10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission File Number: 001-38894

Mayville Engineering Company, Inc.

(Exact Name of Registrant as Specified in its Charter)

Wisconsin	39-0944729
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
715 South Street Mayville, Wisconsin	53050
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (920) 387-4500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	MEC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No  ☒

As of July 28, 2022, the registrant had 20,532,691 shares of common stock, no par value per share, outstanding.

Table of Contents

		Page
PART  I.	FINANCIAL INFORMATION	5
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Shareholders’ Equity	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
PART II.	OTHER INFORMATION	33
Item 1.	Legal Proceedings	33
Items 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 6.	Exhibits	34
Signatures		35

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements related to future events, business strategy, future performance, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek,” “anticipate,” “plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “potential,” “targeting,” “intend,” “could,” “might,” “should,” “believe” and similar expressions or their negative. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on management’s belief, based on currently available information, as to the outcome and timing of future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed in such forward-looking statements. Mayville Engineering Company, Inc. (MEC, the Company, we, our, us or similar terms) believes the expectations reflected in the forward-looking statements contained in this Quarterly Report on Form 10-Q are reasonable, but no assurance can be given that these expectations will prove to be correct. Forward-looking statements should not be unduly relied upon.

Important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to, those described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the SEC) on March 2, 2022, as such may be amended or supplemented in Part II, Item 1A of our subsequently filed Quarterly Reports on Form 10-Q (including this report) and the following:

● the negative impacts the COVID-19 pandemic has had and will continue to have on our business, financial condition, cash flows, results of operations and supply chain, including the supply chain issues encountered by our original equipment manufacturer customers, the current inflationary pressures on wages, benefits, components, and manufacturing supplies and future uncertain impacts;

● risks relating to developments in the industries in which our customers operate;

● risks related to scheduling production accurately and maximizing efficiency;

● failure to compete successfully in our markets;

● our ability to realize net sales represented by our awarded business;

● our ability to maintain our manufacturing, engineering and technological expertise;

● the loss of any of our large customers or the loss of their respective market shares;

● risks related to entering new markets;

● our ability to recruit and retain our key executive officers, managers and trade-skilled personnel;

● volatility in the prices or availability of raw materials critical to our business;

● manufacturing risks, including delays and technical problems, issues with third-party suppliers, environmental risks and applicable statutory and regulatory requirements;

● our ability to successfully identify or integrate acquisitions;

● our ability to develop new and innovative processes and gain customer acceptance of such processes;

● risks related to our information technology systems and infrastructure;

● political and economic developments, including foreign trade relations and associated tariffs;

● results of legal disputes, including product liability, intellectual property infringement and other claims;

● risks associated with our capital-intensive industry;

● risks related to our treatment as an S Corporation prior to the consummation of our initial public offering of common stock (IPO); and

● risks related to our employee stock ownership plan’s treatment as a tax-qualified retirement plan.

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These factors are not necessarily all of the important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements. Other unknown or unpredictable factors could also cause actual results or events to differ materially from those expressed in the forward-looking statements. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements after the date on which any such statement is made, whether as a result of new information, future events or otherwise, except as required by federal securities laws.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

(unaudited)

	June 30,		December 31,
	2022		2021
ASSETS
Cash and cash equivalents	$	105	$	118
Receivables, net of allowances for doubtful accounts of $799 at June 30, 2022 and $631 at December 31, 2021		71,223		55,417
Inventories, net		74,103		70,157
Tooling in progress		5,317		3,950
Prepaid expenses and other current assets		4,580		2,924
Total current assets		155,328		132,566
Property, plant and equipment, net		129,509		120,746
Assets held for sale		1,288		—
Goodwill		71,535		71,535
Intangible assets, net		47,285		50,761
Operating lease assets		37,842		—
Other long-term assets		3,497		3,865
Total assets	$	446,284	$	379,473
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	58,679	$	50,119
Current portion of operating lease obligation		4,803		—
Accrued liabilities:
Salaries, wages, and payroll taxes		9,670		8,684
Profit sharing and bonus		6,329		5,289
Current portion of deferred compensation		17,531		—
Other current liabilities		13,495		13,280
Total current liabilities		110,507		77,372
Bank revolving credit notes		76,063		67,610
Operating lease obligation, less current maturities		33,531		—
Deferred compensation, less current portion		2,949		25,117
Deferred income tax liability		11,040		8,641
Other long-term liabilities		1,725		2,462
Total liabilities	$	235,815	$	181,202
Commitments and contingencies (see Note 8)
Common shares, no par value, 75,000,000 authorized, 21,645,193 shares issued at June 30, 2022 and 21,386,382 at December 31, 2021		—		—
Additional paid-in-capital		199,899		197,186
Retained earnings		17,298		7,547
Treasury shares at cost, 1,112,502 shares at June 30, 2022 and 1,050,448 at December 31, 2021		(6,728)		(6,462)
Total shareholders’ equity		210,469		198,271
Total	$	446,284	$	379,473

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(in thousands, except share amounts and per share data)

(unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net sales	$	138,337	$	120,213	$	274,589	$	232,833
Cost of sales		120,079		103,933		241,449		201,777
Amortization of intangible assets		1,738		2,677		3,476		5,353
Profit sharing, bonuses, and deferred compensation		1,208		3,210		3,755		6,074
Employee stock ownership plan expense		1,330		228		1,820		701
Other selling, general and administrative expenses		6,396		5,362		12,121		10,059
Impairment of long-lived assets and gain on contracts		(906)		—		(2,089)		—
Income from operations		8,492		4,803		14,057		8,869
Interest expense		(765)		(504)		(1,332)		(1,036)
Income before taxes		7,727		4,299		12,725		7,833
Income tax expense		1,798		1,007		2,974		1,996
Net income and comprehensive income	$	5,929	$	3,292	$	9,751	$	5,837
Earnings per share:
Basic	$	0.29	$	0.16	$	0.48	$	0.29
Diluted	$	0.29	$	0.16	$	0.47	$	0.28
Weighted average shares outstanding:
Basic		20,581,945		20,454,541		20,490,944		20,316,936
Diluted		20,650,551		20,864,531		20,807,677		20,685,741

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

6

Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended
	June 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	9,751	$	5,837
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		10,975		10,236
Amortization		3,476		5,353
Allowance for doubtful accounts		168		49
Inventory excess and obsolescence reserve		87		(589)
Stock-based compensation expense		2,714		2,588
Loss (gain) on disposal of property, plant and equipment		(625)		66
Impairment of long-lived assets and gain on contracts		(2,089)		—
Deferred compensation		(4,637)		(170)
Non-cash lease expense		2,482		—
Other non-cash adjustments		176		151
Changes in operating assets and liabilities – net of effects of acquisition:
Accounts receivable		(15,973)		(16,331)
Inventories		(4,033)		(8,984)
Tooling in progress		(1,367)		1,033
Prepaids and other current assets		(1,561)		(1,094)
Accounts payable		9,275		14,324
Deferred income taxes		2,504		1,484
Operating lease obligations		(2,270)		—
Accrued liabilities		6,631		4,277
Net cash provided by operating activities		15,684		18,230
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(26,351)		(16,986)
Proceeds from sale of property, plant and equipment		5,228		414
Net cash used in investing activities		(21,123)		(16,572)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank revolving credit notes		218,867		157,388
Payments on bank revolving credit notes		(210,414)		(158,791)
Repayments of other long-term debt		(547)		—
Purchase of treasury stock		(2,323)		—
Payments on finance leases		(157)		(310)
Proceeds from the exercise of stock options		—		80
Other financing activities		—		(27)
Net cash provided by (used in) financing activities		5,426		(1,660)
Net decrease in cash and cash equivalents		(13)		(2)
Cash and cash equivalents at beginning of period		118		121
Cash and cash equivalents at end of period	$	105	$	119
Supplemental disclosure of cash flow information:
Cash paid for interest	$	999	$	1,077
Cash paid for taxes	$	450	$	716
Non-cash construction in progress in accounts payable	$	5,633	$	2,994

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Mayville Engineering Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(in thousands)

(unaudited)

	Shareholders' Equity
	Additional		Treasury		Retained
	Paid-in-Capital		Shares		Earnings		Total
Balance as of December 31, 2021	$	197,186	$	(6,462)	$	7,547	$	198,271
Net income		—		—		3,822		3,822
401(k) plan contribution		—		2,057		—		2,057
Purchase of treasury stock		—		(2,323)		—		(2,323)
Stock-based compensation		1,257		—		—		1,257
Balance as of March 31, 2022	$	198,443	$	(6,728)	$	11,369	$	203,084
Net income		—		—		5,929		5,929
Stock-based compensation		1,456		—		—		1,456
Balance as of June 30, 2022	$	199,899	$	(6,728)	$	17,298	$	210,469
	Shareholders' Equity
	Additional		Treasury		Retained
	Paid-in-Capital		Shares		Earnings		Total
Balance as of December 31, 2020	$	190,793	$	(4,934)	$	14,998	$	200,857
Net income		—		—		2,545		2,545
401(k) plan contribution		1,319		625		—		1,944
Stock-based compensation		1,200		—		—		1,200
Balance as of March 31, 2021	$	193,312	$	(4,309)	$	17,543	$	206,546
Net income		—		—		3,292		3,292
Stock-based compensation		1,388		—		—		1,388
Stock options exercised		54		—		—		54
Balance as of June 30, 2021	$	194,754	$	(4,309)	$	20,835	$	211,280

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Mayville Engineering Company, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands except share amounts, per share data, years and ratios)

(unaudited)

Note 1. Basis of presentation

The interim unaudited condensed consolidated financial statements of Mayville Engineering Company, Inc. and subsidiaries (MEC, the Company, we, our, us or similar terms) presented here have been prepared in accordance with the accounting principles generally accepted in the United States of America (GAAP) and with instructions to Form 10-Q and Article 10 of Regulation S-X. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and financial position for the interim unaudited periods presented. All intercompany balances and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These interim unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K. A summary of the Company’s significant accounting policies is included in the Company’s 2021 financial statements in the Annual Report on Form 10-K. The Company followed these policies in preparation of the interim unaudited Condensed Consolidated Financial Statements except for new accounting pronouncements adopted as described below.

Nature of Operations

MEC is a leading U.S.-based value-added manufacturing partner that provides a broad range of prototyping and tooling, production fabrication, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. Founded in 1945 and headquartered in Mayville, Wisconsin, we are a leading Tier I U.S. supplier of highly engineered components to original equipment manufacturers (OEM) customers with leading positions in their respective markets. The Company operates 20 facilities, of which 19 are in operation, located in Arkansas, Michigan, Mississippi, Ohio, Pennsylvania, Virginia, and Wisconsin. Our engineering expertise and technical know-how allow us to add value through every product redevelopment cycle (generally every three to five years for our customers).

Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.

The COVID-19 pandemic has had and will continue to have a negative impact on our business, financial condition, cash flows, results of operations, supply chain, and raw material availability, although the full extent is still uncertain.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases, creating Accounting Standard Codification (ASC) 842. Under the new guidance, lessees are required to recognize a right-of-use (ROU) asset and a lease liability for substantially all leases. When measuring ROU assets and lease liabilities, a lessee should include amounts related to option terms, such as the option of extending or terminating the lease or purchasing the underlying asset, that are reasonably certain to be exercised. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition. For finance leases, a lessee will recognize the interest on a lease liability separate from amortization of the ROU asset. In addition, repayments of principal will be presented within financing activities, and interest payments will be presented within operating activities in the statement of cash flows. For operating leases, a lessee will recognize a single lease cost on a straight-line basis and classify all cash payments within operating activities in the statement of cash flows. Entities have the option to adopt the new guidance through a cumulative effect adjustment to retained earnings applied either to the beginning of the earliest period presented (modified retrospective approach) or to the beginning of the period of adoption (effective date approach) whereby the comparative periods are unchanged. For public companies, this guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For as long as the Company remained an emerging growth company (EGC), the new guidance was effective for annual reporting periods beginning after December 15, 2022, and interim periods within fiscal years beginning after December 15, 2022. Early adoption was permitted. The Company adopted the

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annual reporting guidance as of January 1, 2022 using the effective date approach. The Company early adopted the interim reporting guidance during the period ended March 31, 2022.

The new guidance provides a number of optional practical expedients in transition. The Company elected the "package of practical expedients", which allows it to not reassess under the new guidance its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight practical expedient. In addition, the new guidance provides accounting policy elections for an entity’s ongoing lessee accounting. The Company has elected to not separate lease and non-lease components for certain of its real estate leases. The Company has elected the short-term lease recognition exemption for all leases that qualify which means that it will not recognize ROU assets or lease liabilities for those leases with a term of 12 months or less.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes ASC 326, Financial Instruments – Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to ASC 326, Financial Instruments – Credit Losses. This ASU clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC 326. This ASU provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to ASC 326, Financial Instruments – Credit Losses. The ASU clarifies the treatment of expected recoveries for amounts previously written off on purchased receivables, provides transition relief for troubled debt restructuring, and allows for certain disclosure simplifications of accrued interest. For as long as the Company remains an EGC, the new guidance is effective for annual reporting periods beginning after December 15, 2022. The Company is evaluating the potential effects on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes, creating ASC 740, which removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. For public companies, this guidance will be effective for fiscal years beginning after December 15, 2020. For as long as the Company remains an EGC, the new guidance is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. During the period ended March 31, 2021, the Company adopted this guidance. This adoption had no impact on the consolidated financial statements.

A summary of the Company’s evaluation of other recent accounting pronouncements is included in the Company’s 2021 financial statements in its Annual Report on Form 10-K for the year ended December 31, 2021.

Note 2. Select balance sheet data

Inventory

Inventories are stated at the lower of cost, determined on the first-in, first-out method and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Work-in-process and finished goods are valued at production costs consisting of material, labor, and overhead.

Inventories as of June 30, 2022 and December 31, 2021 consist of:

	June 30,		December 31,
	2022		2021
Finished goods and purchased parts	$	42,828	$	41,041
Raw materials		19,500		18,905
Work-in-process		11,775		10,211
Total	$	74,103	$	70,157

At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company received a notification from this customer in February 2022 resulting in a change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company had committed to purchase, to meet obligations under the

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agreement with the former fitness customer as of December 31, 2021. As a result, at December 31, 2021, the Company recorded an inventory impairment of $700, of which $661 was due to loss contacts recorded in other current liabilities and a $39 decrease to inventories. As of June 30, 2022, there was a balance of $329 of loss contract liabilities recorded in other current liabilities on the Condensed Consolidated Balance Sheets.

Property, plant and equipment

Property, plant and equipment as of June 30, 2022 and December 31, 2021 consist of:

	Useful Lives		June 30,		December 31,
	Years		2022		2021
Land		Indefinite	$	1,033	$	1,033
Land improvements		15-39		3,169		3,169
Building and building improvements		15-39		57,971		56,243
Machinery, equipment and tooling		3-10		230,803		222,202
Vehicles		5		3,947		3,943
Office furniture and fixtures		3-7		18,785		17,960
Construction in progress		N/A		22,919		15,443
Total property, plant and equipment, gross				338,627		319,993
Less accumulated depreciation				209,118		199,247
Total property, plant and equipment, net			$	129,509	$	120,746

Depreciation expense was $5,507 and $5,161 for the three months ended June 30, 2022 and 2021, respectively, and $10,975 and $10,236 for the six months ended June 30, 2022 and 2021, respectively.

At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company received a notification from the former fitness customer in February 2022 resulting in a change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company had committed to purchase, to meet obligations under the agreement with the former fitness customer as of December 31, 2021. As a result, at December 31, 2021, the Company recorded a long-lived asset impairment $12,875.

During the three and six months ended June 30, 2022, the Company was able to cancel $906 and $2,089, respectively, of purchase commitments for property, plant and equipment relating to the former fitness customer that had previously been recorded in the Condensed Consolidated Statements of Comprehensive Income as an impairment of long-lived assets and loss on contracts as of December 31, 2021. The cancellation of loss contracts has resulted in the reversal of this amount from other current liabilities in the Condensed Consolidated Balance Sheets and recorded in the Condensed Consolidated Statements of Comprehensive Income as an impairment of long-lived assets and gain on contracts for the current period.

Throughout the three months ended June 30, 2022, the Company sold $4,971 of machinery and equipment originally intended to support production for the former fitness customer, resulting in a gain on sale of the assets of $520, which is classified in cost of sales on the Condensed Consolidated Statements of Comprehensive Income as of June 30, 2022. As a result of the previously mentioned impairment, these assets had been written down to fair value as of December 31, 2021.

As of June 30, 2022, $1,288 of property, plant and equipment has been reclassified within the Condensed Consolidated Balance Sheets as assets held for sale.

The Company adopted ASC 842 on January 1, 2022, classifying finance leases of $981 in property, plant and equipment on the Condensed Consolidated Balance Sheets as of June 30, 2022. Please refer to Note 4 – Leases for additional information. Due to the adoption, the Company reclassified net capital leases of $1,136 to property, plant and equipment on the Condensed Consolidated Balance Sheets as of December 31, 2021.

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Goodwill

Changes in goodwill between December 31, 2021 and June 30, 2022 consist of:

Balance as of December 31, 2021	$	71,535
Impairment		—
Balance as of June 30, 2022	$	71,535

Intangible Assets

The following is a listing of intangible assets, the useful lives in years (amortization period) and accumulated amortization as of June 30, 2022 and December 31, 2021:

	Useful Lives		June 30,		December 31,
	Years		2022		2021
Amortizable intangible assets:
Customer relationships and contracts		9-12	$	78,340	$	78,340
Trade name		10		14,780		14,780
Non-compete agreements		5		8,800		8,800
Patents		19		24		24
Accumulated amortization				(58,470)		(54,994)
Total amortizable intangible assets, net				43,474		46,950
Non-amortizable brand name				3,811		3,811
Total intangible assets, net			$	47,285	$	50,761

Non-amortizable brand name is tested annually during the fourth quarter for impairment, or more frequently if triggering events occur indicating there may be impairment.

Changes in intangible assets between December 31, 2021 and June 30, 2022 consist of:

Balance as of December 31, 2021	$	50,761
Amortization expense		(3,476)
Balance as of June 30, 2022	$	47,285

Amortization expense was $1,738 and $2,677 for the three months ended June 30, 2022 and 2021, respectively, and $3,476 and $5,353 for the six months ended June 30, 2022 and 2021, respectively.

