[Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section outlines the inherent risks and uncertainties associated with forward-looking statements, based on current management beliefs - The report contains forward-looking statements that involve risks and uncertainties, identified by words such as "seek," "anticipate," "plan," "estimate," "expect," "may," "will," "project," "predict," "potential," "targeting," "intend," "could," "might," "should," "believe" and similar expressions[7](index=7&type=chunk) - Important factors that could cause actual results to differ materially include the negative impacts of the COVID-19 pandemic on business, financial condition, cash flows, results of operations, and supply chain, including inflationary pressures, along with other industry, production, competition, and political risks[8](index=8&type=chunk)[9](index=9&type=chunk) - The Company undertakes no obligation to update or revise any forward-looking statements after their date, except as required by federal securities laws[10](index=10&type=chunk) [PART I. Financial Information](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the Company's unaudited condensed consolidated financial statements and management's analysis of financial condition [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, cash flow, and equity [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheets (March 31, 2022 vs. December 31, 2021) | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------- | :------------- | :---------------- | | Total current assets | $153,203 | $132,566 | | Total assets | $443,442 | $379,473 | | Total current liabilities | $88,786 | $77,372 | | Total liabilities | $240,358 | $181,202 | | Total shareholders' equity | $203,084 | $198,271 | - **Total assets increased by $63,969 thousand (16.9%)** from December 31, 2021, to March 31, 2022, primarily driven by increases in receivables, inventories, and operating lease assets[14](index=14&type=chunk) - **Total liabilities increased by $59,156 thousand (32.7%)**, largely due to increases in bank revolving credit notes and operating lease obligations[14](index=14&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the Company's financial performance, detailing net sales, cost of sales, operating income, and net income Condensed Consolidated Statements of Comprehensive Income (Three Months Ended March 31) | Metric (in thousands, except per share) | 2022 | 2021 | Change | % Change | | :------------------------------------ | :------- | :------- | :------- | :------- | | Net sales | $136,252 | $112,620 | $23,632 | 21.0% | | Cost of sales | $121,370 | $97,844 | $23,526 | 24.0% | | Income from operations | $5,564 | $4,066 | $1,498 | 36.8% | | Net income and comprehensive income | $3,822 | $2,545 | $1,277 | 50.2% | | Basic EPS | $0.19 | $0.13 | $0.06 | 46.2% | | Diluted EPS | $0.19 | $0.12 | $0.07 | 58.3% | - **Net sales increased by 21.0%** year-over-year, while cost of sales increased by 24.0%, leading to a slight increase in manufacturing margins[16](index=16&type=chunk) - A **gain of $1,183 thousand** was recognized from the impairment of long-lived assets and gain on contracts in Q1 2022, compared to no such item in Q1 2021[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details cash inflows and outflows from operating, investing, and financing activities over a specific period Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31) | Cash Flow Activity (in thousands) | 2022 | 2021 | Change | % Change | | :---------------------------------------- | :-------- | :-------- | :-------- | :------- | | Net cash provided by (used in) operating activities | $(425) | $4,194 | $(4,619) | (110.1)% | | Net cash used in investing activities | $(12,620) | $(5,255) | $(7,365) | (140.2)% | | Net cash provided by financing activities | $13,047 | $1,064 | $11,983 | 1126.2% | | Net increase in cash and cash equivalents | $2 | $3 | $(1) | (33.3)% | - Operating activities shifted from providing **$4,194 thousand in cash in 2021 to using $425 thousand in 2022**, a decrease of **$4,619 thousand**[19](index=19&type=chunk) - Cash used in investing activities more than doubled, increasing by **$7,365 thousand**, primarily due to higher purchases of property, plant and equipment[19](index=19&type=chunk) - Financing activities provided significantly more cash, increasing by **$11,983 thousand**, driven by higher borrowings on bank revolving credit notes and treasury stock repurchases[19](index=19&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This section outlines changes in the Company's equity, including paid-in capital, treasury shares, and retained earnings Condensed Consolidated Statements of Shareholders' Equity (March 31, 2022 vs. December 31, 2021) | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------- | :------------- | :---------------- | | Additional Paid-in-Capital | $198,443 | $197,186 | | Treasury Shares | $(6,728) | $(6,462) | | Retained Earnings | $11,369 | $7,547 | | Total Shareholders' Equity | $203,084 | $198,271 | - **Total shareholders' equity increased by $4,813 thousand**, primarily due to net income of **$3,822 thousand** and stock-based compensation of **$1,257 thousand**, partially offset by treasury stock purchases of **$2,323 thousand**[21](index=21&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [Note 1. Basis of presentation](index=10&type=section&id=Note%201.%20Basis%20of%20presentation) This note describes the accounting principles and methods used in preparing the interim financial statements - The interim unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC instructions, reflecting all necessary adjustments for fair presentation[23](index=23&type=chunk) - MEC is a leading U.S.-based value-added manufacturing partner providing prototyping, tooling, fabrication, coating, assembly, and aftermarket components to diverse end markets, operating 19 facilities across several states[25](index=25&type=chunk) - The Company adopted ASC 842, Leases, for annual reporting as of January 1, 2022, using the effective date approach, and early adopted interim reporting guidance for the three months ended March 31, 2022[29](index=29&type=chunk) [Note 2. Select balance sheet data](index=12&type=section&id=Note%202.%20Select%20balance%20sheet%20data) This note provides detailed breakdowns and explanations for specific line items within the balance sheet Inventories (March 31, 2022 vs. December 31, 2021) | Inventory Type (in thousands) | March 31, 2022 | December 31, 2021 | | :--------------------------------- | :------------- | :---------------- | | Finished goods and purchased parts | $42,448 | $41,041 | | Raw materials | $18,720 | $18,905 | | Work-in-process | $11,132 | $10,211 | | Total | $72,300 | $70,157 | - An inventory impairment of **$700 thousand** was recorded at December 31, 2021, due to uncertainty in demand from a new fitness customer, with no additional impairments or reversals as of March 31, 2022[35](index=35&type=chunk)[36](index=36&type=chunk) Property, Plant and Equipment, Net (March 31, 2022 vs. December 31, 2021) | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------------------- | :------------- | :---------------- | | Total property, plant and equipment, net | $124,363 | $120,746 | - A **$1,183 thousand gain** was recognized in Q1 2022 from the cancellation of purchase commitments for property, plant and equipment relating to a new fitness customer, reversing a prior impairment[39](index=39&type=chunk) Intangible Assets, Net (March 31, 2022 vs. December 31, 2021) | Intangible Asset (in thousands) | March 31, 2022 | December 31, 2021 | | :--------------------------------------- | :------------- | :---------------- | | Total amortizable intangible assets, net | $45,212 | $46,950 | | Non-amortizable brand name | $3,811 | $3,811 | | Total intangible assets, net | $49,023 | $50,761 | - Amortization expense for intangible assets decreased to **$1,738 thousand** for the three months ended March 31, 2022, from **$2,677 thousand** in the prior year, due to the full amortization of certain assets[44](index=44&type=chunk) [Note 3. Bank revolving credit notes](index=15&type=section&id=Note%203.