UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018
Commission File No.: 001-32401
MANITEX INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Michigan
(State of incorporation)
9725 Industrial Drive
Bridgeview, Illinois
(Address of principal executive offices)
42-1628978
(I.R.S. Employer
Identification No.)
60455
(Zip Code)
Registrant’s telephone number, including area code: (708) 430-7500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, no par value
Preferred Share Purchase Rights
Name of each exchange on which registered
The NASDAQ Stock Market LLC
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Non-Accelerated Filer
Emerging growth company
Accelerated Filer
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the shares of common stock, no par value (“Common Stock”), held by non-affiliates of the registrant as of June 30, 2018
was approximately $169.2 million based upon the closing price for the Common Stock of $12.48 on the NASDAQ Stock Market on such date.
The number of shares of the registrant’s common stock outstanding as of March 1, 2019 was 19,677,293.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the
registrant’s Proxy Statement for its 2019 Annual Meeting (the “2019 Proxy Statement”) to be filed with the SEC within 120 days after the end of the
fiscal year ended December 31, 2018.
TABLE OF CONTENTS
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III
ITEM 10.
ITEM 11.
TEM 12.
ITEM 13.
ITEM 14.
PART IV
ITEM 15.
BUSINESS .........................................................................................................................................................
RISK FACTORS ................................................................................................................................................
UNRESOLVED STAFF COMMENTS .............................................................................................................
PROPERTIES .....................................................................................................................................................
LEGAL PROCEEDINGS ...................................................................................................................................
MINE SAFETY DISCLOSURES ......................................................................................................................
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES ....................................................................................
SELECTED FINANCIAL DATA ......................................................................................................................
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ........................................................................................................................................
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ..................................
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...................................................................
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ........................................................................................................................
CONTROLS AND PROCEDURES...................................................................................................................
OTHER INFORMATION ..................................................................................................................................
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ...........................................
EXECUTIVE COMPENSATION......................................................................................................................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS ...................................................................................................
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES ...................................................................................
EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES ........................................................................
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SIGNATURES .........................................................................................................................................................................
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i
PART I
References to the “Company,” “we,” “our” and “us” refer to Manitex International, Inc., together in each case with our subsidiaries and
any predecessor entities unless the context suggests otherwise.
Forward-Looking Statements
When reading this section of this Annual Report on Form 10-K, it is important that you also read the financial statements and related
notes thereto. This Annual Report on Form 10-K and certain information incorporated herein by reference contain forward-looking
statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements contained in this
Annual Report on Form 10-K, other than statements that are purely historical, are forward-looking statements and are based upon
management’s present expectations, objectives, anticipations, plans, hopes, beliefs, intentions or strategies regarding the future. We use
words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,”
“should,” “could,” and similar expressions to identify forward-looking statements. Forward-looking statements in this Annual Report
on Form 10-K include, without limitation: (1) projections of revenue, earnings, capital structure and other financial items, (2) statements
of our plans and objectives, (3) statements regarding the capabilities and capacities of our business operations, (4) statements of expected
future economic conditions and the effect on us and on our customers, (5) expected benefits of our cost reduction measures, and
(6) assumptions underlying statements regarding us or our business. Our actual results may differ from information contained in these
forward-looking statements for many reasons, including those described below and in the section entitled “Item 1A. Risk Factors”:
(1)
a future substantial deterioration in economic conditions, especially in the United States and Europe;
(2) government spending; fluctuations in the construction industry, and capital expenditures in the oil and gas industry;
(3) our level of indebtedness and our ability to meet financial covenants required by our debt agreements;
(4) our ability to negotiate extensions of our credit agreements and to obtain additional debt or equity financing when needed;
(5)
(6)
(7)
the impact that the restatement of our previously issued financial statements could have on our business reputation and relations
with our customers and suppliers;
the cyclical nature of the markets we operate in;
increase in interest rates;
(8) our increasingly international operations expose us to additional risks and challenges associated with conducting business
internationally;
(9) difficulties in implementing new systems, integrating acquired businesses, managing anticipated growth, and responding to
technological change;
(10) our customers’ diminished liquidity and credit availability;
(11) the performance of our competitors;
(12) shortages in supplies and raw materials or the increase in costs of materials;
(13) potential losses under residual value guarantees,
(14) product liability claims, intellectual property claims, and other liabilities;
(15) the volatility of our stock price;
(16) future sales of our common stock;
(17) the willingness of our stockholders and directors to approve mergers, acquisitions, and other business transactions;
(18) currency transaction (foreign exchange) risks and the risk related to forward currency contracts;
(19) compliance with changing laws and regulations
(20) certain provisions of the Michigan Business Corporation Act and the Company’s Articles of Incorporation, as amended, Amended
and Restated Bylaws, and the Company’s Preferred Stock Purchase Rights may discourage or prevent a change in control of the
Company;
(21) a substantial portion of our revenues are attributed to limited number of customers which may decrease or cease purchasing any
time;
1
(22) a disruption or breach in our information technology systems;
(23) our reliance on the management and leadership skills of our senior executives;
(24) the cost of compliance with Section 404 of the Sarbanes-Oxley Act of 2002;
(25) impairment in the carrying value of goodwill could negatively affect our operating results;
(26) potential negative effects related to the SEC investigation into our Company; and
(27) other factors.
The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial
condition or operating results. All forward-looking statements are made only as of the date hereof. We do not undertake, and expressly
disclaim, any obligation to update this forward-looking information, except as required under applicable law.
ITEM 1. BUSINESS
Our Business
The Company is a leading provider of engineered lifting solutions. The Company reports in a single business segment and has five
operating segments. The Company designs, manufactures and distributes a diverse group of products that serve different functions and
are used in a variety of industries.
Manitex, Inc. (“Manitex”) markets a comprehensive line of boom trucks, truck cranes and sign cranes. Manitex’s boom trucks and crane
products are primarily used for industrial projects, energy exploration and infrastructure development, including roads, bridges and
commercial construction.
Badger Equipment Company (“Badger”) is a manufacturer of specialized rough terrain cranes and material handling products. Badger
primarily serves the needs of the construction, municipality and railroad industries.
PM Oil and Steel S.p.A. (“PM” or “PM Group”), formerly known as PM Group S.p.A., is a leading Italian manufacturer of truck-
mounted hydraulic knuckle boom cranes with a 50-year history of technology and innovation, and a product range spanning more than
50 models. PM is also a manufacturer of truck-mounted aerial platforms with a diverse product line and an international client base.
Manitex Valla S.r.L. (“Valla”) produces a full range of precision pick and carry industrial cranes using electric, diesel, and hybrid power
options. Its cranes offer wheeled or tracked, and fixed or swing boom configurations, with special applications designed specifically to
meet the needs of its customers. These products are sold internationally through dealers and into the rental distribution channel.
Manitex Sabre, Inc. (“Sabre”), which is located in Knox, Indiana, manufactures a comprehensive line of specialized mobile tanks for
liquid and solid storage and containment solutions with capacities from 8,000 to 21,000 gallons. Its mobile tanks are sold to specialized
independent tank rental companies and through the Company’s existing dealer network. The tanks are used in a variety of end markets
such as petrochemical, waste management and oil and gas drilling.
Crane and Machinery, Inc. (“C&M”) is a distributor of the Company’s products as well as Terex Corporation’s (“Terex”) rough terrain
and truck cranes. Crane and Machinery Leasing, Inc. (“C&M Leasing”) rents equipment manufactured by the Company as well as a
limited amount of equipment manufactured by third parties. Although C&M is a distributor of Terex rough terrain and truck cranes,
C&M’s primary business is the distribution of products manufactured by the Company.
Consolidated Variable Interest Entity
Even though it had no ownership interest in SVW Crane & Equipment Company (together with its wholly owned subsidiary, Rental
Consulting Service Company, “SVW”), the Company previously had the power to direct the activities that most significantly impact
SVW’s economic performance. Additionally, the Company was the primary beneficiary of the SVW relationship. SVW obtained third
party financing, which was effectively guaranteed by the Company, on specific cranes the Company manufactured and remitted the loan
proceeds to the Company. Other than its business transactions described herein, SVW had no other substantial business operations. The
Company determined that SVW was a Variable Interest Entity (“VIE”) that under current accounting guidance needed to be consolidated
in the Company’s financial results. SVW was consolidated into the Company’s financial results beginning in the first quarter of 2016
through the fourth quarter of 2017. By December 31, 2017, SVW had ceased operations and is therefore not a consolidated VIE after
December 31, 2017.
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Recent Acquisitions
On March 12, 2015, the Company entered into inventory and equipment purchase agreements with Columbia Tanks, LLC. Financial
results are included in the consolidated results beginning on March 12, 2015.
On January 15, 2015, the Company acquired PM which is based in San Cesario sul Panaro, Modena, Italy. PM’s financial results are
included in the consolidated results beginning on January 15, 2015.
On December 19, 2014, the Company completed an agreement with Terex and became the majority owner of ASV (as defined below),
which is located in Grand Rapids, Minnesota. As a result of the transaction, the Company owned 51% of ASV and Terex owned 49%
of ASV. ASV’s financial results were included in the consolidated results beginning on December 20, 2014. ASV was classified as a
discontinued operation. See “Discontinued Operations” section below for additional information.
On December 16, 2014, the Company, BGI USA Inc. (“BGI”), Movedesign SRL and R&S Advisory S.r.l., entered into an operating
agreement for Lift Ventures LLC (“Lift Ventures”), a joint venture entity. Lift Ventures manufactures and sells certain products and
components, including the Schaeff line of electric forklifts and certain Liftking products. The Company owned 25% of the equity of Lift
Ventures and licenses certain intellectual property related to the Company’s products to Lift Ventures. In 2016, the Company determined
its investment in Lift Ventures was impaired and has recognized an impairment charge to write off its entire investment in Lift Ventures
LLC (See Note 27).
Discontinued Operations
ASV is located in Grand Rapids, Minnesota and manufactures a line of high-quality compact track and skid steer loaders. The products
are used in site clearing, general construction, forestry, golf course maintenance and landscaping industries, with general construction
being the largest.
Prior to the quarter ended June 30, 2017, the Company owned a 51% interest in ASV Holdings, Inc., which was formerly known as
A.S.V., LLC (“ASV” or “ASV Holdings”). On May 11, 2017, in anticipation of an initial public offering, ASV Holdings converted
from an LLC to a C-Corporation and the Company’s 51% interest was converted to 4,080,000 common shares of ASV. On May 17,
2017, in connection within its initial public offering, ASV Holdings sold 1,800,000 of its own shares and the Company sold 2,000,000
shares of ASV Holdings common stock and reduced its investment in ASV to a 21.2% interest. ASV was deconsolidated and was
recorded as an equity investment starting with the quarter ended June 30, 2017. Periods ending before June 30, 2017 reflect ASV as a
discontinued operation. In February 2018, the Company sold an additional 1,000,000 shares of ASV that it held which reduced the
Company’s stake in ASV to approximately 11%. The Company ceased accounting for its investment in ASV under the equity method
and now accounts for its investment as a marketable equity security. See Notes 11 and 26 for additional discussion related to the
accounting treatment of the investment in ASV after the sale of the additional shares.
CVS Ferrari S.r.L (“CVS”) designed and manufactured a range of reach stackers and associated lifting equipment for the global container
handling market. CVS was sold on December 22, 2016 and is presented as a discontinued operation.
Manitex Liftking ULC (“Manitex Liftking” or “Liftking”) sold a complete line of rough terrain forklifts, a line of stand-up electric
forklifts, cushioned tiered forklifts with lifting capacities from 18 thousand to 40 thousand pounds and special mission-oriented vehicles,
as well as other specialized carriers, heavy material handling transporters and steel mill equipment. Liftking was sold on September 30,
2016 and is presented as a discontinued operation.
Manitex Load King, LLC (“Load King”) manufactured specialized custom trailers and hauling systems typically used for transporting
heavy equipment. Load King trailers served niche markets in the commercial construction, railroad, military and equipment rental
industries through a dealer network. Load King was sold on December 28, 2015 and is presented as a discontinued operation.
General Corporate Information
Our predecessor company was formed in 1993 and was purchased in 2003 by Veri-Tek International, Corp., which changed its name to
Manitex International, Inc. in 2008. Our principal executive offices are located at 9725 Industrial Drive, Bridgeview, Illinois 60455 and
our telephone number is (708) 430-7500. Our website address is www.manitexinternational.com. Information contained on our website
is not incorporated by reference into this report and such information should not be considered to be part of this report.
3
INFORMATION ABOUT OUR BUSINESS
Boom Trucks
A boom truck is a straight telescopic boom crane outfitted with a hook and winch which is mounted on a standard flatbed commercial
(Class 7 or 8) truck chassis. Relative to other lifting equipment, boom trucks provide increased versatility and are capable of transporting
relatively large payloads from site to site at highway speeds. A boom truck is usually sold with outriggers, pads and devices for
reinforcing the chassis in order to improve safety and stability. Although produced in a wide range of models and sizes, boom trucks
can be broadly distinguished by their normal lifting capability as light, medium, and heavy-cranes. Various models of medium or heavy-
lift boom trucks can safely lift loads from 15 to 80 tons and operating radii can exceed 200 feet. Another advantage of the boom truck
is the ability to provide occasional man lift capabilities at a very low cost to height ratio. While it is not uncommon to see a very old
boom truck, most replacement cycles seem to trend to seven years. The market for boom trucks has historically been cyclical.
Although the Company offers a complete line of boom trucks from light to heavy capacity cranes much of our efforts have been devoted
to the development of higher capacity boom trucks specifically designed to meet the particular needs of customers including those in
energy production and electrical power distribution. We believe it is an advantage to be skewed towards the heavier lifting capacity,
since the heavier capacity cranes have somewhat higher margins.
Markets that drive demand for boom trucks include power distribution, oil and gas recovery, infrastructure and new home, commercial
and industrial construction. Historically, the new home construction market, which uses lower capacity cranes, has probably been the
most cyclical. Over the past few years, demand from the energy sector has become more cyclical in part due to changes in oil prices.
The Company sells its boom trucks through a network of over forty full service dealers in the United States, Canada, Mexico, South
America, and the Middle East. A number of our dealers maintain a rental fleet of their own. Boom trucks can be rented for either short
or long-term periods.
In 2016, we noted that this selloff of excess equipment continued through much of the year. This selloff dampened demand for new
equipment in both the energy market and the other markets we serve with our boom trucks. We did note that oil prices did begin to
increase and by the beginning of June 2016 were approaching $50 per barrel. Additionally, the oil rig count began to increase again and
by year end totaled 525 oil rigs. Late in the year, orders received began to increase and included orders for a number of cranes in a
multitude of markets that the Company serves.
In 2017, Oil prices remained relatively stable through the first nine months of the year, before the prices began to strengthen considerably
during the fourth quarter of the year. Oil prices at the end of 2017 topped $61 per barrel. The oil rig count declined during the first half
of the year to 431 before rebounding to 658 by the end of 2017. In early 2018, the oil rig count continued to increase and at the end of
March 2018 was over 800. The sell-off of used equipment continued through most of the year but the effects diminished throughout
the year. The market for boom trucks continued to improve throughout the year but remained below normal levels. Orders, however,
increased significantly in the fourth quarter of 2017 and going into 2018 demand for boom trucks continued to increase.
Entering 2018, the demand for boom trucks continued to be significantly above 2017 levels with industry shipments increasing 19%
versus 2017. The general economic environment in the United States during 2018 was favorable. During 2018, the United States
economy was strong, oil prices strengthened, and U.S. oil rig count has increased to 1,083 at December 28, 2018 from 929 at December
29, 2017. The Company currently expects the favorable environment that it is currently operating in to continue through 2019.
Knuckle Boom Cranes
PM is a leading Italian manufacturer of truck mounted hydraulic knuckle boom cranes with a 50-year history of technology and
innovation, and a product range spanning more than 50 models. Through its consolidated subsidiaries, PM has locations in Modena,
Italy; Arad, Romania; Chassieu, France; Buenos Aires, Argentina; Santiago, Chile; London, UK and Mexico City, Mexico.
PM knuckle boom cranes are hydraulic folding and articulating cranes, mounted on a commercial chassis, with lifting capacities that
range from small (lifting capacity up to three-ton meter) to super heavy (lifting capacity two-hundred-and-ten-ton meter), often supplied
with a jib for additional reach. With a compact design and footprint, the crane can be mounted to maximize the load carrying capability
of the chassis onto which it is mounted. Combined with the crane’s ability to operate in a compact footprint the ability to carry a payload
provides a competitive advantage over other truck mounted cranes and makes the knuckle boom crane particularly attractive for a variety
of end uses in the construction and product delivery sectors.
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The knuckle boom crane market is a global market with a wide variety of end sector applications, but focused particularly on residential
and non-residential construction, road and bridge and infrastructure development. Historically the knuckle boom crane has not had
significant application in the energy sector. PM knuckle boom cranes are sold into a variety of geographies including West and East
Europe, Central Asia, Africa, North and Central America, South America, the Middle East and the Far East and Pacific region.
Historically, PM focused on its domestic and local Western European markets, but in recent years has expanded its sales and distribution
efforts internationally. PM has twelve international sales and distribution offices located in several European countries as well as the
Far East and Latin America. After acquisition by Manitex, the Company expanded its distribution capability with the existing Manitex
dealer network in North America as well as expanding the number of independent service centers in the US.
The market for knuckle boom cranes has been growing in recent years as the acceptability of the product has grown and its advantages
have been accepted. Growth in North America where the straight mast boom truck crane has been the more dominant product has been
more rapid in recent years in combination with the overall improvement in the North American construction sector. PM’s share of the
North American market has been historically low; however, this is an area of growth opportunity for the Company following its
acquisition by Manitex.
PM aerial platforms are self-propelled or truck mounted and places an operator in a basket in the air in order to perform maintenance,
repairs or similar activities. The equipment is used in a variety of applications including utilities, sign work and industrial maintenance
and is often sold to rental operations.
PM group product serves in a number of geographies in West and East Europe but also the near and Far East and sells through dealers
as well as its own sales and distribution offices. The market generally follows the domestic economic cycle for any particular country.
Consequently, the market has shown a positive trend in the recent past as European economies recover from the 2009 / 2010 economic
crisis.
As PM serves a global market, its revenues are affected by changes in economic conditions in markets it serves. In 2016, the middle-
east market was soft and had an impact on PM 2016 revenues.
In 2017, the demand for knuckle boom cranes was up modestly in all the markets that PM sells into except for the Middle East. The
demand from the Middle East market was consistent with the prior year but remains significantly depressed. During 2017, Western and
North Europe were PM’s largest markets. Although there was growth in the other PM markets, the demand from such other markets
had not returned to earlier levels.
During 2018, the demand for knuckle boom cranes was steady in all the markets that PM sells into except for some markets in Latin
America where local currency turbulence with strong devaluations towards the Euro and US dollar affected the local demand. The
demand from the Middle East market was consistent with 2017 but remained significantly slow. In 2018, demand from Western and
Northern Europe, PM’s largest markets, remained at a solid level. Although there was light growth in the other PM markets, the demand
from such other markets was still lower than the levels achieved in the past. PM’s markets appear to be stable or growing moving into
2019.
Industrial Cranes
Badger sells specialized industrial cranes through a network of dealers. The Badger product line includes specialized 15- and 30-ton
industrial cranes (which can be used by the railroads) as well as a 10 ton carry deck crane which are all sold under both the Badger and
Manitex names. Additionally, Badger sells lattice cranes with 20 to 30 ton lifting capacity marketed under the Little Giant trade name.
The Little Giant line has five lattice boom models, three of which are dedicated rail cranes. In addition, Badger also sells a 30-ton truck
crane and a 25-ton crawler crane under the Little Giant name. Badger also has the capability to manufacture certain of our lower capacity
boom trucks and provides expanded boom truck manufacturing capacity when needed.
The products are used by railroads, refineries, states, municipalities, and for general construction. The Company believes it has an
advantage over its competitors in selling to railroads as it is the only crane manufacturer that has integrated the installation of rail gear
into its production process. Competitors send their cranes to a third party to have rail gear added which both increases cost and delays
deliveries.
Valla product line of industrial cranes is a full range of precision pick and carry cranes from 2 to 90 tons, using electric, diesel, and
hybrid power options. Its cranes offer wheeled or tracked, and fixed or swing boom configurations, with special applications designed
specifically to meet the needs of its customers. The product is sold internationally through dealers and into the rental distribution channel.
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Mobile Tanks
Sabre manufactures a comprehensive line of specialized mobile tanks for liquid and solid storage and containment solutions with
capacities from 8,000 to 21,000 gallons. Its mobile tanks are sold to specialized independent tank rental companies and throu gh other
direct customers.
The tanks have historically been used in a variety of end markets such as petrochemical, waste management and oil and gas drilling.
However, when we purchased Sabre in 2013, its business heavily skewed towards the energy sector. Since early 2014, we have been
working to diversify the products, customers, and applications. This includes expanding environmental applications and using our tanks
to store deicer fluid at airports.
Equipment Distribution
C&M is a distributor of the Company’s products as well as Terex’s rough terrain and truck cranes.
C&M Leasing rents equipment manufactured by the Company as well as a limited amount of equipment manufactured by third parties.
Although C&M is a distributor of Terex rough terrain and truck cranes; C&M’s primary business is the distribution of products
manufactured by the Company.
Part Sales
As part of our operations, we supply repair and replacement parts for our products. The parts business margins are higher than our
overall margins. Part sales as a percentage of revenues tend to increase when there is a down-turn in the industry. Part sales as a
percentage of revenues are approximately 12%, 11% and 13% for the years ended December 31, 2018, 2017 and 2016, respectively.
Total Company Revenues by Sources
The sources of the Company’s revenues are summarized below:
Boom trucks, knuckle boom & truck cranes
Rough terrain cranes
Mobile tanks
Installation services
Other equipment
Part sales
Total Revenue
2018
2017
2016
73 %
3 %
5 %
2 %
5 %
12 %
100 %
76 %
3 %
2 %
2 %
5 %
12 %
100 %
72 %
3 %
4 %
3 %
5 %
13 %
100 %
In 2018 and 2016, no customer accounted for 10% or more of the Company’s revenue. In 2017, one customer, Rush Truck Center,
accounted for approximately 12.0% of the Company’s revenue.
Raw Materials
The Company purchases a variety of components used in the production of its products. The Company purchases steel and a variety of
machined parts, components and subassemblies including weldments, winches, cylinders, frames, rims, axles, wheels, tires, suspensions,
cables, booms and cabs, as well as engines, transmissions and cabs. Additionally, Manitex and PM mount their cranes on commercial
truck chassis, which are either purchased by the Company or supplied by the customer. Lead times for these materials (including chassis)
vary from several weeks to many months. The Company is vulnerable to a supply interruption in instances when only one supplier has
been qualified and identifying and qualifying alternative suppliers can be very time consuming, and in some cases, could take longer
than a year. The Company has been working on qualifying secondary sources of some products to assure supply consistency and to
reduce costs. The degree to which our supply base can respond to changes in market demand directly affects our ability to increase
production and the Company attempts to maintain some additional inventory in order to react to unexpected increases in demand. During
2018, 2017 and 2016, raw materials and components were generally available to meet our production schedules and had no significant
impact on full year revenues. During the first part of 2018 delivery of chassis for our larger cranes had a modest impact on production,
however this was alleviated during the year as manufacturers increased their production and demand also slowed compared to the first
half of the year.
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Any future supply chain issues that might impact the Company will in part depend on how fast the rate of growth is for a product as
well as the rate of growth in the general economy. Strong general economic growth could put us in competition for parts with other
industries. Additionally, events or circumstance at a particular supplier could impact the availability of a necessary component.
Patents and Trademarks
The Company protects its trade names and trademarks through registration. Its technology consists of bill of materials, drawings, plans,
vendor sources and specifications and although the Company’s technology has considerable value, it does not generally have patent
protection. The Company has (on rare occasions) filed for patent protection on a specific feature. In the future, the Company will
consider seeking patent protection on any new design features believed to present a significant future benefit.
The Company owns and uses several trademarks relating to its brands that have significant value and are instrumental to the Company’s
ability to market its products. The Company’s most significant trademark is “Manitex” (presently registered with the United States
Patent and Trademark Office until 2027). Badger Equipment Company markets its products under the “Little Giant” and Badger trade
names. Sabre markets its products under the “Sabre” tradename. Valla markets its products under the “Valla” tradename. PM sells its
products using the trademark “PM” and PM subsidiary, Oil & Steel S.p.A.; sells its products using the “OIL & STEEL” trademark. The
Manitex, Badger, Little Giant, PM and OIL & STEEL trademarks and trade names are important to the marketing and operation of the
Company’s business as a significant number of our products are sold under those names. PM has three patents. One is registered with
the Italian Patents and Trademarks Office until 2028. PM has two additional patents registered with OHIM that are in force until 2031
and 2034, respectively.
Seasonality
Traditionally, the Company’s peak selling periods for cranes are the second and third quarters of a calendar year as a result of the need
for equipment in the spring, summer and fall construction seasons. A significant portion of cranes sold over the last several years have
been deployed in specialized industries or applications, such as oil and gas production, power distribution and in the railroad industry.
Sales in these markets are subject to significant fluctuations which correlate more with general economic conditions and the prices of
commodities, including oil, and generally are not of a seasonal nature.
Sales of cranes from the Equipment Distribution division mirror the seasonality of the overall Company. However, the sale of parts is
much less seasonal given the geographic breadth of the customer base. Crane repairs are performed by the Equipment Distribution
division throughout the year but are somewhat affected by the slowdown in construction activity during the typically harsh winters in
the Midwestern United States.
Competition
Lifting Equipment
The market for the Company’s boom trucks and knuckle boom cranes, industrial cranes and trailers is highly competitive. The Company
competes based on product design, quality of products and services, product performance, maintenance costs and price. Several
competitors have greater financial, marketing, manufacturing and distribution resources than we do. The Company believes that it
effectively competes with its competitors.
The Company’s boom cranes compete with cranes manufactured by National Crane, Terex, Weldco Beales, Elliott and Altec. The
Company’s knuckle boom cranes compete with Palfinger, Fassi, Effer and HIAB. The Company competes primarily with Terex and
Broderson in selling rough terrain and industrial cranes. The Company’s mobile tanks compete with tanks sold by Dragon Tank and
Pinnacle Mfg., LLC.
Equipment Distribution
The Equipment Distribution division’s primary business is facilitation of sale of products manufactured by the Company. As such, it
faces the same competition described above for products manufactured by the Company. Additionally, the Equipment Distribution
division has a dealership arrangement with Terex and must compete against dealers of other rough terrain and truck crane
manufacturers. Locally, the Equipment Distribution division competes against Runnion Equipment (dealer for National Crane), Power
Equipment Leasing (dealer for Elliott) and Guiffre Cranes (dealer for Manitex and Terex boom trucks). Runnion is also authorized to
sell Manitex boom trucks.
7
While no geographic limitations exist regarding the Equipment Distribution business’s ability to sell cranes internationally, the lack of
any barriers to entry and the heavy use of the Internet make this a highly active and competitive market in which to distribute cranes.
Competition for our Equipment Distribution repair business is even more intense since it is limited geographically due to the necessity
of having physical access to the cranes. Most of the above referenced companies also compete in this aspect of the business, as do other
types of crane and equipment dealers from nearby areas such as Indiana or Wisconsin.
Equipment Distribution parts sales are global in scope and benefit greatly from the Internet and the tenure and expertise of our
employees. While competition in this area is extensive, we believe that the breadth of the products offered and our long history in this
part of the business is a competitive advantage.
Our Equipment Distribution business competes based on the design, quality and performance of the products it distributes, price and the
supporting repair and part services that it provides. Several competitors have greater financial, marketing and distribution resources than
we do. The Company, however, believes that it effectively competes with its competitors.
Backlog
The backlog at December 31, 2018 was approximately $66.7 million, compared to a backlog of approximately $61.5 million at
December 31, 2017. The December 31, 2018 backlog has increased by $5.2 million since September 30, 2018 when it was at $60.5
million. The backlog has continued to grow during the early part of 2019 and was $80.2 million at February 28, 2019. The Company
expects to ship product to fulfill its existing backlog within the next twelve months.
Revenue Recognition and Long-Lived Assets
The information regarding revenue, the basis for attributing revenue from external customers to individual countries, and long-lived
assets is found in Note 4 “Revenue Recognition” and Note 20 “Long-Lived Assets” to our consolidated financial statements, is hereby
incorporated by reference into this Part I, Item 1.
Employees
As of December 31, 2018, the Company had 619 full time employees. The Company has not experienced any work stoppages and
anticipates continued good employee relations. Nineteen (19) of our employees are covered by collective bargaining agreements. Fifteen
(15) of our employees at our Badger subsidiary are represented by International Union, UAW and its local No. 316. The current union
contract expires on January 21, 2020. Four employees are currently represented by Automobile Mechanics’ Local 701. The union
contract expires on September 30, 2020. The employees represented by the Automobile Mechanics’ Local 701 are mechanics that work
in our Equipment Distribution business. A number of our Equipment Distribution customers in the Chicago metropolitan area mandate
union mechanics usage for any service / repair jobs.
Governmental Regulation
The Company is subject to various governmental regulations, such as environmental regulations, employment and health regulations,
and safety regulations. We have various internal controls and procedures designed to maintain compliance with these regulations. The
cost of compliance programs is not material but is subject to additions to or changes in federal, state or local legislation or changes in
regulatory implementation or interpretation of government regulations.
Available Information
The Company makes available free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and amendments to those reports filed or furnished as required by Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), through our Internet Website (www.manitexinternational.com) as soon as is reasonably practicable
after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). The SEC also
maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC. Information contained in or incorporated into our Internet Website or the SEC’s website is not
incorporated by reference herein.
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ITEM 1A. RISK FACTORS
You should carefully consider the following risks, together with the cautionary statement under the caption “Forward-Looking
Statements” and the other information included in this report. The risks described below are not the only ones the Company faces.
Additional risks that are currently unknown to the Company or that the Company currently considers to be immaterial may also impair
its business or adversely affect the Company’s financial condition or results of operations. If any of the following risks actually occur,
the Company’s business, financial condition or results of operation could be adversely affected.
Significant deterioration in economic conditions, especially in the United States and Europe, has had and may again have negative
effects on the Company’s results of operations and cash flows
Significant deterioration in economic conditions, especially in the United States and Europe, has had and may again have negative
effects on the Company’s results of operations and cash flows. Economic conditions affect the Company’s sales volumes, pricing levels
and overall profitability. Demand for many of the Company’s products depends on end-use markets. Challenging economic conditions
may reduce demand for our products and may also impair the ability of customers to pay for products they have purchased. As a result,
the Company’s reserves for doubtful accounts and write-offs for accounts receivable may increase.
A significant deterioration in economic conditions has caused and may again cause deterioration in the credit quality of our customers
and the estimated residual value of our equipment. This could further negatively impact the ability of our customers to obtain the
resources they need to make purchases of our equipment. Reduced credit availability will diminish our customers’ ability to invest in
their businesses, refinance maturing debt obligations, and meet ongoing working capital needs. If customers do not have sufficient access
to credit, demand for the Company’s products will likely decline. Reduced access to credit and the capital markets will also negatively
affect the Company’s ability to invest in strategic growth initiatives such as acquisitions.
Certain of the Company’s products are significantly affected by the level of capital expenditures in the oil and gas industry and lower
capital expenditures have affected and may continue to affect the results of the Company’s operations.
The demand for our product in part depends on the condition of the oil and gas industry and, in particular, on the level of capital
expenditures of companies engaged in the exploration, development, and production of oil and natural gas. Capital expenditures by these
companies are influenced by the following factors:
the oil and gas industry’s ability to economically justify placing discoveries of oil and gas reserves in production;
current and projected oil and gas prices;
the oil and gas industry’s need to clear all structures from the lease once the oil and gas reserves have been depleted;
weather events, such as major tropical storms;
the abilities of oil and gas companies to generate, access and deploy capital;
exploration, production and transportation costs;
the discovery rate of new oil and gas reserves;
the sale and expiration dates of oil and gas leases and concessions;
local and international political and economic conditions;
the ability or willingness of host country government entities to fund their budgetary commitments; and
technological advances.
Historically, prices of oil and natural gas and exploration, development and production have fluctuated substantially. A sustained period
of substantially reduced capital expenditures by oil and gas companies will result in decreased demand for certain equipment produced
by the Company, lower margins, and possibly net losses. Additionally, oil and gas companies may sell excess equipment into the general
construction market which could further depress demand for certain of products.
The Company’s level of indebtedness reduces financial flexibility and could impede our ability to operate.
As of December 31, 2018, the Company’s total debt was $73 million, which includes: notes payable, convertible debt and capital lease
obligations.
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Our level of debt affects our operations in several important ways, including the following:
a significant portion of our cash flow from operations is likely to be dedicated to the payment of the principal and interest
on our indebtedness;
our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions may be
limited;
we may be unable to refinance our indebtedness on terms acceptable to us or at all;
our cash flow may be insufficient to meet our required principal and interest payments; and
we may be unable to obtain additional loans as a result of covenants and agreements with existing debt holders.
The Company must comply with restrictive covenants in its outstanding debt agreements.
The Company’s existing debt agreements contain a number of significant covenants which may limit its ability to, among other things,
borrow additional money, make capital expenditures, pay dividends, dispose of assets and acquire new businesses. These covenants also
require the Company to meet certain financial and non-financial tests. In 2018 and 2017, the Company received waivers related to non-
compliance with certain covenants and defaults under its U.S. credit facilities and its convertible notes. The Company also restructured
certain debt arrangements which restructuring cured the defaults caused by the failed covenant. An additional default or other event of
non-compliance, if not waived or otherwise permitted by the Company’s lenders, could result in acceleration of the Company’s debt
and possibly bankruptcy.
The Company may require additional funding, which may not be available on favorable terms or at all.
Our future capital requirements will depend on the amount of cash generated or required by our current operations, as well as additional
funds which may be needed to finance future acquisitions. Future cash needs are subject to substantial uncertainty.
We cannot guarantee that adequate funds will be available when needed, and if we do not receive sufficient capital, we may be required
to alter or reduce the scope of our operations or to forego making future acquisitions. If we raise additional funds by issuing equity
securities, existing stockholders may be diluted.
The Company’s business is affected by the cyclical nature of its markets.
A substantial portion of our revenues are attributed to limited number of customers which may decrease or cease purchasing any time,
since the Company’s products depends upon the general economic conditions of the markets in which the Company competes. The
Company’s sales depend in part upon its customers’ replacement or repair cycles. Adverse economic conditions, including a decrease
in commodity prices, may cause customers to forego or postpone new purchases in favor of repairing existing machinery. Downward
economic cycles may result in reductions in sales of the Company’s products, which may reduce the Company’s profits. The Company
has taken a number of steps to reduce its fixed costs and diversify its operations to decrease the negative impact of these cycles. There
can be no assurance, however, that these steps will prevent the negative impact of poor economic conditions.
The Company’s business is sensitive to increases in interest rates.
The Company is exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing issuances of variable
rate debt. Primary exposure includes movements in the U.S. prime rate, LIBOR and Italian short-term borrowing rates.
If interest rates rise, it becomes costlier for the Company’s customers to borrow money to pay for the equipment they buy from the
Company. Should the U.S. Federal Reserve Board decide to increase rates, prospects for business investment and manufacturing could
deteriorate sufficiently and impact sales opportunities.
The Company’s business is sensitive to government spending.
Many of the Company’s customers depend substantially on government spending, including highway construction and maintenance and
other infrastructure projects by U.S. federal and state governments and governments in other nations. Any decrease or delay in
government funding of highway construction and maintenance and other infrastructure projects could cause the Company’s revenues
and profits to decrease.
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The Company’s revenues are attributed to limited number of customers which may decrease or cease purchasing any time.
The Company’s revenues are attributed to a limited number of customers. We generally do not have long-term supply agreements with
our customers. Even if a multi-year contract exists, the customer is not required to commit to minimum purchases and can cease
purchasing at any time. If we were to lose either a significant customer or several smaller customers our operating results and cash flows
would be adversely impacted.
The Company is dependent upon third-party suppliers, making us vulnerable to supply shortages.
The Company obtains materials and manufactured components from third-party suppliers. Any delay in the ability of the Company’s
suppliers to provide the Company with necessary materials and components may affect the Company’s capabilities at a number of our
manufacturing locations, or may require the Company to seek alternative supply sources. Delays in obtaining supplies may result from
a number of factors affecting the Company’s suppliers including capacity constraints, labor disputes, the impaired financial condition
of a particular supplier, suppliers’ allocations to other purchasers, weather emergencies or acts of war or terrorism. Any delay in receiving
supplies could impair the Company’s ability to deliver products to customers and, accordingly, could have a material adverse effect on
business, results of operations and financial condition.
In addition, the Company purchases material and services from suppliers on extended terms based on the Company’s overall credit
rating. Negative changes in the Company’s credit rating may impact suppliers’ willingness to extend terms and increase the cash
requirements of the business.
