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.

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 29,~~October 28, 2021, the registrant had ~~20,475,915~~20,436,719 shares of common stock, no par value per share, outstanding.

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, 2020, filed with the Securities and Exchange Commission (the SEC) on March 5, 2021, 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:

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.

	June 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
ASSETS
Cash and cash equivalents	$	119		$	121		$	127		$	121
Receivables, net of allowances for doubtful accounts of $1,347 at June 30, 2021 and $1,298 at December 31, 2020		58,362			42,080
Receivables, net of allowances for doubtful accounts of $1,346 at September 30, 2021 and $1,298 at December 31, 2020								58,841			42,080
Inventories, net		50,939			41,366			62,914			41,366
Tooling in progress		2,093			3,126			3,436			3,126
Prepaid expenses and other current assets		3,400			2,555			3,066			2,555
Total current assets		114,913			89,248			128,384			89,248
Property, plant and equipment, net		114,695			106,688			120,150			106,688
Assets held for sale		3,552			3,552			—			3,552
Goodwill		71,535			71,535			71,535			71,535
Intangible assets-net		56,114			61,467			53,437			61,467
Capital lease, net		2,278			2,581			2,115			2,581
Other long-term assets		3,185			3,462			3,595			3,462
Total	$	366,272		$	338,533		$	379,216		$	338,533
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	49,254		$	33,495		$	49,814		$	33,495
Current portion of capital lease obligation		641			626			648			626
Accrued liabilities:
Salaries, wages, and payroll taxes		12,014			10,190			10,459			10,190
Profit sharing and bonus		3,569			3,089			4,538			3,089
Other current liabilities		5,369			5,340			6,924			5,340
Total current liabilities		70,847			52,740			72,383			52,740
Bank revolving credit notes		43,854			45,257			54,718			45,257
Capital lease obligation, less current maturities		1,736			2,061			1,572			2,061
Deferred compensation and long-term incentive, less current portion		25,461			25,631			25,373			25,631
Deferred income tax liability		12,994			11,887			12,928			11,887
Other long-term liabilities		100			100			100			100
Total liabilities		154,992			137,676			167,074			137,676
Common shares, no par value, 75,000,000 authorized, 21,378,578 shares issued at June 30, 2021 and 21,093,035 at December 31, 2020		—			—
Common shares, no par value, 75,000,000 authorized, 21,386,382 shares issued at September 30, 2021 and 21,093,035 at December 31, 2020								—			—
Additional paid-in-capital		194,754			190,793			195,994			190,793
Retained earnings		20,835			14,998			21,110			14,998
Treasury shares at cost, 902,663 shares at June 30, 2021 and 1,033,645 at December 31, 2020		(4,309	)		(4,934	)
Treasury shares at cost, 949,663 shares at September 30, 2021 and 1,033,645 at December 31, 2020								(4,962	)		(4,934	)
Total shareholders’ equity		211,280			200,857			212,142			200,857
Total	$	366,272		$	338,533		$	379,216		$	338,533

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

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020			2021			2020
Net sales	$	120,213		$	62,582		$	232,833		$	171,187		$	109,018		$	91,075		$	341,851		$	262,262
Cost of sales		103,933			63,736			201,777			160,497			98,109			81,340			299,885			241,838
Amortization of intangibles		2,677			2,677			5,353			5,353			2,677			2,677			8,030			8,030
Profit sharing, bonuses, and deferred compensation		3,210			1,194			6,074			2,519			1,939			2,288			8,013			4,807
Employee stock ownership plan (income) expense		228			(675	)		701			—
Employee stock ownership plan expense														124			—			825			—
Other selling, general and administrative expenses		5,362			4,552			10,059			10,153			5,305			4,490			15,365			14,642
Income (loss) from operations		4,803			(8,902	)		8,869			(7,335	)		864			280			9,733			(7,055	)
Interest expense		(504	)		(637	)		(1,036	)		(1,463	)		(526	)		(647	)		(1,562	)		(2,110	)
Income (loss) before taxes		4,299			(9,539	)		7,833			(8,798	)		338			(367	)		8,171			(9,165	)
Income tax expense (benefit)		1,007			(2,525	)		1,996			(1,834	)		63			733			2,059			(1,101	)
Net income (loss) and comprehensive income (loss)	$	3,292		$	(7,014	)	$	5,837		$	(6,964	)	$	275		$	(1,100	)	$	6,112		$	(8,064	)

Earnings (loss) per share:
Basic	$	0.16		$	(0.35	)	$	0.29		$	(0.35	)	$	0.01		$	(0.05	)	$	0.30		$	(0.41	)
Diluted	$	0.16		$	(0.35	)	$	0.28		$	(0.35	)	$	0.01		$	(0.05	)	$	0.29		$	(0.41	)

Weighted average shares outstanding:
Basic		20,454,541			19,902,912			20,316,936			19,718,222			20,520,985			20,077,039			20,385,732			19,838,701
Diluted		20,864,531			19,902,912			20,685,741			19,718,222			20,961,470			20,077,039			20,812,382			19,838,701

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

	Six Months Ended June 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	5,837		$	(6,964	)	$	6,112		$	(8,064	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		10,236			11,086			15,520			16,304
Amortization		5,353			5,353			8,030			8,030
Stock-based compensation expense		2,588			2,741			3,771			3,719
Allowance for doubtful accounts		49			591			48			767
Inventory excess and obsolescence reserve		(589	)		1,413			(511	)		279
Loss on disposal of property, plant and equipment		66			618
Loss (gain) on disposal of property, plant and equipment								(1,311	)		688
Deferred compensation and long-term incentive		(170	)		(86	)		(258	)		234
Other non-cash adjustments		151			168			236			262
Changes in operating assets and liabilities – net of effects of acquisition:
Accounts receivable		(16,331	)		(35	)		(16,809	)		(9,233	)
Inventories		(8,984	)		3,936			(21,037	)		7,449
Tooling in progress		1,033			(1,463	)		(310	)		(2,053	)
Prepaids and other current assets		(1,094	)		(222	)		(989	)		338
Accounts payable		14,324			(14,356	)		13,819			(4,016	)
Deferred income taxes		1,484			(1,895	)		1,152			(1,189	)
Accrued liabilities, excluding long-term incentive		4,277			2,226			5,330			5,776
Net cash provided by operating activities		18,230			3,111			12,793			19,291
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(16,986	)		(3,652	)		(26,588	)		(5,354	)
Proceeds from sale of property, plant and equipment		414			1,766			5,348			1,920
Net cash used in investing activities		(16,572	)		(1,886	)		(21,240	)		(3,434	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank revolving credit notes		157,388			158,643			276,568			209,857
Payments on bank revolving credit notes		(158,791	)		(156,743	)		(267,108	)		(222,443	)
Deferred financing costs		—			(200	)		—			(206	)
Purchase of treasury stock		—			(2,510	)		(653	)		(2,510	)
Payments on capital leases		(310	)		(296	)		(467	)		(446	)
Proceeds from the exercise of stock options		80			—			139			—
Other financing activities		(27	)		—			(26	)		—
Net cash used in financing activities		(1,660	)		(1,106	)
Net cash provided by (used in) financing activities								8,453			(15,748	)
Net increase (decrease) in cash and cash equivalents		(2	)		119			6			109
Cash and cash equivalents at beginning of period		121			1			121			1
Cash and cash equivalents at end of period	$	119		$	120		$	127		$	110
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,077		$	1,714		$	1,580		$	2,366
Cash paid for taxes	$	716		$	15		$	1,068		$	351
Non-cash construction in progress in accounts payable	$	2,994		$	265		$	4,059		$	201

