Dear Fellow Shareholders,
In 2023, we demonstrated significant progress on our multi-year business transformation journey,
while leveraging our position as the market leading U.S. based vertically integrated provider of
best-in-class design, engineering, and fabrications solutions, to support growth and expanded
capabilities.
Last year we sharpened our commercial focus, expanding within higher-value market
adjacencies, while improving our operational discipline by leveraging automation and process
efficiencies. We introduced a balanced capital allocation strategy, prioritizing high-return,
capital-light advancements with payback periods of less than eighteen months and inorganic
growth, while returning capital to shareholders through opportunistic open market share
repurchases.
Our entire team came together under a “One MEC. One Mission” mindset that emphasizes
performance excellence and a collaborative, customer-first approach. For the full-year 2023,
we delivered significant growth in sales, free cash flow and Adjusted EBITDA, further
demonstrating our sustained focus on long-term value creation.
Throughout our almost 80-year history, MEC’s commitment to innovation has been integral to
building long-lasting, trusted relationships with our customers. Our investments in advanced
technologies and next-generation capabilities provide our customers with on-demand, high-
quality, cost-effective outcomes that embed us within the product lifecycle, contributing to high
customer retention. With the largest domestic manufacturing footprint in our industry, we’ve
continued to capitalize on secular reshoring and onshoring trends that leverage our economies
of scale.
Demand for lightweight materials remains a significant market opportunity for MEC entering
2024. While steel fabrication has been our core area of focus for much of our history, recent
customer investments in energy transition-related technologies, including those that support fleet
electrification and infrastructure, require solutions expertise with comparably lighter-weight
materials, such as aluminum and composites.
In July 2023, we acquired Wisconsin-based Mid-States Aluminum (“MSA”), an industry-leading,
vertically integrated manufacturer of custom aluminum extrusions and fabrications. MSA offers
value-added services that include design, engineering, aluminum extrusions, fabrication,
anodizing and finishing, assembly, and packaging. MSA’s history of growth and innovation,
attractive margin profile, deep customer relationships and diverse end-markets are highly
complementary to our existing business, positioning us to capitalize on the lightweight materials
fabrication opportunity.
In September, we held our first-ever Investor Day at our new Hazel Park, Michigan facility,
outlining a detailed roadmap for strategic expansion and profitable growth. At this event, we
provided a progress update on our MEC Business Excellence Initiative, or MBX, a value creation
framework we introduced across the organization in late 2022.
The MBX framework has several key pillars, including targeted commercial expansion within
higher value adjacent markets, implementation of more efficient business processes, improved
asset optimization and productivity, and standardized operating practices across the enterprise.
Our execution of each pillar is made possible by the development of a high-performance
culture, where a commitment to safety, customer service, accountability and integrity sit at the
core of all we do.
By year-end 2026, our MBX framework is expected to help deliver between $750 and $850 million
in revenues; expand Adjusted EBITDA margin to between 14% and 16%; and generate free cash
flow of between $65 and $75 million. We believe these targets accurately underscore the
significant value creation potential of our business over the coming years, consistent with our
unwavering focus on total shareholder returns.
YEAR IN REVIEW
During 2023, we achieved strong net sales growth of over 9% as a result of robust end-market
demand and the acquisition of MSA. Adjusted EBITDA for the year was a record $66 million and
reflected successful strategic execution, amidst the ramp-up of production at our Hazel Park
facility. While we leveraged our balance sheet for the MSA acquisition in July, two consecutive
quarters of record free cash flow allowed us to repay nearly $40 million of debt in the second
half of the year. Our improved profitability and free cash flow growth during 2023 reflects the
hard work and commitment of our entire team.
Since introducing our MBX framework in the third quarter 2022, we have successfully
implemented a series of business transformation initiatives across our organization. In 2023, we
delivered measurable progress in executing against the core pillars of MBX, resulting in our strong
full-year financial performance.
Development of a High-Performance Culture. Through MBX, we are effectuating this
cultural change by promoting breakthrough thinking, implementing key performance
metrics reviews and other daily lean management routines. We recently updated our
organizational mission statement to align with a culture of standardization and
consistency: One MEC. One Mission. This mission statement has quickly permeated
throughout our company, leading to a heightened focus on continuous improvement and
value creation. We took action to build a stronger, more durable performance culture
last year that provides us a strong foundation entering this next, exciting chapter of growth.
Sustainable Operational Excellence. In practice, operational excellence amounts to
increased standardization, lean manufacturing, and automation of our various production
processes, all of which will help us to improve productivity and reduce costs across the
value chain. Improved productivity and utilization will not only be a catalyst for improved
margins and cash flow, but it will also allow for more agility in response to evolving
customer needs through the economic cycle. During 2023, we executed over 125 MBX
lean events which resulted in us delivering our targeted 40 to 70 basis points of MBX related
margin improvement, as well as, improved working capital efficiency.
Driving Commercial Excellence. With disciplined segmentation and positioning of our
products and services to move up the value chain, we intend to capture additional
growth opportunities from customers who value our full suite of design, prototyping and
aftermarket services. During 2023, we continued our enhanced focus on leveraging our
full suite of value-added service offerings to build a robust pipeline of new projects with
both new and existing customers. For example, we’ve recently begun to do a significant
volume of work with a battery thermal management company, together with commercial
vehicle customers, where we are a key partner in helping our customers develop next-
generation products and battery electric vehicle platforms.
Disciplined Capital Deployment. We will seek to expand within high-growth, adjacent
markets, while continuing to build our share-of-wallet with existing customers. As part of
this initiative, we intend to prioritize capital investment toward automation and robotics,
prioritizing capital-light advancements with rapid returns along with lightweight materials
fabrication, ensuring we are well positioned to support customer growth into fleet
electrification, energy infrastructure and renewables within the impending energy
transition markets. Further to this objective, we acquired Mid-States Aluminum in 2023,
expanding our capabilities in light-weight aluminum extrusion manufacturing. The MSA
acquisition creates an exciting multi-year growth platform that we expect to contribute
approximately $60 to $80 million in incremental revenue growth by 2026.
Human Resource Optimization: Given our significant manufacturing footprint, we are
heavily reliant on a stable pipeline of skilled and experienced talent pool. To that end, we
will continue to prioritize the recruitment and retention of skilled trades, even as we seek
to increase automation across our manufacturing operations. We will seek to utilize
retain high-potential
competitive, performance-based
candidates for development and advancement. Through these efforts, we will aim to
create multi-tiered succession planning and a stable recruiting pipeline to ensure long-
term business growth. During 2023, we made significant progress in better aligning our
talent acquisition and retention efforts to ensure our on-going strategic success. In
addition, late in 2023, we announced our intention to relocate our corporate
in early 2024. By moving our
headquarters to Milwaukee, Wisconsin, effective
headquarters to Milwaukee, we believe that we will be able to improve our access to
high-quality talent and better support our manufacturing base.
incentives to attract and
Our new facility in Hazel Park, Michigan commenced operations in the third quarter 2022 and
continued to successfully ramp-up operations during 2023. We continue to anticipate this facility
will achieve a $100 million run rate of revenues by the end of 2024, as forecasted.
Entering 2024, we see the potential for a slowing in domestic economic growth. While a U.S.
recession did not materialize in 2023, we do anticipate some softening in demand during 2024,
due in part to an elevated interest rate environment. In a scenario where demand does soften,
we remain confident that MEC will drive organic growth in net sales, profitability and free cash
flow in the year ahead due to a combination of market share gains, MBX driven business process
efficiency, asset optimization, and synergy-related contributions from MSA. Importantly, we
believe any potential demand softening will be short-lived, and remain highly optimistic on the
demand outlook entering the 2025 and 2026 timeframe. In the meantime, we remain highly
focused on driving continuous progress toward our 2026 financial targets, consistent with our
value creation strategy.
In closing, I want to thank all of our team members, customers, partners and shareholders for
their continued support of our company. I’m as excited as ever about the future of MEC and I
look forward to our continued growth and success.
Sincerely,
Jagadeesh (Jag) A. Reddy
President, CEO and Director
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 001-38894
Mayville Engineering Company, Inc.
(Exact name of Registrant as specified in its Charter)
Wisconsin
(State or other jurisdiction of
incorporation or organization)
135 S. 84th Street, Suite 300
Milwaukee, Wisconsin
(Address of principal executive offices)
39-0944729
(I.R.S. Employer
Identification No.)
53214
(Zip Code)
Registrant’s telephone number, including area code: (414) 381-2860
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, no par value
Trading
Symbol(s)
MEC
Name of each exchange on which registered
New York Stock Exchange
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 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 every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§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 whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “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 has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm
that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the Registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the Registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based on the closing price of the shares of common
stock on the New York Stock Exchange on June 30, 2023, was $247,236,179.
The number of shares of the Registrant’s Common Stock outstanding as of February 16, 2024 was 20,364,907.
Part III of this report incorporates information by reference to the Registrant’s proxy statement for its 2024 annual meeting of shareholders, which proxy
statement will be filed with the Securities and Exchange Commission no later than 120 days after the close of the year ended December 31, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
Page
1
13
26
26
27
27
27
28
29
30
40
41
71
71
72
72
73
73
73
73
73
74
78
79
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
Item 1.
Item 1A.
Item 1B.
Item 1C
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9.
Controls and Procedures
Item 9A.
Item 9B.
Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Signatures
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 Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
i
Item 1. Business.
Cautionary Statement Regarding Forward-Looking Statements
PART I
Certain matters discussed in this Annual Report on Form 10-K contain forward-looking statements that involve risks and
uncertainties, such as statements related to future events, business strategy, future performance, future operations, financial position,
estimated revenues and losses, projected costs, prospects, plans and objectives of management. All statements other than statements of
historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of
words such as “seek,” “anticipate,” “plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “potential,”
“targeting,” “intend,” “could,” “might,” “should,” “believe” and similar expressions or their negative. Forward-looking statements
should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or
by, which such performance or results will be achieved. Forward-looking statements are based on management’s belief, based on
currently available information, as to the outcome and timing of future events. These statements involve estimates, assumptions,
known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those
expressed in such forward-looking statements. Mayville Engineering Company, Inc. (MEC, the Company, we, our, us or similar
terms) believes the expectations reflected in the forward-looking statements contained in this Annual Report on Form 10-K are
reasonable, but no assurance can be given that these expectations will prove to be correct. Forward-looking statements should not be
unduly relied upon.
Important factors that could cause actual results or events to differ materially from those expressed in forward-looking
statements include, but are not limited to, those described in “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K for
the year ended December 31, 2023, as such may be amended or supplemented in Part II, Item 1A of our subsequently filed Quarterly
Reports on Form 10-Q, and the following:
Macroeconomic conditions, including inflation, elevated interest rates and recessionary concerns, as well as continuing
supply chain constraints affecting some of our customers, labor availability and material cost pressures, have had, and may
continue to have, a negative impact on our business, financial condition, cash flows and results of operations (including
future uncertain impacts);
risks relating to developments in the industries in which our customers operate;
risks related to scheduling production accurately and maximizing efficiency;
our ability to realize net sales represented by our awarded business;
failure to compete successfully in our markets;
our ability to maintain our manufacturing, engineering and technological expertise;
the loss of any of our large customers or the loss of their respective market shares;
risks related to entering new markets;
our ability to recruit and retain our key executive officers, managers and trade-skilled personnel;
volatility in the prices or availability of raw materials critical to our business;
manufacturing risks, including delays and technical problems, issues with third-party suppliers, environmental risks and
applicable statutory and regulatory requirements;
our ability to successfully identify or integrate acquisitions;
our ability to develop new and innovative processes and gain customer acceptance of such processes;
1
risks related to our information technology systems and infrastructure;
geopolitical and economic developments, including foreign trade relations and associated tariffs;
results of legal disputes, including product liability, intellectual property infringement and other claims;
risks associated with our capital-intensive industry;
risks related to our treatment as an S Corporation prior to the consummation of our initial public offering of common stock
(IPO); and
risks related to our employee stock ownership plan’s treatment as a tax-qualified retirement plan.
These factors are not necessarily all of the important factors that could cause actual results or events to differ materially from
those expressed in forward-looking statements. Other unknown or unpredictable factors could also cause actual results or events to
differ materially from those expressed in the forward-looking statements. All forward-looking statements attributable to us are
qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date hereof. We undertake no
obligation to update or revise any forward-looking statements after the date on which any such statement is made, whether as a result
of new information, future events or otherwise, except as required by federal securities laws.
General
Mayville Engineering Company, Inc. (MEC) is a leading U.S.-based, vertically integrated, value-added manufacturing partner
providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication,
aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy-
and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets.
We have developed long-standing relationships with our blue-chip customers based upon our commitment to “Unmatched
Excellence”. We provide a diverse set of process offerings and a one-source solution with benefits throughout the entire product
lifecycle, including front-end collaboration in design and prototyping, product manufacturing, aftermarket components and ancillary
supply chain benefits. Founded as a corporation in 1945 and headquartered in Milwaukee, Wisconsin, we are a leading Tier I U.S.
supplier of highly engineered components to original equipment manufacturer (OEM) customers with leading positions in their
respective markets. We are focused on producing the highest quality components using complex processes at the lowest cost by
working with customers throughout the product design and development process to establish optimal solutions. Our engineering
expertise and technical know-how allow us to add value through every product redevelopment cycle (generally every three to
five years for our customers). According to The Fabricator magazine, we have been ranked as the largest fabricator in the United
States for the past 13 years in a row (2011 – 2023).
Our customers’ complex products require a unique combination of our capabilities that allow us to achieve a customized
offering to satisfy our customers’ desired outcomes. Our capabilities, which include, but are not limited to: metal fabrication, metal
stamping, aluminum extrusion and fabrication, tube bending and forming, robotic part forming, robotic welding, resistance welding,
five-axis tube and fiber laser cutting and custom coatings, including high heat and chemical agent resistant coating (CARC) painting,
are used in a variety of applications and represent the building blocks of what we produce.
Our key customers have globally recognized brands and demand the highest product quality and expertise. Over our more than
75-year history, we have developed capabilities and provided solutions that result in customer loyalty and long-standing relationships,
which we call “The MEC Advantage”. We have a diverse and market-leading customer base that serves broad end markets
representing favorable near- and long-term growth prospects for us. We have a track record of growth and are well-positioned to
increase our market share and benefit from the growth in customer demand as well as the secular trends of reshoring and outsourcing
across the end markets that we serve. To help pursue our strategic mission, we have approximately 2,500 employees who are tactically
aligned around our core values. We are led by an experienced management team that has contributed to our growth by establishing
deep and long-standing relationships with key customers and has worked to expand the customer base both organically and through
strategic acquisitions.
2
We maintain an established base of long-standing customers comprised of leading, blue-chip OEM manufacturers across the
United States. Our broad capabilities offering and track record of producing the highest quality solutions have allowed us to establish,
and subsequently deepen, relationships with additional products and platforms over time. For example, our more than 40-year
relationship with Deere & Company (John Deere) began with a small order of simple stamped parts for a farm tractor in its
agricultural segment that expanded over time and represented 2023 sales in excess of $87 million across five market segments,
representing over 65 model platforms. We have also been successful in winning customers and rapidly expanding relationships with
high-growth customers by utilizing our complete product lifecycle management offering. For instance, we began our relationship with
a powersports company less than ten years ago, starting with our expertise in performance structure suspension components, and we
have been able to expand our relationships into tubes, fabrications and finished goods assemblies. Through this expansion, with
product shipping from multiple facilities, we have been able to deepen our relationship and expand our market position through each
of their new product updates, solidifying us as a strategic partner.
We serve our customers through 23 strategically located U.S. facilities, across seven states, with more than three million square
feet of manufacturing capacity. Our expansive footprint enables us to service and maintain strong relationships with existing key
customers across the United States with a “local” presence, as well as target new customer opportunities. Coupled with our focus on
market alignment and execution, we constantly strive to improve and refine capabilities, capacities and reduce our carbon footprint. In
addition, the ongoing investment in flexible, re-deployable automation allows us to expand output while reducing cost and improving
quality, productivity and consistency for margin enhancement and market leading competitiveness.
Our historical success is a function of our engineering expertise, extensive manufacturing capabilities, limited commodity
exposure, investment in automation and embedded relationships with the contractual ability to pass through variability in commodity
prices. We believe we are poised to grow through economic cycles due to our:
market positioning and reputation;
product breadth;
flexible and re-deployable capital investment in automation and process capabilities; and
our geographic, end market and product diversification.
Our diversified profile today best positions us for stability and leading market performance through all phases of an economic
cycle.
Our Industry
We compete in the highly fragmented market of contract manufacturers, the majority of which are small local players that are
limited in scale, capabilities and technology. Many of these local manufacturers have single or limited production capabilities and
provide niche components in specific geographic markets. Accordingly, there are a limited number of competitors in the value-added
manufacturing market in which we operate with the capacity and expertise to deliver the complete product lifecycle of solutions we
offer. For example, our diverse manufacturing capabilities across product lines have contributed to us being selected the Largest
Fabricator by The Fabricator magazine’s “FAB 40” listing in the desirable U.S. markets for the past 13 years in a row (2011 – 2023).
While we compete with certain manufacturers across selected product lines, we believe that no single manufacturer directly competes
with us across our full offering and end market applications.
Our end market diversification coupled with our extensive product breadth allows us to maintain financial stability as individual
end markets fluctuate. The primary end markets we serve include heavy- and medium-duty commercial vehicles, construction &
access equipment, powersports, agriculture and military, among others. As markets strengthen or weaken, our output is redirected and
realigned to support ongoing change. Further, as these fluctuations affect the market, we are favorably positioned to benefit from the
broader trend of our OEM customers consolidating to fewer and more sophisticated suppliers in order to improve quality and delivery
while lowering the total cost of doing business. This consolidation trend will allow us to grow and protects our cash flow as markets
change and shift.
3
We have also experienced, and benefitted from, OEM trends seeking to improve their strategy execution and simplify their
business through outsourcing and reshoring. Based on our history, OEMs pursue a strategy that focuses on core component market
differentiation, such as structural frames and complete powertrain assemblies, and prefer to outsource the remaining product
components to third parties rather than manufacturing them in-house. This is done in order to maintain their strategic focus, drive cost
savings and reduce their own investment in manufacturing, thereby allowing them to focus on the most important aspects of their
value creation process, namely product design and development, final product assembly and testing, branding, sales, marketing and
distribution. While each specific OEM differs in its strategy, we see these trends continuing as customers deal with workforce and
supply chain constraints and look for optimum return on investments while improving cash flow. Moreover, our OEM customers
focus on the production of the core components of their products, which leads them to rely on outsourced providers like us for the
remaining components of their finished product needs. OEMs are also continuing to bring production back to the US and simplifying
their supply chain processes. We believe we will benefit from this continued shift in our customers’ focus and ongoing desire for
OEMs to improve efficiencies, reduce costs and simplify supply chains. Our established and embedded relationships, breadth of
capabilities and scalability will allow us to streamline the supply chain process for our customers by acting as a single point of contact
in the supply chain. In addition, we believe OEMs are increasingly favoring platforms supported by larger, more sophisticated and
financially stable suppliers with the ability to serve large national and international operations all while maintaining a local touch. Our
extensive manufacturing footprint, competitive cost structure and integrated design, engineering, production planning and quality
program management capabilities position us favorably to take advantage of these opportunities and trends.
Our Competitive Strengths
As an industry-leading value-added manufacturing partner, our commitment to "Unmatched Excellence" is the cornerstone that
attracts our customers. We thrive on strategic collaboration, actively engaging with our customers to create alignment and become an
integral part of their product development and manufacturing processes. Leveraging our deep engineering expertise, we support
prototype, production, and aftermarket needs, delivering cost-effective and robust solutions. With the industry's most expansive
process capabilities, we embody agility, speed, and unmatched capability, allowing us to efficiently support a diverse range of
products and solutions. “The MEC Advantage” is not just a concept; it's the driving force behind our operations, ensuring that every
project benefits from our manufacturing expertise and customer-centric approach. Focusing on forward-thinking innovation,
reliability, and excellence, our engineering expertise and technical know-how allow us to add value through every product
redevelopment cycle, typically occurring every three to five years for our customers. Positioned as the go-to partner, we are dedicated
to building long-lasting partnerships and delivering solutions that consistently exceed our customers’ expectations.
Value-Added Supply Chain Partner with Embedded Relationships. Our embedded relationships with our large and diverse
customer base are driven by the commitment to excellence our employees take in their work, which emphasizes the highest quality
and performance in all facets of our business, including our ability to partner with our customers and deliver to them complex
solutions across a wide range of products. Our unique, end-to-end offering provides solutions throughout the lifecycle of a product,
including upfront product manufacturability advice and prototyping, production volumes and aftermarket components. We strive to
maintain operation alignment (and continuous re-alignment) with our customers’ strategy and production activities as they evolve,
allowing us to remain agile in response to market changes, while enabling our customers to be successful, and remain adaptable to
changes to retain flexibility and adjust appropriately. Our focus on collaboration with our customers and our breadth of capabilities
also generates strategic alignment with our customers, resulting in deep-rooted relationships, driving vendor reduction and providing
other ancillary benefits such as optimization of working capital investments. Our track record of engineering expertise has resulted in
our consistent inclusion in customer design and prototyping activities, enabling customers to view us as an invaluable extension of
their own teams. In turn, this collaboration allows our customers to focus on the development of their core technologies and products.
Our position as a deeply embedded supply chain partner of scale allows us to provide a multitude of solutions, driving strong customer
relationships with high switching costs.
Leading and Defendable Market Position in Attractive North American Market. According to the Fabricator magazine, we
have been ranked as the largest fabricator in the United States for the past 13 years in a row (2011 – 2023). The market is highly
fragmented and characterized by high barriers to entry given the complex nature of the work, established relationships and high
customer switching costs. While there are numerous competitors in the markets in which we operate, few maintain the product
breadth, manufacturing capabilities, scale or engineering expertise that we do. Our depth of capabilities allows us to offer our
customers:
low volume production capability;
4
customized and sophisticated solutions;
unique engineering and manufacturing capabilities throughout the product lifecycle;
critical scale to service large national and regional customers as well as local customers; and
the ability to act as a single point of contact and offer seamless customer service.
End Market and Customer Diversification. Our value-added manufacturing focus enables us to remain diversified across a
variety of customer end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment,
powersports, agriculture, and military, among others. These end markets are representative of our globally recognized customers,
which are comprised of large OEM manufacturers. In 2023, our top customer and top ten customers accounted for 15.0% and 74.6%
of net sales, respectively, which collectively represents hundreds of platforms that we serve across a variety of end markets and
customer operating segments. Our access to a multitude of end markets allows us to strategically shift focus to sell into current
opportunities as end market demand evolves. In addition to customer and end market diversification, our customers themselves are
also diversified across multiple end markets. For example, we provide John Deere, a leading customer with 2023 net sales accounting
for 14.8% of our total revenue, with over 5,000 SKUs across over 65 individual John Deere platforms including the agriculture,
forestry, turf care, power systems and construction & access equipment end markets. Our increasingly stable performance is a direct
result of our intentional business design of agility and adaptability to realign manufacturing capacities to serve diversified and ever-
changing end markets.
5
Breadth of Capabilities Appealing to a Variety of Applications. We have many manufacturing capabilities that together
represent the building blocks for the complex solutions we provide to our customers. We maintain a full spectrum of capabilities
across our 23 facilities to address a wide set of customer needs, including upfront product development advice and prototyping, unique
manufacturing processes and capabilities across a variety of products and back-end finishing, assembly and aftermarket components
representing a unique end-to-end offering. Our range of capabilities combined with our breadth of components, including fabrications,
tubes, tanks, and performance structures, expands the applicable uses and end markets in which we may offer our components.
Throughout our history, our capabilities have allowed us to generate growth by expanding into new verticals and by further
penetrating existing verticals through cross-selling to increase wallet share, a strategy that has driven deep-rooted relationships with
our customers. Further, our unique combination of manufacturing processes allows us to opportunistically target sophisticated, higher
margin business. The diversity of our offering has provided our Company with financial stability through various end market and
economic cycles.
Technology-Enabled Infrastructure. We continue to invest in a technology-enabled asset base that provides significant flexible
and re-deployable capacity to support our planned growth, increases profitability, efficiency, quality and employee safety, reduces
spend on energy and drives a long-term cost advantage over our competitors. We have leveraged our purchasing power to make
significant investments in operational infrastructure throughout our history, in items such as flexible and re-deployable automation and
capacity improvements to enhance throughput, quality and consistency. For example, we were one of the first in our industry to adopt
fiber lasers and have continued to invest in this capability. Throughout the past couple of years, we have implemented 10,000- and
12,000-watt fiber lasers with an automation tower, which are on average three times faster, provide a cleaner, more precise cut and use
one-third the power of traditional CO2 lasers, with a payback period of less than two years. Additionally, the implementation of
robotic brakes has improved quality through a continued shift towards precision automation. By reducing setup procedures, manual
employee lifting requirements and downtime while offering additional capacity, the implementation of robotic brakes has resulted in a
payback period of approximately two years. These two examples of investments in technology-enabled infrastructure allow us to
reallocate our workforce, as employees can be retrained and redeployed into more technically skilled positions. In today’s ever-
changing labor market, the ability to redeploy labor to increase flexibility and capacity for our customers is of the utmost importance
and interest. Our investments in continuous improvement and automation have driven operational efficiencies and improved metric
tracking allowing our management team to more effectively run the business and improve the value we provide to our customers. We
have, from time-to-time, made strategic, customer-driven investments that directly support new product and market expansion which
result in further competitive advantages and higher switching costs for our customers.