%20Bank%20revolving%20credit%20notes) This note details the Company's revolving credit facility, including its terms, covenants, and outstanding balances - The Company has a **$200,000 thousand revolving credit facility**, with an additional **$100,000 thousand debt capacity** through an accordion feature, maturing on September 26, 2024[46](index=46&type=chunk) - As of March 31, 2022, the consolidated total leverage ratio was **1.81 to 1.00** (covenant maximum 3.25 to 1.00) and the interest coverage ratio was **19.13 to 1.00** (covenant minimum 3.00 to 1.00), indicating compliance with all financial covenants[50](index=50&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk) - The amount borrowed on revolving credit notes increased to **$83,330 thousand** at March 31, 2022, from **$67,610 thousand** at December 31, 2021[53](index=53&type=chunk) [Note 4. Leases](index=16&type=section&id=Note%204.%20Leases) This note explains the Company's adoption of ASC 842 and provides details on lease assets, liabilities, and expenses - The Company adopted ASC 842, Leases, as of January 1, 2022, recognizing Right-of-Use (ROU) assets and lease liabilities for operating leases[54](index=54&type=chunk)[57](index=57&type=chunk) Lease Expense (Three Months Ended March 31, 2022) | Lease Expense Component (in thousands) | Amount | | :------------------------------------- | :----- | | Total finance lease expense | $90 | | Operating lease expense | $1,522 | | Short-term lease expense | $179 | | Variable lease expense | $47 | | Total lease expense | $1,838 | Lease Assets and Liabilities (March 31, 2022) | Metric (in thousands) | Amount | | :---------------------- | :----- | | Total lease assets | $40,118 | | Total lease liabilities | $40,576 | [Note 5. Employee stock ownership plan](index=19&type=section&id=Note%205.%20Employee%20stock%20ownership%20plan) This note outlines the Company's Employee Stock Ownership Plan, including related expenses and share allocations - Estimated ESOP expense for the three months ended March 31, 2022, was **$490 thousand**, compared to **$473 thousand** in 2021[64](index=64&type=chunk) - Allocated ESOP shares decreased from **7,292,392** at December 31, 2021, to **6,720,194** at March 31, 2022[65](index=65&type=chunk) [Note 6. Retirement plans](index=20&type=section&id=Note%206.%20Retirement%20plans) This note describes the Company's retirement plans, including the 401(k) Plan and employer contributions - The 401(k) Plan covers substantially all eligible employees, allowing tax-free contributions and employer discretionary profit-sharing contributions[66](index=66&type=chunk)[67](index=67&type=chunk) [Note 7. Income taxes](index=20&type=section&id=Note%207.%20Income%20taxes) This note details the Company's income tax expense, effective tax rate, and unrecognized tax benefits Income Tax Expense and Effective Tax Rate (Three Months Ended March 31) | Metric | 2022 | 2021 | | :----------------- | :------ | :------ | | Income tax expense | $1,175 | $989 | | Effective tax rate | 23.52% | 27.98% | - The ETR decreased from **27.98% in 2021 to 23.52% in 2022**, influenced by state taxes, non-deductible items, R&D credits, and benefits from excess tax deductions related to share-based compensation[69](index=69&type=chunk) - Unrecognized tax benefits related to the R&D tax credit were **$394 thousand** at March 31, 2022, up from **$314 thousand** at December 31, 2021[72](index=72&type=chunk) [Note 8. Contingencies](index=22&type=section&id=Note%208.%20Contingencies) This note addresses potential future obligations arising from claims and lawsuits, assessing their financial impact - Management believes that any reasonably possible loss from current claims and lawsuits is not expected to have a material adverse impact on the consolidated financial statements[74](index=74&type=chunk) [Note 9. Deferred compensation](index=22&type=section&id=Note%209.%20Deferred%20compensation) This note provides information on the Company's deferred compensation plan, including accrued liabilities and credits - The long-term portion of deferred compensation accrued was **$21,913 thousand** at March 31, 2022, a decrease from **$25,117 thousand** at December 31, 2021[78](index=78&type=chunk) - Total credit for the deferred compensation plan was **$1,128 thousand** for the three months ended March 31, 2022, compared to **$170 thousand** in the prior year[78](index=78&type=chunk) [Note 10. Self-Funded insurance](index=22&type=section&id=Note%2010.%20Self-Funded%20insurance) This note details expenses and accrued liabilities related to the Company's self-funded medical benefits program - Self-funded medical benefits expense was approximately **$4,760 thousand** for the three months ended March 31, 2022, a decrease from **$5,096 thousand** in 2021[79](index=79&type=chunk) - An estimated accrued liability for unpaid claims was **$1,571 thousand** at March 31, 2022, up from **$1,471 thousand** at December 31, 2021[79](index=79&type=chunk) [Note 11. Segments](index=22&type=section&id=Note%2011.%20Segments) This note clarifies the Company's operating segments and geographical revenue and asset distribution - The Company operates as one operating segment and does not earn revenues or have long-lived assets in foreign countries[80](index=80&type=chunk) [Note 12. Fair value of financial instruments](index=24&type=section&id=Note%2012.%20Fair%20value%20of%20financial%20instruments) This note provides fair value measurements for financial instruments, particularly deferred compensation liabilities Deferred Compensation Liability Fair Value (March 31, 2022 vs. December 31, 2021) | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Total Deferred compensation liability | $22,941 | $25,117 | | Level 1 | $20,074 | $22,272 | | Level 2 | $2,867 | $2,845 | - Deferred compensation liabilities are recorded at amounts due to participants, with investments primarily classified as Level 1 and Level 2 in the fair value hierarchy[84](index=84&type=chunk) [Note 13. Earnings Per Share](index=24&type=section&id=Note%2013.%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per share, including anti-dilutive impacts - Stock options that were 'in the money' but had an anti-dilutive impact on EPS were **479,947** for Q1 2022, compared to **307,365** for Q1 2021[89](index=89&type=chunk) [Note 14. Revenue Recognition](index=26&type=section&id=Note%2014.%20Revenue%20Recognition) This note disaggregates revenue by product category and details contract assets and liabilities Disaggregated Revenue by Product Category (Three Months Ended March 31) | Product Category (in thousands) | 2022 | 2021 | Change | % Change | | :------------------------------ | :------- | :------- | :------ | :------- | | Fabrication | $82,232 | $69,370 | $12,862 | 18.5% | | Performance structures | $28,959 | $20,455 | $8,504 | 41.6% | | Tube | $18,309 | $14,887 | $3,422 | 23.0% | | Tank | $8,550 | $6,792 | $1,758 | 25.9% | | Outdoor sports | $2,527 | $2,671 | $(144) | (5.4)% | | Total, net sales | $136,252 | $112,620 | $23,632 | 21.0% | Contract Assets and Liabilities (March 31, 2022 vs. December 31, 2021) | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :--------------------- | :------------- | :---------------- | | Contract Assets | $5,196 | $3,950 | | Contract Liabilities | $3,383 | $2,718 | [Note 15. Concentration of major customers](index=27&type=section&id=Note%2015.