Future amortization expense is expected to be as followed:

Year ending December 31,
2022 (remainder)	$	3,476
2023	$	6,866
2024	$	5,192
2025	$	5,192
2026	$	5,192
Thereafter	$	17,556

Note 3. Bank revolving credit notes

On September 26, 2019, and as last amended on March 31, 2022, we entered into an amended and restated credit agreement (Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, as administrative agent (the Agent). The Credit Agreement provides for a $200,000 revolving credit facility (the Revolving Loan), with a letter of credit sub-facility in an aggregate amount not to exceed $5,000, and a swingline facility in an aggregate amount of $20,000. The Credit Agreement also provides for an

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additional $100,000 of debt capacity through an accordion feature. All amounts borrowed under the Credit Agreement mature on September 26, 2024.

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness, create or incur liens, make certain investments, merge or consolidate with another entity, make certain asset dispositions, pay dividends or other distributions to shareholders, enter into transactions with affiliates, enter into sale leaseback transactions or make capital expenditures. The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00 as well as a consolidated total leverage ratio not to exceed 3.25 to 1.00, although such leverage ratio can be increased in connection with certain acquisitions.

In order to provide a means of insurance against future macroeconomic events, we entered into an amendment (Second Amendment) to the Credit Agreement on June 30, 2020. The Second Amendment provided the Company with temporary changes to the total leverage ratio covenant for the period from June 30, 2020, through December 31, 2021, or such earlier date as the Company may elect (Covenant Relief Period), in return for certain increases in interest rates, fees and restrictions on certain activities of the Company, including capital expenditures, acquisitions, dividends and share repurchases. New pricing, which took effect for the quarters ending on and after September 30, 2020, includes interest at a fluctuating London Interbank Offered Rate (LIBOR) (at a floor of 75 basis points), plus 1.00% to 2.75%, along with the commitment fee ranging from 20 to 50 basis points.

During the Covenant Relief Period, the required ceiling on the Company’s total leverage ratio was 4.25 to 1.00 for quarters ending June 30, 2020 through and including December 31, 2020, and declined in quarterly increments to 3.25 to 1.00 through the quarter ending December 31, 2021.

We entered into an amendment (Third Amendment) to the Credit Agreement on March 31, 2021 which allowed the Company to incur up to $70,000 of capital expenditures in 2021, as opposed to $35,000.

We entered into an amendment (Fourth Amendment) to the Credit Agreement on March 31, 2022 which allows the Company to incur up to $65,000 of capital expenditures in 2022, as opposed to $35,000, and revises the definition of Consolidated EBITDA to include certain restructuring and impairment charges.

At June 30, 2022, our consolidated total leverage ratio was 1.52 to 1.00 as compared to a covenant maximum of 3.25 to 1.00 in accordance with the Credit Agreement.

At June 30, 2022, our interest coverage ratio was 18.34 to 1.00 as compared to a covenant minimum of 3.00 to 1.00 under the Credit Agreement.

Under the Credit Agreement, interest is payable quarterly at the adjusted LIBOR plus an applicable margin based on the current funded indebtedness to adjusted EBITDA ratio. The interest rate was 2.06% and 1.75% as of June 30, 2022 and December 31, 2021, respectively. Additionally, the agreement has a fee on the average daily unused portion of the aggregate unused revolving commitments. This fee was 0.20% as of June 30, 2022 and December 31, 2021.

The Company was in compliance with all financial covenants of its credit agreements as of June 30, 2022 and December 31, 2021. The amount borrowed on the revolving credit notes was $76,063 and $67,610 as of June 30, 2022 and December 31, 2021, respectively.

Note 4. Leases

In February 2016, the FASB issued ASU 2019-02, Leases, creating ASC 842. For public companies, this guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For as long as the Company remained an EGC, the new guidance was effective for annual reporting periods beginning after December 15, 2022, and interim periods within fiscal years beginning after December 15, 2022. Early adoption was permitted. The Company adopted the annual

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reporting guidance as of January 1, 2022 using the effective date approach. The Company early adopted the interim reporting guidance during the period ended March 31, 2022.

The most significant judgements and impacts related to the application of the new guidance include the following:

● In evaluating contracts to determine if they qualify as a lease, the Company considers factors such as if the Company has obtained or transferred substantially all of the rights to the underlying asset through exclusivity, if the Company can transfer or has transferred the ability to direct the use of the asset by making decisions about how and for what purpose the asset will be used and if the lessor has substantive substitution rights.

● The Company made judgements regarding lease terms for certain of its leases that were in month-to-month status or that contained auto-renewal clauses. The Company estimated a lease end date based on the required length of usage of the property and calculated a ROU asset and lease liability based on the resulting estimated lease term.

● The Company has recognized ROU assets and lease liabilities for operating leases that have not previously been recorded. The lease liability for operating leases is based on the net present value of future minimum lease payments.

● The ROU asset for operating leases is based on the initial calculated lease liability as adjusted for the reclassification of certain balance sheet amounts such as deferred rent.

● In determining the discount rate used to measure the ROU assets and lease liabilities, the Company uses the rate implicit in the lease, or if not readily available, the Company uses the Company’s incremental borrowing rate. The base rate used to establish the Company’s incremental borrowing rate is based on a Prime Rate (or LIBOR fallback option) plus fixed basis points methodology pursuant to the Company’s revolving credit facility (as amended from time to time). Certain required adjustments were then made to this base rate to arrive at an estimated incremental borrowing rate.

● The Company’s real property leases vary in terms of up to ten years, including options for renewal periods that are considered reasonably certain to be exercised. The Company’s personal property leases vary in terms of up to seven years, including options for renewal periods that are considered reasonably certain to be exercised.

● Upon adoption of the new guidance at January 1, 2022, the Company established a ROU asset of $37,908 and a lease liability of $38,185 related to its real property operating leases and established a ROU asset of $2,415 and a lease liability of $2,418 related to its personal property operating leases. Additionally, the impact on retained earnings was immaterial. The January 1, 2022, balances associated with the Company’s personal property finance leases will be reclassified in the financial statements from capital lease, net to property, plant and equipment, net, from current portion of capital lease obligation to other current liabilities, and from capital lease obligation, less current maturities to other long-term liabilities on the Condensed Consolidated Balance Sheets.

The Company has real property operating leases for office and light manufacturing space. Operating leases for the Company’s personal property consist of leases for office equipment, vehicles, forklifts and storage tanks for bulk gases. The Company recognizes a ROU asset and a lease liability for operating leases based on the net present value of future minimum lease payments. Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term, including renewal periods that are considered reasonably certain.

The Company has finance leases for two laser cutting systems and a vehicle. The Company recognizes a ROU asset and a lease liability for finance leases based on the net present value of future minimum lease payments. Lease expense for the Company’s

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finance leases is comprised of the amortization of the ROU asset and interest expense recognized based on the effective interest method.

Variable lease expense is related to certain of the Company’s real property leases and personal property leases, and it generally consists of property tax and insurance components that are for the benefit of the lessor (real property leases) and variable overage fees (personal property leases) that are remitted as part of the Company’s lease payments.

The components of lease expense were as follows:

	Three Months Ended		Six Months Ended
	June 30, 2022		June 30, 2022
Finance lease cost:
Amortization of finance lease assets	$	78	$	157
Interest on finance lease liabilities		11		22
Total finance lease expense		89		179
Operating lease expense		1,512		3,034
Short-term lease expense		139		318
Variable lease expense		61		108
Sublease income (1)		(146)		(146)
Total lease expense	$	1,655	$	3,493

(1) The Company subleased a portion of its Hazel Park, MI facility starting in June 2022.

Total rent expense for the three and six months ended June 30, 2021 was $1,081 and $2,165, respectively.

Supplemental information related to leases was as follows:

	Balance Sheet Classification	June 30, 2022
Assets:
Finance lease assets	Property, plant and equipment, net	$	981
Operating lease assets	Operating lease assets		37,842
Total lease assets		$	38,823
Current liabilities:
Current finance lease liabilities	Other current liabilities	$	323
Current operating lease liabilities	Current portion of operating lease obligation		4,803
Noncurrent liabilities:
Long-term finance lease liabilities	Other long-term liabilities		730
Long-term operating lease liabilities	Operating lease obligation, less current maturities		33,531
Total lease liabilities		$	39,387

	June 30, 2022
Weighted average remaining lease term (in years)
Finance leases	3.1
Operating leases	8.0
Weighted average discount rate
Finance leases	4.00	%
Operating leases	2.46	%

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The table below represents ROU asset balances by type of lease:

	June 30, 2022
Real estate leases	$	35,706
Equipment leases		2,874
Vehicle leases		243
Total lease assets	$	38,823

Maturities of lease liabilities at June 30, 2022 and minimum lease payments under ASC 842 having initial or remaining non-cancellable terms in excess of one year were as follows:

	Operating		Finance
Year ending December 31,	Leases		Leases		Total
2022 (remainder)	$	2,837	$	179	$	3,016
2023		5,704		359		6,063
2024		5,667		357		6,024
2025		4,837		223		5,060
2026		4,656		—		4,656
Thereafter		18,771		—		18,771
Total lease payments		42,472		1,118		43,590
Less: lease modification not yet commenced		—		—		—
Less: imputed interest		(4,138)		(65)		(4,203)
Total lease obligations	$	38,334	$	1,053	$	39,387

At June 30, 2021, future minimum lease payments under ASC 840 were as follows:

	Operating		Finance
Year ending December 31,	Leases		Leases		Total
2021 (remainder)	$	2,647	$	367	$	3,014
2022		5,528		734		6,262
2023		5,521		734		6,255
2024		4,786		514		5,300
2025		4,282		226		4,508
Thereafter		21,912		—		21,912
Total minimum lease payments	$	44,676	$	2,575	$	47,251

Lease related supplemental cash flow information:

	Six Months Ended
	June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities for finance leases:
Operating cash flows	$	22
Financing cash flows	$	157
Cash paid for amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows	$	2,837
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases	$	106
Finance leases	$	—

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ROU assets are assessed for impairment in accordance with the Company’s long-lived asset policy. The Company reassesses lease classification and remeasures ROU assets and lease liabilities when a lease is modified, and that modification is not accounted for as a separate new lease or upon certain other events that require reassessment in accordance with ASC 842.

Note 5. Employee stock ownership plan

Under the Mayville Engineering Company, Inc. Employee Stock Ownership Plan (the ESOP), the Company can make annual discretionary contributions to the trust for the benefit of eligible employees in the form of cash or shares of common stock of the Company subject to the Board of Directors’ approval. For the three months ended June 30, 2022 and 2021, the Company’s estimated ESOP expense was $1,330 and $228, respectively. For the six months ended June 30, 2022 and 2021, the Company’s estimated ESOP expense amounted to $1,820 and $701, respectively.

At various times following death, disability, retirement or termination of employment, an ESOP participant is entitled to receive their ESOP account balance in accordance with various distribution methods as permitted under the policies adopted by the ESOP.

As of June 30, 2022, and December 31, 2021, the ESOP shares, excluding safe harbor shares held in the Company’s 401(k) Plan, consisted of 5,684,879 and 7,292,392 in allocated shares, respectively.

Note 6. Retirement plans

The Mayville Engineering Company Inc. 401(k) Plan (the 401(k) Plan) covers substantially all employees meeting certain eligibility requirements. The 401(k) Plan is a defined contribution plan and is intended for eligible employees to defer tax-free contributions to save for retirement. Employees may contribute up to 50% of their eligible compensation to the 401(k) Plan, subject to the limits of Section 401(k) of the Internal Revenue Code.

The 401(k) Plan also provides for employer discretionary profit-sharing contributions and the Board of Directors may authorize discretionary profit-sharing contributions (which are usually approved at the end of each calendar year).

Note 7. Income taxes

On a quarterly basis, the Company estimates its effective tax rate for the full fiscal year and records a quarterly income tax provision based on the anticipated rate. As the year progresses, the Company will refine its estimate based on facts and circumstances by each tax jurisdiction.

Income tax expense was $1,798 and $2,974, and the effective tax rate (ETR) was 23.27% and 23.37% for the three and six months ended June 30, 2022, respectively. Our ETR is different from the expected tax rate due to state taxes, non-deductible items, research and development credits and benefit from excess tax deductions related to share based compensation items.

For the three and six months ended June 30, 2021, income tax expense was estimated at $1,007 and $1,996 and the ETR was 23.43% and 25.48%, respectively.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in these jurisdictions. ASC 740, Income Taxes, states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of technical merits.

The Company’s policy for recording interest and penalties associated with potential income tax audits is to record such expense as a component of income tax expense. There were no amounts for penalties or interest recorded as of June 30, 2022. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its positions.

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Uncertain Tax Positions

Based on the Company’s evaluation, it has been concluded that there is one tax position related to the research and development tax credit requiring recognition in the Company’s financial statements as of June 30, 2022. The Company does not anticipate that there will be a material change in the balance of the unrecognized tax benefits in the next 12 months. Any interest and penalties related to uncertain tax positions are recorded in income tax expense. No amounts have been recorded as tax expense for interest and penalties for the three and six months ended June 30, 2022, as the amount for the utilized portion for the research and development credit on the Wisconsin return is considered to be immaterial. At June 30, 2022 and December 31, 2021, a total of $394 and $314, respectively, of unrecognized tax benefits would, if recognized, impact the Company’s ETR.

The Company files income tax returns in the United States federal jurisdiction and in various state and local jurisdictions. Federal tax returns for tax years beginning January 1, 2018, and state tax returns beginning January 1, 2017, are open for examination.

Note 8. Contingencies

From time to time, the Company may be involved in various claims and lawsuits, both for and against the Company, arising in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, in management’s opinion, either the likelihood of loss is remote, or any reasonably possible loss associated with the resolution of such proceedings is not expected to have a material adverse impact on the consolidated financial statements.

Note 9. Deferred compensation

The Mayville Engineering Deferred Compensation Plan is available for certain employees designated to be eligible to participate by the Company and approved by the Board of Directors. Eligible employees may elect to defer a portion of his or her compensation for any plan year and the deferral cannot exceed 50% of the participant’s base salary and may include the participant’s annual short-term cash incentive up to 100%. The participant’s election must be made prior to the first day of the plan year.

An employer contribution will be made for each participant to reflect the amount of any reduced allocations to the ESOP and/or 401(k) employer contributions due solely to the participant’s deferral amounts, as applicable. In addition, a discretionary amount may be awarded to a participant by the Company.

Deferrals are assumed to be invested in an investment vehicle based on the options made available to the participant (which does not include Company stock).

The deferred compensation plan provides benefits payable upon separation of service or death. Payments are to be made 30 days after date of separation from service, either in a lump-sum payment or up to five annual installments as elected by the participant when the participant first elects to defer compensation.

The deferred compensation plan is non-funded, and all future contributions are unsecured in that the employees have the status of a general unsecured creditor of the Company and the agreements constitute a promise by the Company to make benefit payments in the future. During the three and six months ended June 30, 2022 and 2021, eligible employees elected to defer compensation of $0. As of June 30, 2022 and December 31, 2021, the short-term portion accrued for all benefit years less than 12 months under this plan was $17,531 and $0, respectively. As of June 30, 2022 and December 31, 2021, the long-term portion accrued for all benefit years greater than 12 months under this plan was $2,949 and $25,117. These amounts include the initial deferral of compensation as adjusted for (a) subsequent changes in the share value of the Company stock or (b) in the investment options chosen by the participants. Total expense (credit) for the deferred compensation plan for the three months ended June 30, 2022 and 2021 was $(2,461) and $575, respectively. Total expense (credit) for the deferred compensation plan for the six months ended June 30, 2022 and 2021 amounted to $(3,589) and $405, respectively. These expenses (credits) are included in profit sharing, bonuses and deferred compensation on the Condensed Consolidated Statements of Comprehensive Income. Additionally, the Company made distributions of $1,048 and $575 for the six months ended June 30, 2022 and 2021, respectively.

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Note 10. Self-Funded insurance

The Company is self-funded for the medical benefits provided to its employees and their dependents. Healthcare costs are expensed as incurred and are based upon actual claims paid, reinsurance premiums, administration fees, and estimated unpaid claims. Since March 31, 2020, the Company has an aggregate stop loss limit to mitigate risk. Expense related to this is approximately $3,388 and $3,290 for the three months ended June 30, 2022 and 2021, respectively, and $8,148 and $7,011 for the six months ended June 30, 2022 and 2021, respectively. An estimated accrued liability of approximately $1,421 and $1,471 was recorded as of June 30, 2022 and December 31, 2021, respectively, for estimated unpaid claims and is included within other current liabilities on the Condensed Consolidated Balance Sheets.

Note 11. Segments

The Company applies the provisions of ASC 280, Segment Reporting. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete financial information is available. Based on the provisions of ASC 280, the Company has determined it has one operating segment. The Company does not earn revenues or have long-lived assets located in foreign countries.

Note 12. Fair value of financial instruments

Fair value provides information on what the Company may realize if certain assets were sold or might pay to transfer certain liabilities based upon an exit price. Financial assets and liabilities that are measured and reported at fair value are classified into a three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs as follows:

● Level 1 – Quoted prices in active markets for identical assets or liabilities.

● Level 2 – Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data. Long-term debt is classified as a Level 2 fair value input.

● Level 3 – Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be the Company’s own data and judgements about assumptions that market participants would use in pricing the asset or liability.

The following table lists the Company’s financial assets and liabilities accounted for at fair value by the fair value hierarchy:

	Balance at		Fair Value Measurements at
	June 30,		Report Date Using
	2022		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	20,480	$	20,480	$	—	$	—
Total	$	20,480	$	20,480	$	—	$	—

	Balance at		Fair Value Measurements at
	December 31,		Report Date Using
	2021		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	25,117	$	22,272	$	2,845	$	—
Total	$	25,117	$	22,272	$	2,845	$	—

Fair value measurements for the Company’s cash and cash equivalents are classified based upon Level 1 measurements because such measurements are based upon quoted market prices in active markets for identical assets.

Accounts receivable, accounts payable, long-term debt and accrued liabilities are recorded in the Condensed Consolidated Balance Sheets at cost and approximate fair value.

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Deferred compensation liabilities are recorded at amounts due to participants at the time of deferral. Deferrals are invested in an investment vehicle based on the options made available to the participant, considered to be Level 1 and Level 2 on the fair value hierarchy, with the current balance as Level 1. The change in fair value is recorded in the profit sharing, bonuses, and deferred compensation line item on the Condensed Consolidated Statements of Comprehensive Income. The short-term and long-term balances due to participants are reflected on the current portion of deferred compensation and deferred compensation, less current portion, line items, respectively, on the Condensed Consolidated Balance Sheets.