Cost Structure and Operational Excellence. We have reduced our exposure to commodity price risk by structuring our
customer contracts to pass through changes in commodity prices. As such, we have been able to effectively limit any potential impact
from tariffs and commodity price volatility to our margins. Our scale and profitability have also allowed us the flexibility to
implement continuous improvement initiatives in driving efficiencies, such as automation and additional capacity, which will result in
long-term efficiency and margin improvements, and expanded capabilities.
Our Strategy
During 2022, we announced the implementation of a value-creation framework, MEC Business Excellence (MBX), that is
intended to maximize stakeholder value by positioning the Company to achieve above-market performance and capitalizing on multi-
year reshoring and outsourcing trends among major OEMs. As part of MBX, we have established clear short- and long-term
objectives, with the goal of outlining and adapting priorities and targets to improve operational and financial goals while creating a
culture with a keen focus on continuous lean improvements in order to maintain a differentiated and defendable market leading
position. The key elements of MBX include:
High-Performance Culture. The Company is focused on effectuating cultural change across the organization by the
implementation of performance-based metrics, daily lean management and other process-oriented strategies. Through these efforts, the
Company intends to create a high-performance culture enabling teams to drive profitable growth.
Operational Excellence. The Company is focused on leveraging automation and technologies and capabilities to increase
productivity and reduce costs across the value chain with the implementation of lean initiatives such as value stream mapping, sales,
inventory and operations planning (SIOP) and further optimizing its supply chain and procurement strategies, which will inherently
accelerate immediate and long-term productivity and margin improvements.
6
Commercial Excellence. The Company is focused on driving commercial growth through an integrated, solutions-oriented
approach that leverages its full suite of design, prototyping and aftermarket services; an expansion of its fabrication capabilities
beyond steel, with an emphasis on lightweight aluminum, plastics and composites; targeted growth in higher value and high-growth
adjacent markets including energy transition and clean technology; wallet share expansion among our current customer base; and the
implementation of a value-based pricing model capturing the cost to serve. These growth initiatives will continue to deepen and
defend our existing market share, while diversifying our customer and end market exposure.
Disciplined Capital Deployment. The Company is focused on driving a disciplined capital strategy that includes allocating
capital to expand within high-growth adjacent markets, continue to increase our share-of-wallet with existing customers and execute
strategic acquisition opportunities while also generating strong free cash flow, managing debt levels and liquidity positions, and
continuing to return capital to shareholders through share repurchases. As part of this initiative, our intentions are to prioritize capital
investment towards the light-weighting of materials fabrication, such as aluminum, plastics, and composites, to ensure we are in
position to support growth into battery electric vehicles, energy infrastructure and renewables.
Human Resource Optimization. Our employees are the foundation of our company; with experience across a diverse range of
markets and capabilities, they drive innovation, believe in our process and the outcomes of their work and our success. The Company
is focused on increasing our investment in our workforce and the recruiting and retention of skilled, experienced employees to support
the growth of its business. We seek to utilize competitive, performance-based incentives, develop high-potential candidates for
internal development and advancement, ensure business continuity through multi-tiered succession planning and ensure a stable
recruiting pipeline. As part of this effort, the Company moved its corporate headquarters to Milwaukee, WI in 2024. Additionally, as
we continue to invest in our business and increasingly implement a more technology-enabled infrastructure, we strive to redeploy our
employees in other, higher-skilled areas of our business and invest in training where needed.
Our Capabilities
We offer a broad portfolio and a one-source solution comprised of advanced and innovative capabilities that enhance quality and
simplify supply chains for our customers. Through our collaborative approach, we maintain a complete, and growing, set of
sophisticated manufacturing capabilities to meet the diverse needs of our customers, including:
Program Management We offer our customers a complete solution from concept to launch following the Advanced
Product Quality Planning (APQP) process (planning, design for manufacturability and development, process design and
improvement, product and process validation and continuous improvement).
Engineering We collaborate with our customers and provide design for manufacturing, off-line programming (lasers,
brake press, machining, robotic welding, coordinate measuring machines), value engineering and continuous improvement
(CI).
Tool Design and Build Our in-house tool design and tool room capability ensures quality from start to finish. We build
and service all categories of tooling, including large progressive dies.
Laser Cutting Our programmable fiber and CO2 laser cutting capabilities eliminate expensive hard tooling. Our
equipment can cut metal up to 1 inch thick while maintaining tolerances to .002 inches at speeds up to 4,000 per minute.
Our tube lasers are state of the art cutting machines that offer exceptional tolerances and through-put.
Brake Press We combine our operator’s expertise with the proper equipment required to offer top versatility to our
clients for bending, forming, coining and air bending. Our facilities house the latest press brake machinery including robotic
part manipulation and stacking.
Stamping We provide custom metal stamping capabilities for short, medium or long production runs. For longer runs,
our production of sheet metal stamping uses 50 to 1,200-ton manual or automatic feed presses with state-of-the-art feed
lines for precision metal stamping. Our small, high-speed presses are ideal for producing intricate high-volume stampings.
7
Machining We provide a variety of machining capabilities to meet our customer needs by providing in-house machining
assistance for parts that are part of larger fabrications and assemblies.
Aluminum Extrusion We provide a diverse range of aluminum extrusion profiles for various applications using advanced
extrusion presses ranging from 4.5” to 8.0” billet diameters and 880 to 3,150-ton. Using 6000-series alloys, we can produce
a wide array of products from the most common, large extruded profiles, to some of the smallest and thinnest-walled
extruded profiles in the industry.
Tube Bending We maintain vast tube bending capabilities, including (i) manufacturing of oval, round and square tubes
from .25 inch up through six inch and (ii) leveraging our extensive inventory of equipment including the latest computer
numerical control (CNC) benders; and state-of-the-art technologies such as CNC electro-servo-driven bending with multi-
task heads. We have integrated robotic automation into applicable bending cells to generate maximum throughput with less
labor costs.
Welding We have earned our reputation as one of the premier manufacturers of weldments. Our welding departments
offer manual and robotic wire welding, including Gas Metal Arc Welding (GMAW) and also known as Metal Inert Gas
(MIA), Gas Tungsten Arc Welding (GTAW) and also known as Tungsten Inert Gas (TIG), Heliarc, Fluxcore, Metalcore,
Aluminum, Plasma Weld, Brazing and Pulse Heliarc.
Coatings, Assembly and Logistics We provide premier full-service coating, assembly and logistics solutions. Our coating
capabilities offer a full-range of high technology industrial coating capabilities, including: E-Coat, military certified CARC,
commercial and industrial powder and liquid coatings. Our coating systems utilize direct-to-metal and pre-treatments
including acid pickle, zinc phosphate and in-line Alodine for the conversion of aluminum.
Our Proven Approach
We collaborate with our customers to generate a strategic alignment and position ourselves as an essential part of our customers’
product development and manufacturing processes by drawing on our deep product and engineering knowledge to deliver best-in-class
solutions. Our approach is simple: we view quality as a significant business strategy with a strong return on investment. Our
philosophy on quality is based on our commitment to precision and continuous improvement with an international automotive task
force (IATF) and international organization for standardization (ISO) foundation. Our skilled and experienced staff is highly trained in
areas of quality planning, metrology, geometric dimensioning and tolerancing (ASME Y14.5M 1994), ISO, statistical techniques
(SPC) and ISO 14001 certifications. Our Quality Management System is comprised of the following:
IATF 16949:2016 certification (one of the automotive industry’s most widely used international standards for quality
management);
ISO 9001:2015 registration (international standard for quality management systems);
process and assembly line audits with focus on process control;
process capability that is proven at validation and monitored during production; and
specialized validations for paint and weld operations.
We periodically enter into joint process improvement efforts with key customers. Such exercises have historically resulted in
reduced manufacturing critical path time, cost reductions and quality improvements through effective batch sizes and more repeatable
processes. Our commitment to precision and continuous improvement initiatives have resulted in the acquisition and application of
state-of-the-art technologies and plant improvements that support lean, quick response manufacturing flexibility that put us at the
forefront of our market. Moreover, the agility that our quick response manufacturing methodology provides us keeps our purchasing,
manufacturing, engineering and quality teams on the cutting edge of flexible manufacturing. This adaptable approach also decreases
manufacturing costs, allows for faster order turnaround times and elimination of excess waste.
8
We maintain an advanced machinery portfolio in our facilities allowing us to leverage our employee workforce with state-of-
the-art capabilities and functionality. We strive to maintain our assets or upgrade capabilities where deterioration has driven
obsolescence or better technology is available, reducing our carbon footprint. Most recently, we have invested in multiple fiber laser
systems, robotic brake presses and tube bending cells with automation aimed at reducing labor content and optimizing floor space
which allows us to generate more revenue with the same workforce and footprint.
Our Markets
Our primary end markets include (but are not limited to) the heavy- and medium-duty commercial vehicles, construction &
access equipment, powersports, agriculture and military markets. While our individual end markets may be exposed to cyclical
variations, the diversified nature of our end markets affords us the ability to shift production with demand as certain end markets trend
lower and others trend higher. In our experience, our diversification has muted the impact of downturns on our business that have
affected us in the past. For example, we experienced net sales growth during the 2008 and 2009 recessions due to strong orders,
particularly from our customers focused on the military end market. Moreover, as our heavy- and medium-duty commercial vehicles,
construction & access equipment, powersports, and agriculture customers’ revenues fluctuated from 2013 to 2017, with median peak-
to-trough sales decline of 23%, our peak-to-trough sales declines were less than that of those respective markets at only 10%. We were
able to accomplish this by reallocating our resources to serve our heavy- and medium-duty commercial vehicles and powersports
customers, leading to strong double-digit growth in those end markets.
Heavy- and Medium-Duty Commercial Vehicles: Heavy-duty commercial vehicles include class 8 heavy trucks such as
standard semi-trucks. Medium-duty commercial vehicles include classes 3-7 trucks such as box trucks;
Construction & Access Equipment: Primary applications include wheel loaders, crawlers, skid steer loaders, excavators,
motor graders, aerial lifts, boom lifts and other construction equipment;
Powersports: Encompasses our all-terrain (ATV) and multi-utility (MUV) vehicles, as well as marine and motorcycle
markets;
Agriculture: Primary applications include tractors, combines, sprayers, turf care, implements and other agriculture-related
equipment;
Military: We provide a variety of components for military vehicle platforms;
Other: We provide components and assemblies to a variety of other industrial end markets, such as energy infrastructure,
electric vehicles, industrial equipment and fixtures, consumer tools, mining, forestry, medical and the automotive end
market.
Our Customers
We are a critical and deeply embedded supply partner with strong strategic alignment and relationships with our customers. We
have developed long-standing business relationships with our OEM customers, many of which span decades. Further, we are
diversified by customers and end markets with net sales attributed to our top 20 customers accounting for $503 million of 2023 net
sales, and no single end market accounting for more than 38% of net sales. For the year ended December 31, 2023, PACCAR Inc.,
John Deere and AB Volvo accounted for 15.0%, 14.8% and 10.6% of net sales, respectively. We have not historically experienced
customer attrition given high customer switching costs resulting from our embedded relationships driven by our broad capabilities and
scale.
Raw Materials and Manufactured Components
Our primary purchased commodities are steel and aluminum. We maintain a broad and diverse base of over 800 direct material
suppliers. Our established relationships provide efficient and flexible access to resources and redundancy to ensure support of our
customers. We have no history of significant supply issues or outages. In 2023, no single supplier represented more than 16% of our
total raw material purchases and over 98% of the raw materials we purchased were sourced from suppliers in the United States. Our
suppliers are strategically located to maximize efficiencies and minimize shipping costs. We maintain a multitude of alternative
9
suppliers to which we could transfer orders to, if needed. As we continue to grow, however, we intend to leverage our size and scale to
rationalize our supply base to further reduce material costs. We have structured our customer contracts to pass through commodity
price changes, which has allowed us to limit any potential impact of raw material price volatility and tariffs to our margins.
Sales and Marketing
We have a strong sales team comprised of approximately 50 experienced professionals responsible for managing and expanding
client relationships and proactively pursuing new opportunities. Sales personnel are aligned by market segment and customer,
including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and
other end markets, and employ a highly technical and collaborative sales process with deep knowledge of our customers and
capabilities. Sales personnel have assigned support teams comprised of inside sales, commercial operations, marketing and sales
administration personnel. We are consistently involved in the request for proposal processes, where our sales teams with deep process
expertise collaborate with customers on optimal designs for manufacturability and manufacturing efficiency. The upfront
collaboration drives formalization of product specifications, program lifecycle planning, cost estimates and risk mitigation. The sales
process typically takes 3 to 18 months and ultimately ends in the implementation of product lifecycle timelines and purchase orders
under long-term customer arrangements. The sales team utilizes systems infrastructure that effectively track and manage backlogs,
quotes and bookings information, strategic projects and call reports, all of which are reviewed at weekly sales team meetings.
Information Systems
We utilize standardized information technology systems across all areas of quoting and estimating, enterprise resource planning,
materials resource planning, capacity planning and accounting for enhanced procurement of work, project execution and financial
controls. We provide information technology oversight and support from our corporate headquarters in Milwaukee, WI. The
operational information systems we employ throughout our company are industry specific applications that in some cases have been
internally or vendor modified and improved to fit our operations. Our enterprise resource planning software is integrated with our
operational information systems wherever possible to deliver relevant, real-time operational data to designated personnel. Accounting
and operations personnel of acquired companies are trained not only by our information technology support staff, but by long-tenured
employees in our organization with extensive experience using our systems. We believe our information systems provide our people
with the tools to execute their individual job function and achieve our strategic initiatives.
Our Competition
We participate in a highly fragmented market with competitors in each of the end markets we serve ranging in size from small
companies focused on a single capability or end market, to large multi-disciplinary companies. While there can be instances of intense
competition in specific end markets, we believe that we have been able to effectively compete, and maintain competitive advantages
on the basis of our:
scale and product offering with the ability to cross-sell and provide our customers with a one-source solution;
broad manufacturing capability and flexibility to fulfill requests that require complex solutions;
customer service with our highly skilled and knowledgeable workforce able to provide consultative advice; and
regionalized geographic focus provides a defensible position from both foreign and domestic competitors as our customers
continue to take a regionalized approach to production, which provides a shorter supply chain with greater flexibility.
Our Human Capital Management
As of December 31, 2023, we had approximately 2,500 full-time employees, approximately 1,900 of whom are production
employees. None of our employees are represented by a union and we are not party to any collective bargaining agreements. On
average, our employees have approximately nine years of service with us.
10
Training and development
We maintain an experienced and skilled workforce. We have been focused on attracting and retaining high quality personnel as
they represent a critical factor in our continued success. There are many different career paths available to employees, and in order to
assist in their career development, we offer multiple in-house training programs, mentorship programs and tuition reimbursement. Our
talent development efforts span across all levels of the organization, including an annual performance review process, which includes
a development plan assessment allowing employees to discuss and build development plans with their leaders to develop their careers
and an executive coaching program that prepares our future leaders for increased responsibilities at MEC. Despite the recent market
challenges in hiring trade-skilled employees, our continued investment in newer technologies and capabilities has allowed us to
opportunistically re-train and redeploy employees from certain previously human capital-intensive roles into other areas of the
Company.
Compensation and benefits
We believe we deliver highly competitive compensation and comprehensive benefit packages, annually benchmarking them
against comparable industries in the same geographic vicinity to where our facilities are located. The goals of our compensation
programs are to: align pay for performance, support the Company’s goals and attract, retain and motivate high-potential candidates.
Additionally, our stock-based compensation plan is a key part of how we stay competitive from a total compensation perspective, as it
incentivizes and rewards sustained Company performance. Select employees responsible for driving results are eligible to receive
stock-based compensation through our Omnibus Incentive Plan. Refer to Note 18 – Stock-based compensation within the Notes to
Consolidated Financial Statements for additional detail related to our stock-based compensation program.
Full-time employees are eligible to receive the following benefits: a Company matched 401(k) Plan, paid time off, health
insurance (medical, dental, vision), short-term and long-term disability, life insurance, accidental death and dismemberment insurance,
flexible spending accounts, wellness program and life matters employee assistance program. Further enhancing our benefit offerings,
we provide an on-site healthcare team at certain facilities to treat work and non-work related injuries and assist employees with
general wellness and overall well-being.
Lastly, MEC has several initiatives centered around employee appreciation, which include: cookouts and holiday lunches, Fresh
Market food program and quarterly bonuses.
Health and safety
The safety, health and well-being of our employees is one of the Company’s top priorities. Our “Work MEC Safe” program
creates a strong safety culture based on five key elements: Inspire, Lead, Analyze, Educate and Recognize. These elements lay the
foundation for establishing an employee voice in daily operations, ensuring safety ownership from those in leadership roles,
identifying workplace hazards through routine inspections, audits and observations, training employees to identify and mitigate risks
and prevent injuries, and developing avenues to continue enhancing the importance of safety in the workplace.
Ethics
Along with our core values, we act in accordance with our Code of Conduct Policy, which creates expectations and provides
guidance for all our employees to make the right decisions. Our Code of Conduct Policy covers such topics as conducting Company
affairs and fair dealing, conflicts of interest, compliance and disclosures, proper use of Company assets, protecting confidential
information and reporting and enforcement of Code of Conduct violations.
Environmental Matters
We are subject to numerous federal, state and local laws and regulations relating to manufacturing, handling and disposal of
materials into the environment. We believe that our environmental control procedures are adequate.
11
Information About Our Executive Officers
The following table sets forth certain information as of February 1, 2024, regarding our executive officers:
Name
Jagadeesh A. Reddy
Todd M. Butz
Ryan F. Raber
Sean P. Leuba
Rachele M. Lehr
Age
52
52
41
53
47
President and Chief Executive Officer
Chief Financial Officer
Position
Executive Vice President - Strategy, Sales & Marketing
Senior Vice President - Corporate Development and General Counsel
Chief Human Resources Officer
Jagadeesh A. Reddy joined our company as President, Chief Executive Officer and as a member of the Board of Directors in
July 2022. Before joining our company, Mr. Reddy was a member of the senior leadership team at W.R. Grace where he was
responsible for the Strategy and Growth function as well as Managing Director of Advanced Refining Technologies LLC (ART),
Grace’s global joint venture with Chevron. Mr. Reddy previously served as Vice President and General Manager, Water Technologies
Strategic Business Unit, and Vice President, Corporate Strategy at Pentair PLC. Prior to Pentair PLC, he held strategy and business
leadership roles at ITT Corporation, and its spin-off, Xylem Inc, spent time in M&A roles with United Technologies Corp, product
management roles with Danaher Corporation and started his career in manufacturing operations at Denso Corporation. Mr. Reddy
earned a Master of Business Administration in Finance and Strategy from the Kellogg School of Management and a Master’s in
Engineering Management from the McCormick School of Engineering, both at Northwestern University. He also holds a Master’s in
Industrial Engineering from the University of Tennessee, and a Bachelor’s in Mechanical Engineering from a university in India.
Todd M. Butz joined our company in 2008 and has served as our Chief Financial Officer since January 2014. Mr. Butz also
serves on the Board of Trustees for Marian University. Prior to joining our company, Mr. Butz spent time in various roles including
Manager of Worldwide Financial Reporting at Mercury Marine, a subsidiary of the Brunswick Corporation, and Audit Supervisor at
Schenck Business Solutions, now Clifton Larsen Allen. Mr. Butz earned a Bachelor of Science in Accounting and Business
Management from Marian University and is currently a licensed certified public accountant.
Ryan F. Raber joined our company in 2009 and has served as our Executive Vice President – Strategy, Sales & Marketing since
June 2019. Prior to serving in his current position, Mr. Raber served as our Executive Vice President – Sales & Marketing beginning
in November 2018 and as our Vice President of Sales & Marketing beginning in August 2013. Mr. Raber earned a Masters of
Business Administration from the University of Wisconsin-Madison and a Bachelor of Science in Mechanical Engineering from
Purdue University.
Sean P. Leuba joined our company in January 2023 as Senior Vice President – Corporate Development and General Counsel.
Before joining our company, Mr. Leuba was the Head of Corporate Development for Caterpillar Inc. Previously, Mr. Leuba served in
multiple progressively senior roles, including as General Manager, Caterpillar Electric Power Division and General Manager,
Caterpillar Remanufactured Products Division. Prior to joining Caterpillar, Mr. Leuba practiced law with Arnold & Porter in its
Washington, D.C. office focusing on corporate, securities, mergers & acquisitions and venture capital. Mr. Leuba earned a Master of
Business Administration in Finance from the University of Chicago, a Juris Doctor from the Washington and Lee University School of
Law, and a Bachelor of Arts from the University of Maryland Baltimore County.
Rachele M. Lehr joined our company in March 2023 as Chief Human Resources Officer. Prior to joining our company, Ms.
Lehr was the Senior Vice President of Human Resources and Administration at Briggs & Stratton. Previously, Ms. Lehr served in
multiple other senior roles at Briggs & Stratton including Director of Hurman Resources and International Controller. Prior to joining
Briggs & Stratton, Ms. Lehr served as Sales Controller for Bar-S Foods (A Sigma Company). Ms. Lehr earned a Bachelor of Science
in Business Administration with a Major in Accounting from Marquette University.
Available Information
Our website address is www.mecinc.com. We are not including the information provided on our website as a part of, or
incorporating it by reference into, this Annual Report on Form 10-K. We make available free of charge (other than an investor’s own
internet access charges) through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, amendments to these reports and our proxy statements, as soon as reasonably practicable after we electronically file such
material with, or furnish such material to, the United States Securities and Exchange Commission (the SEC).
12
Item 1A. Risk Factors.
Investing in our common stock involves risk. You should carefully consider the risks and uncertainties described below, together
with all of the other information in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a
decision to invest in our common stock. The risks and uncertainties described below may not be the only ones we face. If any of the
risks actually occur, our business, financial condition, operating results and prospects could be materially and adversely affected.
In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
Risks Related to Our Business
Macroeconomic conditions could have a material adverse impact on our business, financial condition, cash flows and results of
operations.
Macroeconomic conditions, including inflation, elevated interest rates and recessionary concerns, as well as continuing supply
chain constraints affecting some of our customers, labor availability and material cost pressures, have had, and may continue to have,
a negative impact on our business, financial condition, cash flows and results of operations. For instance, we were negatively impacted
in 2023 by supply chain constraints impacting certain of our OEMs customers. In addition, in 2023, continued inflationary pressures
on wages, benefits, materials, and manufacturing supplies negatively impacted our results of operations and cash flows.
We expect certain supply chain constraints, material cost inflation and inflationary pressures on wages and benefits to continue
in 2024 and we may not be able to fully mitigate the impact of the inflationary cost pressures through price increases. Continuing or
worsening inflation, recessionary concerns and/or supply chain and labor challenges may have a material adverse impact on our
business, financial condition, cash flows and/or results of operations.
Although we do not have any operations outside the United States, geopolitical events, including the ongoing conflict between
Russia and Ukraine and the conflict in the Middle East, has caused greater uncertainty in the global economy and has led to significant
volatility in raw material costs, component costs, commodity prices and energy costs, exacerbating the inflation situation.
We are affected by developments in the industries in which our customers operate.
We derive our net sales from customers in the following industry sectors: heavy- and medium-duty commercial vehicles,
construction & access equipment, powersports, agriculture, military and other end markets. Factors affecting any of these industries in
general, or any of our customers in particular, could adversely affect us because our net sales growth largely depends on the continued
growth of our customers’ businesses in their respective industries. These factors include:
seasonality of demand for our customers’ products which may cause our manufacturing capacity to be underutilized for
periods of time;
our customers’ failure to successfully market their products, to gain or retain widespread commercial acceptance of their
products or to compete effectively in their industries;
loss of market share for our customers’ products, which may lead our customers to reduce or discontinue purchasing our
processes and solutions and to reduce prices, thereby exerting pricing pressure on us;
economic conditions in the markets in which our customers operate, in particular, the United States, including inflationary
pressures and the other negative impacts on economic conditions, as well as recessionary periods such as a global economic
downturn;
our customers’ decision to insource the production of components that has traditionally been outsourced to us; and
product design changes or manufacturing process changes that may reduce or eliminate demand for the components we
supply.
13
We expect that future sales will continue to depend on the success of our customers. If economic conditions and demand for our
customers’ products deteriorate, we may experience a material adverse effect on our business, operating results and financial
condition.
Most of our customers do not commit to long-term production schedules, which makes it difficult for us to schedule production
accurately and achieve maximum efficiency of our manufacturing capacity.
Most of our customers do not commit to long-term contracts or firm production schedules, and we continue to experience
reduced lead-times in customer orders. Additionally, customers may change production quantities or delay production with little lead-
time or advance notice. Therefore, we rely on and plan our production and inventory levels based on our customers’ advance orders,
commitments and/or forecasts as well as our internal assessments and forecasts of customer demand. The volume and timing of sales
to our customers may vary due to, among others:
variation in demand for or discontinuation of our customers’ products;
our customers’ attempts to manage their inventory;
design changes;
changes in our customers’ manufacturing strategies;
disruptive events in the markets in which our customers operate, including natural disasters and epidemics;
acquisitions of or consolidation among customers.