Price increases in materials could affect our profitability.
We use large amounts of steel and other items in the manufacture of our products. In the past, market prices of some of our key raw
materials increased significantly. If we experience future significant increases in material costs, including steel, we may not be able to
reduce product cost in other areas or pass future raw material price increases on to our customers and our margins could be adversely
affected.
We provide credit guarantees or residual value guarantees for some of our customers.
The Company’s customers, from time to time, may fund acquisitions of our products through third-party finance companies. In certain
instances, the Company has in the past provided credit guarantees or residual value guarantees. With these guarantees, we must assess
the probability of losses or non-performance in ways similar to the evaluation of accounts receivable. We establish reserves based upon
our analysis of the current quality and financial position of our customers, past payment experience and collateral values. In
circumstances where we believe it is probable that a specific customer will have difficulty meeting its financial obligations, a specific
reserve is recorded to recognize a liability for a guarantee we expect to pay, taking into account any amounts that we would anticipate
realizing if we are forced to repossess the equipment that supports the customer’s financial obligations to us. During periods of economic
weakness, collateral underlying our guarantees of indebtedness of customers or receivables can decline sharply, thereby increasing our
exposure to losses. In the future, we may incur losses in excess of our recorded reserves if the financial condition of our customers were
to deteriorate further or the full amount of any anticipated proceeds from the sale of the collateral supporting our customers’ financial
obligations is not realized. Historically, no losses related to guarantees have been realized; however, there can be no assurance that our
historical experience with respect to guarantees will be indicative of future results.
The Company depends on its information technology systems. If its information technology systems do not perform in a satisfactory
manner or if the security of them is breached, it could be disruptive and or adversely affect the operations and results of operations
of the Company.
The Company depends on its information technology systems, some of which are managed by third parties, to process, transmit and
store electronic information (including sensitive data such as confidential business information and personally identifiable data relating
to employees, customers and other business partners), and to manage or support a variety of critical business processes and activities. If
our information technology systems do not perform in a satisfactory manner, it could be disruptive and or adversely affect the operations
and results of operations of the Company, including the ability of the Company to report accurate and timely financial results.
11
Furthermore, our information technology systems may be damaged, disrupted or shut down due to attacks by computer hackers,
computer viruses, employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes
or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be
ineffective or inadequate. A failure of or breach in information technology security could expose us and our customers, distributors and
suppliers to risks of misuse of information or systems, the compromise of confidential information, manipulation and destruction of
data, defective products, production downtimes and operations disruptions. In addition, such breaches in security could result in
litigation, regulatory action and potential liability, as well as the costs and operational consequences of implementing further data
protection measures, each of which could have a material adverse effect on our business or results of operations.
The Company may face limitations on its ability to integrate acquired businesses.
The successful integration of new businesses depends on the Company’s ability to manage these new businesses and cut excess costs.
While the Company believes it has successfully integrated these acquisitions to date, the Company cannot ensure that these acquired
companies will operate profitably or that the intended beneficial effect from these acquisitions will be realized.
If the Company is unable to manage anticipated growth effectively, the business could be harmed.
If the Company fails to manage growth, the Company’s financial results and business prospects may be harmed. To manage the
Company’s growth and to execute its business plan efficiently, the Company will need to institute operational, financial and management
controls, as well as reporting systems and procedures. The Company also must effectively expand, train and manage its employee base.
The Company cannot assure you that it will be successful in any of these endeavors.
The Company relies on key management.
The Company relies on the management and leadership skills of David Langevin, Chairman and Chief Executive Officer. When Mr.
Langevin joined the Company, he signed a three-year employment agreement with the Company which expired on December 31, 2008.
Mr. Langevin’s employment agreement has been extended and now expires on December 31, 2019. Under the employment agreement,
Mr. Langevin’s employment term automatically extends for successive periods of three years unless either the Company or Mr. Langevin
gives written notice to the other party of non-renewal at least 90 days prior to the end of the then current employment term. The loss of
his services could have a significant and negative impact on the Company’s business. In addition, the Company relies on the management
and leadership skills of other senior executives. The Company could be harmed by the loss of key personnel in the future.
The Company’s success depends upon the continued protection of its trademarks and the Company may be forced to incur substantial
costs to maintain, defend, protect and enforce its intellectual property rights.
The Company’s registered and common law trademarks, as well as certain of the Company’s licensed trademarks, have significant value
and are instrumental to the Company’s ability to market its products. The Company’s marks “Manitex”, “Badger”, “Sabre”, “Valla”,
“PM” and “O&S” are important to the Company’s business as the majority of the Company’s products are sold under those names. The
Company has not registered all of its trademarks in the United States nor in the foreign countries where it does business. Third parties
could assert claims against such intellectual property that the Company could be unable to successfully resolve. If the Company has to
change the names of any of its products, it may experience a loss of goodwill associated with its brand names, customer confusion and
a loss of sales.
In addition, international protection of the Company’s intellectual property may not be available in some foreign countries to the same
extent permitted by the laws of the United States. The Company could also incur substantial costs to defend legal actions relating to use
of its intellectual property, which could have a material adverse effect on the Company’s business, results of operations or financial
condition.
The Company may be required to record goodwill impairment charges on all or a significant amount of the goodwill on its
Consolidated Balance Sheets.
As of December 31, 2018, the Company had approximately $36.3 million of goodwill. The Company tests goodwill for impairment at
least annually. If the carrying value of goodwill exceeds the implied fair value of the goodwill, an impairment charge is recorded for the
excess. An impairment of a significant portion of goodwill could materially negatively affect the Company’s results of operations.
12
The Company may be unable to effectively respond to technological change, which could have a material adverse effect on the
Company’s results of operations and business.
The markets served by the Company are not historically characterized by rapidly changing technology. Nevertheless, the Company’s
future success will depend in part upon the Company’s ability to enhance its current products and to develop and introduce new products.
If the Company fails to anticipate or respond adequately to competitors’ product improvements and new production introductions, future
results of operations and financial condition will be negatively affected.
The Company operates in a highly competitive industry and the Company is particularly subject to the risks of such competition.
The Company competes in a highly competitive industry and the competition which the Company encounters has an effect on its product
prices, market share, revenues and profitability. Because certain competitors have substantially greater financial, production, research
and development resources and substantially greater name recognition than the Company, the Company is particularly subject to the
risks inherent in competing with them and may be put at a competitive disadvantage. To compete successfully, the Company’s products
must excel in terms of quality, price, product line, ease of use, safety and comfort, and the Company must also provide excellent customer
service. The greater financial resources of the Company’s competitors may put it at a competitive disadvantage. If competition in the
Company’s industry intensifies or if the Company’s current competitors enhance their products or lower their prices for competing
products, the Company may lose sales or be required to lower its prices. This may reduce revenue from the Company’s products and
services, lower its gross margins or cause the Company to lose market share. The Company may not be able to differentiate our products
from those of competitors, successfully develop or introduce less costly products, offer better performance than competitors or offer
purchasers of our products payment and other commercial terms as favorable as those offered by competitors.
The Company faces product liability claims and other liabilities due to the nature of its business.
In the Company’s lines of business numerous suits have been filed alleging damages for accidents that have occurred during the use or
operation of the Company’s products. The Company is self-insured, up to certain limits, for these product liability exposures, as well as
for certain exposures related to general, workers’ compensation and automobile liability. Insurance coverage is obtained for catastrophic
losses as well as those risks required to be insured by law or contract. Any material liabilities not covered by insurance could have an
adverse effect on the Company’s financial condition.
Our increasingly international operations expose us to additional risks and challenges associated with conducting business
internationally.
The international expansion of our business may expose us to risks inherent in conducting foreign operations. These risks include:
challenges associated with managing geographically diverse operations, which require an effective organizational structure
and appropriate business processes, procedures and controls;
the increased cost of doing business in foreign jurisdictions, including compliance with international and U.S. laws and
regulations that apply to our international operations;
currency exchange and interest rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk
of entering into hedging transactions, if we continue to do so in the future;
potentially adverse tax consequences;
complexities and difficulties in obtaining protection and enforcing our intellectual property;
compliance with additional regulations and government authorities in a highly regulated business; and
general economic and political conditions internationally.
Additionally, changes to the United States’ participation in, withdrawal from, renegotiation of certain international trade agreements or
other major trade related issues including the non-renewal of expiring favorable tariffs granted to developing countries, tariff quotas,
and retaliatory tariffs (including, but not limited to, the current United States administration’s tariffs on China and China's retaliatory
tariffs on certain products from the United States), trade sanctions, new or onerous trade restrictions, embargoes and other stringent
government controls could have a material adverse effect on our business, results of operations and financial condition.
The risks that the Company faces in its international operations may continue to intensify if the Company further develops and expands
its international operations.
13
The Company is subject to currency fluctuations.
Changes in exchange rates between various currencies have had, and will continue to have, an impact on our earnings. We regularly
evaluate opportunities for, and at times engage in, hedging activities to mitigate the impact that changes in exchange rates for various
currencies may have on our financial results. Our hedging activities are designed to reduce and delay, but not to eliminate, the effects
of foreign currency fluctuations. Factors that could affect the effectiveness of our hedging activities include volatility of currency
markets, and the availability of effective hedging instruments. Since the hedging activities are designed to reduce volatility, they may
have the effect of reducing both the negative and positive impacts that changes in exchange rates may have. Our future financial results
could be significantly affected by the value of the U.S. dollar versus the native currencies of our subsidiaries (primarily the Euro) as
well as the native currencies of foreign subsidiaries and other currencies in which they conduct business. The degree to which our
financial results are affected for any given time period will depend in part upon our hedging activities. There can be no assurance that
our hedging activities will have the desired beneficial impact on our financial condition or results of operations. Moreover, no hedging
activity can completely insulate us from the risks associated with changes in currency exchange rates. We currently have exposure to
changes in exchange rates for a number of currencies including the Euro, the Chilean peso and the Argentinean peso.
Risks Relating to our Common Stock
The Company’s principal shareholders, executive officers and directors hold a significant percentage of the Company’s common
stock, and these shareholders may take actions that may be adverse to your interests.
The Company’s principal shareholders, executive officers and directors beneficially own, in the aggregate, approximately 27% of the
Company’s common stock as of February 18, 2019. As a result, these shareholders, acting together, will be able to significantly influence
all matters requiring shareholder approval, including the election and removal of directors and approval of significant corporate
transactions such as mergers, consolidations, sales and purchases of assets. They also could dictate the management of the Company’s
business and affairs. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control or
impeding a merger or consolidation, takeover or other business combination, which could cause the market price of our common stock
to fall or prevent you from receiving a premium in such a transaction.
The cost of compliance with Section 404 of the Sarbanes-Oxley Act of 2002 may negatively impact the Company’s income.
The Company is subject to the rules and regulations of the SEC, including those rules and regulations mandated by the Sarbanes-Oxley
Act of 2002. Section 404 of the Sarbanes-Oxley Act requires all reporting companies to include in their annual report a statement of
management’s responsibilities for establishing and maintaining adequate internal control over financial reporting, together with an
assessment of the effectiveness of those internal controls. Section 404 further requires that the reporting company’s independent auditors
attest to, and report on, this management assessment. The Company expects its expenses related to its internal and external auditors to
be significant. If we fail to maintain a system of adequate controls, it could have an adverse effect on our business and stock price.
The price of our common stock is highly volatile.
The trading price of the Company’s common stock is highly volatile and could be subject to wide fluctuations in price in response to
various factors, many of which are beyond the Company’s control, including:
the degree to which the Company successfully implements its business strategy;
actual or anticipated variations in quarterly or annual operating results;
changes in recommendations by the investment community or in their estimates of the Company’s revenues or operating
results;
failure to meet expectations of industry analysts;
speculation in the press or investment community;
strategic actions by the Company’s competitors;
announcements of technological innovations or new products by the Company or competitors;
changes in business conditions affecting the Company and its customers; and
potential to be delisted.
In the past, following periods of volatility in the market price of a company’s securities, class action litigation has often been brought
against companies. If a securities class action suit is filed against us, whether or not meritorious, we would incur substantial legal fees
and our management’s attention and resources would be diverted from operating our business in order to respond to the litigation.
14
Provisions of the Michigan Business Corporation Act and the Company’s Articles of Incorporation, Amended and Restated Bylaws,
and Rights Agreement may discourage or prevent a takeover of the Company.
Provisions of the Company’s Articles of Incorporation and Amended and Restated Bylaws, Michigan law, and the Rights Agreement,
dated October 17, 2008, between the Company and Broadridge Corporate Issuer Solution, Inc., as rights agent, could make it more
difficult for a third party to acquire the Company, even if doing so would be perceived to be beneficial to you. These provisions could
discourage potential takeover attempts and could adversely affect the market price of the Company’s shares. Because of these provisions,
you might not be able to receive a premium on your investment. These provisions:
authorize the Company’s Board of Directors, with approval by a majority of its independent Directors but without requiring
shareholder consent, to issue shares of “blank check” preferred stock that could be issued by the Company’s Board of
Directors to increase the number of outstanding shares and prevent a takeover attempt;
limit our shareholders’ ability to call a special meeting of the Company’s shareholders;
limit the Company’s shareholders’ ability to amend, alter or repeal the Company bylaws;
may result in the issuance of preferred stock, which would significantly dilute the stock ownership percentage of certain
shareholders and make it more difficult for a third party to acquire a majority of the Company’s outstanding voting stock;
and
restrict business combinations with certain shareholders.
The provisions described above could prevent, delay or defer a change in control of the Company or its management.
The restatement of our previously issued financial statements was time-consuming and expensive and could expose us to additional
risks that could have a negative effect on our Company.
We restated our previously issued audited financial statements for the year ended December 31, 2016 as well as the unaudited quarterly
financial information included in our Annual Report on Form 10-K for the year ended December 31, 2016, the unaudited financial
statements for the quarter ended March 31, 2017 included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017,
and the unaudited financial statements for the six-month period ended June 30, 2017 included in our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2017. In addition, our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 and our Annual
Report on Form 10-K for the year ended December 31, 2017 were not filed in a timely manner. The restatement process was time consuming
and expensive and, along with the failure to make certain filings with the SEC in a timely manner, could expose us to additional risks that
could have a negative effect on our Company. In particular, we had incurred substantial unanticipated expenses and costs, including audit,
legal and other professional fees, in connection with the restatement of our previously issued financial statements and the ongoing
remediation of material weaknesses in our internal control over financial reporting. Certain remediation actions had been recommended
and we are in the process of implementing them (see Item 9A "Controls and Procedures" of this Form 10-K for a description of these
remediation measures). To the extent these steps are not successful, we could be forced to incur additional time and expense. Our
management’s attention had also been diverted from the operation of our business in connection with the restatement and these ongoing
remediation efforts. In addition, as a result of these restatements and failure to timely make certain filings with the SEC, we could be subject
to governmental, regulatory or other actions. Any such proceedings could, regardless of the outcome, consume a significant amount of
management’s time and attention and could result in additional legal, accounting and other costs and liabilities.
ITEM 1B. UNRESOLVED STAFF COMMENTS
The Company continues to comply with the SEC investigation regarding the Company’s restatement of prior financial statements, which
was completed in April 2018.
ITEM 2. PROPERTIES
The Company’s executive offices are located at 9725 Industrial Drive, Bridgeview, Illinois 60455. The Company has seven principal
operating plants. The Company’s Lifting Equipment business operates from the facilities described in this paragraph. The Company
builds boom trucks and sign cranes in its 188,000 sq. ft. leased facility located in Georgetown, Texas. The Company manufactures its
knuckle boom cranes in two owned facilities, the 542,000 sq. ft. plant located in S. Cesario sul Panaro, Italy and the 213,000 sq. ft.
facility located in Arad, Romania. The Romania facility also produces sub-assemblies that are incorporated into PM products
manufactured in Italy. The Company manufactures its precision pick and carry cranes in a 58,000 sq. ft. facility located in Piacenza,
Italy. The Company builds specialized rough terrain cranes and material handling product in its 170,000 sq. ft. owned facility located in
Winona, Minnesota. The Company builds its specialized mobile tanks for liquid and solid storage and containment solutions in its
100,000 sq. ft. leased facility located in Knox, Indiana.
15
The Company operates its crane distribution business from a 39,000 sq. ft. leased facility located in Bridgeview, Illinois. The Bridgeview
facility also houses our corporate offices.
All our facilities are used exclusively by the Company. The Company believes that its facilities are suitable for its business and will be
adequate to meet our current needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, including product liability and workers’ compensation matters which have arisen
in the normal course of operations. The Company has product liability insurance with self-insurance retention that ranges from $50
thousand to $0.5 million. The Company has a $250 thousand per claim deductible on worker compensation claims and aggregates of
$1.0 million to $1.9 million depending on the policy year. Certain cases are at a preliminary stage and it is not possible to estimate the
amount or timing of any cost to the Company. However, the Company does not believe that these contingencies, in the aggregate, will
have a material adverse effect on the Company. Reserves have been established for several liability cases related to PM acquisitions.
When it is probable that a loss has been incurred and possible to make a reasonable estimate of the Company’s liability with respect to
such matters, a provision is recorded for the amount of such estimate or the minimum amount of a range of estimates when it is not
possible to estimate the amount within the range that is most likely to occur.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
16
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market for the Company’s Common Stock
The Company’s common stock is listed on The NASDAQ Capital Market trading under the symbol MNTX.
Number of Common Stockholders
As of February 27, 2019, there were 155 record holders of the Company’s common stock.
Dividends
During the fiscal years ended December 31, 2018, 2017 and 2016, the Company did not declare or pay any cash dividends on its common
stock and the Company does not intend to pay any cash dividends in the foreseeable future. Furthermore, the terms of our credit facility
do not allow us to declare or pay dividends without the prior written consent of the lender.
Performance Graph
The following stock performance graph is intended to show our stock performance compared with that of comparable companies. The
stock performance graph shows the change in market value of ten thousand dollars invested in our Common Stock, the Russell 2000
Index and a peer group of comparable companies (“Peer Group”) for the five-year period commencing December 31, 2013 through
December 31, 2018. The cumulative total stockholder return of the peer group and Russell 2000 Index assumes dividends are reinvested.
The stockholder return shown on the graph below is not indicative of future performance. The companies in the Peer Group are weighted
by market capitalization.
The Peer Group consists of the following companies, which are in similar lines of business to Manitex International Inc. Lindsay
Corporation (LNN), Gencor Industries Inc. (GENC), Astec Industries, Inc. (ASTE), Columbus McKinnon Corporation (CMCO) and
Alamo Group, Inc. (ALG). The companies in the Peer Group generally have market capitalizations that are significantly greater than
the Company’s market capitalization. It was necessary to select companies with higher market capitalizations to find companies with
similar lines of business. Our competitors are most often either small privately-owned companies with a narrow product line or a segment
of a very large company. In selecting our Peer Group, we intentionally excluded the companies that had the largest market capitalization
even when their product lines were similar to ours.
17
CUMULATIVE TOTAL RETURN
Based upon an initial investment of $10,000 on December 31, 2013
with dividends reinvested
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2013
2014
2015
2016
2017
2018
Manitex (MNTX)
Construction Equipment (5 stocks)
Russell 2000 Index
Issuer Purchases of Equity Securities
December 31, December 31, December 31, December 31, December 31, December 31,
$
Manitex International, Inc.
Russell 2000 Index
$
Construction Equipment (5 stocks) $
2013
10,000 $
10,000 $
10,000 $
2014
2015
2016
2017
2018
8,004 $
10,353 $
16,564 $
3,747 $
9,762 $
15,211 $
4,320 $
11,663 $
22,911 $
6,045 $
13,196 $
29,012 $
3,577
11,628
21,435
The following table provides information about the Company’s purchases of equity securities during the quarter ended December 31,
2018:
Period
October 1 through October 31, 2018
November 1 through November 30, 2018
December 1 through December 31, 2018
Total
Total
number
of shares
purchased (1)
—
—
2,651 $
2,651 $
Average
price
paid per
share
Total number
of shares
purchased as
part of publicly
announced
plans or programs
—
—
—
—
Maximum number
or approximate
dollar value of
shares that may
yet be purchased
under the
plans or programs
—
—
—
—
—
—
6.60
6.60
(1) The Company purchased and cancelled 2,651 shares of its common stock on December 31, 2018. The shares were purchased from
employees on December 14, 2018 at the market closing price of $6.60 on that date. The employees used the proceeds from the
sale of shares to satisfy their withholding tax obligations that arose when restricted shares vested on that date.
18
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with our financial statements and the related notes thereto and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report.
The Company’s results include the results for companies acquired from their respective effective dates of acquisition: December 16,
2014 for Lift Ventures, December 20, 2014 for ASV, January 15, 2015 for the PM Group and March 12, 2015 for Columbia Tanks.
The below financial data reflects the following entities as discontinued operations from 2014 through the year in which the entity was
disposed: 2015 for Load King, and 2016 for Liftking, and CVS. In addition, the data for the years 2014 to 2017 presents ASV as a
discontinued operation.
(In thousands except share information)
Summary of Operations:
Net revenues
Operating (loss) income
Net (loss) income from continuing operations
Net (loss) income from continuing operations
attributable to shareholders of Manitex
International, Inc.
2018
2017
2016
2015
2014
$
242,107 $
(235 )
(13,177 )
213,112 $
(265 )
(7,067 )
173,197 $
(9,974 )
(23,189 )
202,747 $
(288 )
(5,325 )
174,738
13,058
7,261
$
(13,177 ) $
(7,067 ) $
(23,189 ) $
(5,325 ) $
7,261
(Loss) earnings per share from continuing operations
attributable to shareholders of Manitex International, Inc.
$
$
Basic
Diluted
Shares used to calculate earnings per share:
(0.72 ) $
(0.72 ) $
(0.43 ) $
(0.43 ) $
(1.44 ) $
(1.44 ) $
(0.33 ) $
(0.33 ) $
0.52
0.52
Basic
Diluted
18,409,296 16,548,444 16,133,284 15,970,074 13,858,189
18,409,296 16,548,444 16,133,284 15,970,074 13,904,289
Total assets
Total debt for continuing operations
Total shareholders' equity attributed to shareholders of
Manitex International, Inc.
$
$
$
217,249 $
73,011 $
225,188 $
95,253 $
326,954 $
106,295 $
401,423 $
109,437 $
314,267
46,389
88,004 $
70,845 $
72,465 $
107,012 $
120,391
19
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following management’s discussion and analysis of financial condition and results of continuing operations should be read in
conjunction with the Company’s financial statements and notes, and other information included elsewhere in this Report.
FORWARD-LOOKING STATEMENTS
When reading this section of this Annual Report on Form 10-K, it is important that you also read the financial statements and related
notes thereto. This Annual Report on Form 10-K and certain information incorporated herein by reference contain forward-looking
statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements contained in this
Annual Report on Form 10-K, other than statements that are purely historical, are forward-looking statements and are based upon
management’s present expectations, objectives, anticipations, plans, hopes, beliefs, intentions or strategies regarding the future. We use
words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,”
“should,” “could,” and similar expressions to identify forward-looking statements. Forward-looking statements in this Annual Report
on Form 10-K include, without limitation: projections of revenue, earnings, capital structure and other financial items, statements of
our plans and objectives, statements regarding the capabilities and capacities of our business operations, statements of expected future
economic conditions and the effect on us and on our customers, expected benefits of our cost reduction measures, and assumptions
underlying statements regarding us or our business. Our actual results may differ from information contained in these forward-looking
statements for many reasons, including those described below and in the section entitled “Item 1A. Risk Factors”:
(1)
a future substantial deterioration in economic conditions, especially in the United States and Europe;
(2) government spending; fluctuations in the construction industry, and capital expenditures in the oil and gas industry;
(3) our level of indebtedness and our ability to meet financial covenants required by our debt agreements;
(4) our ability to negotiate extensions of our credit agreements and to obtain additional debt or equity financing when needed;
(5)
(6)
(7)
the impact that the restatement of our previously issued financial statements could have on our business reputation and relations
with our customers and suppliers;
the cyclical nature of the markets we operate in;
increase in interest rates;
(8) Our increasingly international operations expose us to additional risks and challenges associated with conducting business
internationally;
(9) difficulties in implementing new systems, integrating acquired businesses, managing anticipated growth, and responding to
technological change;
(10) our customers’ diminished liquidity and credit availability;
(11) the performance of our competitors;
(12) shortages in supplies and raw materials or the increase in costs of materials;
(13) potential losses under residual value guarantees,
(14) product liability claims, intellectual property claims, and other liabilities;
(15) the volatility of our stock price;
(16) future sales of our common stock;
(17) the willingness of our stockholders and directors to approve mergers, acquisitions, and other business transactions;
(18) currency transaction (foreign exchange) risks and the risk related to forward currency contracts;
(19) compliance with changing laws and regulations;
(20) certain provisions of the Michigan Business Corporation Act and the Company’s Articles of Incorporation, as amended, Amended
and Restated Bylaws, and the Company’s Preferred Stock Purchase Rights may discourage or prevent a change in control of the
Company;
(21) a substantial portion of our revenues are attributed to limited number of customers which may decrease or cease purchasing any time;
(22) a disruption or breach in our information technology systems;
(23) our reliance on the management and leadership skills of our senior executives;
20
(24) the cost of compliance with Section 404 of the Sarbanes-Oxley Act of 2002;
(25) Impairment in the carrying value of goodwill could negatively affect our operating results;
(26) potential negative effects related to the SEC investigation into our Company; and
(27) other factors.
The risks described in this Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial
condition or operating results. All forward-looking statements are made only as of the date hereof. We do not undertake, and expressly
disclaim, any obligation to update this forward-looking information, except as required under applicable law.
OVERVIEW
The Company is a leading provider of engineered lifting solutions. The Company reports in a single business segment and has five
operating segments. The Company designs, manufactures and distributes a diverse group of products that serve different functions and
are used in a variety of industries.
Manitex, Inc. (“Manitex”) markets a comprehensive line of boom trucks, truck cranes and sign cranes. Manitex’s boom trucks and crane
products are primarily used for industrial projects, energy exploration and infrastructure development, including roads, bridges and
commercial construction.
Badger Equipment Company (“Badger”) is a manufacturer of specialized rough terrain cranes and material handling products. Badger
primarily serves the needs of the construction, municipality and railroad industries.
PM Oil and Steel S.p.A. (“PM”), formerly known as PM Group S.p.A., is a leading Italian manufacturer of truck-mounted hydraulic
knuckle boom cranes with a 50-year history of technology and innovation, and a product range spanning more than 50 models. Its largest
subsidiary, Oil & Steel (“O&S”), is a manufacturer of truck-mounted aerial platforms with a diverse product line and an international
client base.
Valla product line of industrial cranes is a full range of precision pick and carry cranes using electric, diesel, and hybrid power options.
Its cranes offer wheeled or tracked, and fixed or swing boom configurations, with special applications designed specifically to meet the
needs of its customers. These products are sold internationally through dealers and into the rental distribution channel.
Manitex Sabre, Inc. (“Sabre”), which is located in Knox, Indiana, manufactures a comprehensive line of specialized mobile tanks for
liquid and solid storage and containment solutions with capacities from 8,000 to 21,000 gallons. Its mobile tanks are sold to specialized
independent tank rental companies and through the Company’s existing dealer network. The tanks are used in a variety of end markets
such as petrochemical, waste management and oil and gas drilling.
Crane and Machinery, Inc. (“C&M”) is a distributor of the Company’s products as well as Terex Corporation’s (“Terex”) rough terrain
and truck cranes. Crane and Machinery Leasing, Inc. (“C&M Leasing”) rents equipment manufactured by the Company as well as a
limited amount of equipment manufactured by third parties. Although C&M is a distributor of Terex rough terrain and truck cranes,
C&M’s primary business is the distribution of products manufactured by the Company.
Consolidated Variable Interest Entity
Even though it had no ownership interest in SVW Crane & Equipment Company (together with its wholly owned subsidiary, Rental
Consulting Service Company, “SVW”), the Company had the power to direct the activities that most significantly impact SVW’s
economic performance. Additionally, the Company was the primary beneficiary of the SVW relationship. SVW obtained third party
financing, which was effectively guaranteed by the Company, on specific cranes the Company manufactured and remitted the loan
proceeds to the Company. Other than its business transactions described herein, SVW had no other substantial business operations. The
Company had determined that SVW is a Variable Interest Entity (“VIE”) that under current accounting guidance needed to be
consolidated in the Company’s financial results. SVW was consolidated into the Company’s financial results beginning in the first
quarter of 2016 through the fourth quarter of 2017. By December 31, 2017, SVW had ceased operations and is therefore not a
consolidated VIE after December 31, 2017.
Income and losses related to VIE’s are typically shown in a company’s financial statements as being attributed to a non-controlling
interest. Other than its transactions between SVW and the Company, SVW had no other substantial business operations. Furthermore,
the Company exercised control and absorbed all losses and received all the income from SVW operations. Therefore, the Company has
concluded that income and losses related to the VIE are attributable to the Shareholders of the Company.
21
Economic Conditions
In 2016, we noted that the selloff by energy companies of excess equipment that began in 2015 continued through much of the year.
This selloff dampened demand for new equipment in both the energy market and the other markets we serve with our boom trucks. We
did note that oil prices did begin to increase and by the beginning of June 2016 were approaching $50 per barrel. Additionally, the oil
rig count began to increase again and by year end totaled 525 oil rigs. Late in the year, orders received began to increase and included
orders for a number of cranes in a multitude of markets that the Company serves. The Company continues to aggressively pursue
multiple markets including the tree, utility, general construction and energy markets.
In 2017, Oil prices remained relatively stable through the first nine months of the year, before the prices began to strengthen considerably
during the fourth quarter of the year. Oil prices at the end of 2017 topped $61 per barrel. The oil rig count declined during the first half
of the year to 431 before rebounding to 658 by the end of 2017. In early 2018, the oil rig count continued to increase and at the end of
March 2018 increased to over 800. The sell-off of used equipment continued through most of the year but the effects diminished
throughout the year. The market for boom trucks continued to improve throughout the year but remained below normal levels. Orders,
however, increased significantly in the fourth quarter of 2017 and going into 2018 demand for boom trucks continued to increase.
The market for PM knuckle boom cranes was not significantly affected by decrease in oil prices. The markets for these products have
been more stable. The North American market for knuckle boom cranes is growing. PM currently has a small share of the market for
knuckle boom cranes in North America. The Company has started to manufacture knuckle boom cranes on a limited basis in the United
States and is marketing them through the Company’s current distribution channels. The Company currently has a strong presence in
North America for its boom trucks. The Company believes that it can significantly increase the Company’s share for knuckle boom
cranes in North America. The Company believes this is an immediate opportunity that will continue to grow over time.
In 2017, the demand for knuckle boom cranes was up modestly in all the markets that PM sells into except for the Middle East. The
demand from the Middle East market was consistent with the prior year but remains significantly depressed. In 2017, Western and
North Europe were PM’s largest markets. Although there was growth in the other PM markets, the demand from such other markets has
not returned to levels achieved in the past.
During 2018, demand for boom trucks continued to be significantly above 2017 levels with industry shipments increasing 19% versus
2017. The general economic environment in the United States during 2018 was favorable. During 2018, the United States economy was
strong, oil prices strengthened, and U.S. oil rig count increased to 1,083 at December 28, 2018 from 929 at December 31, 2017. The
Company currently expects the favorable environment that it is currently operating to continue through 2019.
During 2018, the demand for knuckle boom cranes was steady in all the markets that PM sells into except for some markets in Latin
America where local currency turbulence with strong devaluations towards the Euro and US dollar affected the local demand. The
demand from the Middle East market was consistent with 2017 but remained significantly slow. During 2018, demand from Western
and Northern Europe, PM’s largest markets, remained at a solid level. Although there was light growth in the other PM markets, the
demand from such other markets was still lower than the levels achieved in the past. PM’s markets appeared to be stable or growing
moving into 2019.
Factors Affecting Revenues and Gross Profit
The Company derives most of its revenue from purchase orders from dealers and distributors. The demand for the Company’s products
depends upon the general economic conditions of the markets in which the Company competes. The Company’s sales depend in part
upon its customers’ replacement or repair cycles. Adverse economic conditions, including a decrease in commodity prices, may cause
customers to forego or postpone new purchases in favor of repairing existing machinery.
Gross profit varies from period to period. Factors that affect gross profit include product mix, production levels and cost of raw materials.
Margins tend to increase when production is skewed towards larger capacity cranes.
22
The following table sets forth certain financial data for the three years ended December 31, 2018, 2017 and 2016:
Results of Consolidated Operations
MANITEX INTERNATIONAL, INC.
(In thousands, except share data)
Net revenues
Cost of sales
Gross profit
Operating expenses
Research and development costs
Selling, general and administrative expenses
Impairment of intangibles
Total operating expenses
Operating loss
Other income (expense)
Interest expense
Interest expense related to write off of debt
issuance costs
Interest income
Changes in fair value of securities held
Foreign currency transaction loss
Other (loss) income
Total other expense
Loss before income taxes and loss in
non-marketable equity interest from
continuing operations
Income tax expense (benefit) from continuing
operations
(Loss) income in non-marketable equity interest,
net of taxes
Loss from continuing operations
Discontinued operations:
Loss from discontinued operations, net of
income tax (benefit) expense of ($23) and
$37,in 2017 and 2016, respectively
$
(Income) loss attributable to noncontrolling interest
Net loss
For the Year Ended For the Year Ended For the Year Ended
December 31,
December 31,
December 31,
2018
2017
2016
$
242,107 $
198,060
44,047
213,112 $
176,266
36,846
2,839
35,707
5,736
44,282
(235 )
2,564
34,547
—
37,111
(265 )
173,197
143,260
29,937
2,939
36,972
—
39,911
(9,974 )
(5,508 )
(6,498 )
(6,390 )
—
168
(5,494 )
(814 )
(374 )
(12,022 )
—
—
—
(1,149 )
367
(7,280 )
(1,439 )
—
—
(1,115 )
915
(8,029 )
(12,257 )
(7,545 )
(18,003 )
511
(118 )
(566 )
(409 )
(13,177 )
360
(7,067 )
(5,752 )
(23,189 )
—
(13,177 ) $
—
(737 )
(7,804 ) $
(274 )
(14,478 )
(37,667 )
574
Loss attributable to shareholders
of Manitex International, Inc.
$
(13,177 ) $
(8,078 ) $
(37,093 )
Year Ended December 31, 2018 from Continuing Operations Compared to Year Ended December 31, 2017 from Continuing
Operations
Net loss from continuing operations
For the year ended December 31, 2018, net loss was $13.2 million, which consists of revenue of $242.1 million, cost of sales of $198.1
million, research and development costs of $2.8 million, SG&A costs of $41.5 million, interest expense of $5.5 million, interest income
of $0.2, a loss in the change in fair value of securities held of $5.5, foreign currency transaction loss of $0.8 million, other loss of $0.4
million, loss in non-marketable equity interest of $0.4 million and income tax expense of $0.5 million.
23
For the year ended December 31, 2017, net loss was $7.1 million, which consists of revenue of $213.1 million, cost of sales of $176.3
million, research and development costs of $2.6 million, SG&A costs of $34.5 million, interest expense of $6.5 million, foreign currency
transaction loss of $1.1 million, other income of $0.4 million, income in non-marketable equity interest of $0.4 million and income tax
benefit of $0.1 million.
Net revenue and gross profit —For the year ended December 31, 2018, net revenue and gross profit were $242.1 million and $44.0
million, respectively. Gross profit as a percent of net revenues was 18.2% for the year ended December 31, 2018. For the year ended
December 31, 2017, net revenue and gross profit were $213.1 million and $36.8 million, respectively. Gross profit as a percent of sales
was 17.3% for the year ended December 31, 2017.
For 2018, revenues increased $29.0 million or 13.6% from $213.1 million for 2017 to $242.1 million for 2018. The increase is primarily
due to an increase in straight mast cranes revenues and specialized mobile tank revenues. The Company also had increases from all
other business units for the year. The revenues for the year ended December 31, 2018 were also favorably impacted by a stronger Euro,
which accounted for approximately $3.7 million of the increase in revenue.
Gross profit as a percent of net revenues was 18.2% for the year ended December 31, 2018, which increased from 17.3% for the year
ended December 31, 2017. The improvement in the gross profit percentage is primarily due to an increase in the gross margin percentage
generated on the sale of straight mast cranes and specialized mobile tanks. Boom truck margins were favorably impacted by an increase
in production volume and improved pricing. Pricing improved in 2018, largely the result of a decrease in discounts being offered during
2018. The gross margin percent for the year ended December 31, 2017 was affected by $1.7 million in inventory reserve adjustments in
the third and fourth quarters of 2017.
Research and development —Research and development for the year ended December 31, 2018 was $2.8 million compared to $2.6
million for the comparable period in 2017. Research and development expenditures were relatively consistent with the prior period. The
Company’s research and development spending continues to reflect our commitment to develop and introduce new products that give
the Company a competitive advantage.