The Company’s non-financial assets such as goodwill, intangible assets and property, plant, and equipment are re-measured at fair value when there is an indication of impairment and adjusted only when an impairment charge is recognized.

Note 13. Earnings Per Share

The Company computes earnings per share in accordance with ASC Topic 260, Earnings per Share. In accordance with ASC 260, outstanding options will be considered to have been exercised and outstanding as of the beginning of the period if the average market price of the common stock during the period exceeds the exercise price of the options (they are “in the money”), and the assumed exercise of the options do not have an anti-dilutive impact on earnings per share.

A reconciliation of basic and diluted net income per share attributable to the Company were as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net income attributable to MEC	$	5,929	$	3,292	$	9,751	$	5,837
Average shares outstanding		20,581,945		20,454,541		20,490,944		20,316,936
Basic per share	$	0.29	$	0.16	$	0.48	$	0.29
Average shares outstanding		20,581,945		20,454,541		20,490,944		20,316,936
Effect of dilutive share-based compensation		68,606		409,990		316,733		368,805
Total potential shares outstanding		20,650,551		20,864,531		20,807,677		20,685,741
Diluted per share	$	0.29	$	0.16	$	0.47	$	0.28

Options in the money that were not included in the computation of diluted earnings per share because they would have had an anti-dilutive impact on earnings per share were as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Stock options	—	300,510	—	300,510

Note 14. Revenue Recognition

Contract Assets and Contract Liabilities

The Company has contract assets and contract liabilities, which are included in tooling in progress and other current liabilities on the Condensed Consolidated Balance Sheets, respectively. Contract assets include products where the Company has satisfied its performance obligation, but receipt of payment is contingent upon delivery. Contract liabilities include deferred tooling revenue, where the performance obligation was not met. The performance obligation is satisfied when the tooling is completed and the customer signs off through the Product Part Approval Process (PPAP). Cost of goods sold is recognized and released from the balance sheet when control of the tooling promised under contract is transferred to the customer.

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The Company’s contracts with customers are short-term in nature; therefore, revenue is typically recognized, billed and collected within a 12-month period. The following table reflects the changes in our contract assets and liabilities during the six months ended June 30, 2022:

	Contract		Contract
	Assets		Liabilities
As of December 31, 2021	$	3,950	$	2,718
Net activity		1,367		2,598
As of June 30, 2022	$	5,317	$	5,316

Disaggregated Revenue

The following table represents a disaggregation of revenue by product category:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Outdoor sports	$	2,522	$	3,006	$	5,049	$	5,677
Fabrication		83,038		78,318		165,271		147,689
Performance structures		28,197		18,753		57,157		39,208
Tube		19,488		15,760		37,796		30,647
Tank		8,915		5,622		17,464		12,413
Total		142,160		121,459		282,737		235,634
Intercompany sales elimination		(3,823)		(1,246)		(8,148)		(2,801)
Total, net sales	$	138,337	$	120,213	$	274,589	$	232,833

Note 15. Concentration of major customers

The following customers accounted for 10% or greater of the Company’s recorded net sales or net trade receivables:

	Net Sales								Accounts Receivable
	Three Months Ended				Six Months Ended				As of		As of
	June 30,				June 30,				June 30,		December 31,
	2022		2021		2022		2021		2022		2021
Customer
A	18.3	%	16.7	%	18.2	%	16.2	%	15.1	%	10.2	%
B	11.9	%	10.3	%	11.5	%	11.1	%	<10	%	<10	%
C	<10	%	<10	%	<10	%	10.8	%	<10	%	<10	%
D	16.1	%	15.2	%	15.9	%	14.3	%	10.2	%	<10	%
E	<10	%	<10	%	<10	%	<10	%	12.7	%	11.2	%

Note 16. Stock based compensation

The Mayville Engineering Company, Inc. 2019 Omnibus Incentive Plan provides the Company the ability to grant monetary payments based on the value of its common stock, up to 2,000,000 shares.

On April 20, 2021, shareholders of the Company approved an amendment to the 2019 Omnibus Incentive Plan increasing the number of shares of common stock authorized for issuance by 2,500,000 shares.

The Company recognizes stock-based compensation using the fair value provisions prescribed by ASC 718, Compensation – Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-based instrument. For units, fair value is equivalent to the stock price at the date of grant. The Black-Scholes option pricing model is utilized to determine fair value for options.

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Cancellations and forfeitures are accounted for as incurred.

Stock awards were granted on April 19, 2022, February 28, 2022, June 3, 2021, May 12, 2021, April 20, 2021, February 28, 2021, May 12, 2020, February 27, 2020 and May 8, 2019. There were no stock awards granted prior to this.

During the six months ended June 30, 2022, 271,992 units vested. For the same period, 512,927 options vested with a weighted average strike price of $9.18. During the six months ended June 30, 2021, 314,902 units vested. For the same period, 484,661 options vested with a strike price of $11.23.

As of June 30, 2022, 1,107,714 options remained outstanding with a weighted average strike price of $10.31 and a weighted average contractual life of 7.73 years remaining.

The Company’s stock-based compensation expense by award type is summarized as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Unit awards	$	874	$	849	$	1,626	$	1,568
Option awards		582		539		1,088		1,020
Stock based compensation expense, net of tax	$	1,456	$	1,388	$	2,714	$	2,588

A roll-forward of unrecognized stock-based compensation expense is displayed in the table below. Unrecognized stock-based compensation expense as of June 30, 2022 will be expensed over the remaining requisite service period from which individual award values relate, up to April 19, 2023.

	Units		Options		Total
Balance as of December 31, 2021	$	1,676	$	1,537	$	3,213
Grants		3,007		2,573		5,580
Forfeitures		(39)		—		(39)
Expense		(751)		(506)		(1,257)
Balance as of March 31, 2022	$	3,893	$	3,604	$	7,497
Grants		750		—		750
Forfeitures		—		—		—
Expense		(874)		(582)		(1,456)
Balance as of June 30, 2022	$	3,769	$	3,022	$	6,791

Note 17. Subsequent events

The Company has evaluated subsequent events since June 30, 2022, the date of these financial statements. There were no material events or transactions discovered during this evaluation that requires recognition or disclosure in the financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in the understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance. This discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Such statements involve risks and uncertainties. Our actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors, including those set forth in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 and “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in Part II Item 1A. of this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 and our unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item I of this Quarterly Report on Form 10-Q. In this discussion, we use certain non-GAAP financial measures. Explanation of these non-GAAP financial measures and reconciliation to the most directly comparable GAAP financial measures are included in this Management Discussion and Analysis of Financial Condition and Results of Operations. Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.

All amounts are presented in thousands except share amounts, per share data, years and ratios.

Overview

MEC is a leading U.S.-based value-added manufacturing partner that provides a broad range of prototyping and tooling, production fabrication, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. We have developed long-standing relationships with our blue-chip customers based upon a high level of experience, trust and confidence.

Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.

COVID-19 Impact

The COVID-19 pandemic has had and will continue to have a negative impact on our business, financial condition, cash flows, results of operations, supply chain, and raw material availability, although the full extent is still uncertain.

For the three and six months ended June 30, 2022 and 2021, net sales reflected the ongoing supply chain constraints impacting many of our customers. Additionally, we continue to experience inflationary pressures on wages, benefits, materials, and manufacturing supplies due to a higher level of competition for employees and materials. We are unable to predict the future impact of the labor and supply chain shortages and inflation, and the resulting impact on our Company’s business, financial condition, cash flows and results of operations.

The future financial effects of the continuing COVID-19 pandemic are unknown due to many factors. These factors include uncertainty related to Delta, Omicron and other variants, uncertainty of the effectiveness of governmental actions to address the pandemic, including health, monetary and fiscal policies, the effect of elevated levels of sovereign and state debt, capital market disruptions, changes in demand and pricing, trade agreements, other geopolitical events, and the availability and volatility in the price of raw materials and other commodities. As a result, predicting the Company’s forecasted financial performance is difficult and subject to many assumptions.

The Company’s first priority has been to safeguard the health and well-being of its employees while fulfilling its obligations as an essential business serving its customer base. This proactive approach has kept employees safe and production facilities operational based on customer demand. Our goal is to continue to successfully manage through the effects of the COVID-19 pandemic and strengthen our position serving customers in the future.

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How We Assess Performance

Net Sales. Net sales reflect sales of our components and products net of allowances for returns and discounts. In addition to the COVID-19 pandemic, several factors affect our net sales in any given period, including general economic conditions, weather, timing of acquisitions and the production schedules of our customers. Net sales are recognized at the time of shipment or at delivery to the customer.

Manufacturing Margins. Manufacturing margins represent net sales less cost of sales. Cost of sales consists of all direct and indirect costs used in the manufacturing process, including raw materials, labor, equipment costs, depreciation, lease expenses, subcontract costs and other directly related overhead costs. Our cost of sales is directly affected by the fluctuations in commodity prices, primarily sheet steel and aluminum, but these changes are largely mitigated by contractual agreements with our customers that allow us to pass through these price variations based upon certain market indexes.

Depreciation and Amortization. We carry property, plant and equipment on our balance sheet at cost, net of accumulated depreciation. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the asset. The periodic expense related to leasehold improvements and intangible assets is depreciation and amortization expense, respectively. Leasehold improvements are depreciated over the lesser of the life of the underlying asset or the remaining lease term. Our intangible assets were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets.

Other Selling, General, and Administrative Expenses. Other selling, general and administrative expenses consist primarily of salaries and personnel costs for our sales and marketing, finance, human resources, information systems, administration and certain other managerial employees and certain corporate level administrative expenses such as incentive compensation, audit, accounting, legal and other consulting and professional services, travel, and insurance.

Other Key Performance Indicators

EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin

EBITDA represents net income before interest expense, provision for income taxes, depreciation and amortization. EBITDA Margin represents EBITDA as a percentage of net sales for each period.

Adjusted EBITDA represents EBITDA before stock-based compensation, Hazel Park transition costs due to the former fitness customer and impairment charges on long-lived assets and gain on contracts specifically purchased to meet obligations under the agreement with our former fitness customer. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of net sales for each period. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. We present Adjusted EBITDA and Adjusted EBITDA Margin as management uses these measures as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.

Our calculation of EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to the similarly named measures reported by other companies. Potential differences between our measures of EBITDA and Adjusted EBITDA compared to other similar companies’ measures of EBITDA and Adjusted EBITDA may include differences in capital structure and tax positions.

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The following table presents a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to EBITDA and Adjusted EBITDA, and the calculation of EBITDA Margin and Adjusted EBITDA Margin for each of the periods presented.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Net income and comprehensive income	$	5,929		$	3,292		$	9,751		$	5,837
Interest expense		765			504			1,332			1,036
Provision for income taxes		1,798			1,007			2,974			1,996
Depreciation and amortization		7,245			7,838			14,451			15,589
EBITDA		15,737			12,641			28,508			24,458
Hazel Park transition costs due to former fitness customer		1,889			—			3,816			—
Stock based compensation expense		1,456			1,388			2,714			2,588
Impairment of long-lived assets and gain on contracts		(906)			—			(2,089)			—
Adjusted EBITDA	$	18,176		$	14,029		$	32,949		$	27,046
Net sales	$	138,337		$	120,213		$	274,589		$	232,833
EBITDA Margin		11.4	%		10.5	%		10.4	%		10.5	%
Adjusted EBITDA Margin		13.1	%		11.7	%		12.0	%		11.6	%

Consolidated Results of Operations

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

	Three Months Ended June 30,
	2022				2021				Increase (Decrease)
			% of Net				% of Net		Amount
	Amount		Sales		Amount		Sales		Change		% Change
Net sales	$	138,337	100.0	%	$	120,213	100.0	%	$	18,124	15.1	%
Cost of sales		120,079	86.8	%		103,933	86.5	%		16,146	15.5	%
Manufacturing margins		18,258	13.2	%		16,280	13.5	%		1,978	12.1	%
Amortization of intangibles		1,738	1.3	%		2,677	2.2	%		(939)	(35.1)	%
Profit sharing, bonuses and deferred compensation		1,208	0.9	%		3,210	2.7	%		(2,002)	(62.4)	%
Employee stock ownership plan expense		1,330	1.0	%		228	0.2	%		1,102	483.3	%
Other selling, general and administrative expenses		6,396	4.6	%		5,362	4.5	%		1,034	19.3	%
Impairment of long-lived assets and gain on contracts		(906)	(0.7)	%		—	0.0	%		(906)	N/A
Income from operations		8,492	6.1	%		4,803	4.0	%		3,689	76.8	%
Interest expense		(765)	0.6	%		(504)	0.4	%		261	51.8	%
Provision for income taxes		1,798	1.3	%		1,007	0.8	%		791	78.6	%
Net income and comprehensive income	$	5,929	4.3	%	$	3,292	2.7	%	$	2,637	80.1	%
EBITDA	$	15,737	11.4	%	$	12,641	10.5	%	$	3,096	24.5	%
Adjusted EBITDA	$	18,176	13.1	%	$	14,029	11.7	%	$	4,147	29.6	%

Net Sales. Net sales were $138,337 for the three months ended June 30, 2022 as compared to $120,213 for the three months ended June 30, 2021, an increase of $18,124, or 15.1%. This increase was primarily driven by contractual raw material price pass-throughs to customers, commercial pricing increases, and improved volumes.

Manufacturing Margins. Manufacturing margins were $18,258 for the three months ended June 30, 2022 as compared to $16,280 for the three months ended June 30, 2021, an increase of $1,978, or 12.1%. The increase was driven by the impact of increased commercial pricing and greater demand, offset by Hazel Park transition costs of $1,875 in the current quarter.

Manufacturing margin percentages were 13.2% for the three months ended June 30, 2022, as compared to 13.5% for the three months ended June 30, 2021, a decrease of 0.3%. The decrease was mainly attributable to the dilutive impact of material price pass-throughs to our customers that increase sales but do not impact margin dollars and Hazel Park transition costs discussed above.

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Amortization of Intangibles Assets. Amortization of intangible assets were $1,738 for the three months ended June 30, 2022 as compared to $2,677 for the three months ended June 30, 2021, a decrease of $939, or 35.1%. The decrease is due to the full amortization of certain intangible assets.

Profit Sharing, Bonuses and Deferred Compensation Expenses. Profit sharing, bonuses, and deferred compensation expenses were $1,208 for the three months ended June 30, 2022 as compared to $3,210 for the three months ended June 30, 2021, a decrease of $2,002, or 62.4%. The decrease was primarily related to a decrease in deferred compensation expense due to fluctuations within the financial markets, offset by moderate increases in expected annual discretionary retirement benefit contributions and bonus expense aligning with business performance.

Employee Stock Ownership Plan Expense. Employee stock ownership plan estimated expense was $1,330 for the three months ended June 30, 2022 as compared to $228 for the three months ended June 30, 2021, an increase of $1,102, or 483.3%. The change is due to the discretionary nature of contributions to the ESOP plan to align with business performance.

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses were $6,396 for the three months ended June 30, 2022 as compared to $5,362 for the three months ended June 30, 2021, an increase of $1,034, or 19.3%. The increase was predominantly attributable to higher consulting, professional and director fees, wages and benefits, information technology and travel and entertainment expenses.

Impairment of Long-Lived Assets and Gain on Contracts. At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company received a notification from this customer in February 2022 resulting in a change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company committed to purchase, to meet obligations under the agreement with the former fitness customer as December 31, 2021. The notification informed the Company that it did not forecast any demand for any products or parts that were the subject of the agreement between the Company and the customer for the remainder of the agreement’s term, which ends in March 2026. Given the circumstances, GAAP required the Company to assess whether the assets were impaired. As a result of this assessment, the Company recorded an impairment on the assets specifically purchased to meet obligations under the agreement with the former fitness customer. Consequently, the Company recorded an impairment of long-lived assets and loss on contracts of $16,151 in the fourth quarter of 2021.

During the three months ended June 30, 2022, the Company was able to cancel $906 of purchase commitments for property, plant and equipment relating to the former fitness customer that had previously been recorded as an impairment of long-lived assets and loss on contracts at December 31, 2021. The cancellation of purchase commitments resulted in the reversal of this amount.

Interest Expense. Interest expense was $765 for the three months ended June 30, 2022 as compared to $504 for the three months ended June 30, 2021, an increase of $261, or 51.8%. The change is due to higher average debt levels as compared to the prior year period.

Provision for Income Taxes. Income tax expense was $1,798 for the three months ended June 30, 2022 as compared to $1,007 for the three months ended June 30, 2021. Please reference Note 7 – Income Taxes of the Condensed Consolidated Financial Statements for more specifics.

Due to the factors described in the preceding paragraphs, net income, comprehensive income, EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBIDTA margin increased during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

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Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

	Six Months Ended June 30,
	2022				2021				Increase (Decrease)
			% of Net				% of Net		Amount
	Amount		Sales		Amount		Sales		Change		% Change
Net sales	$	274,589	100.0	%	$	232,833	100.0	%	$	41,756	17.9	%
Cost of sales		241,449	87.9	%		201,777	86.7	%		39,672	19.7	%
Manufacturing margins		33,140	12.1	%		31,056	13.3	%		2,084	6.7	%
Amortization of intangibles		3,476	1.3	%		5,353	2.3	%		(1,877)	(35.1)	%
Profit sharing, bonuses and deferred compensation		3,755	1.4	%		6,074	2.6	%		(2,319)	(38.2)	%
Employee stock ownership plan expense		1,820	0.7	%		701	0.3	%		1,119	159.6	%
Other selling, general and administrative expenses		12,121	4.4	%		10,059	4.3	%		2,062	20.5	%
Impairment of long-lived assets and gain on contracts		(2,089)	(0.8)	%		—	0.0	%		(2,089)	N/A
Income from operations		14,057	5.1	%		8,869	3.8	%		5,188	58.5	%
Interest expense		(1,332)	0.5	%		(1,036)	0.4	%		296	28.6	%
Provision for income taxes		2,974	1.1	%		1,996	0.9	%		978	49.0	%
Net income and comprehensive income	$	9,751	3.6	%	$	5,837	2.5	%	$	3,914	67.1	%
EBITDA	$	28,508	10.4	%	$	24,458	10.5	%	$	4,050	16.6	%
Adjusted EBITDA	$	32,949	12.0	%	$	27,046	11.6	%	$	5,903	21.8	%

Net Sales. Net sales were $274,589 for the six months ended June 30, 2022 as compared to $232,833 for the six months ended June 30, 2021 for an increase of $41,756, or 17.9%. This change is primarily attributed to contractual raw material price pass-throughs to customers, commercial pricing increases, and improved volume.