The variations in volume and timing of sales make it difficult to schedule production and optimize utilization of manufacturing
capacity. This uncertainty may require us to increase staffing and incur other expenses in order to meet an unexpected increase in
customer demand, potentially placing a significant burden on our resources. Additionally, an inability to respond to such increases in a
timely manner may cause customer dissatisfaction, which may negatively affect our customer relationships.
Further, in order to secure sufficient production scale, we may make capital investments in advance of anticipated customer
demand (including, in some instances, new customer demand). Such investments may lead to low utilization levels if demand
forecasts change and we are unable to utilize the additional capacity. Because fixed costs make up a large proportion of our total
production costs, a reduction in customer demand can have a significant adverse impact on our gross profits and operating results.
Additionally, we order materials and components based on customer forecasts and orders and suppliers may require us to purchase
materials and components in minimum quantities that exceed customer requirements, which may have an adverse impact on our gross
profits and operating results. In the past, anticipated orders from some of our customers and anticipated new customers have failed to
materialize and/or delivery schedules have been deferred as a result of changes in our customers’ business needs.
We may be unable to realize net sales represented by our awarded business, which could materially and adversely impact our
business, financial condition, results of operations and cash flows.
The realization of future net sales from awarded business is inherently subject to a number of important risks and uncertainties,
including a lack of long-term commitments and production schedules with customers and anticipated new customers. Accordingly, we
cannot assure you that we will realize any or all of the future net sales represented by our awarded business. Any failure to realize
these net sales could have a material adverse effect on our business, financial condition, results of operations and cash flows.
14
In addition to not having a commitment from our customers and anticipated new customers regarding the minimum number of
components they must purchase from us if we obtain awarded business, typically the terms and conditions of the agreements with our
customers provide that they have the contractual right to unilaterally terminate our contracts with them with no notice or limited
notice. In many cases, we must commit substantial resources in preparation for production under awarded customer business well in
advance of the customer’s production start date. If such contracts are terminated by our customers, our ability to obtain compensation
from our customers for such termination is generally limited to the direct out-of-pocket costs that we incurred for raw materials and
work-in-progress. Although we have been successful in recovering these costs under appropriate circumstances in the past, we cannot
assure you that our results of operations will not be materially adversely impacted in the future if we are unable to recover these types
of pre-production costs related to our customers’ cancellation of awarded business.
Failure to compete successfully in our markets could materially adversely affect our business, financial condition, results of
operations or prospects.
We offer our processes and solutions in highly competitive markets. The competitors in these markets may, among other things:
respond more quickly to new or emerging technologies;
have greater name recognition, critical mass or geographic market presence;
be better positioned to take advantage of acquisition opportunities;
adapt more quickly to changes in customer requirements;
devote greater resources to the development, promotion and sale of their processes and solutions;
be better positioned to compete on price due to any combination of low-cost labor, raw materials, components, facilities or
other operating items, or willingness to make sales at lower margins than us;
consolidate with other competitors in the industry which may create increased pricing and competitive pressures on our
business; and
be better able to utilize excess capacity which may reduce the cost of their processes and solutions.
Competitors with lower cost structures may have a competitive advantage over us. We also expect our competitors to continue
to improve the performance of their current processes and solutions, to reduce the prices of their existing processes and solutions and
to introduce new processes or solutions that may offer greater performance and improved pricing. Additionally, we may face
competition from new entrants to the industry in which we operate. Any of these developments could cause a decline in sales and
average selling prices, loss of market share or profit margin compression. Maintaining and improving our competitive position will
require successful management of these factors, including continued investment by us in research and development, engineering,
marketing and customer service and support. Our future growth rate depends upon our agility to compete successfully, which is
impacted by a number of factors, including, but not limited to, our ability to (i) identify emerging technological trends in our target
end markets, (ii) develop and maintain a wide range of competitive and appropriately priced processes and solutions and defend our
market share against an ever-expanding number of competitors including many new and non-traditional competitors, (iii) ensure that
our processes and solutions remain cost-competitive and (iv) attract, develop and retain individuals with the requisite technical
expertise and understanding of customers’ needs to develop and sell new technologies and processes.
We may not be able to maintain our manufacturing, engineering and technological expertise.
The markets for our processes and solutions are characterized by changing technology and evolving process development. The
continued success of our business will depend upon our ability to:
hire, retain and expand our pool of qualified engineering and trade-skilled personnel;
15
maintain technological leadership in our industry;
implement new and expand upon current robotics, automation and tooling technologies; and
anticipate or respond to changes in manufacturing processes in a cost-effective and timely manner.
We cannot be certain that we will develop the capabilities required by our customers in the future. The emergence of new
technologies, industry standards or customer requirements may render our equipment, inventory or processes obsolete or
uncompetitive. We may have to acquire new technologies and equipment to remain competitive. The acquisition and implementation
of new technologies and equipment may require us to incur significant expense and capital investment, which could reduce our
margins and affect our operating results. When we establish or acquire new facilities, we may not be able to maintain or develop our
manufacturing, engineering and technological expertise due to a lack of trained personnel, effective training of new staff or technical
difficulties with machinery. Failure to anticipate and adapt to customers’ changing technological needs and requirements or to hire and
retain a sufficient number of engineers and maintain manufacturing, engineering and technological expertise may have a material
adverse effect on our business, operating results and financial condition.
We are dependent on a limited number of large customers for current and future net sales. The loss of any of these customers or
the loss of market share by these customers could materially adversely affect our business, financial condition, results of
operations and cash flows.
We depend on a limited number of major manufacturers for a majority of our net sales. For example, our largest customers in
2023 included PACCAR Inc., John Deere and AB Volvo which accounted for 15.0%, 14.8% and 10.6% of our net sales, respectively.
Our financial performance depends in large part on our ability to continue to arrange for the purchase of our processes and solutions
with these customers, and we expect these customers to continue to make up a large portion of our net sales in the foreseeable future.
The loss of all or a substantial portion of our sales to any of our large-volume customers could have a material adverse effect on our
business, financial condition, results of operations and cash flows by reducing cash flows and by limiting our ability to spread our
fixed costs over a larger net sales base. We may make fewer sales to these customers for a variety of reasons, including, but not
limited to:
loss of business relationship;
reduced or delayed customer requirements;
the insourcing of business that has been traditionally outsourced to us;
strikes or other work stoppages affecting production by our customers; or
reduced demand for our customers’ products, including as a result of inflationary pressures, rising interest rates,
recessionary concerns and/or geopolitical events.
Entering new markets, either organically or via acquisition, poses new competitive threats and commercial risks.
As we expand into new markets, either organically or via acquisition, we expect to diversify our net sales by leveraging our
development, engineering and manufacturing capabilities in order to source necessary parts and components for other industries. Such
diversification requires investments and resources that may not be available as needed. Furthermore, even if we sign contracts in new
markets, we cannot guarantee that we will be successful in leveraging our capabilities into these new markets and thus in meeting the
needs of these new customers and competing favorably in these new markets. If these new customers experience reduced demand for
their products or financial difficulties, our future prospects will be negatively affected as well.
16
We depend on our key executive officers, managers, and trade-skilled personnel and may have difficulty retaining and recruiting
qualified employees. Moreover, we operate in competitive labor markets, which may also impact our ability to hire and retain
employees at our facilities.
Our success depends to a large extent upon the continued services of our executive officers, senior management, managers and
trade-skilled personnel and our ability to recruit and retain skilled personnel to maintain and expand our operations. We could be
affected by the loss of any of our executive officers who are responsible for formulating and implementing our business plan and
strategy, and who have been instrumental in our growth and development. In addition, we need to recruit and retain additional
management personnel and other skilled employees at our facilities. However, competition for our trade-skilled labor is high,
particularly in some of the geographic locations where our facilities are located. Although we intend to continue to devote significant
resources to recruit, train and retain qualified employees, we may not be able to attract, effectively train and retain these employees.
Any failure to do so could impair our ability to conduct design, engineering and manufacturing activities, efficiently perform our
contractual obligations, develop marketable components, timely meet our customers’ needs and ultimately win new business, all of
which could adversely affect our business, financial condition and results of operations. If we are not able to do so, our business and
our ability to continue to grow could be negatively affected. In addition, salaries and related costs are a significant portion of the cost
of providing our solutions and, accordingly, our ability to efficiently utilize our workforce impacts our profitability.
Availability of, and volatility in the prices of, raw materials and energy prices and our ability to pass along increased costs to our
customers could adversely affect our results of operations.
The prices and availability of raw materials critical to our business and performance are based on global supply and demand
conditions. Certain raw materials used by us are only available from a limited number of suppliers, and it may be difficult to find
alternative suppliers at the same or similar costs. While we strive to pass through the price of raw materials to our customers, we may
not be able to do so in the future, and volatility in the prices of raw materials (including as a result of macroeconomic conditions and
geopolitical events) may affect customer demand for certain components. In addition, we, along with our suppliers and customers, rely
on various energy sources for a number of activities connected with our business, such as the transportation of raw materials and
finished parts. The availability and pricing of these resources are subject to market forces that are beyond our control. Furthermore, we
are vulnerable to any reliability issues experienced by our suppliers, which also are beyond our control. Our suppliers contract
separately for the purchase of such resources, and our sources of supply could be interrupted should our suppliers not be able to obtain
these materials due to higher demand or other factors that interrupt their availability (including as a result of macroeconomic
conditions and geopolitical events). Energy and utility prices, including electricity and water prices, and in particular prices for
petroleum-based energy sources, are volatile. Increased supplier and customer operating costs arising from volatility in the prices of
energy sources, such as increased energy and utility costs and transportation costs, could be passed through to us and we may not be
able to increase our product prices sufficiently or at all to offset such increased costs. The impact of any volatility in the prices of
energy or the raw materials on which we rely, including the reduction in demand for certain components caused by such price
volatility, could result in a loss of net sales and profitability and adversely affect our results of operations.
Our manufacturing operations are dependent upon third-party suppliers, making us vulnerable to supply shortages.
We obtain raw materials, parts and certain components from third-party suppliers. Any delay in receiving supplies could impair
our ability to timely deliver components to our customers and, accordingly, could have an adverse effect on our business, financial
condition, results of operations and cash flows. The volatility in the financial markets and uncertainty in the sectors our suppliers
service could result in exposure related to the financial viability of certain of our suppliers. Suppliers may also exit certain business
lines, causing us to find other suppliers for materials or components and potentially delaying our ability to deliver components to
customers, or our suppliers may change the terms on which they are willing to provide parts or materials to us, any of which could
adversely affect our financial condition and results of operations. In addition, many of our suppliers have unionized workforces that
could be subject to work stoppages as a result of labor relations issues. Some of our suppliers supply components and materials that
cannot be quickly or inexpensively re-sourced to another supplier due to long lead times and contractual commitments that might be
required by another supplier in order to provide the components or materials.
17
Increases in the cost of employee benefits could impact our financial results and cash flows.
Our expenses relating to employee health benefits are significant. Unfavorable changes in the cost of and the unpredictability of
claims under such benefits, including the current inflationary pressures on wages and benefits, could impact our financial results and
cash flows. Healthcare costs have risen significantly in recent years, and recent legislative and private sector initiatives regarding
healthcare reform could result in significant changes to the U.S. healthcare system. Due to the breadth and complexity of the
healthcare reform legislation and the uncertainty surrounding further reform proposals, we are not able to fully determine the impact
that healthcare reform will have in the future on company sponsored medical plans.
Our growth strategy includes acquisitions, and we may not be able to identify attractive acquisition targets or successfully integrate
acquired targets without impacting our business.
Acquisitions have played a key role in our growth strategy, and we expect to continue to grow through acquisitions in the future.
We expect to continue evaluating potential strategic acquisitions of businesses, assets and product lines. We may not be able to
identify suitable candidates, negotiate appropriate or favorable acquisition terms, obtain financing that may be needed to consummate
such transactions or complete proposed acquisitions. There is significant competition for acquisition and expansion opportunities in
our businesses, which may increase the cost of any acquisition or result in the loss of attractive acquisition targets.
In addition, acquisitions involve numerous risks, including (i) incurring the time and expense associated with identifying and
evaluating potential acquisitions and negotiating potential transactions, resulting in management’s attention being diverted from the
operation of our existing business; (ii) using estimates and judgments to evaluate credit, operations, funding, liquidity, business,
management and market risks with respect to the target entity or assets; (iii) litigation relating to an acquisition, particularly in the
context of a publicly held acquisition target, could require us to incur significant expenses or result in the delaying or enjoining of the
transaction; (iv) failing to properly identify an acquisition candidate’s liabilities, potential liabilities or risks; and (v) not receiving
required regulatory approvals or such approvals being delayed or restrictively conditional. In addition, any acquisitions could involve
the incurrence of substantial additional indebtedness or dilution to our shareholders. We cannot assure you that we will be able to
successfully integrate any acquisitions that we undertake or that such acquisitions will perform as planned or prove to be beneficial to
our operations and cash flow. Any such failure could seriously harm our financial condition, results of operations and cash flows.
We routinely evaluate potential acquisition candidates and engage in discussions and negotiations regarding potential
acquisitions; however, even if we execute a definitive agreement for an acquisition, there can be no assurance that we will
consummate the transaction within the anticipated closing timeframe, or at all. Further, acquisitions typically involve the payment of a
premium over book- and market-value for the target business or asset and, therefore, some dilution of our tangible book value and/or
earnings per common share may occur in connection with any future transaction.
If we fail to develop new and innovative processes or if customers in our market do not accept them, our results would be
negatively affected.
Our processes must be kept current to meet our customers’ needs. To remain competitive, we therefore must develop new and
innovative processes on an ongoing basis. If we fail to make innovations or the market does not accept our new processes, our sales
and results would suffer. We invest significantly in the research and development of new processes; however, these expenditures do
not always result in processes that will be accepted by the market. To the extent they do not, whether as a function of the process or
the business cycle, we will have increased expenses without significant sales to offset such costs. Failure to develop successful new
processes may also cause potential customers to purchase from competitors.
We are dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity risks
and data leakage risks.
We are dependent on information technology systems and infrastructure that could be damaged or interrupted by a variety of
factors. Any significant breach, breakdown, destruction or interruption of these systems by employees, others with authorized access
to our systems or unauthorized persons has the potential to negatively affect our operations. There is also a risk that we could
experience a business interruption, theft of information or reputational damage as a result of a cyberattack, such as the infiltration of a
data center, denial-of-service attacks, viruses, malicious software, phishing attacks, security breaches or data leakage of confidential
information either internally or at our third-party providers. Although we have invested in the protection of our data and information
18
technology to reduce these risks and periodically test the security of our information systems network, there can be no assurance that
our efforts will prevent breakdowns or breaches in our systems that could have a material adverse effect on our financial condition,
results of operations and liquidity.
We may incur additional expenses and delays due to technical problems or other interruptions at our manufacturing facilities.
Disruptions in operations due to technical problems or power interruptions as well as other interruptions such as floods, fire,
other natural disasters, epidemics or pandemics could adversely affect the manufacturing capacity of our facilities. Such interruptions
could cause delays in production and cause us to incur additional expenses such as charges for expedited deliveries for components
that are delayed. In addition, our customers have the ability to cancel purchase orders in the event of any delays in production and may
decrease future orders if delays are persistent. Additionally, to the extent that such disruptions do not result from damage to our
physical property, these may not be covered by our business interruption insurance. Any such disruptions may adversely affect our
operations and financial results.
Geopolitical and economic developments could adversely affect our business.
Geopolitical events, increased political instability and social unrest, evidenced by the threat or occurrence of terrorist attacks or
conflicts, enhanced national security measures, the risks related to epidemics and the related decline in consumer confidence may
hinder our ability to do business. Any escalation in these events or similar future events may disrupt our operations or those of our
customers and suppliers and could affect the availability of raw materials and components we need in our manufacturing operations or
the means to transport those materials or components to our manufacturing facilities and finished parts to our customers. These events
have had and may continue to have an adverse effect, generally, on the economy and consumer confidence and spending, which could
adversely affect our net sales and operating results. The effect of these events on the volatility of the financial markets could in the
future lead to volatility of the market price of our securities and may limit the capital resources available to us, our customers and our
suppliers.
The impact of foreign trade relations and associated tariffs, as well as our reliance on international suppliers for certain raw
materials, could adversely impact our business.
We currently source certain raw materials from international suppliers. Import tariffs, taxes, customs duties and/or other trade
regulations imposed by the U.S. government on foreign countries, or by foreign countries on the United States, could significantly
increase the prices we pay for certain raw materials, such as steel, aluminum and purchased components, that are critical to our ability
to manufacture components for our customers. The international sourcing for these materials may also be hurt by health concerns
regarding infectious diseases in countries in which these materials are purchased from, adverse weather, natural disasters or
geopolitical events. In addition, we may be unable to find a domestic supplier to provide the necessary raw materials on an economical
basis in the amounts we require. If the cost of our raw materials increases, or if we are unable to procure the necessary raw materials
required to manufacture our components, then we could experience a negative impact on our operating results, profitability, customer
relationships and future cash flows.
Additionally, our customers’ businesses may be negatively impacted by import tariffs, taxes, customs duties and/or other trade
regulations imposed by the U.S. government on foreign countries or by foreign countries on the United States, which could, in turn,
reduce our customers’ demand for the components that we manufacture for them. Any reduction in customer demand for our
components as a result of such tariffs, taxes, customs duties and/or other trade regulations, or as a result of the impact of infectious
diseases, could have a material adverse impact on our financial position, results of operations, cash flows and liquidity.
The risks associated with climate change, as well as climate change legislation and regulations, could adversely affect our
operations and financial condition.
The physical risks of climate change, such as more frequent or more extreme weather events, changes in temperature and
precipitation patterns, changes to ground and surface water availability and other related phenomena, could affect some, or all, of our
operations, as well as the operations of our customers and suppliers. Severe weather or other natural disasters could be destructive,
which could result in increased costs, including supply chain costs.
19
In addition, a number of government bodies have finalized, proposed or are contemplating legislative and regulatory changes in
response to growing concerns about climate change. In recent years, federal, state and local governments have taken steps to reduce
emissions of greenhouse gases (GHGs). The Environmental Protection Agency has finalized a series of GHG monitoring, reporting
and emissions control rules for certain large sources of GHGs, and the U.S. Congress has, from time to time, considered adopting
legislation to reduce GHG emissions. Numerous states have already taken measures to reduce GHG emissions, primarily through the
development of GHG emission inventories and/or regional GHG cap-and-trade programs.
Although it is not possible at this time to predict how future legislation or regulations to address GHG emissions would impact
our business, any such laws and regulations imposing reporting obligations on, or limiting emissions of GHGs from, our equipment
and operations, could require us to incur costs to reduce GHG emissions associated with our operations. We cannot assure you that our
costs, liabilities and obligations relating to environmental matters will not have a material adverse effect on our business, financial
condition, results of operations and cash flows.
Our manufacturing, painting and coating operations are subject to environmental, health and safety laws and regulations that
could result in liabilities to us.
Our manufacturing, painting and coating operations are subject to environmental, health and safety laws and regulations,
including those governing discharges to air and water, the management and disposal of hazardous substances, the cleanup of
contaminated sites and health and safety matters. We could incur material costs, including cleanup costs, civil and criminal fines,
penalties and third-party claims for cost recovery, property damage or personal injury as a result of violations of or liabilities under
such laws and regulations. The ultimate cost of remediating contaminated sites, if any, is difficult to accurately predict and could
exceed estimates. In addition, as environmental, health and safety laws and regulations have tended to become stricter, we could incur
additional costs complying with requirements that are promulgated in the future.
If our manufacturing processes do not comply with applicable statutory and regulatory requirements, or if we manufacture
components containing manufacturing defects, demand for our capabilities may decline and we may be subject to liability claims.
Our manufacturing processes and facilities need to comply with applicable statutory and regulatory requirements. We may also
have the responsibility to ensure that the processes we use satisfy safety and regulatory standards, including those applicable to our
customers and to obtain any necessary certifications. In addition, our customers’ products, as well as the manufacturing processes and
components that we use to produce such products, are often highly complex. As a result, components that we manufacture may at
times contain manufacturing defects, and our manufacturing processes may be subject to errors or not be in compliance with
applicable statutory and regulatory requirements or demands of our customers. Defects in the components we manufacture, whether
caused by a manufacturing or component failure or error, or deficiencies in our manufacturing processes, may result in delayed
shipments to customers, replacement costs or reduced or cancelled customer orders. If these defects or deficiencies are significant, our
business reputation may also be damaged. The failure of the components that we manufacture for our customers to comply with
applicable statutory and regulatory requirements may subject us to legal fines or penalties and, in some cases, require us to shut down
or incur considerable expense to correct a manufacturing process or facility. In addition, these defects may expose us to liability to pay
for the recall of a customer’s product or to indemnify our customers for the costs of any such claims or recalls which they face as a
result of using items manufactured by us in their products.
Adverse judgments or settlements in legal disputes, including product liability, intellectual property infringement and other claims,
could result in materially adverse monetary damages or injunctive relief and damage our business and/or our reputation.
We are subject to, and may become a party to, a variety of litigation or other claims and suits that arise from time to time in the
ordinary course of our business. The results of litigation and other legal proceedings are inherently uncertain and adverse judgments or
settlements in some or all of these legal disputes may result in materially adverse monetary damages or injunctive relief against us, or
in other adverse consequences to our financial condition and results of operations. Additionally, our insurance policies may not protect
us against potential liability due to various exclusions in the policies and self-insured retention amounts. Partially or completely
uninsured claims, if successful and of significant magnitude, could have a material adverse effect on our business, financial condition
and results of operations. Furthermore, any claims or litigation, even if fully indemnified or insured, could damage our reputation and
make it more difficult to compete effectively or obtain adequate insurance in the future.
20
The components we manufacture can expose us to potential liabilities. For instance, our manufacturing operations expose us to
potential product liability claims resulting from injuries caused by defects in components we design or manufacture, as well as
potential claims that components we design infringe on third-party intellectual property rights. Such claims could subject us to
significant liability for damages, subject the infringing portion of our business to injunction and, regardless of their merits, could be
time-consuming and expensive to resolve. We may also have greater potential exposure from warranty claims and recalls due to
problems caused by component or product design. Although we have product liability insurance coverage, it may not be sufficient to
cover the full extent of our product liability, if at all. A successful product liability claim in excess or outside of our insurance
coverage or any material claim for which insurance coverage was denied or limited and for which indemnification was not available
could have a material adverse effect on our business, results of operations and/or financial condition.
Any failure to protect our customers’ intellectual property that we use in the products we manufacture for them could harm our
customer relationships and subject us to liability.
The products we manufacture for our customers often contain our customers’ intellectual property, including copyrights,
patents, trade secrets and know-how. Our success depends, in part, on our ability to protect our customers’ intellectual property. The
steps we take to protect our customers’ intellectual property may not adequately prevent its disclosure or misappropriation. If we fail
to protect our customers’ intellectual property, our customer relationships could be harmed, and we may experience difficulty in
establishing new customer relationships. In addition, our customers might pursue legal claims against us for any failure to protect their
intellectual property, possibly resulting in harm to our reputation and our business, financial condition and operating results.
Compliance or the failure to comply with regulations and governmental policies could cause us to incur significant expense.
We are subject to a variety of local and foreign laws and regulations including those relating to labor and health and safety
concerns. Such laws may require us to pay mandated compensation and penalties. Additionally, we may need to obtain and maintain
licenses and permits to conduct business in various jurisdictions. If we or the businesses or companies we acquire have failed or fail in
the future to comply with such laws and regulations, then we could incur liabilities and fines and our operations could be suspended.
Such laws and regulations could also restrict our ability to modify or expand our facilities, could require us to acquire costly
equipment, or could impose other significant expenditures.
Because our industry is capital intensive and we have significant fixed and semi-fixed costs, our profitability is sensitive to changes
in volume.
The property, plants and equipment needed to produce components for our customers and provide our processes and solutions
can be very expensive. We must spend a substantial amount of capital to purchase and maintain such property, plants and equipment.
Although we believe our current cash balance, along with our projected internal cash flows and available financing sources, will
provide sufficient cash to support our currently anticipated operating and capital needs, if we are unable to generate sufficient cash to
purchase and maintain the property, plants and equipment necessary to operate our business, we may be required to reduce or delay
planned capital expenditures or to incur additional indebtedness.
Prior to our initial public offering, we were treated as an S Corporation, and claims of taxing authorities related to our prior status
as an S Corporation could have an adverse effect on our business, financial condition and results of operations.
Upon the consummation of our initial public offering, our status as an S Corporation was terminated and we have since been
treated as a “C Corporation” for U.S. federal income tax purposes and thus are now subject to U.S. federal income tax. If the
unaudited, open tax years in which we were an S Corporation are audited by the Internal Revenue Service (IRS), and we determined
not to have qualified for, or to have violated any requirement for maintaining our S Corporation status, we will be obligated to pay
back taxes, interest and possibly penalties. The amounts that we would be obligated to pay could include taxes on all our taxable
income attributable to such open tax years. Any such claims could result in additional costs to us and could have a material adverse
effect on our business, financial condition and results of operations.
21
Prior to the completion of our initial public offering we were 100% owned by the Mayville Engineering Company, Inc. Employee
Stock Ownership Plan (ESOP), which is a retirement plan intended to be tax-qualified. If the ESOP fails to meet the requirements
of a tax-qualified retirement plan, we could be subject to substantial penalties.
