine’s “FAB 40” listing in the desirable U.S. markets for the past 13 years in a row (2011 – 2023).
We undertake no obligation to update or revise any forward-looking statements after the date on which any such statement is made, whether as a result of new information, future events or otherwise, except as required by federal securities laws.
We undertake no obligation to update or revise any forward-looking statements after the date on which any such statement is made, whether as a result of new information, future events or otherwise, except as required by federal securities laws. General Mayville Engineering Company, Inc.
Our unique, end-to-end offering provides solutions throughout the life cycle of a product, including upfront product manufacturability advice and prototyping, production volumes and aftermarket components.
Our unique, end-to-end offering provides solutions throughout the lifecycle of a product, including upfront product manufacturability advice and prototyping, production volumes and aftermarket components.
For example, our more than 40-year relationship with Deere & Company (John Deere) began with a small order of simple stamped parts for a farm tractor in its agricultural segment that expanded over time and represented 2022 sales in excess of $92 million across five market segments, representing over 60 model platforms.
For example, our more than 40-year relationship with Deere & Company (John Deere) began with a small order of simple stamped parts for a farm tractor in its agricultural segment that expanded over time and represented 2023 sales in excess of $87 million across five market segments, representing over 65 model platforms.
The diversity of our offering has provided our Company with financial stability through various end market and economic cycles. 6 Table of Contents Technology-Enabled Infrastructure.
The diversity of our offering has provided our Company with financial stability through various end market and economic cycles. Technology-Enabled Infrastructure.
Medium-duty commercial vehicles include classes 3-7 trucks such as box trucks; ● Construction & Access Equipment: Primary applications include wheel loaders, crawlers, skid steer loaders, excavators, motor graders, aerial lifts, boom lifts and other construction equipment; ● Powersports: Encompasses our all-terrain (ATV) and multi-utility (MUV) vehicles, as well as marine and motorcycle markets; ● Agriculture: Primary applications include tractors, combines, sprayers, turf care, implements and other agriculture-related equipment; ● Military: We provide a variety of components for military vehicle platforms; ● Other: We provide components and assemblies to a variety of other industrial end markets, such as power generation, mining, medical cabinetry, and the automotive end market.
Medium-duty commercial vehicles include classes 3-7 trucks such as box trucks; ● Construction & Access Equipment: Primary applications include wheel loaders, crawlers, skid steer loaders, excavators, motor graders, aerial lifts, boom lifts and other construction equipment; ● Powersports: Encompasses our all-terrain (ATV) and multi-utility (MUV) vehicles, as well as marine and motorcycle markets; ● Agriculture: Primary applications include tractors, combines, sprayers, turf care, implements and other agriculture-related equipment; ● Military: We provide a variety of components for military vehicle platforms; ● Other: We provide components and assemblies to a variety of other industrial end markets, such as energy infrastructure, electric vehicles, industrial equipment and fixtures, consumer tools, mining, forestry, medical and the automotive end market.
Our talent development efforts span across all levels of the organization, including an annual performance review process allowing 11 Table of Contents employees to discuss and build development plans with their leaders to develop their careers and an executive coaching program which prepares our future leaders for increased responsibilities at MEC.
Our talent development efforts span across all levels of the organization, including an annual performance review process, which includes a development plan assessment allowing employees to discuss and build development plans with their leaders to develop their careers and an executive coaching program that prepares our future leaders for increased responsibilities at MEC.
Further, we are diversified by customers and end markets with net sales attributed to our top 20 customers accounting for $483 million of 2022 net sales, and no single end market accounting for more than 39% of net sales.
Further, we are diversified by customers and end markets with net sales attributed to our top 20 customers accounting for $503 million of 2023 net sales, and no single end market accounting for more than 38% of net sales.
General MEC is a leading U.S.-based value-added manufacturing partner that provides a full suite of services from concept to production, including prototyping and tooling, production fabrication, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets.
(MEC) is a leading U.S.-based, vertically integrated, value-added manufacturing partner providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets.
For example, we provide John Deere, our leading customer with 2022 net sales accounting for 17.2% of our total revenue, with over 5,000 SKUs across over 60 individual John Deere platforms including the agriculture, forestry, turf care, power systems and construction & access equipment end markets.
For example, we provide John Deere, a leading customer with 2023 net sales accounting for 14.8% of our total revenue, with over 5,000 SKUs across over 65 individual John Deere platforms including the agriculture, forestry, turf care, power systems and construction & access equipment end markets.
Full-time employees are eligible to receive the following benefits: health insurance (medical, dental, vision), short-term and long-term disability, life insurance, accidental death and dismemberment insurance, flexible spending accounts, wellness program and life matters employee assistance program.
Full-time employees are eligible to receive the following benefits: a Company matched 401(k) Plan, paid time off, health insurance (medical, dental, vision), short-term and long-term disability, life insurance, accidental death and dismemberment insurance, flexible spending accounts, wellness program and life matters employee assistance program.
Environmental Matters We are subject to numerous federal, state and local laws and regulations relating to manufacturing, handling and disposal of materials into the environment. We believe that our environmental control procedures are adequate.
Environmental Matters We are subject to numerous federal, state and local laws and regulations relating to manufacturing, handling and disposal of materials into the environment.
Our capabilities, which include, but are not limited to: metal fabrication, metal stamping, tube bending and forming, robotic part forming, robotic welding, resistance welding, five-axis tube and fiber laser cutting and custom coatings, including high heat and chemical agent resistant coating (CARC) painting, are used in a variety of applications and represent the building blocks of what we produce. 2 Table of Contents Our key customers have globally recognized brands and demand the highest product quality and expertise.
Our capabilities, which include, but are not limited to: metal fabrication, metal stamping, aluminum extrusion and fabrication, tube bending and forming, robotic part forming, robotic welding, resistance welding, five-axis tube and fiber laser cutting and custom coatings, including high heat and chemical agent resistant coating (CARC) painting, are used in a variety of applications and represent the building blocks of what we produce.
Our Capabilities We offer a broad portfolio of end-to-end processes and solutions comprised of advanced and innovative capabilities that enhance quality and simplify supply chains for our customers.
Our Capabilities We offer a broad portfolio and a one-source solution comprised of advanced and innovative capabilities that enhance quality and simplify supply chains for our customers.
In 2022, our top customer and top ten customers accounted for 17.2% and 79.9% of net sales, respectively, which collectively represents hundreds of platforms that we serve across a variety of end markets and customer operating segments.
In 2023, our top customer and top ten customers accounted for 15.0% and 74.6% of net sales, respectively, which collectively represents hundreds of platforms that we serve across a variety of end markets and customer operating segments.
Leuba was the Head of Corporate Development for Caterpillar Inc. Previously, Mr. Leuba served in multiple progressively senior roles, including as General Manager, Caterpillar Electric Power Division and General Manager, Caterpillar Remanufactured Products Division. Prior to joining Caterpillar, Mr. Leuba practiced law with Arnold & Porter in its Washington, DC office focusing on corporate, securities, M&A and venture capital. Mr.
Leuba served in multiple progressively senior roles, including as General Manager, Caterpillar Electric Power Division and General Manager, Caterpillar Remanufactured Products Division. Prior to joining Caterpillar, Mr. Leuba practiced law with Arnold & Porter in its Washington, D.C. office focusing on corporate, securities, mergers & acquisitions and venture capital. Mr.
Our employees are the foundation of our company; with experience across a diverse range of markets and capabilities, they drive innovation, believe in our process and the outcomes of their work and our success. Our investment in new technology attracts technically savvy employees to replace retiring traditionally skilled employees.
Our employees are the foundation of our company; with experience across a diverse range of markets and capabilities, they drive innovation, believe in our process and the outcomes of their work and our success.
Our Human Capital Management As of December 31, 2022, we had approximately 2,300 full-time employees, approximately 1,775 of whom are production employees. None of our employees are represented by a union and we are not party to any collective bargaining agreements. On average, our employees have approximately eight years of service with us.
Our Human Capital Management As of December 31, 2023, we had approximately 2,500 full-time employees, approximately 1,900 of whom are production employees. None of our employees are represented by a union and we are not party to any collective bargaining agreements.
We maintain a broad and diverse base of over 1,000 suppliers. Our established relationships provide efficient and flexible access to resources and redundancy to ensure support of our customers. We have no history of significant supply issues or outages.
Raw Materials and Manufactured Components Our primary purchased commodities are steel and aluminum. We maintain a broad and diverse base of over 800 direct material suppliers. Our established relationships provide efficient and flexible access to resources and redundancy to ensure support of our customers. We have no history of significant supply issues or outages.
As we continue to invest in our business and increasingly implement a more technology-enabled infrastructure, we will strive to redeploy our employees in other, higher-skilled areas of our business and invest in training where needed.
As part of this effort, the Company moved its corporate headquarters to Milwaukee, WI in 2024. Additionally, as we continue to invest in our business and increasingly implement a more technology-enabled infrastructure, we strive to redeploy our employees in other, higher-skilled areas of our business and invest in training where needed.
For the year ended December 31, 2022, John Deere, PACCAR Inc. and AB Volvo accounted for 17.2%, 16.0% and 11.9% of net sales, respectively. We have not historically experienced customer attrition given high customer switching costs resulting from our embedded relationships driven by our broad capabilities and scale. Raw Materials and Manufactured Components Our purchases primarily include steel and aluminum.
For the year ended December 31, 2023, PACCAR Inc., John Deere and AB Volvo accounted for 15.0%, 14.8% and 10.6% of net sales, respectively. We have not historically experienced customer attrition given high customer switching costs resulting from our embedded relationships driven by our broad capabilities and scale.
Our continuous improvement initiatives have resulted in the acquisition and application of state-of-the-art technologies and plant improvements that support lean, quick response manufacturing flexibility that put us at the forefront of our market. Moreover, the agility that our quick response manufacturing methodology provides us keeps our purchasing, manufacturing, engineering and quality teams on the cutting edge of flexible manufacturing.
Our commitment to precision and continuous improvement initiatives have resulted in the acquisition and application of state-of-the-art technologies and plant improvements that support lean, quick response manufacturing flexibility that put us at the forefront of our market.
In 2022, no single supplier represented more than 13% of our total purchases and 98% of the raw materials we purchased were sourced from suppliers in the United States.
In 2023, no single supplier represented more than 16% of our total raw material purchases and over 98% of the raw materials we purchased were sourced from suppliers in the United States. Our suppliers are strategically located to maximize efficiencies and minimize shipping costs.
Information About Our Executive Officers The following table sets forth certain information as of February 1, 2023, regarding our executive officers: ​ ​ ​ ​ ​ Name Age Position Jagadeesh A. Reddy ​ 51 ​ President and Chief Executive Officer Todd M. Butz ​ 51 ​ Chief Financial Officer Ryan F.
We believe that our environmental control procedures are adequate. 11 Table of Contents Information About Our Executive Officers The following table sets forth certain information as of February 1, 2024, regarding our executive officers: ​ ​ ​ ​ ​ Name Age Position Jagadeesh A. Reddy ​ 52 ​ President and Chief Executive Officer Todd M.
We are not including the information provided on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.
Lehr earned a Bachelor of Science in Business Administration with a Major in Accounting from Marquette University. Available Information Our website address is www.mecinc.com. We are not including the information provided on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.
Our extensive manufacturing footprint, competitive cost structure and integrated design, engineering, production planning and quality program management capabilities position us favorably to take advantage of these opportunities and trends. Our Competitive Strengths We believe that customers turn to us for their manufacturing needs because we are the ultimate “ReSource”.
Our extensive manufacturing footprint, competitive cost structure and integrated design, engineering, production planning and quality program management capabilities position us favorably to take advantage of these opportunities and trends. Our Competitive Strengths As an industry-leading value-added manufacturing partner, our commitment to "Unmatched Excellence" is the cornerstone that attracts our customers.
We offer our employees competitive compensation and comprehensive benefit packages, annually benchmarking them against comparable industries in the same geographic vicinity to where our facilities are located.
Compensation and benefits We believe we deliver highly competitive compensation and comprehensive benefit packages, annually benchmarking them against comparable industries in the same geographic vicinity to where our facilities are located. The goals of our compensation programs are to: align pay for performance, support the Company’s goals and attract, retain and motivate high-potential candidates.
Stille earned a Master of Science in Supply Chain Management from the University of Michigan State and a Bachelor of Arts, Economics and Management degree from Depauw University. Sean P. Leuba joined our company in January 2023 as Senior Vice President – Corporate Development and General Counsel. Before joining our company, Mr.
Raber earned a Masters of Business Administration from the University of Wisconsin-Madison and a Bachelor of Science in Mechanical Engineering from Purdue University. Sean P. Leuba joined our company in January 2023 as Senior Vice President – Corporate Development and General Counsel. Before joining our company, Mr. Leuba was the Head of Corporate Development for Caterpillar Inc. Previously, Mr.
Before joining our company, Mr. Reddy was a member of the senior leadership team at W.R. Grace where he was responsible for the Strategy and Growth function as well as Managing Director of Advanced Refining Technologies LLC (ART), 12 Table of Contents Grace’s global joint venture with Chevron. Mr.
Grace where he was responsible for the Strategy and Growth function as well as Managing Director of Advanced Refining Technologies LLC (ART), Grace’s global joint venture with Chevron. Mr. Reddy previously served as Vice President and General Manager, Water Technologies Strategic Business Unit, and Vice President, Corporate Strategy at Pentair PLC.
Leuba earned a Master of Business Administration in Finance from the University of Chicago, a Juris Doctor from the Washington and Lee University School of Law, and a Bachelor of Arts from the University of Maryland Baltimore County. Available Information Our website address is www.mecinc.com.
