.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in Its Charter)
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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Trading Symbol(s) |
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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.
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).
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 |
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Non-accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the registrant’s common stock, no par, outstanding at October 31,2023 was
MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES
GENERAL
This Quarterly Report on Form 10-Q filed by Manitex International, Inc. speaks as of September 30, 2023 unless specifically noted otherwise. Unless otherwise indicated, Manitex International, Inc., together with its consolidated subsidiaries, is hereinafter referred to as “Manitex,” the “Registrant,” “us,” “we,” “our” or the “Company.”
Forward-Looking Information
Certain information in this Quarterly Report includes forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995). These statements relate to, among other things, the Company’s expectations, beliefs, intentions, future strategies, future events or future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In addition, when included in this Quarterly Report or in documents incorporated herein by reference the words “may,” “expects,” “should,” “intends,” “anticipates,” “believes,” “plans,” “projects,” “estimates” and the negatives thereof and analogous or similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statement is not forward-looking. We have based these forward-looking statements on current expectations and projections about future events. These statements are not guarantees of future performance. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Such risks and uncertainties, many of which are beyond our control, include, without limitation, those described below and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, in the section entitled “Item 1A. Risk Factors”:
1
The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in this Quarterly Report on Form 10-Q are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. We do not undertake, and expressly disclaim, any obligation to update this forward-looking information, except as required under applicable law.
2
MANITEX INTERNATIONAL, INC.
FORM 10-Q INDEX
TABLE OF CONTENTS
3
PART 1—FINANCIAL INFORMATION
Item 1—Financial Statements
MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
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September 30, |
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December 31, |
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ASSETS |
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Current assets |
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Cash |
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$ |
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$ |
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Cash – restricted |
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Trade receivables (net) |
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Other receivables |
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Inventory (net) |
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Prepaid expense and other current assets |
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Total current assets |
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Total fixed assets, net of accumulated depreciation of $ |
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Operating lease assets |
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Intangible assets (net) |
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Goodwill |
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Deferred tax assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Related party payable (net) |
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Notes payable |
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Current portion of finance lease obligations |
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Current portion of operating lease obligations |
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Customer deposits |
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Total current liabilities |
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Long-term liabilities |
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Revolving term credit facilities (net) |
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Notes payable (net) |
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Finance lease obligations (net of current portion) |
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Operating lease obligations (net of current portion) |
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Deferred gain on sale of property |
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Deferred tax liability |
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Other long-term liabilities |
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Total long-term liabilities |
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Total liabilities |
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Equity |
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Preferred Stock—Authorized |
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Common Stock— |
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Paid in capital |
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Retained deficit |
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( |
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( |
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Accumulated other comprehensive loss |
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Equity attributable to shareholders of Manitex International, Inc. |
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Equity attributed to noncontrolling interest |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying notes are an integral part of these financial statements
4
MANITEX INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share amounts)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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2023 |
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2022 |
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2023 |
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2022 |
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Net revenues |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Operating expenses |
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Research and development costs |
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Selling, general and administrative expenses |
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Transaction costs |
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— |
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— |
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Total operating expenses |
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Operating income (loss) |
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Other income (expense) |
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Interest expense |
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( |
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( |
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( |
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Interest income |
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- |
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Foreign currency transaction (loss) gain |
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( |
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( |
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Other income (expense) |
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( |
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( |
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( |
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Total other expense |
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( |
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( |
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( |
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Income (loss) before income taxes |
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( |
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( |
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Income tax expense |
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Net income (loss) |
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( |
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( |
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Net income attributable to noncontrolling interest |
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Net income attributable to shareholders of |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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Income (loss) per share |
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Basic |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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Diluted |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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Weighted average common shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these financial statements
5
MANITEX INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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2023 |
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2022 |
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2023 |
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2022 |
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Net income (loss) |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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Other comprehensive income (loss) |
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Foreign currency translation gain (loss) |
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( |
) |
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( |
) |
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( |
) |
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( |
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Total other comprehensive income (loss) |
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( |
) |
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( |
) |
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( |
) |
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( |
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Total comprehensive income (loss) |
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( |
) |
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( |
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Less: comprehensive income attributable to noncontrolling interest |
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Total comprehensive income (loss) attributable to shareholders of |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
The accompanying notes are an integral part of these financial statements
6
MANITEX INTERNATIONAL, INC.
(In thousands, except share amounts)
(Unaudited)
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Outstanding |
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Common |
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APIC |
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Retained |
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AOCI |
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Noncontrolling |
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Total |
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Balance at December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Gain on foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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Employee incentive plan issuance |
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( |
) |
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— |
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— |
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— |
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— |
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Repurchase to satisfy withholding and |
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( |
) |
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( |
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— |
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— |
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— |
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— |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Gain on foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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Employee incentive plan issuance |
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( |
) |
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— |
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— |
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— |
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— |
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Repurchase to satisfy withholding and |
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( |
) |
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( |
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— |
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— |
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— |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Loss on foreign currency translation |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Employee incentive plan issuance |
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( |
) |
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— |
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— |
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— |
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— |
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Repurchase to satisfy withholding and |
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( |
) |
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( |
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— |
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— |
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— |
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— |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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Balance at September 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
— |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Loss on foreign currency translation |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Employee incentive plan issuance |
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( |
) |
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— |
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— |
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— |
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— |
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Repurchase to satisfy withholding and |
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( |
) |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
— |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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Loss on foreign currency translation |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Employee incentive plan issuance |
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( |
) |
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— |
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— |
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— |
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— |
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Acquisition of noncontrolling interests |
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— |
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— |
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— |
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— |
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Repurchase to satisfy withholding and |
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( |
) |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Balance at June 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
( |
) |
|
Gain (loss) on foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Employee incentive plan grant |
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Repurchase to satisfy withholding and cancelled |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balance at September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
7
MANITEX INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
Nine months ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Adjustments to reconcile net income (loss) to cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Changes in allowances for credit losses |
|
|
|
|
|
( |
) |
|
Changes in inventory reserves |
|
|
( |
) |
|
|
( |
) |
Deferred income taxes |
|
|
( |
) |
|
|
|
|
Amortization of deferred debt issuance costs |
|
|
|
|
|
|
||
Amortization of debt discount |
|
|
|
|
|
|
||
Loss (gain) on forward currency contract |
|
|
|
|
|
( |
) |
|
Loss (gain) on disposal of fixed assets |
|
|
|
|
|
( |
) |
|
Share-based compensation |
|
|
|
|
|
|
||
Adjustment to deferred gain on sales lease back |
|
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
(Increase) decrease in accounts receivable |
|
|
( |
) |
|
|
( |
) |
(Increase) decrease in other receivables |
|
|
|
|
|
|
||
(Increase) decrease in inventory |
|
|
( |
) |
|
|
( |
) |
(Increase) decrease in prepaid expenses |
|
|
|
|
|
( |
) |
|
Increase (decrease) in other assets |
|
|
- |
|
|
|
( |
) |
Increase (decrease) in accounts payables and related party payables |
|
|
|
|
|
|
||
Increase (decrease) in accrued expenses |
|
|
|
|
|
|
||
Increase (decrease) increase in other current liabilities |
|
|
( |
) |
|
|
( |
) |
Increase (decrease) in other long-term liabilities |
|
|
( |
) |
|
|
( |
) |
Net cashprovided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Payments for acquisition, net of cash acquired |
|
|
— |
|
|
|
( |
) |
Proceeds from the sale of fixed assets |
|
|
|
|
|
|
||
Purchase of property and fixed assets |
|
|
( |
) |
|
|
( |
) |
Investment in intangible assets |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Net borrowings on revolving term credit facilities |
|
|
|
|
|
|
||
Borrowings on term debt |
|
|
— |
|
|
|
|
|
Payments on revolving term credit facility |
|
|
— |
|
|
|
( |
) |
Net borrowings on working capital facilities |
|
|
( |
) |
|
|
|
|
New borrowings—other |
|
|
— |
|
|
|
|
|
Debt issuance costs incurred |
|
|
— |
|
|
|
( |
) |
Note payments |
|
|
( |
) |
|
|
( |
) |
Shares repurchased for income tax withholding on share-based compensation |
|
|
( |
) |
|
|
( |
) |
Payments on finance lease obligations |
|
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
||
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash at the beginning of the year |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
See Note 1 for supplemental cash flow disclosures |
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
8
MANITEX INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
1. Nature of Operations and Basis of Presentation
The unaudited Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022 and the related Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Statements of Shareholders’ Equity and Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations and cash flows of the Company for the interim periods. Interim results may not be indicative of results to be realized for the entire year. The Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The Condensed Consolidated Balance Sheet as of December 31, 2022 was derived from our audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”).