The ESOP, is a defined contribution retirement plan subject to the requirements of the Internal Revenue Code of 1986, as
amended (the Code), and the Employee Retirement Income Security Act of 1974, as amended (ERISA). The ESOP has received a
determination letter from the IRS that it meets the requirements of a tax-qualified retirement plan in form and we endeavor to maintain
and administer the ESOP in compliance with all requirements of the Code and ERISA. However, the rules regarding tax-qualified
plans, and especially ESOPs, are complex and change frequently. Accordingly, it is possible that the ESOP may not have been and
may not in the future be administered in full compliance with all applicable rules under the Code or ERISA.
If the IRS were to determine that the ESOP was not in material compliance with the Code or ERISA, then the ESOP could lose
its tax-qualified status and we could be subject to substantial penalties under the Code and/or ERISA, which could have a material
adverse effect on our business, financial condition or results of operations. Additionally, any retroactive loss of the ESOP’s tax-
qualified status would adversely impact our prior treatment as an S Corporation. See “Prior to our initial public offering, we were
treated as an S Corporation, and claims of taxing authorities related to our prior status as an S Corporation could have an adverse
effect on our business, financial condition and results of operations.”
Risks Related to Our Indebtedness
Our Amended and Restated Credit Agreement restricts our ability and the ability of our subsidiaries to engage in some business
and financial transactions.
On June 28, 2023, we entered into an amended and restated credit agreement (the Credit Agreement) with certain lenders and
Wells Fargo Bank, National Association, the Agent. The Credit Agreement provides for a $250,000,000 revolving credit facility, with
a letter of credit sub-facility, and a swingline facility in an aggregate amount of $25,000,000. The Credit Agreement also provides for
the availability of incremental facilities to the greater of $100,000,000 and 125% of the Company’s twelve month trailing
Consolidated EBITDA through an accordion feature. All amounts borrowed under the credit agreement mature on June 28, 2028.
Our Credit Agreement contains a number of covenants that limit our ability and the ability of our subsidiaries to:
create, incur or assume indebtedness (other than certain permitted indebtedness);
create or incur liens (other than certain permitted liens);
make investments (other than certain permitted investments);
merge or consolidate with another entity;
make asset dispositions (other than certain permitted dispositions);
declare or pay any dividend or any other distribution to shareholders;
enter into transactions with affiliates;
make certain organizational changes, including changing our fiscal year end or amending our organizational documents;
enter into any agreement further restricting our ability to create or assume any lien;
sell notes receivable or accounts receivable except under certain circumstances;
enter into sale leaseback transactions;
22
incur capital expenditures in excess of $35.0 million in any fiscal year;
permit any person or group other than the ESOP or other employee benefit plan of ours (like our 401(k) plan) to own or
control more than 35% of our equity interests; or
permit our Board of Directors to not be composed of a majority of our continuing directors (i.e., our directors as of
September 26, 2019 and any additional or replacement directors that have been approved by at least 51% of the directors
then in office).
Our Credit Agreement also requires us to maintain a minimum interest coverage ratio and a consolidated total leverage ratio,
and contains certain customary representations and warranties, affirmative covenants and events of default (including, among others,
payment default, covenant default, breach of representation or warranty, bankruptcy, cross-default, material ERISA events, material
money judgements and failure to maintain subsidiary guarantees). If an event of default occurs under the Credit Agreement, the
lenders under the Credit Agreement will be entitled to take various actions, including the acceleration of amounts due thereunder, the
termination of such credit facility and all actions permitted to be taken by a secured creditor. Our failure to comply with our
obligations under the Credit Agreement may result in an event of default under the Credit Agreement. A default, if not cured or
waived, may permit acceleration of our indebtedness. If our indebtedness is accelerated, we cannot be certain that we will have
sufficient funds available to pay the accelerated indebtedness or that we will have the ability to refinance the accelerated indebtedness
on terms favorable to us or at all.
We are able to incur additional debt, which could reduce our ability to satisfy our current obligations under our existing
indebtedness.
At December 31, 2023, we had $147.5 million outstanding under our revolving credit facility. In addition, we may be able to
incur significant additional indebtedness in the future, and we may do so, among other reasons, to fund acquisitions as part of our
growth strategy. Although the Credit Agreement contains restrictions on the incurrence of additional indebtedness, these restrictions
are subject to a number of qualifications and exceptions, and we could incur substantial additional indebtedness in compliance with
these restrictions.
Risks Related to Ownership of Our Common Stock
Your ability to influence corporate matters may be limited because the ESOP and our 401(k) plan own a substantial amount of our
stock and continue to have significant influence over us, which may limit your ability to influence the outcome of important
transactions, including a change in control.
As of December 31, 2023, our employees and certain former employees, through their interests in the ESOP and the Mayville
Engineering Company, Inc. 401(k) Plan (the 401(k) Plan), beneficially owned approximately 36% of the outstanding shares of our
common stock. Each participant in the ESOP and the 401(k) Plan is entitled to direct the vote of the shares allocated to his or her
accounts, in his or her sole discretion. As a result, our employees and former employees, if acting together, will be able to influence or
control matters requiring approval by our shareholders, including the election of directors, influence over our management and
policies and the approval of mergers, acquisitions or other extraordinary transactions. As employees and former employees, the ESOP
and 401(k) Plan participants’ interests may be contrary to other investors. This concentration of ownership may have the effect of
delaying, preventing or deterring a change in control of our company, could deprive our non-ESOP and non-401(k) Plan shareholders
of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market
price of our common stock.
The Trustees of the ESOP and the 401(k) Plan may have the power to vote a large block of shares on matters presented to
shareholders for approval.
ESOP and 401(k) Plan participants have the right to direct the vote of the shares allocated to his or her ESOP and 401(k) Plan
accounts. However, if a participant does not timely direct the voting of his or her shares, then (1) GreatBanc Trust Company (the
ESOP Trustee) will vote such shares in its independent fiduciary discretion and (2) Principal Trust Company (the 401(k) Plan Trustee)
will vote such shares as directed by the 401(k) Plan sponsor, which is the Company. Additionally, the ESOP Trustee and the
23
401(k) Plan Trustee have fiduciary duties under ERISA which may cause the ESOP Trustee or the 401(k) Plan Trustee to override
participants’ voting discretions. Consequently, there may be circumstances in which the ESOP Trustee and the 401(k) Plan Trustee
have the ability to vote a significant block of shares on matters presented to shareholders for approval. The ESOP and the 401(k) Plan,
which as retirement plans have the purpose of providing retirement benefits to current and former employees of the Company and
their beneficiaries, may have interests that are different from other investors and may vote in a way with which other shareholders
disagree and which may be adverse to other shareholders interests.
The market price of our common stock may be volatile, and you could lose all or part of your investment.
Since our initial public offering in May 2019, the market price of our common stock has been volatile and has been and could
continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control. These fluctuations
could cause investors to lose all or part of their investment in our common stock. Factors that could cause fluctuations in the market
price of our common stock include the following: sales of substantial amounts of our securities by our directors, executive officers or
significant shareholders (including our current and former employees via the ESOP and the 401(k) Plan) or the perception that such
sales could occur; general economic and geopolitical conditions, inflation, interest rates, tariffs, fuel prices, international currency
fluctuations, recessionary concerns and acts of war or terrorism; price and volume fluctuations in the overall stock market from time to
time; relatively small percentage of our common stock available publicly; actual or anticipated fluctuations in our quarterly financial
results or the quarterly financial results of companies perceived to be similar to us; changes in the market’s expectations about our
operating results; changes in our orders in a given period; success of competitors; our operating results failing to meet the expectation
of securities analysts or investors in a particular period; changes in financial estimates and recommendations by securities analysts
concerning us or the markets in general; operating and stock price performance of other companies that investors deem comparable to
us; our ability to manufacture new and enhanced components for the products of our customers on a timely basis; changes in laws and
regulations affecting our business; commencement of, or involvement in, litigation involving us; changes in our capital structure, such
as future issuances of securities or the incurrence of additional debt; the volume of securities available for public sale; any major
change in our Board of Directors or management; and changes in our investor base.
In the past, following periods of volatility in the overall market and the market price of a particular company’s securities,
securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result
in substantial costs and a diversion of our management’s attention and resources.
We do not expect to declare any dividends in the foreseeable future.
The continued operation and growth of our business, including acquisitions and capital expenditures, will require substantial
cash. Accordingly, we do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Any
determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon results of
operations, financial condition, any contractual restrictions, our indebtedness, restrictions imposed by applicable law and other factors
our Board of Directors deem relevant. Consequently, investors may need to sell all or part of their holdings of our common stock after
price appreciation, which may never occur, as the only way to realize any future gains on their investment.
Some provisions of Wisconsin law and our articles of incorporation and bylaws could make a merger, tender offer or proxy contest
difficult, thereby depressing the trading price of our common stock.
Our status as a Wisconsin corporation and the anti-takeover provisions of the Wisconsin Business Corporation Law (the WBCL)
may discourage, delay or prevent a change in control even if a change in control would be beneficial to our shareholders by
prohibiting us from engaging in a business combination with an interested shareholder for a period of three years after the person
becomes an interested shareholder. We may engage in a business combination with an interested shareholder after the expiration of the
three-year period with respect to that shareholder only if one or more of the following conditions is satisfied: (i) our Board of
Directors approved the acquisition of the stock before the date on which the shareholder acquired the shares, (ii) the business
combination is approved by a majority of our outstanding voting stock not beneficially owned by the interested shareholder or (iii) the
consideration to be received by shareholders meets certain fair prices requirements of the WBCL with respect to form and amount.
24
In addition, our articles of incorporation and bylaws contain provisions that may make the acquisition of the company more
difficult, including the following:
establishing a classified Board of Directors so that not all members of our Board of Directors are elected at one time, which
could delay the ability of shareholders to change the membership of a majority of our Board of Directors;
authorizing undesignated preferred stock, the terms of which may be established and shares of which may be issued by our
Board of Directors without shareholder approval;
requiring certain procedures to be satisfied in order for a shareholder to call a special meeting of shareholders, including
requiring that we receive written demands for a special meeting from holders of 10% or more of all the votes entitled to be
cast on any issue proposed to be considered;
requiring that a director may be removed from office only for “cause” and with the affirmative vote of shareholders holding
at least 66 2/3% of the then outstanding shares of stock entitled to vote in the election of directors;
not providing for cumulative voting in the election of directors, which would otherwise allow holders of less than a majority
of stock to elect some directors; and
establishing advance notice procedures for shareholder proposals or the nomination of candidates for election as directors.
These provisions could have the effect of discouraging, delaying or preventing a transaction involving a change in control of the
Company. These provisions could also have the effect of discouraging proxy contests and make it more difficult for shareholders to
elect directors of their choosing or prevent us from taking other corporate actions that shareholders may desire.
Risks Related to Being a Relatively New Public Company
We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure
requirements applicable to emerging growth companies could make our common stock less attractive to investors.
We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012 (JOBS Act). Under the
JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards
apply to private companies. We have elected to use this exemption from new or revised accounting standards and, therefore, we will
not be subject to the same new or revised accounting standards as other public companies that have not made this election.
In addition, as an emerging growth company under the JOBS Act we are only subject to one portion of Section 404 of the
Sarbanes-Oxley Act of 2002 at this time—management reporting on the assessment of internal control over financial reporting (we are
not currently required to have our independent auditors issue a report addressing these assessments). Assuming we have not ceased to
qualify as an “emerging growth company” earlier, we will be required to comply with both the management and the auditor
assessment of internal control over financial reporting requirements of Section 404 at the time we file our annual report for 2024.
For as long as we continue to be an emerging growth company, we also intend to take advantage of certain other exemptions
from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of
holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not
previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these
exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our
common stock and our stock price may be more volatile.
25
We will remain an emerging growth company until the earliest of (i) the last day of the year which we have total annual gross
revenue of $1.07 billion or more; (ii) the last day of the year following the fifth anniversary of the date of the closing of our initial
public offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years;
or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
The Company is committed to maintaining a strong cybersecurity posture devoting significant resources to cybersecurity and risk
management processes to adapt to the rapidly evolving landscape and respond to emerging threats in a timely and effective manner. Our
cybersecurity risk management program aligns with the National Institute of Standards and Technology (NIST) framework, which
organizes cybersecurity risks into five categories: identify, protect, detect, respond and recover. The Company has designed and
implemented cybersecurity policies and procedures for identifying and managing material risk from cybersecurity threats, both internally
and related to the use of third-party service providers. We use various tools and methodologies to manage cybersecurity risk that are
tested on a regular basis. At the tactical level, our information technology (IT) security team regularly monitors alerts and meets to
discuss threat levels, trends and remediation. The Company monitors and evaluates our cybersecurity position and performance on an
ongoing basis through regular vulnerability scans, penetration tests and threat intelligence feeds. Additionally, the Company maintains
a formal information security training program for all employees that includes training on matters such as phishing, email security best
practices and data privacy. To evaluate and enhance our cybersecurity program, it is regularly evaluated by external experts with the
results of those reviews reported to senior management and the Audit Committee. We also actively engage with key vendors, industry
participants and intelligence and law enforcement communities as part of our continuing efforts to evaluate and enhance the effectiveness
of our information security policies and procedures.
Oversight of cybersecurity risk is maintained by the Company’s Board of Directors and is supported by the Audit Committee of
our Board of Directors (Audit Committee). The Audit Committee is primarily responsible for overseeing our design, execution and
administration of the Company’s enterprise risk management process, and with regard to cybersecurity risks, setting expectations and
accountability for management and reviewing management’s assessment of the effectiveness of our cybersecurity controls, including
policies and procedures to address our cyber risks and overseeing the Company’s cybersecurity disclosures. The Company’s information
security program is managed by the Company’s Director of IT, whom reports to the Chief Financial Officer (CFO), and whose team is
responsible for leading enterprise-wide cybersecurity strategy, policy, standards, architecture and processes. The Director of IT
periodically briefs the Audit Committee and our CFO, as well as our Chief Executive Officer, other members of the Board of Directors
and other members of our senior management as appropriate. These reports include, but are not limited to, new developments, evolving
standards, vulnerability assessments, third-party and independent reviews, threat environment summaries and technological trends.
When applicable, the Audit Committee and other members of the Board of Directors also receive prompt information from the CFO
regarding any material cybersecurity incident and appropriate ongoing updates thereto.
As of the date of this report, the Company is not aware of any risks from cybersecurity threats, including as a result of any previous
cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, our business strategy, results of
operations or financial condition. However, there can be no assurances that a cybersecurity threat or incident that could have a material
impact on the Company will not occur in the future. In response to the rapidly evolving cyber threat environment, the Company continues
to invest in data security and system resiliency. See also Item 1A, “Risk Factors” for additional discussion regarding risks related to
information technology systems.
26
Item 2. Properties.
We maintain 23 strategically located U.S. facilities comprising of more than three million square feet of manufacturing space
with our headquarters in Milwaukee, WI. We believe that our facilities are sufficient to meet our current and near-term manufacturing
needs.
Facility
1. Mayville, WI
2. Fond du Lac, WI
3. Beaver Dam, WI
4. Hazel Park, MI
5. Defiance, OH
6. Defiance, OH
7. Heber Springs, AR
8. Bedford, PA
9. Mayville, WI
10. Beaver Dam, WI
11. Wautoma, WI
12. Atkins, VA
13. Byron Center, MI
14. Defiance, OH
15. Greenville, MS
16. Wayland, MI
17. Neillsville, WI
18. Vanderbilt, MI
19. Neillsville, WI
20. Vanderbilt, MI
21. Piedmont, MI
22. Milwaukee, WI
23. Fond du Lac, WI
TOTAL
Description of Use
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Corporate Headquarters
Manufacturing
Approximate
Square Feet
Ownership
340,000
325,000
303,000
263,000 (1)
250,000
192,000
190,000
181,000
167,000
163,000
157,000
150,000
138,000
90,000
76,000
75,000
58,000
50,000
42,000
40,000
34,000
17,000
— (2)
3,301,000
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Leased
Leased
Leased
Leased
Owned
Owned
Owned
Owned
Leased
Leased
Owned
(1) Excludes approximately 182,000 square feet of subleased manufacturing space starting in June 2022.
(2) Excludes approximately 23,000 square feet of owned manufacturing space that is leased to a non-related party starting in
September 2023.
Item 3. Legal Proceedings.
From time to time, we may be a party to litigation and subject to claims incident to the ordinary course of business. Regardless
of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management
resources and other factors. Also see Note 9 – Commitments and Contingencies in the Notes to Consolidated Financial Statements for
additional information.
Item 4. Mine Safety Disclosures.
Not applicable.
27
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Price Information
Our common stock is traded on the New York Stock Exchange under the symbol MEC. As of February 1, 2024, there were six
registered shareholders of record of our common stock and thousands of beneficial holders of our common stock, including all the
participants in our ESOP and many participants in our 401(k) Plan.
We have never declared or paid any cash dividends on our common stock. We intend to retain all available funds and any future
earnings for use in the operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the
foreseeable future. Any future determination as to the declaration and payment of dividends will be at the discretion of our Board of
Directors and will depend on then-existing conditions, including our financial condition, results of operations, contractual restrictions,
capital requirements, business prospects and other factors that our Board of Directors considers relevant. In addition, the terms of the
Credit Agreement restrict our ability to pay cash dividends to the holders of our common stock.
Issuer Purchases of Equity Securities
The table below sets forth information with respect to purchases we made of shares of our common stock during the
three months ended December 31, 2023:
Period
October 2023
November 2023
December 2023
Total
Total Number
of Shares
Purchased as
Total
Number
of Shares
Purchased
—
—
—
—
Part of Publicly
Average Price
Announced Plans
Paid per Share or Programs (1)
—
$
—
$
—
$
—
—
—
—
Dollar Value of
Shares that
May Yet Be
Purchased
Under the Plans
or Programs (1)
$ 25,000,000
$ 25,000,000
$ 25,000,000
(1) On October 19, 2021, the Board of Directors approved a share repurchase program of up to $25 million of shares through 2023.
On October 26, 2023, the Board of Directors approved a new share repurchase program of up to $25 million of shares through
2026. The new share repurchase program replaced the prior program.
28
Stock Performance Graph
The following graph compares the total return on our common stock since the time of the Company’s IPO with similar returns
on the Standard & Poor’s (S&P) SmallCap 600 Index and the Dow Jones Industrial Average Index. The graph assumes a $100
investment with the reinvestment of any dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
Among Mayville Engineering Company, Inc., the S&P SmallCap 600 Index and
The Dow Jones Industrial Average
Mayville Engineering Company, Inc.
S&P SmallCap 600
Dow Jones Industrial Average
$
$
$
100.00
100.00
100.00
$
$
$
55.18 $
106.11 $
109.90 $
78.94 $
116.26 $
117.87 $
87.71 $
145.65 $
139.94 $
5/9/2019
12/31/2019
12/31/2020
12/31/2021
12/31/2022
74.47 $
120.27 $
127.65 $
12/31/2023
84.82
136.97
145.14
Securities Authorized For Issuance Under Equity Compensation Plans
See Part III, Item 12, of this Annual Report on Form 10-K for certain information regarding our equity compensation plans.
Item 6. Reserved.
29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding
and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be
indicative of future performance. This discussion includes forward-looking statements that reflect our plans, estimates and beliefs.
Such statements involve risks and uncertainties. Our actual results may differ materially from those contemplated by these forward-
looking statements as a result of various factors, including those set forth in “Risk Factors” in Part I, Item 1A and “Cautionary
Statement Regarding Forward-Looking Statements” of this Annual Report on Form 10-K. This discussion should be read in
conjunction with our audited consolidated financial statements and the notes thereto included in Part II, Item 8 of this Annual Report
on Form 10-K. In this discussion, we use certain financial measures that are not prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP). Explanation of these non-GAAP financial measures and reconciliation to
the most directly comparable GAAP financial measures are included in this Management’s Discussion and Analysis of Financial
Condition and Results of Operations. Investors should not consider non-GAAP financial measures in isolation or as substitutes for
financial information presented in compliance with GAAP.
All amounts are presented in thousands except share amounts, per share data, years and ratios.
Critical Accounting Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates
and assumptions that affect the reported amounts and disclosures. Therefore, these estimates and assumptions affect reported amounts
of assets, liabilities, revenue, expenses, and associated disclosures of contingent liabilities. Critical accounting estimates are those
estimates that, in management’s view, are most important in the portrayal of our financial condition and results of operations.
Management evaluates these estimates on an ongoing basis, using historical experience, consultation with third parties, and other
methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our
estimates. Any effects on our business, financial position, or results of operations resulting from revisions to these estimates are
recognized in the accounting period in which the facts that give rise to the revision become known. The methods, estimates, and
judgments that we use in applying our accounting estimates have a significant impact on the results that we report in our financial
statements. These critical accounting estimates require us to make difficult and subjective judgments, often as a result of the need to
make estimates regarding matters that are inherently uncertain. Those critical accounting estimates that require the most significant
judgment or involve the selection or application of alternative accounting policies and are material to our consolidated financial
statements are discussed further below.
Business Combinations
We record assets acquired and liabilities assumed in a business combination under the acquisition method of accounting where
consideration is first assigned to identifiable assets and liabilities based on estimated fair values, with any excess recorded as goodwill.
During the measurement period, which is up to one year from the acquisition date, we may adjust provisional amounts that were
recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition
date.
Determining the fair value of assets acquired and liabilities assumed requires significant judgment, including the selection of
valuation methodologies. For our recent acquisition, fair value estimates of acquired property and equipment were based on
independent appraisals that gave consideration to the highest and best use of the assets. The land, buildings, and improvements; and
other property and equipment appraisals used one, or a combination, of the cost, market or sales comparison approaches. Significant
estimates and assumptions, including recent sales prices of similar equipment, asset condition, and current and anticipated market
trends, were used in determining the fair values of these assets. The assistance of an independent third-party valuation firm was used
to determine the fair values and useful lives of the finite-lived intangible assets, including customer relationships and developed
technology. Valuation methods used were based on management’s forecasted cash inflows and outflows and using a relief from
royalty method for developed technologies and the multi-period excess earnings method for customer relationships. Assumptions used
in the intangible valuations include forecasted revenue growth rates, discounted future cash flows and the weighted average cost of
capital of a select peer group.
30
Goodwill, Intangible Assets and Other Long-Lived Assets
Our long-lived assets consist primarily of property, equipment, purchased intangible assets and goodwill. The valuation and the
impairment testing of these long-lived assets involve significant judgments and assumptions, particularly as they relate to the
identification of reporting units, asset groups and the determination of fair value.
We test our tangible and intangible long-lived assets subject to amortization for impairment whenever facts and circumstances
indicate that the carrying amount of an asset may not be recoverable. We test goodwill and indefinite lived intangible assets for
impairment annually, or more frequently if triggering events occur indicating that there may be impairment.
We have recorded goodwill and perform testing for potential goodwill impairment at a reporting unit level. A reporting unit is
an operating segment, or a business unit one level below an operating segment for which discrete financial information is available,
and for which management regularly reviews the operating results. Additionally, components within an operating segment can be
aggregated as a single reporting unit if they have similar economic characteristics. We have concluded we have one reporting unit.
We determine the fair value of our reporting unit using an income approach. Under the income approach, we calculate the fair
value of a reporting unit based on the present value of estimated future cash flows. The income approach is dependent on several key
management assumptions, including estimates of future sales, gross margins, operating costs, interest expense, income tax rates,
capital expenditures, changes in working capital requirements and the weighted average cost of capital or the discount rate. Discount
rate assumptions include an assessment of the risk inherent in the future cash flows of the reporting unit. Expected cash flows used
under the income approach are developed in conjunction with our budgeting and forecasting process.
We test our goodwill for impairment on an annual basis, and more frequently if events or changes in circumstances indicate that
it might be impaired. For the years ended December 31, 2023 and 2022, there were no events or changes in circumstances that would
indicate an impairment of our goodwill.
Changes to management assumptions and estimates utilized in the income approach could negatively impact the fair value
conclusions for our reporting unit resulting in goodwill impairment. All key assumptions and valuations are determined by and are the
responsibility of management. The factors used in the impairment analysis are inherently subject to uncertainty. We believe that the
estimates and assumptions are reasonable to determine the fair value of our reporting unit, however, if actual results are not consistent
with these estimates and assumptions, goodwill and other intangible assets may be overstated which could trigger an impairment
charge.
For impairment testing of long-lived assets, we identify asset groups at the lowest level for which identifiable cash flows are
largely independent of the cash flows of other groups of assets and liabilities. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flow expected to be generated by the
assets. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the
amount by which the carrying amount of the asset exceeds the estimated fair value of the asset group. For the year ended
December 31, 2023 and 2022, there were no events or changes in circumstances that indicated a material impairment of our long-lived
assets.
Determining the useful life of an intangible asset also requires judgment. Certain intangible assets are expected to have
indefinite lives based on their history and our plans to continue to support and build the acquired brands. Other acquired intangible
assets such as customer relationships, trade names, and non-compete agreements are expected to have determinable useful lives. The
costs of determinable-lived intangibles are amortized to expense over their estimated lives.
Emerging Growth Company
The JOBS Act permits an “emerging growth company” like us to take advantage of an extended transition period to comply
with new or revised accounting standards applicable to public companies. We are choosing to use this provision and, as a result, we
will comply with new or revised accounting standards as required for private companies.