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

	Shareholder’s Equity											Shareholder’s Equity
	Additional Paid-in-Capital		Treasury Shares			Retained Earnings			Total			Additional Paid-in-Capital		Treasury Shares			Retained Earnings			Total
Balance as of December 31, 2020	$	190,793	$	(4,934	)	$	14,998		$	200,857		$	190,793	$	(4,934	)	$	14,998		$	200,857
Net income		—		—			2,545			2,545			—		—			2,545			2,545
401(k) plan contribution		1,319		625			—			1,944			1,319		625			—			1,944
Stock-based compensation		1,200		—			—			1,200			1,200		—			—			1,200
Balance as of March 31, 2021	$	193,312	$	(4,309	)	$	17,543		$	206,546		$	193,312	$	(4,309	)	$	17,543		$	206,546
Net income		—		—			3,292			3,292			—		—			3,292			3,292
Stock-based compensation		1,388		—			—			1,388			1,388		—			—			1,388
Stock options exercised		54		—			—			54			54		—			—			54
Balance as of June 30, 2021	$	194,754	$	(4,309	)	$	20,835		$	211,280		$	194,754	$	(4,309	)	$	20,835		$	211,280
Net income													—		—			275			275
Purchase of treasury stock													—		(653	)		—			(653	)
Stock-based compensation													1,182		—			—			1,182
Stock options exercised													58		—			—			58
Balance as of September 30, 2021												$	195,994	$	(4,962	)	$	21,110		$	212,142


	Shareholder’s Equity											Shareholder’s Equity
	Additional Paid-in-Capital		Treasury Shares			Retained Earnings			Total			Additional Paid-in-Capital		Treasury Shares			Retained Earnings			Total
Balance as of December 31, 2019	$	183,687	$	(4,882	)	$	22,090		$	200,895		$	183,687	$	(4,882	)	$	22,090		$	200,895
Net income		—		—			50			50			—		—			50			50
Purchase of treasury stock		—		(2,435	)		—			(2,435	)		—		(2,435	)		—			(2,435	)
ESOP Contribution		2,374		2,457			—			4,831			2,374		2,457			—			4,831
Stock-based compensation		1,582		—			—			1,582			1,582		—			—			1,582
Balance as of March 31, 2020	$	187,643	$	(4,860	)	$	22,140		$	204,923		$	187,643	$	(4,860	)	$	22,140		$	204,923
Net loss		—		—			(7,014	)		(7,014	)		—		—			(7,014	)		(7,014	)
Purchase of treasury stock		—		(74	)		—			(74	)		—		(74	)		—			(74	)
Stock-based compensation		1,159		—			—			1,159			1,159		—			—			1,159
Balance as of June 30, 2020	$	188,802	$	(4,934	)	$	15,126		$	198,994		$	188,802	$	(4,934	)	$	15,126		$	198,994
Net loss													—		—			(1,100	)		(1,100	)
Stock-based compensation													978		—			—			978
Balance as of September 30, 2020												$	189,780	$	(4,934	)	$	14,026		$	198,872

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

The interim unaudited 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, 2020, 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 2020 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.

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, fitness equipment and other end markets. Along with process engineering and development services, MEC maintains an extensive manufacturing infrastructure with 19 facilities across 7 states. These facilities make it possible to offer conventional and computer numerical control (CNC) stamping, shearing, fiber laser cutting, forming, drilling, tapping, grinding, tube bending, machining, welding, assembly and logistic services. MEC also possesses a broad range of finishing capabilities including shot blasting, e-coating, powder coating, wet spray and military grade chemical agent resistant coating (CARC) painting.

Our 1 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, fitness equipment and other products.

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

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases, creating Topic 842, which requires lessees to record the assets and liabilities arising from all leases in the statement of financial position. Under ASU 2016-02, lessees will recognize a liability for lease payments and a right-of-use asset. When measuring assets and 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. For leases with a term of 12 months or less, lessees are permitted to make an accounting policy election to not recognize lease assets and liabilities. This guidance retains the distinction between finance leases and operating leases and the classification criteria remains similar to existing guidance. For financing leases, a lessee will recognize the interest on a lease liability separate from amortization of the right-of-use 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. For public companies, this guidance will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For as long as the Company remains an “emerging growth company” (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. Early adoption is permitted. The Company is evaluating the potential impact of this guidance on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes, creating Topic 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 financial statements.

A summary of the Company’s evaluation of other recent accounting pronouncements is included in the Company’s 2020 financial statements in its Annual Report on Form 10-K for the year ended December 31, 2020.

Inventories are stated at the lower of cost, determined on the first-in, first-out method (FIFO) 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.

	June 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Finished goods and purchased parts	$	29,205	$	24,561	$	35,195	$	24,561
Raw materials		14,884		11,266		19,317		11,266
Work-in-process		6,850		5,539		8,402		5,539
Total	$	50,939	$	41,366	$	62,914	$	41,366

Property, plant and equipment as of ~~June~~September 30, 2021 and December 31, 2020 consist of:

	Useful Lives Years*	June 30, 2021		December 31, 2020		Useful Lives Years*	September 30, 2021		December 31, 2020
Land	Indefinite	$	1,033	$	1,033	Indefinite	$	1,033	$	1,033
Land improvements	15-39		3,169		3,169	15-39		3,169		3,169
Building and building improvements	15-39		55,556		55,172	15-39		55,837		55,172
Machinery, equipment and tooling	3-10		208,170		199,854	3-10		213,781		199,854
Vehicles	5		3,841		3,778	5		3,856		3,778
Office furniture and fixtures	3-7		17,126		16,242	3-7		17,671		16,242
Construction in progress	N/A		11,717		3,931	N/A		16,005		3,931
Total property, plant and equipment, gross			300,612		283,179			311,352		283,179
Less accumulated depreciation			185,917		176,491			191,202		176,491
Total property, plant and equipment, net		$	114,695	$	106,688		$	120,150	$	106,688

The Company completed the closure of its Greenwood, SC manufacturing facility during the third quarter of the prior ~~year.~~year and sold the facility during the current quarter for $5,300 before commissions and fees, resulting in a gain on the sale of the asset of $1,374, which is classified in cost of sales on the Condensed Consolidated Statements of Comprehensive Income (Loss) as of September 30, 2021. The net amount of property, plant and equipment associated with the facility was $3,552, which iswas classified in assets held for sale on the Condensed Consolidated Balance Sheets as of ~~June 30, 2021 and~~ December 31, 2020.

Additionally, the Company finalized an agreement to open a new facility in Hazel Park, MI during the quarter ended June 30, 2021. As of ~~June~~September 30, 2021, the Company invested ~~$5,271~~$11,758 for the ramp-up of production which is classified in construction in progress.

Changes in goodwill between December 31, 2020 and ~~June~~September 30, 2021 consist of:

Balance as of December 31, 2020	$	71,535	$	71,535
Impairment		0		0
Balance as of June 30, 2021	$	71,535
Balance as of September 30, 2021			$	71,535

The following is a listing of intangible assets, the useful lives in years (amortization period) and accumulated amortization as of ~~June~~September 30, 2021 and December 31, 2020:

	Useful Lives Years	June 30, 2021			December 31, 2020			Useful Lives Years	September 30, 2021			December 31, 2020
Amortizable intangible assets:
Customer relationships and contracts	9-12	$	78,340		$	78,340		9-12	$	78,340		$	78,340
Trade name	10		14,780			14,780		10		14,780			14,780
Non-compete agreements	5		8,800			8,800		5		8,800			8,800
Patents	19		24			24		19		24			24
Accumulated amortization			(49,641	)		(44,288	)			(52,318	)		(44,288	)
Total amortizable intangible assets, net			52,303			57,656				49,626			57,656
Non-amortizable brand name			3,811			3,811				3,811			3,811
Total intangible assets, net		$	56,114		$	61,467			$	53,437		$	61,467

Changes in intangible assets between December 31, 2020 and ~~June~~September 30, 2021 consist of:

Balance as of December 31, 2020	$	61,467		$	61,467
Amortization expense		(5,353	)		(8,030	)
Balance as of June 30, 2021	$	56,114
Balance as of September 30, 2021				$	53,437

Amortization expense was $2,677 for each of the three months ended ~~June~~September 30, 2021 and 2020, and ~~$5,353~~$8,030 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

Year ending December 31,
2021 (remainder)	$	5,353	$	2,677
2022	$	6,952	$	6,952
2023	$	6,866	$	6,866
2024	$	5,192	$	5,192
2025	$	5,192	$	5,192
Thereafter	$	22,748	$	22,747

On September 26, 2019, and as last amended on March 31, 2021, 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.

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 provides 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 takes 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 will be 4.25 to 1.00 for quarters ending June 30, 2020 through and including December 31, 2020, and will decline in quarterly increments to 3.25 to 1.00 through the quarter ending December 31, 2021.