The Company is a leading provider of engineered lifting solutions and equipment rentals. The Company designs, manufactures and distributes a diverse group of products that serve different functions and are used in a variety of industries. Following the completion of the Rabern acquisition, the Company reports in
On April 11, 2022, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”), with Rabern Rentals, LLC (“Rabern”) and Steven Berner, as owner of
Lifting Equipment Segment
Manitex markets a comprehensive line of boom trucks, truck cranes, aerial platforms, electrical industrial cranes and utility vehicles. Manitex’s boom trucks and crane products are primarily used for industrial projects, energy exploration, energy distribution and infrastructure development, including roads, bridges and commercial construction and the tree care industry. The Company previously announced the closing of the Badger reporting unit which is expected to be finalized in 2023.
PM Oil and Steel S.p.A. (“PM” or “PM Group”), a subsidiary of the Company, is a leading Italian manufacturer of truck- mounted hydraulic knuckle boom cranes with a 50-year history of technology and innovation, and a product range spanning more than
The Company’s subsidiary, Manitex Valla S.r.L. (“Valla”), produces a full range of precision pick and carry industrial cranes using electric, diesel, and hybrid power options. Its cranes offer wheeled or tracked, and fixed or swing boom configurations, with special applications designed specifically to meet the needs of its customers. These products are sold internationally through dealers and into the rental distribution channel.
Crane and Machinery, Inc. (“C&M”) is a distributor of the Company’s products. Crane and Machinery Leasing, Inc. rents equipment manufactured by the Company as well as a limited amount of equipment manufactured by third parties.
Rental Equipment Segment
The Company’s majority-owned subsidiary, Rabern, rents heavy duty and light duty commercial construction equipment, mainly to commercial contractors on a short-term rental basis. The Company also rents equipment to homeowners for do-it-yourself projects. Rabern has
COVID-19 Pandemic
We are continuing to closely monitor the impact of the COVID-19 pandemic and other economic conditions, including inflation, interest rate increases and various geopolitical factors, on all aspects of our business, including how these factors are impacting our customers, employees, supply chain, and distribution network, as well as the demand for our products in the industries and markets that we serve. While COVID-19 and these other economic factors have had a material impact on our past financial results, we are unable to predict the ultimate impact that they may have on our business, future results of operations, financial position or cash flows. The extent to which
9
our operations may be impacted by these factors will depend largely on future developments, which are highly uncertain and cannot be accurately predicted. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown.
The Company is continuing to experience supply chain disruptions and related logistical bottlenecks that have impacted our ability to meet strong industrial demand and have also increased costs related to shipping, warehousing and working capital management. While the Company is actively working to mitigate these expenses and the associated timing issues, certain segments have been more impacted than others. Where appropriate and feasible, we have implemented pricing adjustments to protect margins and, in tandem, continue to build inventory to meet our customer requirements. In addition, the Company is actively managing costs and working to further streamline operations where needed.
Supplemental Cash Flow Information
Transactions for the periods ended September 30, 2023 and 2022 are as follows:
|
|
Nine months ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Interest received in cash |
|
$ |
|
|
$ |
|
||
Interest paid in cash |
|
|
|
|
|
|
||
Income tax (refunds) payments in cash |
|
|
( |
) |
|
|
|
|
Recognition of right-of-use asset and right-of-use liability |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at the end of year |
|
$ |
|
|
$ |
|
2. Significant Accounting Policies
The summary of the Company’s significant accounting policies is presented to assist in understanding the Company’s Consolidated Financial Statements. The Condensed Consolidated Financial Statements and notes are representations of the Company’s management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the Condensed Consolidated Financial Statements
Cash and Cash Equivalents
For purposes of the Condensed Consolidated Statements of Cash Flows, the Company considers all short-term securities purchased with maturity dates of three months or less to be cash equivalents. The cash in the Company’s U.S. banks is not fully insured by the FDIC due to the statutory limit of $
Restricted Cash
Certain of the Company’s lending arrangements require the Company to post collateral or maintain minimum cash balances in escrow. These cash amounts are reported as current assets on the Condensed Consolidated Balance Sheets based on when the cash will be contractually released. Total restricted cash was $
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at invoiced amount and do not bear interest. The Company has adopted a policy consistent with GAAP for the periodic review of its accounts receivable to determine whether the establishment of an allowance for credit losses is warranted based on the Company’s assessment of the collectability of the accounts. The Company established an allowance for credit losses of $
Property, Equipment and Depreciation
10
Accrued Warranties
Warranty costs are accrued at the time revenue is recognized. The Company’s products are typically sold with a warranty covering defects that arise during a fixed period of time. The specific warranty offered is a function of customer expectations and competitive forces.
A liability for estimated warranty claims is accrued at the time of sale. Such liability is established using historical warranty claim experience. The current provision may be adjusted to take into account unusual or non-recurring events in the past or anticipated changes in future warranty claims. Adjustments to the initial warranty accrual are recorded if actual claim experience indicates that adjustments are necessary.
As of September 30, 2023 and December 31, 2022, accrued warranties were $
Advertising
Advertising costs are expensed as incurred and were $
Noncontrolling Interest
A noncontrolling interest is the equity interest of consolidated entities that are not owned by the Company. Noncontrolling interest is adjusted for the noncontrolling partners' share of earnings (losses) in accordance with the applicable agreement. Earnings (losses) allocated to such noncontrolling partners are recorded as income applicable to noncontrolling interest in the accompanying Condensed Consolidated Statements of Operations.