31
Internal Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our
company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our
financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over
financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing
reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable
assurance that receipts and expenditures of our assets are made in accordance with management’s authorization; and providing
reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial
statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial
reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Furthermore, our controls and procedures can be circumvented by the individual acts of some persons, by collusion of two or more
people or by management override of the control, and misstatements due to error or fraud may occur and not be detected on a timely
basis.
Overview
MEC is a leading U.S.-based vertically-integrated, value-added manufacturing partner providing a full suite of manufacturing
solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly
and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles,
construction & access equipment, powersports, agriculture, military and other end markets. We have developed long-standing
relationships with our blue-chip customers based upon our commitment to “Unmatched Excellence”.
Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty
commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.
Macroeconomic Conditions
The broader market dynamics over the past few years have resulted in impacts to the Company, including supply chain
constraints affecting some of our customers, material cost inflation and inflationary pressures on wages and benefits due to labor
availability. The Company expects some of these dynamics to continue in 2024 and could continue to have an impact on demand,
material costs and labor.
How We Assess Performance
Net Sales. Net sales reflect sales of our components and products net of allowances for returns and discounts. In addition to the
current macroeconomic conditions, several factors affect our net sales in any given period, including weather, timing of acquisitions
and the production schedules of our customers. Net sales are recognized at the time of shipment or at delivery to the customer.
Manufacturing Margins. Manufacturing margins represents net sales less cost of sales. Cost of sales consists of all direct and
indirect costs used in the manufacturing process, including raw materials, labor, equipment costs, depreciation, lease expenses,
subcontract costs and other directly related overhead costs. Our cost of sales is directly affected by the fluctuations in commodity
prices, primarily sheet steel and aluminum, but these changes are largely mitigated by contractual agreements with our customers that
allow us to pass through these price variations based upon certain market indexes.
Depreciation and Amortization. We carry property, plant and equipment on our balance sheet at cost, net of accumulated
depreciation. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the
asset. The periodic expense related to leasehold improvements and intangible assets is depreciation and amortization expense,
respectively. Leasehold improvements are depreciated over the lesser of the life of the underlying asset or the remaining lease term.
Our intangible assets were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the
estimated useful lives of the assets.
Other Selling, General, and Administrative Expenses. Other selling, general and administrative expenses consist primarily of
salaries and personnel costs for our sales and marketing, finance, human resources, information systems, administration and certain
32
other managerial employees and certain corporate level administrative expenses such as incentive compensation, audit, accounting,
legal and other consulting and professional services, travel, and insurance.
Other Key Performance Indicators
EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin
EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation and
amortization. EBITDA Margin represents EBITDA as a percentage of net sales for each period.
Adjusted EBITDA represents EBITDA before CEO transition costs, stock-based compensation expense, Mid-States Aluminum
(MSA) acquisition related costs, loss on extinguishment of debt, field replacement claim, Hazel Park transition and legal costs due to
the former fitness customer, costs recognized on step-up of MSA acquired inventory, impairment charges on long-lived assets and
inventory and gain on contracts specifically purchased to meet obligations under the agreement with our former fitness customer and
Chief Operating Officer (COO) restructuring costs. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of net
sales for each period. These metrics are supplemental measures of our operating performance that are neither required by, nor
presented in accordance with, GAAP. These measures should not be considered as an alternative to net income (loss) or any other
performance measure derived in accordance with GAAP as an indicator of our operating performance. We present EBITDA, EBITDA
Margin, Adjusted EBITDA and Adjusted EBITDA Margin as management uses these measures as key performance indicators, and we
believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry.
These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our
results as reported under GAAP.
Our calculation of EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to the
similarly named measures reported by other companies. Potential differences between our measures of EBITDA and Adjusted
EBITDA compared to other similar companies’ measures of EBITDA and Adjusted EBITDA may include differences in capital
structure and tax positions.
33
The following table presents a reconciliation of net income (loss) and comprehensive income (loss), the most directly
comparable measure calculated in accordance with GAAP, to EBITDA and Adjusted EBITDA, and the calculation of EBITDA
Margin and Adjusted EBITDA Margin for each of the periods presented.
Net income (loss) and comprehensive income (loss)
Interest expense
Provision (benefit) for income taxes
Depreciation and amortization
EBITDA
CEO transition costs (1)
Loss on extinguishment of debt (2)
MSA acquisition related costs (3)
Stock-based compensation expense (4)
Field replacement claim (5)
Hazel Park transition and legal costs due to former fitness customer (6)
Costs recognized on step-up of MSA acquired inventory (7)
Impairment of inventory and loss on contracts (8)
Impairment of long-lived assets and (gain) loss on contracts (9)
COO restructuring costs (10)
Adjusted EBITDA
Net sales
EBITDA Margin
Adjusted EBITDA Margin
$
$
$
$
$
Twelve Months Ended
December 31,
2022
18,727
3,380
3,667
29,311
55,085
1,512
—
—
3,759
—
4,768
—
—
(4,346)
—
60,778
539,392
2023
7,844
11,092
1,039
35,080
55,055
—
216
1,411
4,485
490
2,650
891
—
—
855
66,053
588,425
$
$
9.4 %
11.2 %
$
$
10.2 %
11.3 %
2021
(7,451)
2,003
(1,943)
31,783
24,392
—
—
—
4,962
—
—
—
700
16,151
—
46,205
454,826
5.4 %
10.2 %
(1) Costs, primarily professional services and legal fees, associated with the retirement and replacement of the former CEO.
(2) Unamortized debt issue costs written off from the prior five-year credit agreement attributable to lenders that are no longer
included in the amended and restated credit agreement or decreased their capacity in the amended and restated credit agreement.
(3) Transaction costs, primarily legal and professional services, related to the acquisition of MSA.
(4) Non-cash employee compensation based on the value of common stock issued pursuant to the 2019 Omnibus Incentive Plan.
(5) Represents a one-time charge related to a COVID related sourcing issue that caused the Company to change suppliers and
ultimately lead to a product being produced outside of customer specifications. These costs are not expected to be incurred on an
ongoing basis and therefore are not indicative of ongoing operations.
(6) Costs incurred to re-purpose the Hazel Park facility from products for the former fitness customer use to general use for the time
period through July 31, 2022, and legal costs associated with the enforcement of the Company’s supply contract with the former
fitness customer.
(7) Expense associated with the recognized fair value step-up of inventory in correlation with the MSA acquisition. See Note 2 –
Acquisitions within the Notes to Consolidated Financial Statements for additional detail.
(8) Loss on purchase commitments and scrapped inventory as a result of the change in forecast of our former fitness customer.
(9)
Initial impairment and (gain) loss on the sale of the fixed assets impaired as a result of the change in forecast of our former fitness
customer.
(10) Restructuring costs associated with the separation of the former COO. See Note 19 – Restructuring within the Notes to
Consolidated Financial Statements for additional detail.
34
Consolidated Results of Operations
A discussion regarding our financial condition and results of operations for the twelve months ended December 31, 2023
compared to the twelve months ended December 31, 2022 is presented below. A discussion regarding our financial condition and
results of operations for the twelve months ended December 31, 2022 compared to the twelve months ended December 31, 2021 can
be found under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our
Annual Report on the Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 1, 2023 and is
available on the SEC’s website at www.sec.gov, as well as our website at www.ir.mecinc.com.
Twelve Months Ended December 31, 2023 Compared to Twelve Months Ended December 31, 2022
2023
Year Ended December 31,
2022
Increase (Decrease)
Net sales
Cost of sales
Manufacturing margins
Amortization of intangible assets
Profit sharing, bonuses and deferred compensation
Other selling, general and administrative expenses
Impairment of long-lived assets and gain on contracts
Income from operations
Interest expense
Loss on extinguishment of debt
Provision for income taxes
Net income and comprehensive income
EBITDA
Adjusted EBITDA
% of Net
Sales
Amount
% of Net
Sales
Amount
Change
Amount
$ 588,425
518,722
69,703
7,742
11,588
30,182
—
20,191
(11,092)
(216)
1,039
$
7,844
$ 55,055
$ 66,053
100.0 % $ 539,392
88.2 % 478,323
61,069
11.8 %
6,952
1.3 %
7,997
2.0 %
24,692
5.1 %
(4,346)
— %
25,774
3.4 %
(3,380)
1.9 %
—
0.0 %
0.2 %
3,667
1.3 % $ 18,727
9.4 % $ 55,085
11.2 % $ 60,778
100.0 % $ 49,033
40,399
88.7 %
8,634
11.3 %
1.3 %
790
3,591
1.5 %
5,490
4.6 %
4,346
(0.8)%
(5,583)
4.8 %
7,712
0.6 %
216
— %
0.7 %
(2,628)
3.5 % $ (10,883)
10.2 % $
(30)
11.3 % $ 5,275
% Change
9.1 %
8.4 %
14.1 %
11.4 %
44.9 %
22.2 %
N/A
(21.7)%
228.2 %
N/A
(71.7)%
(58.1)%
(0.1)%
8.7 %
Net Sales. Net sales were $588,425 for the twelve months ended December 31, 2023 as compared to $539,392 for the
twelve months ended December 31, 2022, an increase of $49,033, or 9.1%. This increase was primarily due to the acquisition of MSA,
increased organic sales volumes within our commercial vehicle, powersports and military end markets and continued price discipline.
These increases were slightly offset by softening demand in our construction and agriculture end markets, lower material price pass-
throughs to customers and United Auto Workers labor union strikes impacting a few of our customers that occurred in the fourth
quarter of the current period.
Manufacturing Margins. Manufacturing margins were $69,703 for the twelve months ended December 31, 2023 as compared
to $61,069 for the twelve months ended December 31, 2022, an increase of $8,634, or 14.1%. The increase was primarily driven by
the above-mentioned organic volume growth, MSA acquisition and commercial price actions. These items were partially negated by
unabsorbed fixed costs associated with new project launches, a one-time field replacement claim, higher employee healthcare
expenses, the non-recurring inventory step-up expense associated with the MSA acquisition and restructuring costs related to the
former COO.
Manufacturing margin percentages were 11.8% for the twelve months ended December 31, 2023 as compared to 11.3% for the
twelve months ended December 31, 2022, an increase of 0.5%. The increase was attributable to the items discussed in the preceding
paragraph.
Amortization of Intangible Assets. Amortization of intangible assets were $7,742 for the twelve months ended December 31,
2023 as compared to $6,952 for the twelve months ended December 31, 2022, an increase of $790, or 11.4%. This increase was solely
due to the amortization expense associated with the identifiable intangible assets from the MSA acquisition. Refer to Note 2 –
Acquisitions within the Notes to Consolidated Financial Statements for additional information related to these identifiable intangible
assets.
35
Profit Sharing, Bonuses and Deferred Compensation Expenses. Profit sharing, bonuses and deferred compensation expenses
were $11,588 for the twelve months ended December 31, 2023 as compared to $7,997 for the twelve months ended December 31,
2022, an increase of $3,591, or 44.9%. The increase was primarily due to deferred compensation expense during the current year
period versus a credit during the prior year period due to fluctuations within the financial markets, the Company’s contributions to the
401(k) match being higher than the prior year period discretionary 401(k) accrual and less stock-based compensation expense in the
prior year period due to increased forfeitures of unvested awards, slightly offset by lower bonus expense.
Other Selling, General and Administrative (SG&A) Expenses. Other selling, general and administrative expenses were
$30,182 for the twelve months ended December 31, 2023 as compared to $24,692 for the twelve months ended December 31, 2022, an
increase of $5,490, or 22.2%. The increase was predominantly attributable to the incremental SG&A and transactions costs related to
the acquisition of MSA, increased salaries, wages and benefits, recruiting fees and higher professional fees related to the Company
preparing to be Sarbanes-Oxley Act Section 404(b) compliant for 2024 and higher legal fees associated with the on-going litigation
with our former fitness customer, partially offset by CEO transition costs incurred during the prior year period.
Impairment of Long-Lived Assets and Gain on Contracts. At December 31, 2021, there was uncertainty as to the level of
demand from the former fitness customer. The Company received a notification from this customer in February 2022 resulting in a
change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company committed to
purchase, to meet obligations under the agreement with the former fitness customer as of December 31, 2021. The notification
informed the Company that it did not forecast any demand for any products or parts that were the subject of the agreement between
the Company and the customer for the remainder of the agreement’s term, which ends in March 2026. Given the circumstances,
GAAP required the Company to assess whether the assets were impaired. As a result of this assessment, the Company recorded an
impairment on the assets purchased and loss on contracts agreed upon specifically to meet obligations under the agreement with the
former fitness customer. Consequently, the Company recorded an impairment of long-lived assets and loss on contracts of $16,151 in
the fourth quarter of 2021.
During the twelve months ended December 31, 2022, the Company was able to cancel $2,257 of purchase commitments for
property, plant and equipment that had been recorded as an impairment of long-lived assets and loss on contracts at December 31,
2021, as previously described. The cancellation of purchase commitments resulted in the reversal of previously recorded impairment
expense. Additionally, the Company was able to sell property, plant and equipment resulting in a gain of $2,089 that had previously
been recorded as an impairment of long-lived assets and written down to fair value at December 31, 2021. There was no further gain
on contracts attributable to the impairment recorded in 2021 during the twelve months ended December 31, 2023.
Interest Expense. Interest expense was $11,092 for the twelve months ended December 31, 2023 as compared to $3,380 for the
twelve months ended December 31, 2022, an increase of $7,712, or 228.2%. The change is due to higher borrowing levels to finance
the acquisition of MSA, which closed on July 1, 2023, and increased interest rates as compared to the prior year period.
Provision for Income Taxes. Income tax expense was $1,039 for the twelve months ended December 31, 2023 as compared to
$3,667 for the twelve months ended December 31, 2022. The decrease of $2,628 is primarily due to higher net income and
comprehensive income in the prior year period. Please reference Note 8 – Income Taxes in the Notes to Consolidated Financial
Statements for further details.
Due to the factors described in the preceding paragraphs, Adjusted EBITDA increased, while net income, comprehensive
income, EBITDA, EBITDA Margin and Adjusted EBITDA Margin decreased during 2023.
36
Liquidity and Capital Resources
The following is a summary of our cash flows from operating, investing, and financing activities, as reflected in the
Consolidated Statement of Cash Flows:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Net change in cash
$
$
$
Twelve Months Ended
December 31,
2022
52,426
(50,668)
(1,749)
9
$
$
$
2023
40,363
(104,132)
64,314
545
2021
14,457
(33,961)
19,501
(3)
Cash Flows Analysis Twelve Months Ended December 31, 2023 Compared to Twelve Months Ended December 31, 2022
Operating Activities. Cash provided by operating activities was $40,363 for the twelve months ended December 31, 2023 as
compared to $52,426 for the twelve months ended December 31, 2022. Of the $12,063 decrease in operating cash flows, $17,562 was
due to a payout of deferred compensation to a retired Company executive. The remaining difference of an increase in cash provided by
operating activities of $5,499 as compared to the prior year period is largely driven by accounts receivable and inventory decreasing
due to the Company’s ongoing collections efforts and initiatives to implement lean inventory management processes, respectively,
partially offset by a decrease in accounts payable resulting from reduced capital expenditures. Additionally, cash provided by
operating activities were negatively impacted by a reduction in accrued liabilities due to the Company implementing a match program
in the 401(k) Plan requiring the employer contribution to be paid concurrently with payroll. In the prior year period, a discretionary
employer contribution was accrued throughout the year and paid after the year ended December 31, 2022.
Investing Activities. Cash used in investing activities was $104,132 for the twelve months ended December 31, 2023, as
compared to $50,668 for the twelve months ended December 31, 2022. The $53,464 increase in cash used in investing activities was
mainly due to the acquisition of MSA, which was completed on July 1, 2023, partially offset by less capital investments in the current
year period due to the completion of the capital investment in the Company’s Hazel Park, MI facility at the end of 2022.
Financing Activities. Cash provided by financing activities was $63,314 for the twelve months ended December 31, 2023, as
compared to cash used in financing activities of $1,749 for the twelve months ended December 31, 2022. The $66,063 increase was
primarily due to the use of funds to purchase MSA, partially offset by higher debt repayments that were able to be made as a result of
our decreased level of capital investment. Under our share repurchase program, the Company purchased $2,661 of common stock in
2023 as compared to $4,947 of its common stock in 2022. The Company’s decision to repurchase additional shares in 2024 will
depend on business conditions, free cash flow generation, other cash requirements and stock price. See Part II, Item 5. Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for additional information
regarding share repurchases.
Amended and Restated Credit Agreement
On June 28, 2023, we entered into an amended and restated credit agreement (the Credit Agreement) with certain lenders and
Wells Fargo Bank, National Association, the Agent. The Credit Agreement provides for a $250,000 revolving credit facility, with a
letter of credit sub-facility, and a swingline facility in an aggregate amount of $25,000. The Credit Agreement also provides for the
availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month trailing Consolidated
EBITDA through an accordion feature. All amounts borrowed under the credit agreement mature on June 28, 2028.
Borrowings under the Credit Agreement bear interest at a fluctuating secured overnight financing rate (SOFR) plus an
applicable margin based on the current consolidated total leverage ratio (which may be adjusted for certain reserve requirements), plus
1.25% to 2.75% depending on the current Consolidated Total Leverage Ratio (as defined in the Credit Agreement). Under certain
circumstances, we may not be able to pay interest based on SOFR. If that happens, we will be required to pay interest at the Base Rate,
which is the sum of (a) the higher of (i) the Prime Rate (as publicly announced by the Agent from time to time), (ii) the Federal Funds
Rate plus 0.50%, and (iii) Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.00%. The Credit Agreement also
includes provisions for determining a replacement rate when SOFR is no longer available.
37
At December 31, 2023, the interest rate on outstanding borrowings under our revolving credit facility was 7.71%. We had
availability of $102,507 under the revolving credit facility at December 31, 2023.
We must pay a commitment fee of 0.20% to 0.35% per annum on the average daily unused portion of the aggregate unused
revolving commitments under the Credit Agreement. We must also pay fees as specified in the Fee Letter (as defined in the Credit
Agreement) and with respect to any letters of credit issued under the Credit Agreement.
The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited
to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to
exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset
dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale
leaseback transactions; and exceed the limits on annual capital expenditures. The Credit Agreement also requires us to satisfy certain
financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00. At December 31, 2023, our interest coverage ratio
was 5.49 to 1.00. The Credit Agreement also requires us to maintain a consolidated total leverage ratio not to exceed 4.00 to 1.00
(which was increased as of July 1, 2023 from 3.50 to 1.00 in connection with the acquisition of MSA). As of December 31, 2023, our
consolidated total leverage ratio was 2.14 to 1.00.
The Credit Agreement includes customary events of default, including, among other things, payment default, covenant default,
breach of representation or warranty, bankruptcy, cross-default, material ERISA events, material money judgments, and failure to
maintain subsidiary guarantees. If an event of default occurs, the Agent will be entitled to take various actions, including the
acceleration of amounts due under the Credit Agreement, termination of the credit facility, and all other actions permitted to be taken
by a secured creditor.
Other Debt
With the consummation of the MSA acquisition, the Company assumed a Fond du Lac County and Fond du Lac Economic
Development Corporation term note (Fond du Lac Term Note) in the amount of $2,875. The Fond du Lac Term Note is secured by a
security agreement, payable in annual installments of $500 plus interest at 2.00% and is due in full in December 2028. The short-term
and long-term balance of $500 and $1,875, respectively, are recorded in other current liabilities and other long-term liabilities in the
Consolidated Balance Sheets.
Capital Requirements and Sources of Liquidity
During the twelve months ended December 31, 2023 and 2022, our capital expenditures were $16,598 and $58,610,
respectively. The decrease of $42,012 was driven by the completion of the capital investment in the Company’s Hazel Park, MI
facility at the end of the prior year. Capital expenditures for the full year 2024 are expected to be between $15,000 and $20,000.
We have historically relied upon cash available through credit facilities, in addition to cash from operations, to finance our
working capital requirements and to support our growth. At December 31, 2023, we had immediate availability of $102,507 through
our revolving credit facility and the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve
month trailing Consolidated EBITDA through an accordion feature under our Credit Agreement, subject to the covenants under the
Credit Agreement. We regularly monitor potential capital sources, including equity and debt financings, in an effort to meet our
planned capital expenditures and liquidity requirements. Our future success will be highly dependent on our ability to access outside
sources of capital. We will continue to have access to the availability currently provided under the Credit Agreement as long as we
remain compliant with the financial covenants. Based on our estimates at this time, we expect to be in compliance with these financial
covenants through 2024 and the foreseeable future.
We believe that our operating cash flow and available borrowings under the Credit Agreement are sufficient to fund our
operations for 2024 and beyond. However, future cash flows are subject to a number of variables, and additional capital expenditures
will be required to conduct our operations. There can be no assurance that operations and other capital resources will provide cash in
sufficient amounts to maintain planned or future levels of capital expenditures. In the event we make one or more acquisitions and the
amount of capital required is greater than the amount we have available for acquisitions at that time, we could be required to reduce
the expected level of capital expenditures and/or seek additional capital. If we seek additional capital, we may do so through
borrowings under the Credit Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means. We cannot
38
guarantee that this additional capital will be available on acceptable terms or at all. If we are unable to obtain the funds we need, we
may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our
operations.
Contractual Obligations
The following table presents our obligations and commitments to make future payments under contracts and contingent
commitments at December 31, 2023:
Payments Due by Period
Long-term debt principal payment obligations (1)
Equipment financing agreements (2)
Forecasted interest on debt payment obligations (3)
Finance lease obligations (4)
Operating lease obligations (4)
Total
Total
$ 149,868
306
29,791
$
2024
500
306
7,626
961
37,492
$ 218,418 $
468
5,840
14,740 $
$
1,000
—
12,840
2025 – 2026 2027 – 2028 Thereafter
—
$ 148,368
$
—
—
—
9,325
—
11,657
11,657
441
10,112
24,393 $ 167,628 $
52
9,883
(1) Principal payments under the Company’s Credit Agreement, which expires in 2028 and the Fond du Lac Term Note, which is due
in full in December 2028.
(2) Financing agreements entered into to purchase manufacturing equipment. Current and long-term portions are classified in other
current liabilities and other long-term liabilities, respectively, on the Consolidated Balance Sheets.
(3) Forecasted interest on debt obligations are based on the debt balance, interest rate, and unused fee of the Company’s revolving
credit facility, debt balance and interest rate of the Company’s Fond due Lac Term Note and the debt balances and interest rates
of the Company’s equipment finance agreements as of December 31, 2023.
(4) See Note 5 – Leases in the Notes to Consolidated Financial Statements for additional information.
Capital expenditures for the full year 2024 are expected to be in-line with 2023 levels, between $15,000 and $20,000.
39
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk from changes in customer forecasts, interest rates, and, to a lesser extent, commodities. To reduce
such risks, we selectively use financial instruments and other proactive management techniques.
Customer Forecasts
The use and consumption of our components, products and services fluctuates depending on order forecasts we receive from our
customers. These order forecasts can change dramatically from quarter-to-quarter dependent upon the respective markets that our
customers provide products in.
Interest Rate Risk
We are exposed to interest rate risk on certain of our short- and long-term debt obligations used to finance our operations and
acquisitions. We have SOFR-based floating rate borrowings under the Credit Agreement, which exposes us to variability in interest
payments due to changes in the referenced interest rates.
The amount borrowed under our revolving credit facility under the Credit Agreement was $147.5 million with an interest rate of
7.71% as of December 31, 2023. Please see “Liquidity and Capital Resources – Amended and Restated Credit Agreement” in Part II,
Item 7 of this Annual Report on Form 10-K and Note 4 –Debt in the Notes to Consolidated Financial Statements for more specifics.
A hypothetical 100-basis-point increase in our borrowing rates would have resulted in an additional $1.4 million of interest
expense based on our variable rate debt at December 31, 2023. We do not use derivative financial instruments to manage interest risk
or to speculate on future changes in interest rates. A rise in interest rates could negatively affect our cash flow.
Commodity Risk
We source a wide variety of materials and components from a network of suppliers. Commodity raw materials, such as steel,
aluminum, copper, paint and paint chemicals, and other production costs are subject to price fluctuations, which could have a negative
impact on our results. We strive to pass along such commodity price increases to customers to avoid profit margin erosion and in
many cases utilize contracts with those customers to mitigate the impact of commodity raw material price fluctuations. As of
December 31, 2023, we did not have any commodity hedging instruments in place.
40
Item 8. Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of Mayville Engineering Company, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Mayville Engineering Company, Inc. and subsidiaries
(the "Company") as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income (loss),
shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally
accepted in the United States of America.
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 audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits 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 regarding the amounts and disclosures in the financial statements. Our audits 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 audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE, LLP
Milwaukee, WI
March 6, 2024
We have served as the Company’s auditor since 2018.