Leuba earned a Master of Business Administration in Finance from the University of Chicago, a Juris Doctor from the Washington and Lee University School of Law, and a Bachelor of Arts from the University of Maryland Baltimore County. Rachele M. Lehr joined our company in March 2023 as Chief Human Resources Officer. Prior to joining our company, Ms.
Over our more than 75-year history, we have developed capabilities and provided solutions that result in customer loyalty and long-standing relationships, which we call “Experience You Can Trust”. We have a diverse and market-leading customer base that serves broad end markets representing favorable near- and long-term growth prospects for us.
We have a diverse and market-leading customer base that serves broad end markets representing favorable near- and long-term growth prospects for us.
Training and development We maintain an experienced and skilled workforce. We have been focused on attracting and retaining high quality personnel as they represent a critical factor in our continued success. There are many different career paths available to employees, and in order to assist in their career development, we offer multiple in-house training programs, mentorship programs and tuition reimbursement.
There are many different career paths available to employees, and in order to assist in their career development, we offer multiple in-house training programs, mentorship programs and tuition reimbursement.
Our small, high-speed presses are ideal for producing intricate high-volume stampings. 8 Table of Contents ● Machining ¾ We provide a variety of machining capabilities to meet our customer needs by providing in-house machining assistance for parts that are part of larger fabrications and assemblies. ● Tube Bending ¾ We maintain vast tube bending capabilities, including (i) manufacturing of oval, round and square tubes from .25 inch up through six inch and (ii) leveraging our extensive inventory of equipment including the latest CNC (computer numerical control) benders; and state-of-the-art technologies such as CNC electro-servo-driven bending with multi-task heads.
Using 6000-series alloys, we can produce a wide array of products from the most common, large extruded profiles, to some of the smallest and thinnest-walled extruded profiles in the industry. ● Tube Bending ¾ We maintain vast tube bending capabilities, including (i) manufacturing of oval, round and square tubes from .25 inch up through six inch and (ii) leveraging our extensive inventory of equipment including the latest computer numerical control (CNC) benders; and state-of-the-art technologies such as CNC electro-servo-driven bending with multi-task heads.
“We Make Things Simple” by providing a diverse set of process offerings and a “one stop shop” for end-to-end solutions with benefits throughout the entire product lifecycle, including front-end collaboration in design and prototyping, product manufacturing, aftermarket components and ancillary supply chain benefits.
We have developed long-standing relationships with our blue-chip customers based upon our commitment to “Unmatched Excellence”. We provide a diverse set of process offerings and a one-source solution with benefits throughout the entire product lifecycle, including front-end collaboration in design and prototyping, product manufacturing, aftermarket components and ancillary supply chain benefits.
As we continue to grow, we intend to leverage our size and scale to further reduce material costs. 10 Table of Contents Sales and Marketing We have a strong sales team comprised of approximately 50 experienced professionals responsible for managing and expanding client relationships and proactively pursuing new opportunities.
We have structured our customer contracts to pass through commodity price changes, which has allowed us to limit any potential impact of raw material price volatility and tariffs to our margins. Sales and Marketing We have a strong sales team comprised of approximately 50 experienced professionals responsible for managing and expanding client relationships and proactively pursuing new opportunities.
We have also recently invested in a machining center with palletizers, leading edge tube lasers with automatic loaders, robotic brake presses, robotic weld cells and a direct-to-metal paint line. 9 Table of Contents Our Markets Our primary end markets include (but are not limited to) the heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture and military markets.
Our Markets Our primary end markets include (but are not limited to) the heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture and military markets.
Raber 40 Executive Vice President - Strategy, Sales & Marketing Rand P. Stille 52 Chief Operating Officer Sean P. Leuba ​ 52 ​ Senior Vice President - Corporate Development and General Counsel ​ Jagadeesh A. Reddy joined our company as President, Chief Executive Officer and as a member of the Board of Directors in July 2022.
Reddy joined our company as President, Chief Executive Officer and as a member of the Board of Directors in July 2022. Before joining our company, Mr. Reddy was a member of the senior leadership team at W.R.
Our Strategy During 2022, we announced the implementation of a value-creation framework that is intended to maximize stakeholder value through operational and commercial excellence, organic and inorganic growth, and the continued cultivation of our high-performance employee-driven culture. Lean-Focused Process Initiative.
Our Strategy During 2022, we announced the implementation of a value-creation framework, MEC Business Excellence (MBX), that is intended to maximize stakeholder value by positioning the Company to achieve above-market performance and capitalizing on multi-year reshoring and outsourcing trends among major OEMs.
We are focused on producing the highest quality components using complex processes at the lowest cost by working with customers throughout the product design and development process to establish optimal solutions. Our engineering expertise and technical know-how allows us to add value through every product redevelopment cycle (generally every three to five years for our customers).
Focusing on forward-thinking innovation, reliability, and excellence, our engineering expertise and technical know-how allow us to add value through every product redevelopment cycle, typically occurring every three to five years for our customers. Positioned as the go-to partner, we are dedicated to building long-lasting partnerships and delivering solutions that consistently exceed our customers’ expectations.
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We have developed long-standing relationships with our blue-chip customers based upon a high level of experience, trust and confidence.
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Our key customers have globally recognized brands and demand the highest product quality and expertise. Over our more than 75-year history, we have developed capabilities and provided solutions that result in customer loyalty and long-standing relationships, which we call “The MEC Advantage”.
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ReSource is a dual-purpose acronym we use to describe the breadth of our capabilities and our goal to provide a complete product lifecycle solution allowing customers to re-source all of their fabrication needs through us.
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We thrive on strategic collaboration, actively engaging with our customers to create alignment and become an integral part of their product development and manufacturing processes. Leveraging our deep engineering expertise, we support prototype, production, and aftermarket needs, delivering cost-effective and robust solutions.
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We collaborate with our customers to generate strategic alignment and position ourselves as an essential part of our customers’ product development and manufacturing process by drawing on our deep product and engineering knowledge to deliver best-in-class solutions. We offer a broad portfolio of end-to-end solutions comprised of advanced and innovative processes and capabilities that enhance quality and simplify supply chains.
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With the industry's most expansive process capabilities, we embody agility, speed, and unmatched capability, allowing us to efficiently support a diverse range of products and solutions. “The MEC Advantage” is not just a concept; it's the driving force behind our operations, ensuring that every project benefits from our manufacturing expertise and customer-centric approach.
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The Company has consistently deployed lean tools within our operations for many years, however, to significantly accelerate efforts and drive exponential improvement across all of the Company’s processes, we have implemented our MEC Business Excellence (MBX) initiative.
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The Company is focused on effectuating cultural change across the organization by the implementation of performance-based metrics, daily lean management and other process-oriented strategies. Through these efforts, the Company intends to create a high-performance culture enabling teams to drive profitable growth. Operational Excellence.
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Based upon lean manufacturing principles, MBX will continuously drive operational and commercial excellence, cost reductions and provide a platform to standardize processes and systems across all facets of the organization.
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The Company is focused on leveraging automation and technologies and capabilities to increase productivity and reduce costs across the value chain with the implementation of lean initiatives such as value stream mapping, sales, inventory and operations planning (SIOP) and further optimizing its supply chain and procurement strategies, which will inherently accelerate immediate and long-term productivity and margin improvements. 6 Table of Contents Commercial Excellence.
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The MBX initiative is expected to drive a reduction of costs and increase operating efficiencies, which will inherently accelerate immediate and long-term productivity and margin improvements. Achieve Sales Growth Through Organic Expansion.
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The Company is focused on driving commercial growth through an integrated, solutions-oriented approach that leverages its full suite of design, prototyping and aftermarket services; an expansion of its fabrication capabilities beyond steel, with an emphasis on lightweight aluminum, plastics and composites; targeted growth in higher value and high-growth adjacent markets including energy transition and clean technology; wallet share expansion among our current customer base; and the implementation of a value-based pricing model capturing the cost to serve.
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We believe there is ample opportunity to achieve deeper penetration of existing customers and to win new customers with our strong value-added manufacturing solutions supporting the complete product lifecycle. Through leveraging our core product capabilities, we expect to expand into new markets, grow into adjacent and complementary product platforms and establish growth on new product introductions.
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These growth initiatives will continue to deepen and defend our existing market share, while diversifying our customer and end market exposure. Disciplined Capital Deployment.
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Secular reshoring and outsourcing trends provide us with an opportunity to expand our relationships with current clients and attract new clients looking to fortify their supply chains. We are actively pursuing strategies to expand our wallet share with our customers by capturing a wider variety of products and platforms through solidifying our relationships with current customers.
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The Company is focused on driving a disciplined capital strategy that includes allocating capital to expand within high-growth adjacent markets, continue to increase our share-of-wallet with existing customers and execute strategic acquisition opportunities while also generating strong free cash flow, managing debt levels and liquidity positions, and continuing to return capital to shareholders through share repurchases.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, our articles of incorporation and bylaws contain provisions that may make the acquisition of the company more difficult, including the following: ● establishing a classified Board of Directors so that not all members of our Board of Directors are elected at one time, which could delay the ability of shareholders to change the membership of a majority of our Board of Directors; ● authorizing undesignated preferred stock, the terms of which may be established and shares of which may be issued by our Board of Directors without shareholder approval; ● requiring certain procedures to be satisfied in order for a shareholder to call a special meeting of shareholders, including requiring that we receive written demands for a special meeting from holders of 10% or more of all the votes entitled to be cast on any issue proposed to be considered; ● requiring that a director may be removed from office only for “cause” and with the affirmative vote of shareholders holding at least 66 2/3% of the then outstanding shares of stock entitled to vote in the election of directors; ● not providing for cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of stock to elect some directors; and ● establishing advance notice procedures for shareholder proposals or the nomination of candidates for election as directors.
Biggest changeWe may engage in a business combination with an interested shareholder after the expiration of the three-year period with respect to that shareholder only if one or more of the following conditions is satisfied: (i) our Board of Directors approved the acquisition of the stock before the date on which the shareholder acquired the shares, (ii) the business combination is approved by a majority of our outstanding voting stock not beneficially owned by the interested shareholder or (iii) the consideration to be received by shareholders meets certain fair prices requirements of the WBCL with respect to form and amount. 24 Table of Contents In addition, our articles of incorporation and bylaws contain provisions that may make the acquisition of the company more difficult, including the following: ● establishing a classified Board of Directors so that not all members of our Board of Directors are elected at one time, which could delay the ability of shareholders to change the membership of a majority of our Board of Directors; ● authorizing undesignated preferred stock, the terms of which may be established and shares of which may be issued by our Board of Directors without shareholder approval; ● requiring certain procedures to be satisfied in order for a shareholder to call a special meeting of shareholders, including requiring that we receive written demands for a special meeting from holders of 10% or more of all the votes entitled to be cast on any issue proposed to be considered; ● requiring that a director may be removed from office only for “cause” and with the affirmative vote of shareholders holding at least 66 2/3% of the then outstanding shares of stock entitled to vote in the election of directors; ● not providing for cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of stock to elect some directors; and ● establishing advance notice procedures for shareholder proposals or the nomination of candidates for election as directors.
Our expenses relating to employee health benefits are significant. Unfavorable changes in the cost of and the unpredictability of claims under such benefits, including the current inflationary pressures on benefits (and wages), could impact our financial results and cash flows.
Our expenses relating to employee health benefits are significant. Unfavorable changes in the cost of and the unpredictability of claims under such benefits, including the current inflationary pressures on wages and benefits, could impact our financial results and cash flows.
See “ ¾ Prior to our initial public offering, we were treated as an S Corporation, and claims of taxing authorities related to our prior status as an S Corporation could have an adverse effect on our business, financial condition and results of operations.” Risks Related to Our Indebtedness Our Amended and Restated Credit Agreement restricts our ability and the ability of our subsidiaries to engage in some business and financial transactions.
See “Prior to our initial public offering, we were treated as an S Corporation, and claims of taxing authorities related to our prior status as an S Corporation could have an adverse effect on our business, financial condition and results of operations.” Risks Related to Our Indebtedness Our Amended and Restated Credit Agreement restricts our ability and the ability of our subsidiaries to engage in some business and financial transactions.
Any failure to realize these net sales could have a material adverse effect on our business, financial condition, results of operations and cash flows. 15 Table of Contents In addition to not having a commitment from our customers and anticipated new customers regarding the minimum number of components they must purchase from us if we obtain awarded business, typically the terms and conditions of the agreements with our customers provide that they have the contractual right to unilaterally terminate our contracts with them with no notice or limited notice.
Any failure to realize these net sales could have a material adverse effect on our business, financial condition, results of operations and cash flows. 14 Table of Contents In addition to not having a commitment from our customers and anticipated new customers regarding the minimum number of components they must purchase from us if we obtain awarded business, typically the terms and conditions of the agreements with our customers provide that they have the contractual right to unilaterally terminate our contracts with them with no notice or limited notice.
Our Credit Agreement also requires us to maintain a minimum interest coverage ratio and a consolidated total leverage ratio, and contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, payment default, covenant default, breach of representation or warranty, bankruptcy, cross-default, material ERISA events, certain changes of control, material money judgements and failure to maintain subsidiary guarantees).
Our Credit Agreement also requires us to maintain a minimum interest coverage ratio and a consolidated total leverage ratio, and contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, payment default, covenant default, breach of representation or warranty, bankruptcy, cross-default, material ERISA events, material money judgements and failure to maintain subsidiary guarantees).