Share-based Compensation
The Company has elected to account for restricted stock awards with market conditions using a graded vesting method. This method recognizes the compensation cost in the Condensed Consolidated Statement of Operations over the requisite service period for each separately-vesting tranche of awards.
3. Revenue Recognition
The following table disaggregates our revenue for the three and nine months ended September 30, 2023 and 2022:
|
|
Three Months Ended |
|
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
2022 |
|
||||
Boom trucks, knuckle boom & truck cranes |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
||||
Aerial platforms |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Part sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rentals |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Merchandise sales and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Revenue |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
11
The Company attributes revenue to different geographic areas based on where items are shipped to or services are performed. The following table provides detail of revenues by geographic area for the three and nine months ended September 30, 2023 and 2022:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
United States |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Italy |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Chile |
|
|
|
|
|
|
|
|
|
|
|
|
||||
France |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United Kingdom |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Argentina |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Customer Deposits
At times, the Company may require an upfront deposit related to its contracts. In instances where an upfront deposit has been received by the Company and the revenue recognition criteria have not yet been met, the Company records a contract liability in the form of a customer deposit, which is classified as a short-term liability on the Condensed Consolidated Balance Sheets. That customer deposit is revenue that is deferred until the revenue recognition criteria have been met, at which time, the customer deposit is recognized into revenue.
The following table summarizes changes in customer deposits for the nine months ended September 30 as follows:
|
|
September 30, |
|
|
September 30, |
|
||
Customer deposits January 1, |
|
$ |
|
|
$ |
|
||
Additional customer deposits received where revenue has not yet been recognized |
|
|
|
|
|
|
||
Revenue recognized from customer deposits |
|
|
( |
) |
|
|
( |
) |
Effect of change in exchange rates |
|
|
( |
) |
|
|
( |
) |
Total customer deposits |
|
$ |
|
|
$ |
|
4. Fair Value Measurements
The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 by level within the fair value hierarchy. As required by ASC 820-10, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The following is summary of items that the Company measures at fair value on a recurring basis:
|
|
Fair Value at September 30, 2023 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency exchange contracts |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total recurring liabilities at fair value |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Fair Value at December 31, 2022 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency exchange contracts |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total current assets at fair value |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
12
Fair Value Measurements
ASC 820-10 classifies the inputs used to measure fair value into the following hierarchy:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability and
Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The fair value of the forward currency contracts is determined on the last day of each reporting period using observable inputs, which are supplied to the Company by the foreign currency trading operation of its bank and are Level 2 items.
The Company’s risk management objective is to use the most efficient and effective methods available to us to minimize, eliminate, reduce or transfer the risks which are associated with fluctuation of exchange rates between the Euro, Chilean peso and the U.S. dollar.
Forward Currency Contracts
The Company enters into forward currency exchange contracts such that the exchange gains and losses on the assets and liabilities denominated in other than the reporting units’ functional currency would be offset by the changes in the market value of the forward currency exchange contracts it holds. The forward currency exchange contracts that the Company has to offset existing assets and liabilities denominated in other than the reporting units’ functional currency have been determined not to be considered a hedge under ASC 815-10. The Company records the forward currency exchange contracts at its market value with any associated gain or loss being recorded in current earnings. Both realized and unrealized gains and losses related to forward currency contracts are included in current earnings and are reflected in the Condensed Consolidated Statements of Operations in the other income (expense) section on the line titled foreign currency transaction gain (loss). Items denominated in other than a reporting unit functional currency include certain intercompany receivables due from the Company’s Italian subsidiaries and accounts receivable and accounts payable of our Italian subsidiaries and their subsidiaries.
PM Group has an intercompany receivable denominated in Euros from its Chilean subsidiary. At September 30, 2023, the Company had entered into forward currency exchange contracts for the purpose of mitigating the income effect related to this intercompany receivable that results with a change in the exchange rate between the Euro and the Chilean peso.
The following table provides the location and fair value amounts of derivative instruments that are reported in the Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022:
|
|
|
|
Fair Value |
|
|||||
|
|
Balance Sheet Location |
|
September 30, |
|
|
December 31, |
|
||
Asset Derivatives |
|
|
|
|
|
|
|
|
||
Foreign currency exchange contract |
|
Prepaid expense and other current assets |
|
$ |
— |
|
|
$ |
|
|
Liabilities Derivatives |
|
|
|
|
|
|
|
|
||
Foreign currency exchange contract |
|
Accrued expenses |
|
$ |
|
|
$ |
— |
|
13
The following tables provide the effect of derivative instruments on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022:
|
|
|
|
Gain (loss) |
|
|
Gain (loss) |
|
||||||||||
|
|
Location of gain or |
|
Three Months Ended |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Derivatives Not Designated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
ward currency contract |
|
Foreign currency |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
During the three and nine months ended September 30, 2023 and 2022, there were
6. Inventory, net
The components of inventory are as follows:
|
|
September 30, |
|
|
December 31, |
|
||
Raw materials and purchased parts, net |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods, net |
|
|
|
|
|
|
||
Inventory, net |
|
$ |
|
|
$ |
|
The Company has established reserves for obsolete and excess inventory of $
7. Goodwill and Intangible Assets
Intangible assets and accumulated amortization by category as of September 30, 2023 is as follows:
|
|
Weighted Average |
|
Gross |
|
|
|
|
|
Net |
|
|||
|
|
Amortization |
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|||
|
|
Period (in years) |
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|||
Patented and unpatented technology |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Customer relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Trade names and trademarks |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Software |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Indefinite lived trade names |
|
|
|
|
|
|
|
— |
|
|
|
|
||
Total intangible assets, net |
|
|
|
|
|
|
|
|
|
$ |
|
Intangible assets and accumulated amortization by category as of December 31, 2022 is as follows:
|
|
Weighted Average |
|
Gross |
|
|
|
|
|
Net |
|
|||
|
|
Amortization |
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|||
|
|
Period (in years) |
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|||
Patented and unpatented technology |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Customer relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Trade names and trademarks |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Software |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Indefinite lived trade names |
|
|
|
|
|
|
|
— |
|
|
|
|
||
Total intangible assets, net |
|
|
|
|
|
|
|
|
|
$ |
|
14
Amortization expense for intangible assets was $
Estimated amortization expense for the next five years and subsequent is as follows:
|
|
Amount |
|
|
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
And subsequent |
|
|
|
|
Total intangible assets currently to be amortized |
|
|
|
|
Intangible assets with indefinite lives not amortized |
|
|
|
|
Total intangible assets |
|
$ |
|
Changes in goodwill for the nine months ended September 30, 2023 and 2022 are as follows:
|
|
2023 |
|
|
2022 |
|
||
Balance January 1, |
|
$ |
|
|
$ |
|
||
Goodwill for Rabern acquisition |
|
|
( |
) |
|
|
|
|
Effect of change in exchange rates |
|
|
( |
) |
|
|
( |
) |
Balance September 30, |
|
$ |
|
|
$ |
|
The Company performed an impairment assessment as of December 31, 2022. No additional triggers for an interim impairment test have been identified as of September 30, 2023.