Selling, general and administrative expense —Selling, general and administrative expense for the year ended December 31, 2018 was
$41.5 million compared to $34.5 million for the comparable period in 2017, an increase of $7.0 million. Approximately $5.8 million
was related to net impairment charges to intangible assets. Approximately $2 million of the increase is attributed to fees related to
financial statement restatement costs and $0.6 million of the increase is attributed to currency exchange impact. In 2017, a non-recurring
expense related to the ConExpo trade show (the show is held every three years and was held in March 2017) accounted for $0.5 million
in expense. The remaining $1 million is attributed to decreases in PM expenses related to restructuring activities, partially offset by
increases in the United States which are partially due to increased revenues.
Operating loss —The Company had an operating loss of $0.2 million for the year ended December 31, 2018 compared to an operating
loss of $0.3 million in the prior year. Operating loss increased due to changes in revenue, cost of sales and operating expenses explained
above.
Interest expense —Interest expense was $5.5 million and $6.5 million for the years ended December 31, 2018 and 2017, respectively.
2018 interest expense reflects the benefit of decreases in outstanding debt balances partially offset by higher interest rates.
Foreign currency transaction loss — Foreign currency loss was $0.8 million for the year ended December 31, 2018 and $1.1 million
for the year ended December 31, 2017. As stated in the past, the Company attempts to purchase forward currency exchange contracts
such that the exchange gains and losses on the assets and liabilities denominated in other than the reporting units’ functional currency
will be offset by the changes in the market value of the forward currency exchange contracts it holds. Currency risks can be reduced
but not eliminated in part because the Company has not been able to identify a strategy to effectively hedge the currency risks related to
the Argentinian peso. The Company records at the balance sheet date the forward currency exchange contracts at their market value
with any associated gain or loss being recorded in current earnings as a currency gain or loss.
A substantial portion of the 2018 loss is attributable to exchange losses related to the Argentinian peso. As previously stated, the
Company has not been able to identify a strategy to effectively hedge currency risks related to the Argentinian peso.
Other (loss) income — For the years ended December 31, 2018 and 2017, the Company had other loss of $0.4 million and other income
of $0.4 million, respectively. For the year ended December, 31, 2018, the other loss was related to the increase in the fair market value
of a contingent liability associated with the PM acquisition based on a revaluation that used updated information.
For the year ended December 31, 2017, other income is the result of revaluing a contingent acquisition liability related to an option to
acquire certain PM bank debt.
24
Change in fair value of securities held—-For the year ended December 31, 2018, the Company had losses of $5.5 million. Losses for
the year ended December 31, 2018 were due to a change in the fair value of securities held in ASV (see Notes 11 and 26 in the
accompanying Consolidated Financial Statements).
Income tax — On December 22, 2017, the Tax Cuts and Jobs Act (the “Jobs Act”) was enacted into law. The Jobs Act makes
comprehensive changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%,
changes to the rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December
31, 2017, immediate expensing of certain qualified property, creation of a new limitation on deductible interest expense, repeal of the
U.S. corporate minimum tax (“AMT”), and changes in the manner in which international operations are taxed in the U.S. Although the
majority of the changes resulting from the Jobs Act are effective beginning in 2018, U.S. GAAP requires that certain impacts of the Jobs
Act be recognized in the income tax provision in the period of enactment.
In response to the enactment of the Jobs Act, the SEC issued Staff Accounting Bulletin (“SAB”) 118, which provides guidance on
accounting for the tax effects of the Jobs Act. SAB 118 provides a measurement period that should not extend beyond one year from
the Jobs Act enactment date for companies to complete the accounting under ASC 740. To the extent that a company’s accounting for
certain income tax effects of the Jobs Act is incomplete but is able to determine a reasonable estimate, it must record a provisional
estimate in the financial statements.
In accordance with SAB 118, the Company recorded a provisional increase to its net deferred tax asset of $0.4 million, which is primarily
attributable to deferred tax liabilities related to indefinite lived intangible assets that became available as a source of taxable income to
offset existing deferred tax assets and for the recognition of refundable alternative minimum tax credits as provided for in the Jobs Act.
The Jobs Act includes a mandatory one-time transition tax on accumulated earnings of foreign subsidiaries. As a result, all previously
unremitted earnings for which no U.S. deferred tax liability had been accrued are now subject to U.S. tax. The Company recorded a
provisional amount for the one-time transition tax liability for all of its foreign subsidiaries resulting in an income tax expense of
approximately $0.5 million, which was offset by a reduction in the valuation allowance. During the year ended December 31, 2018, we
increased our one-time transition tax on accumulated earnings of foreign subsidiaries by $0.3 million, which was offset by a reduction
in the valuation allowance. Due to our net loss position, we were not subject to US federal and state taxes in connection with the deemed
repatriation of foreign earnings.
The Company completed its analysis of the Jobs Act during 2018. There was no impact to income tax expense as a result of the changes
to provisional amounts recorded in the consolidated financial statements for the year-ended December 31, 2017.
Approximately $3.8 million of the Company’s undistributed foreign earnings have been subject to US federal taxation as required by
the Jobs Act. The Company’s assertion to indefinitely reinvest its foreign earnings remains unchanged despite the taxation of its
undistributed foreign earnings. Upon remittance of these earnings, the Company would be subject to withholding tax and some state
tax. It is not practicable to estimate the tax impact of the reversal of the outside basis difference, or the repatriation of cash due to the
complexity associated with the calculations.
The Jobs Act also establishes Global Intangible Low-Taxed Income (“GILTI”) provisions that impose a tax on foreign income in excess
of a deemed return on tangible assets of foreign corporations. The Company has elected to recognize GILTI as a period cost as incurred,
therefore there are no deferred taxes recognized for basis differences that are expected to impact the amount of the GILTI inclusion
upon reversal.
The Company’s effective rate was an income tax provision of 4.04% on a pretax loss of $12.7 million compared to an income tax benefit
of 1.6% on a pretax loss of $7.2 million. The increase in the effective tax rate is due primarily to the tax effects related to the mix of
domestic and foreign earnings, and an increase in nondeductible permanent differences, unrecognized tax benefits and the valuation
allowance.
(Loss) income in equity investments — The Company had (loss) and income related to its equity investment of $(0.4) million and $0.4
million for the years ended December 31, 2018 and 2017, respectively. Loss for the year ended December 31, 2018 was from sale of
shares of ASV Holdings stock and loss on equity investment in ASV Holdings compared to income from equity investment in ASV
Holdings for the comparable period.
Net loss from continuing operations —Net loss for the years ended December 31, 2018 and 2017 was $13.2 million and $7.1 million,
respectively. The change is explained above.
25
Year Ended December 31, 2017 from Continuing Operations Compared to Year Ended December 31, 2016 from Continuing
Operations
Net loss from continuing operations
For the year ended December 31, 2017, net loss was $7.1 million, which consists of revenue of $213.1 million, cost of sales of $176.3
million, research and development costs of $2.6 million, SG&A costs of $34.5 million, interest expense of $6.5 million, foreign currency
transaction loss of $1.1 million, other income of $0.4 million, income in non-marketable equity interest of $0.4 million and income tax
benefit of $0.1 million.
For the year ended December 31, 2016, net loss was $23.2 million, which consists of revenue of $173.2 million, cost of sales of $143.3
million, research and development costs of $2.9 million, SG&A costs of $37.0 million, interest expense of $7.8 million (including debt
issuance costs of $1.4 million), foreign currency transaction loss of $1.1 million, other income of $0.9 million, loss in non-marketable
equity interest of $5.8 million and income tax benefit of $0.6 million.
Net revenue and gross profit —For the year ended December 31, 2017, net revenue and gross profit were $213.1 million and $36.8
million, respectively. Gross profit as a percent of sales was 17.3% for the year ended December 31, 2017. For the year ended
December 31, 2016, net revenue and gross profit were $173.2 million and $29.9 million, respectively. Gross profit as a percent of sales
was 17.3% for the year ended December 31, 2016.
For 2017 revenues increased $39.9 million or 23.0% from $173.2 million for 2016 to $213.1 million for 2017. The increase is primarily
due to an increase in straight mast cranes revenues. The increase is due to an improvement in market conditions addressed above under
the heading “Economic Conditions”. The revenues for the year ended December 31, 2017 were also favorably impacted by a stronger
Euro, which accounted for approximately $1.0 million of the increase in revenue.
Gross profit as a percent of net revenues was 17.3% for the year ended December 31, 2017, which is equal to the gross profit for the
year ended December 31, 2016 year. The gross margin percent for the year ended December 31, 2017 was affected by $1.7 million in
inventory reserve adjustments in the third and fourth quarters of 2017.
Research and development —Research and development for the year ended December 31, 2017 was $2.6 million compared to $2.9
million for the comparable period in 2016. Research and development expenditures were relatively consistent with the prior period. The
Company’s research and development spending continues to reflect our commitment to develop and introduce new products that give
the Company a competitive advantage.
Selling, general and administrative expense —Selling, general and administrative expense for the year ended December 31, 2017 was
$34.5 million compared to $37.0 million for the comparable period in 2016, a decrease of $2.4 million. The three months ended March
31, 2017 included expenses of $0.5 million incurred in connection with our participation at the 2017 Con Expo trade show. The Con
Expo show, which is held every three years, was held in Las Vegas in March of this year. This show is an international gathering place
for the construction industries. It is estimated that 130,000 professionals from around the world attended the show.
Selling, general and administrative expenses decreased $2.9 million when Con Expo expenses are excluded. The decrease is primarily
related to the Company’s continued cost cutting programs.
Operating loss —The Company had an operating loss of $0.3 million for the year ended December 31, 2017 compared to an operating
loss of $10.0 million in the prior year. Operating income increased due to changes in revenue, cost of sales and operating expenses
explained above.
Interest expense —Interest expense was $6.5 million and $7.8 million for the years ended December 31, 2017 and 2016,
respectively. A non-recurring expense in 2016 of $1.4 million accounts for the majority of the decrease. The non-recurring charge was
the result of expensing deferred financing costs when debt was refinanced.
As the majority of the Company’s debt is variable interest rate debt, the modest increases in market interest rates including LIBOR and
the U.S. prime rates were mostly offset by a decrease in outstanding debt.
Foreign currency transaction loss — Foreign currency loss was $1.1 million for both years ended December 31, 2017 and 2016. As
stated in the past, the Company attempts to purchase forward currency exchange contracts such that the exchange gains and losses on
the assets and liabilities denominated in other than the reporting units’ functional currency will be offset by the changes in the market
value of the forward currency exchange contracts it holds. Currency risks can be reduced but not eliminated in part because the Company
has not been able to identify a strategy to effectively hedge the currency risks related to the Argentinian peso. The Company records
at the balance sheet date the forward currency exchange contracts at their market value with any associated gain or loss being recorded
in current earnings as a currency gain or loss.
26
A substantial portion of the 2017 loss is attributable to exchange losses related to the Argentinian peso. As previously stated, the
Company has not been able to identify a strategy to effectively hedge currency risks related to the Argentinian peso.
The 2016 currency loss also reflects the recognition of deferred loss of $0.2 million related to an intercompany receivable. The loss had
been previously deferred in other comprehensive income as there was an intercompany receivable that was not expected to be
repaid. The repayment of the receivable resulted in the recognition of the previously deferred loss.
Other income (loss) — For the years ended December 31, 2017 and 2016, the Company had other income of $0.4 million and $0.9
million, respectively. For the year ended December 31, 2017, other income is the result of revaluing a contingent acquisition liability
related to an option to acquire certain PM bank debt. The fair market value of the contingent acquisition liability is subject to revaluation
on a recurring basis. The revaluation that was performed for March 31, 2018 will take into account the effect of PM debt restructuring
that happened in the first quarter of 2018. During 2016, the fair value of this liability was recalculated based on updated 2017 EBITDA
projections. This revaluation resulted in a gain of approximately $0.9 million.
Income tax — On December 22, 2017, the Tax Cuts and Jobs Act (the “Jobs Act”) was enacted into law. The Jobs Act makes
comprehensive changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%,
changes to the rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December
31, 2017, immediate expensing of certain qualified property, creation of a new limitation on deductible interest expense, repeal of the
U.S. corporate minimum tax (“AMT”), and changes in the manner in which international operations are taxed in the U.S. Although the
majority of the changes resulting from the Jobs Act are effective beginning in 2018, U.S. GAAP requires that certain impacts of the Jobs
Act be recognized in the income tax provision in the period of enactment.
In response to the enactment of the Jobs Act, the SEC issued Staff Accounting Bulletin (“SAB”) 118, which provides guidance on
accounting for the tax effects of the Jobs Act. SAB 118 provides a measurement period that should not extend beyond one year from
the Jobs Act enactment date for companies to complete the accounting under ASC 740. To the extent that a company’s accounting for
certain income tax effects of the Jobs Act is incomplete but is able to determine a reasonable estimate, it must record a provisional
estimate in the financial statements. As described in Note 16, the Company has completed its analysis of the Jobs Act during 2018.
There was no impact to income tax expense as a result of the changes to provisional amounts recorded in the consolidated financial
statements for the year-ended December 31, 2017.
Income tax (benefit) from continuing operations was $(0.1) million and $(0.6) million for the years ended December 31, 2017 and 2016,
respectively. The income tax benefit is attributed to a pre-tax loss of $7.2 million and $23.8 million from continuing operations for the
years ended December 31, 2017 and December 31, 2016, respectively. The Company’s effective rate decreased to 1.64% for 2017 from
2.38% for 2016. The decrease in the effective tax rate is due primarily to the tax effects related to the Tax Cuts and Jobs Act, a decrease
in the valuation allowance, a decrease in deferred tax liabilities related to indefinite lived intangible assets as well as the mix of domestic
and foreign earnings.
Income (loss) in equity investments — The Company had income (loss) related to its equity investment of $0.4 million and ($5.8)
million for the years ended December 31, 2017 and 2016, respectively. Income for the year ended December 31, 2017 was from earnings
from our equity investment in ASV Holdings. The loss in 2016 is result of recognizing an impairment charge of $5.6 million to write
off our entire investment in Lift Ventures LLC during 2016. See Note 27 to the financial statements for additional information related
this impairment.
Net loss from continuing operations —Net loss for the years ended December 31, 2017 and 2016 was $7.1 million and $23.2 million,
respectively. The change is explained above.
Liquidity and Capital Resources
Cash, cash equivalents and restricted cash were $22.3 million and $5.4 million at December 31, 2018 and December 31, 2017,
respectively. In addition, the Company has a U.S. revolving credit facility with a maturity date of July 20, 2021. At December 31, 2018
the Company had approximately $24.5 million available to borrow under its revolving credit facility.
At December 31, 2018, the PM Group had established working capital facilities with five Italian banks, one Spanish bank and eight
South American banks. Under these facilities, the PM Group can borrow $25.2 million against orders, invoices and letters of credit.
These facilities are divided into two types: working capital facilities and cash facilities. At December 31, 2018, the PM Group had
received advances of $18.9 million. Future advances are dependent on having available collateral.
27
Our subsidiary in Argentina (“PM Argentina”) began accounting for their operations as highly inflationary effective July 1, 2018, as
required by GAAP. Under highly inflationary accounting, PM Argentina’s functional currency became the Euro (its parent company’s
reporting currency), and its income statement and balance sheet have been measured in Euros using both current and historical rates of
exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings
in other (income) and expense, net and was not material. As of December 31, 2018, PM Argentina had a small net peso monetary
position. Net sales of PM Argentina were less than 5 and 10 percent of our consolidated net sales for the years ended December 31,
2018 and 2017, respectively.
Significant Transactions Affecting Company Liquidity
During 2018, the Company entered into two transactions that had a significant beneficial impact on the Company’s liquidity. During
February 2018, the Company sold 1.0 million shares of ASV common stock it held for $7.0 million and on May 29, 2018 Tadano Ltd.
purchased approximately 2.9 million shares of the Company’s common stock, which generated cash of approximately $32.0 million,
net of expenses. A portion of the proceeds raised in these two transactions were used to support an increase in working capital, the
result of increased revenues. The remaining proceeds are the principal reason cash has increased by $16.9 million and debt has decreased
by $22.9 million since year end.
Nevertheless, because our availability under our credit lines is limited, it is important that we manage our working capital. The Company
may need to raise additional capital through debt or equity financings to support our long-term growth strategy, which may include
additional acquisitions. There is no assurance that such financing will be available or, if available, on acceptable terms.
Outstanding borrowings and required payments
The following is a summary of our outstanding borrowings at December 31, 2018:
(In millions)
Outstanding
Balance
Interest
Rate
Interest
Paid
Principal Payment
$
U.S. Revolver
Convertible note—Terex
Convertible note—Perella
Capital lease—cranes for sale
Capital lease—Georgetown
facility
Note payable—
Winona Facility
PM unsecured borrowings
PM Autogru term loan #1
PM Autogru term loan #2
PM Autogru term loan #3
PM Argentina Note
PM term loans with related
accrued interest, interest
rate swaps and FMV
adjustments
PM short-term working
capital borrowings
Valla note payable
Valla short-term working
capital borrowings
Debt issuance costs
Debt net of issuance costs
$
—
7.2
14.7
0.5
N/A
7.5%
7.5%
5.5%
5.0
12.50%
0.4
13.9
0.2
0.4
0.3
0.1
8.0%
3.5%
3.00%
2.50%
2.75%
28.5%
11.5
0 to 3.5%
18.9 1.75 to 65.0%
0.1
4.38%
0.0 4.50 to 4.75%
73.2
(0.2 )
73.0
28
Monthly July 20, 2021 maturity
Semi-Annual January 1, 2021 maturity
Semi-Annual January 7, 2021 maturity
Monthly January 13, 2021 maturity
Monthly
$0.06 million monthly payment includes
interest. April 30, 2028 maturity
$0.01 million monthly
Monthly
Semi-Annual
Monthly
Monthly
Annual installments starting December
2019 through December 2025
$0.01 million monthly through
October 2020
$0.01 monthly through
March 2019
Monthly Monthly through June 2023
Quarterly $0.02 monthly through May 2019
Annual
Annual installments starting December
2019 and a balloon payment in
December 2026
Monthly
Upon payment of invoice
Quarterly
Monthly
Over 14 quarterly payments ending
January 2021
Upon payment of invoice or letter of
credit
The debt has various maturity dates. See Notes 13 through 15 to the financial statements for additional details.
Change in outstanding debt
In 2018, our total debt was reduced by $22.9 million (excluding $0.5 million deferred interest reclassification). The primary difference is
attributed to a decrease in the U.S. Revolver debt of $12.9 and a decrease in total PM debt of $8.0 million which was paid off during the
year.
The following is a summary of changes in debt related to continuing operations:
(In millions)
U.S. Revolver
Notes Bank (insurance premiums)
Notes payable-Terex
Capital leases—buildings
Capital leases—equipment
Convertible note—Terex
Convertible note—Perella
Badger notes payable
Valla notes payable
PM
Debt issuance costs
Increase/
(decrease)
(12.9 )
(0.6 )
(0.6 )
0.2
(0.2 )
0.2
0.1
(0.5 )
(1.0 )
(8.1 )
(23.4 )
0.5
(22.9 )
$
$
$
Cash Flows for 2018 and 2017
Operating Activities
For 2018, operating activities provided $1.0 million in cash compared to $9.1 million cash provided during 2017. For 2018, cash used
by working capital was $5.1 million versus $9.9 million of cash generated from working capital in 2017. Receivables were a use of cash
of $0.3 million for 2018 compared to $11.1 million in 2017. Inventory represented a cash outflow of $7.3 million for 2018 and a cash
inflow of $17.1 million during 2017 primarily driven by the sale of $9.5 million of SVW inventory that was held at the end of 2016.
Accounts payable provided $2.8 million of cash for the year ended December 31, 2018, compared to $2.6 million of cash used for the
year ended December 31, 2017. The cash performance in 2017 also included $3.5 million from discontinued operations.
Investing Activities
Cash provided for investing activities was $5.8 million in 2018 which included $7.0 million of proceeds from the sales of partial interest
in equity investment. Cash provided for investing activities was $11.7 million in 2017 which included $12.9 million of proceeds from
the sale of discontinued operations. Cash payments for plant, property and equipment were $1.2 million in 2018 versus payments of
$1.0 million in 2017, an increase of $0.2 million.
Financing Activities
Cash flow from financing activities was an inflow of $11.0 million for the year ended December 31, 2018 which included net proceeds
of $31.9 million in connection with the sale of stock to Tadano, partially offset by a reduction in borrowing under the U.S. credit facility
of $12.9 million. Cash flow from financing activities was an outflow of $20.9 million for the year ended December 31, 2017. Financing
activities of continuing operations consumed $15.8 million and discontinued operations consumed another $5.1 million of cash. The use
of cash in 2017 included a reduction in borrowing under the U.S. credit facility of $7.1 million and debt payments of $16.5 million, of
which approximately $11.2 million was used to retire all SVW related debt.
Contingencies
The Company is involved in various legal proceedings, including product liability and workers’ compensation matters which have arisen
in the normal course of operations. Certain cases are at a preliminary stage, and it is not possible to estimate the amount or timing of
any cost to the Company.
29
The Company does not believe that these contingencies in aggregate will have a material adverse effect on the Company.
Additionally, the Company has been named as a defendant in several multi-defendant asbestos related product liability lawsuits. In
certain instances, the Company is indemnified by a former owner of the product line in question. In the remaining cases the plaintiff
has, to date, not been able to establish any exposure by the plaintiff to the Company’s products. The Company is uninsured with respect
to these claims but believes that it will not incur any material liability with respect to these to claims.
When it is probable that a loss has been incurred and possible to make a reasonable estimate of the Company’s liability with respect to
such matters, a provision is recorded for the amount of such estimate or the minimum amount of a range of estimates when it is not
possible to estimate the amount within the range that is most likely to occur. The Company established reserves for several PM lawsuits
in conjunction with the purchase accounting for this acquisition.
As described in Note 16, included in the unrecognized tax benefits is a liability for the Romania income tax audit for tax years 2012-
2016. Depending upon the final resolution of these audits, the liability could be higher or lower than the amount recorded at December
31, 2018.
Residual Value Guarantees
The Company issues partial residual value guarantees to support a customer’s financing of equipment purchased from the Company. A
residual value guarantee involves a guarantee that a piece of equipment will have a minimum fair market value at a future date if certain
conditions are met by the customer. The Company has issued partial residual guarantees that have maximum exposure of approximately
$1.6 million. The Company, however, does not have any reason to believe that any exposure from such a guarantee is probable at this
time and accordingly, no liability has been recorded. The Company’s lability from its guarantees may be affected by economic conditions
in used equipment markets at the time of loss.
Income Taxes
The Company records accrued interest related to income tax matters in the provision for income taxes in the accompanying consolidated
statement of income. For the years ended December 31, 2018, 2017 and 2016, interest and penalties recognized on unrecognized tax
benefits were $266, $69 and $40, respectively. The accrued balance as of December 31, 2018 and 2017 was $648 and $382, respectively.
Included in the unrecognized tax benefits is a liability for the Romania income tax audit for tax years 2012-2016. Depending upon the
final resolution of the audit, the uncertain tax position liability could be higher or lower than the amount recorded at December 31, 2018.
It is not reasonably possible to estimate the change in unrecognized tax benefits within 12 months of the reporting date.
The Company files income tax returns in the United States, Italy, Romania and Argentina as well as various state and local tax
jurisdictions with varying statutes of limitations. With a few exceptions, the Company is no longer subject to examination by the tax
authorities for U.S. federal or state for the years before 2015, or foreign examinations for years before 2012.
SEC Investigation
The Company continues to comply with the SEC investigation regarding the Company’s restatement of prior financial statements, which
was completed in April 2018.
Off Balance Sheet Arrangements
CIBC has issued 2 standby letters of credit at December 31, 2018. The first standby letter of credit is $0.5 million in favor of an
insurance carrier to secure obligations which may arise in connection with future deductible payments that may be incurred under the
Company’s worker’s compensation insurance policies. The second standby letter of credit is $20 thousand in favor of a governmental
agency to secure obligations which may arise in connection with worker’s compensation claims. During the fourth quarter of 2015 and
first quarter of 2016, the Company entered into four 60-month equipment operating leases in sales and lease back transactions. In
connection with these transactions, the Company received $6.7 million, i.e., $2.6 million for the one executed in 2015 and a total of $4.1
million for the three executed in 2016. In February 2019, the Company came to an agreement with the bank to purchase the remaining
equipment for $1.4 million.
The Company has issued partial residual value guarantees to support a customer’s financing. A residual value guarantee involves a
guarantee that a piece of equipment will have a minimum fair market value at a future date if certain conditions are met by the customer.
The Company has issued partial residual guarantees that have maximum exposure of approximately $1.6 million in aggregate. The
Company, however, does not have any reason to believe that any exposure from any such guarantees is either probable or estimable at
this time, as such, no liability has been recorded.
30
See Note 24 – “Legal Proceedings and Other Contingencies” in the Notes to the Consolidated Financial Statements for further
information regarding our guarantees.
Contractual Obligations
The following is a schedule as of December 31, 2018 of our long-term contractual commitments, future minimum lease payments under
non-cancelable operating lease arrangements and other long-term obligations.
(In thousands)
Working capital borrowings (3)
Term loans (4)
Operating lease obligations
Capital lease obligations (3)
Legal settlement (see Note 24) (3)
Service agreements
Purchase obligations (1)
Total
Total
18,984
52,399
6,907
5,903
1,235
69
15,308
$ 100,805 $
Payments due by period
2020-2021
2019
18,971
5,148
1,950
545
95
69
15,308
42,086 $
2022-2023
Thereafter
10
30,569
2,338
1,066
190
—
—
34,173 $
3
6,626
816
950
190
—
—
8,585 $
—
10,056
1,803
3,342
760
—
—
15,961
(1) Except for a very insignificant amount, purchase obligations are for inventory items. Purchase obligations not for inventory would
include research and development materials, supplies and services.
(2) At December 31, 2018, the Company had a reserve for unrecognized tax benefits of $4.2 million for which the Company is unable
to make reasonably reliable estimates of the period of cash settlement with the respective tax authority. Thus, these liabilities
(reserves) have not been included in the contractual obligations table. (See Note 16).
(3) PM working capital borrowing, Capital lease obligations and legal settlement include imputed interest.
(4) Long-term debt obligations include expected interest expense. Interest expense is calculated using current interest rates for
indebtedness as of December 31, 2018.
Related Party Transactions
For a description of the Company’s related party transactions, please see Note 23 to the Company’s consolidated financial statements
entitled “Transactions between the Company and Related Parties.”
Critical Accounting Policies and Estimates
The preparation of our financial statements and related disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and judgments that affect our reported amounts of assets and liabilities,
revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and
assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and
assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under
different future circumstances. We have identified the following critical accounting policies that affect the more significant judgments
and estimates used in the preparation of our consolidated financial statements.
Principals of Consolidation. The Company consolidates all entities that we control by ownership of a majority voting interest.
Additionally, there are situations in which consolidation is required even though the usual condition of consolidation (ownership of a
majority voting interest) does not apply. Generally, this occurs when an entity holds an interest in another business enterprise that was
achieved through arrangements that do not involve voting interests, which results in a disproportionate relationship between such entity's
voting interests in, and its exposure to the economic risks and potential rewards of, the other business enterprise. This disproportionate
relationship results in what is known as a variable interest, and the entity in which we have the variable interest is referred to as a "VIE."
An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both
(1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (2) the obligation
to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
31
Although the Company did not have an ownership interest in S.V.W. Crane & Equipment Company and its wholly owned subsidiary
Rental Consulting Service Company (collectively “SVW”), the Company had the power to direct the activities of SVW that most
significantly impacted its economic performance and is absorbing the losses. SVW had obtained financing and had remitted the proceeds
to the Company using inventory (cranes) owned by the Company as collateral. The finance companies that held the loans had a perfected
security interest in the inventory and therefore had recourse against this specific inventory. Furthermore, the debt taken on by SVW
was effectively guaranteed by the Company pursuant to certain related agreements.
Income and losses related to VIEs are typically shown in a company’s financial statements as being attributed to a non-controlling
interest. Other than its transactions between SVW and the Company, SVW had no other substantial business operations. Furthermore,
the Company exercised control and absorbed all losses and received all the income from SVW operations. Therefore, the Company had
concluded that income and losses related to the VIE are attributable to the Shareholders of the Company. By December 31, 2017, SVW
had ceased operations and is therefore not a consolidated VIE after December 31, 2017.
The Company eliminates from our financial results all significant intercompany transactions, including the intercompany transactions
with consolidated SVW.
Revenue Recognition. Revenue is recognized when obligations under the terms of the contract with our customer are satisfied; generally,
this occurs with the transfer of control of our equipment, parts or installation services (typically completed within one day), which occurs
at a point in time. Equipment can be redirected during the manufacturing phase such that over time revenue recognition is not
appropriate. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing
services. Our contracts are non-cancellable and returns are only allowed in limited instances through C&M Sales, value add, and other
taxes we collect concurrent with revenue-producing activities are excluded from revenue. The expected costs associated with our base
warranties continue to be recognized as expense when the products are sold and do not constitute a separate performance obligation.
For instances where equipment and installation services are sold together, the Company accounts for the equipment and installation
services separately. The consideration (including any discounts) is allocated between the equipment and installation services based on
their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells
the equipment.
In some instances, the Company fulfills its obligations and bills the customer for the work performed but does not ship the goods until
a later date. These arrangements are considered bill-and-hold transactions. In order to recognize revenue on the bill-and-hold
transactions, the Company ensures the customer has requested the arrangement, the product is identified separately as belonging to the
customer, the product is ready for shipment to the customer in its current form, and the Company does not have the ability to direct the
product to a different customer. A portion of the transaction price is not allocated to the custodial services due to the immaterial value
assigned to that performance obligation. Revenue and related costs are recognized when title passes and risk of loss passes to our
customers which generally occurs upon shipment depending upon the terms of the contract. Under certain contracts with our customers
title passes to the customers when the units are completed. The units are segregated from our inventory and identified as belonging to
the customer, the customer is notified that the units are complete and awaiting pick up or delivery as specified by the customer before
income is recognized. Additionally, the customer is requested to sign an “Invoice Authorization Form” which acknowledges the contract
terms and acknowledges that the customer has economic ownership and control over the unit. It also acknowledges that we are going to
invoice the unit per terms of the contract. The Company insures any custodial risk that it may retain.
Payment terms offered to customers are defined in contracts and purchase orders and do not include a significant financing
component. At times, the Company may offer discounts which are considered variable consideration however, the Company applies
the constraint guidance when determining the transaction price to be allocated to the performance obligations.
Interest Rate Swap Contracts. The Company enters into derivative instruments to manage its exposure to interest rate risk related to
certain foreign term loans. Derivatives are initially recognized at fair value at the date the contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in current earnings immediately
unless the derivative is designated and effective as a hedging instrument, in which case the effective portion of the gain or loss is
recognized and is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods
during which the hedging instrument affects earnings (date of sale). As part of the acquisition of PM Group, which was acquired on
January 15, 2015, the Company acquired interest rate swap contracts, which manage the exposure to interest rate risk related to term
loans with certain financial institutions in Italy. These contracts have been determined not to be hedge instruments under ASC 815-10.
Further details of derivative financial instruments are disclosed in Notes 6 and 7 to the Company’s consolidated financial statements.
Allowance for Doubtful Accounts. Accounts Receivable is reduced by an allowance for amounts that may become uncollectible in the
future. The Company’s estimate for the allowance for doubtful accounts related to trade receivables includes evaluation of specific
accounts where we have information that the customer may have an inability to meet its financial obligations.
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Guarantees. The Company has issued partial residual guarantees to financial institutions related to a customer financing of equipment
purchased by the customer. The Company must assess the probability of losses if the fair market value is less than the guaranteed
residual value.
A residual value guarantee involves a guarantee that a piece of equipment will have a minimum fair market value at a future date. The
Company will record a liability for the estimated fair value of guarantees issued pursuant to Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 460, “Guarantees” (“ASC 460”). We recognize a loss under a guarantee when
the obligation to make payment under the guarantee is probable and the amount of the loss can be estimated. If the expected equipment
value is less than its guaranteed residual value, the Company would recognize a liability for the amount of the short-fall up to the amount
of its partial guarantee. The Company is not responsible for any short-fall in excess of its partial guarantee.
Inventories and Related Reserve for Obsolete and Excess Inventory. Inventories are valued at the lower of cost or net realizable value
and are reduced by a reserve for excess and obsolete inventories. The estimated reserve is based upon specific identification of excess
or obsolete inventories.
Other Intangible Assets. The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles—Goodwill
and Other”. The Company capitalizes certain costs related to patent technology. Additionally, a substantial portion of the purchase price
related to the Company’s acquisitions has been assigned to patents or unpatented technology, trade name, customer backlog, and
customer relationships. Under the guidance, Other Intangible Assets with definite lives are amortized over their estimated useful lives.
Intangible assets with indefinite lives are tested annually for impairment.
Goodwill. Goodwill, representing the difference between the total purchase price and the fair value of assets (tangible and intangible) and
liabilities at the date of acquisition, is reviewed for impairment annually, and more frequently as circumstances warrant, and written down
only in the period in which the recorded value of such assets exceed their fair value. The Company does not amortize goodwill in accordance
with Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 350, “Intangibles—Goodwill and
Other” (“ASC 350”). The Company selected October 1 as the date for the required annual impairment test. In 2018, due to a triggering
event, the valuation analysis was performed at December 31, 2018.
For 2018, the Company evaluated goodwill using the quantitative step one approach. In 2018, goodwill is tested for impairment at the
reporting unit level, which is defined as an operating segment or a component of an operating segment that constitutes a business for
which discrete financial information with similar economic characteristics is available and operating results are regularly reviewed by
our chief operating decision maker. For 2018, we have five operating segments: Manitex, Badger, PM/Valla, Sabre and C&M. All
operating segments are comprised of one reporting segment. Only Manitex, PM/Valla and Sabre are tested for goodwill impairment as
Badger and C&M have no goodwill. In 2018, goodwill was impaired at our PM/Valla operating segment of $3,192.
For 2017, goodwill was tested at the fully consolidated level excluding discontinued operations, as the Company was operating in a
single operating segment. For 2016, goodwill was tested at the three previously reported segment levels that were in effect at that time,
i.e., Lifting Equipment, Equipment Distribution and ASV.
Under ASC350, entities are provided with the option of first performing a qualitative assessment on none, some, or all of its reporting
units to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If after completing
a qualitative analysis, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value a
quantitative analysis is required.
For 2017 and 2016 the Company evaluated its consolidated goodwill using the quantitative two step approach. The first step used to
identify potential impairment involves comparing the reporting unit’s estimated fair value to its carrying value, including goodwill.
During the first step testing, the Company evaluates goodwill for impairment using a business valuation method, which is calculated as
of a measurement date by determining the present value of debt-free, after-tax projected future cash flows, discounted at the weighted
average cost of capital of a hypothetical third-party buyer. The market approach was also considered in evaluating the potential for
impairment by calculating fair value based on multiples of earnings before interest, taxes, depreciation and amortization (EBITDA) of
comparable, publicly traded companies. The Company also observed implied EBITDA multiples from relatively recent merger and
acquisition activity in the industry, which was used to test the reasonableness of the results.
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The second step of the process involves the calculation of an implied fair value of goodwill for each reporting unit for which step one
indicated impairment. The implied fair value of goodwill is determined by measuring the excess of the estimated fair value of the
reporting unit over the estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was
being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the
reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the
goodwill, an impairment charge is recorded for the excess. An impairment loss cannot exceed the carrying value of goodwill assigned
to a reporting unit and the subsequent reversal of goodwill impairment losses is not permitted.
For 2017, the first step did not indicate any impairment of goodwill, for 2016, the second step was necessary for the Equipment
Distribution segment. This further analysis indicated that the Equipment Distribution segment goodwill was impaired and a $275
impairment charge was recognized in 2016 to fully write off the Equipment Distribution segment’s goodwill.
The determination of fair value requires the Company to make significant estimates and assumptions. These estimates and assumptions
primarily include, but are not limited to, revenue growth and operating earnings projections, discount rates, terminal growth rates, and
required capital expenditure projections. Our projections make certain assumptions including expanding PM market share in North
America, a normalization of energy markets over time and a continued expansion of dealer networks. If our progress in meeting these
and other assumptions is slower or different than what was anticipated, it may impact our ability to meet the projections. Due to the
inherent uncertainty involved in making these estimates, actual results could differ materially from those estimates. Deterioration in the
market or actual results as compared with the projections (including not meeting near term projections) may result in impairment in the
near term. In the event the Company determines that goodwill is impaired in the future the Company would need to recognize a non-
cash impairment charge.
Impairment of Long-Lived Assets. The Company’s policy is to assess the realizability of its long-lived assets, including intangible assets,
and to evaluate such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets
(or group of assets) may not be recoverable. Impairment is determined to exist if the estimated future undiscounted cash flows are less
than the carrying value. Future cash flow projections include assumptions for future sales levels, the impact of cost reduction programs,
and the level of working capital needed to support each business. The amount of any impairment then recognized would be calculated
as the difference between the estimated fair value and the carrying value of the asset. The Company recognized $5,736 in net
impairments related to goodwill and trademarks for the year ended December 31, 2018 but did not have any impairment for the years
ended December 31, 2017 and 2016.