Any reduction in customer demand for our components as a result of such tariffs, taxes, customs duties and/or other trade regulations, or as a result of the impact of infectious diseases such as COVID-19, could have a material adverse impact on our financial position, results of operations, cash flows and liquidity.
Any reduction in customer demand for our components as a result of such tariffs, taxes, customs duties and/or other trade regulations, or as a result of the impact of infectious diseases, could have a material adverse impact on our financial position, results of operations, cash flows and liquidity.
We may make fewer sales to these customers for a variety of reasons, including, but not limited to: ● loss of business relationship; ● reduced or delayed customer requirements; 17 Table of Contents ● the insourcing of business that has been traditionally outsourced to us; ● strikes or other work stoppages affecting production by our customers; or ● reduced demand for our customers’ products, including as a result of inflationary pressures, rising interest rates, recessionary concerns and/or geopolitical events.
We may make fewer sales to these customers for a variety of reasons, including, but not limited to: ● loss of business relationship; ● reduced or delayed customer requirements; ● the insourcing of business that has been traditionally outsourced to us; ● strikes or other work stoppages affecting production by our customers; or ● reduced demand for our customers’ products, including as a result of inflationary pressures, rising interest rates, recessionary concerns and/or geopolitical events.
Any such failure could seriously harm our financial condition, results of operations and cash flows. 19 Table of Contents We routinely evaluate potential acquisition candidates and engage in discussions and negotiations regarding potential acquisitions; however, even if we execute a definitive agreement for an acquisition, there can be no assurance that we will consummate the transaction within the anticipated closing timeframe, or at all.
Any such failure could seriously harm our financial condition, results of operations and cash flows. We routinely evaluate potential acquisition candidates and engage in discussions and negotiations regarding potential acquisitions; however, even if we execute a definitive agreement for an acquisition, there can be no assurance that we will consummate the transaction within the anticipated closing timeframe, or at all.
Although we have invested in the protection of our data and information technology to reduce these risks and periodically test the security of our information systems network, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems that could have a material adverse effect on our financial condition, results of operations and liquidity.
Although we have invested in the protection of our data and information 18 Table of Contents technology to reduce these risks and periodically test the security of our information systems network, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems that could have a material adverse effect on our financial condition, results of operations and liquidity.
The continued success of our business will depend upon our ability to: ● hire, retain and expand our pool of qualified engineering and trade-skilled personnel; ● maintain technological leadership in our industry; ● implement new and expand upon current robotics, automation and tooling technologies; and ● anticipate or respond to changes in manufacturing processes in a cost-effective and timely manner.
The continued success of our business will depend upon our ability to: ● hire, retain and expand our pool of qualified engineering and trade-skilled personnel; 15 Table of Contents ● maintain technological leadership in our industry; ● implement new and expand upon current robotics, automation and tooling technologies; and ● anticipate or respond to changes in manufacturing processes in a cost-effective and timely manner.
The competitors in these markets may, among other things: ● respond more quickly to new or emerging technologies; ● have greater name recognition, critical mass or geographic market presence; ● be better positioned to take advantage of acquisition opportunities; ● adapt more quickly to changes in customer requirements; ● devote greater resources to the development, promotion and sale of their processes and solutions; ● be better positioned to compete on price due to any combination of low-cost labor, raw materials, components, facilities or other operating items, or willingness to make sales at lower margins than us; ● consolidate with other competitors in the industry which may create increased pricing and competitive pressures on our business; and ● be better able to utilize excess capacity which may reduce the cost of their processes and solutions. 16 Table of Contents Competitors with lower cost structures may have a competitive advantage over us.
The competitors in these markets may, among other things: ● respond more quickly to new or emerging technologies; ● have greater name recognition, critical mass or geographic market presence; ● be better positioned to take advantage of acquisition opportunities; ● adapt more quickly to changes in customer requirements; ● devote greater resources to the development, promotion and sale of their processes and solutions; ● be better positioned to compete on price due to any combination of low-cost labor, raw materials, components, facilities or other operating items, or willingness to make sales at lower margins than us; ● consolidate with other competitors in the industry which may create increased pricing and competitive pressures on our business; and ● be better able to utilize excess capacity which may reduce the cost of their processes and solutions.
Some of our suppliers supply components and materials that cannot be quickly or inexpensively re-sourced to another supplier due to long lead times and contractual commitments that might be required by another supplier in order to provide the components or materials. Increases in the cost of employee benefits could impact our financial results and cash flows.
Some of our suppliers supply components and materials that cannot be quickly or inexpensively re-sourced to another supplier due to long lead times and contractual commitments that might be required by another supplier in order to provide the components or materials. ​ 17 Table of Contents Increases in the cost of employee benefits could impact our financial results and cash flows.
Severe weather or other natural disasters could be destructive, which could result in increased costs, including supply chain costs. In addition, a number of government bodies have finalized, proposed or are contemplating legislative and regulatory changes in response to growing concerns about climate change.
Severe weather or other natural disasters could be destructive, which could result in increased costs, including supply chain costs. 19 Table of Contents In addition, a number of government bodies have finalized, proposed or are contemplating legislative and regulatory changes in response to growing concerns about climate change.
We may incur additional expenses and delays due to technical problems or other interruptions at our manufacturing facilities. Disruptions in operations due to technical problems or power interruptions as well as other interruptions such as floods, fire, other natural disasters, epidemics or pandemics like COVID-19 could adversely affect the manufacturing capacity of our facilities.
We may incur additional expenses and delays due to technical problems or other interruptions at our manufacturing facilities. Disruptions in operations due to technical problems or power interruptions as well as other interruptions such as floods, fire, other natural disasters, epidemics or pandemics could adversely affect the manufacturing capacity of our facilities.
We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012 (JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards 26 Table of Contents apply to private companies.
We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012 (JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.
The volume and timing of sales to our customers may vary due to, among others: ● variation in demand for or discontinuation of our customers’ products; ● our customers’ attempts to manage their inventory; ● design changes; ● changes in our customers’ manufacturing strategies; ● disruptive events in the markets in which our customers operate, including natural disasters, epidemics and pandemics like COVID-19; and ● acquisitions of or consolidation among customers.
The volume and timing of sales to our customers may vary due to, among others: ● variation in demand for or discontinuation of our customers’ products; ● our customers’ attempts to manage their inventory; ● design changes; ● changes in our customers’ manufacturing strategies; ● disruptive events in the markets in which our customers operate, including natural disasters and epidemics; ● acquisitions of or consolidation among customers.
These factors include: ● seasonality of demand for our customers’ products which may cause our manufacturing capacity to be underutilized for periods of time; ● our customers’ failure to successfully market their products, to gain or retain widespread commercial acceptance of their products or to compete effectively in their industries; ● loss of market share for our customers’ products, which may lead our customers to reduce or discontinue purchasing our processes and solutions and to reduce prices, thereby exerting pricing pressure on us; ● economic conditions in the markets in which our customers operate, in particular, the United States, including inflationary pressures and the other negative impacts on economic conditions, as well as recessionary periods such as a global economic downturn; ● our customers’ decision to insource the production of components that has traditionally been outsourced to us; and 14 Table of Contents ● product design changes or manufacturing process changes that may reduce or eliminate demand for the components we supply.
These factors include: ● seasonality of demand for our customers’ products which may cause our manufacturing capacity to be underutilized for periods of time; ● our customers’ failure to successfully market their products, to gain or retain widespread commercial acceptance of their products or to compete effectively in their industries; ● loss of market share for our customers’ products, which may lead our customers to reduce or discontinue purchasing our processes and solutions and to reduce prices, thereby exerting pricing pressure on us; ● economic conditions in the markets in which our customers operate, in particular, the United States, including inflationary pressures and the other negative impacts on economic conditions, as well as recessionary periods such as a global economic downturn; ● our customers’ decision to insource the production of components that has traditionally been outsourced to us; and ● product design changes or manufacturing process changes that may reduce or eliminate demand for the components we supply. 13 Table of Contents We expect that future sales will continue to depend on the success of our customers.
If these new customers experience reduced demand for their products or financial difficulties, our future prospects will be negatively affected as well. We depend on our key executive officers, managers, and trade-skilled personnel and may have difficulty retaining and recruiting qualified employees.
If these new customers experience reduced demand for their products or financial difficulties, our future prospects will be negatively affected as well. 16 Table of Contents We depend on our key executive officers, managers, and trade-skilled personnel and may have difficulty retaining and recruiting qualified employees.
We are dependent on information technology and our systems and infrastructure face certain risks, including cyber security risks and data leakage risks. We are dependent on information technology systems and infrastructure that could be damaged or interrupted by a variety of factors.
We are dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity risks and data leakage risks. We are dependent on information technology systems and infrastructure that could be damaged or interrupted by a variety of factors.
Geopolitical events, increased political instability and social unrest, evidenced by the threat or occurrence of terrorist attacks or conflicts, enhanced national security measures, the risks related to epidemics or pandemics like COVID-19 and the related decline in consumer confidence may hinder our ability to do business.
Geopolitical events, increased political instability and social unrest, evidenced by the threat or occurrence of terrorist attacks or conflicts, enhanced national security measures, the risks related to epidemics and the related decline in consumer confidence may hinder our ability to do business.
Furthermore, any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or obtain adequate insurance in the future. The components we manufacture can expose us to potential liabilities.
Furthermore, any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or obtain adequate insurance in the future. 20 Table of Contents The components we manufacture can expose us to potential liabilities.
As of December 31, 2022, our employees and certain former employees, through their interests in the ESOP and the Mayville Engineering Company, Inc. 401(k) Plan (the 401(k) Plan), beneficially owned approximately 45% of the outstanding shares of our common stock.
As of December 31, 2023, our employees and certain former employees, through their interests in the ESOP and the Mayville Engineering Company, Inc. 401(k) Plan (the 401(k) Plan), beneficially owned approximately 36% of the outstanding shares of our common stock.
The Credit Agreement also provides for an additional $100.0 million of capacity through an accordion feature. 23 Table of Contents Our Credit Agreement contains a number of covenants that limit our ability and the ability of our subsidiaries to: ● create, incur or assume indebtedness (other than certain permitted indebtedness); ● create or incur liens (other than certain permitted liens); ● make investments (other than certain permitted investments); ● merge or consolidate with another entity; ● make asset dispositions (other than certain permitted dispositions); ● declare or pay any dividend or any other distribution to shareholders; ● enter into transactions with affiliates; ● make certain organizational changes, including changing our fiscal year end or amending our organizational documents; ● enter into any agreement further restricting our ability to create or assume any lien; ● sell notes receivable or accounts receivable except under certain circumstances; ● enter into sale leaseback transactions; ● incur capital expenditures in excess of $35.0 million in any fiscal year (or in excess of $65.0 million and $70.0 million in 2022 and 2021, respectively); ● permit any person or group other than the ESOP or other employee benefit plan of ours (like our 401(k) plan) to own or control more than 35% of our equity interests; or ● permit our Board of Directors to not be composed of a majority of our continuing directors (i.e., our directors as of September 26, 2019 and any additional or replacement directors that have been approved by at least 51% of the directors then in office).
Our Credit Agreement contains a number of covenants that limit our ability and the ability of our subsidiaries to: ● create, incur or assume indebtedness (other than certain permitted indebtedness); ● create or incur liens (other than certain permitted liens); ● make investments (other than certain permitted investments); ● merge or consolidate with another entity; ● make asset dispositions (other than certain permitted dispositions); ● declare or pay any dividend or any other distribution to shareholders; ● enter into transactions with affiliates; ● make certain organizational changes, including changing our fiscal year end or amending our organizational documents; ● enter into any agreement further restricting our ability to create or assume any lien; ● sell notes receivable or accounts receivable except under certain circumstances; ● enter into sale leaseback transactions; 22 Table of Contents ● incur capital expenditures in excess of $35.0 million in any fiscal year; ● permit any person or group other than the ESOP or other employee benefit plan of ours (like our 401(k) plan) to own or control more than 35% of our equity interests; or ● permit our Board of Directors to not be composed of a majority of our continuing directors (i.e., our directors as of September 26, 2019 and any additional or replacement directors that have been approved by at least 51% of the directors then in office).
If we or the businesses or companies we acquire have failed or fail in 22 Table of Contents the future to comply with such laws and regulations, then we could incur liabilities and fines and our operations could be suspended.
If we or the businesses or companies we acquire have failed or fail in the future to comply with such laws and regulations, then we could incur liabilities and fines and our operations could be suspended.
Due to the breadth and complexity of the healthcare reform legislation, the lack of implementing regulations and interpretive guidance and the uncertainty surrounding further reform proposals, we are not able to fully determine the impact that healthcare reform will have in the future on company sponsored medical plans.
Due to the breadth and complexity of the healthcare reform legislation and the uncertainty surrounding further reform proposals, we are not able to fully determine the impact that healthcare reform will have in the future on company sponsored medical plans.
Additionally, the ESOP Trustee and the 401(k) Plan Trustee have fiduciary duties under ERISA which may cause the ESOP Trustee or the 401(k) Plan Trustee to override participants’ voting discretions.
Additionally, the ESOP Trustee and the 23 Table of Contents 401(k) Plan Trustee have fiduciary duties under ERISA which may cause the ESOP Trustee or the 401(k) Plan Trustee to override participants’ voting discretions.
Although we do not have any operations outside the United States, geopolitical events, including the ongoing conflict between Russia and Ukraine and the related economic sanctions by Western governments on Russia, has caused greater uncertainty in the global economy and has led to significant volatility in raw material costs, component costs, commodity prices and energy costs, exacerbating the inflation situation.