Due to our ~~recently~~previously announced relationship with a strategic new customer within the fitness equipment market, we entered into an amendment (Third Amendment) to the Credit Agreement on March 31, 2021. The Third Amendment allows the Company to incur up to $70,000 of capital expenditures in 2021, as opposed to $35,000.

At ~~June~~September 30, 2021, our consolidated total leverage ratio was ~~1.00~~1.23 to 1.00 as compared to a covenant maximum of ~~3.75~~3.50 to 1.00 in accordance with the Second Amendment of the Credit Agreement.

At ~~June~~September 30, 2021, our interest coverage ratio was ~~15.24~~16.51 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 2.25% and 2.50% as of ~~June~~September 30, 2021 and December 31, 2020, respectively. Additionally, the agreement has a fee on the average daily unused portion of the aggregate unused revolving commitments. This fee was 0.25% and 0.20% as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

The Company was in compliance with all financial covenants of its credit agreements as of ~~June~~September 30, 2021 and December 31, 2020. The amount borrowed on the revolving credit notes was ~~$43,854~~$54,718 and $45,257 as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Capital leases consist of equipment with a capitalized cost of $3,847 and $3,825 and accumulated depreciation of ~~$1,569~~$1,732 and $1,245 at ~~June~~September 30, 2021 and December 31, 2020, respectively. Depreciation of $163 and ~~$324~~$487 was recognized on the capital lease assets during the three- and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and $161 and ~~$322~~$483 during the three- and ~~six~~nine months ended ~~June~~September 30, 2020, respectively. Non-cash capital lease transactions amounted to $0 for the three- and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. Future minimum lease payments required under the lease are as follows:

Year ending December 31,
2021 (remainder)	$	367	$	184
2022		734		734
2023		734		734
2024		514		514
2025		226		226
Thereafter		—		—
Total		2,575		2,392
Less payment amount allocated to interest		198		172
Present value of capital lease obligation	$	2,377	$	2,220
Current portion of capital lease obligation		641		648
Long-term portion of capital lease obligation		1,736		1,572
Total capital lease obligation	$	2,377	$	2,220

Operating leases relate to property, plant and equipment. Future minimum lease payments required under the leases are as follows:

Year ending December 31,
2021 (remainder)	$	2,647	$	1,542
2022		5,528		5,849
2023		5,521		5,849
2024		4,786		5,121
2025		4,282		4,623
Thereafter		21,912		22,976
Total	$	44,676	$	45,960

The Company leases certain office space, warehousing facilities, equipment and vehicles under operating lease arrangements with third-party lessors. These lease arrangements expire at various times through August 2031. Total rent expense under the arrangements was approximately ~~$1,081~~$1,392 and ~~$1,094~~$1,128 for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and ~~$2,165~~$3,557 and ~~$2,155~~$3,283 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

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~~Board of ~~directors’~~Directors’ approval. For the three months ended ~~June~~September 30, 2021 and 2020, the Company’s estimated ESOP expense was ~~$228~~$124 and ~~income of $675,~~$0, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company’s estimated ESOP expense amounted to ~~$701~~$825 and $0, 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~~September 30, 2021, and December 31, 2020, the ESOP shares, excluding safe harbor shares held in the Company’s 401(k) plan, consisted of 7,292,392 and 8,253,533 in allocated shares, respectively.

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).

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 ~~$1,007~~$63 and ~~$1,996,~~$2,059, and the effective tax rate (ETR) from continuing operations was ~~23.43%~~18.64% and ~~25.48%~~25.20% for the three and ~~six~~nine months ended ~~June~~September 30, 2021, 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~~nine months ended ~~June~~September 30, 2020, income tax ~~benefit~~expense (benefit) was estimated at ~~$2,525~~$733 and ~~$1,834~~($1,101) and the ETR from continuing operations was ~~27.69%~~-199.82% and ~~28.77%~~12.17% respectively.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in these jurisdictions. Accounting Standards Codification (ASC) Topic 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 (benefit). There were 0 amounts for penalties or interest recorded as of ~~June~~September 30, 2021. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its 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~~September 30, 2021. The Company does not anticipate that there will be a material change in the balance of the unrecognized tax benefits in the next twelve months. Any interest and penalties related to uncertain tax positions are recorded in income tax expense. NaN amounts have been recorded as tax expense for interest and penalties for the three months ended ~~June~~September 30, 2021, as the amount for the utilized portion for the research and development credit on the Wisconsin return is considered to be immaterial. At ~~June~~September 30, 2021 and December 31, 2020, a total of ~~$307~~$301 and $208, 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, 2017, and state tax returns beginning January 1, 2016, are open for examination.

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.

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 months ended ~~June~~September 30, 2021 and 2020, eligible employees elected to defer compensation of $0 and ~~$12,~~$10, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, eligible employees elected to defer compensation of $0 and ~~$41,~~$51, respectively. As of ~~June~~September 30, 2021, and December 31, 2020, the total amount accrued for all benefit years under this plan was ~~$25,461~~$25,373 and $25,631, respectively, which is included within the deferred compensation and long-term incentive on the Condensed Consolidated Balance Sheets. 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 (income) expense for the deferred compensation plan for the three months ended ~~June~~September 30, 2021 and 2020 amounted to ~~$575~~$(89) and ~~$586,~~$310, respectively. Total ~~(income)~~ expense for the deferred compensation plan for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 amounted to ~~$405~~$316 and ~~$(21), respectively~~$289, respectively. These expenses are included in profit sharing, bonuses and deferred compensation on the Condensed Consolidated Statements of Comprehensive Income (Loss).

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.

As of March 31, 2020, the Company consolidated its benefit plans ~~with~~and now has no specific stop loss ~~and~~limitation but has an aggregate stop loss limit to ~~limit~~mitigate risk. Expense related to this contract is approximately $~~3,290~~$5,513 and $~~5,411~~$4,757 for the three months ended ~~June~~September 30, 2021 and 2020, respectively, and $~~7,011~~$12,524 and ~~$11,135~~$16,072 for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. An estimated accrued liability of approximately $~~1,262~~$1,420 and $~~1,721~~$1,721 was recorded as of ~~June~~September 30, 2021 and December 31, 2020, respectively, for estimated unpaid claims and is included within other current liabilities on the Condensed Consolidated Balance Sheets.

The Company applies the provisions of ASC Topic 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 1 operating segment. The Company does not earn revenues or have long-lived assets located in foreign countries.

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:

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

			Fair Value Measurements at Report Date Using								Fair Value Measurements at Report Date Using
	Balance at June 30, 2021		(Level 1)		(Level 2)		(Level 3)		Balance at September 30, 2021		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	25,461	$	18,296	$	7,165	$	0	$	25,373	$	22,385	$	2,988	$	0
Total	$	25,461	$	18,296	$	7,165	$	0	$	25,373	$	22,385	$	2,988	$	0

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 financial statements 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 majority of the current balance as Level 1. The change in fair value is recorded in the ~~Profit~~profit sharing, bonuses, and deferred

compensation line item on the Condensed Consolidated Statements of Comprehensive Income (Loss). The balance due to participants is reflected on the deferred compensation and long-term incentive line item on the Condensed Consolidated Balance Sheets.

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

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.

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:

The Company has contract assets and contract liabilities, which are included in other current assets and other current liabilities on the Condensed Consolidated Balance Sheet, 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 either at a point in time or over a period of time.

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~~nine months ended ~~June~~September 30, 2021.

