Mayville engineering company, inc. announces second quarter 2019 results
Mayville, wis.--(business wire)--mayville engineering company (nyse: mec) (the “company” or “mec”), a leading u.s.-based value-added manufacturing partner that provides a broad range of prototyping and tooling, production fabrication, coating, assembly and aftermarket services, today announced results for the second quarter ended june 30, 2019. highlights: completed ipo in may generating total net proceeds of $101.8 million produced net sales of $145.1 million net loss of $15.3 million includes $23.2 million of one-time ipo related charges recorded adjusted ebitda of $17.8 million lowered the company’s total outstanding debt balance by $90.9 million defiance metal products (“dmp”) performance and integration remain on track company reaffirms 2019 full-year outlook “our leading market position and reputation within the industry, coupled with our operational effectiveness and agility were key factors in our strong performance this quarter,” noted robert d. kamphuis, chairman, president and ceo. “with the elimination of our retiree and diversification repurchase obligations and debt reduction from the ipo, we have increased financial flexibility and are well positioned to execute our growth strategy going forward.” second quarter 2019 results net sales were $145.1 million for the second quarter of 2019 as compared to $91.5 million for the same prior year period, an increase of $53.6 million, primarily driven by dmp. net sales for the legacy business were comparable to the same quarter last year, noting that the 2018 quarter was a then record for the company. manufacturing margins were $20.5 million for the second quarter of 2019 as compared to $15.6 million for the same prior year period, an increase of $4.9 million, primarily driven by dmp. amortization expenses were $2.7 million for the second quarter of 2019 as compared to $0.9 million for the same prior year period. the increase was solely driven by the amortization of identifiable intangible assets related to the dmp acquisition. depreciation expenses were $6.0 million for the second quarter of 2019 as compared to $4.0 million for the same prior year period. the increase relates to the addition of dmp and continued investments in new technology and automation. profit sharing, bonuses, and deferred compensation expenses were $22.8 million for the second quarter of 2019 as compared to $1.4 million for the same prior year period. the increase of $21.4 million was primarily driven by a one-time $10.2 million increase in deferred compensation plan expense and a one-time $9.9 million increase in long term incentive plan (“ltip”) expense, both increases related to the initial public offering (“ipo”). other selling, general and administrative expenses were $10.2 million for the second quarter of 2019 as compared to $2.7 million for the same prior year period. the increase was primarily driven by $3.0 million of one-time ipo expenses, $2.7 million for the dmp contingent consideration fair value adjustment, and the remainder mostly attributable to the dmp acquired entities plus additional costs associated with being a public company. interest expense was $2.0 million for the second quarter of 2019 as compared to $0.9 million for the same prior year period. the increase is due to additional debt related to the dmp acquisition, slightly offset by the partial paydown with use of the ipo proceeds. income tax benefits were $3.5 million for the second quarter of 2019. the benefit is the result of the company’s legacy business converting to a c corporation on may 12, 2019, in conjunction with the one-time ipo expenses incurred during the quarter. prior to the company’s ipo, the company’s legacy business was an s corporation. ebitda and ebitda margin percent were ($8.1) million and -5.6%, respectively, for the second quarter of 2019 as compared to $13.9 million and 15.1%, respectively, for the second quarter of 2018. the $22.0 million decline in ebitda is due to the previously mentioned one-time increases in ltip and deferred compensation expenses, one-time ipo expenses, and the dmp contingent consideration fair value adjustment. these one-time expenses and charges were slightly offset by the addition of dmp. adjusted ebitda and adjusted ebitda margin percent were $17.8 million and 12.3%, respectively, for the second quarter of 2019 as compared to $14.4 million and 15.8%, respectively, for the second quarter of 2018. the increase in adjusted ebitda of $3.4 million was due to the acquisition of dmp. year-to-date 2019 results net sales were $288.9 million for the first half of 2019 as compared to $178.8 million for the same prior year period, an increase of $110.1 million. dmp contributed $103.7 million of the increase with the legacy business contributing the remainder. manufacturing margins were $40.1 million for the first half of 2019 as compared to $27.4 million for the same prior year period, an increase of $12.7 million, primarily driven by dmp. ebitda and ebitda