Warranty Expense. The Company establishes reserves for future warranty expense at the point when revenue is recognized by the
Company and is based on a percentage of revenues. The provision for estimated warranty claims, which is included in cost of sales, is
based on sales.
Retirement Benefit Costs and Termination Benefits. Payments to defined contribution retirement benefit plans are recognized as an
expense when employees have rendered service entitling them to the contributions. For defined benefit retirement benefit plans, the cost
of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each
annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if
applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge
or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other
comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is
recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning
of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:
service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
net interest expense or income; and
remeasurement.
The PM Group presents the first two components of defined benefit costs in profit or loss in the line item personnel. Curtailment gains
and losses are accounted for as past service costs. The retirement benefit obligation recognized in the consolidated statement of financial
position represents the actual deficit or surplus in PM Group’s defined benefit plans. Any surplus resulting from this calculation is
limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions
to the plans. A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the
termination benefit and when the entity recognizes any related restructuring costs.
Litigation Claims. In determining whether liabilities should be recorded for pending litigation claims, the Company must assess the
allegations and the likelihood that it will successfully defend itself. When the Company believes it is probable that it will not prevail in
a particular matter, it will then make an estimate of the amount of liability based, in part, on the advice of outside legal counsel.
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Income Taxes. The Company accounts for income taxes under the provisions of ASC 740 “Income Taxes,” which requires recognition
of income taxes based on amounts payable with respect to the current year and the effects of deferred taxes for the expected future tax
consequences of events that have been included in the Company’s financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the differences between the financial accounting and tax basis of assets and liabilities, as
well as for operating losses and tax credit carryforwards using enacted tax rates in effect for the year in which the differences are
expected to reverse. Valuation allowances are recorded to reduce deferred tax assets when it is more-likely-than-not a tax benefit will
not be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income prior to the expiration of any net operating loss carryforwards. See Note 16 to our Consolidated Financial
Statements for further details.
The Jobs Act also establishes global intangible low-taxed income (“GILTI”) provisions that impose a tax on foreign income in excess
of a deemed return on tangible assets of foreign corporations. The Company has elected to recognize GILTI as a period cost as incurred,
therefore there are no deferred taxes recognized for basis differences that are expected to impact the amount of the GILTI inclusion
upon reversal.
ASC 740 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The Company records interest and penalties related to income tax matters in the
provision for income taxes.
Comprehensive Income. Reporting “Comprehensive Income” requires reporting and displaying comprehensive income and its
components. Comprehensive income includes, in addition to net earnings, other items that are reported as direct adjustments to
stockholder’s equity. Currently, the comprehensive income adjustment required for the Company has two components. First is a foreign
currency translation adjustment, the result of consolidating its foreign subsidiaries. The second component is a derivative instrument
fair market value adjustment (net of income taxes) related to forward currency contracts designated as a cash flow hedge.
Business Combinations. The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business
Combinations. The guidance requires consideration given, including contingent consideration, assets acquired and liabilities assumed
to be valued at their fair market values at the acquisition date. The guidance further provides that: (1) in-process research and
development will be recorded at fair value as an indefinite-lived intangible asset; (2) acquisition costs will generally be expensed as
incurred, (3) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date;
and (4) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect
income tax expense.
ASC 805 requires that any excess of purchase price over fair value of assets acquired, including identifiable intangibles and liabilities
assumed be recognized as goodwill. In accordance with ASC 805, any excess of fair value of acquired net assets, including identifiable
intangibles assets, over the acquisition consideration results in a bargain purchase gain. Prior to recording a gain, the acquiring entity
must reassess whether all acquired assets and assumed liabilities have been identified and recognized and perform re-measurements to
verify that the consideration paid, assets acquired and liabilities assumed have been properly valued.
Recently Adopted Accounting Guidance
Recently Issued Pronouncements – Not Adopted
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” (“ASU 2016-02”), which requires lessees to recognize assets
and liabilities for leases with lease terms of more than 12 months and disclose key information about leasing arrangements. Consistent
with current U.S. GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee
primarily will depend on its classification as a finance or operating lease. Subsequently, the FASB issued the following standards related
to ASU 2016-02: ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,”, ASU 2018-10, “Codification
Improvements to Topic 842, Leases”, ASU 2018-11, “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”) and ASU 2018-
20, “Narrow-Scope Improvements for Lessors”, which provided additional guidance and clarity to ASU 2016-02 (collectively, the “New
Lease Standard”). The Company has adopted the New Lease Standard in the first quarter of fiscal year 2019 under the alternative
transition method permitted by ASU 2018-11. This transition method allows an entity to initially apply the requirements of the New
Lease Standard at the adoption date, versus at the beginning of the earliest period presented, and recognize a cumulative-effect
adjustment to the opening balance of retained earnings in the period of adoption. The New Lease Standard provides a number of optional
practical expedients in transition. The Company expects to elect the transition package of practical expedients, the practical expedient
to not separate lease and non-lease components for all of its leases, and the short-term lease recognition exemption for all of its leases
that qualify for it. The Company has estimated additions of $3,245 for right of use assets and $3,263 for liabilities to be reflected in the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.
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In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive Income,” (“ASU 2018-2”). ASU 2018-02 allows a reclassification from
accumulated other comprehensive income to retained earnings for stranded tax effects resulting from H.R. 1 “An Act to provide for
reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (commonly known as “Tax
Cuts and Jobs Act”). The effective date will be the first quarter of fiscal year 2019. The Company is evaluating the impact that adoption
of this new standard will have on its consolidated financial statements.
Recently Adopted Accounting Guidance
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 outlines a
new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes
most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-
step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for
those goods or services. In August 2015, the FASB issued ASU 2015-14, “Deferral of the Effective Date”, which amends ASU 2014-
09. As a result, the effective date is the first quarter of 2018, with early adoption permitted. The Company adopted this guidance during
the quarter ended March 31, 2018 on a modified retrospective basis. The adoption of this guidance did not have a significant impact on
the operating results when adopted.
In January 2016, the FASB issued ASU 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of
Financial Assets and Financial Liabilities." The amendments in ASU 2016-01, among other things, require equity investments (except those
accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with
changes in fair value recognized in net income; requires public business entities to use the exit price notion when measuring fair value of
financial instruments for disclosure purposes; requires separate presentation of financial assets and financial liabilities by measurement
category and form of financial asset (i.e., securities or loans and receivables); and eliminates the requirement for public business entities to
disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments
measured at amortized cost. The effective date is the first quarter of fiscal year 2018. The Company adopted this guidance during the
quarter ended March 31, 2018. The adoption of this guidance did not have a significant impact on the operating results when adopted.
In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606) Principal versus Agent
Considerations (Reporting Revenue Gross versus Net),” (“ASU 2016-08”). ASU 2016-08 further clarifies principal and agent
relationships within ASU 2014-09. Similar to ASU 2014-09, the effective date is the first quarter of fiscal year 2018 with early adoption
permitted in the first quarter of fiscal year 2017. The Company adopted this guidance during the quarter ended March 31, 2018 on a
modified retrospective basis. The adoption of this guidance did not have a significant impact on the operating results when adopted.
In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606), Identifying Performance
Obligations and Licensing” (“ASU 2016-10”). The amendments in ASU 2016-10 are expected to reduce the cost and complexity of
applying the guidance on identifying promised goods or services in contracts with customers and to improve the operability and
understandability of licensing implementation guidance related to the entity's intellectual property. Similar to ASU 2014-09, the
effective date is the first quarter of fiscal year 2018 with early adoption permitted in the first quarter of fiscal year 2017. The Company
adopted this guidance during the quarter ended March 31, 2018 on a modified retrospective basis. The adoption of this guidance did not
have a significant impact on the operating results when adopted.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and
Cash Payments,” (“ASU 2016-15”). ASU 2016-15 reduces the existing diversity in practice in financial reporting by clarifying existing
principles in ASC 230, “Statement of Cash Flows,” and provides specific guidance on certain cash flow classification issues. The
effective date for ASU 2016-15 is the first quarter of fiscal year 2018 with early adoption permitted. The Company made an election to
use the “Cumulative Earning Approach” to classify distributions received from equity investments. Other than the aforementioned
election (which may have a future impact), the adoption of this guidance during the quarter ended March 31, 2018, did not have an
impact on the Company’s Statement of Cash Flows.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740) - Intra-Entity Transfer of Assets Other than Inventory,”
(“ASU 2016-16”). ASU 2016-16 requires recognition of current and deferred income taxes resulting from an intra-entity transfer of
any asset (excluding inventory) when the transfer occurs. This is a change from existing GAAP which prohibits recognition of current
and deferred income taxes until the asset is sold to a third party. The effective date for ASU 2016-16 is the first quarter of fiscal year
2018 with early adoption permitted. The Company adopted this guidance during the quarter ended March 31, 2018. The adoption of
this guidance did not have a significant impact on the operating results when adopted.
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In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) - Restricted Cash,” (“ASU 2016-18”). ASU
2016-18 requires a statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts
generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash
equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts
shown on the statement of cash flows. The Company adopted ASU 2016-18 on January 1, 2018. Adoption did not have a material effect
on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” (“ASU
2017-01”). ASU 2017-01 provides guidance in ascertaining whether a collection of assets and activities is considered a business. The
effective date is the first quarter of fiscal year 2018, with prospective application. The Company adopted this guidance during the
quarter ended March 31, 2018. The adoption of this guidance did not have an impact on the operating results when adopted.
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment,” (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform
its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should
recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The loss
recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider
income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill
impairment. The effective date will be the first quarter of fiscal year 2020, with early adoption permitted in 2017. The Company adopted
the guidance for the year ended December 31, 2018.
Except as noted above, the guidance issued by the FASB is not expected to have a material effect on the Company’s consolidated
financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks that exist as part of our ongoing business operations and the Company uses derivative
financial instruments, where appropriate, to manage our foreign exchange risks. As a matter of policy, the Company does not engage in
trading or speculative transactions. For further information on accounting policies related to derivative financial instruments, refer to
Note 7 - “Derivative Financial Instruments” in our Consolidated Financial Statements.
Foreign Exchange Risk
The Company is exposed to fluctuations in foreign currency cash flows related to third-party purchases and sales, intercompany product
shipments and intercompany loans. The Company is also exposed to fluctuations in the value of foreign currency investments in
subsidiaries and cash flows related to repatriation of these investments. Additionally, the Company is exposed to volatility in the
translation of foreign currency earnings to U.S. Dollars. Primary exposures include the U.S. Dollar when compared to functional
currencies of our major foreign subsidiaries, primarily the Euro. The Company assesses foreign currency risk based on transactional
cash flows, identifies naturally offsetting positions and purchases hedging instruments to partially offset anticipated exposures. At
December 31, 2018, the Company had no outstanding foreign currency exchange contracts being used to hedge future sale that would
qualify as cash flow hedges. The Company, however, has foreign currency exchange contract to sell 2.0 billion Chilean pesos. This
contract is intended to hedge an intercompany receivable that PM has from its Chilean subsidiary. This forward currency exchange
contract has been determined not to be considered a hedge under ASC 815-10, as such aggregate changes in the translation effect of
foreign currency exchange rate changes would have on our operating income. At December 31, 2018, the Company performed a
sensitivity analysis on the effect that exchange rate changes would have on the Company. Based on this sensitivity analysis, we have
determined that a change in the value of the U.S. Dollar relative to currencies outside the U.S. by 10% to amounts already incorporated
in the financial statements for the year ended December 31, 2018 would have $0.3 million impact on the translation effect of foreign
currency exchange rate changes already included in our reported operating income for the period.
Interest Rate Risk
The Company is exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing issuances of variable
rate debt. Primary exposure includes movements in the U.S. prime rate and EURIBOR. At December 31, 2018, the Company had
approximately $67.8 million of variable interest debt with average weighted average interest rate at year end of approximately 3.84%.
PM subsidiary had interest rate swaps on €0.002 million of its debt. The fair value of the interest rate swaps, which represents the cost
to settle these arrangements at December 31, 2018 was approximately $0.002 million. At December 31, 2018, the Company performed
a sensitivity analysis to determine the impact of an increase in interest rates. Based on this sensitivity analysis, the Company has
determined that an increase of 10% in our average floating interest rates at December 31, 2018 would increase interest expense by
approximately $0.3 million.
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Commodities Risk
Principal materials and components that the Company uses in our various manufacturing processes include steel, castings, engines, tires,
hydraulics, cylinders, drive trains, electric controls and motors, and a variety of other commodities and fabricated or manufactured items.
Extreme movements in the cost and availability of these materials and components may affect the Company’s financial performance.
Changes to input costs did not have a significant effect on the Company’s operating performance in 2018. During 2018, raw materials
and components were generally available to meet our production schedules and had no significant impact on 2018 revenues.
In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from
multiple suppliers. However, certain businesses receive materials and components from a single source supplier, although alternative
suppliers of such materials may be generally available. Current and potential suppliers are evaluated on a regular basis on their ability
to meet our requirements and standards. The Company actively manages our material supply sourcing, and may employ various methods
to limit risk associated with commodity cost fluctuations and availability. The inability of suppliers, especially any single source
suppliers for a particular business, to deliver materials and components promptly could result in production delays and increased costs
to manufacture the Company’s products. To mitigate the impact of these risks, the Company continues to search for acceptable
alternative supply sources and less expensive supply options on a regular basis, including improving the globalization.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of the Company’s independent registered public accounting firm and the Company’s Consolidated Financial Statements are
filed pursuant to this Item 8 and are included in this report. See the Index to Financial Statements.
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The financial statements of the registrant required to be included in Item 8 are listed below:
Index to Financial Statements
Page
Reference
Reports of Independent Registered Public Accounting Firms ......................................................................................................
40
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2018 and 2017 ................................................................................................
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016 .............................................
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2018, 2017 and 2016 .............................
Consolidated Statements of Shareholders’ Equity for Years Ended December 31, 2018, 2017 and 2016 ...................................
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016 ............................................
44
45
46
47
48
Notes to Consolidated Financial Statements .................................................................................................................................
49-90
39
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Manitex International, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Manitex International, Inc. and subsidiaries (the “Company”) as of
December 31, 2018, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for the
year ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its
operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the
United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),
the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in the 2013 Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and
our report dated March 15, 2019 expressed an adverse opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit
provides a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2018.
Chicago, Illinois
March 15, 2019
40
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Manitex International, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Manitex International, Inc. and subsidiaries (the “Company”) as of
December 31, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, because of the effect of the material weaknesses
described in the following paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained
effective internal control over financial reporting as of December 31, 2018, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by COSO.
A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or
detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment:
(1) The Company did not maintain an adequate process for the intake of new contracts, customers and vendors, particularly for
contracts involving unique transaction structures or unusual obligations on the part of the Company, to ensure that all contracts
are appropriately reviewed and approved, and the associated financial reporting requirements associated with such contracts
and transactions structures are properly identified and complied with in accordance with Generally Accepted Accounting
Principles.
(2) The Company did not maintain adequate entity-level controls with respect to ensuring adequate supporting documentation for
journal entries and review procedures with respect to journal entries and disbursements that were unusual in nature and of
significant amounts.
(3) The Company did not maintain an adequate review process with respect to the accounting of bill-and-hold transactions and
ensuring proper revenue recognition.
(4) The Company did not maintain a formal and consistent policy for establishing inventory reserves for excess and obsolete
inventory.
(5) The Company did not maintain an effective control environment over information technology general controls, based on the
criteria established in the COSO framework, to enable identification and mitigation of risks of material accounting errors.
(6) The Company historically has grown through acquisition of non-public companies. In the course of integrating these
companies’ financial reporting methods and systems with those of the Company, the Company has not effectively designed
and implemented effective internal control activities, based on the criteria established in the COSO framework across the
organization. The Company has identified deficiencies in the principles associated with the control activities component of the
COSO framework. Specifically, these control deficiencies constitute material weaknesses, either individually or in the
aggregate, relating to (i) the Company’s ability to attract, develop, and retain sufficient personnel to perform control activities,
(ii) selecting and developing control activities that contribute to the mitigation of risks and support achievement of objectives,
(iii) deploying control activities through consistent policies that establish what is expected and procedures that put policies into
action, and (iv) holding individuals accountable for their internal control related responsibilities.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),
the consolidated financial statements of the Company as of and for the year ended December 31, 2018. The material weaknesses
identified above were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2018 consolidated
financial statements, and this report does not affect our report dated March 15, 2019, which expressed an unqualified opinion on those
financial statements.
41
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted a ccounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Other information
We do not express an opinion or any other form of assurance on management’s remediation activities related to prior year material
weaknesses or management’s remediation plans for the current year material weaknesses in internal control over financial reporting.
/s/ GRANT THORNTON LLP
Chicago, Illinois
March 15, 2019
42
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of Manitex International, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Manitex International, Inc. and Subsidiaries (the Company) as of
December 31, 2017, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash
flows for each of the two years ended December 31, 2017, and the related notes (collectively referred to as the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2017, and the results of its operations and its cash flows for each of the two years ended December 31,
2017, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our audits provides a reasonable basis for our opinion.
We served as the Company’s auditor from 2006 through April 2018.
/s/ UHY LLP
Sterling Heights, Michigan
April 10, 2018
43
ASSETS
Current assets
Cash
Cash - restricted
Marketable equity securities
Trade receivables (net)
Other receivables
Inventory (net)
Prepaid expense and other
Total current assets
Total fixed assets, net of accumulated depreciation of $14,826 and $12,921, at December 31, 2018 and
2017, respectively
Intangible assets (net)
Goodwill
Equity investment in ASV Holdings, Inc.
Other long-term assets
Deferred tax asset
Total assets
LIABILITIES AND EQUITY
Current liabilities
Notes payable
Current portion of capital lease obligations
Accounts payable
Accounts payable related parties
Accrued expenses
Customer deposits
Other current liabilities
Total current liabilities
Long-term liabilities
Revolving term credit facilities
Notes payable
Capital lease obligations
Convertible note-related party (net)
Convertible note (net)
Deferred gain on sale of building
Deferred tax liability
Other long-term liabilities
Total long-term liabilities
Total liabilities
Commitments and contingencies
Equity
Preferred Stock—Authorized 150,000 shares, no shares issued or outstanding at
December 31, 2018 and 2017
Common Stock—no par value 25,000,000 shares authorized, 19,645,773 and 16,617,932 shares
issued and outstanding at December 31, 2018 and 2017, respectively
Paid in capital
Retained deficit
Accumulated other comprehensive loss
Total equity
Total liabilities and equity
The accompanying notes are an integral part of these financial statements
MANITEX INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
As of December 31,
2018
2017
$
$
$
$
22,103 $
245
2,160
45,448
2,374
58,024
1,639
131,993
20,249
24,773
36,298
—
1,570
2,366
217,249 $
22,706 $
422
36,896
1,371
9,249
2,310
—
72,954
—
23,134
5,061
7,158
14,530
842
92
5,474
56,291
129,245
—
130,260
2,674
(41,761 )
(3,169 )
88,004
217,249 $
5,014
352
—
46,633
1,946
54,360
2,017
110,322
22,038
31,014
43,569
14,931
1,475
1,839
225,188
29,131
378
35,386
1,331
10,070
2,242
890
79,428
12,893
26,656
5,483
7,005
14,310
969
3,384
4,215
74,915
154,343
—
97,661
2,802
(28,583 )
(1,035 )
70,845
225,188
44
Net revenues
Cost of sales
Gross profit
Operating expenses
Research and development costs
Selling, general and administrative expenses
Impairment of intangibles
Total operating expenses
Operating loss
Other income (expense)
Interest expense
Interest income
Change in fair value of securities held
Interest expense related to write off of debt issuance costs
Foreign currency transaction loss
Other (loss) income
Total other expense
Loss before income taxes and loss in non-marketable equity
interest from continuing operations
Income tax expense (benefit) from continuing operations
(Loss) income in equity investments, net of taxes
Loss from continuing operations
Discontinued operations: (Note 26)
Loss from operations of discontinued operations (including loss
on disposal of $1,302 and $14,418 in 2017 and 2016,
respectively)
Income tax (benefit) expense
Loss on discontinued operations
Net loss
(Income) loss attributable to noncontrolling interest
Loss attributable to shareholders of Manitex
International, Inc.
Earnings (loss) Per Share
Basic
Loss from continuing operations attributable to
shareholders of Manitex International, Inc.
Loss from discontinued operations attributable to shareholders of
Manitex International, Inc.
Loss attributable to shareholders of Manitex
International, Inc.
Diluted
Loss from continuing operations attributable to
shareholders of Manitex International, Inc.
Loss from discontinued operations attributable to shareholders of
Manitex International, Inc.
Loss attributable to shareholders of Manitex
International, Inc.
Weighted average common shares outstanding
Basic
Diluted
MANITEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
For the years ended December 31,
2017
2016
2018
$
242,107 $
198,060
44,047
213,112 $
176,266 $
36,846
2,839
35,707
5,736
44,282
(235 )
(5,508 )
168
(5,494 )
—
(814 )
(374 )
(12,022 )
(12,257 )
511
(409 )
(13,177 )
—
—
—
(13,177 )
—
2,564
34,547
—
37,111
(265 )
(6,498 )
—
—
—
(1,149 )
367
(7,280 )
(7,545 )
(118 )
360
(7,067 )
(742 )
(5 )
(737 )
(7,804 )
(274 )
173,197
143,260
29,937
2,939
36,972
—
39,911
(9,974 )
(6,390 )
—
—
(1,439 )
(1,115 )
915
(8,029 )
(18,003 )
(566 )
(5,752 )
(23,189 )
(14,441 )
37
(14,478 )
(37,667 )
574
$
(13,177 ) $
(8,078 ) $
(37,093 )
$
$
$
$
$
$
(0.72 ) $
(0.43 ) $
— $
(0.06 ) $
(0.72 ) $
(0.49 ) $
(0.72 ) $
(0.43 ) $
— $
(0.06 ) $
(0.72 ) $
(0.49 ) $
(1.44 )
(0.86 )
(2.30 )
(1.44 )
(0.86 )
(2.30 )
18,409,296
18,409,296
16,548,444
16,548,444
16,133,284
16,133,284
The accompanying notes are an integral part of these financial statements
45
MANITEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Net loss:
Other comprehensive income (loss)
Foreign currency translation adjustments
Total other comprehensive (loss) income
Comprehensive (income) loss attributable to noncontrolling interest
Total comprehensive loss attributable to shareholders of
Manitex International, Inc.
For the year ended December 31,
2017
2016
2018
$
(13,177 ) $
(7,804 ) $
(37,667 )
(2,134 )
(2,134 )
(15,311 )
—
3,237
3,237
(4,567 )
(274 )
1,120
1,120
(36,547 )
574
$
(15,311 ) $
(4,841 ) $
(35,973 )
The accompanying notes are an integral part of these financial statements
46
MANITEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In thousands, except per share data)
Number of common shares outstanding
Balance at beginning of the year
Employee 2004 incentive plan grant
Repurchase to satisfy withholding and cancelled
Shares issued under ATM program
Stock issued in connection with asset purchase
Shares issued to pay rent
Shares issued to Tadano (see Note 21)
Shares issued to repay debt
Balance end of year
Common Stock
Balance at beginning of the year
Employee 2004 incentive plan grant
Repurchase to satisfy withholding and cancelled
Shares issued under ATM program
Shares issued to pay rent
Shares issued to Tadano
Shares issued to repay debt
Balance end of year
Paid in Capital
Balance at beginning of the year
Proportional share of increase in equity investments' paid in capital
Employee 2004 incentive plan grant
Balance end of year
Retained Earnings (deficit)
Balance (deficit) earnings at beginning of the year
Net loss attributable to shareholders of Manitex
International, Inc.
Deficit end of year
Accumulated Other Comprehensive Loss
Deficit at beginning of the year
(Loss) gain on foreign currency translation
Deficit end of year
Equity Attributable to Noncontrolling Interest
Balance at beginning of the year
Investment received from noncontrolling interest
Deconsolidation of ASV
Net income (loss) attributable to noncontrolling interest
Balance end of year
For the year ended December 31,
2017
2016
2018
16,617,932
122,820
(13,521 )
—
—
—
2,918,542
—
19,645,773
16,200,294
124,151
(22,820 )
294,524
21,783
—
—
—
16,617,932
16,072,100
68,876
(13,055 )
—
—
41,948
—
30,425
16,200,294
97,661 $
981
(125 )
—
—
31,743
—
130,260 $
2,802 $
14
(142 )
2,674 $
94,324
925
(168 )
2,426
154
—
—
97,661
2,918
11
(127 )
2,802
$
$
$
$
93,186
841
(80 )
—
227
—
150
94,324
2,630
—
288
2,918
(28,583 ) $
(20,505 )
$
16,588
(13,177 )
(41,760 ) $
(8,078 )
(28,583 )
(1,035 ) $
(2,134 )
(3,169 ) $
— $
—
—
—
— $
(4,272 )
3,237
(1,035 )
25,164
—
(25,438 )
274
—
$
$
$
$
$
(37,093 )
(20,505 )
(5,392 )
1,120
(4,272 )
23,288
2,450
—
(574 )
25,164
$
$
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these financial statements
47
Cash flows from operating activities:
Net loss
Adjustments to reconcile net income to cash provided by (used for) operating activities:
MANITEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
2018
For the years ended December 31,
2017
2016
$
(13,177 ) $
(7,804 )
$
(37,667 )
Depreciation and amortization
Changes in allowances for doubtful accounts
Loss on disposal of assets
Changes in inventory reserves
Changes in deferred income taxes
Amortization of deferred financing cost
Revaluation of contingent acquisition liability
Write down of goodwill
Write down of trademark
Amortization of debt discount
Change in value of interest rate swaps
Loss (income) in equity investments
Change in value of securities held
Share-based compensation
Deferred gain on sale and lease back
Reserves for uncertain tax provisions
Loss on sale of discontinued operations
Rent paid in stock
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
(Increase) decrease in inventory
Decrease (increase) in prepaid expenses
Decrease in other assets
Increase (decrease) in accounts payable
(Decrease) in accrued expense
(Decrease) increase in other current liabilities
(Decrease) increase in other long-term liabilities
Discontinued operations - cash provided by (used for) operating activities
Net cash provided by (used for) operating activities
Cash flows from investing activities:
Proceeds from the sale of partial interest in equity investment
Proceeds from the sale of fixed assets
Purchase of property and equipment
Investment in intangibles other than goodwill
Proceeds from the sale of discontinued operations
Discontinued operations - cash (used for) provided by investing activities
Net cash provided by investing activities
Cash flows from financing activities:
Repayment of 2015 term loan
Net proceeds from stock offering
Payments on revolving term credit facilities
Borrowings on revolving credit facility
Net (repayments) borrowings on working capital facilities
New borrowings—except 2015 term loan
Note payments
Bank fees and cost related to new financing
Shares repurchased for income tax withholding on share-based compensation
Proceeds from sale and leaseback
Payments on capital lease obligations
Discontinued operations - cash used for financing activities
Net cash provided by (used for) financing activities
Net increase (decrease) in cash and cash equivalents
Effect of exchange rate changes on cash
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at end of period
$
(See Note 17 for other supplemental cash flow information)
The accompanying notes are an integral part of these financial statements
48
4,989
10
4
2,539
(1,210 )
208
345
3,192
2,544
(85 )
(3 )
204
5,494
639
(47 )
357
87
—
(296 )
(7,277 )
373
(241 )
2,764
(277 )
(875 )
742
—
1,003
7,000
8
(1,196 )
(21 )
—
—
5,791
—
31,942
(134,993 )
122,100
(5,568 )
7
(1,922 )
(50 )
(124 )
—
(378 )
—
11,014
17,808
(826 )
5,366
22,348 $
5,107
20
90
1,089
(1,509 )
632
(346 )
—
—
446
(428 )
(360 )
—
798
(9 )
49
1,290
154
(11,130 )
17,068
2,641
99
(2,619 )
(412 )
679
24
3,508
9,077
—
15
(1,023 )
(65 )
12,892
(84 )
11,735
—
2,426
(134,614 )
127,550
3,397
2,600
(16,465 )
(50 )
(168 )
896
(1,381 )
(5,058 )
(20,867 )
(55 )
107
5,314
5,366
$
6,636
(225 )
18
333
1,178
1,978
(915 )
275
—
528
(776 )
5,752
—
1,129
(124 )
54
14,458
227
1,607
(3,828 )
(345 )
189
(4,475 )
(1,165 )
171
172
(3,824 )
(18,639 )
—
206
(1,157 )
(97 )
19,074
417
18,443
(2,200 )
—
(6,543 )
—
1,828
12,892
(6,678 )
(1,255 )
(80 )
4,080
(510 )
(4,941 )
(3,407 )
(3,603 )
2,999
5,918
5,314
MANITEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
Note 1. Nature of Operations
The Company is a leading provider of engineered lifting solutions. The Company operates in a single reportable segment and five
operating segments.
The Company designs, manufactures and distributes a diverse group of products that serve different functions and are used in a variety
of industries. Through its Manitex, Inc. (“Manitex”) subsidiary it markets a comprehensive line of boom trucks, truck cranes and sign
cranes. Manitex’s boom trucks and crane products are primarily used for industrial projects, energy exploration and infrastructure
development, including, roads, bridges and commercial construction.
Badger Equipment Company (“Badger”) is a manufacturer of specialized rough terrain cranes and material handling products. Badger
primarily serves the needs of the construction, municipality and railroad industries.
PM is a leading Italian manufacturer of truck mounted hydraulic knuckle boom cranes and a product range spanning more than 50
models. Through its consolidated subsidiaries, PM has locations in Modena, Italy; Arad, Romania; Chassieu, France; Buenos Aires,
Argentina; Santiago, Chile; London, UK and Mexico City, Mexico.
Valla is located in Piacenza, Italy and produces a full range of precision pick and carry industrial cranes using electric, diesel, and hybrid
power options. Its cranes offer wheeled or tracked, and fixed or swing boom configurations, with special applications designed
specifically to meet the needs of its customers. The product is sold internationally through dealers and into the rental distribution channel.
Manitex Sabre, Inc., (“Sabre”) which is located in Knox, Indiana, manufactures a comprehensive line of specialized mobile tanks for
liquid and solid storage and containment solutions with capacities from 8,000 to 21,000 gallons. Its mobile tanks are sold to specialized
independent tank rental companies and through the Company’s existing dealer network. The tanks are used in a variety of end markets
such as petrochemical, waste management and oil and gas drilling.
C&M and C&M Leasing are located in Bridgeview, Illinois. C&M is a distributor of new and used Manitex branded products as well
as Terex rough terrain and truck cranes. C&M also provides repair services in Chicago and supplies repair parts for a wide variety of
medium to heavy duty construction equipment. C&M Leasing rents equipment that is manufactured by the Company as well as a limited
amount of equipment manufactured by third parties.
Change in Reporting Segments
In its Annual Report on Form 10-K filed on March 10, 2017, the Company reported its operations in three segments: the Lifting
Equipment segment, the ASV segment and the Equipment Distribution segment. Since 2015, the Company has sought to redefine itself
strategically and operationally, including through a series of divestitures. ASV Holdings was reported as a discontinued operation and
as such was no longer a reporting segment.
As stated above C&M and C&M Leasing primary business is facilitation of sale of products manufactured by the Company. Further,
the Company’s Chief Operating Decision Maker (“CODM”) reviews C&M and C&M Leasing operations only to determine their impact
on the entire Company. As such, the Company has now concluded that it is not appropriate to reflect C&M and C&M Leasing as a
separate reportable segment, rather an operating segment.
Consolidated Variable Interest Entity
Even though it had no ownership interest in SVW Crane & Equipment Company (together with its wholly owned subsidiary, Rental
Consulting Service Company, “SVW”), the Company had the power to direct the activities that most significantly impacted SVW’s
economic performance. Additionally, the Company was the primary beneficiary of the SVW relationship. SVW obtained third party
financing, which was effectively guaranteed by the Company, on specific cranes the Company manufactured and remitted the loan
proceeds to the Company. Other than its business transactions described herein, SVW had no other substantial business operations. The
Company has determined that SVW is a Variable Interest Entity (“VIE”) that under current accounting guidance needs to consolidate
in the Company’s financial results. SVW was consolidated into the Company’s financial results beginning in the first quarter of 2016
through the fourth quarter of 2017. By December 31, 2017, SVW had ceased operations and is therefore not a consolidated VIE after
December 31, 2017.
49
Discontinued Operations
ASV (as defined below) is located in Grand Rapids, Minnesota manufactures a line of high-quality compact track and skid steer loaders.
The products are used in site clearing, general construction, forestry, golf course maintenance and landscaping industries, with general
construction being the largest. ASV’s financial results are included in the Company’s consolidated results beginning on December 20,
2014.
Prior to the quarter ended June 30, 2017, the Company owned a 51% interest in ASV Holdings, Inc., which was formerly known as
A.S.V., LLC (“ASV” or “ASV Holdings”). On May 11, 2017, in anticipation of an initial public offering, ASV converted from an LLC
to a C-Corporation and the Company’s 51% interest was converted to 4,080,000 common shares of ASV. On May 17, 2017, in
connection with its initial public offering, ASV sold 1,800,000 of its own shares and the Company sold 2,000,000 shares of ASV
common stock and reduced its investment in ASV to a 21.2% interest. ASV was deconsolidated and was recorded as an equity investment
starting with the quarter ended June 30, 2017. Periods ending before June 30, 2017 reflect ASV as a discontinued operation. In February
2018, the Company sold an additional 1,000,000 shares of ASV that it held which reduced the Company’s investment in ASV to
approximately 11.0%. The Company ceased accounting for its investment in ASV under the equity method and now accounts for its
investment as a marketable equity security. Financial information (related to periods before June 2017) included in this 10-K reflect
ASV Holdings as a discontinued operation.
CVS Ferrari, srl (“CVS”) designed and manufactured a range of reach stackers and associated lifting equipment for the global container
handling market. CVS was sold on December 22, 2016 and is presented as a discontinued operation.
Manitex Liftking ULC (“Manitex Liftking” or “Liftking”) sold a complete line of rough terrain forklifts, a line of stand-up electric
forklifts, cushioned tiered forklifts with lifting capacities from 18 thousand to 40 thousand pounds and special mission-oriented vehicles,
as well as other specialized carriers, heavy material handling transporters and steel mill equipment. Liftking was sold on September 30,
2016, and is presented as a discontinued operation.
Note 2. Basis of Presentation
The consolidated financial statements, included herein, have been prepared by the Company pursuant to the rules and regulations of the
United States Securities and Exchange Commission. Pursuant to these rules and regulations, the financial statements are prepared in
accordance with accounting principles generally accepted in the United States of America. The Company owned 25% of Lift Ventures
LLC (“Lift Ventures”) and accounted for it as an unconsolidated equity investment. The investment was determined to be completely
impaired in 2016 and a charge of $5,647 shown on the Statement of Operations line titled “equity investments, net of tax” was taken to
write the investment down to zero. See Note 27, Impairment of Lift Venture Investment, for additional details. The financial statements
for all periods presented classify Liftking, CVS and ASV as discontinued operations.
Financial statements are presented in thousands of dollars except for per share amounts.
Note 3. Summary of Significant Accounting Policies
The summary of significant accounting policies of Manitex International, Inc. is presented to assist in understanding the Company’s
financial statements. The financial statements and notes are representations of the Company’s management who is responsible for their
integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Principals of Consolidation—The Company consolidates all entities that we control by ownership of a majority voting interest.
Additionally, there are situations in which consolidation is required even though the usual condition of consolidation (ownership of a
majority voting interest) does not apply. Generally, this occurs when an entity holds an interest in another business enterprise that was
achieved through arrangements that do not involve voting interests, which results in a disproportionate relationship between such entity's
voting interests in, and its exposure to the economic risks and potential rewards of, the other business enterprise. This disproportionate
relationship results in what is known as a variable interest, and the entity in which we had this interest is referred to as a Variable Interest
Entity (“VIE”). An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE. The primary
beneficiary had both (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance,
and (2) the obligation to absorb losses or the right to receive benefits from the VIE that would potentially be significant to the VIE.
50
Although the Company did not have an ownership interest in S.V.W. Equipment Crane Company and its wholly owned subsidiary
Rental Consulting Services Corporation (collectively “SVW”), the Company had the power to direct the activities of SVW that most
significantly impacted its economic performance and is absorbing the losses. As such, the Company had determined that SVW was a
VIE that required consolidation. SVW had obtained financing and had remitted the proceeds to the Company using inventory (cranes)
owned by the Company as collateral. The finance companies that held the loans had a perfected security interest in the inventory and
therefore had recourse against this specific inventory. Furthermore, the debt taken on by the SVW was effectively guaranteed by the
Company pursuant to certain related agreements. By December 31, 2017, SVW ceased operations and is not a consolidated VIE after
December 31, 2017.