%20Concentration%20of%20major%20customers) This note identifies major customers and their contribution to net sales and accounts receivable Major Customer Concentration (Three Months Ended March 31, 2022) | Customer | Net Sales % (2022) | Net Sales % (2021) | Accounts Receivable % (2022) | Accounts Receivable % (2021) | | :------- | :----------------- | :----------------- | :--------------------------- | :--------------------------- | | A | 18.2% | 15.7% | 15.3% | 10.2% | | B | 11.1% | 12.0% | <10% | <10% | | D | 15.7% | 13.3% | 11.3% | <10% | | E | <10% | <10% | 13.2% | 11.2% | - Customer A's contribution to net sales increased from **15.7% in Q1 2021 to 18.2% in Q1 2022**, and its share of accounts receivable also rose[95](index=95&type=chunk) [Note 16. Stock based compensation](index=27&type=section&id=Note%2016.%20Stock%20based%20compensation) This note details the Company's stock-based compensation plans, including expense and unrecognized amounts Stock-Based Compensation Expense (Three Months Ended March 31) | Award Type (in thousands) | 2022 | 2021 | | :------------------------ | :----- | :----- | | Unit awards | $751 | $719 | | Option awards | $506 | $481 | | Total | $1,257 | $1,200 | - Unrecognized stock-based compensation expense totaled **$7,497 thousand** as of March 31, 2022, to be expensed over the remaining service period up to February 28, 2023[102](index=102&type=chunk) [Note 17. Subsequent events](index=28&type=section&id=Note%2017.%20Subsequent%20events) This note reports on any significant events or transactions occurring after the reporting period - No material events or transactions requiring recognition or disclosure were discovered during the evaluation of subsequent events since March 31, 2022[103](index=103&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting key trends [Overview](index=29&type=section&id=Overview) This section provides a general description of the Company's business, its core operations, and market focus - MEC is a leading U.S.-based value-added manufacturing partner specializing in prototyping, tooling, production fabrication, coating, assembly, and aftermarket components for diverse end markets[107](index=107&type=chunk) - The Company operates as one segment, focusing on metal components for heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, and military products[108](index=108&type=chunk) [COVID-19 Impact](index=29&type=section&id=COVID-19%20Impact) This section discusses the ongoing negative effects of the COVID-19 pandemic on the Company's operations and financial performance - The COVID-19 pandemic continues to negatively impact the Company's business, financial condition, cash flows, results of operations, supply chain, and raw material availability, with the full extent remaining uncertain[109](index=109&type=chunk) - Net sales for Q1 2022 and 2021 reflected ongoing supply chain constraints and inflationary pressures on wages, benefits, materials, and manufacturing supplies[110](index=110&type=chunk) - The Company's priority is safeguarding employee health and maintaining operational production based on customer demand, aiming to manage through the pandemic's effects[112](index=112&type=chunk) [How We Assess Performance](index=30&type=section&id=How%20We%20Assess%20Performance) This section explains the key financial and operational metrics used by management to evaluate the Company's performance - Net sales are affected by economic conditions, weather, acquisitions, and customer production schedules, with revenue recognized at shipment or delivery[113](index=113&type=chunk) - Manufacturing margins are net sales less cost of sales, with commodity price fluctuations largely mitigated by contractual pass-through agreements with customers[114](index=114&type=chunk) - Adjusted EBITDA, a non-GAAP measure, is used by management and investors to evaluate operating performance, excluding stock-based compensation, Hazel Park transition costs, and impairment charges[118](index=118&type=chunk) EBITDA and Adjusted EBITDA (Three Months Ended March 31) | Metric (in thousands) | 2022 | 2021 | Change | % Change | | :--------------------- | :------ | :------ | :------ | :------- | | Net income | $3,822 | $2,545 | $1,277 | 50.2% | | EBITDA | $12,771 | $11,817 | $954 | 8.1% | | Adjusted EBITDA | $14,772 | $13,017 | $1,755 | 13.5% | | EBITDA Margin | 9.4% | 10.5% | (1.1)% | | | Adjusted EBITDA Margin | 10.8% | 11.6% | (0.8)% | | [Consolidated Results of Operations](index=31&type=section&id=Consolidated%20Results%20of%20Operations) This section provides a detailed analysis of the Company's financial results, including sales, costs, and profitability Consolidated Results of Operations (Three Months Ended March 31) | Metric (in thousands) | 2022 | % of Net Sales (2022) | 2021 | % of Net Sales (2021) | Change | % Change | | :----------------------------- | :------- | :-------------------- | :------- | :-------------------- | :------ | :------- | | Net sales | $136,252 | 100.0% | $112,620 | 100.0% | $23,632 | 21.0% | | Cost of sales | $121,370 | 89.1% | $97,844 | 86.9% | $23,526 | 24.0% | | Manufacturing margins | $14,882 | 10.9% | $14,776 | 13.1% | $106 | 0.7% | | Income from operations | $5,564 | 4.1% | $4,066 | 3.6% | $1,498 | 36.8% | | Net income | $3,822 | 2.8% | $2,545 | 2.3% | $1,277 | 50.2% | - **Net sales increased by 21.0%** primarily due to contractual raw material price pass-throughs to customers, commercial pricing increases, and improved volumes[122](index=122&type=chunk) - Manufacturing margin percentage decreased by **2.2% to 10.9%** due to Hazel Park, MI facility transition costs and the dilutive impact of material price pass-throughs to customers[124](index=124&type=chunk)[126](index=126&type=chunk) - Other selling, general and administrative expenses increased by **21.9% to $5,725 thousand**, driven by higher consulting and professional fees, wages and benefits, information technology, and travel and entertainment expenses[129](index=129&type=chunk) - A **gain of $1,183 thousand** was recorded from the cancellation of purchase commitments for property, plant and equipment relating to a new fitness customer, reversing a prior impairment[131](index=131&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's ability to generate and manage cash, including sources and uses of funds Cash Flows Analysis (Three Months Ended March 31) | Cash Flow Activity (in thousands) | 2022 | 2021 | Change | % Change | | :---------------------------------------- | :-------- | :-------- | :-------- | :------- | | Net cash provided by (used in) operating activities | $(425) | $4,194 | $(4,619) | (110.1)% | | Net cash used in investing activities | $(12,620) | $(5,255) | $(7,365) | (140.2)% | | Net cash provided by financing activities | $13,047 | $1,064 | $11,983 | 1126.2% | - Operating cash flow decreased by **$4,619 thousand**, primarily due to changes in net working capital, including increased accounts receivable and inventories, partially offset by higher net income[135](index=135&type=chunk) - Investing activities used **$12,620 thousand**, an increase of **$7,365 thousand**, driven by ongoing investment in new technology, automation, and repurposing assets at the Hazel Park, MI facility[136](index=136&type=chunk) - Financing activities provided **$13,047 thousand**, an increase of **$11,983 thousand**, mainly from higher borrowings on revolving credit notes and the repurchase of **200,000 shares of common stock for $2,323 thousand**[137](index=137&type=chunk) - Capital