Manufacturing Margin. Manufacturing margins were $33,140 for the six months ended June 30, 2022 as compared to $31,056 for the six months ended June 30, 2021, an increase of $2,084, or 6.7%. This increase was driven by the impact of increased commercial pricing and greater demand, offset by Hazel Park transition costs of $3,805 in the first half of the year.

Manufacturing margin percentages were 12.1% for the six months ended June 30, 2022 as compared to 13.3% for the six months ended June 30, 2021, a decrease of 1.2%. The decrease was mainly due to the dilutive impact of material price pass-throughs to our customers that increase sales but do not impact margin dollars and Hazel Park transition costs discussed above.

Amortization of Intangibles Assets. Amortization of intangible assets were $3,476 for the six months ended June 30, 2022 as compared to $5,353 for the six months ended June 30, 2021, a decrease of $1,877, or 35.1%. The decrease is due to the full amortization of certain intangible assets.

Profit Sharing, Bonuses and Deferred Compensation Expenses. Profit sharing, bonuses, and deferred compensation expenses were $3,755 for the six months ended June 30, 2022 as compared to $6,074 for the six months ended June 30, 2021, a decrease of $2,319, or 38.2%. The decrease was primarily related to a decrease in deferred compensation expense due to fluctuations within the financial markets, offset by moderate increases in expected annual discretionary retirement benefit contributions and bonus expense aligning with business performance.

Employee Stock Ownership Plan Expense. Employee stock ownership plan estimated expense was $1,820 for the six months ended June 30, 2022 as compared to $701 for the six months ended June 30, 2021, an increase of $1,119, or 159.6%. The change is due to the discretionary nature of contributions to the ESOP plan to align with business performance.

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses were $12,121 for the six months ended June 30, 2022 as compared to $10,059 for the six months ended June 30, 2021, an increase of $2,062, or 20.5%. The increase was predominantly attributable to higher consulting, professional and director fees, wages and benefits, information technology and travel and entertainment expenses.

Impairment of Long-Lived Assets and Gain on Contracts. At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company received a notification from this customer in February 2022 resulting in a

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change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company committed to purchase, to meet obligations under the agreement with the former fitness customer as December 31, 2021. The notification informed the Company that it did not forecast any demand for any products or parts that were the subject of the agreement between the Company and the customer for the remainder of the agreement’s term, which ends in March 2026. Given the circumstances, GAAP required the Company to assess whether the assets were impaired. As a result of this assessment, the Company recorded an impairment on the assets specifically purchased to meet obligations under the agreement with the former fitness customer. Consequently, the Company recorded an impairment of long-lived assets and loss on contracts of $16,151 in the fourth quarter of 2021.

During the six months ended June 30, 2022, the Company was able to cancel $2,089 of purchase commitments for property, plant and equipment relating to the former fitness customer that had previously been recorded as an impairment of long-lived assets and loss on contracts at December 31, 2021. The cancellation of purchase commitments resulted in the reversal of this amount.

Interest Expense. Interest expense was $1,332 for the six months ended June 30, 2022 as compared to $1,036 for the six months ended June 30, 2021, an increase of $296, or 28.6%. The change is due to higher average debt levels as compared to the prior year period.

Provision for Income Taxes. Income tax expense was $2,974 for the six months ended June 30, 2022 as compared to $1,996 for the six months ended June 30, 2021. Please reference Note 7 – Income Taxes of the Condensed Consolidated Financial Statements for more specifics. As of June 30, 2022, our federal NOL carryforward was $18,466 driven by the pretax losses incurred in prior years. The NOL does not expire and will be used to offset future pretax income. We estimate our long-term effective tax rate to be approximately 27%, based on current tax regulations.

Due to the factors described in the preceding paragraphs, net income, comprehensive income, EBITDA, adjusted EBITDA, and adjusted EBITDA margin increased, and EBITDA margin decreased, during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

Liquidity and Capital Resources

Cash Flows Analysis

	Six Months Ended
	June 30,				Increase (Decrease)
	2022		2021		$ Change		% Change
Net cash provided by operating activities	$	15,684	$	18,230		(2,546)	(14.0)	%
Net cash used in investing activities		(21,123)		(16,572)		(4,551)	(27.5)	%
Net cash provided by (used in) financing activities		5,426		(1,660)		7,086	426.9	%
Net change in cash	$	(13)	$	(2)	$	(11)	(550.0)	%

Operating Activities. Cash provided by operating activities was $15,684 for the six months ended June 30, 2022, as compared to $18,230 for the six months ended June 30, 2021. The $2,546 reduction in operating cash flows primarily correlates to the adverse changes in net working capital offset by higher net income reported during the current period. Specifically on the working capital changes, inventory and accounts payable increased, but by a lesser amount than the prior year, as production levels rebounded during the prior year period from COVID-19 lows and raw material pricing stabilized in the current year period. Additionally, unfavorable changes in a variety of other asset and liability categories used cash for the current period as well.

Investing Activities. Cash used in investing activities was $21,123 for the six months ended June 30, 2022, as compared to $16,572 for the six months ended June 30, 2021. The $4,551 increase in cash used in investing activities was driven by the ongoing investments in new technology and automation and the repurposing of assets at the Company’s Hazel Park, MI facility, which is expected to continue throughout the remainder of 2022. This was slightly offset by the additional proceeds from the sale of property, plant and equipment which was originally intended to support production for the former fitness customer.

Financing Activities. Cash provided by financing activities was $5,426 for the six months ended June 30, 2022, as compared to cash used of $1,660 for the six months ended June 30, 2021. The $7,086 increase was primarily driven by higher borrowings in excess of debt repayments in the current period as the Company continues investing in new technology and automation and its Hazel Park,

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MI facility. Additionally, the Company repurchased 200,000 shares of its common stock during the first half of 2022 under our share repurchase program at a total cost of $2,323. The Company did not repurchase any of our common stock during the prior year period. The Company’s decision to repurchase additional shares for the remainder of the current fiscal year will depend on business conditions, free cash flow generation, other cash requirements and stock price. See Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information regarding share repurchases.

Amended and Restated Credit Agreement

On September 26, 2019, and as last amended as of March 31, 2022, we entered into the Credit Agreement with certain lenders and Wells Fargo Bank, National Association, the Agent. The Credit Agreement provides for a $200,000 Revolving Loan, with a letter of credit sub-facility in an aggregate amount not to exceed $5,000, and a swingline facility in an aggregate amount of $20,000. The Credit Agreement also provides for an additional $100,000 of capacity through an accordion feature. All amounts borrowed under the Credit Agreement mature on September 26, 2024.

Our obligations under the Credit Agreement are secured by first priority security interests in substantially all of our personal property and guaranteed by, and secured by first priority security interests in, substantially all of the personal property of, our direct and indirect subsidiaries: Center Manufacturing, Inc., Center Manufacturing Holdings, Inc., Center—Moeller Products LLC, Defiance Metal Products Co., Defiance Metal Products of Arkansas, Inc., Defiance Metal Products of PA., Inc. and Defiance Metal Products of WI, Inc.

Borrowings under the Credit Agreement bear interest at a fluctuating LIBOR (which may be adjusted for certain reserve requirements), plus 1.00% to 2.00% depending on the current Consolidated Total Leverage Ratio (as defined in the Credit Agreement). Under certain circumstances, we may not be able to pay interest based on LIBOR. If that happens, we will be required to pay interest at the Base Rate, which is the sum of (a) the higher of (i) the Prime Rate (as publicly announced by the Agent from time to time) and (ii) the Federal Funds Rate plus 0.50%, plus (b) 0.00% to 1.00%, depending on the current Total Consolidated Leverage Ratio. The Credit Agreement also includes provisions for determining a replacement rate when LIBOR is no longer available.

At June 30, 2022, the interest rate on outstanding borrowings under the Revolving Loan was 2.06%. At June 30, 2022, we had availability of $123,937 under the Revolving Loan.

We must pay a commitment fee at a rate of 0.20% per annum on the average daily unused portion of the aggregate unused revolving commitments under the Credit Agreement. We must also pay fees as specified in the Fee Letter (as defined in the Credit Agreement) and with respect to any letters of credit issued under the Credit Agreement.

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness, create or incur liens, make certain investments, merge or consolidate with another entity, make certain asset dispositions, pay dividends or other distributions to shareholders, enter into transactions with affiliates, enter into sale leaseback transactions or make capital expenditures. The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00. At June 30, 2022, our interest coverage ratio was 18.34 to 1.00. The Credit Agreement also requires us to maintain a consolidated total leverage ratio not to exceed 3.25 to 1.00, although such leverage ratio can be increased in connection with certain acquisitions. As of June 30, 2022, our consolidated total leverage ratio was 1.52 to 1.00.

The Credit Agreement includes customary events of default, including, among other things, payment default, covenant default, breach of representation or warranty, bankruptcy, cross-default, material ERISA events, material money judgments, and failure to maintain subsidiary guarantees. If an event of default occurs, the Agent will be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement, termination of the credit facility, and all other actions permitted to be taken by a secured creditor.

On June 30, 2020, March 31, 2021 and March 31, 2022, the Company entered into amendments to the Credit Agreement. Please refer to Note 3 – Bank Revolving Credit Notes in the Notes to the Consolidated Financial Statements for a more detailed discussion.

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Capital Requirements and Sources of Liquidity

During the six months ended June 30, 2022 and 2021, our capital expenditures were $26,351 and $16,986, respectively. The increase of $9,365 was driven by our ongoing investment in new technology and automation along with the repurposing of assets in the Company’s Hazel Park, MI facility, which is expected to continue through 2022. Capital expenditures for the full year 2022 are expected to be between $55,000 and $65,000.

We have historically relied upon cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth. At June 30, 2022, we had immediate availability of $123,937 through our Revolving Loan and another $100,000 through an accordion feature under our Credit Agreement, subject to the covenants under the Credit Agreement. We regularly monitor potential capital sources, including equity and debt financings, in an effort to meet our planned capital expenditures and liquidity requirements. Our future success will be highly dependent on our ability to access outside sources of capital. We will continue to have access to the availability currently provided under the Credit Agreement as long as we remain compliant with the financial covenants. Based on our estimates of the impact of the COVID-19 pandemic at this time, we expect to be in compliance with these financial covenants through 2022 and the foreseeable future.

We believe that our operating cash flow and available borrowings under the Credit Agreement are sufficient to fund our operations for 2022 and beyond when taking into consideration the estimated impacts of the pandemic based on the information we have available at this time. However, future cash flows are subject to a number of variables, and additional capital expenditures will be required to conduct our operations. There can be no assurance that operations and other capital resources will provide cash in sufficient amounts to maintain planned or future levels of capital expenditures. In the event we make one or more acquisitions and the amount of capital required is greater than the amount we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital. If we seek additional capital, we may do so through borrowings under the Credit Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means. We cannot guarantee that this additional capital will be available on acceptable terms or at all. If we are unable to obtain the funds we need, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations.

Contractual Obligations

The following table presents our obligations and commitments to make future payments under contracts and contingent commitments at June 30, 2022:

			Payments Due by Period
	Total		2022 (Remainder)		2023 – 2024		2025 – 2026		Thereafter
Long-term debt principal payment obligations (1)	$	76,063	$	—	$	76,063	$	—	$	—
Equipment financing agreements (2)		2,125		605		1,520		—		—
Forecasted interest on debt payment obligations (3)		4,183		953		3,230		—		—
Finance lease obligations (4)		1,118		179		716		223		—
Operating lease obligations (4)		42,472		2,837		11,371		9,493		18,771
Total	$	125,961	$	4,574	$	92,900	$	9,716	$	18,771

(1) Principal payments under the Company’s Credit Agreement, which expires in 2024.

(2) Financing agreements entered into to purchase manufacturing equipment. Current and long-term portions are classified in other current liabilities and other long-term liabilities, respectively, on the Condensed Consolidated Balance Sheets

(3) Forecasted interest on debt obligations are based on the debt balance, interest rate, and unused fee of the Company’s revolver credit facility, and the debt balances and interest rates of the Company’s equipment finance agreements as of June 30, 2022.

(4) See Note 4 – Leases in the Notes to Consolidated Financial Statements for additional information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk from changes in customer forecasts, interest rates, and, to a lesser extent, commodities. To reduce such risks, we selectively use financial instruments and other proactive management techniques.

30

Customer Forecasts

The use and consumption of our components, products and services fluctuates depending on order forecasts we receive from our customers. These order forecasts can change dramatically from quarter-to-quarter dependent upon the respective markets that our customers provide products in.

Interest Rate Risk

We are exposed to interest rate risk on certain of our short- and long-term debt obligations used to finance our operations and acquisitions. We have LIBOR-based floating rate borrowings under the Credit Agreement, which exposes us to variability in interest payments due to changes in the referenced interest rates.

The amount borrowed under the Revolving Loan under the Credit Agreement was $76.1 million as of June 30, 2022. The interest rate was 2.06% as of June 30, 2022. Please see “Liquidity and Capital Resources – Amended and Restated Credit Agreement” in Part I, Item 2 and Note 3 in the Notes to the Unaudited Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for more specifics.

A hypothetical 100-basis-point increase in interest rates would have resulted in an additional $0.4 million of interest expense based on our variable rate debt at June 30, 2022. We do not use derivative financial instruments to manage interest risk or to speculate on future changes in interest rates. A rise in interest rates could negatively affect our cash flow.

Commodity Risk

We source a wide variety of materials and components from a network of suppliers. While such materials are generally available from numerous suppliers, the COVID-19 pandemic has resulted in availability delays at times. In addition, commodity raw materials, such as steel, aluminum, copper, paint and paint chemicals, and other production costs are subject to price fluctuations, which could have a negative impact on our results. We strive to pass along such commodity price increases to customers to avoid profit margin erosion and in many cases utilize contracts with those customers to mitigate the impact of commodity raw material price fluctuations. As of June 30, 2022, we did not have any commodity hedging instruments in place.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, with the exception of those changes related to the adoption of ASC 842 Leases that occurred during the quarter ended March 31, 2022 that have materially affected or are reasonably

31

likely to materially affect the Company’s internal control over financial reporting. The adoption of this guidance resulted in policy, process and related internal control changes to conform with the requirements of the new standard including the implementation of new software and related internal controls. Please refer to Note 4 – Leases of the Notes to the Condensed Consolidated Financial Statements for additional information regarding the impact of ASC 842 Leases on the Company.

32

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently a party to any material litigation proceedings. From time to time, however, we may be a party to litigation and subject to claims incident to the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 2, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The table below sets forth information with respect to purchases we made of shares of our common stock during the quarter ended June 30, 2022:

				Total Number	Dollar Value of
				of Shares	Shares that
	Total			Purchased as	May Yet Be
	Number			Part of Publicly	Purchased
	of Shares	Average Price		Announced Plans	Under the Plans
Period	Purchased	Paid per Share		or Programs (1)	or Programs (1)
April 2022	—	$	—	—	$	21,176,679
May 2022	—	$	—	—	$	21,176,679
June 2022	—	$	—	—	$	21,176,679
Total	—			—

(1) October 28, 2019, our Board of Directors approved an increase of our prior share repurchase program from $4 million to $25 million of shares of our common stock through 2021. On October 19, 2021, the Board of Directors approved a new share repurchase program of up to $25 million of shares through 2023. The new share repurchase program replaced the prior program.

33

Item 6. Exhibits.

The exhibits listed in the Exhibit Index below are filed as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX

Exhibit Number	Description
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

34

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.

	MAYVILLE ENGINEERING COMPANY, INC.
Date: August 3, 2022	By:	/s/ Todd M. Butz
		Todd M. Butz
		Chief Financial Officer

35

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jagadeesh A. Reddy, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Mayville Engineering Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 3, 2022	By:	/s/ Jagadeesh A. Reddy
		Jagadeesh A. Reddy
		President & Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Todd M. Butz, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Mayville Engineering Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 3, 2022	By:	/s/ Todd M. Butz
		Todd M. Butz
		Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Mayville Engineering Company, Inc. (the “Company”) for the period ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jagadeesh A. Reddy, as President and Chief Executive Officer of the Company, and Todd M. Butz, as Chief Financial Officer of the Company, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 3, 2022	By:	/s/ Jagadeesh A. Reddy
		Jagadeesh A. Reddy
		President & Chief Executive Officer
	By:	/s/ Todd M. Butz
		Todd M. Butz
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2022	Jul. 28, 2022
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Entity Registrant Name	Mayville Engineering Company, Inc.
Entity Central Index Key	0001766368
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Shell Company	false
Entity Interactive Data Current	Yes
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	MEC
Security Exchange Name	NYSE
Entity File Number	001-38894
Entity Incorporation, State or Country Code	WI
Entity Tax Identification Number	39-0944729
Entity Address, Address Line One	715 South Street
Entity Address, City or Town	Mayville
Entity Address, State or Province	WI
Entity Address, Postal Zip Code	53050
City Area Code	920
Local Phone Number	387-4500
Document Quarterly Report	true
Document Transition Report	false
Entity Common Stock, Shares Outstanding		20,532,691

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
ASSETS
Cash and cash equivalents	$ 105	$ 118
Receivables, net of allowances for doubtful accounts of $799 at June 30, 2022 and $631 at December 31, 2021	71,223	55,417
Inventories, net	74,103	70,157
Tooling in progress	5,317	3,950
Prepaid expenses and other current assets	4,580	2,924
Total current assets	155,328	132,566
Property, plant and equipment, net	129,509	120,746
Assets held for sale	1,288
Goodwill	71,535	71,535
Intangible assets-net	47,285	50,761
Operating lease assets	37,842
Other long-term assets	3,497	3,865
Total assets	446,284	379,473
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	58,679	50,119
Current portion of operating lease obligation	4,803
Accrued liabilities:
Salaries, wages, and payroll taxes	9,670	8,684
Profit sharing and bonus	6,329	5,289
Current portion of deferred compensation	17,531	0
Other current liabilities	13,495	13,280
Total current liabilities	110,507	77,372
Bank revolving credit notes	76,063	67,610
Operating lease obligation, less current maturities	33,531
Deferred compensation, less current portion	2,949	25,117
Deferred income tax liability	11,040	8,641
Other long-term liabilities	1,725	2,462
Total liabilities	235,815	181,202
Commitments and contingencies (see Note 8)
Additional paid-in-capital	199,899	197,186
Retained earnings	17,298	7,547
Treasury shares at cost, 1,112,502 shares at June 30, 2022 and 1,050,448 at December 31, 2021	(6,728)	(6,462)
Total shareholders' equity	210,469	198,271
Total	$ 446,284	$ 379,473