Although we do not have any operations outside the United States, geopolitical events, including the ongoing conflict between Russia and Ukraine and the conflict in the Middle East, has caused greater uncertainty in the global economy and has led to significant volatility in raw material costs, component costs, commodity prices and energy costs, exacerbating the inflation situation.
We are affected by developments in the industries in which our customers operate. We derive a large amount of our net sales from customers in the following industry sectors: heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture and military.
We are affected by developments in the industries in which our customers operate. We derive our net sales from customers in the following industry sectors: heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets.
There is also a risk that we could experience a business interruption, theft of information or reputational damage as a result of a cyberattack, such as the infiltration of a data center, or data leakage of confidential information either internally or at our third-party providers.
There is also a risk that we could experience a business interruption, theft of information or reputational damage as a result of a cyberattack, such as the infiltration of a data center, denial-of-service attacks, viruses, malicious software, phishing attacks, security breaches or data leakage of confidential information either internally or at our third-party providers.
For instance, we were negatively impacted in 2022 by the ongoing supply chain constraints impacting our OEMs customers (such as microchip shortages and port issues). In addition, in 2022, continued inflationary pressures on wages, benefits, materials, and manufacturing supplies negatively impacted our results of operations and cash flows.
For instance, we were negatively impacted in 2023 by supply chain constraints impacting certain of our OEMs customers. In addition, in 2023, continued inflationary pressures on wages, benefits, materials, and manufacturing supplies negatively impacted our results of operations and cash flows.
We will remain an emerging growth company until the earliest of (i) the last day of the year which we have total annual gross revenue of $1.07 billion or more; (ii) the last day of the year following the fifth anniversary of the date of the closing of our initial public offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. 25 Table of Contents We will remain an emerging growth company until the earliest of (i) the last day of the year which we have total annual gross revenue of $1.07 billion or more; (ii) the last day of the year following the fifth anniversary of the date of the closing of our initial public offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Macroeconomic conditions, including inflation, rising interest rates and recessionary concerns, as well as ongoing supply chain challenges, labor availability and cost pressures, and the COVID-19 pandemic, have had, and may continue to have, a negative impact on our business, financial condition, cash flows and results of operations.
Macroeconomic conditions, including inflation, elevated interest rates and recessionary concerns, as well as continuing supply chain constraints affecting some of our customers, labor availability and material cost pressures, have had, and may continue to have, a negative impact on our business, financial condition, cash flows and results of operations.
We obtain raw materials, parts and certain components from third-party suppliers. Any delay in receiving supplies (including as a result of the ongoing supply chain constraints) could impair our ability to timely deliver components to our customers and, accordingly, could have an adverse effect on our business, financial condition, results of operations and cash flows.
Our manufacturing operations are dependent upon third-party suppliers, making us vulnerable to supply shortages. We obtain raw materials, parts and certain components from third-party suppliers. Any delay in receiving supplies could impair our ability to timely deliver components to our customers and, accordingly, could have an adverse effect on our business, financial condition, results of operations and cash flows.
We are able to incur additional debt, which could reduce our ability to satisfy our current obligations under our existing indebtedness. At December 31, 2022, we had $72.2 million outstanding under the Revolving Loan.
We are able to incur additional debt, which could reduce our ability to satisfy our current obligations under our existing indebtedness. At December 31, 2023, we had $147.5 million outstanding under our revolving credit facility.
The impact of any volatility in the prices of energy or the raw materials on which we rely, including the reduction in demand for certain components caused by such price volatility, could result in a loss of net sales and profitability and adversely affect our results of operations. 18 Table of Contents Our manufacturing operations are dependent upon third-party suppliers, making us vulnerable to supply shortages.
The impact of any volatility in the prices of energy or the raw materials on which we rely, including the reduction in demand for certain components caused by such price volatility, could result in a loss of net sales and profitability and adversely affect our results of operations.
Additionally, customers may change production quantities or delay production with little lead-time or advance notice. Therefore, we rely on and plan our production and inventory levels based on our customers’ advance orders, commitments and/or forecasts as well as our internal assessments and forecasts of customer demand.
Therefore, we rely on and plan our production and inventory levels based on our customers’ advance orders, commitments and/or forecasts as well as our internal assessments and forecasts of customer demand.
In the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies.
In the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
Although the Credit Agreement contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and we could incur substantial additional indebtedness in compliance with these restrictions. 24 Table of Contents Risks Related to Ownership of Our Common Stock Your ability to influence corporate matters may be limited because the ESOP and our 401(k) plan own a substantial amount of our stock and continue to have significant influence over us, which may limit your ability to influence the outcome of important transactions, including a change in control.
Risks Related to Ownership of Our Common Stock Your ability to influence corporate matters may be limited because the ESOP and our 401(k) plan own a substantial amount of our stock and continue to have significant influence over us, which may limit your ability to influence the outcome of important transactions, including a change in control.
We expect inflationary cost pressures, supply chain challenges and labor shortages to continue in 2023 and we may not be able to fully mitigate the impact of the rising inflationary cost pressures through price increases.
We expect certain supply chain constraints, material cost inflation and inflationary pressures on wages and benefits to continue in 2024 and we may not be able to fully mitigate the impact of the inflationary cost pressures through price increases.
Prior to the completion of our initial public offering we were 100% owned by the ESOP, which is a retirement plan intended to be tax-qualified. If the ESOP fails to meet the requirements of a tax-qualified retirement plan, we could be subject to substantial penalties.
Employee Stock Ownership Plan (ESOP), which is a retirement plan intended to be tax-qualified. If the ESOP fails to meet the requirements of a tax-qualified retirement plan, we could be subject to substantial penalties.
Any of these developments could cause a decline in sales and average selling prices, loss of market share or profit margin compression. Maintaining and improving our competitive position will require successful management of these factors, including continued investment by us in research and development, engineering, marketing and customer service and support.
Maintaining and improving our competitive position will require successful management of these factors, including continued investment by us in research and development, engineering, marketing and customer service and support.
We also expect our competitors to continue to improve the performance of their current processes and solutions, to reduce the prices of their existing processes and solutions and to introduce new processes or solutions that may offer greater performance and improved pricing. Additionally, we may face competition from new entrants to the industry in which we operate.
Competitors with lower cost structures may have a competitive advantage over us. We also expect our competitors to continue to improve the performance of their current processes and solutions, to reduce the prices of their existing processes and solutions and to introduce new processes or solutions that may offer greater performance and improved pricing.
The effect of these events on the volatility of the financial markets could in the future lead to volatility of the market price of our securities and may limit the capital resources available to us, our customers and our suppliers. 20 Table of Contents The impact of foreign trade relations and associated tariffs, as well as our reliance on international suppliers for certain raw materials, could adversely impact our business.
The effect of these events on the volatility of the financial markets could in the future lead to volatility of the market price of our securities and may limit the capital resources available to us, our customers and our suppliers.
Our manufacturing processes and facilities need to comply with applicable statutory and regulatory requirements. We may also have the responsibility to ensure that the processes we use satisfy safety and regulatory standards, including those applicable to our customers and to obtain any necessary certifications.
We may also have the responsibility to ensure that the processes we use satisfy safety and regulatory standards, including those applicable to our customers and to obtain any necessary certifications. In addition, our customers’ products, as well as the manufacturing processes and components that we use to produce such products, are often highly complex.
Accordingly, we do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future.
We do not expect to declare any dividends in the foreseeable future. The continued operation and growth of our business, including acquisitions and capital expenditures, will require substantial cash. Accordingly, we do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future.
For example, our largest customers in 2022, including John Deere, PACCAR Inc. and AB Volvo accounted for 17.2%, 16.0% and 11.9% of our net sales, respectively.
For example, our largest customers in 2023 included PACCAR Inc., John Deere and AB Volvo which accounted for 15.0%, 14.8% and 10.6% of our net sales, respectively.
The amounts that we would be obligated to pay could include taxes on all our taxable income attributable to such open tax years. Any such claims could result in additional costs to us and could have a material adverse effect on our business, financial condition and results of operations.
The amounts that we would be obligated to pay could include taxes on all our taxable income attributable to such open tax years.
We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions.
Most of our customers do not commit to long-term production schedules, which makes it difficult for us to schedule production accurately and achieve maximum efficiency of our manufacturing capacity. Most of our customers do not commit to long-term contracts or firm production schedules, and we continue to experience reduced lead-times in customer orders.
Most of our customers do not commit to long-term contracts or firm production schedules, and we continue to experience reduced lead-times in customer orders. Additionally, customers may change production quantities or delay production with little lead-time or advance notice.
Although we intend to continue to devote significant resources to recruit, train and retain qualified employees, we may not be able to attract, effectively train and retain these employees.
However, competition for our trade-skilled labor is high, particularly in some of the geographic locations where our facilities are located. Although we intend to continue to devote significant resources to recruit, train and retain qualified employees, we may not be able to attract, effectively train and retain these employees.
Healthcare costs have risen significantly in recent years, and recent legislative and private sector initiatives regarding healthcare reform could result in significant changes to the U.S. healthcare system. Pursuant to the Affordable Care Act, employees may be ineligible for certain healthcare subsidies if such employee is eligible and offered qualifying and affordable healthcare coverage under an employer’s plan.
Healthcare costs have risen significantly in recent years, and recent legislative and private sector initiatives regarding healthcare reform could result in significant changes to the U.S. healthcare system.
In addition, as environmental, health and safety laws and regulations have tended to become stricter, we could incur additional costs complying with requirements that are promulgated in the future. 21 Table of Contents If our manufacturing processes do not comply with applicable statutory and regulatory requirements, or if we manufacture components containing manufacturing defects, demand for our capabilities may decline and we may be subject to liability claims.
If our manufacturing processes do not comply with applicable statutory and regulatory requirements, or if we manufacture components containing manufacturing defects, demand for our capabilities may decline and we may be subject to liability claims. Our manufacturing processes and facilities need to comply with applicable statutory and regulatory requirements.
We expect that future sales will continue to depend on the success of our customers. If economic conditions and demand for our customers’ products deteriorate, we may experience a material adverse effect on our business, operating results and financial condition.
If economic conditions and demand for our customers’ products deteriorate, we may experience a material adverse effect on our business, operating results and financial condition. Most of our customers do not commit to long-term production schedules, which makes it difficult for us to schedule production accurately and achieve maximum efficiency of our manufacturing capacity.
On September 26, 2019, and as last amended as of March 31, 2022, we entered into an amended and restated credit agreement (Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, as administrative agent.
On June 28, 2023, we entered into an amended and restated credit agreement (the Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, the Agent. The Credit Agreement provides for a $250,000,000 revolving credit facility, with a letter of credit sub-facility, and a swingline facility in an aggregate amount of $25,000,000.
We offer our processes and solutions in highly competitive markets.
Failure to compete successfully in our markets could materially adversely affect our business, financial condition, results of operations or prospects. We offer our processes and solutions in highly competitive markets.
Removed
The COVID-19 pandemic continues to negatively affect our business, financial condition, cash flows, results of operations, supply chain and raw material availability, as well as customer demand. Since the first quarter of 2020, there has been a worldwide impact from the COVID-19 pandemic.
Added
Additionally, we may face competition from new entrants to the industry in which we operate. Any of these developments could cause a decline in sales and average selling prices, loss of market share or profit margin compression.
Removed
Government authorities have taken measures to try to contain the virus, such as limiting or closing business activities, transportation and person-to-person interactions, resulting in disruptions at some of our manufacturing operations and facilities, as well as the operations of our customers, and those of our suppliers.
Added
The impact of foreign trade relations and associated tariffs, as well as our reliance on international suppliers for certain raw materials, could adversely impact our business. We currently source certain raw materials from international suppliers.
Removed
In some cases, the relaxation of such trends has been followed by actual or contemplated returns to stringent restrictions on commerce or gatherings, including in parts of the United States and the rest of the world.
Added
In addition, as environmental, health and safety laws and regulations have tended to become stricter, we could incur additional costs complying with requirements that are promulgated in the future.
Removed
Global trade conditions and customer trends that originated during the pandemic continue to persist and may also have a long-lasting adverse impact on us independently of the progress on the pandemic.
Added
Any such claims could result in additional costs to us and could have a material adverse effect on our business, financial condition and results of operations. 21 Table of Contents Prior to the completion of our initial public offering we were 100% owned by the Mayville Engineering Company, Inc.
Removed
For example, the COVID-19 pandemic resulted in supply chain issues at our OEM customers (such as microchip shortages and port issues), inflationary pressures on wages, benefits, materials and manufacturing supplies, recessionary concerns and other evolving macroeconomic conditions.
Added
The Credit Agreement also provides for the availability of incremental facilities to the greater of $100,000,000 and 125% of the Company’s twelve month trailing Consolidated EBITDA through an accordion feature. All amounts borrowed under the credit agreement mature on June 28, 2028.
Removed
The COVID-19 pandemic has had, and could continue to have, a negative impact on our business, financial condition, cash flows, results of operations, supply chain, and raw material availability, although the full extent is still uncertain and cannot be predicted. Failure to compete successfully in our markets could materially adversely affect our business, financial condition, results of operations or prospects.
Added
Although the Credit Agreement contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and we could incur substantial additional indebtedness in compliance with these restrictions.
Removed
However, competition for our trade-skilled labor is high, particularly in some of the geographic locations where our facilities are located, and especially in light of the labor pressures resulting from the COVID-19 pandemic.
Removed
We currently source certain raw materials from international suppliers.
Removed
In addition, our customers’ products, as well as the manufacturing processes and components that we use to produce such products, are often highly complex.