8. Accrued Expenses
|
|
September 30, |
|
|
December 31, |
|
||
Accrued payroll and benefits |
|
$ |
|
|
$ |
|
||
Accrued warranty |
|
|
|
|
|
|
||
Accrued vacation |
|
|
|
|
|
|
||
Accrued income tax and other taxes |
|
|
|
|
|
|
||
Accrued legal settlement |
|
|
|
|
|
|
||
Accrued expenses—other |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
9. Accrued Warranty
The liability for estimated warranty claims is accrued at the time of sale and the expense is recorded in the Condensed Consolidated Statement of Operations in Cost of Sales. The liability is established using historical warranty claim experience. The current provision may be adjusted to take into account unusual or non-recurring events in the past or anticipated changes in future warranty claims. Adjustments to the warranty accrual are recorded if actual claim experience indicates that adjustments are necessary. Warranty reserves are reviewed to ensure critical assumptions are updated for known events that may impact the potential warranty liability.
The following table summarizes the changes in product warranty liability:
|
|
For the nine months ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Balance January 1, |
|
$ |
|
|
$ |
|
||
Provision for warranties issued during the year |
|
|
|
|
|
|
||
Warranty services provided |
|
|
( |
) |
|
|
( |
) |
Foreign currency translation |
|
|
( |
) |
|
|
( |
) |
Balance September 30, |
|
$ |
|
|
$ |
|
15
10. Credit Facilities and Debt
Debt is summarized as follows:
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
U.S. Credit Facilities |
|
$ |
|
|
$ |
|
||
U.S. Term Loan |
|
|
|
|
|
|
||
Italy Group Short-Term Working Capital Borrowings |
|
|
|
|
|
|
||
Italy Group Term Loan |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total debt |
|
|
|
|
|
|
||
Less: Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Debt, net of issuance costs |
|
$ |
|
|
$ |
|
U.S. Credit Facilities and Term Loan
On April 11, 2022, the Company entered into a Commercial Credit Agreement (the “Credit Agreement”), by and among the Company, the Company’s domestic subsidiaries and Amarillo National Bank. The Credit Agreement provides for a $
The unused balance of the revolving credit facilities incurs a
The Credit Agreement requires the Company to maintain a debt service coverage ratio of at least
PM Group Short-Term Working Capital Borrowings
At September 30, 2023 and December 31, 2022, respectively, the PM Group had established demand credit and overdraft facilities with
At September 30, 2023 and December 31, 2022, the banks had advanced PM Group $
Valla Short-Term Working Capital Borrowings
16
At September 30, 2023 and December 31, 2022, respectively, Valla had established demand credit and overdraft facilities with
PM Group Term Loans
At September 30, 2023 and December 31, 2022 respectively, the PM Group has a $
At September 30, 2023 and December 31, 2022 respectively, the PM Group has unsecured borrowings totaling $
11. Leases
The Company leases certain warehouses, office space, machinery, vehicles and equipment. Leases with an initial term of 12 months or shorter are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the applicable lease term.
The Company is not aware of any variable lease payments, residual value guarantees, covenants or restrictions imposed by the leases.
If there was a discount rate explicit in the lease, then such discount rate was used. For those leases with no explicit or implicit interest rate, an incremental borrowing rate was used. The weighted average remaining useful life for operating and finance leases were
Leases |
|
Classification |
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Assets |
|
|
|
|
|
|
|
|
||
Operating lease assets |
|
Operating lease assets |
|
$ |
|
|
$ |
|
||
Financing lease assets |
|
|
|
|
|
|
|
|||
Total leased assets |
|
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
|
|
||
Current |
|
|
|
|
|
|
|
|
||
Operating |
|
Current liabilities |
|
$ |
|
|
$ |
|
||
Financing |
|
Current liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Non-current |
|
|
|
|
|
|
|
|
||
Operating |
|
Non-current liabilities |
|
|
|
|
|
|
||
Financing |
|
Non-current liabilities |
|
|
|
|
|
|
||
Total lease liabilities |
|
|
|
$ |
|
|
$ |
|
17
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
Lease Cost |
|
Classification |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Operating lease costs |
|
Operating lease assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of |
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on lease liabilities |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease cost |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Three months ended September 30, |
|
|
For the nine months ended |
|
||||||||||
Other Information |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cash paid for amounts included in the |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating cash flows from operating |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating cash flows from finance |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financing cash flows from finance |
|
|
|
|
|
|
|
|
|
|
|
|
Future principal minimum lease payments for the next five years and subsequent are:
|
|
Operating Leases |
|
|
Finance Leases |
|
||
2023 |
|
$ |
|
|
$ |
|
||
2024 |
|
|
|
|
|
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
And subsequent |
|
|
|
|
|
- |
|
|
Total undiscounted lease payments |
|
|
|
|
|
|
||
Less interest |
|
|
( |
) |
|
|
( |
) |
Total liabilities |
|
$ |
|
|
$ |
|
||
Less current maturities |
|
|
( |
) |
|
|
( |
) |
Non-current lease liabilities |
|
$ |
|
|
$ |
|
In connection with our acquisition of Rabern, the Company became the lessee of four locations from HTS Management LLC (“HTS”), an entity controlled by Steven Berner, who is a key member of Rabern management. HTS operates as a holding company for property and as a single lessor leasing company for business use property for Rabern. HTS’s ongoing activities preceding and succeeding the Rabern acquisition relate to financing, purchasing, leasing and holding property leased to Rabern.
12. Income Taxes
For the three months ended September 30, 2023, the Company recorded an income tax provision of $
The effective tax rate for the three months ended September 30, 2023 was an income tax provision of
18
in the U.S., a partial valuation allowance in Italy, nondeductible foreign permanent differences, income taxed in foreign jurisdictions at varying tax rates and a reduction in the uncertain tax position liability related to the expiration of the statute of limitations for a foreign jurisdiction, offset by an accrual of interest related to unrecognized tax benefits.
For the nine months ended September 30, 2023, the Company recorded an income tax provision of $
The effective tax rate for the nine months ended September 30, 2023 was an income tax provision of
13. Net Earnings (Loss) per Common Share
Basic net earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Details of the calculations are as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to shareholders of |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Net income (loss) attributable to shareholders of |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Net income (loss) attributable to shareholders of |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of restricted stock units and stock options |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Dilutive |
|
|
|
|
|
|
|
|
|
|
|
|
19
The following securities were not included in the computation of diluted earnings per share as their effect would have been antidilutive:
|
|
September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Unvested restricted stock units |
|
|
|
|
|
|
||
Options to purchase common stock |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
14. Equity
Stock Issued to Employees and Directors
The Company issued shares of common stock to employees and Directors as restricted stock units issued under the Company’s 2019 Incentive Plan vest. Upon issuance, entries were recorded to increase common stock and decrease paid in capital for the amounts shown below.