	Contract Assets			Contract Liabilities		Contract Assets		Contract Liabilities
As of December 31, 2020	$	3,126		$	1,060	$	3,126	$	1,060
Net Activity		(1,033	)		260		309		1,412
As of June 30, 2021	$	2,093		$	1,320
As of September 30, 2021						$	3,435	$	2,472

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020			2021			2020
Outdoor sports	$	3,006		$	1,592		$	5,677		$	3,363		$	2,230		$	1,898		$	7,907		$	5,260
Fabrication		78,318			43,224			147,689			113,016			74,512			56,658			222,201			169,674
Performance structures		18,753			7,152			39,208			23,791			15,632			18,543			54,840			42,334
Tube		15,760			9,320			30,647			24,274			14,392			12,772			45,039			37,047
Tank		5,622			2,364			12,413			9,082			5,564			4,316			17,977			13,399
Total		121,459			63,652			235,634			173,526			112,330			94,187			347,964			267,714
Intercompany sales elimination		(1,246	)		(1,070	)		(2,801	)		(2,339	)		(3,312	)		(3,112	)		(6,113	)		(5,452	)
Total, net sales	$	120,213		$	62,582		$	232,833		$	171,187		$	109,018		$	91,075		$	341,851		$	262,262

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

	Net Sales											Accounts Receivable				Net Sales												Accounts Receivable
	Three Months Ended June 30,						Six Months Ended June 30,					As of		As of		Three Months Ended September 30,						Nine Months Ended September 30,						As of		As of
	2021			2020			2021		2020			June 30, 2021		December 31, 2020		2021			2020			2021			2020			September 30, 2021		December 31, 2020
Customer
A	16.7		%		18.0	%	16.2	%	16.9		%	14.0	%	11.3	%		18.0	%		13.3	%	16.8		%	15.6		%	15.3	%	11.3	%
B		10.3	%	<10		%	11.1	%		10.0	%	<10	%	<10	%	<10		%	10.5		%	10.6		%		10.1	%	<10	%	<10	%
C	<10		%	<10		%	10.8	%	<10		%	<10	%	12.2	%	<10		%	15.7		%		10.0	%	11.7		%	<10	%	12.2	%
D	15.2		%	<10		%	14.3	%	10.2		%	10.8	%	<10	%	13.6		%	13.3		%	14.1		%	11.3		%	<10	%	<10	%
E	<10		%	<10		%	<10	%	<10		%	12.7	%	<10	%	10.8		%	<10		%	<10		%	<10		%	13.9	%	<10	%

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 Topic 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.

Stock awards were granted on June 3, 2021, May 12, 2021, April 20, 2021, February 28, 2021, May 12, 2020, February 27, 2020 and May 8, 2019. There were 0 stock awards granted prior to this.

During the ~~six~~nine months ended ~~June~~September 30, 2021, 314,902 units vested. For the same period, 484,661 options vested with a weighted average strike price of ~~$11.23.~~$9.68. There were 125,414 options vested for the ~~six~~nine months ended ~~June~~September 30, 2020.

As of ~~June~~September 30, 2021, ~~1,129,487~~1,121,683 options remained outstanding with a weighted average strike price of ~~$11.08~~$11.11 and a weighted average contractual life of ~~8.88~~8.63 years remaining.

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

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2021		2020		2021		2020
One-time IPO unit awards	$	—	$	304	$	—	$	1,029	$	—	$	—	$	—	$	1,029
Unit awards		849		520		1,568		1,084		714		586		2,282		1,670
Option awards		539		335		1,020		628		468		392		1,489		1,020
Stock based compensation expense, net of tax	$	1,388	$	1,159	$	2,588	$	2,741	$	1,182	$	978	$	3,771	$	3,719

A rollforward of unrecognized stock-based compensation expense is displayed in the table below. Unrecognized stock-based compensation expense as of ~~June~~September 30, 2021 will be expensed over the remaining requisite service period from which individual award values relate, up to February 28, 2023.

	Units			Options			Total			Units			Options			Total
Balance as of December 31, 2020	$	1,545		$	1,432		$	2,977		$	1,545		$	1,432		$	2,977
Grants		2,564			2,130			4,694			2,564			2,130			4,694
Forfeitures		(81	)		—			(81	)		(81	)		—			(81	)
Expense		(719	)		(481	)		(1,200	)		(719	)		(481	)		(1,200	)
Balance as of March 31, 2021		3,309			3,081			6,390			3,309			3,081			6,390
Grants		892			—			892			892			—			892
Forfeitures		(113	)		(69	)		(182	)		(113	)		(69	)		(182	)
Expense		(849	)		(539	)		(1,388	)		(849	)		(539	)		(1,388	)
Balance as of June 30, 2021	$	3,239		$	2,473		$	5,712		$	3,239		$	2,473		$	5,712
Grants											—			—			—
Forfeitures											(125	)		—			(125	)
Expense											(714	)		(468	)		(1,182	)
Balance as of September 30, 2021										$	2,400		$	2,005		$	4,405

Based on the Company’s investments in new technology and automation, which have resulted in a smaller footprint requirement to maintain manufacturing capacity, the Company announced it would be closing its Greenwood, SC facility on May 6, 2020. The facility closure was finalized during the third quarter of 2020 with all customer components re-distributed among five other MEC manufacturing facilities. All customer relationships and manufactured components were maintained through this transition without disruption to our customers.

On July 1, 2021, the Company entered into a contract to sell the Greenwood, SC facility for $5,300 before commissions and fees. Settlement of the contract occurred on August 30, 2021, resulting in a gain on the sale of the asset of $1,374, which is classified in cost of sales on the Condensed Consolidated Statements of Comprehensive Income (Loss) as of September 30, 2021.

Costs associated with the closure ~~are being~~were accounted for in accordance with ASC 420 Exit or Disposal Cost Obligations.

For the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company incurred $0 costs associated with the facility closure and restructuring. For the three ~~and six~~ months ended ~~June~~September 30, 2020, the Company incurred ~~$1,838~~$687 of ~~total costs.~~costs associated with the facility closure and restructuring, including $51 for severance and retention bonuses, $88 for the loss on sale of manufacturing equipment not transferred to another facility, $78 for the buyout of operating leases, and the remainder mostly related to costs to close the facility and relocate equipment to other facilities. For the nine months ended September 30, 2020, the Company incurred $2,524 of costs associated with the facility closure and restructuring, including $282 for severance and retention bonuses, $931 for the loss on sale of manufacturing equipment not transferred to another MEC facility, $78 for the buyout of operating leases, $622 for the disposition of inventory, and the remainder mostly related to costs to close the facility and relocate equipment to other facilities. These costs were recognized on the cost of sales line item of the Condensed Consolidated Statements of Comprehensive Income (Loss), including $844 for the loss on the sale of manufacturing equipment that was not being transferred to another MEC facility, $231 for severance and retention bonus, $638 for the increase to the excess and obsolete inventory reserve for the inventory the Company planned to dispose of and $125 mostly related to costs to close this facility and relocate equipment to other facilities..

As a result of the Greenwood facility closure, future earnings and cash flows ~~will no longer be~~were not impacted by the depreciation associated with the assets disposed of or the facility, maintenance costs of the facility, and facility personnel expenses.

Assets disposed of had a net book value of $2,475 with a remaining useful life of approximately 3 years resulting in approximately $825 of annual depreciation expense that ~~will~~were no longer be incurred. The facility ~~has~~had a net book value of $3,552 as of ~~June~~August 30, 2021 with a remaining weighted average useful life of approximately 27 years resulting in approximately $133 of annual depreciation expense that ~~will~~was no longer be incurred.

Additionally, the Company ~~will~~ no longer ~~have~~has approximately $800 of annual facility maintenance costs.

Total personnel costs associated with the facility were approximately $2,250 for the first quarter 2020 resulting in approximately $9,000 of annual personnel expenses; the majority of these costs were transitioned to 5 other MEC facilities that are now manufacturing these components. As previously mentioned, all customer relationships and manufacturing programs were retained through the transition.

The aforementioned depreciation, maintenance costs, and personnel expenses associated with the Greenwood facility have been classified as cost of sales on the Condensed Consolidated Statements of Comprehensive Income (Loss).

~~The Company evaluated events and transactions for potential recognition or disclosure in theinterim unaudited Condensed Consolidated Financial Statements through August 4,~~On October 19, 2021, the ~~date on which theinterim unaudited Condensed Consolidated Financial Statements were available to be issued.~~

~~On July 1, 2021, the Company entered into~~Company’s Board of Directors approved a new ~~contractual agreement~~share repurchase program of up to ~~sell~~$25 million of our common stock through 2023. The new share repurchase program replaced the Greenwood, SC manufacturing facility for $5,300 before commissions and fees. Finalization of the contract is contingent upon a 30-day due diligence period, that may be extended for an additional 15 days, upon written notice from the purchaser.

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, 2020 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, 2020 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.

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, fitness equipment and other products.