The Company eliminated from the Company’s financial results all significant intercompany transactions, including the intercompany
transactions with consolidated VIEs.
Cash and Cash Equivalents —For purposes of the statement of cash flows, the Company considers all short-term securities purchased
with maturity dates of three months or less to be cash equivalents.
Restricted Cash—Certain of the Company’s lending arrangements require the Company to post collateral or maintain minimum cash
balances in escrow. These cash amounts are reported as current assets on the balance sheets based on when the cash will be contractually
released. Total restricted cash was $245 and $352 at December 31, 2018 and 2017, respectively.
Revenue Recognition —Revenue is recognized when obligations under the terms of the contract with our customer are satisfied;
generally, this occurs with the transfer of control of our equipment, parts or installation services (typically completed within one day),
which occurs at a point in time. Equipment can be redirected during the manufacturing phase such that over time revenue recognition
is not appropriate. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or
providing services. Our contracts are non-cancellable and returns are only allowed in limited instances through Crane & Machinery,
Inc. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. The expected
costs associated with our base warranties continue to be recognized as expense when the products are sold and do not constitute a
separate performance obligation.
For instances where equipment and installation services are sold together, the Company accounts for the equipment and installation
services separately. The consideration (including any discounts) is allocated between the equipment and installation services based on
their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells
the equipment.
In some instances, the Company fulfills its obligations and bills the customer for the work performed but does not ship the goods until
a later date. These arrangements are considered bill-and-hold transactions. In order to recognize revenue on the bill-and-hold
transactions, the Company ensures the customer has requested the arrangement, the product is identified separately as belonging to the
customer, the product is ready for shipment to the customer in its current form, and the Company does not have the ability to direct the
product to a different customer. A portion of the transaction price is not allocated to the custodial services due to the immaterial value
assigned to that performance obligation.
Payment terms offered to customers are defined in contracts and purchase orders and do not include a significant financing
component. At times, the Company may offer discounts which are considered variable consideration however, the Company applies
the constraint guidance when determining the transaction price to be allocated to the performance obligations.
Investment—Equity Method of Accounting — Beginning with the quarter ended June 30, 2017, the Company accounted for its 21.2%
investment in ASV under the equity method of accounting. Under the equity method, the Company’s share of the net income (loss) of
ASV was recognized as income (loss) in the Company’s statement of operations and added to the investment account, and dividends
received from ASV were treated as a reduction of the investment account. The Company reports ASV’s earnings on a one quarter lag
as ASV may not report earnings in time to be included in the Company’s financial statements for any given reporting period.
On May 17, 2017 (the date ASV became an equity investment), the Company’s investment in ASV exceeded the proportional share of
ASV’s net assets. Under current applicable guidance, assets and liabilities of the investee (ASV) were valued at fair market value on the
date of the investment. The Company’s investment, however, was not adjusted for the difference between the Company’s proportional
share of the net assets and the fair value of the assets that existed on the date that the investment was made. The differences were
accounted for on a memo basis. The differences can be either of temporary nature or permanent differences. Adjustment to inventory
and identifiable intangible assets with finite lives are temporary differences. Fair market adjustments to land and goodwill are examples
of permanent differences. Differences related to temporary items are amortized over their lives. Earnings recognized are the
proportional share of investee’s income for the period adjusted for reversal of any timing differences or additional amortization related
to the memo fair market adjustments of identifiable intangible assets that have finite lives.
51
Between February 26 and 28, 2018, the Company sold 1,000,000 shares of ASV stock reducing the Company’s investment in ASV to
approximately 11.0%. See Notes 11 and 26. During the quarter ended March 31, 2018, the Company:
Recognized its proportional share of ASV loss for the three months ended December 31, 2017,
Recorded a loss on the sale of shares,
Ceased accounting for ASV as an equity investment, and
Valued its remaining investment in ASV at its current market value.
In addition, our non-marketable equity investments are investments we have made in privately-held companies accounted for under the
equity method. We periodically review our non-marketable equity investments for impairment. In September 2016, the Company
determined its investment in Lift Ventures was impaired and has recognized an impairment charge to write off its entire investment in
Lift Ventures (See Note 27). There was no impairment related to this investment in prior periods.
Allowance for Doubtful Accounts —Accounts receivable are stated at the amounts the Company’s customers are invoiced and do not
bear interest. The Company has adopted a policy consistent with U.S. GAAP for the periodic review of its accounts receivable to
determine whether the establishment of an allowance for doubtful accounts is warranted based on the Company’s assessment of the
collectability of the accounts. The Company established an allowance for bad debt of $37 and $82 at December 31, 2018 and 2017,
respectively. The Company also has in some instances a security interest in its accounts receivable until payment is received.
Guarantees — The Company has issued partial residual guarantees to financial institutions related to a customer financing of equipment
purchases by the customer. The Company must assess the probability of losses if the fair market value is less than the guaranteed
residual value.
A residual value guarantee involves a guarantee that a piece of equipment will have a minimum fair market value at a future date. The
Company will record a liability for the estimated fair value of guarantees issued pursuant to Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 460, “Guarantees” (“ASC 460”). We recognize a loss under a guarantee when
the obligation to make payment under the guarantee is probable and the amount of the loss can be estimated. If the expected equipment
value is less than its guaranteed residual value, the Company would recognize a liability for the amount of the short-fall up to the amount
of its partial guarantee. The Company is not responsible for any short-fall in excess of its partial guarantee.
Property, Equipment and Depreciation —Property and equipment are stated at cost or the fair market value at date of acquisition for
property and equipment acquired in connection with the acquisition of a company. Depreciation of property and equipment is provided
over the following remaining useful lives:
Asset Category
Buildings
Machinery and equipment
Furniture and fixtures
Leasehold improvements
Motor Vehicles
Computer software
Depreciable Life
10 –32 years
1 – 10 years
1 – 9 years
1 – 11 years
2 – 4 years
3 – 5 years
Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures
for maintenance and repairs are charged to expense as incurred. Depreciation expense for the years ended December 31, 2018, 2017 and
2016 was $2,220, $2,380 and $2,846, respectively.
Other Intangible Assets —The Company accounts for Other Intangible Assets under the guidance of ASC 350, “Intangibles—Goodwill
and Other”. The Company capitalizes certain costs related to patent technology. Additionally, a substantial portion of the purchase price
related to the Company’s acquisitions has been assigned to patents or unpatented technology, trade name, customer backlog, and
customer relationships. Under the guidance, Other Intangible Assets with definite lives are amortized over their estimated useful lives.
Intangible assets with indefinite lives are tested annually for impairment. For the year ended December 31, 2018 there was impairment
of $2,544 related to an indefinite lived trademark. For the years ended December 31, 2017 and 2016, there was no impairment.
52
Goodwill — Goodwill, representing the difference between the total purchase price and the fair value of assets (tangible and intangible)
and liabilities at the date of acquisition, is reviewed for impairment annually, and more frequently as circumstances warrant, and written
down only in the period in which the recorded value of such assets exceed their fair value. The Company does not amortize goodwill in
accordance with Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 350, “Intangibles—
Goodwill and Other” (“ASC 350”). The Company selected October 1 as the date for the required annual impairment test. In 2018, due to a
triggering event, the valuation analysis was performed at December 31, 2018.
For 2018, the Company evaluated goodwill using the quantitative step one approach. In 2018, goodwill is tested for impairment at the
reporting unit level, which is defined as an operating segment or a component of an operating segment that constitutes a business for
which discrete financial information with similar economic characteristics is available and operating results are regularly reviewed by
our chief operating decision maker. For 2018, we have five operating segments: Manitex, Badger, PM/Valla, Sabre and C&M. All
operating segments are comprised of one reporting unit. Only Manitex, PM/Valla and Sabre were tested for goodwill impairment as
Badger and C&M have no goodwill. In 2018, the Company had net impairment of $3,192 million at our PM/Valla operating segment.
For 2017, goodwill was tested at the fully consolidated level excluding discontinued operations, as the Company was operating in a
single operating segment. For 2016, goodwill was tested at the three previously reported segment levels that were in effect at that time,
i.e., Lifting Equipment, Equipment Distribution and ASV.
Under ASC350, entities are provided with the option of first performing a qualitative assessment on none, some, or all of its reporting
units to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If after completing
a qualitative analysis, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value a
quantitative analysis is required.
For 2017 and 2016, the Company evaluated its consolidated goodwill using the quantitative two step approach. The first step used to
identify potential impairment involves comparing the reporting unit’s estimated fair value to its carrying value, including goodwill.
During the first step testing, the Company evaluates goodwill for impairment using a business valuation method, which is calculated as
of a measurement date by determining the present value of debt-free, after-tax projected future cash flows, discounted at the weighted
average cost of capital of a historical third-party buyer. The market approach was also considered in evaluating the potential for
impairment by calculating fair value based on multiples of earnings before interest, taxes, depreciation and amortization (EBITDA) of
comparable, publicly traded companies. The Company also observed implied EBITDA multiples from relatively recent merger and
acquisition activity in the industry, which was used to test the reasonableness of the results.
The second step of the process involves the calculation of an implied fair value of goodwill for each reporting unit for which step one
indicated impairment. The implied fair value of goodwill is determined by measuring the excess of the estimated fair value of the
reporting unit over the estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was
being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the
reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the
goodwill, an impairment charge is recorded for the excess. An impairment loss cannot exceed the carrying value of goodwill assigned
to a reporting unit and the subsequent reversal of goodwill impairment losses is not permitted.
For 2017, the first step did not indicate any impairment of goodwill, for 2016, the second step was necessary for the Equipment
Distribution segment. This further analysis indicated that the Equipment Distribution segment goodwill was impaired and a $275
impairment charge was recognized in 2016 to fully write off the Equipment Distribution segment’s goodwill.
The determination of fair value requires the Company to make significant estimates and assumptions. These estimates and assumptions
primarily include, but are not limited to, revenue growth and operating earnings projections, discount rates, terminal growth rates, and
required capital expenditure projections. Our projections make certain assumptions including expanding PM market share in North
America, a normalization of energy markets over time and a continued expansion of dealer networks. If our progress in meeting these
and other assumptions is slower or different than what was anticipated, it may impact our ability to meet the projections. Due to the
inherent uncertainty involved in making these estimates, actual results could differ materially from those estimates. Deterioration in the
market or actual results as compared with the projections (including not meeting near term projections) may result in impairment in the
near term. In the event the Company determines that goodwill is impaired in the future the Company would need to recognize a non-
cash impairment charge.
53
Impairment of Long-Lived Assets —The Company’s policy is to assess the realizability of its long-lived assets, including intangible
assets, and to evaluate such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
such assets (or group of assets) may not be recoverable. Impairment is determined to exist if the estimated future undiscounted cash
flows are less than the carrying value. Future cash flow projections include assumptions for future sales levels, the impact of cost
reduction programs, and the level of working capital needed to support each business. The amount of any impairment then recognized
would be calculated as the difference between estimated fair value and the carrying value of the asset. The Company recognized $2,544
of impairment charges on trademark for the year ended December 31, 2018 but did not have any impairment for the years ended
December 31, 2017 and 2016.
Inventory —Inventory consists of stock materials and equipment stated at the lower of cost (first in, first out) or net realizable value.
All equipment classified as inventory is available for sale. The company records excess and obsolete inventory reserves. The estimated
reserve is based upon specific identification of excess or obsolete inventories. Selling, general and administrative expenses are expensed
as incurred and are not capitalized as a component of inventory.
Foreign Currency Translation and Transactions —The financial statements of the Company’s non-U.S. subsidiaries are translated
using the current exchange rate for assets and liabilities and the weighted-average exchange rate for the year for income and expense
items. Resulting translation adjustments are recorded to accumulated other comprehensive income (OCI) as a component of
shareholders’ equity.
The Company converts receivables and payables denominated in other than the Company’s functional currency at the exchange rate as
of the balance sheet date. The resulting transaction exchange gains or losses, except for certain transaction gains or loss r elated to
intercompany receivable and payables, are included in other income and expense. Transaction gains and losses related to intercompany
receivables and payables not anticipated to be settled in the foreseeable future are excluded from the determination of net income and
are recorded as a translation adjustment (with consideration to the tax effect) to accumulated other comprehensive income (OCI) as a
component of shareholders’ equity.
Derivatives—Forward Currency Exchange Contracts —When the Company enters into forward currency exchange contracts it does
so in relationship such that the exchange gains and losses on the assets and liabilities that are being hedged which are denominated in
other than the reporting units’ functional currency would be offset by the changes in the market value of the forward currency exchange
contracts it holds. The forward currency exchange contracts that the Company has to offset existing assets and liabilities denominated
in other than the reporting units’ functional currency have been determined not to be considered a hedge under ASC 815-10. The
Company records at the balance sheet date the forward currency exchange contracts at its market value with any associated gain or loss
being recorded in current earnings. Both realized and unrealized gains and losses related to forward currency contracts are included in
current earnings and are reflected in the Statement of Operations in the other income expense section on the line titled foreign currency
transaction gain (loss).
The forward currency contracts to hedge future sales are designated as cash flow hedges under ASC 815-10. As required, forward
currency contracts are recognized as an asset or liability at fair value on the Company’s Consolidated Balance Sheet. For derivative
instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as
a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged
transaction affects earnings (date of sale). Gains or losses on cash flow hedges when recognized into income are included in net revenues.
Interest Rate Swap Contracts—The Company enters into derivative instruments to manage its exposure to interest rate risk related to
certain foreign term loans. Derivatives are initially recognized at fair value at the date the contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in current earnings immediately
unless the derivative is designated and effective as a hedging instrument, in which case the effective portion of the gain or loss is
recognized and is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods
during which the hedging instrument affects earnings (date of sale). As part of the acquisition of PM Group, which was acquired on
January 15, 2015, the Company acquired interest rate swap contracts, which manage the exposure to interest rate risk related to term
loans with certain financial institutions in Italy. These contracts have been determined not to be hedge instruments under ASC 815-10.
Credit Risk Concentrations — Financial instruments which potentially subject the Company to concentrations of credit risk consist
primarily of cash, trade receivables and payables. The Company maintains its cash balances principally at a bank located in Chicago,
Illinois as well as several separate Italian banks. At December 31, 2018 and 2017, the Company had uninsured balances of $22,098 and
$5,116, respectively. Revenues for the year ended December 31, 2017 included one customer, Rush Truck Center that represented
approximately 12.0% of total revenue. No other customer represented more than 10% of revenues for the year ended December 31,
2017. In 2018 and 2016, no one customer accounted for 10% or more of total company’s revenues.
54
For the years ended December 31, 2018 and 2017, no customers accounted for 10% or more of total Company’s accounts receivable.
For 2018, 2017 and 2016 purchases from any single supplier did not exceed 10% of total purchases.
Research and Development Expenses— The Company expenses research and development costs, as incurred. For the periods ended
December 31, 2018, 2017 and 2016 expenses were $2,839, $2,564 and $2,939, respectively.
Advertising —Advertising costs are expensed as incurred and were $572, $994 and $950 for the years ended December 31, 2018, 2017
and 2016, respectively.
Retirement Benefit Costs and Termination Benefits —Payments to defined contribution retirement benefit plans are recognized as an
expense when employees have rendered service entitling them to the contributions. For defined benefit retirement benefit plans, the cost
of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each
annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if
applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge
or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other
comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is
recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning
of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:
service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
net interest expense or income; and
remeasurement.
Curtailment gains and losses are accounted for as past service costs. The retirement benefit obligation recognized in the consolidated
statement of financial position represents the actual deficit or surplus in PM Group’s defined benefit plans. Any surplus resulting from
this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in
future contributions to the plans. A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw
the offer of the termination benefit and when the entity recognizes any related restructuring costs.
Litigation Claims —In determining whether liabilities should be recorded for pending litigation claims, the Company must assess the
allegations and the likelihood that it will successfully defend itself. When the Company believes it is probable that it will not prevail in
a particular matter, it will then record an estimate of the amount of liability based, in part, on advice of outside legal counsel.
Accounting for Marketable Equity Securities— Marketable equity securities are valued at fair market value based on the closing price
of the stock on the date of the balance sheet. Gains and loss related fair value adjustments related to marketable equity securities are
recorded into income each reporting period.
Shipping and Handling —The Company records the amount of shipping and handling costs billed to customers as revenue. The cost
incurred for shipping and handling is included in the cost of sales.
Adoption of Highly Inflationary Accounting in Argentina— GAAP guidance requires the use of highly inflationary accounting for
countries whose cumulative three-year inflation exceeds 100 percent. In the second quarter of 2018, published inflation indices indicated
that the three-year cumulative inflation in Argentina exceeded 100 percent, and as of July 1, 2018, we elected to adopt highly inflationary
accounting for our subsidiary in Argentina (“PM Argentina”). Under highly inflationary accounting, PM Argentina’s functional currency
became the Euro (its parent company’s reporting currency), and its income statement and balance sheet have been measured in Euros
using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and
liabilities has been reflected in earnings in other (income) and expense, net and was not material. As of December 31, 2018, PM
Argentina had a small net peso monetary position. Net sales of PM Argentina were less than 5 and 10 percent of our consolidated net
sales for the years ended December 31, 2018 and 2017, respectively.
Use of Estimates —The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
55
Income Taxes — The Company accounts for income taxes under the provisions of ASC 740 “Income Taxes,” which requires recognition
of income taxes based on amounts payable with respect to the current year and the effects of deferred taxes for the expected future tax
consequences of events that have been included in the Company’s financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the differences between the financial accounting and tax basis of assets and liabilities, as
well as for operating losses and tax credit carryforwards using enacted tax rates in effect for the year in which the differences are
expected to reverse. Valuation allowances are recorded to reduce deferred tax assets when it is more-likely-than-not a tax benefit will
not be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income prior to the expiration of any net operating loss carryforwards. See Note 16, Income Taxes, for further details.
The Jobs Act also establishes Global Intangible Low-Taxed Income (“GILTI”) provisions that impose a tax on foreign income in excess
of a deemed return on tangible assets of foreign corporations. The Company has elected to recognize GILTI as a period cost as incurred,
therefore there are no deferred taxes recognized for basis differences that are expected to impact the amount of the GILTI inclusion
upon reversal.
ASC 740 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The Company records interest and penalties related to income tax matters in the
provision for income taxes.
Accrued Warranties —Warranty costs are accrued at the time revenue is recognized. The Company’s products are typically sold with
a warranty covering defects that arise during a fixed period of time. The specific warranty offered is a function of customer expectations
and competitive forces. The Equipment Distribution segment does not accrue for warranty costs at the time of sales, as they are
reimbursed by the manufacturers for any warranty that they provide to their customers.
A liability for estimated warranty claims is accrued at the time of sale. The liability is established using historical warranty claim
experience. Historical warranty experience is, however, reviewed by management. The current provision may be adjusted to take into
account unusual or non-recurring events in the past or anticipated changes in future warranty claims. Adjustments to the initial warranty
accrual are recorded if actual claim experience indicates that adjustments are necessary. Warranty reserves are reviewed to ensure critical
assumptions are updated for known events that may impact the potential warranty liability.
Debt Issuance Costs —Debt issuance costs incurred in securing the Company’s financing arrangements are capitalized and amortized
over the term of the associated debt. Deferred financing costs associated with long-term debt are presented in the balance sheet as direct
deduction from the carrying amount of that debt liability, consistent with debt discount. Deferred financing costs associated with
revolving lines of credit are included with other long-term assets on the Company’s balance sheet.
Sale and Leaseback —In accordance with ASC 840-40 Sales-Leaseback Transactions, the Company has recorded deferred gain in
relationship to the sale and leaseback of one of the Company’s operating facilities and on certain equipment. As such, the gains have
been deferred and are being amortized on a straight- line basis over the life of the leases.
Computation of EPS —Basic Earnings per Share (“EPS”) was computed by dividing net income (loss) by the weighted average number
of common shares outstanding during the period.
The number of shares related to options, warrants, restricted stock, convertible debt and similar instruments included in diluted EPS
(“EPS”) is based on the “Treasury Stock Method” prescribed in ASC 260-10, Earnings per Share. This method assumes theoretical
repurchase of shares using proceeds of the respective stock option or warrant exercised, and for restricted stock the amount of
compensation cost attributed to future services which has not yet been recognized and the amount of current and deferred tax benefit, if
any, that would be credited to additional paid in capital upon the vesting of the restricted stock, at a price equal to the issuer’s average
stock price during the related earnings period. Accordingly, the number of shares includable in the calculation of EPS in respect of the
stock options, warrants, restricted stock, convertible debt and similar instruments is dependent on this average stock price and will
increase as the average stock price increases.
Stock Based Compensation —In accordance with ASC 718 Compensation-Stock Compensation, share-based payments to employees,
including grants of restricted stock units, are measured at fair value as of the date of grant and are expensed in the consolidated statement
of income over the service period (generally the vesting period).
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Comprehensive Income — “Reporting Comprehensive Income” requires reporting and displaying comprehensive income and its
components. Comprehensive income includes, in addition to net earnings, other items that are reported as direct adjustments to
shareholder’s equity. Currently, the comprehensive income adjustment required for the Company has two components. First is a foreign
currency translation adjustment, the result of consolidating its foreign subsidiary. The second component is a derivative instrument fair
market value adjustment (net of income taxes) related to forward currency contracts designated as a cash flow hedge.
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative
is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the
hedged transaction affects earnings (date of sale). See Note 7 for additional details.
Reclassifications — A reclassification to properly reflect a decrease of both goodwill and deferred tax liabilities of approximately $2.6
million was recorded in the fourth quarter of 2018 for the year ended December 31, 2017.
Business Combinations —The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business
Combinations. The guidance requires consideration given, including contingent consideration, assets acquired and liabilities assumed
to be valued at their fair market values at the acquisition date. The guidance further provides that: (1) in-process research and
development will be recorded at fair value as an indefinite-lived intangible asset; (2) acquisition costs will generally be expensed as
incurred, (3) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date;
and (4) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect
income tax expense.
ASC 805 requires that any excess of purchase price over fair value of assets acquired, including identifiable intangibles and liabilities
assumed be recognized as goodwill. In accordance with ASC 805, any excess of fair value of acquired net assets, including identifiable
intangibles assets, over the acquisition consideration results in a bargain purchase gain. Prior to recording a gain, the acquiring entity
must reassess whether all acquired assets and assumed liabilities have been identified and recognized and perform re-measurements to
verify that the consideration paid, assets acquired and liabilities assumed have been properly valued.
Note 4. Revenue Recognition
Revenue is recognized when obligations under the terms of the contract with our customer are satisfied; generally, this occurs with the
transfer of control of our equipment, parts or installation services (typically completed within one day), which occurs at a point in
time. Equipment can be redirected during the manufacturing phase such that over time revenue recognition is not appropriate. Revenue
is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Our contracts
are non-cancellable and returns are only allowed in limited instances through Crane & Machinery, Inc. Sales, value add, and other taxes
we collect concurrent with revenue-producing activities are excluded from revenue. The expected costs associated with our base
warranties continue to be recognized as expense when the products are sold and do not constitute a separate performance obligation.
For instances where equipment and installation services are sold together, the Company accounts for the equipment and installation
services separately. The consideration (including any discounts) is allocated between the equipment and installation services based on
their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells
the equipment.
In some instances, the Company fulfills its obligations and bills the customer for the work performed but does not ship the goods until
a later date. These arrangements are considered bill-and-hold transactions. In order to recognize revenue on the bill-and-hold
transactions, the Company ensures the customer has requested the arrangement, the product is identified separately as belonging to the
customer, the product is ready for shipment to the customer in its current form, and the Company does not have the ability to direct the
product to a different customer. A portion of the transaction price is not allocated to the custodial services due to the immaterial value
assigned to that performance obligation.
Payment terms offered to customers are defined in contracts and purchase orders and do not include a significant financing
component. At times, the Company may offer discounts which are considered variable consideration however, the Company applies
the constraint guidance when determining the transaction price to be allocated to the performance obligations.
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The following table disaggregates our sources of revenues for the years indicated (ended December 31):
Boom trucks, knuckle boom & truck cranes
Rough terrain cranes
Mobile tanks
Installation services
Other equipment
Part sales
Total Revenue
Equipment sales
Part sales
Installation services
Total Revenue
$
$
$
$
2018
175,895
7,384
11,413
4,134
14,547
28,734
242,107
2018
209,239
28,734
4,134
242,107
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The Company attributes revenue to different geographic areas based on where items are shipped to or services are performed. The
following table provides details of revenues by geographic area for the years ended December 31, 2018, 2017 and 2016, respectively.
2018
2017
2016
United States
Canada
Italy
France
Other
Chile
Argentina
United Kingdom
Spain
Germany
Finland
Czech Republic
Netherlands
Mexico
Peru
Malaysia
Qatar
United Arab Emirates
Israel
Hong Kong
Indonesia
Denmark
Ukraine
Ireland
Romania
Martinique
Kuwait
South Africa
Turkey
Singapore
Saudi Arabia
Morocco
Russia
Bahrain
Thailand
Australia
Uzbekistan
Switzerland
Trinidad and Tobago
Columbia
Guadeloupe
Hungry
Greece
Sweden
Taiwan
Oman
Portugal
Estonia
Poland
Bulgaria
Norway
Lebanon
New Zealand
Brazil
Algeria
Korea
$
$
124,060 $
24,516
20,402
9,826
8,158
8,297
8,214
8,117
5,226
4,805
3,623
2,352
1,413
1,372
1,102
875
807
749
711
708
534
505
464
464
406
402
357
214
211
195
188
162
158
145
56
48
—
—
—
—
—
—
—
634
501
750
—
—
—
380
—
—
—
—
—
—
242,107 $
102,718 $
18,205
18,759
6,085
2,708
7,919
16,101
6,985
4,243
3,166
2,793
1,431
893
1,642
439
804
—
773
3,660
871
615
681
693
410
362
304
173
1,082
202
1,138
683
425
554
—
267
157
1,387
429
425
348
312
307
303
261
229
163
156
151
151
125
125
88
81
74
56
—
213,112 $
75,639
11,332
24,983
5,756
4,780
5,692
7,662
9,410
2,604
2,229
3,513
818
1,659
2,499
170
1,173
—
937
1,069
1,339
359
471
693
535
97
—
721
1,282
476
564
860
123
—
530
—
313
—
339
—
686
—
—
—
—
—
—
—
—
83
—
650
—
276
1
89
785
173,197
59
Customer Deposits
At times, the Company may require an upfront deposit related to its contracts. In instances where an upfront deposit has been received
by the Company and the revenue recognition criteria have not yet been met, the Company records a contract liability in the form of a
customer deposit, which is classified as a short-term liability on the balance sheet. That customer deposit is revenue that is deferred
until the revenue recognition criteria have been met, at which time, the customer deposit is recognized into revenue.
The following table summarizes changes in customer deposits for the year ended December 31, 2018:
Customer deposits at January 1, 2018
Revenue recognized from customer deposits
Additional customer deposits received where revenue has not
yet been recognized
Effect of change in exchange rates
Customer deposits at December 31, 2018
$
$
2,242
(10,547 )
10,839
(224 )
2,310
60
Note 5. Earnings per Common Share
Basic net earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution of restricted stock units. Details of the calculations are as follows:
For the Years Ended December 31,
2017
2016
2018
Net loss attributable to shareholders of Manitex
International, Inc.
Loss from continuing operations
Discontinued operations:
Income (loss) from operations of discontinued
operations, net of income taxes
(Income) loss attributable to noncontrolling
interest
Income from operations of discontinued
operations, net of income taxes attributable to
shareholders of Manitex International, Inc.
Loss on sale of discontinued operations, net of
income taxes
Loss from discontinued operations attributable
Shareholders of Manitex International, Inc.
Loss attributable to shareholders of Manitex
International, Inc.
Earnings (loss) per share
Basic
Loss from continuing operations attributable
to shareholders' of Manitex International, Inc.
Earnings from operations of discontinued
operations attributable to shareholders of Manitex
International, Inc., net of income taxes
Loss on sale of discontinued operations attributable to
shareholders of Manitex International, Inc., net of
income taxes
Loss attributable to shareholders of Manitex
International, Inc.
Diluted
Loss from continuing operations attributable
to shareholders' of Manitex International, Inc.
Earnings from operations of discontinued
operations attributable to shareholders of Manitex
International, Inc., net of income taxes
Loss on sale of discontinued operations attributable to
shareholders of Manitex International, Inc., net of
income taxes
Loss attributable to shareholders of Manitex
International, Inc.
Weighted average common shares outstanding
Basic
Diluted
Basic
Dilutive effect of warrants
Dilutive effect of restricted stock units
$
(13,177 ) $
(7,067 ) $
(23,189 )
—
553
(20 )
—
(274 )
574
—
279
554
—
(1,290 )
(14,458 )
—
(1,011 )
(13,904 )
$
(13,177 ) $
(8,078 ) $
(37,093 )
$
(0.72 ) $
(0.43 ) $
(1.44 )
$
$
$
— $
0.02 $
0.03
— $
(0.08 ) $
(0.90 )
(0.72 ) $
(0.49 ) $
(2.30 )
$
(0.72 ) $
(0.43 ) $
(1.44 )
$
$
$
— $
0.02 $
0.03
— $
(0.08 ) $
(0.90 )
(0.72 ) $
(0.49 ) $
(2.30 )
18,409,296 16,548,444 16,133,284
18,409,296 16,548,444 16,133,284
—
—
18,409,296 16,548,444 16,133,284
—
—
—
—
There are 136,035, 204,072 and 342,004 restricted stock units which are anti-dilutive and therefore are not included in the average
number of diluted shares shown above for the years ended December 31, 2018, 2017 and 2016, respectively.
61
The following securities were not included in the computation of diluted earnings per share as their effect would have been antidilutive:
Unvested restricted stock units
Options to purchase common stock
Convertible subordinated notes
2018
For the Years Ended December 31,
2017
168,763
—
2016
342,004
—
1,549,451 1,549,451 1,549,451
1,669,762 1,718,214 1,891,455
72,874
47,437
Note 6. Fair Value Measurements
The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value by level with the fair
value hierarchy. As required by ASC 820-10, financial assets and liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement. Except as noted the below assets and liabilities are valued at fair market on a
recurring basis,
The following is a summary of items that the Company measured at fair value during the periods:
Asset:
Marketable securities
Forward currency exchange contracts
Total current assets at fair value
Liabilities:
PM contingent liabilities
Valla contingent consideration
Interest rate swap contracts
Total liabilities at fair value
Liabilities:
Forward currency exchange contracts
Interest rate swap contracts
Valla contingent consideration
Total liabilities at fair value
Liabilities:
Balance at December 31, 2017
Effect of change in exchange rates
Change in fair value during the period
Balance at December 31, 2018
Fair Value at December 31, 2018
Level 1
Level 2
Level 3
Total
$
$
$
$
$
$
2,160 $
—
2,160 $
— $
—
—
— $
— $
91
91 $
— $
—
2
2 $
— $
—
— $
2,160
91
2,251
321 $
210
—
531 $
321
210
2
533
Fair Value at December 31, 2017
Level 1
Level 2
Level 3
Total
— $
—
—
— $
213 $
6
—
219 $
— $
—
220
220 $
213
6
220
439
Fair Value Measurements Using Significant
Unobservable Inputs (level 3)
Valla
Contingent
Consideration
PM Contingent
Liability
Total
$
$
— $
(24 )
345
321 $
220 $
(10 )
—
210 $
220
(34 )
345
531
In 2018, the fair value of PM contingent liabilities a Level 3 item was based on an option pricing framework, more specifically, a Monte
Carlo simulation. The original fair value of Valla contingent consideration was also determined was using an option pricing framework
more specifically a Monte Carlo simulation at the acquisition date.
In 2017, the Company qualitatively evaluated the PM contingent liability. During 2017, the Company determined that based on 2017
expected EBITDA there was virtual certainty that no payment would be required and determined that there was no liability. Final 2017
EBITDA did not meet the threshold for a payment.
62
The Company has qualitatively evaluated the Valla contingent liability from the date of acquisition.
The carrying value of the amounts reported in the Consolidated Balance Sheets for cash, accounts receivable, accounts payable and
short-term variable debt, including any amounts outstanding under the Company’s revolving credit facilities and working capital
borrowing, approximate fair value due to the short periods during which these amounts are outstanding.
The book and fair value of the Company’s term debt was $26,871 and $26,871 for the year ended December 31, 2018, respectively, and
$29,629 and $29,629 for the year ending December 31, 2017, respectively. The book and fair value of the Company’s capital leases was
$5,482 and $6,925 for the year ended December 31, 2018, respectively and $5,861 and $7,679 for the year ending December 31, 2017,
respectively. There is no difference between the book value and the fair value for amount recorded in connection with a long-term legal
settlement, which was $851 and $890 for the years ending December 31, 2018 and 2017, respectively.
Fair Value Measurements
ASC 820-10 classifies the inputs used to measure fair value into the following hierarchy:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or
liabilities;
Level 2 - Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially
the full term of the asset or liability; and
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable
(i.e., supported by little or no market activity)
Fair value of the forward currency contracts are determined on the last day of each reporting period using observable inputs, which are
supplied to the Company by the foreign currency trading operation of its bank and are Level 2 items.
Note 7. Derivative Financial Instruments
The Company’s risk management objective is to use the most efficient and effective methods available to us to minimize, eliminate,
reduce or transfer the risks which are associated with fluctuation of exchange rates between the Euro, Chilean Peso and the U.S. dollar.
Forward Currency Contracts
When the Company receives a significant order in other than the operating unit’s functional currency, management may evaluate
different options that are available to mitigate future currency exchange risks. The decision to hedge future sales is not automatic and is
decided case by case. The Company only uses hedge instruments to hedge firm existing sales orders and not estimated exposure, when
management determines that exchange risks exceed desired risk tolerance levels. The forward currency contracts used to hedge future
sales are designated as cash flow hedges under ASC 815-10 provided certain criteria are met. For derivative instruments that are
designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other
comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings
(date of sale). Gains or losses on cash flow hedges when recognized into income are included in net revenues. Gains and losses on the
derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness
are recognized in current earnings. The Company expects minimal ineffectiveness as the Company has hedged only firm sales orders
and has not hedged estimated exposures. As of December 31, 2018, the Company had no outstanding forward currency contracts that
were in place to hedge future sales. Therefore, there are currently no unrealized pre-tax gains or loss which will reclassified from other
comprehensive income into earnings during the next 12 months.
In addition, the Company enters into forward currency exchange contracts in relationship such that the exchange gains and losses on the
assets and liabilities denominated in other than the reporting units’ functional currency would be offset by the changes in the market
value of the forward currency exchange contracts it holds. The forward currency exchange contracts that the Company has to offset
existing assets and liabilities denominated in other than the reporting units’ functional currency have been determined not to be
considered a hedge under ASC 815-10. The Company records at the balance sheet date the forward currency exchange contracts at its
market value with any associated gain or loss being recorded in current earnings. Both realized and unrealized gains and losses related
to forward currency contracts are included in current earnings and are reflected in the Statement of Income in the other income expense
section on the line titled foreign currency transaction gains (losses). Items denominated in other than a reporting unit functional currency
include certain intercompany receivables due from the Company’s Italian subsidiaries and accounts receivable and accounts payable of
our Italian subsidiaries and their subsidiaries.
63
PM Group has an intercompany receivable denominated in Euros from its Chilean subsidiary. At December 31, 2018, the Company
had entered into two forward currency exchange contracts that matures on February 14, 2019. Under the contract the Company is
obligated to sell 1,800,000 Chilean pesos for 2,333 euros. The Company has a second contract which obligates the Company to sell
200,000 Chilean pesos for $294. The purpose of the forward contract is to mitigate the income effect related to this intercompany
receivable that results with a change in exchange rate between the Euro and the Chilean peso.
Interest Rate Swap Contracts
The Company uses financial instruments available on the market, including derivatives, solely to minimize its cost of borrowing and
hedge the risk of interest rate and exchange rate fluctuation. In January 2009, prior to the January 15, 2015 acquisition date, PM Group
entered into contracts in order to hedge the interest rate risk related to its term loans.
A contract was signed by PM Group, for an original notional amount of € 482 (€ 186 at December 31, 2018), maturing on October 1,
2020 with interest paid monthly. PM pays interest at a rate of 3.90% and receives from the counterparty’s interest at the “Euribor” rate
for the period in question if greater than 0.90%.