Date of Issue |
|
Employees or |
|
Shares Issued |
|
|
Value of |
|
||
March 6, 2023 |
|
Employees |
|
|
|
|
|
|
||
March 7, 2023 |
|
Directors |
|
|
|
|
|
|
||
March 8, 2023 |
|
Employees |
|
|
|
|
|
|
||
March 8, 2023 |
|
Directors |
|
|
|
|
|
|
||
April 11, 2023 |
|
Employees |
|
|
|
|
|
|
||
June 1, 2023 |
|
Directors |
|
|
|
|
|
|
||
June 2, 2023 |
|
Employees |
|
|
|
|
|
|
||
June 2, 2023 |
|
Directors |
|
|
|
|
|
|
||
July 1, 2023 |
|
Employees |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
Stock Repurchases
The Company purchases shares of Common Stock from certain employees at the closing share price on the date of purchase. The stock is purchased from the employees to satisfy employees’ withholding tax obligations related to stock issuances described above.
Date of Purchase |
|
Shares |
|
|
Closing Price |
|
||
March 6, 2023 |
|
|
|
|
$ |
|
||
March 8, 2023 |
|
|
|
|
$ |
|
||
June 2, 2023 |
|
|
|
|
$ |
|
||
July 1, 2023 |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
Restricted Stock Awards
The following table contains information regarding restricted stock units during the current year through September 30, 2023:
|
|
September 30, |
|
|
Outstanding on January 1, 2023 |
|
|
|
|
Units granted during the period |
|
|
|
|
Vested and issued |
|
|
( |
) |
Vested-issued and repurchased for income tax withholding |
|
|
( |
) |
Forfeited |
|
|
( |
) |
Outstanding on September 30, 2023 |
|
|
|
20
The value of the restricted stock is being charged to compensation expense over the vesting period. Compensation expense includes expense related to restricted stock units of $
Restricted Stock Award with Market Conditions
On May 3, 2022, in connection with J. Michael Coffey’s appointment as the Company’s Chief Executive Officer as of April 11, 2022, he was granted
Restricted Stock Award with Market and Performance Conditions
On May 3, 2022, in connection with his appointment, Mr. Coffey was also granted
Stock Options
On May 3, 2022, in connection with his appointment, Mr. Coffey was also granted
On May 1, 2023,
|
|
Grant date |
|
|
Grant date |
|
||
Dividend yields |
|
|
— |
|
|
|
— |
|
Expected volatility |
|
|
% |
|
|
% |
||
Risk free interest rate |
|
|
% |
|
|
% |
||
Expected life (in years) |
|
|
|
|
|
|
||
Fair value of the option granted |
|
$ |
|
|
$ |
|
15. Legal Proceedings and Other Contingencies
The Company is involved in various legal proceedings, including product liability, employment related issues, and workers’ compensation matters that have arisen in the normal course of operations. The Company has product liability insurance with self-insurance retention that range from $
21
When it is probable that a loss has been incurred and it is possible to make a reasonable estimate of the Company’s liability with respect to such matters, a provision is recorded for the amount of such estimate that is most likely to occur. Certain legal proceedings are at a preliminary stage, and it is not possible to estimate the amount or timing of any cost, if any, to the Company for these cases. However, the Company does not believe that these contingencies, in the aggregate, will have a material adverse effect on the Company.
The Company has been named as a defendant in several multi-defendant asbestos-related product liability lawsuits. In certain instances, the Company is indemnified by a former owner of the product line involved. In the remaining cases the plaintiff has, to date, not been able to establish any exposure by the plaintiff to the Company’s products. The Company is uninsured with respect to these claims but believes that it will not incur any material liability with respect to these claims.
On
It is reasonably possible that the estimated reserve for product liability claims may change within the next
The Company has accrued $
16. Transactions between the Company and Related Parties
In the course of conducting its business, the Company has entered into certain related party transactions.
C&M conducts business with RAM P&E LLC for the purposes of obtaining parts business as well as buying, selling and renting equipment.
C&M is a distributor of Terex rough terrain and truck cranes. As such, C&M purchases cranes and parts from Terex.
PM is a manufacturer of cranes. PM sold cranes, parts, and accessories to Tadano during 2023.
Rabern rents heavy duty and light duty commercial construction equipment, mainly to commercial contractors on a short-term rental basis. Rabern sold a fixed asset to Steven Berner, the general manager of Rabern, in April 2022, in connection with the Rabern acquisition.
In 2022, the Company became the lessee of four buildings from HTS Management LLC (“HTS”), an entity controlled by Mr. Berner, who is a key member of Rabern management. HTS operates as a holding company for property and as a single lessee leasing company for business use property for Rabern. HTS’s ongoing activities preceding and succeeding the Rabern acquisition relate to financing, purchasing, leasing and holding property leased to Rabern. Based on these activities, HTS would be subject to interest rate risk and real estate investment pricing risk related to holding the real estate as an investment. These risks represent the potential variability to be considered as passed to interest holders. Although we have a variable interest through our relationship with Steven Berner, such variability is not passed on to Rabern in connection with the arrangement, and therefore Rabern is not the primary beneficiary of the VIE. Furthermore, all risks and benefits of the significant activities of HTS are passed to Steven Berner directly and do not represent a direct or an indirect obligation for Rabern.
|
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Accounts Receivable |
|
Tadano (2) |
|
$ |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
||
Accounts Payable |
|
Terex (1) |
|
$ |
|
|
$ |
|
||
Net Related Party Accounts |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
22
The following is a summary of the amounts attributable to certain related party transactions as described in the footnotes to the table, for the periods indicated:
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Rent paid: |
|
Rabern Facility (4) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales to: |
|
Terex (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Tadano (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
RAM P&E (3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Steven Berner (5) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Total Sales |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Purchases from: |
|
Terex (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Tadano (2) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total Purchases |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Note 17. Restructuring
On January 12, 2022, the Company announced a restructuring plan (the “Restructuring”) that will result in the closure of its Badger facility in Winona, Minnesota. As part of the Restructuring, the Company intends to move the manufacturing of its straight mast boom cranes and aerial platforms now produced in Winona, Minnesota, to its Georgetown, Texas, facility. The Restructuring is expected to be completed during 2023.
Note 18. Segment Information
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by the Chief Executive Officer, who is also the Company’s Chief Operating Decision Maker, for making decisions about the allocation of resources and assessing performance as the source of the Company’s reportable operating segments.
The Company is a leading provider of engineered lifting solutions and equipment rentals. The Company operates in
Lifting Equipment Segment
The Lifting Equipment segment is a leading provider of engineered lifting solutions. The Company manufactures a comprehensive line of boom trucks, articulating cranes, truck cranes and sign cranes. The Company is also a manufacturer of specialized rough terrain cranes and material handling products. Through PM and Valla, two of the Company's Italian subsidiaries, the Company manufacturers truck- mounted hydraulic knuckle boom cranes and a full range of precision pick and carry industrial cranes using electric, diesel and hybrid power options.
Rental Equipment Segment
23
The Company’s Rental Equipment segment rents heavy duty and light duty commercial construction equipment, mainly to commercial contractors on a short-term rental basis. The Company also rents equipment to homeowners for do-it-yourself projects.