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Statement Of Financial Position [Abstract]
Allowances for doubtful accounts	$ 799	$ 631
Common Stock, No Par Value	$ 0	$ 0
Common Stock, Shares Authorized	75,000,000	75,000,000
Common Stock, Shares, Issued	21,645,193	21,386,382
Treasury stock at cost	1,112,502	1,050,448

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement Of Income And Comprehensive Income [Abstract]
Net sales	$ 138,337	$ 120,213	$ 274,589	$ 232,833
Cost of sales	120,079	103,933	241,449	201,777
Amortization of intangible assets	1,738	2,677	3,476	5,353
Profit sharing, bonuses, and deferred compensation	1,208	3,210	3,755	6,074
Employee stock ownership plan expense	1,330	228	1,820	701
Other selling, general and administrative expenses	6,396	5,362	12,121	10,059
Impairment of long-lived assets and (gain) loss on contract	(906)		(2,089)
Income from operations	8,492	4,803	14,057	8,869
Interest expense	(765)	(504)	(1,332)	(1,036)
Income before taxes	7,727	4,299	12,725	7,833
Income tax expense	1,798	1,007	2,974	1,996
Net income and comprehensive income	$ 5,929	$ 3,292	$ 9,751	$ 5,837
Earnings per share:
Basic	$ 0.29	$ 0.16	$ 0.48	$ 0.29
Diluted	$ 0.29	$ 0.16	$ 0.47	$ 0.28
Weighted average shares outstanding:
Basic	20,581,945	20,454,541	20,490,944	20,316,936
Diluted	20,650,551	20,864,531	20,807,677	20,685,741

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income			$ 9,751	$ 5,837
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	$ 5,507	$ 5,161	10,975	10,236
Amortization			3,476	5,353
Allowance for doubtful accounts			168	49
Inventory excess and obsolescence reserve			87	(589)
Stock-based compensation expense			2,714	2,588
Loss (gain) on disposal of property, plant and equipment	(520)		(625)	66
Impairment of long-lived assets and (gain) loss on contract	(906)		(2,089)
Deferred compensation			(4,637)	(170)
Non-cash lease expense			2,482
Other non-cash adjustments			176	151
Changes in operating assets and liabilities - net of effects of acquisition:
Accounts receivable			(15,973)	(16,331)
Inventories			(4,033)	(8,984)	$ (39)
Tooling in progress			(1,367)	1,033
Prepaids and other current assets			(1,561)	(1,094)
Accounts payable			9,275	14,324
Deferred income taxes			2,504	1,484
Operating lease obligations			(2,270)
Accrued liabilities			6,631	4,277
Net cash provided by operating activities			15,684	18,230
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment			(26,351)	(16,986)
Proceeds from sale of property, plant and equipment			5,228	414
Net cash used in investing activities			(21,123)	(16,572)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank revolving credit notes			218,867	157,388
Payments on bank revolving credit notes			(210,414)	(158,791)
Repayments of other long-term debt			(547)
Purchase of treasury stock			(2,323)
Payments on finance leases			(157)	(310)
Proceeds from the exercise of stock options				80
Other financing activities				(27)
Net cash provided by (used in) financing activities			5,426	(1,660)
Net decrease in cash and cash equivalents			(13)	(2)
Cash and cash equivalents at beginning of period			118	121	121
Cash and cash equivalents at end of period	$ 105	$ 119	105	119	$ 118
Supplemental disclosure of cash flow information:
Cash paid for interest			999	1,077
Cash paid for taxes			450	716
Non-cash construction in progress in accounts payable			$ 5,633	$ 2,994

XML

Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Additional Paid-in-Capital [Member]	Treasury Shares [Member]	Retained Earnings [Member]	Total
Beginning, Balance at Dec. 31, 2020	$ 190,793	$ (4,934)	$ 14,998	$ 200,857
Net income			2,545	2,545
401(k) plan contribution	1,319	625		1,944
Stock-based compensation	1,200			1,200
Ending, Balance at Mar. 31, 2021	193,312	(4,309)	17,543	206,546
Beginning, Balance at Dec. 31, 2020	190,793	(4,934)	14,998	200,857
Net income				5,837
Ending, Balance at Jun. 30, 2021	194,754	(4,309)	20,835	211,280
Beginning, Balance at Mar. 31, 2021	193,312	(4,309)	17,543	206,546
Net income			3,292	3,292
Stock-based compensation	1,388			1,388
Stock options exercised	54			54
Ending, Balance at Jun. 30, 2021	194,754	(4,309)	20,835	211,280
Beginning, Balance at Dec. 31, 2021	197,186	(6,462)	7,547	198,271
Net income			3,822	3,822
401(k) plan contribution		2,057		2,057
Purchase of treasury stock		(2,323)		(2,323)
Stock-based compensation	1,257			1,257
Ending, Balance at Mar. 31, 2022	198,443	(6,728)	11,369	203,084
Beginning, Balance at Dec. 31, 2021	197,186	(6,462)	7,547	198,271
Net income				9,751
Ending, Balance at Jun. 30, 2022	199,899	(6,728)	17,298	210,469
Beginning, Balance at Mar. 31, 2022	198,443	(6,728)	11,369	203,084
Net income			5,929	5,929
Stock-based compensation	1,456			1,456
Ending, Balance at Jun. 30, 2022	$ 199,899	$ (6,728)	$ 17,298	$ 210,469

XML

Basis of presentation

6 Months Ended

Jun. 30, 2022

Basis Of Presentation [Abstract]

Basis of presentation

Note 1. Basis of presentation

The interim unaudited condensed consolidated financial statements of Mayville Engineering Company, Inc. and subsidiaries (MEC, the Company, we, our, us or similar terms) presented here have been prepared in accordance with the accounting principles generally accepted in the United States of America (GAAP) and with instructions to Form 10-Q and Article 10 of Regulation S-X. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and financial position for the interim unaudited periods presented. All intercompany balances and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These interim unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K. A summary of the Company’s significant accounting policies is included in the Company’s 2021 financial statements in the Annual Report on Form 10-K. The Company followed these policies in preparation of the interim unaudited Condensed Consolidated Financial Statements except for new accounting pronouncements adopted as described below.

Nature of Operations

MEC is a leading U.S.-based value-added manufacturing partner that provides a broad range of prototyping and tooling, production fabrication, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. Founded in 1945 and headquartered in Mayville, Wisconsin, we are a leading Tier I U.S. supplier of highly engineered components to original equipment manufacturers (OEM) customers with leading positions in their respective markets. The Company operates 20 facilities, of which 19 are in operation, located in Arkansas, Michigan, Mississippi, Ohio, Pennsylvania, Virginia, and Wisconsin. Our engineering expertise and technical know-how allow us to add value through every product redevelopment cycle (generally every three to five years for our customers).

Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.

The COVID-19 pandemic has had and will continue to have a negative impact on our business, financial condition, cash flows, results of operations, supply chain, and raw material availability, although the full extent is still uncertain.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases, creating Accounting Standard Codification (ASC) 842. Under the new guidance, lessees are required to recognize a right-of-use (ROU) asset and a lease liability for substantially all leases. When measuring ROU assets and lease liabilities, a lessee should include amounts related to option terms, such as the option of extending or terminating the lease or purchasing the underlying asset, that are reasonably certain to be exercised. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition. For finance leases, a lessee will recognize the interest on a lease liability separate from amortization of the ROU asset. In addition, repayments of principal will be presented within financing activities, and interest payments will be presented within operating activities in the statement of cash flows. For operating leases, a lessee will recognize a single lease cost on a straight-line basis and classify all cash payments within operating activities in the statement of cash flows. Entities have the option to adopt the new guidance through a cumulative effect adjustment to retained earnings applied either to the beginning of the earliest period presented (modified retrospective approach) or to the beginning of the period of adoption (effective date approach) whereby the comparative periods are unchanged. For public companies, this guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For as long as the Company remained an emerging growth company (EGC), the new guidance was effective for annual reporting periods beginning after December 15, 2022, and interim periods within fiscal years beginning after December 15, 2022. Early adoption was permitted. The Company adopted the

annual reporting guidance as of January 1, 2022 using the effective date approach. The Company early adopted the interim reporting guidance during the period ended March 31, 2022.

The new guidance provides a number of optional practical expedients in transition. The Company elected the "package of practical expedients", which allows it to not reassess under the new guidance its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight practical expedient. In addition, the new guidance provides accounting policy elections for an entity’s ongoing lessee accounting. The Company has elected to not separate lease and non-lease components for certain of its real estate leases. The Company has elected the short-term lease recognition exemption for all leases that qualify which means that it will not recognize ROU assets or lease liabilities for those leases with a term of 12 months or less.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes ASC 326, Financial Instruments – Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to ASC 326, Financial Instruments – Credit Losses. This ASU clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC 326. This ASU provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to ASC 326, Financial Instruments – Credit Losses. The ASU clarifies the treatment of expected recoveries for amounts previously written off on purchased receivables, provides transition relief for troubled debt restructuring, and allows for certain disclosure simplifications of accrued interest. For as long as the Company remains an EGC, the new guidance is effective for annual reporting periods beginning after December 15, 2022. The Company is evaluating the potential effects on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes, creating ASC 740, which removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. For public companies, this guidance will be effective for fiscal years beginning after December 15, 2020. For as long as the Company remains an EGC, the new guidance is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. During the period ended March 31, 2021, the Company adopted this guidance. This adoption had no impact on the consolidated financial statements.

A summary of the Company’s evaluation of other recent accounting pronouncements is included in the Company’s 2021 financial statements in its Annual Report on Form 10-K for the year ended December 31, 2021.

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Select balance sheet data

6 Months Ended

Jun. 30, 2022

Select Balance Sheet Data [Abstract]

Select balance sheet data

Note 2. Select balance sheet data

Inventory

Inventories are stated at the lower of cost, determined on the first-in, first-out method and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Work-in-process and finished goods are valued at production costs consisting of material, labor, and overhead.

Inventories as of June 30, 2022 and December 31, 2021 consist of:

	June 30,		December 31,
	2022		2021
Finished goods and purchased parts	$	42,828	$	41,041
Raw materials		19,500		18,905
Work-in-process		11,775		10,211
Total	$	74,103	$	70,157

At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company received a notification from this customer in February 2022 resulting in a change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company had committed to purchase, to meet obligations under the

agreement with the former fitness customer as of December 31, 2021. As a result, at December 31, 2021, the Company recorded an inventory impairment of $700, of which $661 was due to loss contacts recorded in other current liabilities and a $39 decrease to inventories. As of June 30, 2022, there was a balance of $329 of loss contract liabilities recorded in other current liabilities on the Condensed Consolidated Balance Sheets.

Property, plant and equipment

Property, plant and equipment as of June 30, 2022 and December 31, 2021 consist of:

	Useful Lives		June 30,		December 31,
	Years		2022		2021
Land		Indefinite	$	1,033	$	1,033
Land improvements		15-39		3,169		3,169
Building and building improvements		15-39		57,971		56,243
Machinery, equipment and tooling		3-10		230,803		222,202
Vehicles		5		3,947		3,943
Office furniture and fixtures		3-7		18,785		17,960
Construction in progress		N/A		22,919		15,443
Total property, plant and equipment, gross				338,627		319,993
Less accumulated depreciation				209,118		199,247
Total property, plant and equipment, net			$	129,509	$	120,746

Depreciation expense was $5,507 and $5,161 for the three months ended June 30, 2022 and 2021, respectively, and $10,975 and $10,236 for the six months ended June 30, 2022 and 2021, respectively.

At December 31, 2021, there was uncertainty as to the level of demand from the former fitness customer. The Company received a notification from the former fitness customer in February 2022 resulting in a change in forecasted future cash flow, triggering an impairment assessment of assets purchased, and assets the Company had committed to purchase, to meet obligations under the agreement with the former fitness customer as of December 31, 2021. As a result, at December 31, 2021, the Company recorded a long-lived asset impairment $12,875.

During the three and six months ended June 30, 2022, the Company was able to cancel $906 and $2,089, respectively, of purchase commitments for property, plant and equipment relating to the former fitness customer that had previously been recorded in the Condensed Consolidated Statements of Comprehensive Income as an impairment of long-lived assets and loss on contracts as of December 31, 2021. The cancellation of loss contracts has resulted in the reversal of this amount from other current liabilities in the Condensed Consolidated Balance Sheets and recorded in the Condensed Consolidated Statements of Comprehensive Income as an impairment of long-lived assets and gain on contracts for the current period.

Throughout the three months ended June 30, 2022, the Company sold $4,971 of machinery and equipment originally intended to support production for the former fitness customer, resulting in a gain on sale of the assets of $520, which is classified in cost of sales on the Condensed Consolidated Statements of Comprehensive Income as of June 30, 2022. As a result of the previously mentioned impairment, these assets had been written down to fair value as of December 31, 2021.

As of June 30, 2022, $1,288 of property, plant and equipment has been reclassified within the Condensed Consolidated Balance Sheets as assets held for sale.

The Company adopted ASC 842 on January 1, 2022, classifying finance leases of $981 in property, plant and equipment on the Condensed Consolidated Balance Sheets as of June 30, 2022. Please refer to Note 4 – Leases for additional information. Due to the adoption, the Company reclassified net capital leases of $1,136 to property, plant and equipment on the Condensed Consolidated Balance Sheets as of December 31, 2021.

Goodwill

Changes in goodwill between December 31, 2021 and June 30, 2022 consist of:

Balance as of December 31, 2021	$	71,535
Impairment		—
Balance as of June 30, 2022	$	71,535

Intangible Assets

The following is a listing of intangible assets, the useful lives in years (amortization period) and accumulated amortization as of June 30, 2022 and December 31, 2021:

	Useful Lives		June 30,		December 31,
	Years		2022		2021
Amortizable intangible assets:
Customer relationships and contracts		9-12	$	78,340	$	78,340
Trade name		10		14,780		14,780
Non-compete agreements		5		8,800		8,800
Patents		19		24		24
Accumulated amortization				(58,470)		(54,994)
Total amortizable intangible assets, net				43,474		46,950
Non-amortizable brand name				3,811		3,811
Total intangible assets, net			$	47,285	$	50,761

Non-amortizable brand name is tested annually during the fourth quarter for impairment, or more frequently if triggering events occur indicating there may be impairment.

Changes in intangible assets between December 31, 2021 and June 30, 2022 consist of:

Balance as of December 31, 2021	$	50,761
Amortization expense		(3,476)
Balance as of June 30, 2022	$	47,285

Amortization expense was $1,738 and $2,677 for the three months ended June 30, 2022 and 2021, respectively, and $3,476 and $5,353 for the six months ended June 30, 2022 and 2021, respectively.

Future amortization expense is expected to be as followed:

Year ending December 31,
2022 (remainder)	$	3,476
2023	$	6,866
2024	$	5,192
2025	$	5,192
2026	$	5,192
Thereafter	$	17,556

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Bank revolving credit notes

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Bank revolving credit notes

Note 3. Bank revolving credit notes

On September 26, 2019, and as last amended on March 31, 2022, we entered into an amended and restated credit agreement (Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, as administrative agent (the Agent). The Credit Agreement provides for a $200,000 revolving credit facility (the Revolving Loan), with a letter of credit sub-facility in an aggregate amount not to exceed $5,000, and a swingline facility in an aggregate amount of $20,000. The Credit Agreement also provides for an

additional $100,000 of debt capacity through an accordion feature. All amounts borrowed under the Credit Agreement mature on September 26, 2024.

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness, create or incur liens, make certain investments, merge or consolidate with another entity, make certain asset dispositions, pay dividends or other distributions to shareholders, enter into transactions with affiliates, enter into sale leaseback transactions or make capital expenditures. The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00 as well as a consolidated total leverage ratio not to exceed 3.25 to 1.00, although such leverage ratio can be increased in connection with certain acquisitions.

In order to provide a means of insurance against future macroeconomic events, we entered into an amendment (Second Amendment) to the Credit Agreement on June 30, 2020. The Second Amendment provided the Company with temporary changes to the total leverage ratio covenant for the period from June 30, 2020, through December 31, 2021, or such earlier date as the Company may elect (Covenant Relief Period), in return for certain increases in interest rates, fees and restrictions on certain activities of the Company, including capital expenditures, acquisitions, dividends and share repurchases. New pricing, which took effect for the quarters ending on and after September 30, 2020, includes interest at a fluctuating London Interbank Offered Rate (LIBOR) (at a floor of 75 basis points), plus 1.00% to 2.75%, along with the commitment fee ranging from 20 to 50 basis points.

During the Covenant Relief Period, the required ceiling on the Company’s total leverage ratio was 4.25 to 1.00 for quarters ending June 30, 2020 through and including December 31, 2020, and declined in quarterly increments to 3.25 to 1.00 through the quarter ending December 31, 2021.

We entered into an amendment (Third Amendment) to the Credit Agreement on March 31, 2021 which allowed the Company to incur up to $70,000 of capital expenditures in 2021, as opposed to $35,000.

We entered into an amendment (Fourth Amendment) to the Credit Agreement on March 31, 2022 which allows the Company to incur up to $65,000 of capital expenditures in 2022, as opposed to $35,000, and revises the definition of Consolidated EBITDA to include certain restructuring and impairment charges.

At June 30, 2022, our consolidated total leverage ratio was 1.52 to 1.00 as compared to a covenant maximum of 3.25 to 1.00 in accordance with the Credit Agreement.

At June 30, 2022, our interest coverage ratio was 18.34 to 1.00 as compared to a covenant minimum of 3.00 to 1.00 under the Credit Agreement.

Under the Credit Agreement, interest is payable quarterly at the adjusted LIBOR plus an applicable margin based on the current funded indebtedness to adjusted EBITDA ratio. The interest rate was 2.06% and 1.75% as of June 30, 2022 and December 31, 2021, respectively. Additionally, the agreement has a fee on the average daily unused portion of the aggregate unused revolving commitments. This fee was 0.20% as of June 30, 2022 and December 31, 2021.

The Company was in compliance with all financial covenants of its credit agreements as of June 30, 2022 and December 31, 2021. The amount borrowed on the revolving credit notes was $76,063 and $67,610 as of June 30, 2022 and December 31, 2021, respectively.

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Leases

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Leases

Note 4. Leases

In February 2016, the FASB issued ASU 2019-02, Leases, creating ASC 842. For public companies, this guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For as long as the Company remained an EGC, the new guidance was effective for annual reporting periods beginning after December 15, 2022, and interim periods within fiscal years beginning after December 15, 2022. Early adoption was permitted. The Company adopted the annual

reporting guidance as of January 1, 2022 using the effective date approach. The Company early adopted the interim reporting guidance during the period ended March 31, 2022.