margin percent were $5.6 million and 1.9%, respectively, for the first half of 2019 as compared to $24.2 million and 13.5%, respectively, for the same prior year period. the $18.6 million decline in ebitda is due to the previously mentioned one-time ipo related expenses and the dmp contingent consideration fair value adjustment, slightly offset by the addition of dmp. adjusted ebitda and adjusted ebitda margin percent were $34.6 million and 12.0%, respectively, for the first half of 2019 as compared to $24.8 million and 13.9%, respectively, for the first half of 2018. the increase in adjusted ebitda of $9.8 million was primarily due to the recent acquisition of dmp. balance sheet and liquidity total outstanding debt balance, which includes long-term debt and bank revolving credit notes, was $89.0 million as of june 30, 2019, compared to $179.9 million as of december 31, 2018. the $90.9 million decline is attributable to the repayment of debt from the $101.8 million of ipo proceeds, offset by one-time ipo related expenses and share repurchases in the second quarter of 2019. capital expenditures were $16.6 million for the first half of 2019. budgeted capital expenditures for the full year 2019 remain consistent at approximately $20 million. outlook based on the company’s recent performance, the overall economic climate, and industry trends, the company is confirming the 2019 financial outlook previously issued in may 2019: net sales are expected to be between $558 million to $570 million adjusted ebitda is expected to be between $66 million and $72 million kamphuis explained, “we are comfortable confirming our outlook for the year based on our current visibility, internal plans and order book. of course, we remain focused on macroeconomic and industry trends and will use our market and operating agility to adjust our focus as needed in the coming quarters. we continue to execute our strategy effectively and want to express our appreciation for the dedication and hard work of our more than 3,000 employee owners who are striving every day to deliver for our customers.” conference call the company will host a conference call on wednesday, august 7th, 2019 at 10:00 a.m. eastern time (9:00 a.m. central time). for a live internet webcast of the conference call, visit www.mecinc.com and click on the link to the live webcast on the investors page. for telephone access to the conference, call (866) 652-5200 within the united states, call (855)-669-9657 within canada, or +1 (412) 317-6060 from outside the united states and canada. forward looking statements this press-release includes forward-looking statements that reflect plans, estimates and beliefs. such statements involve risks and uncertainties. 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” and “cautionary statement regarding forward-looking statements” in the company’s previously filed registration statement on form s-1. 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: failure to compete successfully in our markets; risks relating to developments in the industries in which our customers operate; our ability to maintain our manufacturing, engineering and technological expertise; the loss of any of our large customers or the loss of their respective market shares; risks related to scheduling production accurately and maximizing efficiency; our ability to realize net sales represented by our awarded business; our ability to successfully identify or integrate acquisitions; risks related to entering new markets; our ability to develop new and innovative processes and gain customer acceptance of such processes; our ability to recruit and retain our key executive officers, managers and trade-skilled personnel; risks related to our information technology systems and infrastructure; manufacturing risks, including delays and technical problems, issues with third-party suppliers, environmental risks and applicable statutory and regulatory requirements; political and economic developments, including foreign trade relations and associated tariffs; volatility in the prices or availability of raw materials critical to our business; results of legal disputes, including product liability, intellectual property infringement and other claims; risks associated with our capital-intensive industry; risks related to our treatment as an s corporation prior to the consummation of the initial public offering; risks related to our employee stock ownership plan’s treatment as a tax-qualified retirement plan; and our ability to remediate the material weaknesses in internal control over financial reporting identified in preparing our audited consolidated financial statements and to subsequently maintain effective internal control over financial reporting. this discussion should be read in conjunction with our audited consolidated financial statements included in the company’s previously filed registration statement on form s-1. 