The following is financial information for our two operating segments: Lifting Equipment and Rental Equipment:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lifting Equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Rental Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lifting Equipment |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Rental Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lifting Equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Rental Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total depreciation and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lifting Equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Rental Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
24
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Recent Developments
Impact of COVID-19
The COVID-19 pandemic has significantly impacted our ability to meet demand for the Company’s products. While these impacts began to subside in 2023 and continue to decrease in 2023, the Company experienced, and is still experiencing, supply chain and logistic constraints and increased costs that negatively impact its ability to manufacture and ship products to meet customer requirements.
Business Overview
The following management’s discussion and analysis of financial condition and results of continuing operations should be read in conjunction with the Company’s financial statements and notes and other information included elsewhere in this Quarterly Report on Form 10-Q.
Backlog
The Company’s backlog was approximately $197 million and $230 million at September 30, 2023 and December 31, 2022, respectively.
25
Results of Condensed Consolidated Operations
MANITEX INTERNATIONAL, INC.
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Net revenues |
|
$ |
71,331 |
|
|
$ |
65,037 |
|
|
$ |
6,294 |
|
|
|
9.7 |
% |
Cost of sales |
|
|
54,746 |
|
|
|
52,693 |
|
|
|
2,053 |
|
|
|
3.9 |
|
Gross profit |
|
|
16,585 |
|
|
|
12,344 |
|
|
|
4,241 |
|
|
|
34.4 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development costs |
|
|
861 |
|
|
|
659 |
|
|
|
202 |
|
|
|
30.7 |
|
Selling, general and administrative expenses |
|
|
10,545 |
|
|
|
10,440 |
|
|
|
105 |
|
|
|
1.0 |
|
Transaction costs |
|
|
— |
|
|
|
37 |
|
|
|
(37 |
) |
|
|
(100.0 |
) |
Total operating expenses |
|
|
11,406 |
|
|
|
11,136 |
|
|
|
270 |
|
|
|
2.4 |
|
Operating income |
|
|
5,179 |
|
|
|
1,208 |
|
|
|
3,971 |
|
|
|
328.7 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
(1,997 |
) |
|
|
(1,409 |
) |
|
|
(588 |
) |
|
|
41.7 |
|
Interest income |
|
|
141 |
|
|
|
— |
|
|
|
141 |
|
|
|
100.0 |
|
Foreign currency transaction gain (loss) |
|
|
(883 |
) |
|
|
175 |
|
|
|
(1,058 |
) |
|
|
(604.6 |
) |
Other expense |
|
|
196 |
|
|
|
(2,852 |
) |
|
|
3,048 |
|
|
|
(106.9 |
) |
Total other expense |
|
|
(2,543 |
) |
|
|
(4,086 |
) |
|
|
1,543 |
|
|
|
(37.8 |
) |
Income (loss) before income taxes |
|
|
2,636 |
|
|
|
(2,878 |
) |
|
|
5,514 |
|
|
|
(191.6 |
) |
Income tax expense |
|
|
742 |
|
|
|
206 |
|
|
|
536 |
|
|
|
260.2 |
|
Net income (loss) |
|
|
1,894 |
|
|
|
(3,084 |
) |
|
|
4,978 |
|
|
|
(161.4 |
) |
Net income attributable to noncontrolling interest |
|
|
194 |
|
|
|
288 |
|
|
|
(94 |
) |
|
|
(32.6 |
) |
Net income (loss) attributable to shareholders of |
|
$ |
1,700 |
|
|
$ |
(3,372 |
) |
|
$ |
5,072 |
|
|
(150.4)% |
|
Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022
Net revenues and gross profit
Net revenues increased $6.3 million or 9.7% to $71.3 million for the three months ended September 30, 2023 from $65.0 million for the comparable period in 2022. The increase in revenues is primarily due to increase in sales of articulated cranes by the Company's PM business, aerial work platforms from the Oil & Steel business and straight mast cranes from the Manitex business. These are partially offset by $4 million in lower chassis sales as compared with the prior year.
Our gross profit increased $4.3 million to $16.6 million, for the three months ended September 30, 2023 from $12.3 million for the comparable period in 2022. The increase in gross profit is driven by increased sales volume, higher selling prices and sales mix in the PM and Manitex businesses. The gross profit percentage increased from 19.0% for the three months ended September 30, 2022 to 23.0% for the three months ended September 30, 2023. The increase is driven by increased pricing, lowered costs and favorable sales mix.
Research and development — Research and development expense was $0.9 million for the three months ended September 30, 2023 compared to $0.7 million for the same period in 2022. The Company’s research and development spending reflects our continued commitment to develop and introduce new products that give the Company a competitive advantage.
Selling, general and administrative expense — SG&A expense for the three months ended September 30, 2023 was $10.5 million compared to $10.4 million for the comparable period in 2022, a decrease of $0.1 million. The increase of salaries and benefits and insurance costs in 2023 are offset by lower stock compensation and lower severance expenses incurred in the prior year.
Interest expense — Interest expense was $2.0 million for the three months ended September 30, 2023 compared to $1.4 million for the comparable period in 2022. The increase in interest expense is due to higher debt incurred to finance inventory and increases in the rental fleet as well as increased interest rates.
Foreign currency transaction losses — For the three months ended September 30, 2023, the Company had foreign currency losses of $0.9 million compared to a gain of $0.2 million for the comparable period in 2022. A substantial portion of the losses relate to changes in the Argentine and Chilean peso.
26
Other income (expense) — Other income was less than $0.2 million for the three months ended September 30, 2023 compared to other expense of $2.9 million for the comparable period in 2022. The prior year expense is mainly due to a legal settlement.
Income taxes —For the three months ended September 30, 2023, the Company recorded an income tax provision of $0.7 million, which includes a discrete income tax benefit of less than $0.1 million. The calculation of the overall income tax provision for the three months ended September 30, 2023 primarily consists of U.S .federal income taxes for Rabern which is a separate taxpayer for US federal tax purposes, foreign income taxes, and a discrete tax income tax benefit related to the expiration of the statute of limitations for a foreign jurisdiction offset by an accrual of interest related to unrecognized tax benefits. For the three months ended September 30, 2022, the Company recorded an income tax provision of $0.2 million, which includes a discrete income tax benefit of less than $0.1 million. The calculation of the overall income tax provision for the three months ended September 30, 2022 primarily consists of U.S. federal income taxes for Rabern which is a separate taxpayer for U.S. federal tax purposes, foreign income taxes, a discrete income tax benefit for a reduction in the valuation allowance recorded against state tax credits in connection with the Rabern acquisition and a discrete income tax benefit related to the expiration of the statute of limitations for a foreign jurisdiction.
The effective tax rate for the three months ended September 30, 2023 was an income tax provision of 28.1% on pretax income of $2.6 million compared to an income tax provision of 7.2% on a pretax loss of $2.9 million in the comparable prior period. The effective tax rate for the three months ended September 30, 2023 differs from the U.S. statutory rate of 21% primarily due to a valuation allowance in the U.S., a partial valuation allowance in Italy, nondeductible foreign permanent differences, income taxed in foreign jurisdictions at varying tax rates and a reduction in the uncertain tax position liability related to the expiration of the statute of limitations for a foreign jurisdiction offset by an accrual of interest related to unrecognized tax benefits.