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

For the three and ~~six~~nine months ended ~~June~~September 30, 2021, net sales reflected the supply chain issues encountered by original equipment manufacturers’ that led to lower production demand at times, which can be directly attributed to microchip shortages in the commercial vehicle market and port issues that impacted nearly all end markets served. Additionally, we are experiencing 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 COVID-19 are unknown due to many factors. These factors include the uncertainty of the new Delta variant, uncertainty of the effectiveness of governmental actions to address COVID-19, 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 COVID-19 and strengthen our position serving customers in the future.

Net Sales. Net sales reflect sales of our components and products net of allowances for returns and discounts. In addition to COVID-19, 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 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 changes based upon certain market indexes.

Depreciation and Amortization. We carry property, plant and equipment on our balance sheet at cost, net of accumulated depreciation and amortization. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the asset. Amortization expense is the periodic expense related to leasehold improvements and intangible assets. Leasehold improvements are amortized 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.

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

Adjusted EBITDA represents EBITDA before stock-based compensation expenses and restructuring expenses related to the closure of the Greenwood facility. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of net sales for each period. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as an alternative to net income (loss) or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. We present 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.

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

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020			2021			2020
Net income (loss)	$	3,292		$	(7,014	)	$	5,837		$	(6,964	)	$	275		$	(1,100	)	$	6,112		$	(8,064	)
Interest expense		504			637			1,036			1,463			526			647			1,562			2,110
Provision (benefit) for income taxes		1,007			(2,525	)		1,996			(1,834	)		63			733			2,059			(1,101	)
Depreciation and amortization		7,838			8,159			15,589			16,439			7,961			7,894			23,550			24,334
EBITDA		12,641			(743	)		24,458			9,104			8,825			8,174			33,283			17,279
IPO stock based compensation expense		—			304			—			1,029			—			—			—			1,029
Stock based compensation expense		1,388			855			2,588			1,712			1,182			978			3,771			2,690
Greenwood restructuring charges		—			1,838			—			1,838			—			687			—			2,524
Adjusted EBITDA	$	14,029		$	2,254		$	27,046		$	13,683		$	10,007		$	9,839		$	37,054		$	23,522
Net sales	$	120,213		$	62,582		$	232,833		$	171,187		$	109,018		$	91,075		$	341,851		$	262,262
EBITDA Margin		10.5	%		-1.2	%		10.5	%		5.3	%		8.1	%		9.0	%		9.7	%		6.6	%
Adjusted EBITDA Margin		11.7	%		3.6	%		11.6	%		8.0	%		9.2	%		10.8	%		10.8	%		9.0	%

Three Months Ended ~~June~~September 30, 2021 Compared to Three Months Ended ~~June~~September 30, 2020

	Three Months Ended June 30,																		Three Months Ended September 30,
	2021						2020						Increase (Decrease)						2021						2020						Increase (Decrease)
	Amount			% of Net Sales			Amount			% of Net Sales			Amount Change			% Change			Amount			% of Net Sales			Amount			% of Net Sales			Amount Change			% Change
Net sales	$	120,213			100.0	%	$	62,582			100.0	%	$	57,631			92.1	%	$	109,018			100.0	%	$	91,075			100.0	%	$	17,943			19.7	%
Cost of sales		103,933			86.5	%		63,736			101.8	%		40,197			63.1	%		98,109			90.0	%		81,340			89.3	%		16,769			20.6	%
Manufacturing margins		16,280			13.5	%		(1,154	)		-1.8	%		17,434			1510.7	%		10,909			10.0	%		9,735			10.7	%		1,174			12.1	%
Amortization of intangibles		2,677			2.2	%		2,677			4.3	%		—			0.0	%		2,677			2.5	%		2,677			2.9	%		—			0.0	%
Profit sharing, bonuses and deferred compensation		3,210			2.7	%		1,194			1.9	%		2,016			168.8	%		1,939			1.8	%		2,288			2.5	%		(349	)		-15.3	%
Employee stock ownership plan (income) expense		228			0.2	%		(675	)		-1.1	%		903			133.8	%
Employee stock ownership plan expense																				124			0.1	%		—			0.0	%		124		N/A
Other selling, general and administrative expenses		5,362			4.5	%		4,552			7.3	%		810			17.8	%		5,305			4.9	%		4,490			4.9	%		815			18.2	%
Income (loss) from operations		4,803			4.0	%		(8,902	)		-14.2	%		13,705			154.0	%
Income from operations																				864			0.8	%		280			0.3	%		584			208.6	%
Interest expense		(504	)		0.4	%		(637	)		1.0	%		(133	)		-20.9	%		(526	)		0.5	%		(647	)		0.7	%		(121	)		-18.7	%
Provision (benefit) for income taxes		1,007			0.8	%		(2,525	)		-4.0	%		3,532			139.9	%
Provision for income taxes																				63			0.1	%		733			0.8	%		(670	)		-91.4	%
Net income (loss) and comprehensive income (loss)	$	3,292			2.7	%	$	(7,014	)		-11.2	%	$	10,306			146.9	%	$	275			0.3	%	$	(1,100	)		-1.2	%	$	1,375			125.0	%
EBITDA	$	12,641			10.5	%	$	(743	)		-1.2	%	$	13,384			1801.3	%	$	8,825			8.1	%	$	8,174			9.0	%	$	651			8.0	%
Adjusted EBITDA	$	14,029			11.7	%	$	2,254			3.6	%	$	11,775			522.4	%	$	10,007			9.2	%	$	9,839			10.8	%	$	168			1.7	%

Net Sales. Net sales were ~~$120,213~~$109,018 for the three months ended ~~June~~September 30, 2021 as compared to ~~$62,582~~$91,075 for the three months ended ~~June~~September 30, 2020, an increase of ~~$57,631,~~$17,943, or ~~92.1%~~19.7%. This change is primarily ~~attributed~~relates to ~~increasing sales volumes due~~$8.4 million in contractual raw material pricing pass throughs to ~~the continued improvement of market conditions~~customers in the current period and ~~the impact of~~$9.3 million attributed to market demand increases post COVID-19 that caused customer ~~plant~~facility shutdowns ~~caused by COVID-19~~ during the prior year period.

Manufacturing Margins. Manufacturing margins were ~~$16,280~~$10,909 for the three months ended ~~June~~September 30, 2021 as compared to ~~a loss of $1,154~~$9,735 for the three months ended ~~June~~September 30, 2020, an increase of ~~$17,434,~~$1,174, or ~~1,510.7%~~12.1%. The increase was driven by ~~the aforementioned sales volume increases in the current period coupled with the utilization of the Company’s investments in new technology~~increased production volumes and automation. In addition, reduced overhead costs following the closure of the Greenwood, SC facility in 2020 resulted in a significant improvement in absorbed manufacturing overhead costs in the current period, and $429 related to the reversal of inventory obsolescence and healthcare reserves specific to the estimated potential impacts of COVID-19.higher scrap income resulting from improved market pricing for scrap material. This was partially offset by ~~the lag in contractual raw material price increases passed through to customers~~inflationary pressures on wages, benefits, materials, and general manufacturing supplies in the current period. ~~The~~Additionally, the Company incurred approximately ~~$100~~$800 in launch costs related to the new Hazel Park, MI facility for our new customer in the fitness equipment market. ~~Additionally, the~~The prior year period also included ~~$1,838~~$687 of restructuring costs charged to cost of sales related to the Greenwood facility closure.

Manufacturing margin percentages were ~~13.5%~~10.0% for the three months ended ~~June~~September 30, 2021, as compared to ~~a negative 1.8%~~10.7% for the three months ended ~~June~~September 30, 2020, ~~an increase~~a decrease of ~~1,510.7%~~0.7%. ~~This percentage change~~The decrease was mainly attributable to the ~~items~~previously discussed ~~above.~~contractual raw material pricing pass throughs to customers, inflationary pressures, and the approximately $800 in launch costs related to the new Hazel Park, MI facility.

Amortization of Intangibles Expense. Amortization of intangibles expense was $2,677 for both the three months ended ~~June~~September 30, 2021 and 2020.