Removed
The Credit Agreement provides for (i) a $200.0 million revolving credit facility (the Revolving Loan), with a letter of credit sub-facility in an aggregate amount not to exceed $5.0 million, and a swingline facility in an aggregate amount of $20.0 million.
Removed
This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. 25 Table of Contents We do not expect to declare any dividends in the foreseeable future. The continued operation and growth of our business, including acquisitions and capital expenditures, will require substantial cash.
Removed
We may engage in a business combination with an interested shareholder after the expiration of the three-year period with respect to that shareholder only if one or more of the following conditions is satisfied: (i) our Board of Directors approved the acquisition of the stock before the date on which the shareholder acquired the shares, (ii) the business combination is approved by a majority of our outstanding voting stock not beneficially owned by the interested shareholder or (iii) the consideration to be received by shareholders meets certain fair prices requirements of the WBCL with respect to form and amount.
Removed
Item 1B. Unresolved Staff Comments. None. 27 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePiedmont, MI Manufacturing 34,000 Leased TOTAL 2,959,000 ​ ​ (1) Excludes approximately 182,000 square feet of subleased manufacturing space starting in June 2022.
Biggest changeVanderbilt, MI Manufacturing 40,000 Owned 21. Piedmont, MI Manufacturing 34,000 Leased 22. Milwaukee, WI ​ Corporate Headquarters 17,000 Leased 23. Fond du Lac, WI ​ Manufacturing — (2) ​ Owned TOTAL 3,301,000 ​ ​ (1) Excludes approximately 182,000 square feet of subleased manufacturing space starting in June 2022.
Hazel Park, MI ​ Manufacturing ​ 263,000 (1) ​ Leased 4. Defiance, OH Manufacturing 250,000 Owned 5. Defiance, OH Manufacturing 192,000 Owned 6. Heber Springs, AR Manufacturing 190,000 Owned 7. Bedford, PA Manufacturing 181,000 Leased 8. Mayville, WI Manufacturing 167,000 Owned 9. Beaver Dam, WI Manufacturing 163,000 Owned 10. Wautoma, WI Manufacturing 157,000 Owned 11.
Beaver Dam, WI Manufacturing 303,000 Owned 4. Hazel Park, MI ​ Manufacturing ​ 263,000 (1) ​ Leased 5. Defiance, OH Manufacturing 250,000 Owned 6. Defiance, OH Manufacturing 192,000 Owned 7. Heber Springs, AR Manufacturing 190,000 Owned 8. Bedford, PA Manufacturing 181,000 Leased 9. Mayville, WI Manufacturing 167,000 Owned 10. Beaver Dam, WI Manufacturing 163,000 Owned 11.
Atkins, VA Manufacturing 150,000 Owned 12. Byron Center, MI Manufacturing 138,000 Leased 13. Defiance, OH Manufacturing 90,000 Leased 14. Greenville, MS Manufacturing 76,000 Leased 15. Wayland, MI Manufacturing 75,000 Leased 16. Neillsville, WI Manufacturing 58,000 Owned 17. Vanderbilt, MI Manufacturing 50,000 Owned 18. Neillsville, WI Manufacturing 42,000 Owned 19. Vanderbilt, MI Manufacturing 40,000 Owned 20.
Wautoma, WI Manufacturing 157,000 Owned 12. Atkins, VA Manufacturing 150,000 Owned 13. Byron Center, MI Manufacturing 138,000 Leased 14. Defiance, OH Manufacturing 90,000 Leased 15. Greenville, MS Manufacturing 76,000 Leased 16. Wayland, MI Manufacturing 75,000 Leased 17. Neillsville, WI Manufacturing 58,000 Owned 18. Vanderbilt, MI Manufacturing 50,000 Owned 19. Neillsville, WI Manufacturing 42,000 Owned 20.
We believe that our facilities are sufficient to meet our current and near-term manufacturing needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ Facility Description of Use Square Feet Ownership 1. Mayville, WI ​ Manufacturing / Corporate Headquarters ​ 340,000 ​ Owned 2. Beaver Dam, WI Manufacturing 303,000 Owned 3.
We believe that our facilities are sufficient to meet our current and near-term manufacturing needs. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ Facility Description of Use Square Feet Ownership 1. Mayville, WI ​ Manufacturing ​ 340,000 ​ Owned 2. Fond du Lac, WI ​ Manufacturing ​ 325,000 ​ Owned 3.
Item 2. Properties. We maintain 20 strategically located U.S. facilities comprising approximately three million square feet of manufacturing space with our headquarters in Mayville, WI.
Item 2. Properties. We maintain 23 strategically located U.S. facilities comprising of more than three million square feet of manufacturing space with our headquarters in Milwaukee, WI.
Added
(2) Excludes approximately 23,000 square feet of owned manufacturing space that is leased to a non-related party starting in September 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlso see Note 8 – Contingencies in the Notes to the Consolidated Financial Statements for additional information. Item 4. Mine Safety Disclosures. Not applicable. ​ ​ 28 Table of Contents PART II
Biggest changeAlso see Note 9 – Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information. Item 4. Mine Safety Disclosures. Not applicable. 27 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures ​ 28 ​ ​ ​ ​ PART II ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ 29 Item 6 . Reserved ​ 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 31 Item 7A.
Biggest changeItem 4. Mine Safety Disclosures ​ 27 ​ ​ ​ ​ PART II ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ 28 Item 6 . Reserved ​ 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 30 Item 7A.
Quantitative and Qualitative Disclosures About Market Risk ​ 42 Item 8. Financial Statements and Supplementary Data ​ 43
Quantitative and Qualitative Disclosures About Market Risk ​ 40 Item 8. Financial Statements and Supplementary Data ​ 41

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The table below sets forth information with respect to purchases we made of shares of our common stock during the three months ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number ​ Dollar Value of ​ ​ ​ ​ ​ ​ ​ of Shares ​ Shares that ​ ​ Total ​ ​ ​ ​ Purchased as ​ May Yet Be ​ ​ Number ​ ​ ​ ​ Part of Publicly ​ Purchased ​ ​ of Shares ​ Average Price ​ Announced Plans ​ Under the Plans Period Purchased Paid per Share or Programs (1) or Programs (1) October 2022 ​ — ​ $ — ​ — ​ $ 18,552,679 November 2022 ​ — ​ $ — ​ — ​ $ 18,552,679 December 2022 ​ — ​ $ — ​ — ​ $ 18,552,679 Total — ​ ​ — ​ (2) On October 28, 2019, our Board of Directors approved an increase of our prior share repurchase program from $4.0 million to $25.0 million shares of our common stock through 2021.
Biggest changeIssuer Purchases of Equity Securities The table below sets forth information with respect to purchases we made of shares of our common stock during the three months ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number ​ Dollar Value of ​ ​ ​ ​ ​ ​ ​ of Shares ​ Shares that ​ ​ Total ​ ​ ​ ​ Purchased as ​ May Yet Be ​ ​ Number ​ ​ ​ ​ Part of Publicly ​ Purchased ​ ​ of Shares ​ Average Price ​ Announced Plans ​ Under the Plans Period Purchased Paid per Share or Programs (1) or Programs (1) October 2023 ​ — ​ $ — ​ — ​ $ 25,000,000 November 2023 ​ — ​ $ — ​ — ​ $ 25,000,000 December 2023 ​ — ​ $ — ​ — ​ $ 25,000,000 Total — ​ ​ — ​ (1) On October 19, 2021, the Board of Directors approved a share repurchase program of up to $25 million of shares through 2023.
The new share repurchase program replaced the prior program. 29 Table of Contents Stock Performance Graph The following graph compares the total return on our common stock since the time of the Company’s IPO with similar returns on the Standard & Poor’s (S&P) SmallCap 600 Index and the Dow Jones Industrial Average Index.
The new share repurchase program replaced the prior program. ​ 28 Table of Contents Stock Performance Graph The following graph compares the total return on our common stock since the time of the Company’s IPO with similar returns on the Standard & Poor’s (S&P) SmallCap 600 Index and the Dow Jones Industrial Average Index.
COMPARISON OF CUMULATIVE TOTAL RETURN Among Mayville Engineering Company, Inc., the S&P SmallCap 600 Index and The Dow Jones Industrial Average ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5/9/2019 12/31/2019 ​ 12/31/2020 12/31/2021 12/31/2022 Mayville Engineering Company, Inc. ​ $ 100.00 ​ $ 55.18 ​ $ 78.94 ​ $ 87.71 ​ $ 74.47 S&P SmallCap 600 ​ $ 100.00 ​ $ 106.11 ​ $ 116.26 ​ $ 145.65 ​ $ 120.27 Dow Jones Industrial Average ​ $ 100.00 ​ $ 109.90 ​ $ 117.87 ​ $ 139.94 ​ $ 127.65 ​ Securities Authorized For Issuance Under Equity Compensation Plans See Part III, Item 12, of this Annual Report on Form 10-K for certain information regarding our equity compensation plans. ​
COMPARISON OF CUMULATIVE TOTAL RETURN Among Mayville Engineering Company, Inc., the S&P SmallCap 600 Index and The Dow Jones Industrial Average ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5/9/2019 ​ 12/31/2019 12/31/2020 ​ 12/31/2021 12/31/2022 12/31/2023 Mayville Engineering Company, Inc. ​ $ 100.00 ​ $ 55.18 ​ $ 78.94 ​ $ 87.71 ​ $ 74.47 ​ $ 84.82 S&P SmallCap 600 ​ $ 100.00 ​ $ 106.11 ​ $ 116.26 ​ $ 145.65 ​ $ 120.27 ​ $ 136.97 Dow Jones Industrial Average ​ $ 100.00 ​ $ 109.90 ​ $ 117.87 ​ $ 139.94 ​ $ 127.65 ​ $ 145.14 ​ Securities Authorized For Issuance Under Equity Compensation Plans See Part III, Item 12, of this Annual Report on Form 10-K for certain information regarding our equity compensation plans. ​
As of February 1, 2023, there were five registered shareholders of record of our common stock and thousands of beneficial holders of our common stock, including all the participants in our ESOP and many participants in our 401(k) Plan. We have never declared or paid any cash dividends on our common stock.
As of February 1, 2024, there were six registered shareholders of record of our common stock and thousands of beneficial holders of our common stock, including all the participants in our ESOP and many participants in our 401(k) Plan. We have never declared or paid any cash dividends on our common stock.
On October 19, 2021, the Board of Directors approved a new share repurchase program of up to $25.0 million of shares of our common stock through 2023.
On October 26, 2023, the Board of Directors approved a new share repurchase program of up to $25 million of shares through 2026.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table presents a reconciliation of net income (loss) and comprehensive income (loss), the most directly comparable measure calculated in accordance with GAAP, to EBITDA and Adjusted EBITDA, and the calculation of EBITDA Margin and Adjusted EBITDA Margin for each of the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended ​ ​ December 31, ​ 2022 2021 2020 Net income (loss) and comprehensive income (loss) ​ $ 18,727 ​ $ (7,451) ​ $ (7,092) Interest expense ​ 3,380 ​ ​ 2,003 ​ ​ 2,668 ​ Provision (benefit) for income taxes ​ 3,667 ​ ​ (1,943) ​ ​ (2,074) ​ Depreciation and amortization ​ 29,311 ​ ​ 31,783 ​ ​ 32,089 ​ EBITDA ​ 55,085 ​ 24,392 ​ 25,591 ​ CEO transition costs ​ 1,512 ​ ​ — ​ ​ — ​ IPO stock-based compensation expense ​ — ​ ​ — ​ ​ 1,029 ​ Stock-based compensation expense ​ 3,759 ​ ​ 4,962 ​ ​ 3,703 ​ Hazel Park transition costs due to former fitness customer ​ 4,768 ​ ​ — ​ ​ — ​ Greenwood restructuring charges ​ ​ — ​ ​ — ​ ​ 2,524 ​ Impairment of inventory and loss on contracts ​ — ​ ​ 700 ​ ​ — ​ Impairment of long-lived assets and (gain) loss on contracts ​ (4,346) ​ ​ 16,151 ​ ​ — ​ Adjusted EBITDA ​ $ 60,778 ​ $ 46,205 ​ $ 32,847 ​ Net sales ​ $ 539,392 ​ $ 454,826 ​ $ 357,606 ​ EBITDA Margin ​ 10.2 % 5.4 % 7.2 % Adjusted EBITDA Margin ​ 11.3 % 10.2 % 9.2 % ​ 35 Table of Contents Consolidated Results of Operations Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ 2021 ​ ​ Increase (Decrease) ​ ​ ​ ​ % of Net ​ ​ ​ ​ % of Net ​ ​ Amount ​ ​ ​ Amount Sales ​ Amount Sales ​ Change % Change ​ Net sales ​ $ 539,392 ​ 100.0 % ​ $ 454,826 ​ 100.0 % ​ $ 84,566 ​ 18.6 % Cost of sales ​ ​ 478,323 ​ 88.7 % ​ ​ 403,451 ​ 88.7 % ​ ​ 74,872 ​ 18.6 % Manufacturing margins ​ ​ 61,069 ​ 11.3 % ​ ​ 51,375 ​ 11.3 % ​ ​ 9,694 ​ 18.9 % Amortization of intangible assets ​ 6,952 1.3 % ​ ​ 10,706 2.4 % ​ ​ (3,754) (35.1) % Profit sharing, bonuses and deferred compensation ​ 7,997 1.5 % ​ ​ 11,500 2.5 % ​ ​ (3,503) (30.5) % Other selling, general and administrative expenses ​ 24,692 4.6 % ​ ​ 20,409 4.5 % ​ ​ 4,283 21.0 % Impairment of long-lived assets and (gain) loss on contracts ​ (4,346) (0.8) % ​ ​ 16,151 3.6 % ​ ​ (20,497) (126.9) % Income (loss) from operations ​ 25,774 4.8 % ​ ​ (7,391) (1.6) % ​ ​ 33,165 448.7 % Interest expense ​ (3,380) 0.6 % ​ ​ (2,003) 0.4 % ​ ​ 1,377 68.7 % Provision (benefit) for income taxes ​ 3,667 0.7 % ​ ​ (1,943) (0.4) % ​ ​ 5,610 288.7 % Net income (loss) and comprehensive income (loss) ​ $ 18,727 3.5 % ​ $ (7,451) (1.6) % ​ $ 26,178 351.3 % EBITDA ​ $ 55,085 10.2 % ​ $ 24,392 5.4 % ​ $ 30,693 125.8 % Adjusted EBITDA ​ $ 60,778 11.3 % ​ $ 46,205 10.2 % ​ $ 14,573 31.5 % ​ Net Sales.