The most significant judgements and impacts related to the application of the new guidance include the following:

● In evaluating contracts to determine if they qualify as a lease, the Company considers factors such as if the Company has obtained or transferred substantially all of the rights to the underlying asset through exclusivity, if the Company can transfer or has transferred the ability to direct the use of the asset by making decisions about how and for what purpose the asset will be used and if the lessor has substantive substitution rights.

● The Company made judgements regarding lease terms for certain of its leases that were in month-to-month status or that contained auto-renewal clauses. The Company estimated a lease end date based on the required length of usage of the property and calculated a ROU asset and lease liability based on the resulting estimated lease term.

● The Company has recognized ROU assets and lease liabilities for operating leases that have not previously been recorded. The lease liability for operating leases is based on the net present value of future minimum lease payments.

● The ROU asset for operating leases is based on the initial calculated lease liability as adjusted for the reclassification of certain balance sheet amounts such as deferred rent.

● In determining the discount rate used to measure the ROU assets and lease liabilities, the Company uses the rate implicit in the lease, or if not readily available, the Company uses the Company’s incremental borrowing rate. The base rate used to establish the Company’s incremental borrowing rate is based on a Prime Rate (or LIBOR fallback option) plus fixed basis points methodology pursuant to the Company’s revolving credit facility (as amended from time to time). Certain required adjustments were then made to this base rate to arrive at an estimated incremental borrowing rate.

● The Company’s real property leases vary in terms of up to ten years, including options for renewal periods that are considered reasonably certain to be exercised. The Company’s personal property leases vary in terms of up to seven years, including options for renewal periods that are considered reasonably certain to be exercised.

● Upon adoption of the new guidance at January 1, 2022, the Company established a ROU asset of $37,908 and a lease liability of $38,185 related to its real property operating leases and established a ROU asset of $2,415 and a lease liability of $2,418 related to its personal property operating leases. Additionally, the impact on retained earnings was immaterial. The January 1, 2022, balances associated with the Company’s personal property finance leases will be reclassified in the financial statements from capital lease, net to property, plant and equipment, net, from current portion of capital lease obligation to other current liabilities, and from capital lease obligation, less current maturities to other long-term liabilities on the Condensed Consolidated Balance Sheets.

The Company has real property operating leases for office and light manufacturing space. Operating leases for the Company’s personal property consist of leases for office equipment, vehicles, forklifts and storage tanks for bulk gases. The Company recognizes a ROU asset and a lease liability for operating leases based on the net present value of future minimum lease payments. Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term, including renewal periods that are considered reasonably certain.

The Company has finance leases for two laser cutting systems and a vehicle. The Company recognizes a ROU asset and a lease liability for finance leases based on the net present value of future minimum lease payments. Lease expense for the Company’s

finance leases is comprised of the amortization of the ROU asset and interest expense recognized based on the effective interest method.

Variable lease expense is related to certain of the Company’s real property leases and personal property leases, and it generally consists of property tax and insurance components that are for the benefit of the lessor (real property leases) and variable overage fees (personal property leases) that are remitted as part of the Company’s lease payments.

The components of lease expense were as follows:

	Three Months Ended		Six Months Ended
	June 30, 2022		June 30, 2022
Finance lease cost:
Amortization of finance lease assets	$	78	$	157
Interest on finance lease liabilities		11		22
Total finance lease expense		89		179
Operating lease expense		1,512		3,034
Short-term lease expense		139		318
Variable lease expense		61		108
Sublease income (1)		(146)		(146)
Total lease expense	$	1,655	$	3,493

(1) The Company subleased a portion of its Hazel Park, MI facility starting in June 2022.

Total rent expense for the three and six months ended June 30, 2021 was $1,081 and $2,165, respectively.

Supplemental information related to leases was as follows:

	Balance Sheet Classification	June 30, 2022
Assets:
Finance lease assets	Property, plant and equipment, net	$	981
Operating lease assets	Operating lease assets		37,842
Total lease assets		$	38,823
Current liabilities:
Current finance lease liabilities	Other current liabilities	$	323
Current operating lease liabilities	Current portion of operating lease obligation		4,803
Noncurrent liabilities:
Long-term finance lease liabilities	Other long-term liabilities		730
Long-term operating lease liabilities	Operating lease obligation, less current maturities		33,531
Total lease liabilities		$	39,387

	June 30, 2022
Weighted average remaining lease term (in years)
Finance leases	3.1
Operating leases	8.0
Weighted average discount rate
Finance leases	4.00	%
Operating leases	2.46	%

The table below represents ROU asset balances by type of lease:

	June 30, 2022
Real estate leases	$	35,706
Equipment leases		2,874
Vehicle leases		243
Total lease assets	$	38,823

Maturities of lease liabilities at June 30, 2022 and minimum lease payments under ASC 842 having initial or remaining non-cancellable terms in excess of one year were as follows:

	Operating		Finance
Year ending December 31,	Leases		Leases		Total
2022 (remainder)	$	2,837	$	179	$	3,016
2023		5,704		359		6,063
2024		5,667		357		6,024
2025		4,837		223		5,060
2026		4,656		—		4,656
Thereafter		18,771		—		18,771
Total lease payments		42,472		1,118		43,590
Less: lease modification not yet commenced		—		—		—
Less: imputed interest		(4,138)		(65)		(4,203)
Total lease obligations	$	38,334	$	1,053	$	39,387

At June 30, 2021, future minimum lease payments under ASC 840 were as follows:

	Operating		Finance
Year ending December 31,	Leases		Leases		Total
2021 (remainder)	$	2,647	$	367	$	3,014
2022		5,528		734		6,262
2023		5,521		734		6,255
2024		4,786		514		5,300
2025		4,282		226		4,508
Thereafter		21,912		—		21,912
Total minimum lease payments	$	44,676	$	2,575	$	47,251

Lease related supplemental cash flow information:

	Six Months Ended
	June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities for finance leases:
Operating cash flows	$	22
Financing cash flows	$	157
Cash paid for amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows	$	2,837
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases	$	106
Finance leases	$	—

ROU assets are assessed for impairment in accordance with the Company’s long-lived asset policy. The Company reassesses lease classification and remeasures ROU assets and lease liabilities when a lease is modified, and that modification is not accounted for as a separate new lease or upon certain other events that require reassessment in accordance with ASC 842.

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Employee stock ownership plan

6 Months Ended

Jun. 30, 2022

Employee Stock Ownership Plan E S O P Shares In E S O P [Abstract]

Employee stock ownership plan

Note 5. Employee stock ownership plan

Under the Mayville Engineering Company, Inc. Employee Stock Ownership Plan (the ESOP), the Company can make annual discretionary contributions to the trust for the benefit of eligible employees in the form of cash or shares of common stock of the Company subject to the Board of Directors’ approval. For the three months ended June 30, 2022 and 2021, the Company’s estimated ESOP expense was $1,330 and $228, respectively. For the six months ended June 30, 2022 and 2021, the Company’s estimated ESOP expense amounted to $1,820 and $701, respectively.

At various times following death, disability, retirement or termination of employment, an ESOP participant is entitled to receive their ESOP account balance in accordance with various distribution methods as permitted under the policies adopted by the ESOP.

As of June 30, 2022, and December 31, 2021, the ESOP shares, excluding safe harbor shares held in the Company’s 401(k) Plan, consisted of 5,684,879 and 7,292,392 in allocated shares, respectively.

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Retirement plans

6 Months Ended

Jun. 30, 2022

Compensation And Retirement Disclosure [Abstract]

Retirement Plans

Note 6. Retirement plans

The Mayville Engineering Company Inc. 401(k) Plan (the 401(k) Plan) covers substantially all employees meeting certain eligibility requirements. The 401(k) Plan is a defined contribution plan and is intended for eligible employees to defer tax-free contributions to save for retirement. Employees may contribute up to 50% of their eligible compensation to the 401(k) Plan, subject to the limits of Section 401(k) of the Internal Revenue Code.

The 401(k) Plan also provides for employer discretionary profit-sharing contributions and the Board of Directors may authorize discretionary profit-sharing contributions (which are usually approved at the end of each calendar year).

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Income taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income taxes

Note 7. Income taxes

On a quarterly basis, the Company estimates its effective tax rate for the full fiscal year and records a quarterly income tax provision based on the anticipated rate. As the year progresses, the Company will refine its estimate based on facts and circumstances by each tax jurisdiction.

Income tax expense was $1,798 and $2,974, and the effective tax rate (ETR) was 23.27% and 23.37% for the three and six months ended June 30, 2022, respectively. Our ETR is different from the expected tax rate due to state taxes, non-deductible items, research and development credits and benefit from excess tax deductions related to share based compensation items.

For the three and six months ended June 30, 2021, income tax expense was estimated at $1,007 and $1,996 and the ETR was 23.43% and 25.48%, respectively.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in these jurisdictions. ASC 740, Income Taxes, states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of technical merits.

The Company’s policy for recording interest and penalties associated with potential income tax audits is to record such expense as a component of income tax expense. There were no amounts for penalties or interest recorded as of June 30, 2022. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its positions.

Uncertain Tax Positions

Based on the Company’s evaluation, it has been concluded that there is one tax position related to the research and development tax credit requiring recognition in the Company’s financial statements as of June 30, 2022. The Company does not anticipate that there will be a material change in the balance of the unrecognized tax benefits in the next 12 months. Any interest and penalties related to uncertain tax positions are recorded in income tax expense. No amounts have been recorded as tax expense for interest and penalties for the three and six months ended June 30, 2022, as the amount for the utilized portion for the research and development credit on the Wisconsin return is considered to be immaterial. At June 30, 2022 and December 31, 2021, a total of $394 and $314, respectively, of unrecognized tax benefits would, if recognized, impact the Company’s ETR.

The Company files income tax returns in the United States federal jurisdiction and in various state and local jurisdictions. Federal tax returns for tax years beginning January 1, 2018, and state tax returns beginning January 1, 2017, are open for examination.

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Contingencies

6 Months Ended

Jun. 30, 2022

Commitments And Contingencies Disclosure [Abstract]

Contingencies

Note 8. Contingencies

From time to time, the Company may be involved in various claims and lawsuits, both for and against the Company, arising in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, in management’s opinion, either the likelihood of loss is remote, or any reasonably possible loss associated with the resolution of such proceedings is not expected to have a material adverse impact on the consolidated financial statements.

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Deferred compensation

6 Months Ended

Jun. 30, 2022

Deferred Compensation Liability [Abstract]

Deferred compensation

Note 9. Deferred compensation

The Mayville Engineering Deferred Compensation Plan is available for certain employees designated to be eligible to participate by the Company and approved by the Board of Directors. Eligible employees may elect to defer a portion of his or her compensation for any plan year and the deferral cannot exceed 50% of the participant’s base salary and may include the participant’s annual short-term cash incentive up to 100%. The participant’s election must be made prior to the first day of the plan year.

An employer contribution will be made for each participant to reflect the amount of any reduced allocations to the ESOP and/or 401(k) employer contributions due solely to the participant’s deferral amounts, as applicable. In addition, a discretionary amount may be awarded to a participant by the Company.

Deferrals are assumed to be invested in an investment vehicle based on the options made available to the participant (which does not include Company stock).

The deferred compensation plan provides benefits payable upon separation of service or death. Payments are to be made 30 days after date of separation from service, either in a lump-sum payment or up to five annual installments as elected by the participant when the participant first elects to defer compensation.

The deferred compensation plan is non-funded, and all future contributions are unsecured in that the employees have the status of a general unsecured creditor of the Company and the agreements constitute a promise by the Company to make benefit payments in the future. During the three and six months ended June 30, 2022 and 2021, eligible employees elected to defer compensation of $0. As of June 30, 2022 and December 31, 2021, the short-term portion accrued for all benefit years less than 12 months under this plan was $17,531 and $0, respectively. As of June 30, 2022 and December 31, 2021, the long-term portion accrued for all benefit years greater than 12 months under this plan was $2,949 and $25,117. These amounts include the initial deferral of compensation as adjusted for (a) subsequent changes in the share value of the Company stock or (b) in the investment options chosen by the participants. Total expense (credit) for the deferred compensation plan for the three months ended June 30, 2022 and 2021 was $(2,461) and $575, respectively. Total expense (credit) for the deferred compensation plan for the six months ended June 30, 2022 and 2021 amounted to $(3,589) and $405, respectively. These expenses (credits) are included in profit sharing, bonuses and deferred compensation on the Condensed Consolidated Statements of Comprehensive Income. Additionally, the Company made distributions of $1,048 and $575 for the six months ended June 30, 2022 and 2021, respectively.

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Self-Funded insurance

6 Months Ended

Jun. 30, 2022

Insurance [Abstract]

Self-Funded insurance

Note 10. Self-Funded insurance

The Company is self-funded for the medical benefits provided to its employees and their dependents. Healthcare costs are expensed as incurred and are based upon actual claims paid, reinsurance premiums, administration fees, and estimated unpaid claims. Since March 31, 2020, the Company has an aggregate stop loss limit to mitigate risk. Expense related to this is approximately $3,388 and $3,290 for the three months ended June 30, 2022 and 2021, respectively, and $8,148 and $7,011 for the six months ended June 30, 2022 and 2021, respectively. An estimated accrued liability of approximately $1,421 and $1,471 was recorded as of June 30, 2022 and December 31, 2021, respectively, for estimated unpaid claims and is included within other current liabilities on the Condensed Consolidated Balance Sheets.

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Segments

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Segments

Note 11. Segments

The Company applies the provisions of ASC 280, Segment Reporting. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete financial information is available. Based on the provisions of ASC 280, the Company has determined it has one operating segment. The Company does not earn revenues or have long-lived assets located in foreign countries.

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Fair value of financial instruments

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair value of financial instruments

Note 12. Fair value of financial instruments

Fair value provides information on what the Company may realize if certain assets were sold or might pay to transfer certain liabilities based upon an exit price. Financial assets and liabilities that are measured and reported at fair value are classified into a three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs as follows:

● Level 1 – Quoted prices in active markets for identical assets or liabilities.

● Level 2 – Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data. Long-term debt is classified as a Level 2 fair value input.

● Level 3 – Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be the Company’s own data and judgements about assumptions that market participants would use in pricing the asset or liability.

The following table lists the Company’s financial assets and liabilities accounted for at fair value by the fair value hierarchy:

	Balance at		Fair Value Measurements at
	June 30,		Report Date Using
	2022		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	20,480	$	20,480	$	—	$	—
Total	$	20,480	$	20,480	$	—	$	—

	Balance at		Fair Value Measurements at
	December 31,		Report Date Using
	2021		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	25,117	$	22,272	$	2,845	$	—
Total	$	25,117	$	22,272	$	2,845	$	—

Fair value measurements for the Company’s cash and cash equivalents are classified based upon Level 1 measurements because such measurements are based upon quoted market prices in active markets for identical assets.

Accounts receivable, accounts payable, long-term debt and accrued liabilities are recorded in the Condensed Consolidated Balance Sheets at cost and approximate fair value.

Deferred compensation liabilities are recorded at amounts due to participants at the time of deferral. Deferrals are invested in an investment vehicle based on the options made available to the participant, considered to be Level 1 and Level 2 on the fair value hierarchy, with the current balance as Level 1. The change in fair value is recorded in the profit sharing, bonuses, and deferred compensation line item on the Condensed Consolidated Statements of Comprehensive Income. The short-term and long-term balances due to participants are reflected on the current portion of deferred compensation and deferred compensation, less current portion, line items, respectively, on the Condensed Consolidated Balance Sheets.

The Company’s non-financial assets such as goodwill, intangible assets and property, plant, and equipment are re-measured at fair value when there is an indication of impairment and adjusted only when an impairment charge is recognized.

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Earnings per share

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Earnings per share

Note 13. Earnings Per Share

The Company computes earnings per share in accordance with ASC Topic 260, Earnings per Share. In accordance with ASC 260, outstanding options will be considered to have been exercised and outstanding as of the beginning of the period if the average market price of the common stock during the period exceeds the exercise price of the options (they are “in the money”), and the assumed exercise of the options do not have an anti-dilutive impact on earnings per share.

A reconciliation of basic and diluted net income per share attributable to the Company were as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net income attributable to MEC	$	5,929	$	3,292	$	9,751	$	5,837
Average shares outstanding		20,581,945		20,454,541		20,490,944		20,316,936
Basic per share	$	0.29	$	0.16	$	0.48	$	0.29
Average shares outstanding		20,581,945		20,454,541		20,490,944		20,316,936
Effect of dilutive share-based compensation		68,606		409,990		316,733		368,805
Total potential shares outstanding		20,650,551		20,864,531		20,807,677		20,685,741
Diluted per share	$	0.29	$	0.16	$	0.47	$	0.28

Options in the money that were not included in the computation of diluted earnings per share because they would have had an anti-dilutive impact on earnings per share were as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Stock options	—	300,510	—	300,510

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Revenue Recognition

6 Months Ended

Jun. 30, 2022

Revenue From Contract With Customer [Abstract]

Revenue Recognition

Note 14. Revenue Recognition

Contract Assets and Contract Liabilities

The Company has contract assets and contract liabilities, which are included in tooling in progress and other current liabilities on the Condensed Consolidated Balance Sheets, respectively. Contract assets include products where the Company has satisfied its performance obligation, but receipt of payment is contingent upon delivery. Contract liabilities include deferred tooling revenue, where the performance obligation was not met. The performance obligation is satisfied when the tooling is completed and the customer signs off through the Product Part Approval Process (PPAP). Cost of goods sold is recognized and released from the balance sheet when control of the tooling promised under contract is transferred to the customer.