Profit Sharing, Bonuses and Deferred Compensation Expenses. Profit sharing, bonuses, and deferred compensation expenses were ~~$3,210~~$1,939 for the three months ended ~~June~~September 30, 2021 as compared to ~~$1,194~~$2,288 for the three months ended ~~June~~September 30, 2020, ~~an increase~~a decrease of ~~$2,016,~~$349, or ~~168.8%~~15.3%. This change was primarily driven by the ~~return~~prior year’s accelerated accrual amounts as the Company re-established discretionary bonus and 401(k) related accruals in the prior year period that were eliminated in the second quarter of ~~normalized discretionary employer 401(k) and bonus accruals as business activity and sales volumes move towards pre-pandemic levels.~~the prior year due to the uncertainty caused by COVID-19 at that time.

Employee Stock Ownership Plan ~~(Income)~~ Expense. Employee stock ownership plan estimated expense was ~~$228~~$124 for the three months ended ~~June~~September 30, 2021 as compared to ~~income of $675~~$0 for the three months ended ~~June~~September 30, 2020, an increase of ~~$903, or 133.8%.~~$124. The change is due to the discretionary nature of contributions to the ESOP plan and the decision made in the second quarter of the prior year ~~period~~ to eliminate the discretionary accrual for the fiscal year 2020 as a result of lower forecasted financial performance due to the impacts of COVID-19.

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses were ~~$5,362~~$5,305 for the three months ended ~~June~~September 30, 2021 as compared to ~~$4,552~~$4,490 for the three months ended ~~June~~September 30, 2020, an increase of ~~$810,~~ $815,

or ~~17.8%~~18.2%. The increase was ~~principally~~predominantly driven by higher salary, payroll, travel, and ~~payroll~~entertainment expenses in the current period, ~~as well as higher travel and entertainment expenses,~~ which were ~~artificially~~unusually low in the prior year period due to the COVID-19 pandemic.

Interest Expense. Interest expense was ~~$504~~$526 for the three months ended ~~June~~September 30, 2021 as compared to ~~$637~~$647 for the three months ended ~~June~~September 30, 2020, a decrease of ~~$133,~~$121, or ~~20.9%~~18.7%. The change is due to lower debt levels inand interest rates during the current period ~~and comparative interest rates in~~as compared to the prior ~~year~~ period.

Provision ~~(Benefit)~~ for Income Taxes. Income tax expense was ~~$1,007~~$63 for the three months ended ~~June~~September 30, 2021 as compared to ~~income tax benefit of $2,525~~$733 for the three months ended ~~June~~September 30, 2020. Please reference Note 8 of the Condensed Consolidated Financial Statements for more specifics. As of ~~June~~September 30, 2021, our federal operating loss (NOL) carryforward was ~~$11,833~~$11,699 driven by the pretax losses incurred in ~~the~~ 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 26%, based on current tax regulations.

Net Income (Loss) and Comprehensive Income (Loss). Net income and comprehensive income were ~~$3,292~~$275 for the three months ended ~~June~~September 30, 2021 as compared to a loss of ~~$7,014~~$1,100 for the three months ended ~~June~~September 30, 2020. The increase of ~~$10,306~~$1,375 was due to the previously discussed items.

EBITDA and EBITDA Margin. EBITDA and EBITDA Margin were ~~$12,641~~$8,825 and ~~10.5%~~8.1%, respectively, for the three months ended ~~June~~September 30, 2021 as compared to ~~negative $743~~$8,174 and ~~negative 1.2%~~9.0%, respectively, for the three months ended ~~June~~September 30, 2020. The ~~$13,384~~$651 increase in EBITDA was primarily ~~due to the increase in net~~driven by increased sales, ~~caused~~partially offset by the ~~aforementioned increase in sales volumes, improved~~raw material pricing pass throughs to customers, inflationary pressures on wages, benefits, materials, and general manufacturing ~~overhead absorption costs due to~~supplies during the ~~utilization of our investments in new technology and automation and reduction in overhead costs from the closure of the Greenwood, SC facility in 2020,~~current period, and the adverse impacts of COVID-19 in the prior period. Raw material pricing pass throughs to customers impact both sales and cost of sales resulting in a dilutive impact to EBITDA Margin percentage. Additionally, the Company incurred approximately $800 in launch costs related to the new Hazel Park, MI facility during the current period.

Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and Adjusted EBITDA Margin were ~~$14,029~~$10,007 and ~~11.7%~~9.2%, respectively, for the three months ended ~~June~~September 30, 2021, as compared to ~~$2,254~~$9,839 and ~~3.6%~~10.8%, respectively, for the three months ended ~~June~~September 30, 2020. The increase in Adjusted EBITDA of ~~$11,775~~$168 and decrease in Adjusted EBITDA Margin of 1.6% was primarily due to the aforementioned items discussed above and the ~~adverse impacts~~Greenwood restructuring costs of ~~COVID-19~~$2,524 in the prior period.

~~Six~~Nine Months Ended ~~June~~September 30, 2021 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2020

	Six Months Ended June 30,																		Nine Months Ended September 30,
	2021						2020						Increase (Decrease)						2021						2020						Increase (Decrease)
	Amount			% of Net Sales			Amount			% of Net Sales			Amount Change			% Change			Amount			% of Net Sales			Amount			% of Net Sales			Amount Change			% Change
Net sales	$	232,833			100.0	%	$	171,187			100.0	%	$	61,646			36.0	%	$	341,851			100.0	%	$	262,262			100.0	%	$	79,589			30.3	%
Cost of sales		201,777			86.7	%		160,497			93.8	%		41,280			25.7	%		299,885			87.7	%		241,838			92.2	%		58,047			24.0	%
Manufacturing margins		31,056			13.3	%		10,690			6.2	%		20,366			190.5	%		41,966			12.3	%		20,424			7.8	%		21,542			105.5	%
Amortization of intangibles		5,353			2.3	%		5,353			3.1	%		—			0.0	%		8,030			2.3	%		8,030			3.1	%		—			0.0	%
Profit sharing, bonuses and deferred compensation		6,074			2.6	%		2,519			1.5	%		3,555			141.1	%		8,013			2.3	%		4,807			1.8	%		3,206			66.7	%
Employee stock ownership plan expense		701			0.3	%		—			0.0	%		701		N/A				825			0.2	%		—			0.0	%		825		N/A
Other selling, general and administrative expenses		10,059			4.3	%		10,153			5.9	%		(94	)		-0.9	%		15,365			4.5	%		14,642			5.6	%		723			4.9	%
Income (loss) from operations		8,869			3.8	%		(7,335	)		-4.3	%		16,204			220.9	%		9,733			2.8	%		(7,055	)		-2.7	%		16,788			238.0	%
Interest expense		(1,036	)		0.4	%		(1,463	)		0.9	%		(427	)		-29.2	%		(1,562	)		0.5	%		(2,110	)		0.8	%		(548	)		-26.0	%
Provision (benefit) for income taxes		1,996			0.9	%		(1,834	)		-1.1	%		3,830			208.8	%		2,059			0.6	%		(1,101	)		-0.4	%		3,160			287.0	%
Net income (loss) and comprehensive income (loss)	$	5,837			2.5	%	$	(6,964	)		-4.1	%	$	12,801			183.8	%	$	6,112			1.8	%	$	(8,064	)		-3.1	%	$	14,176			175.8	%
EBITDA	$	24,458			10.5	%	$	9,104			5.3	%	$	15,354			168.6	%	$	33,283			9.7	%	$	17,279			6.6	%	$	16,004			92.6	%
Adjusted EBITDA	$	27,046			11.6	%	$	13,683			8.0	%	$	13,363			97.7	%	$	37,054			10.8	%	$	23,522			9.0	%	$	13,532			57.5	%

Net Sales. Net sales were ~~$232,833~~$341,851 for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to ~~$171,187~~$262,262 for the ~~six~~nine months ended ~~June~~September 30, 2020 for an increase of ~~$61,646,~~$79,589, or ~~36.0%~~30.3%. This change is primarily attributed to ~~increasing~~increased sales volumes due to the ~~continued~~ improvement ofin market conditions from the prior year period and $13.1 million in ~~the current~~contractual raw material price pass throughs to customers. The prior year ~~and the impact of~~period was impacted by lower market demand and related destocking activities, ~~during the first quarter of the prior year period,~~ which ~~was~~were most apparent in the Commercial Vehicle, Agricultural and Construction and Access Equipment end markets served, along with ~~manufacturing volume reductions~~customer facility shutdowns driven by ~~COVID-19 in the second quarter of the prior year due to forced customer plant shutdowns, which averaged 5 – 6 weeks per customer.~~COVID-19.