As of December 31, 2018, the Company had the following forward currency contracts and interest rate swaps:
Nature of Derivative
Forward currency sales
contracts
Interest rate swap contracts
Currency
Chilean peso
Amount
Type
Not designated as hedge instrument
2,000,000
Euro
186 Not designated as hedge instrument
The following table provides the location and fair value amounts of derivative instruments that are reported in the Consolidated Balance
Sheet as of December 31, 2018 and 2017:
Total derivatives not designated as a hedge instrument
Asset Derivatives
Foreign currency exchange contracts
Total derivative assets
Liabilities Derivatives
Foreign currency Exchange Contracts
Interest rate swap contracts
Total derivative liabilities
Balance Sheet Location
Prepaid expense and other
Accrued expense
Notes payable-Short term
Fair Value
As of December 31,
2017
2018
$
$
$
$
91 $
91 $
— $
2
2 $
—
—
213
6
219
The following tables provide the effect of derivative instruments on the Consolidated Statement of Income for 2018, 2017 and 2016:
Derivatives not designated as Hedge Instrument
Forward currency contracts
Forward currency contracts
Interest rate swap contracts
Total derivatives (loss) gain
Location of gain or
(loss)
recognized
in Income Statement
Foreign currency
transaction (losses)
gains
Gain from
operations of
discontinued
operations
Interest expense
64
Years ended December 31,
2017
2018
2016
$
(205 ) $
15 $
(483 )
—
(4 )
(209 ) $
—
1
16 $
54
(41 )
(470 )
$
During 2018, 2017 and 2016, there were no forward currency contracts designated as cash flow hedges. As such, all gains and loss
related to forward currency contracts during 2018 and 2017 were recorded in current earnings and did not impact other comprehensive
income.
Note 8. Inventory
The components of inventory at December 31, are summarized as follows:
Raw materials and purchased parts
Work in process
Finished goods and replacement parts
Inventories, net
2018
2017
38,192 $
5,360
14,472
58,024 $
35,205
4,513
14,642
54,360
$
$
The Company has established reserves for obsolete and excess inventory of $5,967 and $3,462 as of December 31, 2018 and 2017,
respectively.
Note 9. Property, Plant and Equipment
Property, plant and equipment consist of the following at December 31, 2018 and 2017, respectively:
Land
Buildings
Machinery and equipment
Furniture and fixtures
Leasehold improvements
Computer software & equipment
Motor vehicles
Construction in progress
Totals
Less: accumulated depreciation
Net property and equipment
2018
2017
$
$
4,216 $
14,231
11,648
1,704
1,122
1,240
777
137
35,075
(14,826 )
20,249 $
4,396
14,370
13,070
311
996
1,343
413
60
34,959
(12,921 )
22,038
Depreciation expense was $2,220 (net of $80 amortization of deferred gain on building), $2,380 (net of $80 amortization of deferred
gain on building), and $2,846 (net of $106 amortization of deferred gain on building) in 2018, 2017 and 2016, respectively. See Note
14 for information regarding capital leases.
Note 10. Goodwill and Other Intangible Assets
The Company accounts for Other Intangible Assets under the guidance in ASC 350, Intangibles—Goodwill and Other. Under the
guidance intangible assets with definite lives are amortized over their estimated useful lives. Indefinite lived intangible assets are subject
to annual impairment testing. For the year ended December 31, 2018 there was impairment charge of $2,544 related to an indefinite
lived trademark and $3,192 net impairment charge to goodwill. For the year ended December 31, 2017, there was no impairment
compared to $275 of impairment for the year ended December 31, 2016. The Company capitalizes certain costs related to patent
technology. Additionally, a substantial portion of the purchase price related to the Company’s acquisitions has been assigned to patents
or unpatented technology, trade name, customer backlog and customer relationships. The intangibles acquired in acquisitions have been
valued using a discounted cash flow approach. Intangibles, except goodwill, are being amortized over their estimated useful lives.
65
Intangible assets were comprised of the following as of December 31:
Patented and unpatented technology
Amortization
Customer relationships
Amortization
Trade names and trademarks
Amortization
Non-competition agreements
Amortization
Customer backlog
Amortization
Total Intangible assets
2018
2017
Useful Lives
$
18,111 $
(12,762 )
23,301
(11,419 )
18,458
(12,011 )
23,837
(9,907 )
9,828
(2,286 )
50
(50 )
370
(370 )
24,773 $
12,724
(2,090 )
50
(47 )
370
(370 )
31,014
$
10 years
5-20 years
25 years -
Indefinite
2-5 years
< 1 year
Amortization expense was $2,769, $2,727 and $3,790 for the periods ended December 31, 2018, 2017 and 2016, respectively. The
weighted average amortization period for definite lived intangibles was 7 years for patented and unpatented technology, and 13 years
for both customer relationships and trade names and trademarks.
Estimated amortization expense for the next five years and subsequent is as follows:
2019
2020
2021
2022
2023
And subsequent
Total intangibles currently to be amortized
Intangibles with indefinite lives not amortized
Total intangible assets
Amount
2,120
2,048
2,032
2,032
2,032
9,510
19,774
4,999
24,773
$
$
Changes in the Company’s goodwill are as follows:
Balance December 31, 2016
Effects of change in exchange rate
Balance December 31, 2017
Goodwill impairment
Reclass to deferred tax liability
Effects of change in exchange rate
Balance December 31, 2018
Goodwill
$
39,669
3,900
43,569
(3,212 )
(2,557 )
(1,502 )
36,298
$
$
$
The Company performed its annual impairment assessment as of October 1, 2018, its annual measurement date. At that date, there was
significant cushion between the carrying values of each of our reporting units and the market capitalization of the Company. During
the fourth quarter of 2018, there was a significant decline in the U.S. stock markets and specifically our stock declined from a closing
price of $9.64 at October 1, 2018 to a closing price of $5.68 at December 31, 2018. Subsequent to December 31, stock markets in
general rebounded from the December lows. The Company’s stock priced increased as well, but not to the same levels as the general
market or our previous averages for the year. The Company considered this sustained market capitalization decrease to be a triggering
event and as such reevaluated goodwill impairment at December 31, 2018. In order to more closely align the estimated fair values of
our reporting units to our overall market capitalization, an increase to our risk premium utilized within our discounted cash flows analysis
was applied, resulting in an impairment charge to our PM reporting unit.
66
11. Equity Method Investments
The Company accounted for its investment in ASV during the period (May 17, 2017 to February 26, 2018) that it owned 21.2% of ASV
as an equity method investment. Under the equity method, the Company’s share of the net income (loss) of ASV was recognized as
income (loss) in the Company’s statement of operations and added to investment account, and dividends received from ASV were
treated as a reduction of the investment account. The Company reported ASV’s earnings on a one quarter lag as ASV may not report
earnings in time to be included in the Company’s financial statements for any given reporting period. During the quarter ended March
31, 2018, the Company recorded its proportional share of ASV’s loss for the quarter ended December 31, 2017 and recorded amortization
related temporary differences.
The following tables present ASV summary income statement information:
For the three
months ended
December 31, (2)
2017
Net sales
Gross profit
Net income
$
Net income attributable to the Company (1)
Amortization of FMV adjustment
Income recognized by the Company
__________________
(1) Represents 21.2% of ASV Holdings loss for the quarter ended December 31, 2017.
$
(2) The Company's policy is to record our earnings based on a one quarter lag.
30,455
4,146
(796 )
(169 )
(35 )
(204 )
Between February 26 and 28, 2018, the Company sold 1,000,000 shares of ASV stock, reducing the Company’s investment to
approximately 11.0%, and ceased accounting for its investment in ASV as an equity method investment. See Note 26, Discontinued
Operations.
Note 12. Accrued Expenses
$
Accrued payroll
Accrued employee benefits
Accrued bonuses
Accrued vacation expense
Accrued interest
Accrued commissions
Accrued expenses—other
Accrued warranty
Accrued taxes other than income taxes
Accrued product liability and workers compensation claims
Total accrued expenses
$
As of December 31,
2018
2017
1,195 $
951
146
1,274
723
424
1,038
2,004
1,243
251
9,249 $
1,198
1,317
180
1,214
414
560
2,045
2,030
969
143
10,070
Note 13. Revolving Term Credit Facilities and Debt
U.S. Credit Facilities
At December 31, 2018, the Company and its U.S. subsidiaries have a Loan and Security Agreement, as amended, (the “Loan Agreement”)
with CIBC Bank USA (“CIBC”), formerly known as “The Private Bank and Trust Company”. The Loan Agreement provides
a revolving credit facility with a maturity date of July 20, 2021. The aggregate amount of the facility is $25,000.
67
The maximum borrowing available to the Company under the Loan Agreement is limited to: (1) 85% of eligible receivables; plus (2)
50% of eligible inventory valued at the lower of cost or market subject to a $17,500 limit; plus (3) 80% of eligible used equipment, as
defined, valued at the lower of cost or market subject to a $2,000 limit. At December 31, 2018, the maximum the Company could
borrow based on available collateral was $24,500. At December 31, 2018, the Company had no borrowings under this facility. The
Company’s collateral is subject to a $5,000 reserve until the Fixed Charge Coverage ratio exceeds 1.15 to 1.00. The indebtedness under
the Loan Agreement is collateralized by substantially all of the Company’s assets, except for the assets of certain of the Company’s
subsidiaries.
The Loan Agreement provides that the Company can opt to pay interest on the revolving credit at either a base rate plus a spread, or a
LIBOR rate plus a spread. The base rate spread ranges from 0.25% to 1.00% depending on the Senior Leverage Ratio (as defined in the
Loan Agreement). The LIBOR spread ranges from 2.25% to 3.00% also depending on the Senior Leverage Ratio. Funds borrowed under
the LIBOR option can be borrowed for periods of one, two, or three months and are limited to four LIBOR contracts outstanding at any
time. In addition, CIBC assesses a 0.50% unused line fee that is payable monthly.
The Loan Agreement subjects the Company and its domestic subsidiaries to a quarterly EBITDA covenant (as defined). The quarterly
EBITDA covenant (as defined) is $2,000 for all quarters starting with the quarter ended September 30, 2017 through the end of the
agreement. Additionally, the Company and its domestic subsidiaries are subject to a Fixed Charge Coverage ratio of 1.05 to 1.00
measured on an annual basis beginning December 31, 2017, followed by a Fixed Charge Coverage ratio of 1.15 to 1.00 measured
quarterly starting March 31, 2018 (based on a trailing twelve-month basis) through the term of the agreement. At the end of a quarter,
if there is $15,000 of availability and outstanding borrowings of less than $5,000, covenant testing is waived. The Loan Agreement
contains customary affirmative and negative covenants, including covenants that limit or restrict the Company’s ability to, among other
things, incur additional indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, pay
dividends or make distributions, repurchase stock, in each case subject to customary exceptions for a credit facility of this size. The
Company was in compliance with loan covenants at December 31, 2018.
The Loan Agreement has a Letter of Credit facility of $3,000, which is fully reserved against availability.
Note Payable—Winona Facility Purchase
At December 31, 2018, Badger has balance on note payable to Avis Industrial Corporation of $378. Badger is required to make 60
monthly payments of $10 that began on August 1, 2017. The note dated July 26, 2017, had an original principal amount of $500 and
annual interest rate of 8.00%. The note is guaranteed by the Company.
PM Debt Restructuring
On March 6, 2018, PM Group and Oil & Steel S.p.A. (PM Group’s subsidiary) entered into a Debt Restructuring Agreement (the
“Restructuring Agreement”) with Banca Monte dei Paschi di Siena S.p.A., Banca Nazionale del Lavoro S.p.A., BPER Banca S.p.A.,
Cassa di Risparmio in Bologna S.p.A. and Unicredit S.p.A. (collectively the “Lenders”), and Loan Agency Services S.r.l. (the “Agent”).
The Restructuring Agreement, which replaces the previous debt restructuring agreement with the Lenders entered into in 2014, provides
for, among other things:
The provision of subordinated shareholders’ loans by the Company to PM Group, consisting of (i) conversion of an existing
trade receivable in the amount of €3.1 million into a loan; (ii) an additional subordinated shareholders’ loan in the aggregate
maximum amount of up to €2.4 million, to be made currently; and (iii) a further loan of €1.8 million to be made by
December 31, 2018, in each case to be used to repay a portion of PM Group’s outstanding obligations to the Lenders;
Amendments to the 2014 put and call options agreement with BPER to, among other things, extend the exercise of the
options until the approval of PM Group’s financial statements for the 2021 fiscal year and permit the assignment of certain
subordinated receivables to the Company. The fair market value of this liability is subject to revaluation on a recurring
basis.
New amortization and repayment schedules for amounts owed by PM Group to the Lenders under the various outstanding
tranches of indebtedness, along with revised interest rates and financial covenants. Under the Debt Restructuring Agreement
term debt is repaid over a nine-year period starting in 2018 and ending in 2026 (2022 prior to Debt Restructuring
Agreement); and
The effect of PM not meeting its December 31, 2017 financial covenants was cured by the Debt Restructuring Agreement.
68
PM Group Short-Term Working Capital Borrowings
At December 31, 2018 and 2017, respectively, PM Group had established demand credit and overdraft facilities with five and seven
Italian banks, one Spanish bank and eight and seven banks in South America. Under the facilities, as of December 31, 2018 and 2017
respectively, PM Group can borrow up to approximately €21,990 ($25,192) and €26,260 ($31,570) for advances against invoices, and
letter of credit and bank overdrafts. These facilities are divided into two types: working capital facilities and cash facilities. For the year
ended December, 31, 2018, interest on the Italian working capital facilities is charged at the 3-month Euribor plus 175 or 200 basis
points and 3-month Euribor plus 350 basis points, respectively. Interest on the Spanish bank working capital facility is charged at 3.75%.
Interest on the South American facilities is charged at a flat rate of points for advances on invoices ranging from 9% - 65%. For the year
ended December 31, 2017, Interest on the Italian working capital facilities was charged at the 3-month or 6-month Euribor plus 200
basis points, while interest on overdraft facilities was charged at the 3-month Euribor plus 350 basis points. Interest on the South
American facilities was charged at a flat rate of points for advances on invoices ranging from 10% - 32%.
At December 31, 2018, the Italian banks had advanced PM Group €15,796 ($18,096), at variable interest rates, which currently range
from 1.75% to 2.00%. At December 31, 2018, there were no advances to PM Group from the Spanish bank. At December 31, 2018, the
South American banks had advanced PM Group €715 ($820). Total short-term borrowings for PM Group were €16,511 ($18,916) at
December 31, 2018. At December 31, 2017, the Italian banks had advanced PM Group €17,931 ($21,556), at variable interest rates,
which currently range from 1.42% to 1.67%. At December 31, 2017, the South American banks had advanced PM Group €2,515
($3,024). Total short-term borrowings for PM Group were €20,446 ($24,580) at December 31, 2017.
PM Group Term Loans
At December 31, 2018 and 2017 respectively, PM Group has a €10,451 ($11,973) and €9,609 ($11,552) term loan with two Italian
banks, BPER and Unicredit. The term loan is split into a note and a balloon payment and is secured by PM Group’s common stock as
of December 31, 2018. The term loan was split into three separate notes and is secured by PM Group’s common stock as of December
31, 2017.
At December 31, 2018, the note and balloon payment have an outstanding principal balance of €7,449 ($8,534) and €3,002 ($3,439),
respectively. Both are charged interest at a fixed rate of 3.5%, with an effective rate of 3.5% at December 31, 2018. The note is payable
in annual installments of principal €958 for 2019, €991 for 2020, €1,026 for 2021, €1,062 for 2022, €1,099 for 2023, €1,137 for 2024,
and €1,177 for 2025. The balloon payment is payable in a single payment of €3,002 in 2026. See above for restructuring, however, at
December 31, 2017, the first note had an outstanding principal balance of €3,528 ($4,242), was charged interest at the 6-month Euribor
plus 236 basis points, effective rate of 2.09% at December 31, 2017. The note was payable in semi-annual installments beginning June
2017 and ending December 2021. The second note had an outstanding principal balance of €3,922 ($4,715), was charged interest at the
6-month Euribor plus 286 basis points, effective rate of 2.59% at December 31, 2017. The note was payable in semi-annual installments
beginning June 2017 and ending December 2021. The third note had an outstanding principal balance of €2,500 ($3,005) and was non-
interest bearing. The note was payable in semi-annual installments beginning June 2016 and ending December 2017 and a final balloon
payment in December 2022.
An adjustment in the purchase accounting to value the non-interest- bearing debt at its fair market value was made. At March 6, 2018 it
was determined that the fair value of the debt was €480 or $550 less than the book value. This reduction is not reflected in the above
descriptions of PM debt. This discount is being amortized over the life of the debt and being charged to interest expense. As of December
31, 2018, and 2017 respectively, the remaining balance was €391 ($448) and €625 ($751) and has been offset to the debt.
At December 31, 2018, PM Group has unsecured borrowings with three Italian banks totaling €12,115 ($13,879). Interest on the
unsecured notes is charged at a stated and effective rate of 3.5% at December 31, 2018. Annual payments of €1,731 are payable beginning
in 2019 and ending in 2025. At December 31, 2017 PM Group had unsecured borrowings with four Italian banks totaling €13,015
($15,647). Interest on the unsecured notes was charged at the 3-month Euribor plus 250 basis points, effective rate of 2.17% at December
31, 2017. Principal payments were due on a semi-annual basis beginning June 2019 and ending December 2021. Accrued interest on
these borrowings through the date of acquisition at January 15, 2015, totaled €358 ($430) and was payable in semi-annual installments
beginning June 2019 and ending December 2019.
PM Group is subject to certain financial covenants as defined by the debt restructuring agreement including maintaining (1) Net debt to
EBITDA, (2) Net debt to equity, and (3) EBITDA to net financial charges ratios. The covenants are measured on a semi-annual basis
beginning on December 31, 2018. Covenants were met at December 31, 2018. PM group was not in compliance as of December 31,
2017 however, see above for derails regarding the debt restructuring that occurred as a result of the failure.
69
At December 31, 2018 and 2017, respectively, Autogru PM RO, a subsidiary of PM Group, had three and two notes. The first note is
payable in 60 monthly principal installments of €8 ($9), €8 ($10), plus interest at the 1-month Euribor plus 300 basis points, effective
rate of 3.00% at December 31, 2018 and 2017, maturing October 2020. At December 31, 2018 and 2017 respectively, the outstanding
principal balance of the note was €186 ($213) and €288 ($346).
The second note is payable in monthly installments of €9 ($10) starting from October 2018 and ending in March 2019, and one final
payment of €294 ($337) in March 2019. The note is charged interest at the 1-month Euribor plus 250 basis points, effective rate of
2.50% at December 31, 2018. At December 31, 2018 and 2017, respectively, the outstanding principal balance of the note was €320
($367) and €422 ($507).
The third note is divided in three parts: the first part is payable in 60 monthly installments of €1 ($1) plus interest at the 6-month Euribor
plus 275 basis points, effective rate of 2.75% at December 31, 2018, maturing February 2023; the second part is payable in 60 monthly
installments of €4 ($5) plus interest at the 6-month Euribor plus 275 basis points, effective rate of 2.75% at December 31, 2018, maturing
April 2023; the third part is payable in 60 monthly installments of €1 ($1) plus interest at the 6-month Euribor plus 275 basis points,
effective rate of 2.75% at December 31, 2018, maturing June 2023. At December 31, 2018, the outstanding principal balance of the note
was €304 ($348).
PM has interest rate swaps with a fair market value at December 31, 2018 of €2 ($2) which has been included in debt.
At December 31, 2018 PM Argentina Sistemas de Elevacion, a subsidiary of PM Group has a note payable. The note is payable in
fifteen monthly installments of €13 ($15) starting from March 2018 and ending in May 2019, the note is charged interest at 28.50% at
December 31, 2018. At December 31, 2018, the outstanding principal balance of the note was €68 ($78). At December 31, 2017 PM
Argentina Sistemas de Elevacion, a subsidiary of PM Group had two notes. The first note was payable in one balloon payment in April
2018. At December 31, 2017, the outstanding balance of the note was €154 ($185) plus interest at 29%. The second note was payable
in five quarterly installments of €79 ($95) starting from April 2018 and ending in April 2019, the note was charged interest at 28.50%
at December 31, 2017. At December 31, 2017, the outstanding principal balance of the note was €397 ($478).
Valla Short-Term Working Capital Borrowings
At December 31, 2018 and 2017, respectively, Valla had established demand credit and overdraft facilities with two Italian banks. Under
the facilities, Valla can borrow up to approximately €870 ($997) and €1,343 ($1,615) for advances against orders, invoices and bank
overdrafts. Interest on the Italian working capital facilities is charged at a flat percentage rate for advances on invoices and orders ranging
from 4.50% - 4.75% and 2% - 5 % at December 31, 2018 and 2017, respectively. At December 31, 2018 and 2017, the Italian banks
had advanced Valla €40 ($46) and €824 ($991).
Valla Term Loans
At December 31, 2018 and 2017, Valla had a term loan with Carisbo. The note is payable in quarterly principal installments beginning
on October 30, 2017 of €8 ($10), plus interest at the 3-month Euribor plus 470 basis points, effective rate of 4.39% and 4.37% at
December 31, 2018 and 2017, respectively. The note matures on January 2021. At December 31, 2018 and 2017, respectively, the
outstanding principal balance of the note was €71 ($81) and €102 ($123).
70
Schedule of Debt Maturities
Scheduled annual maturities of the principal portion of debt outstanding at December 31, 2018 in the next five years and the remaining
maturity in aggregate are summarized below. Amounts shown include the debt described above in this footnote and the convertible
notes disclosed in Note 15—Convertible Notes at their face amount of $22,500.
2019
2020
2021
2022
2023
Thereafter
Interest rate swaps
Debt discount related to non-interest-bearing debt
Debt issuance cost
Debt discounts related to convertible notes
Total
$
Note 14. Leases
Capital leases
Georgetown facility
North America
$
95 $
7,535
15,179
69
—
—
22,878
—
—
(196 )
(616 )
22,066 $
Italy
Total
22,725 $
3,340
3,238
3,279
3,269
10,057
45,908
2
(448 )
—
—
45,462 $
22,820
10,875
18,417
3,348
3,269
10,057
68,786
2
(448 )
(196 )
(616 )
67,528
The Company leases its Georgetown facility under capital lease that was amended and extended on September 1, 2015. The amended
lease expires on April 28, 2028. The monthly rent is currently $66 and is increased by 3% annually on September 1 during the term of
the lease.
The present value of the future minimum lease payments (including the annual increase) was determined using a 12.5% discount rate
(the discount rate used to record the original lease which was signed in April 2006). At December 31, 2018, the outstanding capital
lease obligation is $5,025.
Equipment
The Company has entered into a lease agreement with a bank pursuant to which the Company is permitted to borrow 100% of the cost
of new equipment with 44 month repayment periods, respectively. At the conclusion of the lease period, for each piece of equipment
the Company is required to purchase that piece of leased equipment for one dollar.
The equipment, which is acquired in ordinary course of the Company’s business, is available for sale and rental prior to sale.
Under the lease agreement the Company can elect to exercise an early buyout option at any time, and pay the bank the present value of
the remaining rental payments discounted by a specified Index Rate established at the time of leasing. The early buyout option results
in a prepayment penalty which progressively decreases during the term of the lease. Alternatively, the Company under the like-kind
provisions in the agreement can elect to replace or substitute different equipment in place of equipment subject to the early buyout
without incurring a penalty.
The following is a summary of amounts financed under equipment capital lease agreements:
New equipment
Amount
Borrowed
Repayment
Period
Amount of
Monthly Payment
Balance
As of December 31,
2018
$
896
44 $
18 $
453
71
Future Minimum Lease Payments are:
Years
2019
2020
2021
2022
2023
Subsequent
Total Minimum Lease Payments
Less: imputed interest
Present value of minimum lease payment
Less: current portion
Long-term capital lease obligations
Operating Leases Capital Leases
1,043
1,950 $
$
1,066
1,169
896
1,169
904
408
932
408
4,371
1,803
9,212
6,907
(3,729 )
5,483
(422 )
5,061
$
$
$
Capital Items—as of or for the year ended December 31, 2018
Building—Georgetown, TX
Other Capitalized leases
Totals
Capital Items—as of or for the year ended December 31, 2017
Building—Georgetown, TX
Other Capitalized leases
Totals
Cost
Accumulated
Depreciation
Depreciation
Expense
Interest
Expense
4,831 $
896
5,727 $
1,212 $
—
1,212 $
382 $
—
382 $
640
10
650
Cost
Accumulated
Depreciation
Depreciation
Expense
Interest
Expense
4,831 $
896
5,727 $
894 $
—
894 $
382 $
—
382 $
657
10
667
$
$
$
$
Sales and Leaseback—In accordance with ASC 840-40 Sales- Leaseback Transaction, at December 31, 2018 and 2017, the Company
has deferred gain of $842 and $969, respectively, related to the sale and leaseback of Georgetown operating facilities and certain
equipment. The deferred gain is being amortized over the life of the leases which reduces depreciation expense $80 annually through
April 2028 and will also increase revenue by $37 for the next four years.
Operating Leases
Bridgeview Facility
The Company leases its 40,000 sq. ft. Bridgeview facility from an entity controlled by Mr. David Langevin, the Company’s Chairman
and CEO. Pursuant to the terms of the lease, the Company currently makes monthly lease payments of $23. The Company is also
responsible for all the associated operations expenses, including insurance, property taxes, and repairs. On October 3, 2018, the lease
was amended to extend the term of the lease to May 3, 2025 with an optional extension for one five-year period and thereafter for six
one-year periods. The lease contains a rental escalation clause under which annual rent is increased during the initial lease term by the
lesser of the increase in the Consumer Price Increase or 2.0%. Rent for any extension period shall, however, be the then-market rate for
similar industrial buildings within the market area.
The Company has the option to purchase the building by giving the landlord written notice at any time prior to the date that is 180 days
prior to the expiration of the lease or any extension period. The landlord can require the Company to purchase the building if a change
of Control Event, as defined in the lease, occurs by giving written notice to the Company at any time prior to the date that is 180 days
prior to the expiration of the lease or any extension period. The purchase price, regardless whether the purchase is initiated by the
Company or the landlord, will be the Fair Market Value as of the closing date of said sale. Rent expense for the current and former
Bridgeview facility was $268, $263 and $259 for the years ended December 31, 2018, 2017 and 2016, respectively.
72
The Company leases its Knox, Indiana facility under two operating leases. The leases which expire on August 19, 2020, currently
provides for monthly rent of $11 and $3, respectively. The leases contain a rental escalation clause under which annual rent is increased
during the lease term by the lesser of the increase in the Consumer Price Increase or 2.0%. The Company is also responsible for all the
associated operations expenses, including insurance, property taxes, and repairs. The Company has an option to extend the leases for an
additional five year period. The Company has the right to purchase the facility at a negotiated price any time during the lease period. If
the parties are unable to agree on purchase price, the purchase price under the terms of the lease will be the average of two appraisals of
the premises performed by independent third-party appraisers, one selected by the landlord and one selected by the Company. Total rent
expense related to the leases was $163, $163 and $163 for the year ended December 31, 2018, 2017 and 2016, respectively.
The Company leases a number of boom trucks and other equipment under five year operating leases. The Company entered into the
leases to provide financing for equipment some of which was manufactured by our Manitex subsidiary that will be in Equipment
Distribution’s rental fleet. The Company had the option to purchase the equipment at the end of the lease for the higher residual value
or then fair market value of the equipment. In February 2019, the Company came to an agreement with the bank to purchase the
remaining equipment. This was purchased for $1,352 and the Company believes it will be able to sell this equipment at a profit.
At December 31, 2018, PM leases forklifts under four operating leases for monthly payments totaling $13. These leases expire between
February 2020 and February 2023.
Additionally, PM leases automobiles for a number of its employees. The leases expire at various times between 2019 and 2022.
Currently, the aggregate monthly rent is approximately $15. Future monthly rents will change as leases expire and new leases are
executed.
The Company has various building maintenance and production plant leases with various expiration dates through 2023. Total rent
expense under these additional leases was $43, $107 and $154 for the years ended December 31, 2018, 2017 and 2016.
Note 15. Convertible Notes
Related Party
On December 19, 2014, the Company issued a subordinated convertible debenture with a $7,500 face amount payable to Terex, a related
party. The convertible debenture is subordinated, carries a 5% per annum coupon, and is convertible into Company common stock at a
conversion price of $13.65 per share or a total of 549,451 shares, subject to customary adjustment provisions. The debenture has a
December 19, 2020 maturity date.
From and after the third anniversary of the original issuance date, the Company may redeem the convertible debenture in full (but not
in part) at any time that the last reported sale price of the Company’s common stock equals at least 130% of the Conversion Price (as
defined in the debenture) for at least 20 of any 30 consecutive trading days. Following an election by the holder to convert the debenture
into common stock of the Company in accordance with the terms of the debenture, the Company has the discretion to deliver to the
holder either (i) shares of common stock, (ii) a cash payment, or (iii) a combination of cash and stock.
In accounting for the issuance of the note, the Company separated the note into liability and equity components. The carrying amount
of the liability component was calculated by measuring the estimated fair value of a similar liability that does not have an associated
convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the
fair value of the liability component from the face value of the Note as a whole. The excess of the principal amount of the liability
component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the note using the effective
interest method with an effective interest rate of 7.5 percent per annum. The equity component is not remeasured as long as it continues
to meet the conditions for equity classification.
On December 19, 2014, the components of the note was as follows:
Liability component
Equity component (a component of paid in capital)
$
$
6,607
893
7,500
Additionally, in connection with the transaction a $321 deferred tax liability was established and was recorded as a deduction to paid in
capital. The deferred tax liability was recognized as the excess of the principal amount being amortized and charged to interest expenses
is not tax deductible.
73
As of December 31, 2018, the note had a remaining principal balance of $7,158 and an unamortized discount of $342. The difference
between this amount and the amount initially recorded represents $551 of discount amortization.
The Terex agreements included obligations on the part of the Company to timely file with the SEC its reports that are required to be
filed pursuant to the Exchange Act. Effective March 29, 2018, the Company has obtained waivers from the Holders with respect to any
breaches, defaults or events of default that may have been or may be triggered in connection with the Company’s failure to timely file
its reports with the SEC.
Perella Notes
On January 7, 2015, the Company entered into a Note Purchase Agreement (the “Perella Note Purchase Agreement”) with MI Convert
Holdings LLC (which is owned by investment funds constituting part of the Perella Weinberg Partners Asset Based Value Strategy) and
Invemed Associates LLC (together, the “Investors”), pursuant to which the Company agreed to issue $15,000 in aggregate principal
amount of convertible notes due January 7, 2021 (the “Perella Notes”) to the Investors. The Notes are subordinated, carry a 6.50% per
annum coupon, and are convertible, at the holder’s option, into shares of Company common stock, based on an initial conversion price
of $15.00 per share, subject to customary adjustments. Following an election by the holder to convert the debenture into common stock
of the Company in accordance with the terms of the debenture, the Company has the discretion to deliver to the holder either (i) shares
of common stock, (ii) a cash payment, or (iii) a combination of cash and stock. Upon the occurrence of certain fundamental corporate
changes, the Perella Notes are redeemable at the option of the holders of the Perella Notes. The Perella Notes are not redeemable at the
Company’s option prior to the maturity date, and the payment of principal is subject to acceleration upon an event of default. The
issuance of the Perella Notes by the Company was made in reliance upon the exemptions from registration provided by Rule 506 and
Section 4(2) of the Securities Act of 1933.
In connection with the issuance of the Perella Notes, on January 7, 2015, the Company entered into a Registration Rights Agreement
with the Investors (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company has agreed to
register the resale of the shares of common stock issuable upon conversion of the Perella Notes. The Company filed a Registration
Statement on Form S-3 to register the shares with the Securities and Exchange Commission, which was declared effective on
February 23, 2015.
In accounting for the issuance of the note, the Company separated the note into liability and equity components. The carrying amount
of the liability component was calculated by measuring the estimated fair value of a similar liability that does not have an associated
convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the
fair value of the liability component from the face value of the Note as a whole. The excess of the principal amount of the liability
component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the note using the effective
interest method with an effective interest rate of 7.5 percent per annum. The equity component is not remeasured as long as it continues
to meet the conditions for equity classification.
On January 7, 2015, the components of the note were as follows:
Liability component
Equity component (a component of paid in capital)
$
$
14,286
714
15,000
Additionally, in connection with the transaction a $257 deferred tax liability was established and was recorded as a deduction to paid in
capital. The deferred tax liability was recognized as the excess of the principal amount being amortized and charged to interest expense
and is not tax deductible.
As of December 31, 2018, the note had a remaining principal balance of $14,726 (less $196 debt issuance cost for a net debt $14,530)
and an unamortized discount of $274. The difference between this amount and the amount initially recorded represents $440 of discount
amortization.
The Perella agreements included obligations on the part of the Company to timely file with the SEC its reports that are required to be
filed pursuant to the Exchange Act. Effective March 28, 2018, the Company has obtained waivers from the Holders with respect to any
breaches, defaults or events of default that may have been or may be triggered in connection with the Company’s failure to timely file
its reports with the SEC.
74
Note 16. Income Taxes
On December 22, 2017, the legislation commonly known as the Tax Cuts and Jobs Act (the “Jobs Act”) was enacted into law. The Jobs
Act makes comprehensive changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from
35% to 21%, changes to the rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after
December 31, 2017, immediate expensing of certain qualified property, creation of a new limitation on deductible interest expense,
repeal of the U.S. corporate minimum tax (“AMT”), and changes in the manner in which international operations are taxed in the U.S.
Although the majority of the changes resulting from the Jobs Act are effective beginning in 2018, U.S. GAAP requires that certain
impacts of the Jobs Act be recognized in the income tax provision in the period of enactment.
In response to the enactment of the Jobs Act, the SEC issued Staff Accounting Bulletin (“SAB”) 118, which provides guidance on
accounting for the tax effects of the Jobs Act. SAB 118 provides a measurement period that should not extend beyond one year from
the Jobs Act enactment date for companies to complete the accounting under ASC 740. To the extent that a company’s accounting for
certain income tax effects of the Jobs Act is incomplete but is able to determine a reasonable estimate, it must record a provisional
estimate in the financial statements.
In accordance with SAB 118, the Company recorded a provisional increase to its net deferred tax asset of $0.4 million, which is primarily
attributable to deferred tax liabilities related to indefinite lived intangible assets that became available as a source of taxable income to
offset existing deferred tax assets and for the recognition of refundable alternative minimum tax credits as provided for in the Jobs Act.
The Jobs Act includes a mandatory one-time transition tax on accumulated earnings of foreign subsidiaries. As a result, all previously
unremitted earnings for which no U.S. deferred tax liability had been accrued are now subject to U.S. tax. The Company recorded a
provisional amount for the one-time transition tax liability for all of its foreign subsidiaries resulting in an income tax expense of
approximately $0.5 million, which was offset by a reduction in the valuation allowance. During the year ended December 31, 2018, we
increased our one-time transition tax on accumulated earnings of foreign subsidiaries by $0.3 million, which was offset by a reduction
in the valuation allowance. Due to our net loss position, we were not subject to U.S. federal and state taxes in connection with the
deemed repatriation of foreign earnings.
The Company completed its analysis of the Jobs Act during 2018. There was no impact to income tax expense as a result of the changes
to provisional amounts recorded in the consolidated financial statements for the year-ended December 31, 2017.
Approximately $3.8 million of the Company’s undistributed foreign earnings have been subject to US federal taxation as required by
the Jobs Act. The Company’s assertion to indefinitely reinvest its foreign earnings remains unchanged despite the taxation of its
undistributed foreign earnings. Upon remittance of these earnings, the Company would be subject to withholding tax and some state
tax. It is not practicable to estimate the tax impact of the reversal of the outside basis difference, or the repatriation of cash due to the
complexity associated with the calculation.
The Jobs Act also establishes Global Intangible Low-Taxed Income (“GILTI”) provisions that impose a tax on foreign income in excess
of a deemed return on tangible assets of foreign corporations. The Company has elected to recognize GILTI as a period cost as incurred,
therefore there are no deferred taxes recognized for basis differences that are expected to impact the amount of the GILTI inclusion
upon reversal.
Information pertaining to the Company’s income before income taxes from continuing operations is as follows:
Loss before income taxes:
Domestic
Foreign
Total net loss before income taxes
Years ended December 31,
2017
2016
2018
$
$
(5,313 ) $
(7,354 )
(12,667 ) $
(6,289 ) $
(896 )
(7,185 ) $
(24,795 )
1,040
(23,755 )
75
Information pertaining to the Company’s provision (benefit) for income taxes for continuing operations is as follows:
Provision (benefit) for income taxes:
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
Total provision (benefit) for income taxes
Years ended December 31,
2017
2018
2016
$
$
(106 ) $
74
1,753
1,721
49
573
(1,832 )
(1,210 )
511 $
262 $
79
448
789
(389 )
(954 )
436
(907 )
(118 ) $
(2,033 )
(27 )
(310 )
(2,370 )
(136 )
1,163
777
1,804
(566 )
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are
as follows:
Deferred tax assets:
Accrued expenses
Inventory
Other liabilities
Deferred gain
Net operating loss carryforwards
Tax credit carryforwards
Capital loss carryforwards
Unrealized foreign currency loss
Interest expense
Restructuring cost
Property, plant and equipment
Total deferred tax asset
Deferred tax liabilities:
Intangibles
Discount on convertible notes
Deferred State Income Tax
Debt
Investments
Total deferred tax liability
Valuation allowance
Net deferred tax asset (liability)
Year ended December 31,
2017
2018
$
$
965 $
2,410
696
208
6,209
1,785
442
229
2,845
266
1,777
17,832
5,047
139
407
2,260
62
7,915
(7,643 )
2,274 $
1,092
2,046
432
245
7,463
1,271
188
137
2,026
559
1,240
16,699
10,077
200
386
—
176
10,839
(7,405 )
(1,545 )
In assessing the realizability of deferred tax assets, we evaluate whether it is more likely than not (more than 50%) that some portion or
all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. We assess
all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized.