Biggest changePotential differences between our measures of EBITDA and Adjusted EBITDA compared to other similar companies’ measures of EBITDA and Adjusted EBITDA may include differences in capital structure and tax positions. ​ 33 Table of Contents The following table presents a reconciliation of net income (loss) and comprehensive income (loss), the most directly comparable measure calculated in accordance with GAAP, to EBITDA and Adjusted EBITDA, and the calculation of EBITDA Margin and Adjusted EBITDA Margin for each of the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended ​ ​ December 31, ​ 2023 2022 2021 Net income (loss) and comprehensive income (loss) ​ $ 7,844 ​ $ 18,727 ​ $ (7,451) Interest expense ​ 11,092 ​ ​ 3,380 ​ ​ 2,003 ​ Provision (benefit) for income taxes ​ 1,039 ​ ​ 3,667 ​ ​ (1,943) ​ Depreciation and amortization ​ 35,080 ​ ​ 29,311 ​ ​ 31,783 ​ EBITDA ​ 55,055 ​ 55,085 ​ 24,392 ​ CEO transition costs (1) ​ ​ — ​ ​ 1,512 ​ ​ — ​ Loss on extinguishment of debt (2) ​ 216 ​ ​ — ​ ​ — ​ MSA acquisition related costs (3) ​ 1,411 ​ ​ — ​ ​ — ​ Stock-based compensation expense (4) ​ 4,485 ​ ​ 3,759 ​ ​ 4,962 ​ Field replacement claim (5) ​ ​ 490 ​ ​ — ​ ​ — ​ Hazel Park transition and legal costs due to former fitness customer (6) ​ 2,650 ​ ​ 4,768 ​ ​ — ​ Costs recognized on step-up of MSA acquired inventory (7) ​ ​ 891 ​ ​ — ​ ​ — ​ Impairment of inventory and loss on contracts (8) ​ — ​ ​ — ​ ​ 700 ​ Impairment of long-lived assets and (gain) loss on contracts (9) ​ — ​ ​ (4,346) ​ ​ 16,151 ​ COO restructuring costs (10) ​ ​ 855 ​ ​ — ​ ​ — ​ Adjusted EBITDA ​ $ 66,053 ​ $ 60,778 ​ $ 46,205 ​ Net sales ​ $ 588,425 ​ $ 539,392 ​ $ 454,826 ​ EBITDA Margin ​ 9.4 % 10.2 % 5.4 % Adjusted EBITDA Margin ​ 11.2 % 11.3 % 10.2 % (1) Costs, primarily professional services and legal fees, associated with the retirement and replacement of the former CEO.
We present Adjusted EBITDA and Adjusted EBITDA Margin as management uses these measures as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry.
We present EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin as management uses these measures as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry.
The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our financial statements. These critical accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.
The methods, estimates, and judgments that we use in applying our accounting estimates have a significant impact on the results that we report in our financial statements. These critical accounting estimates require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.
Leasehold improvements are amortized over the lesser of the life of the underlying asset or the remaining lease term. Our intangible assets were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets. Other Selling, General, and Administrative Expenses.
Leasehold improvements are depreciated over the lesser of the life of the underlying asset or the remaining lease term. Our intangible assets were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets. Other Selling, General, and Administrative Expenses.
We carry property, plant and equipment on our balance sheet at cost, net of accumulated depreciation and amortization. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the asset. Amortization expense is the periodic expense related to leasehold improvements and intangible assets.
We carry property, plant and equipment on our balance sheet at cost, net of accumulated depreciation. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the asset. The periodic expense related to leasehold improvements and intangible assets is depreciation and amortization expense, respectively.
We will continue to have access to the availability currently provided under the Credit Agreement as long as we remain compliant with the financial covenants. Based on our estimates at this time, we expect to be in compliance with these financial covenants through 2023 and the foreseeable future.
We will continue to have access to the availability currently provided under the Credit Agreement as long as we remain compliant with the financial covenants. Based on our estimates at this time, we expect to be in compliance with these financial covenants through 2024 and the foreseeable future.
We believe that our operating cash flow and available borrowings under the Credit Agreement are sufficient to fund our operations for 2023 and beyond. However, future cash flows are subject to a number of variables, and additional capital expenditures will be required to conduct our operations.
We believe that our operating cash flow and available borrowings under the Credit Agreement are sufficient to fund our operations for 2024 and beyond. However, future cash flows are subject to a number of variables, and additional capital expenditures will be required to conduct our operations.
The notification 36 Table of Contents informed the Company that it did not forecast any demand for any products or parts that were the subject of the agreement between the Company and the customer for the remainder of the agreement’s term, which ends in March 2026. Given the circumstances, GAAP required the Company to assess whether the assets were impaired.
The notification informed the Company that it did not forecast any demand for any products or parts that were the subject of the agreement between the Company and the customer for the remainder of the agreement’s term, which ends in March 2026. Given the circumstances, GAAP required the Company to assess whether the assets were impaired.
If we seek additional capital, we may do so through borrowings under the Credit Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means. We cannot guarantee that this additional capital will be available on acceptable terms or at all.
If we seek additional capital, we may do so through borrowings under the Credit Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means. We cannot 38 Table of Contents guarantee that this additional capital will be available on acceptable terms or at all.
The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness, create or incur liens, make certain investments, merge or consolidate with another entity, make certain asset dispositions, pay dividends or other distributions to shareholders, enter into transactions with affiliates, enter into sale leaseback transactions or make capital expenditures.
The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale leaseback transactions; and exceed the limits on annual capital expenditures.
We must pay a commitment fee rate ranging from 0.20% to 0.50% per annum on the average daily unused portion of the aggregate unused revolving commitments under the Credit Agreement. We must also pay fees as specified in the Fee Letter (as defined in the Credit Agreement) and with respect to any letters of credit issued under the Credit Agreement.
We must pay a commitment fee of 0.20% to 0.35% per annum on the average daily unused portion of the aggregate unused revolving commitments under the Credit Agreement. We must also pay fees as specified in the Fee Letter (as defined in the Credit Agreement) and with respect to any letters of credit issued under the Credit Agreement.
The Company’s decision to repurchase shares in 2023 will depend on business conditions, free cash flow generation, other cash requirements and stock price. See Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, for additional information regarding share repurchases.
The Company’s decision to repurchase additional shares in 2024 will depend on business conditions, free cash flow generation, other cash requirements and stock price. See Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for additional information regarding share repurchases.
We have developed long-standing relationships with our blue-chip customers based upon a high level of experience, trust and confidence. Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.
We have developed long-standing relationships with our blue-chip customers based upon our commitment to “Unmatched Excellence”. Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.
During the twelve months ended December 31, 2022, the Company was able to cancel $2,257 of purchase commitments for property, plant and equipment relating to the former fitness customer that had been recorded as an impairment of long-lived assets and loss on contracts at December 31, 2021, as previously described.
During the twelve months ended December 31, 2022, the Company was able to cancel $2,257 of purchase commitments for property, plant and equipment that had been recorded as an impairment of long-lived assets and loss on contracts at December 31, 2021, as previously described. The cancellation of purchase commitments resulted in the reversal of previously recorded impairment expense.
The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00. At December 31, 2022, our interest coverage ratio was 13.14 to 1.00.
The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00. At December 31, 2023, our interest coverage ratio was 5.49 to 1.00.
Overview MEC is a leading U.S.-based value-added manufacturing partner that provides a full suite of services from concept to production, including prototyping and tooling, production fabrication, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, 33 Table of Contents powersports, agriculture, military and other end markets.
Overview MEC is a leading U.S.-based vertically-integrated, value-added manufacturing partner providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets.
Internal Controls and Procedures Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Due to the factors described in the preceding paragraphs, net loss, comprehensive loss, EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin increased during 2021. 38 Table of Contents Liquidity and Capital Resources The following is a summary of our cash flows from operating, investing, and financing activities, as reflected in the Consolidated Statement of Cash Flows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended ​ ​ December 31, ​ 2022 2021 2020 Net cash provided by operating activities ​ $ 52,426 ​ $ 14,457 ​ $ 36,523 Net cash used in investing activities ​ (50,668) ​ (33,961) ​ (5,774) Net cash provided by (used in) financing activities ​ (1,749) ​ 19,501 ​ (30,629) Net change in cash ​ $ 9 ​ $ (3) ​ $ 120 Cash Flows Analysis Twelve Months Ended December 31, 2022 Compared to Twelve Months Ended December 31, 2021 Operating Activities.
Due to the factors described in the preceding paragraphs, Adjusted EBITDA increased, while net income, comprehensive income, EBITDA, EBITDA Margin and Adjusted EBITDA Margin decreased during 2023. ​ 36 Table of Contents Liquidity and Capital Resources The following is a summary of our cash flows from operating, investing, and financing activities, as reflected in the Consolidated Statement of Cash Flows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended ​ ​ ​ December 31, ​ 2023 2022 2021 Net cash provided by operating activities ​ ​ $ 40,363 ​ $ 52,426 ​ $ 14,457 Net cash used in investing activities ​ (104,132) ​ (50,668) ​ (33,961) Net cash provided by (used in) financing activities ​ 64,314 ​ (1,749) ​ 19,501 Net change in cash ​ ​ $ 545 ​ $ 9 ​ $ (3) ​ Cash Flows Analysis Twelve Months Ended December 31, 2023 Compared to Twelve Months Ended December 31, 2022 Operating Activities.
Cash used in investing activities was $50,668 for the twelve months ended December 31, 2022, as compared to $33,961 for the twelve months ended December 31, 2021.
Investing Activities. Cash used in investing activities was $104,132 for the twelve months ended December 31, 2023, as compared to $50,668 for the twelve months ended December 31, 2022.
Goodwill, Intangible Assets and Other Long-Lived Assets Our long-lived assets consist primarily of property, equipment, purchased intangible assets and goodwill. The valuation and the impairment testing of these long-lived assets involve significant judgments and assumptions, particularly as they relate to the identification of reporting units, asset groups and the determination of fair value.
The valuation and the impairment testing of these long-lived assets involve significant judgments and assumptions, particularly as they relate to the identification of reporting units, asset groups and the determination of fair value.
Other acquired intangible assets such as customer relationships, trade names, and non-compete agreements are expected to have determinable useful lives. The costs of determinable-lived intangibles are amortized to expense over their estimated lives.
Certain intangible assets are expected to have indefinite lives based on their history and our plans to continue to support and build the acquired brands. Other acquired intangible assets such as customer relationships, trade names, and non-compete agreements are expected to have determinable useful lives. The costs of determinable-lived intangibles are amortized to expense over their estimated lives.
We test our goodwill for impairment on an annual basis, and more frequently if events or changes in circumstances indicate that it might be impaired.
We test our goodwill for impairment on an annual basis, and more frequently if events or changes in circumstances indicate that it might be impaired. For the years ended December 31, 2023 and 2022, there were no events or changes in circumstances that would indicate an impairment of our goodwill.
Net sales are recognized at the time of shipment or at delivery to the customer. Manufacturing Margins. Manufacturing margins represents net sales less cost of sales. Cost of sales consists of all direct and indirect costs used in the manufacturing process, including raw materials, labor, equipment costs, depreciation, lease expenses, subcontract costs and other directly related overhead costs.
Cost of sales consists of all direct and indirect costs used in the manufacturing process, including raw materials, labor, equipment costs, depreciation, lease expenses, subcontract costs and other directly related overhead costs.
Emerging Growth Company The JOBS Act permits an “emerging growth company” like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to use this provision and, as a result, we will comply with new or revised accounting standards as required for private companies.
Emerging Growth Company The JOBS Act permits an “emerging growth company” like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.
If that happens, we will be required to pay interest at the Base Rate, which is the sum of (a) the higher of (i) the Prime Rate (as publicly announced by the Agent from time to time) and (ii) the Federal Funds Rate plus 0.50%, plus (b) 0.00% to 1.00%, depending on the current Total Consolidated Leverage Ratio.
If that happens, we will be required to pay interest at the Base Rate, which is the sum of (a) the higher of (i) the Prime Rate (as publicly announced by the Agent from time to time), (ii) the Federal Funds Rate plus 0.50%, and (iii) Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.00%.
Other selling, general and administrative expenses consist primarily of salaries and personnel costs for our sales and marketing, finance, human resources, information systems, administration and certain other managerial employees and corporate level administrative expenses such as incentive compensation, audit, accounting, legal and other consulting and professional services, travel and insurance. 34 Table of Contents Other Key Performance Indicators EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation and amortization.