41
Mayville Engineering Company, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
ASSETS
Cash and cash equivalents
Receivables, net of allowances for doubtful accounts of $685 at December 31, 2023
and $545 at December 31, 2022
Inventories, net
Tooling in progress
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Assets held for sale
Goodwill
Intangible assets, net
Operating lease assets
Other long-term assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable
Current portion of operating lease obligation
Accrued liabilities:
Salaries, wages, and payroll taxes
Profit sharing and bonus
Current portion of deferred compensation
Other current liabilities
Total current liabilities
Bank revolving credit notes
Operating lease obligation, less current maturities
Deferred compensation, less current portion
Deferred income tax liability
Other long-term liabilities
Total liabilities
Commitments and contingencies (see Note 9)
Common shares, no par value, 75,000,000 authorized, 21,853,477 shares issued at
December 31, 2023 and 21,645,193 at December 31, 2022
Additional paid-in-capital
Retained earnings
Treasury shares at cost, 1,542,893 shares at December 31, 2023 and 1,472,447 at
December 31, 2022
Total shareholders’ equity
Total
December 31, December 31,
2023
2022
$
672 $
127
57,445
67,782
5,457
3,267
134,623
175,745
—
92,650
58,667
32,233
2,743
496,661 $
58,001
71,708
7,938
3,529
141,303
145,771
83
71,535
43,809
36,073
2,007
440,581
46,526 $
5,064
53,735
4,857
6,368
3,107
289
10,355
71,709
147,493
28,606
3,816
12,606
2,453
266,683 $
7,288
6,860
18,062
11,646
102,448
72,236
31,891
3,132
11,818
1,189
222,714
—
205,373
34,118
—
200,945
26,274
$
$
$
(9,513)
229,978
496,661 $
(9,352)
217,867
440,581
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
42
Mayville Engineering Company, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in thousands, except share amounts and per share data)
Net sales
Cost of sales
Amortization of intangible assets
Profit sharing, bonuses, and deferred compensation
Other selling, general and administrative expenses
Impairment of long-lived assets and (gain) loss on contracts
Income (loss) from operations
Interest expense
Loss on extinguishment of debt
Income (loss) before taxes
Income tax expense (benefit)
Net income (loss) and comprehensive income (loss)
Earnings (loss) per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
$
$
$
$
$
$
Twelve Months Ended
December 31,
2022
539,392
478,323
6,952
7,997
24,692
(4,346)
25,774
(3,380)
—
22,394
3,667
18,727
$
2023
588,425
518,722
7,742
11,588
30,182
—
20,191
(11,092)
(216)
8,883
1,039
7,844
0.38
0.38
$
$
0.92
0.91
2021
454,826
403,451
10,706
11,500
20,409
16,151
(7,391)
(2,003)
—
(9,394)
(1,943)
(7,451)
(0.37)
(0.36)
$
$
$
20,415,157
20,698,970
20,399,737
20,682,628
20,404,543
20,830,977
The accompanying notes are an integral part of these Consolidated Financial Statements.
43
Mayville Engineering Company, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation
Amortization
Allowance for doubtful accounts
Inventory excess and obsolescence reserve
Stock-based compensation expense
Gain on disposal of property, plant and equipment
Impairment of inventory and loss on contracts
Impairment of long-lived assets and gain on contracts
Deferred compensation
Loss on extinguishment of debt
Non-cash lease expense
Other non-cash adjustments
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Tooling in progress
Prepaids and other current assets
Accounts payable
Deferred income taxes
Operating lease obligations
Accrued liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payment for acquisition, net of cash acquired
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank revolving credit notes
Payments on bank revolving credit notes
Repayments of other long-term debt
Payments of financing costs
Purchase of treasury stock
Payments on finance leases
Proceeds from the exercise of stock options
Other financing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Twelve Months Ended
December 31,
2022
2021
2023
$
7,844 $
18,727 $
(7,451)
27,338
7,742
140
183
4,485
(526)
—
—
(17,089)
216
3,840
259
7,791
13,441
2,555
532
(9,438)
687
(3,078)
(6,559)
40,363
(16,598)
1,059
(88,593)
(104,132)
22,359
6,952
(86)
80
3,759
(161)
—
(4,346)
(3,923)
—
4,251
329
(2,498)
(1,631)
(3,988)
(616)
9,361
4,710
(3,856)
3,003
52,426
(58,610)
7,942
—
(50,668)
21,077
10,706
(667)
(935)
4,962
(1,311)
700
16,151
(514)
—
—
325
(12,670)
(27,896)
(824)
(1,013)
11,836
(3,323)
—
5,304
14,457
(39,309)
5,348
—
(33,961)
588,040
(512,783)
(6,673)
(1,205)
(2,661)
(404)
—
—
64,314
545
127
672 $
437,939
(433,312)
(1,107)
—
(4,947)
(322)
—
—
(1,749)
9
118
127 $
385,226
(362,873)
(268)
—
(2,153)
(544)
139
(26)
19,501
(3)
121
118
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
44
Mayville Engineering Company, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Supplemental disclosure of cash flow information:
Cash paid for interest
Cash paid for taxes
Non-cash property, plant & equipment, net
Non-cash 401(k) contribution of treasury stock
In conjunction with the acquisition, assets acquired and liabilities assumed
were as follows:
Fair value of assets acquired, net of cash acquired
Liabilities assumed
Cash paid for acquisition, net of cash acquired
$
$
$
$
$
$
Twelve Months Ended
December 31,
2022
2021
2023
10,669 $
513 $
446 $
2,500 $
3,670 $
704 $
603 $
2,057 $
2,122
1,548
6,347
625
102,356 $
(13,763)
88,593 $
— $
—
— $
—
—
—
The accompanying notes are an integral part of these Consolidated Financial Statements.
45
Mayville Engineering Company, Inc. and Subsidiaries
Consolidated Statement of Shareholders’ Equity
(in thousands)
Balance as of December 31, 2020
Net loss
Share repurchases
401(k) contribution
Stock options exercised
Stock-based compensation
Balance as of December 31, 2021
Net income
Share repurchases
401(k) contribution
Stock-based compensation
Balance as of December 31, 2022
Net income
Share repurchases
401(k) contribution
Restricted stock units employee tax withholding
Stock options exercised
Stock-based compensation
Balance as of December 31, 2023
Additional
Paid-in-Capital
$
Shareholder’s Equity
Treasury
Shares
Retained
Earnings
(4,934) $
—
(2,153)
625
—
—
(6,462) $
—
(4,947)
2,057
—
(9,352) $
—
(2,661)
2,500
—
—
—
(9,513) $
14,998 $
(7,451)
—
—
—
—
7,547 $
18,727
—
—
—
26,274 $
7,844
—
—
—
—
—
34,118 $
Total
200,857
(7,451)
(2,153)
1,944
112
4,962
198,271
18,727
(4,947)
2,057
3,759
217,867
7,844
(2,661)
2,500
(115)
58
4,485
229,978
190,793 $
—
—
1,319
112
4,962
197,186 $
—
—
—
3,759
200,945 $
—
—
—
(115)
58
4,485
205,373 $
$
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
46
Mayville Engineering Company, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except share amounts and per share data)
Note 1. Nature of business and summary of significant accounting policies
Mayville Engineering Company, Inc. (MEC) is a leading U.S.-based, vertically-integrated, value-added manufacturing partner
providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication,
aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy-
and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets.
Founded in 1945 and headquartered in Milwaukee, Wisconsin, we are a leading Tier I U.S. supplier of highly engineered components
to original equipment manufacturer (OEM) customers with leading positions in their respective markets. The Company operates 23
facilities located in Arkansas, Michigan, Mississippi, Ohio, Pennsylvania, Virginia, and Wisconsin. Our engineering expertise and
technical know-how allow us to add value through every product redevelopment cycle (generally every three to five years for our
customers).
Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty
commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.
In December 1985, the Company formed the Mayville Engineering Company, Inc. Employee Stock Ownership Plan (ESOP).
The ESOP is a tax qualified retirement plan and is designed to invest primarily in the Company’s common stock which is held in a
trust. From January 2003 until the Company’s initial public offering of common stock (IPO) in May 2019, the ESOP owned 100% of
the Company’s outstanding shares of common stock which have been fully allocated to active or retired eligible employees. In
connection with the IPO, the Company initially sold 6,250,000 shares of common stock into the public market, reducing ESOP
ownership to approximately 67%. As of December 31, 2023, approximately 36% of all outstanding shares were held by the ESOP or
within the Company’s 401(k) plan.
Basis of presentation and consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP). They include the accounts of the Company and its wholly-owned subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation.
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates
and assumptions that affect the reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly-liquid investments purchased with original maturities of 90 days or less to be cash and cash
equivalents.
Concentration of credit risk
Financial instruments that potentially subject the Company to credit risk consist principally of bank balances above the Federal
Deposit Insurance Corporation insurability limits of $250 per official custodian. The Company has not experienced any losses on
these accounts and management believes the Company is not exposed to any significant credit risk on cash.
47
Accounts receivable
Accounts receivable are generally uncollateralized customer obligations due under normal trade terms requiring payment within
30 to 60 days from the invoice date. Management periodically reviews past due balances and established an allowance for doubtful
accounts of $685 and $545 as of December 31, 2023 and 2022, respectively, for probable uncollectible amounts based on its
assessment of the current status of individual accounts. The estimated valuation allowance results in a reduction to sales and the
accounts are written-off through a charge to the valuation allowance and a credit to accounts receivable after the Company has used all
reasonable collection efforts.
As the Company's customer base is principally made up of blue-chip OEMs with high credit ratings and our trade receivables
are due within one year or less, the Company does not have a reserve for credit losses.
Inventories
Inventories are stated at the lower of cost, determined on the first-in, first-out method (FIFO), or net realizable value. Net
realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion,
disposal and transportation. Work-in-process and finished goods are valued at production cost consisting of material, labor and
overhead. The Company maintains a reserve for obsolete and slow-moving inventory of $2,527 and $2,344 as of December 31, 2023
and 2022, respectively, which is based upon the aging of current inventory as well as assumptions on future demand and market
conditions.
Tooling in progress
The Company has agreements with its customers to provide production tooling which will be used to produce specific parts for
its customers. The costs to design, engineer, and manufacture the tooling are charged to tooling in progress as incurred and based on
when control of the tooling is transferred to the customer under contract or when the customer signs off through the Product Part
Approval Process (PPAP) or other documented customer acceptance, either at a point in time or over a period of time is when revenue
is recognized. The Company may also provide production tooling that is not sold to customers but is capitalized in property, plant and
equipment. To the extent that estimated costs exceed expected reimbursement from the customer, the Company recognizes a loss.
Tooling in progress was $5,457 and $7,938 as of December 31, 2023 and 2022, respectively.
Property, plant and equipment
Property, plant and equipment are stated at cost. Expenditures for additions and improvements are capitalized while
replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are expensed as incurred.
Properties sold, or otherwise disposed of, are removed from the property accounts, with gains or losses on disposal credited or charged
to the results of operations. Depreciation is provided over the estimated useful lives of the respective assets, using the straight-line
depreciation method for financial reporting purposes and begins when the asset is placed into service.
Business combinations
The Company accounts for all business combinations in accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 805, Business Combinations. In connection with a business combination, the acquiring
company must allocate the cost of the acquisition to assets acquired and liabilities assumed based on fair values as of the acquisition
date. Any excess or shortage of amounts assigned to assets and liabilities over or under the purchase price is recorded as goodwill or a
gain on bargain purchase price, respectively. Transaction costs associated with acquisitions are expensed as incurred within selling,
general and administrative expenses.
48
Goodwill
We test goodwill for impairment annually, or more frequently if triggering events occur indicating that there may be an
impairment. We have recorded goodwill and perform testing for potential goodwill impairment at a reporting unit level. A reporting
unit is an operating segment, or a business unit one level below an operating segment for which discrete financial information is
available, and for which management regularly reviews the operating results. Additionally, components within an operating segment
can be aggregated as a single reporting unit if they have similar economic characteristics. We have concluded we have one reporting
unit.
We determine the fair value of our reporting units using an income approach. Under the income approach, we calculate the fair
value of a reporting unit based on the present value of estimated future cash flows. The income approach is dependent on several key
management assumptions, including estimates of future sales, gross margins, operating costs, interest expense, income tax rates,
capital expenditures, changes in working capital requirements and the weighted average cost of capital or the discount rate. Discount
rate assumptions include an assessment of the risk inherent in the future cash flows of the reporting unit. Expected cash flows used
under the income approach are developed in conjunction with our budgeting and forecasting process.
We test our goodwill for impairment on an annual basis in the fourth quarter of each fiscal year, and more frequently if events or
changes in circumstances indicate that it might be impaired. At December 31, 2023 and 2022, the Company had goodwill with a
carrying amount of $92,650 and $71,535, respectively, with the fair value of our reporting unit exceeding the carrying value.
If the market valuation of our common shares or operating results of our reporting unit significantly decline beyond current
levels, we may again need to conduct an evaluation of the fair value of our goodwill, which may result in an impairment change.
Changes to management assumptions and estimates utilized in the income approach could negatively impact the fair value
conclusions for our reporting units resulting in goodwill impairment. All key assumptions and valuations are determined by and are
the responsibility of management. The factors used in the impairment analysis are inherently subject to uncertainty. We believe that
the estimates and assumptions are reasonable to determine the fair value of our reporting unit, however, if actual results are not
consistent with these estimates and assumptions, goodwill and other intangible assets may be overstated which could result in an
impairment charge.
Intangible assets, net
The Company’s primary other intangible assets are customer relationships and contracts, trade names, non-compete agreements,
developed technology and patents acquired in business combinations. Intangible assets are initially valued using a methodology
commensurate with the intended use of the asset. The costs of amortizable intangible assets are recognized over their expected useful
lives using the straight-line method. Intangible assets that are subject to amortization are evaluated for impairment using a process
similar to that used to evaluate long-lived assets described below. Intangible assets not subject to amortization are assessed for
impairment at least annually and whenever events or changes in circumstances indicate that it is more likely than not that an asset may
be impaired. The impairment test for indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset
with its carrying amount. An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the
asset.
Fair value of financial instruments
Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The
carrying amount of all significant financial instruments approximates fair value due to either the short maturity or the existence of
variable interest rates that approximate prevailing market rates. Cash and cash equivalents, accounts receivable and accounts payable
are classified as Level 1 fair value inputs as further described in Note 13 – Fair Value of Financial Instruments. Long-term debt is
classified as a Level 2 fair value input.
Impairment of long-lived assets and (gain) loss on contracts
When events or conditions warrant, the Company evaluates the recoverability of long-lived assets and considers whether these
assets are impaired. The Company assesses the recoverability of these assets based on several factors, including management’s
49
intention with respect to these assets and their projected undiscounted cash flows. If projected undiscounted cash flows are less than
the carrying amount of the respective assets, the Company adjusts the carrying amounts of such assets to their estimated fair value. To
the extent that the carrying value of the net assets of an asset group is greater than the estimated fair value, the Company may be
required to record impairment charges. The Company records intangible asset impairment charges as a reduction to intangible assets.
The Company records other long-lived asset impairment charges as a reduction to property, plant and equipment and an increase in
other current liabilities for loss contracts in the Consolidated Balance Sheets. The Company records a gain on sale of a previously
impaired asset and a reversal of a loss contract within impairment of long-lived assets and (gain) loss on contracts.
Deferred financing costs
Loan issuance costs and discounts are capitalized upon the issuance of long-term debt and amortized over the life of the related
debt. Loan issuance costs associated with revolving debt arrangements are presented as a component of other assets. Loan issuance
costs incurred in connection with revolving debt arrangements are amortized using the straight-line method over the life of the credit
agreement. Loan issuance costs and discounts incurred in connection with term debt are amortized using the effective interest method.
Amortization of deferred loan issuance costs and discounts are included in interest expense.
During 2023 and 2022, the Company recorded $1,205 and $0, respectively, of deferred financing costs associated with its long-
term debt and line of credit arrangements. Amortization expense associated with the deferred debt issuance costs and discounts in
2023, 2022 and 2021 was $309, $336 and $336, respectively. Accumulated amortization was $141 and $1,056 as of December 31,
2023 and 2022, respectively. Amendments made to existing debt in 2023, 2022 and 2021 resulted in the write-off of $216, $0 and $0,
respectively, of unamortized costs associated with the debt that was replaced.
Revenue recognition
The Company recognizes revenue for the transfer of goods or services to a customer in an amount that reflects the consideration
it expects to receive in exchange for those goods or services. The Company enters into supply agreements and purchase orders that
include both free on board (FOB) origin and FOB destination shipping terms. Depending on the terms of the agreement, the customer
takes ownership at shipment or at delivery, and this is when control transfers. Sales are supported by documentation such as supply
agreements and purchase orders, which specify certain terms and conditions including product specifications, quantities, fixed prices,
delivery dates and payments terms. Revenue related to services is recognized in the period services are performed, thus the Company
recognizes revenue at a point in time.
There are many customers where the Company designs, engineers and builds production tooling, which is purchased by the
customer. Tooling revenue is recognized at the point the customer signs off on the product through the Product Part Approval Process
(PPAP) or other documented customer acceptance and control of the tooling promised under a contract is transferred to the customer
at a point in time. Revenue is recognized in an amount that reflects the consideration to which the Company expects to be entitled in
exchange for the tooling.
The Company offers certain customers discounts for early payments. These discounts are recorded against net sales in the
Consolidated Statement of Comprehensive Income (Loss) and accounts receivable in the Consolidated Balance Sheets. The Company
does not offer any other customer incentives, rebates or allowances.
Shipping and handling
The Company expenses shipping and handling costs as incurred. These costs are generally comprised of salaries and wages,
shipping supplies and warehouse costs. Inbound freight costs, which mostly relate to raw materials, are included in cost of sales on the
Consolidated Statements of Comprehensive Income (Loss). Outbound freight costs, which mostly relate to sales, are included in net
sales on the Consolidated Statements of Comprehensive Income (Loss). The Company does not charge customers nor recognize
revenue for shipping and handling. The Company’s OEM customers arrange and pay the freight for delivery.
50
Advertising
The Company expenses the costs of advertising when incurred. Advertising expense was $141, $169 and $163 for the
twelve months ended December 31, 2023, 2022 and 2021, respectively. Advertising costs are charged to selling, general and
administrative expenses.
Income taxes
Income taxes and uncertain tax positions are accounted for in accordance with ASC 740, Accounting for Income Taxes. Deferred
income taxes are provided for the differences between the bases of assets and liabilities for financial reporting and income tax
purposes. The Company measures deferred tax assets and liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse and recognizes the effect of a change in enacted rates in the period of enactment. Tax positions
meeting the more-likely-than-not recognition threshold are measured pursuant to the guidance set forth in ASC 740. A valuation
allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. See Note 8 – Income
Taxes of these Notes to Consolidated Financial Statements for further discussion.
Income (loss) per share
The Company computes basic income (loss) per share by dividing net income (loss) available to shareholders by the actual
weighted average number of common shares outstanding for the reporting period. The dilutive impact to basic earnings per share
considers the impact to earnings if all convertible securities were exercised or outstanding that do not have an antidilutive impact on
earnings per share.
Treasury stock
Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as
treasury stock. Subsequent reissuance of shares to the 401(k) Plan or ESOP are recorded as a reduction to treasury stock and as ESOP
expense in the Consolidated Statements of Comprehensive Income (Loss).
Recent accounting pronouncements
In December 2023, the FASB issued Accounting Standards Updated (ASU) 2023-09, Improvements to Income Tax Disclosures,
amending ASC 740, Income Taxes. The amendment is intended to enhance the transparency about income tax information through
improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The
amendments require that on an annual basis, entities disclose specific categories in the rate reconciliation and provide additional
information for reconciling items that meet a quantitative threshold. In addition, the amendments require that entities disclose
additional information about income taxes paid as well as additional disclosures of pretax income and income tax expense and remove
the requirement to disclose certain items that are no longer considered cost beneficial or relevant. ASU 2023-09 is effective for fiscal
years beginning after December 15, 2024, may be applied prospectively or retrospectively and allows for early adoption. The
Company is evaluating the potential impact of this guidance on the consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, amending ASC 280,
Segment Reporting. The amendment is intended to improve reportable segment disclosures, primarily through enhanced disclosures
about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in
which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities
with a single reportable segment and contain other disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after
December 15, 2024, may be applied prospectively or retrospectively and allows for early adoption. The Company is evaluating the
potential impact of this guidance on the consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes
ASC 326, Financial Instruments – Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at
amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt
securities, net investment in leases, and most other financial assets that represent a right to receive cash. The Company adopted the
new standard as of January 1, 2023. As our customer base is principally made up of blue-chip OEMs with high credit ratings and our
51
trade receivables are due within one year or less, the adoption of this standard did not have a material impact on our consolidated
financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases, creating ASC 842. Under the new guidance, lessees are required to
recognize a right-of-use (ROU) asset and a lease liability for substantially all leases. When measuring ROU assets and lease liabilities,
a lessee should include amounts related to option terms, such as the option of extending or terminating the lease or purchasing the
underlying asset, that are reasonably certain to be exercised. The new guidance will continue to classify leases as either finance or
operating, with classification affecting the pattern of expense recognition. For finance leases, a lessee will recognize the interest on a
lease liability separate from amortization of the ROU asset. In addition, repayments of principal will be presented within financing
activities, and interest payments will be presented within operating activities in the statement of cash flows. For operating leases, a
lessee will recognize a single lease cost on a straight-line basis and classify all cash payments within operating activities in the
statement of cash flows. Entities have the option to adopt the new guidance through a cumulative effect adjustment to retained
earnings applied either to the beginning of the earliest period presented (modified retrospective approach) or to the beginning of the
period of adoption (effective date approach) whereby the comparative periods are unchanged. For public companies, this guidance
was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For as long as
the Company remained an EGC, the new guidance was effective for annual reporting periods beginning after December 15, 2022, and
interim periods within fiscal years beginning after December 15, 2022. Early adoption was permitted. The Company adopted the
annual reporting guidance as of January 1, 2022 using the effective date approach.
The new guidance provides a number of optional practical expedients in transition. The Company elected the “package of
practical expedients”, which allows it to not reassess under the new guidance its prior conclusions about lease identification, lease
classification and initial direct costs. The Company did not elect the use-of-hindsight practical expedient. In addition, the new
guidance provides accounting policy elections for an entity’s ongoing lessee accounting. The Company has elected to not separate
lease and non-lease components for certain of its real estate leases. The Company has elected the short-term lease recognition
exemption for all leases that qualify which means that it will not recognize ROU assets or lease liabilities for those leases with a term
of 12 months or less.
Note 2. Acquisitions
On July 1, 2023, the Company completed its acquisition of Mid-States Aluminum (MSA). The acquisition was consummated in
accordance with terms and conditions of the certain Unit Purchase Agreement, dated as of June 19, 2023, among the Company and
shareholders of MSA. The purchase price of the acquisition was $95,945, subject to adjustments for the amount of cash, indebtedness,
net working capital and certain expenses of MSA as of the closing. At the closing of the acquisition, the Company applied an estimate
of the adjustments and paid total net consideration of $90,002. The Company financed the acquisition by borrowing under its amended
and restated credit agreement, as described in Note 4 – Debt in the Notes to Consolidated Financial Statements.
Located in Fond du Lac, WI, MSA is an industry leading, vertically-integrated manufacturer of custom aluminum extrusions
and fabrications that also offers related services including design, engineering, anodizing and finishing, assembly and packaging. The
acquisition enables MEC to secure an attractive entry point within light-weight materials fabrication, while providing significant new
cross-selling opportunities with both new and existing customers.
The Company accounted for the acquisition using the acquisition method of accounting in accordance with ASC 805, Business
Combinations, with MEC being the acquiring entity, and reflects estimates and assumptions deemed appropriate by Company
management. Transaction costs related to the acquisition were expensed as incurred within other selling, general and administrative
expenses and totaled $1,411 for the twelve months ended December 31, 2023. The net sales and operating income of MSA
consolidated into MEC’s financial statements since the date of acquisition were $25,687 and $3,027, for the twelve months ended
December 31, 2023, respectively.
The aggregate purchase price has been allocated to the assets acquired and liabilities assumed based on their preliminary
estimated fair values at the acquisition date. The estimate of the excess purchase price over the preliminary estimated fair value of net
tangible assets acquired was allocated to identifiable intangible assets and goodwill. The Company engaged an independent third party
to assist with the identification and valuation of these intangible assets. Management makes significant estimates and assumptions
when determining the fair value of assets acquired and liabilities assumed. These estimates include, but are not limited to, discount
rates, projected future net sales, projected future expected cash flows, useful lives, attrition rates, royalty rates and growth rates. These
measures are based on significant Level 3 inputs (see Note 13) not observable in the market.
52
The following table is a summary of the assets acquired, liabilities assumed and net cash consideration paid for MSA during
2023:
Cash
Accounts receivable, net
Inventory
Property, plant and equipment
Other assets
Intangible assets
Developed technology
Customer relationships
Goodwill
Total assets acquired
Accounts payable
Accrued expenses
Other liabilities
Debt
Total consideration
Preliminary
Opening Balance
Sheet Allocation
Estimated
Useful
Life
$
$
324
7,381
9,698
41,271
291
4,900
17,700
21,115
102,680
(2,386)
(1,509)
(1,984)
(7,884)
88,917
7 Years
17 Years
Indefinite
Inventory was valued at its estimated fair value, which is defined as expected sales price, less costs to sell, plus a reasonable
margin for selling effort. The valuation resulted in an inventory fair value step-up of $891 and was fully expensed and reflected in cost
of sales on the Consolidated Statements of Comprehensive Income (Loss) during the twelve months ended December 31, 2023.
Property, plant and equipment was valued at its estimated fair value using the cost, market and sales comparison approaches.