This evidence includes, but is not limited to, prior earnings history, scheduled reversal of taxable temporary differences, tax planning
strategies and projected future taxable income. Significant weight is given to positive and negative evidence that is objectively verifiable.
76
As required by the authoritative guidance on accounting for income taxes, the Company evaluates the realizability of deferred tax assets
on a jurisdictional basis at each reporting date. Accounting for income taxes requires that a valuation allowance be established when it
is more likely than not that all or a portion of the deferred tax assets will not be realized. In circumstances where there is sufficient
negative evidence indicating that the deferred tax assets are not more likely than not realizable, we establish a valuation allowance. With
the exception of certain more likely than not realizable state and federal credits, the Company maintains a valuation allowance against
its U.S. net deferred tax assets and net deferred tax assets in certain foreign jurisdictions.
As of December 31, 2018, the Company had U.S. federal and foreign net operating loss carryforwards of approximately $14.0 million
and $5.3 million, respectively. The U.S. net operating loss carryforwards expire in 2036 and 2037. The majority of the foreign loss
carryforwards are available for carryforward indefinitely. The Company also had state net operating losses of approximately $0.6 million
that are set to expire at varying periods between 2026 and 2037 if not utilized. As of December 31, 2018, the Company has a Texas
Margin Tax Credit of $1.1 million and U.S. federal R&D credits of $0.1 million that may be utilized through 2026 and 2037, respectively.
During fiscal 2018, the valuation allowance increased by $238. Any further increase or decrease in the valuation allowance could have
favorable or unfavorable impact on the income tax provision in the period in which determination is made.
The effective tax rate before income taxes varies from the current U.S. federal statutory income tax rate as follows:
Statutory rate
State and local taxes
Permanent differences
Tax credits
Foreign operations
Uncertain tax positions
Remeasurement of deferred taxes
Valuation allowance
Other
Years ended December 31,
2017
2018
21.00 %
0.45 %
-11.93 %
0.49 %
-0.55 %
-2.81 %
0.00 %
-9.69 %
-1.00 %
-4.04 %
35.00 %
1.07 %
-5.55 %
0.09 %
-13.05 %
-0.66 %
-49.35 %
30.97 %
3.12 %
1.64 %
A reconciliation of the beginning and ending amount of unrecognized tax benefits, including interest and penalties, is as follows:
Balance at January 1,
Increases in tax positions for prior years
Increases in tax positions for current years
Other
Settlements
Balance at December 31,
2018
2017
1,016 $
2,352
860
(70 )
(43 )
4,115 $
741
673
(8 )
66
(456 )
1,016
$
$
Of the amounts reflected in the above table at December 31, 2018, approximately $0.8 million would reduce the Company’s annual
effective tax rate if recognized. The Company records accrued interest and penalties related to income tax matters in the provision for
income taxes in the accompanying consolidated statement of income. For the years ended December 31, 2018, 2017 and 2016, interest
and penalties recognized on unrecognized tax benefits were $266, $69 and $40, respectively. The accrued balance as of December 31,
2018 and 2017 was $648 and $382, respectively. Included in the unrecognized tax benefits is a liability for the Romania income tax
audit for tax years 2012-2016. Depending upon the final resolution of the audit, the uncertain tax position liabilities could be higher or
lower than the amount recorded at December 31, 2018. It is not reasonably possible to estimate the change in unrecognized tax benefits
within 12 months of the reporting date.
The Company files income tax returns in the United States, Italy, Romania and Argentina as well as various state and local tax
jurisdictions with varying statutes of limitations. With a few exceptions, the Company is no longer subject to examination by the tax
authorities for U.S. federal or state for the years before 2015, or foreign examinations for years before 2012.
77
Note 17. Supplemental Cash Flow Disclosures
Interest received and paid, income taxes paid and non-cash transactions incurred during the years ended December 31, 2018, 2017 and
2016 were as follows:
Interest received in cash
Interest paid in cash
Income tax payments (refunds) in cash
Non-Cash Transactions:
$
2018
2017
2016
167 $
5,841
1
— $
7,234
1,729
—
10,576
(1,322 )
Proportional share of increase in equity investments' paid
in capital
Share based compensation paid in connection with
Tadano transaction
Equipment held for sale financed on a capital lease
Terex note payment paid in stock (see Note 21)
14
11
200
—
—
—
896
—
—
—
—
150
Note 18. Employee Benefits
U.S. Plan
The Company sponsors a 401(k) plan. The plan is intended to cover all non-union United States based employees. The plan is open to
employees 21 years of age and older. There is no minimum employment duration required before eligibility. The plan allows for monthly
enrollment and contribution changes.
The Company currently matches dollar for dollar participants’ contributions up to 3% of the participants’ gross income and a 50% match
on the next 2% of gross income. There is no dollar limit regarding matched funds and the plan also calls for immediate vesting of the
employer contribution component. The employer match is paid when payroll is processed.
The amount paid in matching contributions by the company for 2018, 2017 and 2016 were $386, $235 and $375, respectively.
Non-U.S. Plan
Employees in Italy are entitled to Trattamento di Fine Rapporto (“TFR”), commonly referred to as an employee leaving indemnity,
which represents deferred compensation for employees in the private sector. Under Italian law, an entity is obligated to accrue for TFR
on an individual employee basis payable to each individual upon termination of employment (including both voluntary and involuntary
dismissal). The annual accrual is approximately 7% of total pay, with no ceiling, and is revalued each year by applying a pre-established
rate of return of 1.50%, plus 75% of the Consumer Price Index, and is recorded by a book reserve. TFR is an unfunded plan.
The accrued employee severance indemnity must be transferred to the Fund for the payment of severance pay to employees in the private
sector, managed by the INPS (the National Social Contributions Authority), on behalf of the State, on a special account opened at the
State Treasury. In this case the workers continue to have as their sole interlocutor the employer, who will provide monthly payment of
the amount due (together with the social contributions due to INPS). In this situation, the Company will pay the severance to the
employees leaving and then those amounts will be compensated by the payments to be made in favor of INPS.
The amount paid by the company for 2018, 2017 and 2016 was $213, $149, and $75. The amount allocated to the Employee severance
indemnity provision in 2018, 2017 and 2016 were $579, $728 and $668.
Note 19. Accrued Warranties
A liability for estimated warranty claims is accrued at the time of sale. The liability is established using historical warra nty claim
experience. Historical warranty experience is, however, reviewed by management.
The current provision may be adjusted to take into account unusual or non-recurring events in the past or anticipated changes in future
warranty claims. Adjustments to the initial warranty accrual are recorded if actual claim experience indicates that adjustments are
necessary. Warranty reserves are reviewed to ensure critical assumptions are updated for known events that may impact the potential
warranty liability.
78
The following table summarizes the changes in product warranty liability:
Balance January 1,
Accrual for warranties issued during the year
Warranty services provided
Changes in estimates
Foreign currency translation
Balance December 31,
Note 20. Long Lived Assets
United States
Italy
Total Long-Lived Assets
Long-Lived Assets are based on where the operating unit is domiciled.
Note 21. Equity
Tadano, Ltd. Investment in the Company
2018
2017
$
$
2,030 $
3,549
(3,317 )
(267 )
9
2,004 $
1,568
2,192
(1,839 )
64
45
2,030
2018
18,365 $
66,891
85,256 $
2017
35,841
79,025
114,866
$
$
On May 24, 2018, the Company entered into a (a) Securities Purchase Agreement (the “Purchase Agreement”) and (b) Registration
Rights Agreement (the “Registration Rights Agreement”) with Tadano Ltd., a Japanese company (“Tadano”).
Pursuant to the Purchase Agreement, the Company agreed to issue and sell to Tadano, and Tadano agreed to purchase from the Company,
2,918,542 shares of the Company’s common stock, no par value (the “Shares”), representing approximately 14.9% of the outstanding
shares of common stock of the Company (based on the number of outstanding shares as of the date of the Purchase Agreement), at a
purchase price of $11.19 per share and for an aggregate purchase price of $32,658. The transaction closed on May 29, 2018 (the “Closing
Date”). The Shares were issued in a private placement exempt from the registration requirements of the Securities Act of 1933, as
amended (the “Securities Act”).
The Purchase Agreement also provides for certain rights of Tadano and certain limitations on the Company, subject in each case to
Tadano continuing to meet certain minimum ownership requirements. Specifically, so long as Tadano owns at least a majority of the
Shares, Tadano has certain preemptive rights to purchase its pro rata share of specified equity securities (including certain derivative
and convertible securities) issued by the Company after the Closing Date. Additionally, so long as Tadano owns at least 10% of the
Company’s issued and outstanding shares of common stock, the Company is prohibited, absent Tadano’s consent, from, among other
items: (i) increasing the number of directors on the Company’s board of directors to a number greater than ten; (ii) entering into certain
related person or affiliated transactions, subject to certain exceptions; and (iii) authorizing or approving any plan of dissolution of the
Company, any liquidating distribution of the Company’s assets or other action relating to the dissolution or liquidation of the Company.
The Purchase Agreement also contains certain restrictions on asset sales by the Company. In addition, so long as it owns at least 10%
of the Company’s issued and outstanding shares of common stock, Tadano shall have the right to nominate one individual to serve on
the Company’s board of directors
See the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 31, 2018 for additional
information regarding this transaction.
In connection with this transaction, the Company incurred legal, investment banking and consulting fees that in aggregate totaled $916.
These fees are recorded net of common stock.
Issuance of Common Stock
On July 25, 2017, the Company issued 21,783 shares of common stock with a value of $154 to Avis Industrial Corporation. The shares
were issued as part of the consideration paid to purchase the Winona manufacturing facility.
79
On October 14, 2016 the Company issued 41,948 shares of common stock with a value of $227 to Avis Industrial Corporation as
payment for rent of the Company’s Winona, Minnesota facility. The shares were valued based on closing price on October 14, 2016 of
$5.41.
At the Market Program
On January 23, 2017, Manitex International Inc. entered into a Controlled Equity Offering Sales Agreement (“Sales Agreement”) with
Cantor Fitzgerald & Co. (“Cantor”) pursuant to which the Company may offer and sell shares of its common stock, no par value per
share, having an aggregate offering price up to $20 million through Cantor. The Company thought it prudent to put a mechanism in
place by which supplemental liquidity can be provided to address working capital requirements or other capital requirements that may
arise in conjunction with production requirements. Under the program, the Company’s stock is issued at the current market price and
the Company pays a 7% commission to Cantor.
The following table contains information regarding stock issued under the program:
Date of Issue
January 25, 2017
January 27, 2017
January 30, 2017
January 31, 2017
Shares
Issued
Shares
Price
Value of
Shares
Issued
Commissions
247,604 $ 8.8750 $
27,120 $ 8.8376 $
1,100 $ 8.6464 $
18,700 $ 8.6451 $
$
294,524
2,197 $
240 $
10 $
162 $
2,609 $
Net
Proceeds
2,043
223
9
151
2,426
154 $
17 $
1 $
11 $
183 $
Shares issued to Terex Corporation
On March 1, 2016, the Company issued 30,425 shares of common stock to Terex Corporation as the Company elected to pay $150 of
the final principal payment due March 1, 2016 in shares of the Company’s common stock. The share price for the transaction was $4.93
which was determined based upon the average closing price for the twenty trading days ending the day before the payment was due.
80
Stock issued to employees and Directors
The Company issued shares of common stock to employees and Directors at various times in 2018, 2017 and 2016 as restricted stock
units issued under the Company’s 2004 Incentive Plan vested. Upon issuance entries were recorded to increase common stock and
decrease paid in capital for the amounts shown below. The following is a summary of stock issuances that occurred during the three-
year period:
Shares Issued
Shares Issued
Employees or
Director
Directors
Employees
Directors
Employees
Directors
Directors
Employees
Employees
Directors
Directors
Directors
Employees
Employees or
Director
Directors
Employees
Directors
Employees
Employees
Directors
Directors
Directors
Employees
Employees or
Director
Directors
Employees
Employees
Directors
Employees
Directors
Employees
Value of
Shares Issued
56
160
47
159
59
135
12
39
35
61
43
104
910
4,420 $
12,536
7,675
26,215
6,600
11,600
1,073
6,750
6,600
6,800
7,675
18,559
116,503 $
Value of
Shares Issued
54
266
47
258
32
35
59
43
131
925
4,290 $
20,932
7,675
42,533
4,493
6,600
6,600
7,675
23,353
124,151 $
Value of
Shares Issued
55
329
7
36
68
128
218
841
4,290 $
25,920
642
6,800
7,511
9,915
13,798
68,876 $
Shares Issued
Date of Issue
January 1, 2018
January 1, 2018
January 4, 2018
January 4, 2018
January 15, 2018
May 31, 2018
May 31, 2018
August 8, 2018
September 15, 2018
October 15, 2018
December 14, 2018
December 14, 2018
Date of Issue
January 1, 2017
January 1, 2017
January 4, 2017
January 4, 2017
June 1, 2017
September 15, 2017
October 16, 2017
December 14, 2017
December 14, 2017
Date of Issue
January 1, 2016
January 1, 2016
June 5, 2016
September 15, 2016
September 30, 2016
December 31, 2016
December 31, 2016
81
Stock Repurchase
The Company purchased shares of Common Stock at various times from certain employees at the closing price on date of purchase. The
stock was purchased from the employees to satisfy employees’ withholding tax obligations related to stock issuances described above.
The following is a summary of common stock purchased during 2018, 2017 and 2016:
Date of Purchase
January 1, 2018
January 4, 2018
August 8, 2018
December 14, 2018
January 1, 2017
January 4,2017
December 14, 2017
January 1, 2016
June 5, 2016
September 30, 2016
December 31, 2016
Shares
Purchased
Closing Price
on Date of
Purchase
3,183 $
5,709 $
1,978 $
2,651 $
13,521
6,312 $
11,750 $
4,758 $
22,820
7,074 $
197 $
2,254 $
3,530 $
13,055
9.60
9.39
11.54
6.60
6.86
7.27
8.35
5.95
6.75
5.51
6.86
2004 Equity Incentive Plan
In 2004, the Company adopted the 2004 Equity Incentive Plan and subsequently amended and restated the plan on September 13, 2007,
May 28, 2009, June 5, 2013 and June 2, 2016. The maximum number of shares of common stock reserved for issuance under the plan
is 1,329,364 shares. The total number of shares reserved for issuance however, can be adjusted to reflect certain corporate transactions
or changes in the Company’s capital structure. The Company’s employees and members of the board of directors who are not our
employees or employees of our affiliates are eligible to participate in the plan. The plan is administered by a committee of the board
comprised of members who are outside directors. The plan provides that the committee has the authority to, among other things, select
plan participants, determine the type and amount of awards, determine award terms, fix all other conditions of any awards, and interpret
the plan and any plan awards. Under the plan, the committee can grant stock options, stock appreciation rights, restricted stock, restricted
stock units, performance shares and performance units, except Directors may not be granted stock appreciation rights, performance
shares and performance units. During any calendar year, participants are limited in the number of grants they may receive under the
plan. In any year, an individual may not receive options for more than 15,000 shares, stock appreciation rights with respect to more than
20,000 shares, more than 20,000 shares of restricted stock and/or an award for more than 10,000 performance shares or restricted stock
units or performance units. The plan requires that the exercise price for stock options and stock appreciation rights be not less than fair
market value of the Company’s common stock on date of grant.
The Company awarded under the Amended and Restated 2004 Equity Incentive Plan a total of 28,768; 24,493; and 329,325 restricted
stock units to employees and directors during 2018, 2017 and 2016, respectively. The restricted stock units are subject to the same
conditions as the restricted stock awards except the restricted stock units will not have voting rights and the common stock will not be
issued until the vesting criteria are satisfied.
82
Compensation expense in 2018, 2017 and 2016 includes $639, $798 and $1,129 related to restricted stock units, respectively.
Compensation expense related to restricted stock units will be $219, $43 and $4 for 2019, 2020 and 2021, respectively.
The following is a summary of restricted stock units that were awarded during 2018, 2017 and 2016:
2018 Grants
May 15, 2018
May 31, 2018
May 31, 2018
May 31, 2018
August 20, 2018
2017 Grants
June 1, 2017
October 9, 2017
2016 Grants
January 4, 2016
September 15, 2016
December 14, 2016
Vesting Date
May 15, 2019 560 units; May 15,
2020 560 units and May 15, 2021
575 units
May 31, 2018 6,600 units; May 31,
2019 6,600 units and May 31, 2020
6,800 units
May 31, 2018 5,000 units
May 31, 2018 1,073 units
August 20, 2019 333 units; August
20, 2020 333 units and August 20,
2021 334 units
Vesting Date
June 1, 2017 4,493 units
October 16, 2017 6,600 units;
January 15, 2018 6,600 units and
October 15, 2018 6,800 units
Vesting Date
January 4, 2017 60,671 units;
January 4, 2018 60,671 units and
62,508 units January 4, 2019
September 15, 2016 6,800 units;
September 15, 2017 6,600 units and
September 15, 2018 6,600 units
December 14, 2017 41,407 units;
December14, 2018 41,407 units
and December 14, 2019 42,661
units
Number of
Restricted
Stock Units
1,695 $
Closing Price on
Date of Grant
11.30
Value of
Restricted Stock
Units Issued
$
19
20,000 $
11.64
5,000 $
1,073 $
$
11.64 $
11.64 $
1,000 $
28,768
11.46 $
$
233
58
12
11
333
Number of
Restricted
Stock Units
Closing Price on
Date of Grant
Value of
Restricted Stock
Units Issued
4,493 $
7.01 $
31
20,000 $
24,493
9.00 $
$
180
211
Number of
Restricted
Stock Units
Closing Price on
Date of Grant
Value of
Restricted Stock
Units Issued
183,850 $
6.07 $
1,116
20,000 $
5.32 $
106
125,475 $
329,325
5.60 $
$
703
1,925
The following table contains information regarding restricted stock units for the years ended December 31, 2018, 2017 and 2016,
respectively:
Outstanding on January 1,
Units granted during period
Vested and issued
Vested—issued and repurchased for income tax withholding
Forfeited
Outstanding on December 31
2018
168,763
28,768
(102,982 )
(13,521 )
(8,154 )
72,874
Restricted Stock Units
2017
342,004
24,493
(101,331 )
(22,820 )
(73,583 )
168,763
2016
118,773
329,325
(55,821 )
(13,055 )
(37,218 )
342,004
83
Note 22. Recent Accounting Guidance
Recently Issued Pronouncements – Not Adopted
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” (“ASU 2016-02”), which requires lessees to recognize assets
and liabilities for leases with lease terms of more than 12 months and disclose key information about leasing arrangements. Consistent
with current U.S. GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee
primarily will depend on its classification as a finance or operating lease. Subsequently, the FASB issued the following standards related
to ASU 2016-02: ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,”, ASU 2018-10, “Codification
Improvements to Topic 842, Leases”, ASU 2018-11, “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”) and ASU 2018-
20, “Narrow-Scope Improvements for Lessors”, which provided additional guidance and clarity to ASU 2016-02 (collectively, the “New
Lease Standard”). The Company has adopted the New Lease Standard in the first quarter of fiscal year 2019 under the alternative
transition method permitted by ASU 2018-11. This transition method allows an entity to initially apply the requirements of the New
Lease Standard at the adoption date, versus at the beginning of the earliest period presented, and recognize a cumulative-effect
adjustment to the opening balance of retained earnings in the period of adoption. The New Lease Standard provides a number of optional
practical expedients in transition. The Company expects to elect the transition package of practical expedients, the practical expedient
to not separate lease and non-lease components for all of its leases, and the short-term lease recognition exemption for all of its leases
that qualify for it. The Company has estimated additions of $3,245 for right of use assets and $3,263 for liabilities to be reflected in the
Quarterly Report on the Form 10-Q for the quarter ended March 31, 2019.
In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive Income,” (“ASU 2018-2”). ASU 2018-02 allows a reclassification from
accumulated other comprehensive income to retained earnings for stranded tax effects resulting from H.R. 1 “An Act to provide for
reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (commonly known as “Tax
Cuts and Jobs Act”). The effective date will be the first quarter of fiscal year 2019. The Company is evaluating the impact that adoption
of this new standard will have on its consolidated financial statements.
Recently Adopted Accounting Guidance
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 outlines a
new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes
most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-
step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for
those goods or services. In August 2015, the FASB issued ASU 2015-14, “Deferral of the Effective Date”, which amends ASU 2014-
09. As a result, the effective date is the first quarter of 2018, with early adoption permitted. The Company adopted this guidance during
the quarter ended March 31, 2018 on a modified retrospective basis. The adoption of this guidance did not have a significant impact on
the operating results when adopted.
In January 2016, the FASB issued ASU 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of
Financial Assets and Financial Liabilities." The amendments in ASU 2016-01, among other things, require equity investments (except
those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair
value with changes in fair value recognized in net income; requires public business entities to use the exit price notion when measuring
fair value of financial instruments for disclosure purposes; requires separate presentation of financial assets and financial liabilities by
measurement category and form of financial asset (i.e., securities or loans and receivables); and eliminates the requirement for public
business entities to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for
financial instruments measured at amortized cost. The effective date is the first quarter of fiscal year 2018. The Company adopted this
guidance during the quarter ended March 31, 2018. The adoption of this guidance did not have a significant impact on the operating
results when adopted.
In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606) Principal versus Agent
Considerations (Reporting Revenue Gross versus Net),” (“ASU 2016-08”). ASU 2016-08 further clarifies principal and agent
relationships within ASU 2014-09. Similar to ASU 2014-09, the effective date is the first quarter of fiscal year 2018 with early adoption
permitted in the first quarter of fiscal year 2017. The Company adopted this guidance during the quarter ended March 31, 2018 on a
modified retrospective basis. The adoption of this guidance did not have a significant impact on the operating results when adopted.
84
In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606), Identifying Performance
Obligations and Licensing” (“ASU 2016-10”). The amendments in ASU 2016-10 are expected to reduce the cost and complexity of
applying the guidance on identifying promised goods or services in contracts with customers and to improve the operability and
understandability of licensing implementation guidance related to the entity's intellectual property. Similar to ASU 2014-09, the
effective date is the first quarter of fiscal year 2018 with early adoption permitted in the first quarter of fiscal year 2017. The Company
adopted this guidance during the quarter ended March 31, 2018 on a modified retrospective basis. The adoption of this guidance did not
have a significant impact on the operating results when adopted.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and
Cash Payments,” (“ASU 2016-15”). ASU 2016-15 reduces the existing diversity in practice in financial reporting by clarifying existing
principles in ASC 230, “Statement of Cash Flows,” and provides specific guidance on certain cash flow classification issues. The
effective date for ASU 2016-15 is the first quarter of fiscal year 2018 with early adoption permitted. The Company made an election to
use the “Cumulative Earning Approach” to classify distributions received from equity investments. Other than the aforementioned
election (which may have a future impact), the adoption of this guidance during the quarter ended March 31, 2018, did not have an
impact on the Company’s Statement of Cash Flows.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740) - Intra-Entity Transfer of Assets Other than Inventory,”
(“ASU 2016-16”). ASU 2016-16 requires recognition of current and deferred income taxes resulting from an intra-entity transfer of
any asset (excluding inventory) when the transfer occurs. This is a change from existing GAAP which prohibits recognition of current
and deferred income taxes until the asset is sold to a third party. The effective date for ASU 2016-16 is the first quarter of fiscal year
2018 with early adoption permitted. The Company adopted this guidance during the quarter ended March 31, 2018. The adoption of
this guidance did not have a significant impact on the operating results when adopted.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) - Restricted Cash,” (“ASU 2016-18”). ASU
2016-18 requires a statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts
generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash
equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts
shown on the statement of cash flows. The Company adopted ASU 2016-18 on January 1, 2018. Adoption did not have a material effect
on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” (“ASU
2017-01”). ASU 2017-01 provides guidance in ascertaining whether a collection of assets and activities is considered a business. The
effective date is the first quarter of fiscal year 2018, with prospective application. The Company adopted this guidance during the quarter
ended March 31, 2018. The adoption of this guidance did not have an impact on the operating results when adopted.
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment,” (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform
its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should
recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The loss
recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider
income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill
impairment. The effective date is the first quarter of fiscal year 2020, with early adoption permitted in 2017. The Company adopted this
guidance during the year ended December 31, 2018.
Except as noted above, the guidance issued by the FASB during the current year is not expected to have a material effect on the
Company’s consolidated financial statements.
Note 23. Transactions between the Company and Related Parties
In the course of conducting its business, the Company has entered into certain related party transactions.
C&M is a distributor of Terex rough terrain and truck cranes. As such, C&M purchases cranes and parts from Terex. Additionally, The
Company has a convertible note with a face amount of $7,500 payable to Terex. See Note 15 for additional details.
During the quarter ended March 31, 2017, the Company was the majority owner of ASV and, therefore, ASV was not a related party
during that period. In May 2017, the Company reduced is its ownership interest in ASV to 21.2% and in February 2018 further reduced
its ownership to approximately 11%. As such, ASV became a related party beginning in the quarter ended June 30, 2017. The Company
did not have any transactions with ASV during 2018.
85
As of December 31, 2018, and 2017, the Company had accounts receivable and accounts payable with related parties as shown below:
December 31, 2018
$
December 31, 2017
Accounts Receivable
SL Industries
ASV
Terex
Accounts Payable
Terex
SL Industries and BGI (1)
Net Related Party
Accounts Payable
$
$
$
$
— $
—
23
23 $
1,394 $
—
1,394 $
1,371 $
28
26
—
54
100
1,285
1,385
1,331
The following is a summary of the amounts attributable to certain related party transactions as described in the footnotes to the table,
for the periods indicated:
Bridgeview Facility (2)
Sales to:
SL Industries, Ltd (1)
Terex
Lift Ventures
Total Sales
Inventory Purchases from:
SL Industries, Ltd (1)
Lift Ventures
BGI (1)
Terex
Total Inventory Purchases
2018
2017
2016
$
268 $
263 $
259
n/a
43
—
43
8
34
—
42
n/a
—
n/a
2,306
2,306 $
564
618
2,886
990
5,058 $
$
1
—
14
15
15
1,985
—
1,723
3,723
(1)
(2)
These companies are controlled by a former executive officer of the Company. The former officer retired effective December 31, 2016 but
provided consulting services to the Company through April 30, 2017. Although the Company continues to purchase from SL Industries and
BGI, these entities are not related parties after December 31, 2017. Therefore, accounts payable to these companies are included in trade payables
in 2018.
The Company leases its 40,000 sq. ft. Bridgeview facility from an entity controlled by Mr. David Langevin, the Company’s Chairman and CEO.
Pursuant to the terms of the lease, the Company makes monthly lease payments of $23. The Company is also responsible for all the associated
operations expenses, including insurance, property taxes, and repairs. On October 3, 2018, the lease was amended to extend the initial lease term
to fifteen years expiring in May 3, 2025 with a provision for an option one five-year period and thereafter, six one-year extension periods. The
lease contains a rental escalation clause under which annual rent is increased during the initial lease term by the lesser of the increase in the
Consumer Price Increase or 2.0%. Rent for any extension period shall, however, be the then-market rate for similar industrial buildings within
the market area. The Company has the option to purchase the building by giving the Landlord written notice at any time prior to the date that is
180 days prior to the expiration of the lease or any extension period. The Landlord can require the Company to purchase the building if a Change
of Control Event, as defined in the agreement occurs by giving written notice to the Company at any time prior to the date that is 180 days prior
to expiration of the lease or any extension period. The purchase price regardless whether the purchase is initiated by the Company or the landlord
will be the Fair Market Value as of the closing date of said sale.
Transactions with Terex
On December 19, 2014, Terex became a related party. At December 31, 2018 and 2017, the Company has the following note payable
to Terex:
Convertible note
See Note 15 for additional details regarding the above debt obligations.
Years Ended December 31,
2018
2017
$
7,158 $
7,005
86
On March 4, 2016, CVS and Terex Operations Italy S.R.L. (“TOI”) entered into an agreement whereby TOI acquired certain inventories
and intellectual property related to CVS’ terminal tractor line. The transaction totaled €2,839 ($3,119) inclusive of VAT taxes and
resulted in a gain of €1,987 ($2,212), which is included in loss on sale of discontinued operations. The transaction also contained a
contract manufacturing requirement for CVS to continue production of the terminal tractor line for TOI for a period of nine months.
After this period of time CVS will have the access to terminal tractor equipment directly from TOI under a private label agreement.
Note 24. Legal Proceedings and Other Contingencies
The Company is involved in various legal proceedings, including product liability, employment related issues, and workers’
compensation matters which have arisen in the normal course of operations. The Company has product liability insurance with self-
insurance retention that range from $50 to $500.
Certain cases are at a preliminary stage, and it is not possible to estimate the amount or timing of any cost to the Company. However,
the Company does not believe that these contingencies, in the aggregate, will have a material adverse effect on the Company.
The Company has been named as a defendant in several multi-defendant asbestos related product liability lawsuits. In certain instances,
the Company is indemnified by a former owner of the product line in question. In the remaining cases the plaintiff has, to date, not been
able to establish any exposure by the plaintiff to the Company’s products. The Company is uninsured with respect to these cla ims but
believes that it will not incur any material liability with respect to these claims.
When it is probable that a loss has been incurred and possible to make a reasonable estimate of the Company’s liability with respect to
such matters, a provision is recorded for the amount of such estimate or the minimum amount of a range of estimates when it is not
possible to estimate the amount within the range that is most likely to occur. The Company established reserves for several PM lawsuits
in conjunction with the accounting for this acquisition.
Additionally, beginning on December 31, 2011, the Company’s worker’s compensation insurance policy has per claim deductible of
$250 and annual aggregates of $1,000 to $1,875 depending on the policy year. The Company is fully insured for any amount on any
individual claim that exceeds the deductible and for any additional amounts of all claims once the aggregate is reached. The Company
currently has several worker’s compensation claims related to injuries that occurred after December 31, 2011 and therefore are subject
to a deductible. The Company does not believe that the contingencies associated with these worker compensation claims in aggregate
will have a material adverse effect on the Company.
On May 5, 2011, Company entered into two separate settlement agreements with two plaintiffs. As of December 31, 2018, the Company
has a remaining obligation under the agreements to pay the plaintiffs $1,235 without interest in 13 annual installments of $95 on or
before May 22 each year. The Company has recorded a liability for the net present value of the liability. The difference between the net
present value and the total payment will be charged to interest expense over payment period.
It is reasonably possible that the “Estimated Reserve for Product Liability Claims” may change within the next 12 months. A change in
estimate could occur if a case is settled for more or less than anticipated, or if additional information becomes known to the Company.
Romania Income Tax Audit
As described in Note 16, included in the unrecognized tax benefits is a liability for the Romania income tax audit for tax years 2012-
2016. Depending upon the final resolution of the audit, the liability could be higher or lower than the amount recorded at December 31,
2018.
Residual Value Guarantees
The Company issues partial residual value guarantees to support a customer’s financing of equipment purchased from the Company. A
residual value guarantee involves a guarantee that a piece of equipment will have a minimum fair market value at a future date if certain
conditions are met by the customer. The Company has issued partial residual guarantees that have maximum exposure of approximately
$1.6 million in the aggregate. The Company does not have any reason to believe that any exposure from such a guarantee is either
probable or estimable at this time, as such, no liability has been recorded. The Company’s ability to recover losses experienced from its
guarantees may be affected by economic conditions in used equipment markets at the time of loss.
SEC Investigation
The Company continues to comply with the SEC investigation regarding the Company’s restatement of prior financial statements, which
was completed in April 2018.
87
Note 25. Unaudited Quarterly Financial Data
Summarized quarterly financial data for 2018 and 2017 are as follows (in thousands, except per share amounts).
Net revenues
Gross Profit
Net (loss) income from continuing
operations attributable to shareholders
of Manitex International,Inc.
Net income (loss) from discontinued
operations attributable to shareholders of
Manitex International, Inc.
Net (loss) income attributable to
shareholders of Manitex
International, Inc.
Earnings (Loss) per Share
Basic
(Loss) earnings from continuing
operations attributable to
shareholders of Manitex
International, Inc.
Earnings (Loss) from discontinued
operations attributable to
shareholders of Manitex
International, Inc.
Loss attributable to shareholders
of Manitex International, Inc.
Diluted
(Loss) earnings from continuing
operations attributable to
shareholders of Manitex
International, Inc.
Earnings (Loss) from discontinued
operations attributable to
shareholders of Manitex
International, Inc.
(Loss) earnings attributable to
shareholders of Manitex
International, Inc.
Shares outstanding
Basic
Diluted
1st Qtr
2nd Qtr
2018
3rd Qtr
4th Qtr
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
2017
$
56,675 $
11,100
63,904 $
12,441
60,938 $
11,994
60,590 $
8,512
40,119 $
7,392
52,051 $
9,404
56,464 $
9,873
64,478
10,177
(1,485 )
(967 )
122
(10,847 )
(3,425 )
(1,490 )
(1,522 )
(630 )
—
—
—
—
137
(971 )
15
(192 )
$
(1,485 ) $
(967 ) $
122 $
(10,847 ) $
(3,288 ) $
(2,461 ) $
(1,507 ) $
(822 )
$
(0.09 ) $
(0.05 ) $
0.01 $
(0.55 ) $
(0.21 ) $
(0.09 ) $
(0.09 ) $
(0.04 )
$
$
— $
— $
— $
— $
0.01 $
(0.06 ) $
0.00 $
(0.01 )
(0.09 ) $
(0.05 ) $
0.01 $
(0.55 ) $
(0.20 ) $
(0.15 ) $
(0.09 ) $
(0.05 )
$
(0.09 ) $
(0.05 ) $
0.01 $
(0.55 ) $
(0.21 ) $
(0.09 ) $
(0.09 ) $
(0.04 )
$
$
— $
— $
— $
— $
0.01 $
(0.06 ) $
0.00 $
(0.01 )
(0.09 ) $
(0.05 ) $
0.01 $
(0.55 ) $
(0.20 ) $
(0.15 ) $
(0.09 ) $
(0.05 )
16,666,937 17,734,383 19,610,168 19,625,695 16,559,343 16,553,667 16,573,927 16,595,726
16,666,937 17,734,383 19,694,379 19,625,695 16,559,343 16,553,667 16,573,927 16,595,726
Note 26. Discontinued Operations
Company Sells Liftking
On September 30, 2016, the Company completed the sale of Manitex Liftking, ULC, an Alberta unlimited liability corporation pursuant
to a Share Purchase Agreement (the “Liftking Purchase Agreement”) with Mi-Jack Products, Inc. and its wholly-owned subsidiary
Liftking Acquisition ULC.
The Company received cash consideration of $14 million. The Company recognized a pre-tax loss of $9,296 on the sale including
transaction expenses of $551. The pre-tax loss includes a non-cash portion related to intangible assets and goodwill write-offs of $2,710
and $3,686, respectively. The aforementioned intangible and goodwill represents an allocation of a portion of the Lifting Equipment
segment’s intangibles and goodwill that existed on the date of sale. The allocation percentage was arrived at by computing the full value
of the Lifting Equipment segment and subtracting the value of the cash consideration that the Company received related to the Liftking
disposition. The Company did record an income tax benefit of $453 attributable to this transaction.
88
Company Sells CVS
On December 22, 2016, Manitex International, Inc. (the “Company”) completed the sale of its CVS Ferrari srl (“CVS”) subsidiary to
two Italian companies BP S.r.l. and NEIP III S.p.A. (collectively the “Purchasers”) for $5 million in cash, less $1.3 million payable for
inventory due in 2017, and the assumption of $14 million of net CVS debt (the “Transaction”). The Transaction was consummated
pursuant to a Sale and Purchase Agreement between the Company and the Purchasers (the “Purchase Agreement”). The Purchasers are
privately-held manufacturers and service providers for terminal handling equipment provided around the world. As part of the
transaction, the Company retained the operations of CVS’s Valla division, which offers a full range of electric precision pick and carry
cranes.
The Company recognized a pre-tax loss of $7,984 on the sale including transaction expenses of $650. The pre-tax loss includes a non-
cash portion related to intangible assets and goodwill write-offs of $2,649 and $4,358, respectively. The aforementioned intangible and
goodwill represents an allocation of a portion of CVS’s segment’s intangibles and goodwill that existed on the date of sale. The
allocation percentage was arrived at by computing the full value of the Lifting Equipment segment and subtracting the value of the cash
consideration that the Company received related to the CVS disposition. The Company did record an income tax benefit of $100
attributable to this transaction.