Other selling, general and administrative expenses consist primarily of salaries and personnel costs for our sales and marketing, finance, human resources, information systems, administration and certain 32 Table of Contents other managerial employees and certain corporate level administrative expenses such as incentive compensation, audit, accounting, legal and other consulting and professional services, travel, and insurance.
For the year ended December 31, 2022, there were no events or changes in circumstances that indicated a material impairment of our long-lived assets. Determining the useful life of an intangible asset also requires judgment. Certain intangible assets are expected to have indefinite lives based on their history and our plans to continue to support and build the acquired brands.
For the year ended December 31, 2023 and 2022, there were no events or changes in circumstances that indicated a material impairment of our long-lived assets. Determining the useful life of an intangible asset also requires judgment.
Borrowings under the Credit Agreement bear interest at a fluctuating London Interbank Offered Rate (LIBOR) (which may be adjusted for certain reserve requirements), plus 1.00 to 2.00% depending on the current Consolidated Total Leverage Ratio (as defined in the Credit Agreement). Under certain circumstances, we may not be able to pay interest based on LIBOR.
Borrowings under the Credit Agreement bear interest at a fluctuating secured overnight financing rate (SOFR) plus an applicable margin based on the current consolidated total leverage ratio (which may be adjusted for certain reserve requirements), plus 1.25% to 2.75% depending on the current Consolidated Total Leverage Ratio (as defined in the Credit Agreement).
Adjusted EBITDA represents EBITDA before CEO transition costs, stock-based compensation, Hazel Park transition costs due to the former fitness customer, restructuring expenses related to the closure of the Greenwood facility and impairment charges on long-lived assets and inventory and (gain) loss on contracts specifically purchased to meet obligations under the agreement with our former fitness customer.
Adjusted EBITDA represents EBITDA before CEO transition costs, stock-based compensation expense, Mid-States Aluminum (MSA) acquisition related costs, loss on extinguishment of debt, field replacement claim, Hazel Park transition and legal costs due to the former fitness customer, costs recognized on step-up of MSA acquired inventory, impairment charges on long-lived assets and inventory and gain on contracts specifically purchased to meet obligations under the agreement with our former fitness customer and Chief Operating Officer (COO) restructuring costs.
The Credit Agreement also includes provisions for determining a replacement rate when LIBOR is no longer available. At December 31, 2022, the interest rate on outstanding borrowings under the Revolving Loan was 5.69%. At December 31, 2022, we had availability of $127,764 under the Revolving Loan.
The Credit Agreement also includes provisions for determining a replacement rate when SOFR is no longer available. 37 Table of Contents At December 31, 2023, the interest rate on outstanding borrowings under our revolving credit facility was 7.71%. We had availability of $102,507 under the revolving credit facility at December 31, 2023.
Cash provided by financing activities was $19,501 for the twelve months ended December 31, 2021, as compared to cash used in financing activities of $30,629 for the twelve months ended December 31, 2020.
Cash provided by financing activities was $63,314 for the twelve months ended December 31, 2023, as compared to cash used in financing activities of $1,749 for the twelve months ended December 31, 2022.
The cancellation of purchase commitments resulted in the reversal of this amount. Additionally, the Company was able to sell property, plant and equipment resulting in a gain of $2,089 relating to the former fitness customer that had previously been recorded as an impairment of long-lived assets and written down to fair value at December 31, 2021. Interest Expense.
Additionally, the Company was able to sell property, plant and equipment resulting in a gain of $2,089 that had previously been recorded as an impairment of long-lived assets and written down to fair value at December 31, 2021. There was no further gain on contracts attributable to the impairment recorded in 2021 during the twelve months ended December 31, 2023.
Interest expense was $3,380 for the twelve months ended December 31, 2022 as compared to $2,003 for the twelve months ended December 31, 2021. The change is due to higher borrowing levels and interest rates as compared to the prior year period. Provision (Benefit) for Income Taxes.
The change is due to higher borrowing levels to finance the acquisition of MSA, which closed on July 1, 2023, and increased interest rates as compared to the prior year period. Provision for Income Taxes. Income tax expense was $1,039 for the twelve months ended December 31, 2023 as compared to $3,667 for the twelve months ended December 31, 2022.
Other selling, general and administrative expenses were $24,692 for the twelve months ended December 31, 2022 as compared to $20,409 for the twelve months ended December 31, 2021, an increase of $4,283, or 21.0%.
Other Selling, General and Administrative (SG&A) Expenses. Other selling, general and administrative expenses were $30,182 for the twelve months ended December 31, 2023 as compared to $24,692 for the twelve months ended December 31, 2022, an increase of $5,490, or 22.2%.
The Credit Agreement also requires us to maintain a consolidated total leverage ratio not to exceed 3.25 to 1.00, although such leverage ratio can be increased in connection with certain acquisitions. As of December 31, 2022, our consolidated total leverage ratio was 1.26 to 1.00.
The Credit Agreement also requires us to maintain a consolidated total leverage ratio not to exceed 4.00 to 1.00 (which was increased as of July 1, 2023 from 3.50 to 1.00 in connection with the acquisition of MSA). As of December 31, 2023, our consolidated total leverage ratio was 2.14 to 1.00.
(3) Forecasted interest on debt obligations are based on the debt balance, interest rate, and unused fee of the Company’s revolver credit facility, and the debt balances and interest rates of the Company’s equipment finance agreements as of December 31, 2022. (4) See Note 4 – Leases in the Notes to the Consolidated Financial Statements for additional information.
(3) Forecasted interest on debt obligations are based on the debt balance, interest rate, and unused fee of the Company’s revolving credit facility, debt balance and interest rate of the Company’s Fond due Lac Term Note and the debt balances and interest rates of the Company’s equipment finance agreements as of December 31, 2023.
All key assumptions and valuations are determined by and are the responsibility of management. The factors used in the impairment analysis are inherently subject to uncertainty.
Changes to management assumptions and estimates utilized in the income approach could negatively impact the fair value conclusions for our reporting unit resulting in goodwill impairment. All key assumptions and valuations are determined by and are the responsibility of management. The factors used in the impairment analysis are inherently subject to uncertainty.
The decrease is due to the full amortization of certain intangible assets. Profit Sharing, Bonuses and Deferred Compensation Expenses. Profit sharing, bonuses and deferred compensation expenses were $7,997 for the twelve months ended December 31, 2022 as compared to $11,500 for the twelve months ended December 31, 2021, a decrease of $3,503, or 30.5%.
Profit sharing, bonuses and deferred compensation expenses were $11,588 for the twelve months ended December 31, 2023 as compared to $7,997 for the twelve months ended December 31, 2022, an increase of $3,591, or 44.9%.
The increase was mainly driven by higher consulting, legal, and professional fees, CEO transition costs, wages and benefits due to continued inflationary pressures, information technology, and travel and entertainment expenses. Impairment of Long-Lived Assets and (Gain) Loss on Contracts. At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer.
Impairment of Long-Lived Assets and Gain on Contracts. At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer.
Contractual Obligations The following table presents our obligations and commitments to make future payments under contracts and contingent commitments at December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period ​ Total 2023 2024 – 2025 2026 – 2027 Thereafter Long-term debt principal payment obligations (1) ​ $ 72,236 ​ $ — ​ $ 72,236 ​ $ — ​ $ — Equipment financing agreements (2) ​ ​ 1,470 ​ ​ 1,164 ​ ​ 306 ​ ​ — ​ ​ — Forecasted interest on debt payment obligations (3) ​ ​ 7,800 ​ ​ 4,475 ​ ​ 3,325 ​ ​ — ​ ​ — Finance lease obligations (4) ​ 1,242 ​ 426 ​ 717 ​ 99 ​ — Operating lease obligations (4) ​ 40,668 ​ 5,709 ​ 10,490 ​ 9,329 ​ 15,140 Total ​ $ 123,416 ​ $ 11,774 ​ $ 87,074 ​ $ 9,428 ​ $ 15,140 (1) Principal payments under the Company’s Credit Agreement, which expires in 2024.
Contractual Obligations The following table presents our obligations and commitments to make future payments under contracts and contingent commitments at December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period ​ Total 2024 2025 – 2026 2027 – 2028 Thereafter Long-term debt principal payment obligations (1) ​ $ 149,868 ​ $ 500 ​ $ 1,000 ​ $ 148,368 ​ $ — Equipment financing agreements (2) ​ ​ 306 ​ ​ 306 ​ ​ — ​ ​ — ​ ​ — Forecasted interest on debt payment obligations (3) ​ ​ 29,791 ​ ​ 7,626 ​ ​ 12,840 ​ ​ 9,325 ​ ​ — Finance lease obligations (4) ​ 961 ​ 468 ​ 441 ​ 52 ​ — Operating lease obligations (4) ​ 37,492 ​ 5,840 ​ 10,112 ​ 9,883 ​ 11,657 Total ​ $ 218,418 ​ $ 14,740 ​ $ 24,393 ​ $ 167,628 ​ $ 11,657 (1) Principal payments under the Company’s Credit Agreement, which expires in 2028 and the Fond du Lac Term Note, which is due in full in December 2028.
Please reference Note 7 – Income Taxes in the Notes to the Consolidated Financial Statements for further details.
The decrease of $2,628 is primarily due to higher net income and comprehensive income in the prior year period. Please reference Note 8 – Income Taxes in the Notes to Consolidated Financial Statements for further details.
How We Assess Performance Net Sales. Net sales reflect sales of our components and products net of allowances for returns and discounts. In addition to current macroeconomic conditions and the COVID-19 pandemic, several factors affect our net sales in any given period, including weather, timing of acquisitions and the production schedules of our customers.
In addition to the current macroeconomic conditions, several factors affect our net sales in any given period, including weather, timing of acquisitions and the production schedules of our customers. Net sales are recognized at the time of shipment or at delivery to the customer. Manufacturing Margins. Manufacturing margins represents net sales less cost of sales.
Manufacturing margin percentages were 11.3% for the twelve months ended December 31, 2021 as compared to 8.8% for the twelve months ended December 31, 2020, an increase of 2.5%, which can be attributed to the items discussed above. Profit Sharing, Bonuses and Deferred Compensation.
Manufacturing margin percentages were 11.8% for the twelve months ended December 31, 2023 as compared to 11.3% for the twelve months ended December 31, 2022, an increase of 0.5%. The increase was attributable to the items discussed in the preceding paragraph. Amortization of Intangible Assets.
Cash provided by operating activities was $52,426 for the twelve months ended December 31, 2022 as compared to $14,457 for the twelve months ended December 31, 2021.
Cash provided by operating activities was $40,363 for the twelve months ended December 31, 2023 as compared to $52,426 for the twelve months ended December 31, 2022. Of the $12,063 decrease in operating cash flows, $17,562 was due to a payout of deferred compensation to a retired Company executive.
All amounts are presented in thousands except share amounts, per share data, years and ratios. Critical Accounting Policies and Estimates Critical accounting policies are those policies that, in management’s view, are most important in the portrayal of our financial condition and results of operations. The notes to the consolidated financial statements include full disclosure of significant accounting policies.
All amounts are presented in thousands except share amounts, per share data, years and ratios. Critical Accounting Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts and disclosures.
We have historically relied upon cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth. At December 31, 2022, we had immediate availability of $127,764 through our Revolving Loan and another $100,000 through an accordion feature under our Credit Agreement, subject to covenants under the Credit Agreement.
Capital expenditures for the full year 2024 are expected to be between $15,000 and $20,000. We have historically relied upon cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth.
EBITDA Margin represents EBITDA as a percentage of net sales for each period.
Other Key Performance Indicators EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation and amortization. EBITDA Margin represents EBITDA as a percentage of net sales for each period.
Those critical accounting policies and estimates that require the most significant judgment are discussed further below. See Note 1 – Nature of Business and summary of significant accounting policies, in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for more specifics.
Those critical accounting estimates that require the most significant judgment or involve the selection or application of alternative accounting policies and are material to our consolidated financial statements are discussed further below.
Manufacturing margins were $61,069 for the twelve months ended December 31, 2022 as compared to $51,375 for the twelve months ended December 31, 2021, an increase of $9,694, or 18.9%.
Manufacturing margins were $69,703 for the twelve months ended December 31, 2023 as compared to $61,069 for the twelve months ended December 31, 2022, an increase of $8,634, or 14.1%. The increase was primarily driven by the above-mentioned organic volume growth, MSA acquisition and commercial price actions.
Net sales were $539,392 for the twelve months ended December 31, 2022 as compared to $454,826 for the twelve months ended December 31, 2021, an increase of $84,566, or 18.6%.
Interest Expense. Interest expense was $11,092 for the twelve months ended December 31, 2023 as compared to $3,380 for the twelve months ended December 31, 2022, an increase of $7,712, or 228.2%.
Manufacturing margin percentages were 11.3% for both the twelve months ended December 31, 2022 and 2021. Amortization of Intangible Assets. Amortization of intangible assets were $6,952 for the twelve months ended December 31, 2022 as compared to $10,706 for the twelve months ended December 31, 2021, a decrease of $3,754, or 35.1%.
Amortization of intangible assets were $7,742 for the twelve months ended December 31, 2023 as compared to $6,952 for the twelve months ended December 31, 2022, an increase of $790, or 11.4%. This increase was solely due to the amortization expense associated with the identifiable intangible assets from the MSA acquisition.