Manufacturing Margins. Manufacturing margins were ~~$31,056~~$41,966 for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to ~~$10,690~~$20,424 for the ~~six~~nine months ended ~~June~~September 30, 2020, an increase of ~~$20,366,~~$21,542, or ~~190.5%~~105.5%. The increase was driven by the aforementioned ~~sales~~production volume increases, ~~in the current period, coupled with~~improved scrap income, the utilization of the Company’s investments in new technology and ~~automation.~~automation, and $429 related to the reversal of inventory obsolescence and healthcare reserve specific to the estimated potential impacts of COVID-19. In addition, reduced indirect overhead costs following the closure of the Greenwood, SC facility in 2020 resulted in a significant improvement in absorbed manufacturing overhead costs. This was partially offset by the raw material pricing pass through to customers, inflationary pressures on wages, benefits, materials, and general manufacturing supplies costs during the current period and ~~$429~~increased utility, freight, repair, and other costs related to improved sales volumes. Additionally, the Company incurred approximately $900 in launch costs related to the reversal of inventory obsolescence and healthcare reserves specific to the estimated potential impacts of COVID-19. This was offset by the lag in contractual raw material price increases passed through to customersnew Hazel Park, MI facility for our new customer in the ~~second quarter of the current year.~~fitness equipment market. Further, the prior year period was negatively impacted by the following: previously discussed market demand changes, customer shutdowns related to COVID-19, approximately $775 of inventory obsolescence and health care charges specific to the estimated potential impacts of COVID-19, and ~~$1,838~~$2,524 of restructuring costs related to the Greenwood facility closure.

Manufacturing margin percentages were ~~13.3%~~12.3% for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to ~~6.2%~~7.8% for the ~~six~~nine months ended ~~June~~September 30, 2020, an increase of ~~190.5%.~~4.5% points. This increase was attributable to the items discussed above.

Amortization of Intangibles Expense. Amortization of intangibles expense was ~~$5,353~~$8,030 for both the ~~six~~nine months ended ~~June~~September 30, 2021, and 2020.

Profit Sharing, Bonuses and Deferred Compensation Expense. Profit sharing, bonuses and deferred compensation expenses were ~~$6,074~~$8,013 for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to ~~$2,519~~$4,807 for the ~~six~~nine months ended ~~June~~September 30, 2020, an increase of ~~$3,555,~~$3,206, or ~~141.1%~~66.7%. This change was primarily driven by the return of normalized discretionary employer 401(k) and bonus accruals as business activity and sales volumes have improved to more normalized levels.

Employee Stock Ownership Plan Expense. Employee stock ownership plan expense was ~~$701~~$825 for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to $0 for the ~~six~~nine months ended ~~June~~September 30, 2020, an increase of ~~$701.~~$825. The change is ~~primarily~~ due to the discretionary nature of contributions to the ESOP plan and the decision made in the second quarter of the prior year ~~period~~ to eliminate the discretionary accrual for the fiscal year 2020 as a result of lower forecasted financial performance due to the impacts of COVID-19.

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses were ~~$10,059~~$15,365 for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to ~~$10,153~~$14,642 for the ~~six~~nine months ended ~~June~~September 30, 2020, an increase of $723, or 4.9%. The increase was driven by higher salary and payroll expenses.

Interest Expense. Interest expense was $1,562 for the nine months ended September 30, 2021 as compared to $2,110 for the nine months ended September 30, 2020, a decrease of ~~$94,~~$548, or 0.9%. The decrease was driven by lower public company costs attributable to process improvements, continued synergies through the integration of Defiance Metal Products and other cost saving initiatives, offset by higher salary and payroll expenses in the current year period.

~~Interest Expense.~~ ~~Interest expense was $1,036 for the six months ended June 30, 2021 as compared to $1,463 for the six months ended June 30, 2020, a decrease of $427, or 29.2%~~26.0%. The change is due to lower borrowings and interest rates during the current period as compared to the prior period.

Provision (Benefit) for Income Taxes. Income tax expense was ~~$1,996~~$2,059 for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to income tax benefit of ~~$1,834~~$1,101 for the ~~six~~nine months ended ~~June~~September 30, 2020. The change is due to pretax income in the current period as compared to a pretax loss for the same prior year period. Please reference Note 8 of the Condensed Consolidated Financial Statements for more specifics. As of ~~June~~September 30, 2021, our federal operating loss (NOL) carryforward was ~~$11,833~~$11,699 driven by the pretax losses incurred in the 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 26%, based on current tax regulations.

Net Income (Loss) and Comprehensive Income (Loss). Net income and comprehensive income were ~~$5,837~~$6,112 for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to a loss of ~~$6,964~~$8,064 for the ~~six~~nine months ended ~~June~~September 30, 2020. The increase of ~~$12,801~~$14,176 was due to the previously discussed items.

EBITDA and EBITDA Margin. EBITDA and EBITDA Margin were ~~$24,458~~$33,283 and ~~10.5%~~9.7%, respectively, for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to ~~$9,104~~$17,279 and ~~5.3%~~6.6%, respectively, for the ~~six~~nine months ended ~~June~~September 30, 2020. The ~~$15,354~~$16,004 increase in EBITDA was primarily driven by ~~increasing~~increased sales volumes due to the ~~continued~~ improvement of market conditions, improved manufacturing overhead absorption costs with the utilization of the Company’s investments in new technology and automation and a reduction in overhead costs following the closure of the Greenwood, SC facility in ~~2020,~~2020. These improvements were partially offset by ~~the lag in contractual~~ raw material ~~price increases passed through~~pricing pass throughs to customers, inflationary pressures on wages, benefits, materials, and general manufacturing supplies, increases in utilities, freight, repair and other costs related to higher volumes in the ~~second quarter~~current period, and the adverse impacts of COVID-19 in the ~~current year.~~prior year period. Raw material pricing pass throughs to customers impact both sales and cost of sales resulting in a dilutive impact to EBITDA Margin percentage. Additionally, the Company incurred approximately $900 in launch costs related to the new Hazel Park, MI facility for our new customer in the fitness equipment market.

Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and Adjusted EBITDA Margin were ~~$27,046~~$37,054 and ~~11.6%~~10.8%, respectively, for the ~~six~~nine months ended ~~June~~September 30, 2021, as compared to ~~$13,683~~$23,522 and ~~8.0%~~9.0%, respectively, for the ~~six~~nine months ended ~~June~~September 30, 2020. The increase in Adjusted EBITDA of ~~$13,363~~$13,532 was primarily due to ~~the aforementioned~~ items previously discussed above ~~offset by the lag in contractual raw material price increases passed through to customers in the current year period~~ and the ~~adverse impacts~~Greenwood restructuring costs of ~~COVID-19~~$2,524 in the prior ~~year period.~~period

	Six Months Ended June 30,						Increase (Decrease)						Nine Months Ended September 30,						Increase (Decrease)
	2021			2020			$ Change			% Change			2021			2020			$ Change			% Change
Net cash provided by operating activities	$	18,230		$	3,111			15,119			486.0	%	$	12,793		$	19,291			(6,498	)		-33.7	%
Net cash used in investing activities		(16,572	)		(1,886	)		(14,686	)		-778.7	%		(21,240	)		(3,434	)		(17,806	)		-518.5	%
Net cash used in financing activities		(1,660	)		(1,106	)		(554	)		-50.1	%
Net cash provided by (used in) financing activities														8,453			(15,748	)		24,201			153.7	%
Net change in cash	$	(2	)	$	119		$	(121	)		101.7	%	$	6		$	109		$	(103	)		-94.5	%

Operating Activities. Cash provided by operating activities was ~~$18,230~~$12,793 for the ~~six~~nine months ended ~~June~~September 30, 2021, as compared to ~~$3,111~~$19,291 for the ~~six~~nine months ended ~~June~~September 30, 2020. The ~~$15,119,~~$6,498, or ~~486.0% increase~~33.7% decrease in operating cash flows was primarily due to changes in net working ~~capital.~~capital and income reported in the current period as compared to a loss in the prior year period. More specifically to the working capital changes, accounts receivable rose relative to the growth in sales, while inventories and accounts payable were elevated due to higher raw material prices and other costs as production levels rebounded from COVID-19 lows. Beneficial changes in a variety of other asset and liability categories increased operating cash flows for the current period as well. Additionally, income was reported in the current period as compared to a loss in the prior year period. Changes to customer pricing, payment terms and credit terms did not have a significant impact on changes to working capital items, or any other element of the operating cash flow activities, for the periods presented.