expenditures for the full year 2022 are expected to be between **$55,000 thousand and $65,000 thousand**[146](index=146&type=chunk) Contractual Obligations (March 31, 2022) | Obligation Type (in thousands) | Total | 2022 (Remainder) | 2023 – 2024 | 2025 – 2026 | Thereafter | | :--------------------------------------- | :-------- | :--------------- | :---------- | :---------- | :--------- | | Long-term debt principal payment obligations | $83,330 | $0 | $83,330 | $0 | $0 | | Equipment financing agreements | $2,428 | $908 | $1,520 | $0 | $0 | | Forecasted interest on debt payment obligations | $4,351 | $1,341 | $3,010 | $0 | $0 | | Finance lease obligations | $1,208 | $269 | $716 | $223 | $0 | | Operating lease obligations | $43,853 | $4,240 | $11,355 | $9,487 | $18,771 | | Total | $135,170 | $6,758 | $99,931 | $9,710 | $18,771 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the Company's exposure to market risks, including customer forecasts, interest rates, and commodity prices - The Company is exposed to market risk from fluctuating customer order forecasts, which can change dramatically quarter-to-quarter[153](index=153&type=chunk) - Interest rate risk arises from LIBOR-based floating rate borrowings under the Credit Agreement; a hypothetical **100-basis-point increase** in interest rates would result in an additional **$0.2 million** in interest expense based on variable rate debt at March 31, 2022[154](index=154&type=chunk)[156](index=156&type=chunk) - Commodity risk from raw materials like steel and aluminum is largely mitigated by contractual agreements allowing price pass-throughs to customers[157](index=157&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the Company's disclosure controls and procedures, confirming effectiveness and reporting internal control changes - Management, under the supervision of the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022[159](index=159&type=chunk) - The adoption of ASC 842 Leases during Q1 2022 resulted in material changes to internal control over financial reporting, including policy, process, and new software implementation[160](index=160&type=chunk) [PART II. Other Information](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes information on legal proceedings, risk factors, equity sales, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the Company is not currently involved in any material litigation proceedings - The Company is not currently a party to any material litigation proceedings[163](index=163&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section confirms no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[164](index=164&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's share repurchase activities during the quarter ended March 31, 2022 Share Repurchase Activity (Quarter Ended March 31, 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------ | :------------------------------- | :--------------------------- | | January 2022 | 100,000 | $11.78 | | February 2022 | 100,000 | $11.46 | | March 2022 | — | $— | | Total | 200,000 | | - The Company repurchased **200,000 shares of common stock for a total cost of $2,323 thousand** during Q1 2022[137](index=137&type=chunk)[165](index=165&type=chunk) - As of March 31, 2022, **$21,176,679** remained available for repurchase under the **$25 million** share repurchase program approved on October 19, 2021[165](index=165&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of this Quarterly Report on Form 10-Q, including agreements, certifications, and XBRL - Exhibits include the Fourth Amendment to the Amended and Restated Credit Agreement, Retirement Transition Agreement, Agreement on Confidentiality, Assignment of Intellectual Property, Non-Competition and Non-Solicitation, and various certifications (31.1, 31.2, 32) and XBRL documents[168](index=168&type=chunk) [Signatures](index=43&type=section&id=Signatures) This section contains the signatures of the Company's authorized officers, certifying the report's submission - The report is signed by Robert D. Kamphuis, Chairman, President & Chief Executive Officer, and Todd M. Butz, Chief Financial Officer, on May 4, 2022[174](index=174&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-38894 Mayville Engineering Company, Inc. (Exact name of Registrant as specified in its Charter) Wisconsin 39-0944729 (State or other ...

Mayville Engineering Company, Inc. (NYSE:MEC) Q4 2021 Results Conference Call March 2, 2022 10:00 AM ET Company Participants Nathan Elwell - IR Robert Kamphuis - Chairman, President & CEO Todd Butz - CFO Ryan Raber - EVP, Strategy, Sales & Marketing Conference Call Participants Stephen Volkmann - Jefferies Mircea Dobre - Baird Andy Kaplowitz - Citigroup Larry De Maria - William Blair Operator Hello and welcome to today's Mayville Engineering Company's Fourth Quarter and Full Year Earnings Call. My name is B ...

Financial Data and Key Metrics Changes - For Q3 2021, the company reported net sales of $109 million, a 20% increase from $91.1 million in the same period last year, primarily driven by raw material price pass-throughs and improved market demand [36][9] - EBITDA for the third quarter was $10 million, with adjusted EBITDA margin decreasing to 9.2% from 10.8% year-over-year, impacted by inflationary pressures and material price pass-throughs [44][36] - Manufacturing margins increased to $10.9 million, up 12% from $9.7 million in the prior year, despite a decline in margin percentage to 10% from 10.7% due to various cost pressures [37][39] Business Line Data and Key Metrics Changes - The commercial vehicles market faced significant shutdowns, impacting production volumes, but is expected to recover as supply chain issues are resolved [61][16] - Power sports demand remains strong, with expectations for continued retail demand and inventory rebuilding [17] - The construction and access markets are improving, particularly in residential construction, while non-residential sectors are beginning to show signs of recovery [18] Market Data and Key Metrics Changes - The agricultural market is anticipated to improve due to rising crop prices and low equipment inventories, which should lead to increased volumes [19] - The military segment remains stable with solid backlogs for U.S. government contracts, indicating potential for revenue growth [19] Company Strategy and Development Direction - The company is focused on maintaining and expanding its skilled workforce to meet future demand, despite challenges in recruitment [22] - Investments in automation and technology are being prioritized to enhance production capacity and efficiency [22][30] - The company plans to invest $35 million to $40 million in the Hazel Park facility, which is expected to support growth and market diversification [24][45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term demand trends across various markets, despite short-term supply chain disruptions [8][33] - The company anticipates that supply chain issues will be temporary and expects to work through these challenges with customers [12][20] - Future guidance has been adjusted to reflect ongoing supply chain challenges, with projected sales between $450 million to $470 million for 2021 [50] Other Important Information - The company has a strong balance sheet with a leverage ratio of 1.2x, allowing for continued investments and share repurchase programs [48][30] - The new business pipeline remains robust, with numerous projects being actively pursued to expand the customer base [25][29] Q&A Session Summary Question: Clarification on guidance assumptions and production outlook for Q4 - Management indicated that production volumes are expected to improve