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenues |
|
$ |
212,736 |
|
|
$ |
195,034 |
|
|
$ |
17,702 |
|
|
|
9.1 |
% |
Cost of sales |
|
|
166,806 |
|
|
|
160,198 |
|
|
|
6,608 |
|
|
|
4.1 |
|
Gross profit |
|
|
45,930 |
|
|
|
34,836 |
|
|
|
11,094 |
|
|
|
31.8 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development costs |
|
|
2,512 |
|
|
|
2,095 |
|
|
|
417 |
|
|
|
19.9 |
|
Selling, general and administrative expenses |
|
|
32,342 |
|
|
|
30,317 |
|
|
|
2,025 |
|
|
|
6.7 |
|
Transaction costs |
|
|
— |
|
|
|
2,236 |
|
|
|
(2,236 |
) |
|
|
(100.0 |
) |
Total operating expenses |
|
|
34,854 |
|
|
|
34,648 |
|
|
|
206 |
|
|
|
0.6 |
|
Operating income |
|
|
11,076 |
|
|
|
188 |
|
|
|
10,888 |
|
|
N/M |
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
(5,658 |
) |
|
|
(2,982 |
) |
|
|
(2,676 |
) |
|
|
89.7 |
|
Interest income |
|
|
141 |
|
|
|
3 |
|
|
|
138 |
|
|
N/M |
|
|
Foreign currency transaction gain (loss) |
|
|
(1,656 |
) |
|
|
268 |
|
|
|
(1,924 |
) |
|
|
(717.9 |
) |
Other expense |
|
|
(541 |
) |
|
|
(1,864 |
) |
|
|
1,323 |
|
|
|
(71.0 |
) |
Total other expense |
|
|
(7,714 |
) |
|
|
(4,575 |
) |
|
|
(3,139 |
) |
|
|
68.6 |
|
Income (loss) before income taxes |
|
|
3,362 |
|
|
|
(4,387 |
) |
|
|
7,749 |
|
|
|
(176.6 |
) |
Income tax expense |
|
|
962 |
|
|
|
570 |
|
|
|
392 |
|
|
|
68.8 |
|
Net income (loss) |
|
|
2,400 |
|
|
|
(4,957 |
) |
|
|
7,357 |
|
|
|
(148.4 |
) |
Net income attributable to noncontrolling interest |
|
|
243 |
|
|
|
442 |
|
|
|
(199 |
) |
|
|
(45.0 |
)% |
Net income (loss) attributable to shareholders of |
|
$ |
2,157 |
|
|
$ |
(5,399 |
) |
|
$ |
7,556 |
|
|
(140.0)% |
|
Nine Months Ended September 30, 2023 Compared to nine Months Ended September 30, 2022
Net revenues and gross profit
Net revenues increased $17.7 million to $212.7 million from $195.0 million for the comparable period in 2022. The increase is due to higher sales of articulated cranes and aerial platforms by our PM business, the acquisition of Rabern in April of 2022, and increased revenue from sales of straight mast cranes in the Manitex business. These are partially offset by nearly $8 million in lower chassis sales as compared with the prior year.
Gross profit increased $11.1 million to $45.9 million for the nine months ended September 30, 2023 from $34.8 million for the comparable period in 2022. The increase is due to higher sales of articulated cranes and aerial platforms by our PM and Oil & Steel businesses, the acquisition of Rabern in April of 2022 and increased revenue from sales of straight mast cranes in the Manitex business. The gross profit percentage increased from 17.9% to 21.6% driven by higher margins across most businesses due to increased pricing and favorable sales mix in our manufacturing businesses and a full year of results in 2023 from the rental business.
27
Research and development — Research and development expense was $2.5 million for the nine months ended September 30, 2023 compared to $2.1 million for the same period in 2022. The Company’s research and development spending reflects our continued commitment to develop and introduce new products that give the Company a competitive advantage.
Selling, general and administrative expense — SG&A expense for the nine months ended September 30, 2023 was $32.3 million compared to $30.3 million for the comparable period in 2022, an increase of $2.0 million. The increase is driven by an additional three months of expense in the rental segment, the acquisition having occurred in April 2022, trade show expenses, increases in salaries and benefits and legal settlement costs partially offset by decreased severance costs incurred in 2022.
Transactions Costs - Transaction costs for the nine months ended September 30, 2022 were $2.2 million related to deal costs in connection with the Rabern acquisition.
Interest expense — Interest expense was $5.7 million for the nine months ended September 30, 2023 compared to $3.0 million for the comparable period in 2022. The increase in interest expense is due to higher debt and interest rates due to the new credit facilities and term debt added in connection with the Rabern acquisition.
Foreign currency transaction losses — For the nine months ended September 30, 2023, the Company had foreign currency losses of $1.7 million compared to currency gain of $0.3 million for the comparable period in 2022. A substantial portion of the losses relate to changes in the Argentine and Chilean peso.
Other income (expense) — Other expense was $0.5 million for the nine months ended September 30, 2023 compared to other expense of $1.9 million for the comparable period in 2022. The expense in 2023 relates to a pension settlement obligation of $0.3 million related to the termination of services provided by union members and $0.3 million of legal settlement charges offset by royalty income. The amount for 2022 relates to a legal settlement, partially offset by a gain on the sale of a Badger facility and the reversal of a previous recorded contingent liability.
Income taxes —For the nine months ended September 30, 2023, the Company recorded an income tax provision of $0.9 million, which includes a discrete income tax benefit less than of $0.1 million. The calculation of the overall income tax provision for the nine months ended September 30, 2023 primarily consists of US federal income taxes for Rabern which is a separate taxpayer for US federal tax purposes, foreign income taxes, and a discrete income tax benefit related to the expiration of the statutes of limitations for various states and a foreign jurisdiction offset by an accrual of interest related to unrecognized tax benefits. For the nine months ended September 30, 2022, the Company recorded an income tax provision of $0.6 million, which includes a discrete income tax benefit of $0.2 million. The calculation of the overall income tax provision for the nine months ended September 30, 2022 primarily consists of US federal income taxes for Rabern which is a separate taxpayer for US federal tax purposes, foreign income taxes, and a discrete income tax benefit for a reduction in the valuation allowance recorded against state tax credits in connection with the Rabern acquisition, and a discrete income tax benefit related to the expiration of the statutes of limitations for various states and a foreign jurisdiction.
The effective tax rate for the nine months ended September 30, 2023 was an income tax provision of 28.05% on a pretax income of $3.4 million compared to an income tax provision of 13.0% on a pretax loss of $4.4 million in the comparable prior period. The effective tax rate for the nine months ended September 30, 2023 differs from the U.S. statutory rate of 21% primarily due to a valuation allowance in the U.S., a partial valuation allowance in Italy, nondeductible foreign permanent differences, income taxed in foreign jurisdictions at varying tax rates and a reduction in the uncertain tax position liability related to the expiration of the statutes of limitations for various states and a foreign jurisdiction offset by an accrual of interest related to unrecognized tax benefits.