Investing Activities. Cash used in investing activities was ~~$16,572~~$21,240 for the ~~six~~nine months ended ~~June~~September 30, 2021, as compared to ~~$1,886~~$3,434 for the ~~six~~nine months ended ~~June~~September 30, 2020. The ~~$14,686,~~$17,806, or ~~778.7%~~518.5% increase in cash used in investing activities was driven by the Company’s continued investment in technology and automation in the current period as compared to leveraging our investments in new technology and automation and preserving cash during the prior year period. Additionally, the Company invested ~~$5,271~~$11,758 into the new Hazel Park, MI facility during the current year period for the ramp-up of production for our new customer in the fitness equipment end market. The Company also recorded $5,348 in proceeds from the sale of property, plant and equipment due to the sale of the Greenwood, SC facility during the current period.

Financing Activities. Cash ~~used in~~provided by financing activities was ~~$1,660~~$8,453 for the ~~six~~nine months ended ~~June~~September 30, 2021, as compared to ~~$1,106~~cash used in $15,748 for the ~~six~~nine months ended ~~June~~September 30, 2020. The ~~$554~~$24,201 change was primarily driven by ~~lower~~higher borrowings ~~and higher debt repayments due to the aforementioned items~~ in the current period compared to ~~higher~~debt repayments in excess of borrowings ~~offset by the purchase of treasury stock for~~during the prior year period.

On September 26, 2019, and as last amended as of March 31, 2021, 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~~September 30, 2021, the interest rate on outstanding borrowings under the Revolving Loan was 2.25%. At ~~June~~September 30, 2021, we had availability of approximately ~~$156,146~~$145,282 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~~September 30, 2021, our interest coverage ratio was ~~15.24~~16.51 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. This ratio was increased through the Second Amendment to the Credit Agreement to ~~3.75~~3.50 to 1.00 for this quarter, as discussed in more detail below. As of ~~June~~September 30, 2021, our consolidated total leverage ratio was ~~1.00~~1.23 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, the Company entered into the Second Amendment to the Credit Agreement. The Second Amendment provides the Company with temporary relief regarding a financial covenant (the consolidated total leverage ratio) 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 and fees and restrictions on certain activities of the Company, including capital expenditures, acquisitions, dividends and share repurchases. New pricing, which takes effect for the quarters ended on and after September 30, 2020, includes interest at a fluctuating 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 consolidated total leverage ratio will be 4.25 to 1.00 for quarters ending June 30, 2020 through and including December 31, 2020 and will decline in quarterly increments to 3.25 to 1.00 for the quarter ending December 31, 2021.

As of ~~June~~September 30, 2021, our consolidated total leverage ratio was ~~1.00~~1.23 to 1.00 in accordance with the Second Amendment of the Credit Agreement.

At ~~June~~September 30, 2021, we were in compliance with all covenants under the Credit Agreement and the Second Amendment.

On March 31, 2021, the Company entered into the Third Amendment to the Credit Agreement. The Third amendment allows the Company to incur up to $70,000 of capital expenditures during 2021, versus $35,000 in the prior period.

During the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, our capital expenditures were ~~$16,986~~$26,588 and ~~$3,652,~~$5,354, respectively. The increase of ~~$13,334~~$21,234 was driven by our continued focus on investment in technology and automation in the current period as compared to leveraging our investments and preserving cash during the same prior year period. Additionally, the Company invested ~~$5,271~~$11,758 into the new Hazel Park, MI facility during the current year period for the ramp-up of production. Capital expenditures for the full year 2021 are expected to be approximately ~~$55,000~~$52,000 to ~~$65,000.~~$57,000. The addition of our new strategic customer is generating the requirement of $35,000 to ~~$45,000~~$40,000 in additional capital investments.

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~~September 30, 2021, we had immediate availability of approximately ~~$156,146~~$145,282 through our Revolving Loan and another $100,000 through an accordion feature under our Credit Agreement, subject to the covenants under the Credit Agreement and Second Amendment. 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 COVID-19 at this time, we expect to be in compliance with these financial covenants through 2021 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 2021 when taking into consideration the estimated impacts of COVID-19 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.

The following table presents our obligations and commitments to make future payments under contracts and contingent commitments at ~~June~~September 30, 2021:

			Payments Due by Period										Payments Due by Period
	Total		2021 (Remainder)		2022 – 2023		2024 – 2025		Thereafter		Total		2021 (Remainder)		2022 – 2023		2024 – 2025		Thereafter
Long-term debt principal payment obligations ⁽¹⁾	$	43,854	$	—	$	—	$	43,854	$	—	$	54,718	$	—	$	—	$	54,718	$	—
Forecasted interest on debt payment obligations ⁽²⁾		4,475		688		2,754		1,033		—		4,784		399		3,189		1,196		—
Capital lease obligations		2,575		367		1,468		740		—		2,392		184		1,468		740		—
Operating lease obligations		44,676		2,647		11,049		9,068		21,912		45,960		1,542		11,698		9,744		22,976
Total	$	95,580	$	3,702	$	15,271	$	54,695	$	21,912	$	107,854	$	2,125	$	16,355	$	66,398	$	22,976

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.

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.

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 ~~$43.9~~$54.7 million as of ~~June~~September 30, 2021. The interest rate was 2.25% as of ~~June~~September 30, 2021. Please see “Liquidity and Capital Resources - Amended and Restated Credit Agreement” in Part I, Item 2 of this Quarterly Report on Form 10-Q and Note 3 in the Notes to the Unaudited Condensed Consolidated Financial Statements for more specifics.

A hypothetical 100-basis-point increase in interest rates would have resulted in an additional $0.1 million of interest expense based on our variable rate debt at ~~June~~September 30, 2021. 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.

We source a wide variety of materials and components from a network of suppliers. While such materials are generally available from numerous suppliers, COVID-19 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~~September 30, 2021, we did not have any commodity hedging instruments in place.

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.

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~~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.

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.

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, 2020, which was filed with the SEC on March 5, 2021.

The table below sets forth information with respect to purchases we made of shares of our common stock during the quarter ended ~~June~~September 30, 2021:

Period

Total
Number
of Shares
Purchased

Average Price
Paid per Share

Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs (1)

Dollar Value of
Shares that
May Yet Be
Purchased
Under the Plans
or Programs (1)

April 2021

—

$
—

—

$
19,896,406

May 2021

—

$
-

—

$
19,896,406

June 2021

—

$
—

—

$
19,896,406

Total

—

—

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 2021		—	$	—		—	$	19,896,406
August 2021		—	$	—		—	$	19,896,406
September 2021		47,000	$	13.89		47,000	$	19,243,534
Total		—				—

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

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.


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)



		Page

PART I.	FINANCIAL INFORMATION	4

Item 1.	Financial Statements (Unaudited)	4

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Comprehensive Income (Loss)	5

	Condensed Consolidated Statements of Cash Flows	6

	Condensed Consolidated Statements of Shareholders Equity	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	28

PART II.	OTHER INFORMATION	29

Item 1.	Legal Proceedings	29

Items 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 6.	Exhibits	30

Signatures		31

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)


	~~Mayville Engineering Company, Inc.~~MAYVILLE ENGINEERING COMPANY, INC.

Date: ~~August 4,~~November 3, 2021	By:	/s/ Robert D. Kamphuis
		Robert D. Kamphuis
		Chairman, President & Chief Executive Officer

	By:	/s/ Todd M. Butz
		Todd M. Butz
		Chief Financial Officer

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

Emerging growth company	☒

			Fair Value Measurements at Report Date Using
	Balance at December 31, 2020		(Level 1)		(Level 2)		(Level 3)
Deferred compensation liability	$	25,631	$	4,865	$	20,766	$	0
Total	$	25,631	$	4,865	$	20,766	$	0