The valuation resulted in a property, plant and equipment fair value step-up of $21,157. Depreciation on property, plant and
equipment is computed on a straight-line basis over the estimated useful life of the respective assets.
The Company also recorded $17,700 of customer relationships intangible assets with an estimated useful life of 17 years and
$4,900 of developed technology intangible assets with an estimated useful life of 7 years. The purchase price allocated to these assets
was based on management’s forecasted cash inflows and outflows and using a relief from royalty method for developed technologies
and the multi-period excess earnings method for customer relationships. Amortization expense related to these intangible assets is
recorded on a straight-line basis and reflected in amortization of intangible expenses on the Consolidated Statements of
Comprehensive Income.
The purchase price of MSA exceeded the preliminary estimated fair value of identifiable net assets and accordingly, the
difference was allocated to goodwill, which is not tax deductible.
The Company believes that the information gathered to date provides a reasonable basis for estimating the fair values of assets
acquired and liabilities assumed; however, the purchase price allocations are preliminary as we continue to gather the necessary
information to finalize our fair value estimates and provisional amounts. Provisional amounts include items related to working capital
adjustments, intangibles, indemnification of assets and liabilities and deferred taxes. The Company finalized the net working capital
adjustment in conjunction with the fair value estimates for assets acquired, liabilities assumed, identifiable assets and the net income
tax provision. During the twelve months ended December 31, 2023, the Company adjusted the purchase price by ($1,084) related to
working capital adjustments. The offsetting adjustment was primarily related to goodwill.
The Company has recorded preliminary estimates for the items noted in the preceding paragraph and will record adjustments, if
any, to the preliminary amounts upon finalization of the respective valuations. Such changes are not expected to be significant. The
Company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.
53
Pro Forma Financial Information (Unaudited)
In accordance with ASC 805, the following unaudited pro forma combined results of operations have been prepared and
presented to give effect to the MSA acquisition as if it had occurred on January 1, 2022, the beginning of the comparable period,
applying certain assumptions and pro forma adjustments. These pro forma adjustments primarily relate to the estimated depreciation
expense associated with the fair value of the acquired property, plant and equipment, amortization of identifiable intangible assets,
interest expense related to additional debt needed to fund the acquisition, and the tax impact of these adjustments. Additionally, the
pro forma adjustments include non-recurring expenses related to transaction costs, a one-time bonus payment and the sale of stepped-
up inventory. The unaudited pro forma consolidated results are provided for illustrative purposes only, are not indicative of the
Company’s actual consolidated results of operations or consolidated financial position and do not reflect any revenue and operating
synergies or cost savings that may result from the acquisition.
Net sales
Net income
Year Ended
December 31,
2023
619,381 $
8,324 $
2022
624,995
21,477
$
$
Based on our variable rate debt, a hypothetical 12.5-basis-point increase or decrease in our borrowing rate would have resulted
in a $113 change in interest expense due to incremental borrowings from the acquisition.
Note 3. Select balance sheet data
Inventory
Inventories are stated at the lower of cost, determined on the first-in, first-out method, or net realizable value. Net realizable
value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and
transportation. Work-in-process and finished goods are valued at production costs consisting of material, labor, and overhead.
Inventories as of December 31, 2023 and December 31, 2022 consist of:
December 31,
Finished goods and purchased parts
Raw materials
Work-in-process
Total
$
$
$
2023
31,489
25,929
10,363
67,782 $
December 31,
2022
44,728
17,003
9,977
71,708
The MSA inventory fair value step-up of $891 was fully expensed and included within cost of goods sold in the Consolidated
Statements of Comprehensive Income (Loss) for the twelve months ended December 31, 2023.
54
Property, plant and equipment
Property, plant and equipment as of December 31, 2023 and December 31, 2022 consist of:
Useful Lives December 31, December 31,
Land
Land improvements
Building and building improvements
Machinery, equipment and tooling
Vehicles
Office furniture and fixtures
Construction in progress
Total property, plant and equipment, gross
Less accumulated depreciation
Total property, plant and equipment, net
Years
Indefinite $
15-39
15-39
3-10
5
3-7
N/A
2023
2,640 $
4,378
79,682
295,960
4,571
21,325
9,779
2022
1,030
3,169
59,664
250,110
4,359
19,585
26,435
364,352
218,581
$ 175,745 $ 145,771
418,335
242,590
Depreciation expense was $27,338, $22,359 and $21,077 for the twelve months ended December 31, 2023, 2022 and 2021,
respectively.
At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company
received a notification from the former fitness customer in February 2022 resulting in a change in forecasted future cash flow,
triggering an impairment assessment of assets purchased, and assets the Company had committed to purchase, to meet obligations
under the agreement with the former fitness customer as of December 31, 2021. As a result, at December 31, 2021, the Company
recorded a long-lived asset impairment of $12,875, and an increase in other current liabilities of $3,276 due to non-cancellable
commitments to purchase property, plant and equipment related to loss contracts.
During the twelve months ended December 31, 2022, the Company was able to cancel $2,257 of purchase commitments for
property, plant and equipment relating to the former fitness customer that had previously been recorded in the Consolidated
Statements of Comprehensive Income (Loss) as an impairment of long-lived assets and loss on contracts as of December 31, 2021.
The cancellation of loss contracts has resulted in the reversal of these amounts from other current liabilities in the Consolidated
Balance Sheets and recorded in the Consolidated Statements of Comprehensive Income (Loss) as an impairment of long-lived assets
and gain on contracts.
Throughout the twelve months ended December 31, 2022, the Company sold $5,097 of machinery and equipment originally
intended to support production for the former fitness customer, resulting in a gain on the sale of the assets of $2,089. The gain on the
sale of assets is classified in impairment of long-lived assets and gain on contracts on the Consolidated Statements of Comprehensive
Income (Loss) as of December 31, 2022. As a result of the previously mentioned impairment, these assets had been written down to
fair value at December 31, 2021.
The Company adopted ASC 842 on January 1, 2022, classifying finance leases of $854 and $1,103 in property, plant and
equipment on the Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022, respectively. Please refer to Note 5
– Leases for additional information.
Goodwill
We test our goodwill for impairment on an annual basis in the fourth quarter of each fiscal year, and more frequently if events or
changes in circumstances indicate that it might be impaired. Our annual qualitative goodwill impairment test during the fourth quarter
of fiscal years 2023 and 2022 did not indicate an impairment existed. At December 31, 2023, the Company had goodwill with a
carrying amount of $92,650. The fair value exceeded the carrying value for 2023.
55
The following table sets forth the changes in the carrying amount of goodwill as of December 31, 2023. The carrying value of
goodwill was increased by $21,115 during the twelve months ended December 31, 2023, due to the acquisition of MSA.
Balance as of December 31, 2022
Acquisition
Balance as of December 31, 2023
Intangible Assets
$
$
71,535
21,115
92,650
The following is a listing of intangible assets, the useful lives in years (amortization period) and accumulated amortization as of
December 31, 2023 and December 31, 2022:
Amortizable intangible assets:
Customer relationships and contracts
Trade name
Non-compete agreements
Developed technology
Patents
Total intangible assets, net
Amortizable intangible assets:
Customer relationships and contracts
Trade name
Non-compete agreements
Patents
Total intangible assets, net
Useful Lives
Years
Gross Carrying Accumulated
Amortization
Amount
December 31, 2023
9-17
10
5
7
19
$
96,040 $
14,780
8,800
4,900
24
$ 124,544 $
53,078 $
7,446
8,800
350
14
69,688 $
Useful Lives
Years
Gross Carrying Accumulated
Amortization
Amount
December 31, 2022
9-17
10
5
19
$
78,340 $
14,780
8,800
24
$ 101,944 $
48,839 $
5,968
7,126
13
61,946 $
Net
42,962
7,334
—
4,550
10
54,856
Net
29,501
8,812
1,674
11
39,998
Additionally, the Company reported an indefinite lived non-amortizable brand name asset with a balance of $3,811 for the
twelve months ended December 2023 and 2022. Non-amortizable brand name is tested annually during the fourth quarter for
impairment, or more frequently if triggering events occur indicating there may be impairment. There has been no impairment recorded
for the years ended December 31, 2023, 2022 and 2021.
Changes in intangible assets between December 31, 2022 and December 31, 2023 consist of:
Balance as of December 31, 2021
Amortization expense
Balance as of December 31, 2022
Amortization expense
Acquisition (see Note 2)
Balance as of December 31, 2023
$
$
$
50,761
(6,952)
43,809
(7,742)
22,600
58,667
Amortization expense was $7,742, $6,952 and $10,706, for the twelve months ended December 31, 2023, 2022 and 2021,
respectively.
56
Future amortization expense is expected to be as followed:
Year ending December 31,
2024
2025
2026
2027
2028
Thereafter
Note 4. Debt
$
$
$
$
$
$
6,933
6,933
6,933
6,933
6,877
20,247
On June 28, 2023, we entered into an amended and restated credit agreement (the Credit Agreement) with certain lenders and
Wells Fargo Bank, National Association, as administrative agent (the Agent). The Credit Agreement provides for a $250,000
revolving credit facility, with a letter of credit sub-facility, and a swingline facility in an aggregate amount of $25,000. The Credit
Agreement also provides the availability of incremental facilities to the greater of $100,000 and 125% of the Company’s twelve month
trailing Consolidated EBITDA through an accordion feature. All amounts borrowed under the credit agreement mature on June 28,
2028.
The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited
to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to
exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset
dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale
leaseback transactions; and exceed the limits on annual capital expenditures. The Credit Agreement also requires us to satisfy certain
financial covenants, including a minimum consolidated interest coverage ratio of 3.00 to 1.00 as well as a consolidated total leverage
ratio not to exceed 4.00 to 1.00 (which was increased as of July 1, 2023 from 3.50 to 1.00 in connection with the acquisition of MSA).
The Company incurred deferred financing costs of $1,248 associated with executing the Credit Agreement, which has been
recorded as an other long-term asset in the Consolidated Balance Sheets and will be amortized over the duration of the agreement.
At December 31, 2023, our consolidated total leverage ratio was 2.14 to 1.00 as compared to a covenant maximum of 4.00 to
1.00 under the Credit Agreement.
At December 31, 2023, our consolidated interest coverage ratio was 5.49 to 1.00 as compared to a covenant minimum of 4.00 to
1.00 under the Credit Agreement.
Under the Credit Agreement, interest is payable quarterly at the adjusted secured overnight financing rate (SOFR) plus an
applicable margin based on the current consolidated total leverage ratio. The interest rate was 7.71% and 5.69% as of December 31,
2023 and December 31, 2022, respectively. Additionally, the agreement has a fee on the average daily unused portion of the aggregate
unused revolving commitments. This fee was 0.30% and 0.25% as of December 31, 2023 and December 31, 2022, respectively.
Prior to June 28, 2023, the Company maintained a credit agreement (Former Credit Agreement) with certain lenders and the
Agent. The Former Credit Agreement provided for a $200,000 revolving credit facility, with a letter of credit sub-facility in an
aggregate amount not to exceed $5,000, and a swingline facility in an aggregate amount of $20,000. The Former Credit Agreement
also provided for an additional $100,000 of debt capacity through an accordion feature.
The Company was in compliance with all financial covenants of its credit agreements as of December 31, 2023 and
December 31, 2022. The amount borrowed on the revolving credit notes was $147,493 and $72,236 as of December 31, 2023 and
December 31, 2022, respectively.
Other Debt
With the consummation of the MSA acquisition, the Company assumed a Small Business Administration (SBA) loan and a
Fond du Lac County and Fond du Lac Economic Development Corporation term note (Fond du Lac Term Note) in the amounts of
57
$5,009 and $2,875, respectively. The SBA loan is secured by specific equipment, payable in monthly installments of $27, including
interest at 1.17% and due in full in September 2045. Due to the nature of the SBA loan, the Company did not meet the necessary
criteria to qualify for this type of loan, so the Company paid off the full loan amount of $5,009 during the third quarter of the current
year period. The Fond du Lac Term Note is secured by a security agreement, payable in annual installments of $500 plus interest at
2.00% and is due in full in December 2028. The short-term and long-term balance of $500 and $1,875, respectively, are recorded in
other current liabilities and other long-term liabilities in the Consolidated Balance Sheets.
Note 5. Leases
In February 2016, the FASB issued ASU 2016-02, Leases, creating ASC 842. The Company adopted the annual reporting
guidance as of January 1, 2022 using the effective date approach. Upon adoption of the new guidance at January 1, 2022, the
Company established a ROU asset of $37,908 and a lease liability of $38,185 related to its real property operating leases and
established a ROU asset of $2,415 and a lease liability of $2,418 related to its personal property operating leases. Additionally, the
impact on retained earnings was immaterial. The January 1, 2022 balances associated with the Company’s personal property finance
leases were reclassified in the financial statements from capital lease, net to property, plant and equipment, net, from current portion of
capital lease obligation to other current liabilities, and from capital lease obligation, less current maturities to other long-term
liabilities on the Consolidated Balance Sheets.
The Company has real property operating leases for office and light manufacturing space. Operating leases for the Company’s
personal property consist of leases for office equipment, vehicles, forklifts and storage tanks for bulk gases. The Company recognizes
a ROU asset and a lease liability for operating leases based on the net present value of future minimum lease payments. Lease expense
for the Company’s operating leases is recognized on a straight-line basis over the lease term, including renewal periods that are
considered reasonably certain.
The Company has finance leases for two laser cutting systems, four vehicles and a number of copiers. The Company recognizes
an ROU asset and a lease liability for finance leases based on the net present value of future minimum lease payments. Lease expense
for the Company’s finance leases is comprised of the amortization of the ROU asset and interest expense recognized based on the
effective interest method.
Variable lease expense is related to certain of the Company’s real property leases and personal property leases, and it generally
consists of property tax and insurance components that are for the benefit of the lessor (real property leases) and variable overage fees
(personal property leases) that are remitted as part of the Company’s lease payments.
The components of lease expense were as follows:
Finance lease cost:
Amortization of finance lease assets
Interest on finance lease liabilities
Total finance lease expense
Operating lease expense
Short-term lease expense
Variable lease expense
Lease income (1)
Total lease expense
Year Ended
December 31,
2023
2022
$
$
414 $
44
458
5,237
610
197
(2,070)
4,432 $
320
42
362
6,063
683
217
(1,133)
6,192
(1) The Company subleased a portion of its Hazel Park, MI facility starting in June 2022. Lease income for the twelve months ended
December 31, 2023 and 2022 was $2,070 and $1,133, respectively.
Total rent expense for the twelve months ended December 31, 2021 was $5,282.
58
Supplemental information related to leases was as follows:
Assets:
Finance lease assets
Operating lease assets
Total lease assets
Current liabilities:
Current finance lease liabilities
Current operating lease liabilities
Noncurrent liabilities:
Long-term finance lease liabilities
Long-term operating lease liabilities
Total lease liabilities
December 31, December 31,
2023
2022
Balance Sheet Classification
Property, plant and equipment, net
Operating lease assets
Other current liabilities
Current portion of operating lease obligation
$
$
$
Other long-term liabilities
Operating lease obligation, less current maturities
$
854 $
32,233
33,087 $
1,103
36,073
37,176
441 $
5,064
388
4,857
478
28,606
34,589 $
784
31,891
37,920
Weighted average remaining lease term (in years)
Finance leases
Operating leases
Weighted average discount rate
Finance leases
Operating leases
The table below represents ROU asset balances by type of lease:
Real estate leases
Equipment Leases
Vehicle Leases
Total lease assets
December 31, December 31,
2023
2022
2.4
7.0
3.1
7.8
3.99 %
2.57 %
3.93 %
2.49 %
December 31, December 31,
2023
30,558 $
2,179
350
33,087 $
2022
34,211
2,506
459
37,176
$
$
Maturities of lease liabilities at December 31, 2023 and minimum lease payments under ASC 842 having initial or remaining
non-cancellable terms in excess of one year were as follows:
Year ending December 31,
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: imputed interest
Total lease obligations
Operating
Leases
Finance
Leases
Total
$
$
5,840 $
5,149
4,963
4,987
4,896
11,657
37,492
(3,822)
33,670 $
468 $
333
108
52
—
—
961
(42)
919 $
6,308
5,482
5,071
5,039
4,896
11,657
38,453
(3,864)
34,589
59
Lease related supplemental cash flow information:
Year Ended
December 31,
2023
2022
Cash paid for amounts included in the measurement of lease liabilities for finance leases:
Operating cash flows
Financing cash flows
$
$
44
404
$
$
42
322
Cash paid for amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows
$
5,824 $
5,672
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases
Finance leases
$
$
455 $
2 $
1,271
284
ROU assets are assessed for impairment in accordance with the Company’s long-lived asset policy. The Company reassesses
lease classification and remeasures ROU assets and lease liabilities when a lease is modified, and that modification is not accounted
for as a separate new lease or upon certain other events that require reassessment in accordance with ASC 842.
Note 6. Employee stock ownership plan
Under the ESOP, the Company can make annual discretionary contributions to the trust for the benefit of eligible employees in
the form of cash or shares of common stock of the Company subject to the Board of Directors’ approval. For each of the
twelve months ended December 31, 2023, 2022 and 2021, the Company recorded no ESOP expense.
As of January 1, 2023, the Company amended the plan reducing the distribution period from five years to three years.
At various times following death, disability, retirement, termination of employment or the exercise of diversification rights, an
ESOP participant is entitled to receive their ESOP account balance in accordance with various distribution methods as permitted under
the policies adopted by the ESOP.
As of December 31, 2023 and December 31, 2022, the ESOP shares consisted of 4,062,583 and 5,684,879 in allocated shares,
respectively.
Note 7. Retirement plans
The Mayville Engineering Company, Inc. 401(k) Plan (the 401(k) Plan) covers substantially all employees meeting certain
eligibility requirements. The 401(k) Plan is a defined contribution plan and is intended for eligible employees to defer tax-free
contributions to save for retirement. Employees may contribute up to 50% of their eligible compensation to the 401(k) Plan, subject to
the limits of Section 401(k) of the Internal Revenue Code.
As of January 1, 2023, the Company implemented an employer match program to the 401(k) Plan. The Company now provides
a 50% match for employee contributions, up to 6%. For the twelve months ended December 31, 2023, the Company’s employer match
expense was $3,232. Additionally, the 401(k) Plan provides for employer discretionary profit-sharing contributions and the Board of
Directors may authorize discretionary profit-sharing contributions (which are usually approved at the end of each calendar year). For
the twelve months ended December 31, 2023, 2022 and 2021, the Company’s estimated discretionary profit-sharing expense was $0,
$2,500 and $2,057, respectively.
60
Note 8. Income taxes
Income taxes are included in the Consolidated Statements of Comprehensive Income (Loss) at December 31, 2023, 2022 and
2021 as below:
Current income tax expense
U.S. Federal
State
Total
Deferred income tax expense (benefit)
U.S. Federal
State
Total
Total income tax expense (benefit)
December 31,
December 31,
December 31,
2023
2022
2021
$
$
$
—
191
191
808
40
848
1,039
$
$
—
414
414
4,722
(1,469)
3,253
3,667
$
100
1,203
1,303
(2,790)
(456)
(3,246)
(1,943)
A reconciliation of the statutory federal income tax provision (benefit) to the income tax provision (benefit) from continuing
operations provided at December 31, 2023, 2022 and 2021 is as follows:
December 31, December 31,
December 31,
2023
2022
2021
$
1,865
429
305
80
(975)
195
283
(162)
(1,137)
182
(26)
1,039
11.7 %
$
4,703 $
831
(427)
43
(63)
16
54
50
(424)
(1,071)
(45)
3,667 $
16.4 %
(1,971)
523
14
29
(301)
75
(7)
(546)
147
43
51
(1,943)
26.5 %
Income tax provision (benefit) at the federal statutory rate - 21%
State and local income taxes - net of federal income tax benefits
Compensation deduction limitation - section 162(m) adjustment
Other - permanent differences
Tax credits generated
Uncertain tax positions - current year
Uncertain tax positions - prior year
Stock compensation
Return to provision
Changes in tax rates
Other miscellaneous tax
Total income tax provision (benefit)
Effective tax rate
$
$
61
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities are
presented below:
Deferred tax assets:
Deferred compensation
Inventory adjustments
Accrued expenses
Right of use - liability
Credits
Net operating loss
Interest Expense
Other
Total deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Intangibles
Right of use - asset
Other
Total deferred tax liabilities
Valuation allowance
Net deferred tax liability
December 31,
2023
December 31,
2022
$
$
3,693
1,573
1,478
8,165
2,322
4,401
2,969
398
24,999
24,009
5,775
7,816
5
37,605
—
(12,606)
$
$
7,674
1,601
411
8,853
942
4,781
721
478
25,461
17,909
10,671
8,689
10
37,279
—
(11,818)
Consolidated federal net operating loss carryforwards are $20,008 and do not expire. In addition, the Company has consolidated
and separate company net operating loss carryforwards of $19,169, certain of which begin to expire in 2031.
Uncertain Tax Positions
Based on an evaluation of its tax positions, the Company recorded an unrecognized tax benefit related to research and
development tax credits in its financial statements as of December 31, 2023 and December 31, 2022. The Company does not
anticipate that there will be a material change in the balance of the unrecognized tax benefits in the next twelve months. Any interest
and penalties related to uncertain tax positions are recorded in income tax expense. No amounts have been recorded as tax expense for
interest and penalties for the year ended December 31, 2023 as the amount for the utilized portion of the research and development
credit on the Wisconsin return is considered to be immaterial. At December 31, 2023, a total of $771 of unrecognized tax benefits
would, if recognized, impact the company’s effective tax rate.
The Company files income tax returns in the United States federal jurisdiction and in various state and local jurisdictions.
Federal tax returns for tax years beginning January 1, 2019, and state tax returns beginning January 1, 2018, are open for examination.
62
Details of Unrecognized Tax Benefits
The following is a reconciliation of beginning and ending amounts of unrecognized tax benefits:
Balance as of December 31, 2020
Increase from current year tax positions
Increase from prior year tax positions
Decrease from settlements with tax authority
Decrease from expiration of statute of limitations
Balance as of December 31, 2021
Increase from current year tax positions
Decrease from prior year tax positions
Decrease from settlements with tax authority
Decrease from expiration of statute of limitations
Balance as of December 31, 2022
Increase from current year tax positions
Increase from prior year tax positions
Decrease from settlements with tax authority
Decrease from expiration of statute of limitations
Balance as of December 31, 2023
$
$
221
100
(7)
—
—
314
16
54
—
—
384
1,099
217
—
(25)
1,675
Note 9. Commitments and contingencies
Litigation
On August 4, 2022, the Company filed a lawsuit against Peloton Interactive, Inc. (“Peloton”) in the Supreme Court of the State
of New York, New York County. The lawsuit arises from a March 2021 Supply Agreement between the parties, pursuant to which
MEC was to manufacture and supply custom component parts for Peloton’s exercise bikes (the “Manufacturing Project”). In the
lawsuit, the Company originally asserted two claims (1) breach and anticipatory repudiation of contract and (2) breach of the duty of
good faith and fair dealing (pleaded in the alternative). In January 2023, in response to Peloton’s motion to dismiss, the court allowed
the first claim to proceed and dismissed the alternative claim. In the remaining claim, MEC asserts that Peloton breached and
anticipatorily repudiated the Supply Agreement by unilaterally cancelling the Manufacturing Project, and refusing to pay MEC certain
monthly fixed revenue payments owed under the terms of the Supply Agreement. The parties have cross-appealed the court’s order on
the motion to dismiss – Peloton appealed the portion of the order that denied the motion to dismiss the claim for breach and
anticipatory repudiation of contract and MEC appealed the portion of the order that dismissed the claim for breach of duty of good
faith and fair dealing. Both appeals are pending.
On November 3, 2023, Peloton filed a counterclaim alleging that Peloton was induced by fraud to enter into the Supply
Agreement and seeking recission of the Supply Agreement and damages, among other forms of relief. On November 22, 2023, the
Company answered Peloton’s counterclaim, denying the allegations in the counterclaim.
The total amount for damages claimed by MEC is substantial but the amount and timing of the ultimate recovery is uncertain.
As a result, any recovery from this litigation or settlement of this claim is a contingent gain and will be recognized if, and when,
realized or realizable.
From time to time, the Company may be involved in various claims and lawsuits, both for and against the Company, arising in
the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, in management’s
opinion, either the likelihood of loss is remote, or any reasonably possible loss associated with the resolution of such proceedings is
not expected to have a material adverse impact on the consolidated financial statements.
63
Note 10. Deferred compensation
The Mayville Engineering Company Deferred Compensation Plan is available for certain employees designated to be eligible to
participate by the Company and approved by the Board of Directors. Eligible employees may elect to defer a portion of their
compensation for any plan year and the deferral cannot exceed 50% of the participant’s base salary and may include the participant’s
annual short-term cash incentive up to 100%. The participant’s election must be made prior to the first day of the plan year.
An employer contribution will be made for each participant to reflect the amount of any reduced allocations to the ESOP and/or
401(k) employer contributions due solely to the participant’s deferral amounts, as applicable. In addition, a discretionary amount may
be awarded to a participant by the Company.
Deferrals are assumed to be invested in an investment vehicle based on the options made available to the participant (which does
not include Company stock).