As disclosed in Note 23, in March 2016 the Company recognized a gain of $2,212 from the sale of inventory and intellectual property
related to CVS’s terminal tractor line.
Sale of ASV Shares
On May 11, 2017, in anticipation of an initial public offering, ASV Holdings converted from an LLC to a C-Corporation and the
Company’s 51% interest was converted to 4,080,000 common shares of ASV Holdings. On May 17, 2017, in connection within its
initial public offering (“IPO”), ASV Holdings sold 1,800,000 of its own shares and the Company sold 2,000,000 shares of ASV Holdings
common stock. After the IPO, the Company held a 21.2% interest in ASV Holdings, but no longer has a controlling interest in ASV
holdings. ASV Holdings was deconsolidated during the quarter ended June 30, 2017 and is recorded as an equity investment starting
with quarter ended June 30, 2017. The Company recognized a loss of $1,133 in connection with the sale of these shares.
Following the sale of the above referenced shares, the Company had significant continuing involvement with ASV in the form of an
equity investment (21.2% ownership in ASV). At the time of the above transaction, the Company plans were to hold the remaining
shares it owned in ASV for an indefinite period. Although the Company had no plans to sell additional shares, the sale of additional
shares in the future remained an option. If the Company were to sell more than 117,600 shares, the Company would cease to account
for its investment in ASV as an Equity Investment.
Over the period from February 26-28, 2018, the Company sold an aggregate of 1,000,000 shares of ASV Holdings, Inc. in privately-
negotiated transactions with institutional purchasers. All such shares were sold for $7.00 per share. Following such sale transactions,
the Company owns an aggregate of 1,080,000 shares of ASV Holdings, Inc., which equates to an ownership of approximately 11%.
After the sale of the shares, the Company no longer accounts for the investment in ASV using the equity method of accounting. The
Company incurred a loss of $205 on the sale these shares.
Net revenues
Cost of sales
Research and development costs
Selling, general and administrative expenses
Interest expense
Other income
Income (loss) from discontinued operations before income taxes
Loss on sale of discontinued operations including transactions
expense of $128 and $551 in 2017 and 2016, respectively
Total loss on discontinued operations before
income taxes
Income tax expense related to discontinued operations
Net loss on discontinued operations
For the Year Ended December 31,
2017
2016
$
38,357 $
32,403
694
3,504
1,156
(40 )
560
170,340
143,656
2,667
16,064
8,094
(118 )
(23 )
(1,302 )
(14,418 )
(742 )
(5 )
(737 ) $
(14,441 )
37
(14,478 )
$
89
27. Impairment of Lift Venture Investment
In December 2014, the Company entered into a joint venture agreement pursuant to which Lift Ventures LLC was formed. The joint
venture was formed to manufacture and sell certain products and components, including the Company's Schaeff electric forklift business,
which was operated by the Company's Liftking subsidiary and certain other Liftking products. One of the other partners in the joint
venture contributed design services which were to be used to develop additional new products for the joint venture.
As a result of the sale, in the third quarter of 2016, of the Company's Liftking subsidiary, Lift Ventures LLC will no longer have the
right to sell Schaeff and Liftking products in the future. Additionally, as a result of certain financial difficulties experienced by the
partner, who was to contribute design services, it will not be able to provide such services. As a result of these events, the Company
had determined that its investment in the Lift Ventures had become impaired and had recognized an impairment charge of $5,647 to
write off its entire investment in Lift Ventures LLC.
90
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision of and with the participation of management and the Audit Committee of the Board of Directors, the Company
conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act, as of December 31, 2018. The Company’s evaluation has identified certain material
weaknesses in its internal control over financial reporting as noted below in Management’s Report on Internal Control Over Financial
Reporting. Based on the evaluation of these material weaknesses, the Company has concluded that the Company’s disclosure controls
and procedures were not effective as of December 31, 2018 to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified
in the SEC’s rules and forms. Based on a number of factors, including the completion of the Audit Committee’s internal investigation,
our internal review that identified revisions to our previously issued financial statements, and efforts to remediate the material
weaknesses in internal control over financial reporting described below we believe the consolidated financial statements in this Annual
Report fairly present, in all material respects, our financial position, results of operations and cash flows as of the dates, and for the
periods, presented, in conformity with GAAP.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-
15(f) and 15d-15(f) of the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of its financial reporting and the preparation of its financial statements for external
purposes in accordance with GAAP and includes those policies and procedures that: (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision of and with the participation of management, the Company conducted an evaluation of the effectiveness of its
internal control over financial reporting based on the criteria in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”). A material weakness is a control deficiency, or combination of
control deficiencies, such that there is a reasonable possibility that a material misstatement to the annual or interim financial statements
will not be prevented or detected on a timely basis. Based upon that evaluation, management identified the following material
weaknesses at December 31, 2017 in the Company’s internal control over financial reporting, principally related to the Company’s
period-end financial reporting and consolidation processes and still exist at December 31, 2018:
1. We did not maintain an adequate process for the intake of new contracts, customers and vendors, particularly for contracts
involving unique transaction structures or unusual obligations on the part of the Company, to ensure that all contracts are
appropriately reviewed and approved, and the associated financial reporting requirements associated with such contracts
and transactions structures are properly identified and complied with in accordance with Generally Accepted Accounting
Principles.
2. We did not maintain adequate entity-level controls with respect to ensuring adequate supporting documentation for journal
entries and review procedures with respect to journal entries and disbursements that were unusual in nature and of significant
amounts.
3. We did not maintain an adequate review process with respect to the accounting of bill-and-hold transactions and ensuring
proper revenue recognition.
4. We did not maintain a formal and consistent policy for establishing inventory reserves for excess and obsolete inventory.
91
Based upon the above evaluation, management identified the following additional material weaknesses at December 31, 2018 in the
Company’s internal control over financial reporting, principally related to the Company’s period-end financial reporting and
consolidation processes:
1. We did not maintain an effective control environment over information technology general controls, based on the criteria
established in the COSO framework, to enable identification and mitigation of risks of material accounting errors.
2.
The Company historically has acquired a number of non-public companies. In the course of integrating these companies’
financial reporting methods and systems with those of the Company, the Company has not effectively designed and
implemented effective internal control activities, based on the criteria established in the COSO framework, across the
organization in connection with such acquisitions. We have identified deficiencies in the principles associated with the
control activities component of the COSO framework. Specifically, these control deficiencies constitute material
weaknesses, either individually or in the aggregate, relating to (i) our ability to attract, develop, and retain sufficient
personnel to perform control activities, (ii) selecting and developing control activities that contribute to the mitigation of
risks and support achievement of objectives, (iii) deploying control activities through consistent policies that establish what
is expected and procedures that put policies into action, and (iv) holding individuals accountable for their internal control
related responsibilities.
As a result of the material weaknesses in internal control over financial reporting described above, management concluded that the
Company’s internal control over financial reporting was not effective as of December 31, 2018 based on the criteria established in
Internal Control—Integrated Framework issued by the COSO. Additionally, these material weaknesses could result in a misstatement
of the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated
financial statements that would not be prevented or detected.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018 has
been audited by Grant Thornton LLP, our independent registered public accounting firm, as stated in their report which appears herein.
Management’s Remediation Activities
During 2018, management invested significant time and effort to remediate one of the material weaknesses identified in 2017.
Specifically, the following remediation actions were taken and completed:
Hotline – In 2018 we updated our whistleblower hotline materials for our U.S. based companies, including instructions on
the use of the line and a new policy specific to the issues of Retaliation. In addition, posters were to be posted in busy
locations around the plants and offices. It is the intent of the Company to roll out the hotline every other year.
Other than the changes disclosed above and the identification of two new material weaknesses, there were no changes in internal control
over financial reporting (as defined by Rules 13a-15 and 15d-15) that occurred during the fourth quarter ended December 31, 2018, that
have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.
Plan for Remediation of the Material Weaknesses in Internal Control Over Financial Reporting
Management has been actively engaged in the planning for, and implementation of, remediation efforts to address the material
weaknesses, as well as other identified areas of risk. These remediation efforts, outlined below, are intended both to address the identified
material weaknesses and to enhance the Company’s overall financial control environment. Management’s planned actions to further
address these issues in fiscal year 2019 include:
Review of existing policies and procedures against a standard list of criteria to ensure that new business relationships and
atypical transaction structures are properly vetted (including for any related party transaction issues), and related accounting
and other requirements are clearly identified and complied with in accordance with Generally Accepted Accounting
Principles, including with respect to all new customers and business relationships beginning with the first quarter of 2019;
Establish controls to prevent anyone in a senior management position from being able to post manual journal entries, and
require all manual journal entries to be reviewed and approved by an appropriate individual other than the preparer;
Closely review all bill-and-hold transactions to ensure that the appropriate documentation is maintained in order to properly
recognize revenue, and implement controls to ensure that goods are shipped prior to invoicing, unless it is being recognized on
a valid bill-and-hold basis;
Implement a formal and consistent policy for establishing inventory reserves for excess and obsolete inventory and situations
where net realizable value is less than inventory cost;
92
Hire an information technology director to evaluate and improve the information technology controls at our U.S. operations
so as to enable us to identify and mitigate risks of material accounting errors;
Other control improvements will include employee retraining with respect to the Company’s Code of Ethics; and
Executive oversight will be improved through additional reporting requirements and meetings.
The audit committee has directed management to develop a detailed plan and timetable for the implementation of the foregoing remedial
measures (to the extent not already completed) and will monitor their implementation. In addition, under the direction of the audit
committee, management will continue to review and make necessary changes to the overall design of the Company’s internal control
environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting.
Management believes the measures described above and others that will be implemented will remediate the control deficiencies the
Company has identified and strengthen its internal control over financial reporting. Management is committed to continuous
improvement of the Company’s internal control processes and will continue to diligently review the Company’s financial reporting
controls and procedures. As management continues to evaluate and work to improve internal control over financial reporting, the
Company may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate
circumstances not to complete, certain of the remediation measures described above.
ITEM 9B. OTHER INFORMATION
None.
93
Certain information required by Part III is omitted from this Form 10-K as the Company intends to file with the SEC its definitive Proxy
Statement for its 2019 Annual Meeting of Shareholders (the “2019 Proxy Statement”) pursuant to Regulation 14A of the Exchange Act,
not later than 120 days after December 31, 2018.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information under the headings “Nominees to Serve Until the 2020 Annual Meeting,” “Executive Officers of the Company who are
not also Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Committee on Directors and Board Governance,”
and “Audit Committee” in our 2019 Proxy Statement is incorporated herein by reference.
Our directors, executive officers and stockholders with ownership of 10% or greater are required, under Section 16(a) of the Exchange
Act, to file reports of their ownership and changes to their ownership of our securities with the SEC. Based solely on our review of the
reports and any written representations we received that no other reports were required, we believe that, during the year ended December
31, 2018, all of our officers, directors and stockholders with ownership of 10% or greater complied with all Section 16(a) filing
requirements applicable to them, except Steve Kiefer, an executive officer, filed a Form 4 on January 9, 2019 reporting a transaction
that had occurred on May 31, 2018.
Code of Ethics
The Company has adopted a code of ethics applicable to our principal executive officer and principal financial and accounting officer,
in accordance with Section 406 of the Sarbanes-Oxley Act of 2002, the rules of the SEC promulgated thereunder, and the NASDAQ
rules. The code of ethics also applies to all employees of the Company as well as the Board of Directors. In the event that any changes
are made or any waivers from the provisions of the code of ethics are made, these events would be disclosed on the Company’s website
or in a report on Form 8-K within four business days of such event. The code of ethics is posted on our website at
www.manitexinternational.com. Copies of the code of ethics will be provided free of charge upon written request directed to Investor
Relations, Manitex International, Inc., 9725 Industrial Drive, Bridgeview, Illinois 60455.
ITEM 11. EXECUTIVE COMPENSATION
The information under the headings “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report
on Executive Compensation” “COMPENSATION DISCUSSION AND ANALYSIS,” “EXECUTIVE COMPENSATION,” and
“DIRECTOR COMPENSATION” in our 2019 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information under the headings “Equity Compensation Plan Information” and “PRINCIPAL STOCKHOLDERS” in our 2019 Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information under the headings “Transactions with Related Persons,” “Corporate Governance,” “Compensation Committee,” and
“Audit Committee” in our 2019 Proxy Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information under the heading “Audit Committee” in our 2019 Proxy Statement is incorporated herein by reference.
94
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Report:
PART IV
(1) Financial Statements
See Index to Financial Statements on page 39.
(2)
Supplemental Schedules
None.
All schedules have been omitted because the required information is not present in amounts sufficient to require submission of the
schedules, or because the required information is included in the consolidated financial statements or notes thereto.
(b) Exhibits
See the Exhibit Index following the signature page.
(c) Financial Statement Schedules
All information for which provision is made in the applicable accounting regulations of the SEC is either included in the financial
statements, is not required under the related instructions or is inapplicable, and therefore has been omitted.
95
Exhibit No.
Description
Exhibit Index
1.1
2.1
2.2
2.3
2.4
2.5
2.6
3.1
3.2
4.1
4.2
4.3
4.4
4.5
Controlled Equity OfferingSM Sales Agreement, dated January 23, 2017, by and between Manitex International, Inc. and
Cantor Fitzgerald & Co. (incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K filed on
January 23, 2017).
English Summary of Form of Agreement for Sale of Company Division dated June 27, 2011 between C.V.S.
Costruzione Veicoli Speciali S.p.A. and CVS Ferrari srl (incorporated by reference to Exhibit 2.1 to the Current Report
on Form 8-K/A filed on August 8, 2011) (File No. 001-32401)).
Stock Purchase Agreement, dated October 29, 2014, between Manitex International, Inc. and Terex Corporation
(incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed on November 3, 2014).
Amendment No. 1, dated December 19, 2014 to Stock Purchase Agreement, dated October 29, 2014, between Manitex
International, Inc. and Terex Corporation (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K
filed on December 23, 2014).
Purchase Agreement, dated as of December 28, 2015, by and between Manitex International, Inc. and Utility One Source
Forestry Equipment LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on
January 4, 2016).
Share Purchase Agreement, dated as of September 30, 2016, by and among Manitex International, Inc., Liftking, Inc.,
Mi-Jack Products, Inc. and Liftking Acquisition ULC (incorporated by reference to Exhibit 2.1 to the Current Report on
Form 8-K filed on October 3, 2016).
Sale and Purchase Agreement by and among Manitex International, Inc., BP S.r.l. and NEIP III S.p.A. (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed on December 28, 2016).
Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q
filed on November 13, 2008) (File No. 001-32401).
Amended and Restated Bylaws of Veri-Tek International, Corp. (now known as Manitex International, Inc.), as amended
(incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed on March 27, 2008) (File No. 001-
32401).
Specimen Common Stock Certificate of Manitex International, Inc. (incorporated by reference to Exhibit 4.1 to the
Annual Report on Form 10-K filed on March 25, 2009) (File No. 001-32401).
Rights Agreement, dated as of October 17, 2008, between Manitex International, Inc. and American Stock Transfer &
Trust Company, LLC (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on October 21,
2008) (File No. 001-32401).
Amendment No. 1, dated as of May 24, 2018, to Rights Agreement, dated October 17, 2008, by and between Manitex
International, Inc. and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 10.3 to
the Current Report on Form 8-K filed on May 31, 2018).
Amendment No. 2, dated as of October 2, 2018, to Rights Agreement, dated October 17, 2008, by and between Manitex
International, Inc. and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.1 to the
Current Report on Form 8-K filed on October 3, 2018).
Subordinated Convertible Promissory Note, dated as of December 19, 2014, between Manitex International, Inc. and
Terex Corporation (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on December 23,
2014).
10.1
*
Employment Agreement, dated December 12, 2012, between Manitex International, Inc. and David J. Langevin
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-k filed on December 17, 2012) (File No.
001-32401).
10.2
*
Second Amended and Restated Manitex International, Inc. 2004 Equity Incentive Plan (incorporated by reference to
Exhibit 10.4 to the Annual Report on Form 10-K filed on March 30, 2010) (File No. 001-32401).
96
Exhibit No.
Description
10.3
*
Form of Restricted Stock Unit Award (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed
on November 16, 2007) (File No. 001-32401).
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
Lease dated April 17, 2006 between Krislee-Texas, LLC and Manitex, Inc. for facility located in Georgetown, Texas
(incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K filed on April 13, 2007) (File No. 001-
32401).
Lease Agreement, dated July 10, 2009, by and between Badger Equipment Company and Avis Industrial Corporation
(incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on July 16, 2009) (File No. 001-
32401).
Lease Agreement, dated May 26, 2010, between Manitex International, Inc. and KB Building, LLC (incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 28, 2010) (File No. 001-32401).
Lease Amendment, dated June 6, 2014 between Manitex International, Inc. and KB Building, LLC (incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 6, 2014).
Lease Amendment, dated October 3, 2018, between Manitex International, Inc. and KB Building, LLC (incorporated by
reference to Exhibit 10.1 to the Current Report on From 8-K filed on October 3, 2018).
Lease dated June 8, 2010, between Aldrovandi Equipment Limited and Manitex Liftking, ULC for facility located in
Woodbridge, Ontario (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on
August 13, 2010) (File No. 001-32401).
First Amendment to Commercial lease with Sabre Realty, LLC dated August 19, 2013 (incorporated by reference to
Exhibit 10.3 of the Company’s Current Report on Form 8-K filed (with respect to Items 1.01, 2.01, 2.03, 3.02, and 9.01)
August 20, 2013) (File No. 001-32401).
Commercial lease with Sabre Realty, LLC dated January 1, 2009 (incorporated by reference to Exhibit 10.1 of the
Company’s Current Report on Form 8-K filed (with respect to Items 1.01, 2.01, 2.03, 3.02, and 9.01) August 20, 2013)
(File No. 001-32401).
Commercial lease with Brave New World Realty, LLC dated August 29, 2011 (incorporated by reference to Exhibit 10.2
of the Company’s Current Report on Form 8-K filed (with respect to Items 1.01, 2.01, 2.03, 3.02, and 9.01) August 20,
2013) (File No. 001-32401).
First Amendment to Commercial lease with Brave New World Realty, LLC dated August 19, 2013 (incorporated by
reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed (with respect to Items 1.01, 2.01, 2.03,
3.02, and 9.01) August 20, 2013) (File No. 001-32401).
Amendment No. 1 to Amended and Restated Letter Agreement dated December 23, 2011 (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 5, 2013) (File No. 001-32401).
Amended and Restated Specialized Equipment Facility Master Note (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed February 5, 2013) (File No. 001-32401).
Reaffirmation of Manitex International, Inc. Guaranty (incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed February 5, 2013) (File No. 001-32401).
Reaffirmation of Manitex, LLC Guaranty (incorporated by reference to Exhibit 10.4 to the Company’s Current Report
on Form 8-K filed February 5, 2013) (File No. 001-32401).
Guarantor Waiver executed by Manitex International, Inc. and Manitex, LLC (incorporated by reference to Exhibit 10.6
to the Company’s Current Report on Form 8-K filed February 5, 2013) (File No. 001-32401).
Acknowledgement of Manitex International, Inc. and Manitex, LLC (incorporated by reference to Exhibit 10.7 to the
Company’s Current Report on Form 8-K filed February 5, 2013) (File No. 001-32401).
Amendment dated April 3, 2013 to Master Revolving Note dated June 29, 2011 (incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K filed April 8, 2013) (File No. 001-32401).
97
Exhibit No.
Description
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
First Amendment to the Second Amended and Restated Manitex International, Inc. 2004 Equity Incentive Plan
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q August 7, 2013) (File No.
001-32401).
Second Amendment to Manitex International, Inc.’s Second Amended and Restated 2004 Equity Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 3, 2016).
Loan and Security Agreement, dated as of July 20, 2016, by and among The PrivateBank and Trust Company, as
administrative agent and sole lead arranger, Manitex International, Inc., Manitex Inc., Manitex Sabre, Inc., Badger
Equipment Company, Crane and Machinery, Inc., Crane and Machinery Leasing, Inc., Lifking, Inc. and Manitex, LLC
(as the US Borrowers) and Manitex Liftking, ULC (as the Canadian Borrower) (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K filed July 25, 2016).
First Amendment to Loan and Security Agreement, dated as of August 4, 2016, by and among Manitex International,
Inc., Manitex Inc., Manitex Sabre, Inc., Badger Equipment Company, Crane and Machinery, Inc., Crane and Machinery
Leasing, Inc., Liftking, Inc., Manitex, LLC and Manitex Liftking, ULC, The Private Bank and Trust Company and the
lenders party thereto (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed November 9,
2016).
Consent and Second Amendment to Loan and Security Agreement, dated as of September 30, 2016, by and among
Manitex International, Inc., Manitex Inc., Manitex Sabre, Inc., Badger Equipment Company, Crane and Machinery, Inc.,
Crane and Machinery Leasing, Inc., Liftking, Inc. and Manitex, LLC, The Private Bank and Trust Company and the
lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 3, 2016).
Third Amendment to Loan and Security Agreement, dated as of November 8, 2016, by and among Manitex
International, Inc., Manitex Inc., Manitex Sabre, Inc., Badger Equipment Company, Crane and Machinery, Inc., Crane
and Machinery Leasing, Inc., and Manitex, LLC, The Private Bank and Trust Company and the lenders party thereto
(incorporated by reference to Exhibit 10.4 to the Current Report on Form 10-Q filed November 9, 2016).
Fourth Amendment to Loan and Security Agreement, dated as of February 10, 2017, by and among Manitex
International, Inc., Manitex Inc., Manitex Sabre, Inc., Badger Equipment Company, Crane and Machinery, Inc., Crane
and Machinery Leasing, Inc., and Manitex, LLC, The Private Bank and Trust Company and the lenders party thereto
(incorporated by reference to Exhibit 10.28 to the Annual Report on Form 10-K filed on March 10, 2017).
Fifth Amendment to Loan and Security Agreement, dated as of April 26, 2017, by and among Manitex International,
Inc., Manitex Inc., Manitex Sabre, Inc., Badger Equipment Company, Crane and Machinery, Inc., Crane and Machinery
Leasing, Inc. and Manitex LLC, The Private Bank and Trust Company (incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q filed on May 4, 2017.
Sixth Amendment to Loan and Security Agreement, dated as of March 9, 2018, by and among Manitex International,
Inc., Manitex Inc., Manitex Sabre, Inc., Badger Equipment Company, Crane and Machinery, Inc., Crane and Machinery
Leasing, Inc., and Manitex, LLC, CIBC Bank USA (f/k/a The PrivateBank and Trust Company) and the lenders party
thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 14, 2018).
Seventh Amendment to Loan and Security Agreement, dated as of July 23, 2018, by and among Manitex International,
Inc., Manitex Inc., Manitex Sabre, Inc., Badger Equipment Company, Crane and Machinery, Inc., Crane and Machinery
Leasing, Inc., and Manitex, LLC, CIBC Bank USA (f/k/a The PrivateBank and Trust Company) and the lenders party
thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 26, 2018)
Second Amended and Restated Letter Agreement between Manitex Liftking, ULC and Comerica Bank dated November
13, 2013 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 14, 2013)
(File No. 001-32401).
Second Amended and Restated Specialized Equipment Export Facility Master Revolving Note between Manitex
Liftking, ULC and Comerica Bank dated November 13, 2013 (incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K filed on November 14, 2013) (File No. 001-32401).
Amendment No. 1 to the Second Amended and Restated Specialized Equipment Export Facility Master Revolving Note
dated November 13, 2013 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 7,
2015).
98
Exhibit No.
Description
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
Amendment No. 2 to the Amended and Restated Specialized Equipment Export Facility Master Revolving Note dated
November 13, 2013 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 1,
2015).
Advance Formula Agreement dated as of December 23, 2011, made by Manitex Liftking, ULC in favor of Comerica
Bank (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on December 30, 2011) (File
No. 001-32401).
Amendment No. 1, dated August 10, 2012, to Advance Formula Agreement dated as of December 23, 2011, made by
Manitex Liftking, ULC in favor of Comerica Bank (incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K filed on August 13, 2012) (File No. 001-32401).
Master Revolving Note in the principal amount of $500,000 dated May 5, 2010, between Manitex International, Inc. and
Comerica Bank (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on August May 11,
2010) (File No. 001-32401).
Amendment No. 1, dated August 10, 2012, to Master Revolving Note in the principal amount of $500,000 dated May 5,
2010, between Manitex International, Inc. and Comerica Bank (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed on August 13, 2012) (File No. 001-32401).
Letter agreement dated May 5, 2010, between Manitex International, Inc. and Comerica Bank (incorporated by
reference to Exhibit 10.4 to the Current Report on Form 8-K filed on May 11, 2010) (File No. 001-32401).
Amendment effective as of June 29, 2011 to the Letter Agreement dated May 5, 2010 between Manitex International, Inc.
and Comerica Bank (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on July 1, 2011)
(File No. 001-32401).
Comerica Bank Foreign Currency Exchange Master Agreement, dated September 7, 2007, between Veri-Tek
International, Corp. (now known as Manitex International, Inc.) and Comerica Bank (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on November 14, 2007) (File No. 001-32401).
Specialized Equipment Export Facility Master Revolving Note for $2.0 million dated December 23, 2011, between
Manitex Liftking, ULC and Comerica Bank (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-
K filed on December 30, 2011) (File No. 001-32401).
Manitex International, Inc. Guarantee dated as of December 23, 2011 in favor of Comerica Bank related to indebtedness
of Manitex Liftking, ULC Specialized Equipment Export Facility (incorporated by reference to Exhibit 10.4 to the
Current Report on Form 8-K filed on December 30, 2011) (File No. 001-32401).
Manitex, LLC Guarantee dated as of December 23, 2011, in favor of Comerica Bank related to indebtedness of Manitex
Liftking, ULC Specialized Equipment Export Facility (incorporated by reference to Exhibit 10.5 to the Current Report
on Form 8-K filed on December 30, 2011) (File No. 001-32401).
Manitex International, Inc. Waiver issued to Export Development Canada dated December 9, 2011 (incorporated by
reference to Exhibit 10.6 to the Current Report on Form 8-K filed on December 30, 2011) (File No. 001-32401).
Manitex, LLC Waiver issued to Export Development Canada dated December 9, 2011 (incorporated by reference to
Exhibit 10.7 to the Current Report on Form 8-K filed on December 30, 2011) (File No. 001-32401).
Amended and Restated Master Revolving Note (Multi-Currency) for $6.5 million dated December 23, 2011, between
Manitex Liftking, ULC and Comerica Bank (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-
K filed on December 30, 2011) (File No. 001-32401).
Amended and Restated Guaranty dated December 23, 2011 from Manitex International, Inc. to Comerica Bank related to
Manitex Liftking, ULC Amended and Restated Master Revolving Note (incorporated by reference to Exhibit 10.10 to
the Current Report on Form 8-K filed on December 30, 2011) (File No. 001-32401).
Amended and Restated Security Agreement dated as of December 23, 1011 from Manitex International, Inc. to
Comerica Bank related to Manitex Liftking, ULC Amended and Restated Master Revolving Note (incorporated by
reference to Exhibit 10.11 to the Current Report on Form 8-K filed on December 30, 2011) (File No. 001-32401).
99
Exhibit No.
Description
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
10.58
10.59
10.60
10.61
10.62
10.63
10.64
Amended and Restated Guaranty dated December 23, 2011 from Manitex, LLC to Comerica Bank related to Manitex
Liftking, ULC Amended and Restated Master Revolving Note (incorporated by reference to Exhibit 10.12 to the
Current Report on Form 8-K filed on December 30, 2011) (File No. 001-32401).
Security Agreement dated as of December 23, 2011 from Manitex, LLC to Comerica Bank related to Manitex Liftking,
ULC Amended and Restated Master Revolving Note (incorporated by reference to Exhibit 10.13 to the Current Report
on Form 8-K filed on December 30, 2011) (File No. 001-32401).
Floorplan and Security Agreement between Manitex International, Inc. and HCA Equipment Finance LLC, dated
December 15, 2008, together with the form of Extension of Credit, which is attached as Exhibit A thereto, and the
Addendum to Floorplan and Security Agreement, dated January 20, 2009 (incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K filed on January 27, 2009) (File No. 001-32401).
Restructuring Agreement, dated October 6, 2008, by and among Terex Corporation, Crane & Machinery, Inc., and
Manitex International, Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on
October 10, 2008) (File No. 001-32401).
Term Note in principal amount of $2,000,000, dated October 6, 2008, payable by Manitex International, Inc. to Terex
Corporation (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on October 10, 2008)
(File No. 001-32401).
Security Agreement, dated October 6, 2008, by and between Crane & Machinery, Inc. and Terex Corporation
(incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on October 10, 2008) (File No. 001-
32401).
Master Revolving Note in the principal amount of $22.5 million dated June 29, 2011 by and between, and between
Manitex, Inc. and Comerica Bank (incorporated by reference to Exhibit 10-2 to the Current Report on Form 8-K filed on
July 1, 2011) (File No. 001-32401).
Master Revolving Note in the principal amount of $1.0 million dated June 29, 2011 by and between, and between
Manitex International, Inc. and Comerica Bank (incorporated by reference to Exhibit 10-6 to the Current Report on
Form 8-K filed on July 1, 2011) (File No. 001-32401).
Guaranty of Manitex International, Inc. dated June 29, 2011 that guarantees Manitex, Inc. indebtedness to Comerica
Bank (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on July 1, 2011) (File No. 001-
32401).
Guaranty of Manitex International, Inc. dated June 29, 2011 that guarantees Manitex Liftking, ULC indebtedness to
Comerica Bank (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on July 1, 2011)
(File No. 001-32401).
Guaranty of Badger Equipment Company and Manitex Load King, Inc. dated June 29, 2011 that guarantees Manitex,
Inc. and Manitex International, Inc. indebtedness to Comerica Bank (incorporated by reference to Exhibit 10.11 to the
Current Report on Form 8-K filed on July 1, 2011) (File No. 001-32401).
Security Agreement dated June 29, 2011 by and between, and between Badger Equipment Company and Comerica Bank
(incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K filed on July 1, 2011) (File No. 001-
32401).
Security Agreement dated June 29, 2011 by and between, and between Manitex Load King, Inc. and Comerica Bank
(incorporated by reference to Exhibit 10.13 to the Current Report on Form 8-K filed on July 1, 2011) (File No. 001-
32401).
Guaranty of Manitex, Inc. dated June 29, 2011 that guarantees Manitex International, Inc. indebtedness to Comerica
Bank (incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K filed on July 1, 2011) (File No.
001-32401).
Loan Agreement dated November 2, 2011, between the South Dakota Board of Economic Development and Manitex
Load King, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 8,
2011) (File No. 001-32401).
100
Exhibit No.
Description
10.65
10.66
10.67
Promissory Note in the principal amount of $857,500 dated November 2, 2011, between Manitex Load King, Inc. and
the South Dakota Board of Economic Development (incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K filed on November 8, 2011) (File No. 001-32401).
Mortgage—One Hundred Eighty Day Redemption dated November 2, 2011, between Manitex Load King, Inc. and the
South Dakota Board of Economic Development (incorporated by reference to Exhibit 10.3 to the Current Report on
Form 8-K filed on November 8, 2011) (File No. 001-32401).
Guaranty Agreement dated November 2, 2011, between the State of South Dakota Board of Economic Development and
Manitex International, Inc. (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on
November 8, 2011) (File No. 001-32401).
10.68
*
Employment Agreement dated November 2, 2011, between the State of South Dakota Board of Economic Development
and Manitex Load King, Inc. (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on
November 8, 2011) (File No. 001-32401).
10.69
10.70
10.71
10.72
10.73
10.74
10.75
10.76
10.77
10.78
10.79
10.80
10.81
Promissory Note in the principal amount of $857,500 dated November 2, 2011, between Manitex Load King, Inc. and
Home Federal Bank (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on November 8,
2011 (File No. 001-32401)).
Mortgage One Hundred Eighty Day Redemption dated November 2, 2011, between Manitex Load King, Inc. and Home
Federal Bank (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on November 8, 2011
(File No. 001-32401)).
Guaranty dated November 2, 2011, between Manitex International, Inc., Manitex Load King, Inc. and Home Federal
Bank (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on November 8, 2011 (File No.
001-32401)).
Promissory Note in the principal amount of $400,000 dated November 2, 2011, between Manitex Load King, Inc. and
Home Federal Bank (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on November 8,
2011 (File No. 001-32401)).
Security Agreement dated November 2, 2011, between Home Federal Bank and Manitex Load King, Inc. (incorporated
by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on November 8, 2011 (File No. 001-32401)).
English Summary of Form of Agreement for the Provision of Goods dated June 29, 2011 between CVS Ferrari Srl and
Cabletronic srl. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K/A filed on August 8, 2011
(File No. 001-32401)).
English Summary of Form of Letter Agreement dated February 11, 2011 between C.V.S. Costruzione Veicoli Speciali
S.p.A. and CVS Ferrari srl (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K/A filed on
August 8, 2011 (File No. 001-32401)).
Investment Agreement, dated July 21, 2014, between Manitex International, Inc., IPEF III Holdings n° 11 S.A and
Columna Holdings Limited (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on
July 25, 2014).
Debt Assignment Agreements, dated July 21, 2014, between Manitex International, Inc. and Banca Popolare del’Emilia
Romagna S.C. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on July 25, 2014).
Debt Assignment Agreements, dated July 21, 2014, between Manitex International, Inc. and Unicredit S.P.A.
(incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on July 25, 2014).
Option Agreement, dated July 21, 2014, by and between Manitex International, Inc. and Banca Popolare del’Emilia
Romagna S.C. (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on July 25, 2014).
Commitment Letter dated July 21, 2014 the Company and PM Group (incorporated by reference to Exhibit 10.5 to the
Current Report on Form 8-K filed on July 25, 2014).
Common Stock and Convertible Debenture Purchase Agreement, dated October 29, 2014, between Manitex
International, Inc. and Terex Corporation (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K
filed on November 3, 2014).
101
Exhibit No.
Description
10.82
10.83
10.84
10.85
10.86
10.87
21.1
23.1
23.2
24.1
31.1
31.2
32.1
101
Credit Agreement, dated as of December 19, 2014 among ASV, the Loan Parties party thereto and Garrison Loan
Agency Services LLC, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K filed on December 23, 2014).
First Amendment, dated March 15, 2016, to Credit Agreement, dated as of December 19, 2014 among ASV, the Loan
Parties party thereto and Garrison Loan Agency Services LLC, as Administrative Agent (incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K filed on April 27, 2017).
Revolving Credit, Term Loan and Security Agreement dated as of December 23, 2016 among A.S.V., LLC, the Loan
Parties thereto, the Lenders and PNC Bank, National Association, as agent for Lenders (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed on December 29, 2016).
Credit Agreement, dated as of December 19, 2014 among ASV, the Loan Parties party thereto, the Lenders party thereto
and JPMorgan Chase bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K filed on December 23, 2014).
Note Purchase Agreement, dated as of January 7, 2015, by and among Manitex International, Inc., MI Convert Holdings
LLC and Invemed Associates LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed
on January 12, 2015).
English translation of Debt Restructuring Agreement, dated March 6, 2018, by and among PM Group S.p.A. and Oil &
Steel S.p.A., Loan Agency Services S.r.l. and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed on March 12, 2018).
(1)
Subsidiaries of the Company.
(1) Consent of UHY LLP
(1) Consent of Grant Thornton LLP
(1) Power of Attorney (included on signature page).
(1)
(1)
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of
1934, as amended.
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of
1934, as amended.
(1) Certification by Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. 1350.
(1)
The following financial information from the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of
Operations for the fiscal years ended December 31, 2018, 2017 and 2016, (ii) Consolidated Balance Sheets as of
December 31, 2018 and 2017, (iii) Consolidated Statements of Shareholders’ Equity and Comprehensive Loss, (iv)
Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements.
Denotes a management contract or compensatory plan or arrangement.
*
(1) Filed herewith.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: March 15, 2019
MANITEX INTERNATIONAL, INC.
By:
/s/ LAURA R. YU
Laura R. Yu
Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoint David J.
Langevin his or her attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to
this Annual Report on Form 10-K, and to file the same, with Exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or substitute or substitutes
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
/s/ DAVID J. LANGEVIN
David J. Langevin,
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ LAURA R. YU
Laura R. Yu
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ RONALD M. CLARK
Ronald M. Clark,
Director
/s/ ROBERT S. GIGLIOTTI
Robert S. Gigliotti,
Director
/s/ FREDERICK B. KNOX
Frederick B. Knox,
Director
/s/ MARVIN B. ROSENBERG
Marvin B. Rosenberg,
Director
/s/ INGO SCHILLER
Ingo Schiller,
Director
/s/ STEPHEN J. TOBER
Stephen J. Tober,
Director
March 15, 2019
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March 15, 2019
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