Twelve Months Ended December 31, 2021 Compared to Twelve Months Ended December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twelve Months Ended December 31, ​ ​ ​ ​ ​ ​ ​ 2021 ​ 2020 ​ Increase (Decrease) ​ ​ ​ ​ % of Net ​ ​ ​ % of Net ​ Amount ​ ​ ​ ​ Amount Sales Amount Sales Change % Change Net sales ​ $ 454,826 ​ 100.0 % $ 357,606 ​ 100.0 % $ 97,220 ​ 27.2 % Cost of sales ​ ​ 403,451 ​ 88.7 % ​ 326,105 ​ 91.2 % ​ 77,346 ​ 23.7 % Manufacturing margins ​ ​ 51,375 ​ 11.3 % ​ 31,501 ​ 8.8 % ​ 19,874 ​ 63.1 % Amortization of intangibles ​ 10,706 2.4 % ​ 10,706 3.0 % ​ — 0.0 % Profit sharing, bonuses and deferred compensation ​ 11,500 2.5 % ​ 8,250 2.3 % ​ 3,250 39.4 % Other selling, general and administrative expenses ​ 20,409 4.5 % ​ 19,043 5.3 % ​ 1,366 7.2 % Impairment of long-lived assets and loss on contracts ​ 16,151 3.6 % ​ — 0.0 % ​ 16,151 N/A ​ Loss from operations ​ (7,391) (1.6) % ​ (6,498) (1.8) % ​ 893 13.7 % Interest expense ​ (2,003) 0.4 % ​ (2,668) 0.7 % ​ (665) (24.9) % Benefit for income taxes ​ (1,943) (0.4) % ​ (2,074) (0.6) % ​ (131) (6.3) % Net loss and comprehensive loss ​ $ (7,451) (1.6) % $ (7,092) (2.0) % $ 359 5.1 % EBITDA ​ $ 24,392 5.4 % $ 25,591 7.2 % $ (1,199) (4.7) % Adjusted EBITDA ​ $ 46,205 10.2 % $ 32,847 9.2 % $ 13,358 40.7 % ​ 37 Table of Contents Net Sales.
Twelve Months Ended December 31, 2023 Compared to Twelve Months Ended December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ ​ 2022 ​ ​ Increase (Decrease) ​ ​ ​ ​ % of Net ​ ​ ​ ​ % of Net ​ ​ Amount ​ ​ ​ Amount Sales ​ Amount Sales ​ Change % Change ​ Net sales ​ $ 588,425 ​ 100.0 % ​ $ 539,392 ​ 100.0 % ​ $ 49,033 ​ 9.1 % Cost of sales ​ ​ 518,722 ​ 88.2 % ​ ​ 478,323 ​ 88.7 % ​ ​ 40,399 ​ 8.4 % Manufacturing margins ​ ​ 69,703 ​ 11.8 % ​ ​ 61,069 ​ 11.3 % ​ ​ 8,634 ​ 14.1 % Amortization of intangible assets ​ 7,742 1.3 % ​ ​ 6,952 1.3 % ​ ​ 790 11.4 % Profit sharing, bonuses and deferred compensation ​ 11,588 2.0 % ​ ​ 7,997 1.5 % ​ ​ 3,591 44.9 % Other selling, general and administrative expenses ​ 30,182 5.1 % ​ ​ 24,692 4.6 % ​ ​ 5,490 22.2 % Impairment of long-lived assets and gain on contracts ​ — — % ​ ​ (4,346) (0.8) % ​ ​ 4,346 N/A ​ Income from operations ​ 20,191 3.4 % ​ ​ 25,774 4.8 % ​ ​ (5,583) (21.7) % Interest expense ​ (11,092) 1.9 % ​ ​ (3,380) 0.6 % ​ ​ 7,712 228.2 % Loss on extinguishment of debt ​ ​ (216) ​ 0.0 % ​ ​ — ​ — % ​ ​ 216 ​ N/A ​ Provision for income taxes ​ 1,039 0.2 % ​ ​ 3,667 0.7 % ​ ​ (2,628) (71.7) % Net income and comprehensive income ​ $ 7,844 1.3 % ​ $ 18,727 3.5 % ​ $ (10,883) (58.1) % EBITDA ​ $ 55,055 9.4 % ​ $ 55,085 10.2 % ​ $ (30) (0.1) % Adjusted EBITDA ​ $ 66,053 11.2 % ​ $ 60,778 11.3 % ​ $ 5,275 8.7 % ​ Net Sales.
The Credit Agreement provides for a $200,000 Revolving Loan, with a letter of credit sub-facility in an aggregate amount not to exceed $5,000, and a swingline facility in an aggregate amount of $20,000. The Credit Agreement also provides for an additional $100,000 of capacity through an accordion feature. All amounts borrowed under the Credit Agreement mature on September 26, 2024.
The Credit Agreement also provides for the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month trailing Consolidated EBITDA through an accordion feature. All amounts borrowed under the credit agreement mature on June 28, 2028.
Please refer to Note 3 – Bank Revolving Credit Notes in the Notes to the Consolidated Financial Statements for a more detailed discussion. 40 Table of Contents Capital Requirements and Sources of Liquidity During the twelve months ended December 31, 2022 and 2021, our capital expenditures were $58,610 and $39,309, respectively.
See Note 19 – Restructuring within the Notes to Consolidated Financial Statements for additional detail. ​ 34 Table of Contents Consolidated Results of Operations A discussion regarding our financial condition and results of operations for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 is presented below.
Removed
For the years ended December 31, 2022 and 2021, there were no events or changes in circumstances that would indicate a material impairment of our goodwill. 31 Table of Contents Changes to management assumptions and estimates utilized in the income approach could negatively impact the fair value conclusions for our reporting unit resulting in goodwill impairment.
Added
Therefore, these estimates and assumptions affect reported amounts of assets, liabilities, revenue, expenses, and associated disclosures of contingent liabilities. Critical accounting estimates are those estimates that, in management’s view, are most important in the portrayal of our financial condition and results of operations.
Removed
For the twelve months ended December 31, 2021, the Company recorded an impairment of its long-lived assets in the amount of $16,151. Please refer to Note 2 – Select Balance Sheet Data in the Notes to Consolidated Financial Statements for further discussion of the facts and circumstances that led to this impairment.
Added
Management evaluates these estimates on an ongoing basis, using historical experience, consultation with third parties, and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates.
Removed
Income Taxes The provision for, or benefit from, income taxes includes deferred taxes resulting from temporary differences in income for financial and tax purposes using the liability method. Such temporary differences result primarily from differences in the carrying value of assets and liabilities.
Added
Any effects on our business, financial position, or results of operations resulting from revisions to these estimates are recognized in the accounting period in which the facts that give rise to the revision become known.
Removed
Future realization of deferred income tax assets requires sufficient taxable income within the carryback and/or carryforward period available under tax law. The Company evaluates on a quarterly basis whether, based on all available evidence, it is probable that the deferred income tax assets are realizable.
Added
Business Combinations We record assets acquired and liabilities assumed in a business combination under the acquisition method of accounting where consideration is first assigned to identifiable assets and liabilities based on estimated fair values, with any excess recorded as goodwill.
Removed
Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized.
Added
During the measurement period, which is up to one year from the acquisition date, we may adjust provisional amounts that were recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date.
Removed
The evaluation includes the consideration of all available evidence, both positive and negative, regarding the estimated future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, historical taxable income in prior carryback periods if carryback is permitted, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused.
Added
Determining the fair value of assets acquired and liabilities assumed requires significant judgment, including the selection of valuation methodologies. For our recent acquisition, fair value estimates of acquired property and equipment were based on independent appraisals that gave consideration to the highest and best use of the assets.
Removed
The verifiable evidence such as future reversals of existing temporary differences and the ability to carryback are considered before the subjective sources such as estimate future taxable income exclusive of temporary differences and tax planning strategies.
Added
The land, buildings, and improvements; and other property and equipment appraisals used one, or a combination, of the cost, market or sales comparison approaches. Significant estimates and assumptions, including recent sales prices of similar equipment, asset condition, and current and anticipated market trends, were used in determining the fair values of these assets.
Removed
Additionally, we record uncertain tax positions at their net recognizable amount, based on the amount that management deems is more likely than not to be sustained upon ultimate settlement with the tax authorities in jurisdictions in which we operate.
Added
The assistance of an independent third-party valuation firm was used to determine the fair values and useful lives of the finite-lived intangible assets, including customer relationships and developed technology. Valuation methods used were based on management’s forecasted cash inflows and outflows and using a relief from royalty method for developed technologies and the multi-period excess earnings method for customer relationships.
Removed
Revenue recognition The Company recognizes revenue for the transfer of goods or services to a customer in an amount that reflects the consideration it expects to receive in exchange for those goods or services. The Company enters into supply agreements and purchase orders that include both free on board (FOB) origin and FOB destination shipping terms.
Added
Assumptions used in the intangible valuations include forecasted revenue growth rates, discounted future cash flows and the weighted average cost of capital of a select peer group. 30 Table of Contents Goodwill, Intangible Assets and Other Long-Lived Assets Our long-lived assets consist primarily of property, equipment, purchased intangible assets and goodwill.
Removed
Depending on the terms of the agreement, the customer takes ownership at shipment or at delivery, and this is when control transfers. Sales are supported by documentation such as supply agreements and purchase orders, which specify certain terms and conditions including product specifications, quantities, fixed prices, delivery dates and payments terms.
Added
We are choosing to use this provision and, as a result, we will comply with new or revised accounting standards as required for private companies. 31 Table of Contents Internal Controls and Procedures Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company.
Removed
Revenue related to services is recognized in the period in which the services are performed, thus the Company recognizes revenue at a point in time. There are many customers where the Company designs, engineers and builds production tooling, which is purchased by the customer.
Added
Macroeconomic Conditions The broader market dynamics over the past few years have resulted in impacts to the Company, including supply chain constraints affecting some of our customers, material cost inflation and inflationary pressures on wages and benefits due to labor availability.
Removed
Most of the tooling revenue is complete at the point the customer signs off on the product through the Product Part Approval Process (PPAP) and the tool is placed into service.
Added
The Company expects some of these dynamics to continue in 2024 and could continue to have an impact on demand, material costs and labor. How We Assess Performance Net Sales. Net sales reflect sales of our components and products net of allowances for returns and discounts.
Removed
Revenue is recognized when control of the tooling promised under a 32 Table of Contents contract is transferred to the customer either at a point in time or over a period of time in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the goods or services.
Added
(2) Unamortized debt issue costs written off from the prior five-year credit agreement attributable to lenders that are no longer included in the amended and restated credit agreement or decreased their capacity in the amended and restated credit agreement. (3) Transaction costs, primarily legal and professional services, related to the acquisition of MSA.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn addition, commodity raw materials, such as steel, aluminum, copper, paint and paint chemicals, and other production costs are subject to price fluctuations, which could have a negative impact on our results.
Biggest changeCommodity Risk We source a wide variety of materials and components from a network of suppliers. Commodity raw materials, such as steel, aluminum, copper, paint and paint chemicals, and other production costs are subject to price fluctuations, which could have a negative impact on our results.
Interest Rate Risk We are exposed to interest rate risk on certain of our short- and long-term debt obligations used to finance our operations and acquisitions. We have LIBOR-based floating rate borrowings under the Credit Agreement, which exposes us to variability in interest payments due to changes in the referenced interest rates.
Interest Rate Risk We are exposed to interest rate risk on certain of our short- and long-term debt obligations used to finance our operations and acquisitions. We have SOFR-based floating rate borrowings under the Credit Agreement, which exposes us to variability in interest payments due to changes in the referenced interest rates.
We strive to pass along such commodity price increases to customers to avoid profit margin erosion and in many cases utilize contracts with those customers to mitigate the impact of commodity raw material price fluctuations. As of December 31, 2022, we did not have any commodity hedging instruments in place. ​ 42 Table of Contents
We strive to pass along such commodity price increases to customers to avoid profit margin erosion and in many cases utilize contracts with those customers to mitigate the impact of commodity raw material price fluctuations. As of December 31, 2023, we did not have any commodity hedging instruments in place. ​ 40 Table of Contents
A hypothetical 100-basis-point increase in our borrowing rates would have resulted in an additional $0.7 million of interest expense based on our variable rate debt at December 31, 2022. We do not use derivative financial instruments to manage interest risk or to speculate on future changes in interest rates. A rise in interest rates could negatively affect our cash flow.
A hypothetical 100-basis-point increase in our borrowing rates would have resulted in an additional $1.4 million of interest expense based on our variable rate debt at December 31, 2023. We do not use derivative financial instruments to manage interest risk or to speculate on future changes in interest rates. A rise in interest rates could negatively affect our cash flow.
Please see “Liquidity and Capital Resources – Amended and Restated Credit Agreement” in Part II, Item 7 of this Annual Report on Form 10-K and Note 3 – Bank Revolving Credit Notes in the Notes to the Consolidated Financial Statements for more specifics.
Please see “Liquidity and Capital Resources – Amended and Restated Credit Agreement” in Part II, Item 7 of this Annual Report on Form 10-K and Note 4 –Debt in the Notes to Consolidated Financial Statements for more specifics.
The amount borrowed under the Revolver Loan under the Credit Agreement was $72.2 million as of December 31, 2022. The interest rate was 5.69% as of December 31, 2022.
The amount borrowed under our revolving credit facility under the Credit Agreement was $147.5 million with an interest rate of 7.71% as of December 31, 2023.
Removed
Commodity Risk We source a wide variety of materials and components from a network of suppliers. While such materials are generally available from numerous suppliers, the COVID-19 pandemic resulted in availability delays at times.

Other MEC 10-K year-over-year comparisons