The deferred compensation plan provides benefits payable upon separation of service or death. Payments are to be made 30 or
180 days after date of separation from service, either in a lump-sum payment or up to five annual installments as elected by the
participant when the participant first elects to defer compensation.
The deferred compensation plan is non-funded, and all future contributions are unsecured in that the employees have the status
of a general unsecured creditor of the Company and the agreements constitute a promise by the Company to make benefit payments in
the future. During the twelve months ended December 31, 2023, 2022 and 2021, eligible employees elected to defer compensation of
$490, $117 and $0, respectively. As of December 31, 2023 and 2022, the short-term portion accrued for all benefit years less than 12
months under this plan was $289 and $18,062, respectively. As of December 31, 2023 and 2022, the long-term portion accrued for all
benefit years greater than 12 months under this plan was $3,816 and $3,132. Total expense (credit) for the deferred compensation plan
for the twelve months ended December 31, 2023, 2022 and 2021 amounted to $942, ($3,051) and $812, respectively. These expenses
(credits) are included in profit sharing, bonuses and deferred compensation on the Consolidated Statements of Comprehensive Income
(Loss). Additionally, the Company made distributions of $18,520, $1,048 and $1,327 for the twelve months ended December 31,
2023, 2022 and 2021, respectively.
Note 11. Self-Funded insurance
The Company is self-funded for the medical benefits provided to its employees and their dependents. Healthcare costs are
expensed as incurred and are based upon actual claims paid, reinsurance premiums, administration fees and estimated unpaid claims.
Since March 31, 2020, the Company has an aggregate stop loss limit to mitigate risk. Expense related to this contract were $20,292,
$17,146 and $17,157 for the twelve months ended December 31, 2023, 2022 and 2021, respectively. An estimated accrued liability of
$1,018 and $900 was recorded as of December 31, 2023 and December 31, 2022, respectively, for estimated unpaid claims and is
included within other current liabilities on the Consolidated Balance Sheets.
Note 12. Segments
The Company applies the provisions of ASC 280, Segment Reporting. An operating segment is defined as a component that
engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete
financial information is available. Based on the provisions of ASC 280, the Company has determined it has one operating segment.
The Company does not earn revenues or have long-lived assets located in foreign countries.
Note 13. Fair value of financial instruments
Fair value provides information on what the Company may realize if certain assets were sold or might pay to transfer certain
liabilities based upon an exit price. Financial assets and liabilities that are measured and reported at fair value are classified into a
three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within the
valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based
on the observability and objectivity of the pricing inputs, as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
64
Level 2 – Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data
through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar
assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information
derived from or corroborated by observable market data. Long-term debt is classified as a Level 2 fair value input.
Level 3 – Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be
the Company’s own data and judgements about assumptions that market participants would use in pricing the asset or
liability.
The following table lists the Company’s financial assets and liabilities accounted for at fair value by the fair value hierarchy:
Deferred compensation liability
Total
$
$
4,105 $
4,105 $
4,105 $
4,105 $
— $
— $
—
—
Balance at
December 31,
2023
Fair Value Measurements at
Report Date Using
(Level 2)
(Level 3)
(Level 1)
Deferred compensation liability
Total
Balance at
December 31,
2022
21,194 $
21,194 $
$
$
Fair Value Measurements at
Report Date Using
(Level 2)
(Level 3)
(Level 1)
21,194 $
21,194 $
— $
— $
—
—
Fair value measurements for the Company’s cash and cash equivalents are classified based upon Level 1 measurements because
such measurements are based upon quoted market prices in active markets for identical assets.
Accounts receivable, accounts payable, long-term debt and accrued liabilities are recorded in the Consolidated Balance Sheets at
cost and approximate fair value.
Deferred compensation liabilities are recorded at amounts due to participants at the time of deferral. Deferrals are invested in an
investment vehicle based on the options made available to the participant, considered to be Level 1 and Level 2 on the fair value
hierarchy, with the current balance all as Level 1. The change in fair value is recorded in the profit sharing, bonuses, and deferred
compensation line item on the Consolidated Statements of Comprehensive Income (Loss). The short-term and long-term balances due
to participants are reflected on the current portion of deferred compensation and deferred compensation, less current portion line
items, respectively, on the Consolidated Balance Sheets.
The Company’s non-financial assets such as intangible assets and property, plant, and equipment are re-measured at fair value
when there is an indication of impairment and adjusted only when an impairment charge is recognized.
Note 14. Revenue recognition
Contract Assets and Contract Liabilities
The Company has contract assets and contract liabilities, which are included in tooling in progress and other current liabilities
on the Consolidated Balance Sheets, respectively. Contract assets include products where the Company has satisfied its performance
obligation, but receipt of payment is contingent upon delivery. Contract liabilities include deferred tooling revenue, where the
performance obligation was not met. The performance obligation is satisfied when the tooling is completed and the customer signs off
through the PPAP or other documented customer acceptance. Cost of goods sold is recognized and released from the balance sheet
when control of the tooling promised under contract is transferred to the customer.
65
The Company’s contracts with customers are short-term in nature; therefore, revenue is typically recognized, billed and
collected within a 12-month period. The following table reflects the changes in our contract assets and liabilities during the
twelve months ended December 31, 2023, 2022 and 2021.
As of December 31, 2020
Net activity
As of December 31, 2021
Net activity
As of December 31, 2022
Net activity
As of December 31, 2023
Disaggregated Revenue
Contract
Assets
Contract
Liabilities
$
$
3,126 $
824
3,950
3,988
7,938
(2,481)
5,457 $
1,060
1,658
2,718
3,423
6,141
(2,506)
3,635
The following tables represents a disaggregation of revenue by product category and end market:
Product Category
Outdoor sports
Fabrication
Performance structures
Tube
Tank
Total
Intercompany sales elimination
Total, net sales
End Market
Commercial vehicle
Construction & access
Powersports
Agriculture
Military
Other
Total, net sales
2021
10,039
295,988
73,207
58,749
25,816
463,799
(8,973)
454,826
2021
156,488
92,298
90,247
49,827
24,147
41,819
454,826
Twelve Months Ended
December 31,
2022
$
$
9,498
324,254
109,888
73,868
38,246
555,754
(16,362)
539,392
$
$
2023
9,017
342,689
136,819
76,322
43,947
608,794
(20,369)
588,425
$
$
2023
225,252 $
105,228
97,788
57,231
37,311
65,615
Twelve Months Ended
December 31,
2022
212,992
111,525
87,531
57,412
24,831
45,101
539,392
588,425 $
$
$
66
Note 15. Common equity
At December 31, 2023, the authorized stock of the Company consisted of 75,000,000 shares of common stock without par
value.
Changes in outstanding common shares are summarized as follows:
Beginning balance
Treasury stock purchases
Common stock issued (including share-based compensation impact)
Ending balance
Note 16. Earnings per share
2023
20,172,746
(184,964)
322,802
20,310,584
2022
20,335,934
(559,945)
396,757
20,172,746
2021
20,059,390
(147,785)
424,329
20,335,934
The Company computes earnings per share in accordance with ASC 260, Earnings per Share. In accordance with ASC 260,
outstanding options will be considered to have been exercised and outstanding as of the beginning of the period if the average market
price of the common stock during the period exceeds the exercise price of the options (they are “in the money”), and the assumed
exercise of the options do not have an anti-dilutive impact on earnings per share.
A reconciliation of basic and diluted net income (loss) per share attributable to the Company were as follows:
Net income (loss) attributable to MEC
Average shares outstanding
Basic income (loss) per share
Average shares outstanding
Effect of dilutive share-based compensation
Total potential shares outstanding
Diluted income (loss) per share
Twelve Months Ended December 31,
2023
2022
2021
7,844
20,415,157
0.38
$
$
18,727
20,399,737
0.92
$
$
(7,451)
20,404,543
(0.37)
20,415,157
283,813
20,698,970
0.38
20,399,737
282,891
20,682,628
0.91
20,404,543
426,434
20,830,977
(0.36)
$
$
$
$
$
Options in the money that were not included in the computation of diluted earnings per share because they would have had an
antidilutive impact on earnings per share were as follows:
Stock options
—
—
Note 17. Concentration of major customers
The following customers accounted for 10% or greater of the Company’s recorded net sales and net trade receivables:
Twelve Months Ended December 31,
2022
2023
2021
300,510
Net Sales
Twelve Months Ended December 31,
2022
2023
2021
Accounts Receivable
As of
December 31,
2023
As of
December 31,
2022
Customer
A
B
C
D
E
15.0 %
14.8 %
10.6 %
<10 %
<10 %
16.0 %
17.2 %
11.9 %
<10 %
<10 %
14.1 %
16.6 %
10.8 %
10.0 %
<10 %
<10 %
12.6 %
<10 %
<10 %
12.7 %
<10 %
11.0 %
<10 %
<10 %
12.6 %
67
Note 18. Stock-based compensation
The Mayville Engineering Company, Inc. 2019 Omnibus Incentive Plan provided the Company the ability to grant monetary
payments based on the value of its common stock, up to 2,000,000 shares.
On April 20, 2021, shareholders of the Company approved an amendment to the 2019 Omnibus Incentive Plan increasing the
number of shares of common stock authorized for issuance by 2,500,000 shares.
The Company recognizes stock-based compensation using the fair value provisions prescribed by ASC 718, Compensation –
Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based
on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-
based instrument. For units, fair value is equivalent to the adjusted closing stock price at the date preceding the date of grant. The
Black-Scholes option pricing model is utilized to determine fair value for options.
Cancellations and forfeitures are accounted for as incurred.
Stock awards were granted on November 3, 2023, September 18, 2023, June 26, 2023, April 18, 2023, March 13, 2023,
February 28, 2023, January 25, 2023, July 19, 2022, April 19, 2022, February 28, 2022, June 3, 2021, May 12, 2021 and February 28,
2021.
The Company’s stock-based compensation expense by award type is summarized as follows:
Twelve Months Ended December 31,
2022
2023
2021
Unit awards
Option awards
Stock based compensation expense, net of tax
$
$
3,001
1,484
4,485
$
$
2,490
1,269
3,759
$
$
3,006
1,956
4,962
A rollforward of unrecognized stock-based compensation expense is displayed in the table below. Unrecognized stock-based
compensation expense as of December 31, 2023 will be expensed over the remaining requisite service period from which individual
award values relate, up to November 3, 2025
Balance as of December 31, 2021
Grants
Forfeitures
Expense
Balance as of December 31, 2022
Grants
Forfeitures
Expense
Balance as of December 31, 2023
$
$
Units
Options
Total
1,676 $
4,426
(1,873)
(2,490)
1,739
4,465
(899)
(3,001)
2,304 $
1,537 $
2,573
(1,791)
(1,269)
1,050
2,585
(638)
(1,484)
1,513 $
3,213
6,999
(3,664)
(3,759)
2,789
7,050
(1,537)
(4,485)
3,817
68
Units
A summary of the Company’s unit award activity is as follows:
Nonvested, beginning of year
Grants
Forfeitures
Vested
Nonvested, end of year
Stock Options
Twelve Months Ended December 31,
2023
Weighted-Average
Grant Date Fair
2022
Weighted-Average
Grant Date Fair
Number of Units
Value
Number of Units
Value
392,550 $
295,109 $
(63,878) $
(254,169) $
369,612 $
9.52
15.22
13.86
10.00
12.99
354,906 $
477,277 $
(167,641) $
(271,992) $
392,550 $
11.59
9.27
11.18
10.76
9.52
A summary of the Company’s stock option award activity is as follows:
Twelve Months Ended December 31,
2023
2022
Weighted-Average
Weighted-Average
Number of Options Exercise Price
Nonvested, beginning of year
Grants
Forfeitures
Vested
Nonvested, end of year
184,052 $
281,822 $
(84,261) $
(195,264) $
186,349 $
13.51
14.79
13.54
11.67
17.37
Number of Options Exercise Price
10.91
10.32
11.30
9.18
13.51
526,895 $
479,947 $
(309,863) $
(512,927) $
184,052 $
As of December 31, 2023, there were 250,505, 696,041, 225,114 and 120,571 options issued and outstanding at exercise prices
of $17.00, $7.12, $14.01 and $10.32 per share, respectively, with a remaining weighted average contractual life of 6.45 years. The
intrinsic values of these outstanding options were $0, $7.30, $0.42 and $4.10, respectively, based on the Company’s stock price as of
December 31, 2023.
The Company uses the Black-Scholes valuation model to estimate the fair value of stock options which were $9.28 and $5.36
for those options granted during the years ended December 31, 2023 and 2022, respectively. The Company utilized the following
assumptions in determining these fair values:
Assumptions
Stock price at date of grant/exercise price
Expected term (in years)
Estimated volatility
Estimated risk-free rate of return
Expected dividend yield
$
2023
14.12 $
5.75
58.5 %
3.9 %
0.0 %
Inputs
2022
10.32 $
5.75
55.3 %
1.9 %
0.0 %
2021
14.01
5.75
53.9 %
0.8 %
0.0 %
The Company does not have historical option exercise data to estimate the expected term. For options granted, the Company
utilizes the simplified method prescribed by Staff Accounting Bulletin (SAB) Topic 14 to estimate the expected term, which is
calculated as the average of the vesting term and the contractual term. The option grants have a contractual life of 10 years and a
requisite service period, or vesting term, of 2 years with 50% vesting on the annual anniversary dates. Applying the simplified method,
the Company calculated the expected terms of each tranche to be 5.5 years and 6.0 years resulting in an average expected term of
69
5.75 years for these awards. The Company will continue to employ the simplified method until more relevant detailed information
becomes available from which to make this estimate.
Note 19. Restructuring
On November 2, 2023, as part of our efforts to optimize our operations, the Company restructured its operations team,
eliminating the position of Chief Operating Officer (COO). For the twelve months ended December 31, 2023, the Company incurred
severance costs of $855 which were recognized within cost of sales in the Consolidated Statements of Comprehensive Income (Loss)
as of December 31, 2023. The operations team reorganization was finalized during the fourth quarter of the current period. The
following table summarizes the activity related to the separation with the Company’s former COO through December 31, 2023:
Balance as of December 31, 2022
Charges
Cash receipts (payments)
Balance as of December 31, 2023
Note 20. Valuation and qualifying accounts
Description
Year ended December 31, 2023
Allowance for doubtful accounts
Year ended December 31, 2022
Allowance for doubtful accounts
Year ended December 31, 2021
Allowance for doubtful accounts
Note 21. Subsequent events
Employee Severance
Reserve
$
$
—
855
(855)
—
Balance at
beginning of
period
Additions
Deductions
Balance at
end of
period
$
545 $
447 $
307 $
685
$
631 $
697 $
784 $
545
$
1,298 $
751 $
1,418 $
631
The Company has evaluated subsequent events and transactions for potential recognition or disclosure in the consolidated
financial statements through March 6, 2024, the date on which the consolidated financial statements were available to be issued.
70
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to
be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is
accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow
timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of
any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.
Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
period covered by this Annual Report on Form 10-K and has concluded that, as of the end of such period, our disclosure controls and
procedures were effective at the reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such
term is defined in Rules 13a- 15(f) and 15d-15(f) of the Exchange Act. 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 GAAP. Our internal control over financial reporting 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 our
assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our
management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on our financial statements.
On July 1, 2023, the Company completed its acquisition of Mid-States Aluminum (MSA). Consistent with guidance issued by
the SEC that an assessment of a recently acquired business may be omitted from management’s report on internal control over
financial reporting in the year of acquisition, management elected to exclude an assessment of the effectiveness of the Company’s
internal control over financial reporting related to MSA. Total assets and revenues of MSA that were excluded from management’s
assessment constitute 19.4% of the Company’s total assets and 4.4% of total revenues as of and for the year ended December 31,
2023.
Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that,
as of December 31, 2023, our internal control over financial reporting was effective.
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 the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
71
Attestation Report of the Registered Public Accounting Firm (PCAOB ID No. 34)
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm
regarding internal control over financial reporting due to an exemption established by the Jumpstart Our Business Startups Act of
2012 for “emerging growth companies.”
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act) during the fourth quarter of 2023 that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
During the three months ended December 31, 2023, no director or Section 16 officer of the Company adopted or terminated a
“Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
72
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item is included under the captions “Election of Directors,” “Corporate Governance” and
“Delinquent Section 16(a) Reports” in the Company’s definitive proxy statement for its 2024 annual meeting of shareholders (Proxy
Statement) and is hereby incorporated herein by reference. Information with respect to the executive officers of the Company appears
in Item 1 of this Annual Report on Form 10-K.
The Company has adopted a Code of Conduct and Ethics that applies to all of the Company’s directors, officers and employees,
including the Company’s Chief Executive Officer and Chief Financial Officer and other persons performing similar functions. The
Company has posted a copy of the Code of Conduct and Ethics on its website at www.mecinc.com. The Company intends to satisfy
the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, the Code of Conduct and Ethics
by posting such information on its website at www.mecinc.com. The Company is not including the information contained on its
website as part of, or incorporating it by reference into, this report.
Item 11. Executive Compensation.
The information required by this Item is included under the captions “Corporate Governance – Transactions with Related
Persons,” “Executive Compensation” and “2023 Director Compensation” in the Proxy Statement and is hereby incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item with respect to security ownership of certain beneficial owners and management is
included under the caption “Principal Shareholders” in the Proxy Statement and is hereby incorporated by reference.
The following table sets forth information with respect to compensation plans under which equity securities of the Company are
authorized for issuance as of December 31, 2023:
Plan Category
Equity compensation plans approved by security holders (2)
Equity compensation plans not approved by security holders
Total
Number of
securities issued
or to be issued
upon vesting of
units or exercise
of outstanding
options, warrants,
and rights
Weighted average
exercise price of
outstanding
options, warrants
and rights (1)
2,890,808 $
—
2,890,808 $
10.53
—
10.53
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities reflected
in column (a))
1,609,192
—
1,609,192
(1) Represents weighted average exercise price of 1,292,231 outstanding options and does not take into account restricted stock units.
(2) Consists of the Mayville Engineering Company, Inc. 2019 Omnibus Incentive Plan.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is included under the caption “Corporate Governance” in the Proxy Statement and is
hereby incorporated by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this Item is included under the caption “Miscellaneous – Independent Registered Public
Accounting Firm” in the Proxy Statement and is hereby incorporated by reference.
73
Item 15. Exhibits, Financial Statement Schedules.
Consolidated Financial Statements
PART IV
The consolidated financial statements listed in the accompanying index to the consolidated financial statements are filed as part
of this Annual Report on Form 10-K.
Financial Statement Schedules
All financial statement schedules have been omitted because they are not applicable or the required information is included in
the consolidated financial statements and the related notes thereto.
Exhibits
The exhibits listed in the exhibit index below are filed as part of this Annual Report on Form 10-K.
74
Exhibit
Number
2
EXHIBIT INDEX
Description
Unit Purchase Agreement, dated as of June 19, 2023, among Mayville Engineering Company, Inc. and the shareholders of
Mid-States Aluminum Corp. (incorporated by reference to Exhibit 2 to the Current Report on Form 8-K filed on June 21,
2023) [The disclosure schedules and similar attachments to this agreement are not being filed herewith. The registrant
agrees to furnish supplementally a copy of any such schedules or attachments to the Security and Exchange Commission
upon request.]
3.1
Amended and Restated Articles of Incorporation of Mayville Engineering Company, Inc. (incorporated by reference to
Exhibit 3.1 to Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-230840) filed on April 29,
2019).
3.2
Bylaws of Mayville Engineering Company, Inc. as amended through April 18, 2023 (incorporated by reference to
Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on April 19, 2023).
4
Description of Mayville Engineering Company, Inc.’s Securities (incorporated by reference to Exhibit 4 to the Company’s
Annual Report on Form 10-K filed on March 2, 2020).
10.1†
Mayville Engineering Company, Inc. 2019 Omnibus Incentive Plan, as amended through April 20, 2021 (incorporated by
reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on March 8, 2021).
10.2†
Form of Restricted Stock Unit Award Agreement (Non-Employee Director) under the Mayville Engineering
Company, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q filed on June 18, 2019).
10.3†
Form of Restricted Stock Unit Award Agreement (Employee) under the Mayville Engineering Company, Inc. 2019
Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed
on June 18, 2019).
10.4†
Form of Stock Option Award Agreement under the Mayville Engineering Company, Inc. 2019 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.8 to Amendment No. 1 to the Registration Statement on Form S-1 (File
No. 333-230840) filed on April 29, 2019).
10.5†
Form of Restricted Stock Award Agreement (Non-Employee Director) under the Mayville Engineering Company, Inc.
2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.11 to Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-230840) filed on April 29, 2019).
10.6†
Form of Restricted Stock Award Agreement (Employee) under the Mayville Engineering Company, Inc. 2019 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.12 to Amendment No. 1 to the Registration Statement on Form S-1
(File No. 333-230840) filed on April 29, 2019).
10.7†
Form of Stock Option Award Agreement under the Mayville Engineering Company, Inc. 2019 Omnibus Incentive Plan
(Full Term Exercise Period on Retirement) (incorporated by reference to Exhibit 10 to the Company’s Current Report on
Form 8-K filed on January 29, 2020).
10.8†
10.9†
Mayville Engineering Company, Inc. Long-Term Incentive Plan, as amended and restated effective May 13, 2019
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on June 18, 2019).
Mayville Engineering Company, Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.3 to the
Registration Statement on Form S-1 (File No. 333-230840) filed on April 12, 2019).
75
10.10†
Form of Severance Agreement between Mayville Engineering Company, Inc. and Jagadeesh A. Reddy (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 20, 2022).
10.11†
Form of Change in Control Employment and Severance Agreement between Mayville Engineering Company, Inc. and
Jagadeesh A. Reddy (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on
July 20, 2022).
10.12†
Form of Severance Agreement between Mayville Engineering Company, Inc. and Todd M. Butz (incorporated by
reference to Exhibit 10.6 to the Registration Statement on Form S-1 (File No. 333-230840) filed on April 12, 2019).
10.13†
Form of Change in Control Employment and Severance Agreement between Mayville Engineering Company, Inc. and
Todd M. Butz (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on
November 3, 2020).
10.14†
Form of Severance Agreement between Mayville Engineering Company, Inc. and each of Ryan F. Raber, Sean P. Leuba
and Rachele M. Lehr (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
July 20, 2022).
10.15†
Form of Change in Control Employment and Severance Agreement between Mayville Engineering Company, Inc. and
each of Ryan F. Raber, Sean P. Leuba and Rachele M. Lehr (incorporated by reference to Exhibit 10.2 to the Company’s
Quarterly Report on Form 10-Q filed on November 3, 2020).
10.16†
Amended and Restated Credit Agreement, dated as of June 28, 2023, by and among Mayville Engineering Company, Inc.,
certain subsidiaries of Mayville Engineering Company, Inc. as guarantors, the lenders from time to time party thereto, and
Wells Fargo Bank, National Association, as Administrative Agent for the lenders (incorporated by reference to Exhibit 10
to the Company’s Current Report on Form 8-K filed on June 29, 2023).
10.17†* Form of Performance Stock Unit Award Agreement (Employee) under the Mayville Engineering Company, Inc. 2019
Omnibus Incentive Plan
21*
List of Subsidiaries of Mayville Engineering Company, Inc.
23*
Consent of Independent Registered Public Accounting Firm.
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act
of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act
of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97*
Mayville Engineering Company, Inc. Compensation Recovery Policy.
99
Proxy Statement for the 2024 Annual Meeting of Shareholders. [To be filed with the Securities and Exchange Commission
under Regulation 14A within 120 days after December 31, 2023; except to the extent specifically incorporated by
reference, the Proxy Statement for the 2024 Annual Meeting of Shareholders shall not be deemed to be filed with the
Securities and Exchange Commission as part of this Annual Report on Form 10-K].
101.INS
Inline XBRL Instance Document
76
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Date File (embedded within the Inline XBRL document)
* Filed herewith.
† Management contract, compensatory plan or arrangement
77
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Comprehensive Income (Loss) for the Twelve Months ended December 31, 2023 and 2022, and
2021
Consolidated Statements of Cash Flows for the Twelve Months ended December 31, 2023 and 2022, and 2021
Consolidated Statements of Stockholders’ Equity for the Twelve Months ended December 31, 2023 and 2022, and 2021
Notes to Consolidated Financial Statements
Item 16. Form 10-K Summary
None.
41
42
43
44
46
47
78
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
MAYVILLE ENGINEERING COMPANY, INC.
Date: March 6, 2024
By:
/s/ Jagadeesh A. Reddy
Jagadeesh A. Reddy
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the
following persons on behalf of the Registrant in the capacities and on the dates indicated.
Name
/s/ Jagadeesh A. Reddy
Jagadeesh A. Reddy
/s/ Todd M. Butz
Todd M. Butz
/s/ Allen J. Carlson
Allen J. Carlson
/s/ Timothy L. Christen
Timothy L. Christen
/s/ Steven L. Fisher
Steven L. Fisher
/s/ Jennifer J. Kent
Jennifer J. Kent
/s/ Robert L. McCormick
Robert L. McCormick
/s/ Jay O. Rothman
Jay O. Rothman
Title
President, Chief Executive Officer (Principal
Executive Officer) and Director
March 6, 2024
Date
Chief Financial Officer (Principal Financial
and Accounting Officer)
March 6, 2024
Director
Director
Director
Director
Director
Director
March 6, 2024
March 6, 2024
March 6, 2024
March 6, 2024
March 6, 2024
March 6, 2024
79