sequentially in Q4, driven by price increases and modest volume recovery [59][60] Question: Impact of labor availability and strikes on demand outlook - Management acknowledged the impact of labor issues at a key customer but expressed confidence in their own operations and the ability to manage through these challenges [67][68] Question: Potential for EBITDA margin expansion in 2022 - Management noted that higher volumes and better utilization could lead to improved margins, with a focus on recovering from current inflationary pressures [70][72] Question: Update on new customer contributions and M&A pipeline - Management confirmed that the expected EBIT contribution from a new customer remains in the ballpark of $15 million, with ongoing evaluations of M&A opportunities within North America [79][83]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands): | Metric | September 30, 2021 | December 31, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $127 | $121 | $6 | 5.0% | | Receivables, net | $58,841 | $42,080 | $16,761 | 39.8% | | Inventories, net | $62,914 | $41,366 | $21,548 | 52.1% | | Total current assets | $128,384 | $89,248 | $39,136 | 43.9% | | Property, plant and equipment, net | $120,150 | $106,688 | $13,462 | 12.6% | | Total assets | $379,216 | $338,533 | $40,683 | 12.0% | | Total current liabilities | $72,383 | $52,740 | $19,643 | 37.2% | | Bank revolving credit notes | $54,718 | $45,257 | $9,461 | 20.9% | | Total liabilities | $167,074 | $137,676 | $29,398 | 21.4% | | Total shareholders' equity | $212,142 | $200,857 | $11,285 | 5.6% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands, except per share data): | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Change ($) | Change (%) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $109,018 | $91,075 | $17,943 | 19.7% | $341,851 | $262,262 | $79,589 | 30.3% | | Income (loss) from operations | $864 | $280 | $584 | 208.6% | $9,733 | $(7,055) | $16,788 | 238.0% | | Net income (loss) | $275 | $(1,100) | $1,375 | 125.0% | $6,112 | $(8,064) | $14,176 | 175.8% | | Basic EPS | $0.01 | $(0.05) | $0.06 | 120.0% | $0.30 | $(0.41) | $0.71 | 173.2% | | Diluted EPS | $0.01 | $(0.05) | $0.06 | 120.0% | $0.29 | $(0.41) | $0.70 | 170.7% | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands): | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $12,793 | $19,291 | $(6,498) | -33.7% | | Net cash used in investing activities | $(21,240) | $(3,434) | $(17,806) | 518.5% | | Net cash provided by (used in) financing activities | $8,453 | $(15,748) | $24,201 | 153.7% | | Net increase (decrease) in cash and cash equivalents | $6 | $109 | $(103) | -94.5% | [Condensed Consolidated Statements of Shareholders Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%20Equity) Condensed Consolidated Statements of Shareholders' Equity (in thousands): | Metric | Balance as of Dec 31, 2020 | Balance as of Sep 30, 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Additional Paid-in-Capital | $190,793 | $195,994 | $5,201 | 2.7% | | Retained Earnings | $14,998 | $21,110 | $6,112 | 40.7% | | Treasury Shares | $(4,934) | $(4,962) | $(28) | 0.6% | | Total Shareholder's Equity | $200,857 | $212,142 | $11,285 | 5.6% | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Basis of presentation](index=9&type=section&id=Note%201.%20Basis%20of%20presentation) - MEC operates as a leading U.S.-based value-added manufacturing partner, serving diverse end markets including **commercial vehicles, construction, powersports, agriculture, military, and fitness equipment**[26](index=26&type=chunk)[27](index=27&type=chunk)[103](index=103&type=chunk) - The **COVID-19 pandemic** has had and is expected to continue having a negative impact on the company's business, financial condition, cash flows, results of operations, and supply chain[27](index=27&type=chunk)[105](index=105&type=chunk) - The company is evaluating the potential impact of **ASU 2016-02, Leases (Topic 842)**, which requires lessees to record lease assets and liabilities on the balance sheet[28](index=28&type=chunk) - **ASU 2019-12, Income Taxes (Topic 740)**, was adopted during the period ended March 31, 2021, with no impact on the financial statements[29](index=29&type=chunk)[30](index=30&type=chunk) [Note 2. Select balance sheet data](index=10&type=section&id=Note%202.%20Select%20balance%20sheet%20data) Inventory Composition (in thousands): | Category | September 30, 2021 | December 31, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Finished goods and purchased parts | $35,195 | $24,561 | $10,634 | 43.3% | | Raw materials | $19,317 | $11,266 | $8,051 | 71.5% | | Work-in-process | $8,402 | $5,539 | $2,863 | 51.7% | | Total | $62,914 | $41,366 | $21,548 | 52.1% | Property, Plant and Equipment, Net (in thousands): | Category | September 30, 2021 | December 31, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total property, plant and equipment, gross | $311,352 | $283,179 | $28,173 | 9.9% | | Less accumulated depreciation | $191,202 | $176,491 | $14,711 | 8.3% | | Total property, plant and equipment, net | $120,150 | $106,688 | $13,462 | 12.6% | - The company sold its Greenwood, SC manufacturing facility for **$5,300 thousand**, resulting in a gain of **$1,374 thousand**[34](index=34&type=chunk) - An investment of **$11,758 thousand** was made for the ramp-up of production at a new facility in Hazel Park, MI[35](index=35&type=chunk) Intangible Assets, Net (in thousands): | Category | September 30, 2021 | December 31, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total amortizable intangible assets, net | $49,626 | $57,656 | $(8,030) | -13.9% | | Non-amortizable brand name | $3,811 | $3,811 | $0 | 0.0% | | Total intangible assets, net | $53,437 | $61,467 | $(8,030) | -13.1% | | Amortization expense (9 months) | $8,030 | $8,030 | $0 | 0.0% | [Note 3. Bank revolving credit notes](index=12&type=section&id=Note%203.%20Bank%20revolving%20credit%20notes) - The company has a **$200,000 thousand revolving credit facility**, maturing on September 26, 2024, with an additional **$100,000 thousand debt capacity** via an accordion feature[41](index=41&type=chunk)[146](index=146&type=chunk) - As of September 30, 2021, the company was in compliance with all financial covenants, with a consolidated total leverage ratio of **1.23 to 1.00** and an interest coverage ratio of **16.51 to 1.00**[45](index=45&type=chunk)[46](index=46&type=chunk)[151](index=151&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - The Third Amendment to the Credit Agreement increased allowable capital expenditures for 2021 from **$35,000 thousand to $70,000 thousand**[45](index=45&type=chunk)[156](index=156&type=chunk) - The interest rate on outstanding borrowings was **2.25%** as of September 30, 2021, down from 2.50% at December 31, 2020[47](index=47&type=chunk)[149](index=149&type=chunk) [Note 4. Capital lease obligation](index=13&type=section&id=Note%204.%20Capital%20lease%20obligation) Capital Lease Obligations (in thousands): | Year Ending December 31, | Amount | | :--- | :--- | | 2021 (remainder) | $184 | | 2022 | $734 | | 2023 | $734 | | 2024 | $514 | | 2025 | $226 | | Total | $2,392 | | Less payment amount allocated to interest | $172 | | Present value of capital lease obligation | $2,220 | | Current portion of capital lease obligation | $648 | | Long-term portion of capital lease obligation | $1,572 | - Capitalized cost of equipment under capital leases was **$3,847 thousand** as of September 30, 2021, with accumulated depreciation of **$1,732 thousand**[50](index=50&type=chunk) [Note 5. Operating lease obligation](index=13&type=section&id=Note%205.