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. about mayville engineering company 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, powersports, agriculture, military and other end markets. we have developed long-standing relationships with our blue-chip customers based upon a high level of experience, trust and confidence. our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction, powersports, agricultural, military and other products. use of non-gaap financial measures this press release contains financial information calculated in a manner other than in accordance with u.s. generally accepted accounting principles (“gaap”). the non-gaap measures used in this press release are ebitda, ebitda margin, adjusted ebitda and adjusted ebitda margin. ebitda represents net income 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 transaction fees incurred in connection with the dmp acquisition and our initial public offering, the loss on debt extinguishment relating to our december 2018 credit agreement, non-cash purchase accounting charges including costs recognized on the step-up of acquired inventory and contingent consideration fair value adjustments, and one-time increases in deferred compensation and long term incentive plan expenses related to the initial public offering. adjusted ebitda margin represents adjusted ebitda as a percentage of net sales for each period. these metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, gaap. these measures should not be considered as an alternative to net income or any other performance measure derived in accordance with gaap as an indicator of our operating performance. we present adjusted ebitda and adjusted ebitda margin as management uses these measures as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry. these measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under gaap. our calculation of ebitda, ebitda margin, adjusted ebitda and adjusted ebitda margin may not be comparable to the similarly named measures reported by other companies. potential differences between our measures of ebitda and adjusted ebitda compared to other similar companies’ measures of ebitda and adjusted ebitda may include differences in capital structure and tax positions. please reference our reconciliation of net income, the most directly comparable measure calculated in accordance with gaap, to ebitda and adjusted ebitda, and the calculation of ebitda margin and adjusted ebitda margin included in this press release. (unaudited) december 31, june 30, 2019 2018 $ 1 $ 3,089 65,220 52,298 50,582 53,405 2,539 2,318 3,394 1,649 121,736 112,759 127,721 123,883 72,430 69,437 77,526 82,879 1,807 1,953 5,441 814 total $ 406,661 $ 391,725 mayville engineering company, inc. december 31, june 30, 2019 2018 $ 48,411 $ 45,992 269 281 8,392 8,606 7,897 7,548 6,528 6,124 17,291 14,610 88,788 83,161 41,485 59,629 1,562 1,697 39,168 111,675 24,602 13,351 19,824 19,123 100 100 215,529 288,736 — 133,806 — 26,842 — (57,659 ) — 102,989 — — 180,997 — 14,017 — (3,882 ) — 191,132 102,989 $ 406,661 $ 391,725 share counts give effect to the issuance of a stock dividend of approximately 1,334.34-for-1 related to the company’s may 2019 ipo. there were 45,000 shares authorized, 28,946 shares issued and 18,871 treasury shares at december 31, 2018. three months ended six months ended june 30, june 30, 2019 2018 2019 2018 $ 145,130 91,535 $ 288,862 $ 178,757 124,595 75,986 248,748 151,396 2,677 939 5,353 1,878 22,830 1,365 24,580 3,005 1,500 1,000 3,000 2,000 10,180 2,713 17,772 5,581 (16,652 ) 9,532 (10,591 ) 14,897 (1,991 ) (853 ) (4,824 ) (1,760 ) (154 ) (588 ) (154 ) (588 ) (18,797 ) 8,091 (15,569 ) 12,549 (3,513 ) — (2,744 ) 29 $ (15,284 ) $ 8,091 $ (12,825 ) $ 12,520 $ (15,284 ) $ 8,091 $ (12,825 ) $ 12,520 $ (0.91 ) $ 0.56 $ (0.85 ) $ 0.87 16,799,915 14,341,538 15,131,012 14,341,538 $ (15,284 ) $ 8,091 $ (12,825 ) $ 12,520 103 2,104 173 3,226 $ (15,387 ) $ 5,987 $ (12,998 ) $ 9,294 $ (0.92 ) $ 0.42 $ (0.86 ) $ 0.65 16,799,915 14,341,538 15,131,012 14,341,538 weighted average shares give effect to the issuance of a stock dividend of approximately 1,334.34-for-1 related to the ipo. tax adjusted pro forma amounts reflect income tax adjustments as if the company was a taxable entity as of the beginning of 2018 using a 26% effective tax rate. 2019 2018 net income (loss) $ (12,825 ) $ 12,520 16,355 9,902 797 — 395 — 3,544 — (24 ) — 11,251 173 (367 ) 558 290 103 (12,417 ) (3,659 ) 2,296 (2,928 ) (221 ) 214 (1,744 ) (1,129 ) 4,363 1,356 (4,730 ) — (504 ) (341 ) 6,459 16,769 (16,637 ) (5,990 ) (2,368 ) — 24 — (18,981 ) (5,990 ) 223,835 135,499 (241,979 ) (142,919 ) (72,446 ) — — 42,053 101,763 (44,083 ) (1,592 ) (753 ) — (569 ) (147 ) — 9,434 (10,772 ) (3,088 ) 7 3,089 76 $ 1 $ 83 $ 4,524 $ 2,349 2019 2018 2019 2018 $ (15,284 ) $ 8,091 $ (12,825 ) $ 12,520 1,991 853 4,824 1,760 (3,513 ) — (2,744 ) 29 8,704 4,911 16,355 9,902 (8,102 ) 13,855 5,610 24,211 154 588 154 588 — — 395 — 2,674 — 3,544 — 10,159 — 10,159 — 9,921 — 9,921 — 2,997 — 4,809 — $ 17,803 $ 14,443 $ 34,592 $ 24,799 $ 145,130 $ 91,535 $ 288,862 $ 178,757 -5.6% 15.1% 1.9% 13.5% 12.3% 15.8% 12.0% 13.9%