The Company’s contracts with customers are short-term in nature; therefore, revenue is typically recognized, billed and collected within a 12-month period. The following table reflects the changes in our contract assets and liabilities during the six months ended June 30, 2022:

	Contract		Contract
	Assets		Liabilities
As of December 31, 2021	$	3,950	$	2,718
Net activity		1,367		2,598
As of June 30, 2022	$	5,317	$	5,316

Disaggregated Revenue

The following table represents a disaggregation of revenue by product category:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Outdoor sports	$	2,522	$	3,006	$	5,049	$	5,677
Fabrication		83,038		78,318		165,271		147,689
Performance structures		28,197		18,753		57,157		39,208
Tube		19,488		15,760		37,796		30,647
Tank		8,915		5,622		17,464		12,413
Total		142,160		121,459		282,737		235,634
Intercompany sales elimination		(3,823)		(1,246)		(8,148)		(2,801)
Total, net sales	$	138,337	$	120,213	$	274,589	$	232,833

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Concentration of major customers

6 Months Ended

Jun. 30, 2022

Risks And Uncertainties [Abstract]

Concentration of major customers

Note 15. Concentration of major customers

The following customers accounted for 10% or greater of the Company’s recorded net sales or net trade receivables:

	Net Sales								Accounts Receivable
	Three Months Ended				Six Months Ended				As of		As of
	June 30,				June 30,				June 30,		December 31,
	2022		2021		2022		2021		2022		2021
Customer
A	18.3	%	16.7	%	18.2	%	16.2	%	15.1	%	10.2	%
B	11.9	%	10.3	%	11.5	%	11.1	%	<10	%	<10	%
C	<10	%	<10	%	<10	%	10.8	%	<10	%	<10	%
D	16.1	%	15.2	%	15.9	%	14.3	%	10.2	%	<10	%
E	<10	%	<10	%	<10	%	<10	%	12.7	%	11.2	%

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Stock based compensation

6 Months Ended

Jun. 30, 2022

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock based compensation

Note 16. Stock based compensation

The Mayville Engineering Company, Inc. 2019 Omnibus Incentive Plan provides the Company the ability to grant monetary payments based on the value of its common stock, up to 2,000,000 shares.

On April 20, 2021, shareholders of the Company approved an amendment to the 2019 Omnibus Incentive Plan increasing the number of shares of common stock authorized for issuance by 2,500,000 shares.

The Company recognizes stock-based compensation using the fair value provisions prescribed by ASC 718, Compensation – Stock Compensation. Accordingly, compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-based instrument. For units, fair value is equivalent to the stock price at the date of grant. The Black-Scholes option pricing model is utilized to determine fair value for options.

Cancellations and forfeitures are accounted for as incurred.

Stock awards were granted on April 19, 2022, February 28, 2022, June 3, 2021, May 12, 2021, April 20, 2021, February 28, 2021, May 12, 2020, February 27, 2020 and May 8, 2019. There were no stock awards granted prior to this.

During the six months ended June 30, 2022, 271,992 units vested. For the same period, 512,927 options vested with a weighted average strike price of $9.18. During the six months ended June 30, 2021, 314,902 units vested. For the same period, 484,661 options vested with a strike price of $11.23.

As of June 30, 2022, 1,107,714 options remained outstanding with a weighted average strike price of $10.31 and a weighted average contractual life of 7.73 years remaining.

The Company’s stock-based compensation expense by award type is summarized as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Unit awards	$	874	$	849	$	1,626	$	1,568
Option awards		582		539		1,088		1,020
Stock based compensation expense, net of tax	$	1,456	$	1,388	$	2,714	$	2,588

A roll-forward of unrecognized stock-based compensation expense is displayed in the table below. Unrecognized stock-based compensation expense as of June 30, 2022 will be expensed over the remaining requisite service period from which individual award values relate, up to April 19, 2023.

	Units		Options		Total
Balance as of December 31, 2021	$	1,676	$	1,537	$	3,213
Grants		3,007		2,573		5,580
Forfeitures		(39)		—		(39)
Expense		(751)		(506)		(1,257)
Balance as of March 31, 2022	$	3,893	$	3,604	$	7,497
Grants		750		—		750
Forfeitures		—		—		—
Expense		(874)		(582)		(1,456)
Balance as of June 30, 2022	$	3,769	$	3,022	$	6,791

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Subsequent events

6 Months Ended

Jun. 30, 2022

Subsequent Events [Abstract]

Subsequent events

Note 17. Subsequent events

The Company has evaluated subsequent events since June 30, 2022, the date of these financial statements. There were no material events or transactions discovered during this evaluation that requires recognition or disclosure in the financial statements.

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Basis of presentation (Policies)

6 Months Ended

Jun. 30, 2022

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Nature of Operations

Nature of Operations

MEC is a leading U.S.-based value-added manufacturing partner that provides a broad range of prototyping and tooling, production fabrication, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agriculture, military and other end markets. Founded in 1945 and headquartered in Mayville, Wisconsin, we are a leading Tier I U.S. supplier of highly engineered components to original equipment manufacturers (OEM) customers with leading positions in their respective markets. The Company operates 20 facilities, of which 19 are in operation, located in Arkansas, Michigan, Mississippi, Ohio, Pennsylvania, Virginia, and Wisconsin. Our engineering expertise and technical know-how allow us to add value through every product redevelopment cycle (generally every three to five years for our customers).

Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, agricultural, military and other products.

The COVID-19 pandemic has had and will continue to have a negative impact on our business, financial condition, cash flows, results of operations, supply chain, and raw material availability, although the full extent is still uncertain.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases, creating Accounting Standard Codification (ASC) 842. Under the new guidance, lessees are required to recognize a right-of-use (ROU) asset and a lease liability for substantially all leases. When measuring ROU assets and lease liabilities, a lessee should include amounts related to option terms, such as the option of extending or terminating the lease or purchasing the underlying asset, that are reasonably certain to be exercised. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition. For finance leases, a lessee will recognize the interest on a lease liability separate from amortization of the ROU asset. In addition, repayments of principal will be presented within financing activities, and interest payments will be presented within operating activities in the statement of cash flows. For operating leases, a lessee will recognize a single lease cost on a straight-line basis and classify all cash payments within operating activities in the statement of cash flows. Entities have the option to adopt the new guidance through a cumulative effect adjustment to retained earnings applied either to the beginning of the earliest period presented (modified retrospective approach) or to the beginning of the period of adoption (effective date approach) whereby the comparative periods are unchanged. For public companies, this guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For as long as the Company remained an emerging growth company (EGC), the new guidance was effective for annual reporting periods beginning after December 15, 2022, and interim periods within fiscal years beginning after December 15, 2022. Early adoption was permitted. The Company adopted the

annual reporting guidance as of January 1, 2022 using the effective date approach. The Company early adopted the interim reporting guidance during the period ended March 31, 2022.

The new guidance provides a number of optional practical expedients in transition. The Company elected the "package of practical expedients", which allows it to not reassess under the new guidance its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight practical expedient. In addition, the new guidance provides accounting policy elections for an entity’s ongoing lessee accounting. The Company has elected to not separate lease and non-lease components for certain of its real estate leases. The Company has elected the short-term lease recognition exemption for all leases that qualify which means that it will not recognize ROU assets or lease liabilities for those leases with a term of 12 months or less.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes ASC 326, Financial Instruments – Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to ASC 326, Financial Instruments – Credit Losses. This ASU clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC 326. This ASU provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to ASC 326, Financial Instruments – Credit Losses. The ASU clarifies the treatment of expected recoveries for amounts previously written off on purchased receivables, provides transition relief for troubled debt restructuring, and allows for certain disclosure simplifications of accrued interest. For as long as the Company remains an EGC, the new guidance is effective for annual reporting periods beginning after December 15, 2022. The Company is evaluating the potential effects on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes, creating ASC 740, which removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. For public companies, this guidance will be effective for fiscal years beginning after December 15, 2020. For as long as the Company remains an EGC, the new guidance is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. During the period ended March 31, 2021, the Company adopted this guidance. This adoption had no impact on the consolidated financial statements.

A summary of the Company’s evaluation of other recent accounting pronouncements is included in the Company’s 2021 financial statements in its Annual Report on Form 10-K for the year ended December 31, 2021.

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Select balance sheet data (Tables)

6 Months Ended

Jun. 30, 2022

Select Balance Sheet Data [Abstract]

Schedule of Inventories

	June 30,		December 31,
	2022		2021
Finished goods and purchased parts	$	42,828	$	41,041
Raw materials		19,500		18,905
Work-in-process		11,775		10,211
Total	$	74,103	$	70,157

Schedule of Property, Plant and Equipment

	Useful Lives		June 30,		December 31,
	Years		2022		2021
Land		Indefinite	$	1,033	$	1,033
Land improvements		15-39		3,169		3,169
Building and building improvements		15-39		57,971		56,243
Machinery, equipment and tooling		3-10		230,803		222,202
Vehicles		5		3,947		3,943
Office furniture and fixtures		3-7		18,785		17,960
Construction in progress		N/A		22,919		15,443
Total property, plant and equipment, gross				338,627		319,993
Less accumulated depreciation				209,118		199,247
Total property, plant and equipment, net			$	129,509	$	120,746

Schedule of Changes In Goodwill

Balance as of December 31, 2021	$	71,535
Impairment		—
Balance as of June 30, 2022	$	71,535

Schedule of Listing of Intangible Assets

	Useful Lives		June 30,		December 31,
	Years		2022		2021
Amortizable intangible assets:
Customer relationships and contracts		9-12	$	78,340	$	78,340
Trade name		10		14,780		14,780
Non-compete agreements		5		8,800		8,800
Patents		19		24		24
Accumulated amortization				(58,470)		(54,994)
Total amortizable intangible assets, net				43,474		46,950
Non-amortizable brand name				3,811		3,811
Total intangible assets, net			$	47,285	$	50,761

Schedule of Changes In Intangible Assets

Balance as of December 31, 2021	$	50,761
Amortization expense		(3,476)
Balance as of June 30, 2022	$	47,285

Schedule of Future Amortization Expense

Year ending December 31,
2022 (remainder)	$	3,476
2023	$	6,866
2024	$	5,192
2025	$	5,192
2026	$	5,192
Thereafter	$	17,556

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Leases (Tables)

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Summary of components of lease expense

	Three Months Ended		Six Months Ended
	June 30, 2022		June 30, 2022
Finance lease cost:
Amortization of finance lease assets	$	78	$	157
Interest on finance lease liabilities		11		22
Total finance lease expense		89		179
Operating lease expense		1,512		3,034
Short-term lease expense		139		318
Variable lease expense		61		108
Sublease income (1)		(146)		(146)
Total lease expense	$	1,655	$	3,493

Schedule of supplemental balance sheet information

	Balance Sheet Classification	June 30, 2022
Assets:
Finance lease assets	Property, plant and equipment, net	$	981
Operating lease assets	Operating lease assets		37,842
Total lease assets		$	38,823
Current liabilities:
Current finance lease liabilities	Other current liabilities	$	323
Current operating lease liabilities	Current portion of operating lease obligation		4,803
Noncurrent liabilities:
Long-term finance lease liabilities	Other long-term liabilities		730
Long-term operating lease liabilities	Operating lease obligation, less current maturities		33,531
Total lease liabilities		$	39,387

	June 30, 2022
Weighted average remaining lease term (in years)
Finance leases	3.1
Operating leases	8.0
Weighted average discount rate
Finance leases	4.00	%
Operating leases	2.46	%

Schedule of ROU asset balances

	June 30, 2022
Real estate leases	$	35,706
Equipment leases		2,874
Vehicle leases		243
Total lease assets	$	38,823

Future Minimum Lease Payments Under Leases

	Operating		Finance
Year ending December 31,	Leases		Leases		Total
2022 (remainder)	$	2,837	$	179	$	3,016
2023		5,704		359		6,063
2024		5,667		357		6,024
2025		4,837		223		5,060
2026		4,656		—		4,656
Thereafter		18,771		—		18,771
Total lease payments		42,472		1,118		43,590
Less: lease modification not yet commenced		—		—		—
Less: imputed interest		(4,138)		(65)		(4,203)
Total lease obligations	$	38,334	$	1,053	$	39,387

Schedule of minimum lease payments under ASC 842- Finance leases

	Operating		Finance
Year ending December 31,	Leases		Leases		Total
2022 (remainder)	$	2,837	$	179	$	3,016
2023		5,704		359		6,063
2024		5,667		357		6,024
2025		4,837		223		5,060
2026		4,656		—		4,656
Thereafter		18,771		—		18,771
Total lease payments		42,472		1,118		43,590
Less: lease modification not yet commenced		—		—		—
Less: imputed interest		(4,138)		(65)		(4,203)
Total lease obligations	$	38,334	$	1,053	$	39,387

Schedule of minimum lease payments under ASC 840- Operating leases

	Operating		Finance
Year ending December 31,	Leases		Leases		Total
2021 (remainder)	$	2,647	$	367	$	3,014
2022		5,528		734		6,262
2023		5,521		734		6,255
2024		4,786		514		5,300
2025		4,282		226		4,508
Thereafter		21,912		—		21,912
Total minimum lease payments	$	44,676	$	2,575	$	47,251

Schedule of Future Minimum Lease Payments Required Under The Lease

	Operating		Finance
Year ending December 31,	Leases		Leases		Total
2021 (remainder)	$	2,647	$	367	$	3,014
2022		5,528		734		6,262
2023		5,521		734		6,255
2024		4,786		514		5,300
2025		4,282		226		4,508
Thereafter		21,912		—		21,912
Total minimum lease payments	$	44,676	$	2,575	$	47,251

Schedule of Supplemental cash flow information

	Six Months Ended
	June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities for finance leases:
Operating cash flows	$	22
Financing cash flows	$	157
Cash paid for amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows	$	2,837
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases	$	106
Finance leases	$	—

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Fair value of financial instruments (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities Accounted for at Fair Value by Fair Value Hierarchy

The following table lists the Company’s financial assets and liabilities accounted for at fair value by the fair value hierarchy:

	Balance at		Fair Value Measurements at
	June 30,		Report Date Using
	2022		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	20,480	$	20,480	$	—	$	—
Total	$	20,480	$	20,480	$	—	$	—

	Balance at		Fair Value Measurements at
	December 31,		Report Date Using
	2021		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	25,117	$	22,272	$	2,845	$	—
Total	$	25,117	$	22,272	$	2,845	$	—

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Earnings per share (Tables)

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Schedule of earnings per share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net income attributable to MEC	$	5,929	$	3,292	$	9,751	$	5,837
Average shares outstanding		20,581,945		20,454,541		20,490,944		20,316,936
Basic per share	$	0.29	$	0.16	$	0.48	$	0.29
Average shares outstanding		20,581,945		20,454,541		20,490,944		20,316,936
Effect of dilutive share-based compensation		68,606		409,990		316,733		368,805
Total potential shares outstanding		20,650,551		20,864,531		20,807,677		20,685,741
Diluted per share	$	0.29	$	0.16	$	0.47	$	0.28

Schedule of Antidilutive Securities Excluded from Computation of Diluted Earnings Per Share

Options in the money that were not included in the computation of diluted earnings per share because they would have had an anti-dilutive impact on earnings per share were as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Stock options	—	300,510	—	300,510

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2022

Revenue From Contract With Customer [Abstract]

Schedule of Changes in Contract Assets and Liabilities

	Contract		Contract
	Assets		Liabilities
As of December 31, 2021	$	3,950	$	2,718
Net activity		1,367		2,598
As of June 30, 2022	$	5,317	$	5,316

Schedule of Disaggregation of Revenue by Product Category

The following table represents a disaggregation of revenue by product category:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Outdoor sports	$	2,522	$	3,006	$	5,049	$	5,677
Fabrication		83,038		78,318		165,271		147,689
Performance structures		28,197		18,753		57,157		39,208
Tube		19,488		15,760		37,796		30,647
Tank		8,915		5,622		17,464		12,413
Total		142,160		121,459		282,737		235,634
Intercompany sales elimination		(3,823)		(1,246)		(8,148)		(2,801)
Total, net sales	$	138,337	$	120,213	$	274,589	$	232,833

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Concentration of major customers (Tables)

6 Months Ended

Jun. 30, 2022

Risks And Uncertainties [Abstract]

Schedules of Major Customer Concentrations

The following customers accounted for 10% or greater of the Company’s recorded net sales or net trade receivables:

	Net Sales								Accounts Receivable
	Three Months Ended				Six Months Ended				As of		As of
	June 30,				June 30,				June 30,		December 31,
	2022		2021		2022		2021		2022		2021
Customer
A	18.3	%	16.7	%	18.2	%	16.2	%	15.1	%	10.2	%
B	11.9	%	10.3	%	11.5	%	11.1	%	<10	%	<10	%
C	<10	%	<10	%	<10	%	10.8	%	<10	%	<10	%
D	16.1	%	15.2	%	15.9	%	14.3	%	10.2	%	<10	%
E	<10	%	<10	%	<10	%	<10	%	12.7	%	11.2	%

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Stock based compensation (Tables)

6 Months Ended

Jun. 30, 2022

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock-based Compensation Expenses

The Company’s stock-based compensation expense by award type is summarized as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Unit awards	$	874	$	849	$	1,626	$	1,568
Option awards		582		539		1,088		1,020
Stock based compensation expense, net of tax	$	1,456	$	1,388	$	2,714	$	2,588

Schedule of Unrecognized Stock-based Compensation Expense

	Units		Options		Total
Balance as of December 31, 2021	$	1,676	$	1,537	$	3,213
Grants		3,007		2,573		5,580
Forfeitures		(39)		—		(39)
Expense		(751)		(506)		(1,257)
Balance as of March 31, 2022	$	3,893	$	3,604	$	7,497
Grants		750		—		750
Forfeitures		—		—		—
Expense		(874)		(582)		(1,456)
Balance as of June 30, 2022	$	3,769	$	3,022	$	6,791

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Basis of presentation - Additional Information (Details)	6 Months Ended
	Jun. 30, 2022 facility segment
Basis Of Presentation [Line Items]
Number of facilities operated	20
Number of facilities in operation	19
Number of operating segments | segment	1
Accounting Standards Update 2016-02 [Member]
Basis Of Presentation [Line Items]
Change in accounting principle, accounting standards update, early adoption	true
ASU 2019-12 [Member]
Basis Of Presentation [Line Items]
Change in accounting principle, accounting standards update, adoption date	Mar. 31, 2021
Change in accounting principle, accounting standards update, immaterial effect	true

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Select balance sheet data - Schedule of Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Select Balance Sheet Data [Abstract]
Finished goods and purchased parts	$ 42,828	$ 41,041
Raw materials	19,500	18,905
Work-in-process	11,775	10,211
Total	$ 74,103	$ 70,157