%20Operating%20lease%20obligation) Operating Lease Obligations (in thousands): | Year Ending December 31, | Amount | | :--- | :--- | | 2021 (remainder) | $1,542 | | 2022 | $5,849 | | 2023 | $5,849 | | 2024 | $5,121 | | 2025 | $4,623 | | Thereafter | $22,976 | | Total | $45,960 | Total Rent Expense (in thousands): | Period | 2021 | 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $1,392 | $1,128 | $264 | 23.4% | | Nine Months Ended Sep 30 | $3,557 | $3,283 | $274 | 8.3% | [Note 6. Employee stock ownership plan](index=13&type=section&id=Note%206.%20Employee%20stock%20ownership%20plan) ESOP Expense (in thousands): | Period | 2021 | 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $124 | $0 | $124 | N/A | | Nine Months Ended Sep 30 | $825 | $0 | $825 | N/A | - The increase in ESOP expense is due to the **elimination of the discretionary accrual in fiscal year 2020** due to COVID-19 impacts[123](index=123&type=chunk)[136](index=136&type=chunk) - Allocated ESOP shares decreased from **8,253,533** at December 31, 2020, to **7,292,392** at September 30, 2021[54](index=54&type=chunk) [Note 7. Retirement plans](index=14&type=section&id=Note%207.%20Retirement%20plans) - The Mayville Engineering Company Inc. **401(k) Plan** is a defined contribution plan covering eligible employees[55](index=55&type=chunk)[56](index=56&type=chunk) [Note 8. Income taxes](index=14&type=section&id=Note%208.%20Income%20taxes) Income Tax Expense (Benefit) and Effective Tax Rate (ETR): | Period | Income Tax Expense (Benefit) (in thousands) | ETR | | :--- | :--- | :--- | | Three Months Ended Sep 30, 2021 | $63 | 18.64% | | Three Months Ended Sep 30, 2020 | $733 | -199.82% | | Nine Months Ended Sep 30, 2021 | $2,059 | 25.20% | | Nine Months Ended Sep 30, 2020 | $(1,101) | 12.17% | - The federal operating loss (NOL) carryforward was **$11,699 thousand** as of September 30, 2021, which does not expire[127](index=127&type=chunk)[139](index=139&type=chunk) - Unrecognized tax benefits related to the research and development tax credit amounted to **$301 thousand** at September 30, 2021[62](index=62&type=chunk) [Note 9. Contingencies](index=14&type=section&id=Note%209.%20Contingencies) - Management believes any reasonably possible loss from current legal proceedings is **not expected to have a material adverse impact** on the financial statements[64](index=64&type=chunk) [Note 10. Deferred compensation](index=14&type=section&id=Note%2010.%20Deferred%20compensation) - The total accrued amount for the deferred compensation plan was **$25,373 thousand** at September 30, 2021[68](index=68&type=chunk) Deferred Compensation Expense (in thousands): | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $(89) | $310 | | Nine Months Ended Sep 30 | $316 | $289 | [Note 11. Self-Funded insurance](index=15&type=section&id=Note%2011.%20Self-Funded%20insurance) Healthcare Costs (in thousands): | Period | 2021 | 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $5,513 | $4,757 | $756 | 15.9% | | Nine Months Ended Sep 30 | $12,524 | $16,072 | $(3,548) | -22.1% | - An estimated accrued liability for unpaid claims of **$1,420 thousand** was recorded as of September 30, 2021[69](index=69&type=chunk) [Note 12. Segments](index=15&type=section&id=Note%2012.%20Segments) - The company operates as a **single operating segment** and does not have revenues or long-lived assets in foreign countries[70](index=70&type=chunk) [Note 13. Fair value of financial instruments](index=15&type=section&id=Note%2013.%20Fair%20value%20of%20financial%20instruments) - Deferred compensation liabilities are recorded at fair value, classified as **Level 1** (quoted prices) and **Level 2** (observable data)[73](index=73&type=chunk)[75](index=75&type=chunk) - Cash and cash equivalents are classified as **Level 1** fair value measurements[73](index=73&type=chunk) [Note 14. Earnings Per Share](index=16&type=section&id=Note%2014.%20Earnings%20Per%20Share) Anti-Dilutive Stock Options: | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | 300,510 | — | | Nine Months Ended Sep 30 | 300,510 | — | [Note 15. Revenue Recognition](index=16&type=section&id=Note%2015.%20Revenue%20Recognition) Changes in Contract Assets and Liabilities (in thousands): | Metric | As of Dec 31, 2020 | As of Sep 30, 2021 | Net Activity | | :--- | :--- | :--- | :--- | | Contract Assets | $3,126 | $3,435 | $309 | | Contract Liabilities | $1,060 | $2,472 | $1,412 | Disaggregated Revenue by Product Category (in thousands): | Product Category | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Change ($) | Change (%) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Outdoor sports | $2,230 | $1,898 | $332 | 17.5% | $7,907 | $5,260 | $2,647 | 50.3% | | Fabrication | $74,512 | $56,658 | $17,854 | 31.5% | $222,201 | $169,674 | $52,527 | 31.0% | | Performance structures | $15,632 | $18,543 | $(2,911) | -15.7% | $54,840 | $42,334 | $12,506 | 29.5% | | Tube | $14,392 | $12,772 | $1,620 | 12.7% | $45,039 | $37,047 | $7,992 | 21.6% | | Tank | $5,564 | $4,316 | $1,248 | 28.9% | $17,977 | $13,399 | $4,578 | 34.2% | | Total, net sales | $109,018 | $91,075 | $17,943 | 19.7% | $341,851 | $262,262 | $79,589 | 30.3% | [Note 16. Concentration of major customers](index=17&type=section&id=Note%2016.%20Concentration%20of%20major%20customers) Concentration of Major Customers (10% or greater): | Customer | Net Sales (3 Months Ended Sep 30, 2021) | Net Sales (9 Months Ended Sep 30, 2021) | Accounts Receivable (As of Sep 30, 2021) | | :--- | :--- | :--- | :--- | | A | 18.0% | 16.8% | 15.3% | | D | 13.6% | 14.1% | <10% | | E | 10.8% | <10% | 13.9% | [Note 17. Stock based compensation](index=18&type=section&id=Note%2017.%20Stock%20based%20compensation) - Shareholders approved an amendment to the 2019 Omnibus Incentive Plan, increasing authorized shares for issuance by **2,500,000**[84](index=84&type=chunk) Stock-Based Compensation Expense (in thousands): | Award Type | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Change ($) | Change (%) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Unit awards | $714 | $586 | $128 | 21.8% | $2,282 | $1,670 | $612 | 36.7% | | Option awards | $468 | $392 | $76 | 19.4% | $1,489 | $1,020 | $469 | 46.0% | | Total expense, net of tax | $1,182 | $978 | $204 | 20.9% | $3,771 | $3,719 | $52 | 1.4% | - Unrecognized stock-based compensation expense was **$4,405 thousand** as of September 30, 2021, to be expensed through February 28, 2023[90](index=90&type=chunk) [Note 18. Greenwood Facility Closure, Restructuring, and Sale](index=19&type=section&id=Note%2018.%20Greenwood%20Facility%20Closure%2C%20Restructuring%2C%20and%20Sale) - The Greenwood, SC facility was sold on August 30, 2021, for **$5,300 thousand**, resulting in a gain on sale of **$1,374 thousand**[92](index=92&type=chunk) - The closure eliminated approximately **$825 thousand** in annual depreciation expense for disposed assets and **$800 thousand** in annual facility maintenance costs[96](index=96&type=chunk)[97](index=97&type=chunk) Greenwood Facility Closure and Restructuring Costs (in thousands): | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $0 | $687 | | Nine Months Ended Sep 30 | $0 | $2,524 | [Note 19. Subsequent events](index=19&type=section&id=Note%2019.%20Subsequent%20events) - On October 19, 2021, the Board of Directors approved a new share repurchase program of up to **$25 million** of common stock through 2023[99](index=99&type=chunk)[175](index=175&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition, operational results, and key performance drivers [Overview](index=20&type=section&id=Overview) - MEC is a leading U.S.