Liquidity and Capital Resources
The global economy generally and our customers and suppliers specifically are being significantly impacted by a number of factors, including the ongoing impacts of the COVID-19 pandemic, increasing inflation and interest rates and general economic uncertainty. While the potential negative financial impact that these factors will have on our results of operations and liquidity position cannot be reasonably estimated at this time, such impacts could be material. In the context of these uncertain conditions, we are actively managing the business to maintain cash flow and ensure that we have sufficient liquidity for a variety of scenarios. We believe that such strategy will allow us to meet our anticipated funding requirements.
On April 11, 2022, the Company entered into an $85 million credit facility with Amarillo National Bank consisting of a working capital facility of $40 million secured by assets of Manitex U.S. businesses, working capital facility of $30 million secured by assets of Rabern, and $15 million term loan facility. This new banking facility provided the funds for the Rabern acquisition and working capital facilities for both the Manitex U.S. and Rabern businesses. At September 30, 2023 the PM Group had established working capital facilities with five Italian, one Spanish, twelve South American banks and one Romanian bank. Under these facilities, the PM Group can borrow $20.3 million against orders, invoices and letters of credit.
28
Cash, cash equivalents and restricted cash were $4.9 million and $8.2 million at September 30, 2023 and December 31, 2022, respectively At September 30, 2023, the Company had global liquidity of approximately $29 million based on the cash balance and availability under its working capital facilities. Future advances are dependent on having available collateral.
If our revenues were to increase significantly in the future, the provision limiting borrowing against accounts receivable and inventory would limit future borrowings. If this were to occur, we would attempt to negotiate higher inventory caps with our banks. There is, however, no assurance that the banks would agree to increase the caps.
The Company expects cash flows from operations and existing availability under the current revolving credit and working capital facilities will be adequate to fund future operations. If, in the future, we were to determine that additional funding is necessary, we believe that it would be available. There is, however, no assurance that such financing will be available or, if available, on acceptable terms.
At September 30, 2023 and December 31, 2022, no customer accounted for 10% or more of the Company’s accounts receivable.
Cash flows for the nine-month period ended September 30, 2023 compared to the nine-month period ended September 30, 2022
Operating Activities - For the nine months ended September 30, 2023 and 2022, cash flow provided by operating activities was $0.2 million compared to cash used in operating activities of $11.3 million for the same period in the prior year. Cash used for working capital was $14.1 million for the nine months ended September 30, 2023 compared to cash used for working capital of $13.0 million for the same period in the prior year. The change is primarily related to increased collections on accounts receivable, the paydown of accounts payable, and inventory purchases to support production
Investing Activities - Cash used in investing activities was $4.3 million in the first nine months of 2023, compared to $50.2 million used in investing activities in the same period a year ago. Cash used in the nine-month period ended September 30, 2023 was primarily related to purchases of assets for growth in the rental segment. Cash used in the nine-month period ended September 30, 2022 was primarily related to cash payments for the Rabern acquisition of $38.4 million, property and equipment purchases of $13.7 million, offset by $1.9 million in proceeds from the sale of the Badger facility and other equipment.
Financing Activities - Cash provided by financing activities was an inflow of $1.1 million for the nine months ended September 30, 2023 which included an increase in borrowings on the revolving credit facility of $6.7 million, partially offset by a decrease in borrowings on the working capital facilities of $2.9 million and note payments of $2.4 million. Cash provided by financing activities was an inflow of $55.5 million for the nine months ended September 30, 2022 which included an increase in borrowings on the revolving credit facility in connection with the Rabern acquisition of $46.7 million, borrowings on the term loan in connection with the Rabern acquisition of $15.0 million, additional borrowings on the revolving credit facility of $6.7 million, working capital borrowings of $0.9 million and borrowings for insurance agreements and finance leases of $0.9 million, offset by repayment of previous revolving credit facility of $12.8 million and notes of $1.1 million.
Critical Accounting Policies
The Company’s critical accounting policies have not materially changed since the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 was filed. See Item 7, Management’s Discussion and Analysis of Results of Operations and Financial Condition, in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a discussion of the Company’s critical accounting policies.
29
Item 3—Quantitative and Qualitative Disclosures about Market Risk
Not required for Smaller Reporting Companies.
Item 4—Controls and Procedures
Disclosure Controls and Procedures
With the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) and under the supervision of the Audit Committee of the Board of Directors, our management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of September 30, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of September 30, 2023, were effective and provided reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). During the period covered by this report, the Company made no changes that have materially affected, or that are reasonably likely to materially affect, its internal control over financial reporting.
30
PART II—OTHER INFORMATION
Item 1—Legal Proceedings
The information set forth in Note 15 (Legal Proceedings and Other Contingencies) to the accompanying Condensed Consolidated Financial Statements included in Part I. Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q is incorporated herein by reference.
Item 1A—Risk Factors
As of the date of this filing, there have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2022.
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds.
The Company’s Credit Agreement with Amarillo National Bank directly restricts the Company’s ability to declare or pay dividends without Amarillo’s consent. In addition, pursuant to the Company’s Credit Agreement with Amarillo National Bank, the Company’s U.S. subsidiaries must maintain a debt service coverage ratio of at least 1.25:1.00 and a net worth for U.S. entities of at least $80 million, each as measured on the last date of each calendar quarter, beginning September 30, 2023.
ISSUER PURCHASES OF EQUITY SECURITIES
Period |
|
(a) Total |
|
|
(b) Average |
|
|
(c) Total |
|
|
(d) Maximum |
|
||||
January 1 - January 31, 2023 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
February 1 - February 28, 2023 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
March 1 - March 31, 2023 |
|
|
7,605 |
|
|
|
5.22 |
|
|
|
— |
|
|
|
— |
|
April 1- April, 2023 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
May 1 - May 31, 2023 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
June 1 - June 30, 2023 |
|
|
1,875 |
|
|
|
4.82 |
|
|
|
— |
|
|
|
— |
|
July 1 - July 31, 2023 |
|
|
1,727 |
|
|
|
5.43 |
|
|
|
— |
|
|
|
— |
|
|
|
|
11,207 |
|
|
$ |
5.19 |
|
|
|
— |
|
|
|
— |
|
Item 3—Defaults Upon Senior Securities
None.
Item 4—Mine Safety Disclosures
Not applicable.
Item 5—Other Information
None.
Item 6—Exhibits
See the Exhibit Index set forth below for a list of exhibits included with this Quarterly Report on Form 10-Q.
31
EXHIBIT INDEX
Exhibit Number |
|
Exhibit Description |
|
|
|
10.1 |
|
|
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1** |
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
104 |
|
Cover Page Interactive Data File-The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
* Filed herewith
** Furnished herewith
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
November 2, 2023
|
|
By: |
|
/s/ MICHAEL COFFEY |
|
|
|
|
Michael Coffey |
|
|
|
|
Chief Executive Officer |
|
|
|
|
(Principal Executive Officer) |
November 2, 2023
|
|
By: |
|
/s/ JOSEPH DOOLAN |
|
|
|
|
Joseph Doolan |
|
|
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
33