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Select balance sheet data - Schedule of Property, Plant and Equipment (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jan. 01, 2022	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	$ 338,627		$ 319,993
Less accumulated depreciation	209,118		199,247
Total property, plant and equipment, net	129,509	$ 1,136	120,746
Land [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	$ 1,033		1,033
Property, plant and equipment useful lives	Indefinite
Land Improvements [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	$ 3,169		3,169
Land Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment useful lives	15 years
Land Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment useful lives	39 years
Building and Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	$ 57,971		56,243
Building and Building Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment useful lives	15 years
Building and Building Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment useful lives	39 years
Machinery, Equipment and Tooling [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	$ 230,803		222,202
Machinery, Equipment and Tooling [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment useful lives	3 years
Machinery, Equipment and Tooling [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment useful lives	10 years
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	$ 3,947		3,943
Property, plant and equipment useful lives	5 years
Office Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	$ 18,785		17,960
Office Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment useful lives	3 years
Office Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment useful lives	7 years
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	$ 22,919		$ 15,443

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Select balance sheet data - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	Jan. 01, 2022
Select Balance Sheet Data [Line Items]
Impairment of inventory			$ 329		$ 700
Decreased inventories, net			4,033	$ 8,984	39
Depreciation	$ 5,507	$ 5,161	10,975	10,236
Impairment of long-lived asset					12,875
Purchase commitments for property, plant and equipment canceled	906		2,089
Finance leases right of use assets	981		981			$ 981
Machinery and Equipment Sold	4,971
Gain on sale of assets	520		625	(66)
Property, plant and equipment, net	129,509		129,509		120,746	$ 1,136
Assets held for sale	1,288		1,288
Amortization expense	$ 1,738	$ 2,677	$ 3,476	$ 5,353
Other Current Liabilities [Member]
Select Balance Sheet Data [Line Items]
Impairment of inventory					$ 661

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Select balance sheet data - Schedule of Changes In Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($)
Select Balance Sheet Data [Abstract]
Balance	$ 71,535
Impairment	0
Balance	$ 71,535

XML

Select balance sheet data - Schedule of Listing of Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Amortizable intangible assets [Abstract]
Accumulated amortization	$ (58,470)	$ (54,994)
Total amortizable intangible assets, net	43,474	46,950
Total intangible assets, net	47,285	50,761
Customer relationships and contracts [Member]
Amortizable intangible assets [Abstract]
Amortizable intangible assets, gross	$ 78,340	78,340
Trade name [Member]
Amortizable intangible assets [Abstract]
Intangible assets useful Lives	10 years
Amortizable intangible assets, gross	$ 14,780	14,780
Non-compete agreements [Member]
Amortizable intangible assets [Abstract]
Intangible assets useful Lives	5 years
Amortizable intangible assets, gross	$ 8,800	8,800
Patents [Member]
Amortizable intangible assets [Abstract]
Intangible assets useful Lives	19 years
Amortizable intangible assets, gross	$ 24	24
Non-amortizable Brand Name [Member]
Amortizable intangible assets [Abstract]
Total intangible assets, net	$ 3,811	$ 3,811
Minimum [Member] | Customer relationships and contracts [Member]
Amortizable intangible assets [Abstract]
Intangible assets useful Lives	9 years
Maximum [Member] | Customer relationships and contracts [Member]
Amortizable intangible assets [Abstract]
Intangible assets useful Lives	12 years

XML

Select balance sheet data - Schedule of Changes In Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Select Balance Sheet Data [Abstract]
Balance			$ 50,761
Amortization expense	$ (1,738)	$ (2,677)	(3,476)	$ (5,353)
Balance	$ 47,285		$ 47,285

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Select balance sheet data - Schedule of Future Amortization Expense (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Select Balance Sheet Data [Abstract]
2022 (remainder)	$ 3,476
2023	6,866
2024	5,192
2025	5,192
2026	5,192
Thereafter	$ 17,556

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Bank revolving credit notes - Additional Information (Details) - USD ($) $ in Thousands		3 Months Ended	6 Months Ended		12 Months Ended
	Sep. 26, 2019	Dec. 31, 2021	Jun. 30, 2022	Dec. 31, 2020	Dec. 31, 2021
Line Of Credit Facility [Line Items]
Revolving credit notes		$ 67,610	$ 76,063		$ 67,610
A&R Credit Agreement [Member]
Line Of Credit Facility [Line Items]
Minimum interest coverage ratio			3.00%
Maximum consolidated leverage ratio			3.25%
A&R Credit Agreement [Member] | The Agent [Member]
Line Of Credit Facility [Line Items]
Credit agreement additional borrowing capacity through accordion feature	$ 100,000
Credit agreement maturity date	Sep. 26, 2024
Second Amendment [Member]
Line Of Credit Facility [Line Items]
Minimum interest coverage ratio			3.00%
Maximum consolidated leverage ratio			3.25%
Debt instrument covenant description			The Second Amendment provided the Company with temporary changes to the total leverage ratio covenant for the period from June 30, 2020, through December 31, 2021, or such earlier date as the Company may elect (Covenant Relief Period), in return for certain increases in interest rates, fees and restrictions on certain activities of the Company, including capital expenditures, acquisitions, dividends and share repurchases. New pricing, which took effect for the quarters ending on and after September 30, 2020, includes interest at a fluctuating London Interbank Offered Rate (LIBOR) (at a floor of 75 basis points), plus 1.00% to 2.75%, along with the commitment fee ranging from 20 to 50 basis points.
Floor rate			0.75%
Leverage ratio		3.25%		4.25%
Consolidated leverage ratio			1.52%
Interest coverage ratios			18.34%
Second Amendment [Member] | Minimum [Member]
Line Of Credit Facility [Line Items]
Debt instrument commitment fee percentage			0.20%
Second Amendment [Member] | Minimum [Member] | LIBOR [Member]
Line Of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate			1.00%
Second Amendment [Member] | Maximum [Member]
Line Of Credit Facility [Line Items]
Debt instrument commitment fee percentage			0.50%
Second Amendment [Member] | Maximum [Member] | LIBOR [Member]
Line Of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate			2.75%
Third Amendment [Member]
Line Of Credit Facility [Line Items]
Capital expenditure incurred					35,000
Third Amendment [Member] | Maximum [Member]
Line Of Credit Facility [Line Items]
Capital expenditure incurred					$ 70,000
Fourth Amendment [Member]
Line Of Credit Facility [Line Items]
Capital expenditure incurred			$ 35,000
Fourth Amendment [Member] | Maximum [Member]
Line Of Credit Facility [Line Items]
Capital expenditure incurred			$ 65,000
Revolving Credit Facility [Member]
Line Of Credit Facility [Line Items]
Interest rate			2.06%		1.75%
Revolving commitments fee percentage			0.20%		0.20%
Revolving credit notes		$ 67,610	$ 76,063		$ 67,610
Revolving Credit Facility [Member] | A&R Credit Agreement [Member] | The Agent [Member]
Line Of Credit Facility [Line Items]
Credit agreement borrowing capacity	$ 200,000
Letter of Credit Sub-facility [Member] | A&R Credit Agreement [Member] | The Agent [Member]
Line Of Credit Facility [Line Items]
Credit agreement borrowing capacity	5,000
Swingline Facility [Member] | A&R Credit Agreement [Member] | The Agent [Member]
Line Of Credit Facility [Line Items]
Credit agreement borrowing capacity	$ 20,000

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Leases (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jan. 01, 2022
Leases
Lease option to extend	true
Operating lease assets	$ 37,842
Operating lease liability	$ 38,334
Real Property [Member]
Leases
Operating lease assets		$ 37,908
Operating lease liability		38,185
Real Property [Member] | Maximum [Member]
Leases
Lease term	10 years
Personal Property [Member]
Leases
Operating lease assets		2,415
Operating lease liability		$ 2,418
Personal Property [Member] | Maximum [Member]
Leases
Lease term	7 years

XML

Leases - Components of lease expense (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2022
Leases [Abstract]
Amortization of finance lease assets	$ 78	$ 157
Interest on finance lease liabilities	11	22
Total finance lease expense	89	179
Operating lease expense	1,512	3,034
Short-term lease expense	139	318
Variable lease expense	61	108
Sublease income	(146)	(146)
Total lease expense	1,655	3,493
Rent expense	$ 1,081	$ 2,165

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Leases - Supplemental information related to leases (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Jan. 01, 2022
Leases [Abstract]
Finance leases right of use assets	$ 981	$ 981
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Property, plant and equipment, net
Operating lease assets	$ 37,842
Total lease assets	38,823
Current portion of finance lease obligation	323
Current portion of operating lease obligation	4,803
Finance lease obligation, less current maturities	730
Operating lease obligation, less current maturities	33,531
Total lease liabilities	$ 39,387
Weighted average remaining lease term (in years) - Finance leases	3 years 1 month 6 days
Weighted average remaining lease term (in years) - Operating leases	8 years
Weighted average discount rate -Finance leases	4.00%
Weighted average discount rate -Operating leases	2.46%

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Leases - ROU asset balances (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Leases
Total lease assets	$ 38,823
Real estate leases
Leases
Total lease assets	35,706
Equipment [Member]
Leases
Total lease assets	2,874
Vehicles [Member]
Leases
Total lease assets	$ 243

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Leases - Minimum lease payments under ASC 842 (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Operating leases
2022 (remainder)	$ 2,837
2023	5,704
2024	5,667
2025	4,837
2026	4,656
Thereafter	18,771
Total	42,472
Less: imputed interest	(4,138)
Total lease obligations	38,334
Finance leases
2022 (remainder)	179
2023	359
2024	357
2025	223
Total lease payments	1,118
Less: imputed interest	(65)
Total lease obligations	1,053
Leases
2022 (remainder)	3,016
2023	6,063
2024	6,024
2025	5,060
2026	4,656
Thereafter	18,771
Total lease payments	43,590
Less: imputed interest	(4,203)
Total lease obligations	$ 39,387

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Leases - Future minimum lease payments under ASC 840 (Details) $ in Thousands	Jun. 30, 2021 USD ($)
Operating lease
2021 (remainder)	$ 2,647
2022	5,528
2023	5,521
2024	4,786
2025	4,282
Thereafter	21,912
Total minimum lease payments	44,676
Finance lease
2022 (remainder)	367
2023	734
2024	734
2025	514
2026	226
Total	2,575
Leases
2021 (remainder)	3,014
2022	6,262
2023	6,255
2024	5,300
2025	4,508
Thereafter	21,912
Total minimum lease payments	$ 47,251

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Leases - Supplemental cash flow information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities for finance leases: Operating cash flows	$ 22
Cash paid for amounts included in the measurement of lease liabilities for finance leases: Financing cash flows	157	$ 310
Cash paid for amounts included in the measurement of lease liabilities for operating leases: Operating cash flows	2,837
Right-of-use assets obtained in exchange for recorded lease obligations: Operating cash flows	$ 106

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Employee stock ownership plan - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Employee stock ownership plan (ESOP), (income) expense	$ 1,330	$ 228	$ 1,820	$ 701
Shares in ESOP	5,684,879		5,684,879		7,292,392
Employee Stock Option [Member]
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Employee stock ownership plan (ESOP), (income) expense	$ 1,330	$ 228	$ 1,820	$ 701

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Retirement plans - Additional Information (Details)	6 Months Ended
	Jun. 30, 2022
Compensation And Retirement Disclosure [Abstract]
Percentage of employee contribution of eligible compensation plan	50.00%

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Income taxes - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Income Tax Disclosure [Abstract]
Income tax expense	$ 1,798	$ 1,007	$ 2,974	$ 1,996
Effective income tax rate	23.27%	23.43%	23.37%	25.48%
Penalties or interest recorded	$ 0		$ 0
Tax expense for interest and penalties			0
Unrecognized tax benefits that would impact effective tax rate	$ 394		$ 394		$ 314

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Deferred compensation - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Deferred Compensation Arrangement With Individual Excluding Share Based Payments And Postretirement Benefits [Line Items]
Description of deferred compensation arrangements			The Mayville Engineering Deferred Compensation Plan is available for certain employees designated to be eligible to participate by the Company and approved by the Board of Directors.
Deferred compensation plan (Income) expense	$ 1,208	$ 3,210	$ 3,755	$ 6,074
Deferred compensation cash-based arrangements liability, Current	17,531		17,531		$ 0
Deferred compensation cash-based arrangements liability, Non current	2,949		2,949		$ 25,117
Deferred compensation, distributions paid			1,048	575
Deferred Profit Sharing [Member]
Deferred Compensation Arrangement With Individual Excluding Share Based Payments And Postretirement Benefits [Line Items]
Deferred compensation plan (Income) expense	(2,461)	$ 575	$ (3,589)	$ 405
Employees [Member]
Deferred Compensation Arrangement With Individual Excluding Share Based Payments And Postretirement Benefits [Line Items]
Deferred compensation plan (Income) expense	$ 0
Maximum [Member]
Deferred Compensation Arrangement With Individual Excluding Share Based Payments And Postretirement Benefits [Line Items]
Annual short term cash incentive			100.00%
Deferred compensation arrangements			50.00%

XML

Self-Funded insurance - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Insurance [Abstract]
Estimated accrued liability	$ 1,421		$ 1,421		$ 1,471
Reinsured limit of aggregate expense	$ 3,388	$ 3,290	$ 8,148	$ 7,011

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Segments - Additional Information (Details)	6 Months Ended
	Jun. 30, 2022 segment
Segment Reporting [Abstract]
Number of operating segments	1

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Fair value of financial instruments - Schedule of Financial Assets and Liabilities Accounted for at Fair Value by Fair Value Hierarchy (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total	$ 20,480	$ 25,117
Fair Value, Inputs, Level 1 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total	20,480	22,272
Fair Value, Inputs, Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total		2,845
Deferred Compensation Liability [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total	20,480	25,117
Deferred Compensation Liability [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total	$ 20,480	22,272
Deferred Compensation Liability [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total		$ 2,845

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Earnings Per Share, Basic [Abstract]
Net income attributable to MEC	$ 5,929	$ 3,822	$ 3,292	$ 2,545	$ 9,751	$ 5,837
Average shares outstanding	20,581,945		20,454,541		20,490,944	20,316,936
Basic per share	$ 0.29		$ 0.16		$ 0.48	$ 0.29
Earnings Per Share, Diluted, Other Disclosures [Abstract]
Average shares outstanding	20,581,945		20,454,541		20,490,944	20,316,936
Effect of dilutive share-based compensation	68,606		409,990		316,733	368,805
Total potential shares outstanding	20,650,551		20,864,531		20,807,677	20,685,741
Diluted per share	$ 0.29		$ 0.16		$ 0.47	$ 0.28

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Earnings per share - Schedule of Antidilutive Securities Excluded from Computation of Diluted Earnings Per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted earnings per share	68,606	409,990	316,733	368,805
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted earnings per share		300,510		300,510

XML

Revenue Recognition - Schedule of Changes in Contract Assets and Liabilities (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($)
Revenue From Contract With Customer [Abstract]
Contract asset, beginning balance	$ 3,950
Net Activity	1,367
Contract asset, ending balance	5,317
Contract liability, beginning balance	2,718
Net activity	2,598
Contract liability, ending balance	$ 5,316

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Revenue Recognition - Schedule of Disaggregation of Revenue by Product Category (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Disaggregation Of Revenue [Line Items]
Net sales	$ 138,337	$ 120,213	$ 274,589	$ 232,833
Operating Segments
Disaggregation Of Revenue [Line Items]
Net sales	142,160	121,459	282,737	235,634
Intercompany Elimination
Disaggregation Of Revenue [Line Items]
Net sales	(3,823)	(1,246)	(8,148)	(2,801)
Outdoor Sports | Reportable Legal Entities
Disaggregation Of Revenue [Line Items]
Net sales	2,522	3,006	5,049	5,677
Fabrication | Operating Segments
Disaggregation Of Revenue [Line Items]
Net sales	83,038	78,318	165,271	147,689
Performance structures | Reportable Legal Entities
Disaggregation Of Revenue [Line Items]
Net sales	28,197	18,753	57,157	39,208
Tube | Reportable Legal Entities
Disaggregation Of Revenue [Line Items]
Net sales	19,488	15,760	37,796	30,647
Tank | Reportable Legal Entities
Disaggregation Of Revenue [Line Items]
Net sales	$ 8,915	$ 5,622	$ 17,464	$ 12,413

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Concentration of major customers - Schedule of Major Customer Concentrations (Details) - Customer Concentration Risk [Member]	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Customer A [Member] | Net Sales [Member]
Concentration Risk [Line Items]
Concentration risk percentage	18.30%	16.70%	18.20%	16.20%
Customer A [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration risk percentage			15.10%		10.20%
Customer B [Member] | Net Sales [Member]
Concentration Risk [Line Items]
Concentration risk percentage	11.90%	10.30%	11.50%	11.10%
Customer B [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration risk percentage			<10		<10
Customer C [Member] | Net Sales [Member]
Concentration Risk [Line Items]
Concentration risk percentage				10.80%
Concentration risk percentage	<10	<10	<10
Customer C [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration risk percentage			<10		<10
Customer D [Member] | Net Sales [Member]
Concentration Risk [Line Items]
Concentration risk percentage	16.10%	15.20%	15.90%	14.30%
Customer D [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration risk percentage			10.20%
Concentration risk percentage					<10
Customer E [Member] | Net Sales [Member]
Concentration Risk [Line Items]
Concentration risk percentage	<10	<10	<10	<10
Customer E [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration risk percentage			12.70%		11.20%

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Stock based compensation - Additional Information (Details) - $ / shares	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Apr. 20, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options, outstanding number	1,107,714
Weighted average exercise price	$ 10.31
Weighted average contractual life remaining	7 years 8 months 23 days
Unrecognized stock-based compensation recognition period	Apr. 19, 2023
2019 Omnibus Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Payments based on the value of its common stock	2,000,000
Number of shares authorized			2,500,000
Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of units, vested	271,992	314,902
Employee Stock Option [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of units, vested	512,927	484,661
Weighted average strike price	$ 9.18	$ 11.23

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Stock based compensation - Summary of Stock-based Compensation Expenses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock based compensation expense, net of tax	$ 1,456	$ 1,388	$ 2,714	$ 2,588
Unit awards [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock based compensation expense, net of tax	874	849	1,626	1,568
Option awards [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock based compensation expense, net of tax	$ 582	$ 539	$ 1,088	$ 1,020

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Stock based compensation - Schedule of Unrecognized Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2022	Mar. 31, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Beginning Balance	$ 7,497	$ 3,213
Grants	750	5,580
Forfeitures		(39)
Expense	(1,456)	(1,257)
Ending Balance	6,791	7,497
Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Beginning Balance	3,893	1,676
Grants	750	3,007
Forfeitures		(39)
Expense	(874)	(751)
Ending Balance	3,769	3,893
Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Beginning Balance	3,604	1,537
Grants		2,573
Expense	(582)	(506)
Ending Balance	$ 3,022	$ 3,604