-based value-added manufacturing partner, serving diverse end markets such as **commercial vehicles, construction, powersports, agriculture, military, and fitness equipment**[103](index=103&type=chunk)[104](index=104&type=chunk) [COVID-19 Impact](index=20&type=section&id=COVID-19%20Impact) - **COVID-19** continues to negatively impact the business, financial condition, cash flows, results of operations, and supply chain[105](index=105&type=chunk) - **Supply chain issues**, including microchip shortages and port issues, led to lower production demand and impacted net sales[106](index=106&type=chunk) - The company is experiencing **inflationary pressures** on wages, benefits, materials, and manufacturing supplies[106](index=106&type=chunk) [How We Assess Performance](index=20&type=section&id=How%20We%20Assess%20Performance) - **Net sales** are affected by general economic conditions, weather, acquisitions, and customer production schedules[109](index=109&type=chunk) - **Manufacturing margins** are largely protected from commodity price fluctuations by contractual pass-through agreements with customers[110](index=110&type=chunk) - Non-GAAP measures like **EBITDA and Adjusted EBITDA** are used as key performance indicators by management and investors[113](index=113&type=chunk)[114](index=114&type=chunk) [Consolidated Results of Operations](index=22&type=section&id=Consolidated%20Results%20of%20Operations) [Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020](index=22&type=section&id=Three%20Months%20Ended%20September%2030%2C%202021%20Compared%20to%20Three%20Months%20Ended%20September%2030%2C%202020) Key Financial Highlights (Three Months Ended September 30, in thousands): | Metric | 2021 | 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $109,018 | $91,075 | $17,943 | 19.7% | | Manufacturing margins | $10,909 | $9,735 | $1,174 | 12.1% | | Income from operations | $864 | $280 | $584 | 208.6% | | Net income (loss) | $275 | $(1,100) | $1,375 | 125.0% | | EBITDA | $8,825 | $8,174 | $651 | 8.0% | | Adjusted EBITDA | $10,007 | $9,839 | $168 | 1.7% | - Net sales increased by **19.7%** due to **$8.4 million** in raw material pricing pass-throughs and **$9.3 million** from increased market demand[118](index=118&type=chunk) - Manufacturing margin percentage decreased from **10.7% to 10.0%** due to raw material pass-throughs, inflation, and **$800 thousand** in launch costs for the new Hazel Park facility[119](index=119&type=chunk)[120](index=120&type=chunk) [Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020](index=24&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202021%20Compared%20to%20Nine%20Months%20Ended%20September%2030%2C%202020) Key Financial Highlights (Nine Months Ended September 30, in thousands): | Metric | 2021 | 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $341,851 | $262,262 | $79,589 | 30.3% | | Manufacturing margins | $41,966 | $20,424 | $21,542 | 105.5% | | Income (loss) from operations | $9,733 | $(7,055) | $16,788 | 238.0% | | Net income (loss) | $6,112 | $(8,064) | $14,176 | 175.8% | | EBITDA | $33,283 | $17,279 | $16,004 | 92.6% | | Adjusted EBITDA | $37,054 | $23,522 | $13,532 | 57.5% | - Net sales increased by **30.3%** due to improved market conditions, increased sales volumes, and **$13.1 million** in raw material price pass-throughs[132](index=132&type=chunk) - Manufacturing margin percentage increased from **7.8% to 12.3%**, driven by higher production volumes and cost reductions from the Greenwood facility closure[133](index=133&type=chunk)[134](index=134&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) [Cash Flows Analysis](index=26&type=section&id=Cash%20Flows%20Analysis) Cash Flows (Nine Months Ended September 30, in thousands): | Activity | 2021 | 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $12,793 | $19,291 | $(6,498) | -33.7% | | Net cash used in investing activities | $(21,240) | $(3,434) | $(17,806) | 518.5% | | Net cash provided by (used in) financing activities | $8,453 | $(15,748) | $24,201 | 153.7% | | Net change in cash | $6 | $109 | $(103) | -94.5% | - The decrease in operating cash flows was primarily due to **changes in net working capital**, including increased accounts receivable and inventories[143](index=143&type=chunk) - Investing activities saw a significant increase in cash used, driven by **$26,588 thousand in capital expenditures**, including **$11,758 thousand** for the new Hazel Park facility[144](index=144&type=chunk)[157](index=157&type=chunk) [Amended and Restated Credit Agreement](index=26&type=section&id=Amended%20and%20Restated%20Credit%20Agreement) - The company has a **$200,000 thousand revolving credit facility**, with **$145,282 thousand available** as of September 30, 2021[146](index=146&type=chunk)[149](index=149&type=chunk) - The interest rate on outstanding borrowings was **2.25%** at September 30, 2021[149](index=149&type=chunk) - The company was in compliance with all financial covenants, including an interest coverage ratio of **16.51 to 1.00** and a consolidated total leverage ratio of **1.23 to 1.00**[151](index=151&type=chunk)[155](index=155&type=chunk) [Second Amendment to the Credit Agreement](index=27&type=section&id=Second%20Amendment%20to%20the%20Credit%20Agreement) - The Second Amendment provided **temporary relief for the consolidated total leverage ratio covenant**, setting it at 3.50 to 1.00 for the quarter[153](index=153&type=chunk)[154](index=154&type=chunk) - This relief came with **increased interest rates and fees**, and restrictions on capital expenditures, acquisitions, and dividends[153](index=153&type=chunk) [Third Amendment to the Credit Agreement](index=27&type=section&id=Third%20Amendment%20to%20the%20Credit%20Agreement) - The Third Amendment increased the allowable capital expenditures for 2021 to **$70,000 thousand** from $35,000 thousand to support a new strategic customer[156](index=156&type=chunk) [Capital Requirements and Sources of Liquidity](index=27&type=section&id=Capital%20Requirements%20and%20Sources%20of%20Liquidity) - Capital expenditures for the nine months ended September 30, 2021, were **$26,588 thousand**, with full-year 2021 expenditures expected to be **$52,000 thousand to $57,000 thousand**[157](index=157&type=chunk) - The company relies on **operating cash flow and available credit facilities** to fund working capital and growth[158](index=158&type=chunk)[159](index=159&type=chunk) [Contractual Obligations](index=28&type=section&id=Contractual%20Obligations) Contractual Obligations at September 30, 2021 (in thousands): | Obligation | Total | 2021 (Remainder) | 2022 – 2023 | 2024 – 2025 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt principal payment obligations | $54,718 | $0 | $0 | $54,718 | $0 | | Forecasted interest on debt payment obligations | $4,784 | $399 | $3,189 | $1,196 | $0 | | Capital lease obligations | $2,392 | $184 | $1,468 | $740 | $0 | | Operating lease obligations | $45,960 | $1,542 | $11,698 | $9,744 | $22,976 | | Total | $107,854 | $2,125 | $16,355 | $66,398 | $22,976 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to market risks like customer forecasts, interest rates, and commodity prices [Customer Forecasts](index=28&type=section&id=Customer%20Forecasts) - The company is exposed to market risk from **fluctuations in customer order forecasts**, which can change dramatically[164](index=164&type=chunk) [Interest Rate Risk](index=28&type=section&id=Interest%20Rate%20Risk) - The company is exposed to interest rate risk on **LIBOR-based floating rate borrowings** under its Credit Agreement[165](index=165&type=chunk) - A hypothetical **100-basis-point increase** in interest rates would result in an additional **$0.1 million** of interest expense[167](index=167&type=chunk) [Commodity Risk](index=28&type=section&id=Commodity%20Risk) - The company faces commodity risk from price fluctuations in raw materials like **steel, aluminum, copper, and paint**[168](index=168&type=chunk) - To mitigate commodity risk, the company strives to **pass price increases to customers** through contractual agreements[168](index=168&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of disclosure controls and procedures and changes in internal financial reporting controls [Evaluation of Disclosure Controls and Procedures](index=29&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management concluded that the company's disclosure controls and procedures were **effective** at the reasonable assurance level as of September 30, 2021[170](index=170&type=chunk) [Changes in Internal Control Over Financial Reporting](index=29&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There were **no material changes** in the company's internal control over financial reporting during the fiscal quarter ended September 30, 2021[171](index=171&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms the company is not currently involved in any material litigation - The company is **not currently a party** to any material litigation proceedings[173](index=173&type=chunk) [Items 1A. Risk Factors](index=30&type=section&id=Items%201A.%20Risk%20Factors) This section confirms no material changes to previously disclosed risk factors - There have been **no material changes** to the risk factors previously disclosed in the Annual Report on Form 10-K[174](index=174&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides details on common stock repurchases and a new share repurchase program Common Stock Repurchases (Quarter Ended September 30, 2021): | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | July 2021 | — | $— | — | $19,896,406 | | August 2021 | — | $— | — | $19,896,406 | | September 2021 | 47,000 | $13.89 | 47,000 | $19,243,534 | | Total | 47,000 | $13.89 | 47,000 | $19,243,534 | - On October 19, 2021, the Board of Directors approved a new share repurchase program of up to **$25 million** of common stock through 2023[175](index=175&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q - The report includes **certifications from the Principal Executive Officer and Principal Financial Officer** and various Inline XBRL documents[179](index=179&type=chunk) [Signatures](index=32&type=section&id=Signatures) This section contains the official signatures certifying the filing of the report - The report is signed by **Robert D. Kamphuis, Chairman, President & Chief Executive Officer**, and **Todd M. Butz, Chief Financial Officer**, on November 3, 2021[183](index=183&type=chunk)

Financial Data and Key Metrics Changes - The company reported net sales of $120.2 million for Q2 2021, nearly doubling the $62.6 million from Q2 2020, representing a 92% increase driven by higher sales volumes and improved market conditions [9][39] - Adjusted EBITDA for Q2 2021 was $14 million, up from $2.3 million in the prior year, with an adjusted EBITDA margin of 11.7%, an increase of 810 basis points from 3.6% in Q2 2020 [12][47] - Manufacturing margins improved to $16.3 million in Q2 2021 compared to a loss of $1.2 million in the same period last year, marking an increase of approximately 1,500% [40] Business Line Data and Key Metrics Changes - The commercial vehicles market showed significant recovery, with a robust Class 8 truck backlog and strong freight demand [14] - The power sports segment remained strong, with elevated demand for outdoor recreation products, leading to expectations of continued retail demand [15] - The construction and access markets are improving, particularly in residential construction, while non-residential and oil and gas markets are stabilizing [16] Market Data and Key Metrics Changes - The agricultural market is expected to see stable to improving volumes due to rising crop prices and low inventories [17] - The military segment remains stable with solid backlogs for U.S. government contracts, indicating potential for increased revenues [18] - Supply chain disruptions are impacting customer growth, but the company is managing these challenges proactively [19][22] Company Strategy and Development Direction - The company is focused on investing in technology and automation to enhance productivity and meet growing customer demand, particularly through the new facility in Hazel Park, Michigan [13][26] - A new strategic relationship with a leading U.S.-based fitness company is expected to enhance production capabilities and diversify the market [25][29] - The company is exploring M&A opportunities to expand into new markets and enhance product offerings [36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future performance, citing positive trends in end markets and a strong outlook for the second half of 2021 [11][37] - The company anticipates challenges from supply chain issues and inflationary pressures but believes it is well-positioned to navigate these headwinds [20][59] - The long-term goal remains to achieve 15% adjusted EBITDA margins as production volumes return to pre-pandemic levels [55][78] Other Important Information - Capital expenditures for Q2 2021 were $11.4 million, with expectations for full-year capital spending between $55 million and $65 million [49][50] - The company reduced total outstanding debt to $46.2 million, significantly down from $77.5 million a year earlier, resulting in a leverage ratio of 1x [51] Q&A Session Summary Question: Impact of supply chain disruptions on production schedules - Management noted that while there was some impact from supply chain issues, it was not significant enough to drastically affect results [62] Question: Revenue outlook for the second half of the year - The company expects solid performance in the second half, with modest increases in output and stable revenue [66] Question: Demand for localization of supply chains - There is continued interest from customers in localizing supply chains due to ongoing constraints, with opportunities being pursued [71] Question: Margin expectations for Q3 and Q4 - Margins are expected to be slightly lower in the second half due to ongoing price pass-through effects [74] Question: Confidence in achieving 15% EBITDA margin - Management remains confident in reaching the 15% EBITDA margin target, contingent on stabilizing material prices and increased production volumes [82]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38894 Mayville Engineering Company, Inc. (Exact Name of Registrant as Specified in its Charter) Wisconsin 39-0944729 (State or oth ...

ල Investor Presentation July 2021 Disclaimer Forward-Looking Statements This presentation contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek," "anticipate," "plan," "continue," "estimate," "expect," "may," "will," "project," "predict," "potential," "targeting," "intend," "could," "might," "should," ...

May 2021 Investor Presentation Disclaimer Forward-Looking Statements This presentation contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek," "anticipate," "plan," "continue," "estimate," "expect," "may," "will," "project," "predict," "potential," "targeting," "intend," "could," "might," "should," "b ...

Mayville Engineering Company, Inc. (NYSE:MEC) Q1 2021 Earnings Conference Call May 5, 2021 10:00 AM ET Company Participants Nathan Elwell - Investor Relations Robert Kamphuis - Chairman, CEO & President Todd Butz - CFO, Secretary & Treasurer Ryan Raber - EVP, Strategy, Sales and Marketing Conference Call Participants Joe Grabowski - Robert W. Baird & Co. Kevin Ivers - ePark Systems Steven Fisher - UBS Operator Good day, and welcome to the Mayville Engineering Company First Quarter 2021 Earnings conference c ...