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The Shyft Group Posts Strong Third Quarter Results

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NOVI, Mich., Nov. 5, 2020 /PRNewswire/ -- The Shyft Group, Inc. (NASDAQ:SHYF) ("Shyft" or the "Company"), the North American leader in specialty vehicle manufacturing, assembly and upfit for the commercial, retail, and service specialty vehicle markets, today reported operating results for the third quarter ending September 30, 2020. 

As part of its transformational strategy to further focus on accelerating growth and profitability, the Company divested its Emergency Response ("ER") business effective February 1, 2020, as previously announced. Accordingly, the financial results of ER have been classified as discontinued operations for all periods presented. Unless otherwise noted, financial results presented are based on continuing operations. 

Sales for the three and nine-month periods ending September 30, 2019, include $23.0 million and $91.4 million, respectively, of pass-through revenues from the one-time USPS truck body order (USPS order). 

Third Quarter 2020 Highlights from Continuing Operations

For the third quarter of 2020 compared to the third quarter of 2019: 

  • Sales of $203.5 million, a decrease of $21.2 million, or 9.4%, from $224.7 million. Sales increased $1.8 million, or 0.9%, excluding the USPS order.
  • Gross profit margin of 24.9% of sales, an 800 basis point improvement from 16.9% of sales, driven by product mix, improved material costs and actions taken to improve overall operating efficiency.
  • Income from continuing operations of $19.4 million, or $0.54 per share, compared to $13.1 million, or $0.37 per share.
  • Adjusted EBITDA of $32.6 million, or 16.0% of sales, an increase of $10.3 million, or 46%, from $22.3 million, or 9.9% of sales. The USPS order reduced adjusted EBITDA as a percentage of sales by approximately 110 basis points in the prior year.
  • Adjusted net income of $22.1 million, or $0.62 per share, an increase of $6.2 million, or 39.7%, from $15.9 million, or $0.45 per share.
  • Generated $32.4 million of cash from operating activities during the third quarter of 2020, providing $143.7 million of total liquidity
  • Consolidated backlog at September 30, 2020, totaled $280.6 million, up $16.9 million, or 6.4%, compared to $263.7 million at September 30, 2019. Since September 30, 2020, consolidated backlog has increased approximately $46 million, to $326 million in October, reflecting strong demand for parcel delivery vehicles.
  • Purchased F3 MFG, Inc. ("F3"), a leading aluminum service body and accessory manufacturer of the well-recognized DuraMag® and Magnum® brands, effective October 1, 2020.

"I am extremely proud of our team and of our performance this quarter, as we navigated the pandemic resulting in the most profitable quarter in our Company's history," said Daryl Adams, President and Chief Executive Officer.  The strong performance reflects growing momentum from our transformative efforts to focus on higher growth and margin opportunities in parcel delivery supporting ecommerce and specialty vehicles." 

Fleet Vehicles and Services (FVS)

FVS segment sales were $145.2 million, a decrease of 19.2% from $179.6 million, primarily due to significantly lower truck body sales and upfit volumes being impacted by the pandemic, partially offset by higher walk-in-van volumes.  Sales decreased 7.3%, or $11.4 million, excluding the USPS order. 

Adjusted EBITDA increased $8.5 million to $33.2 million, or 22.9% of sales, from $24.7 million, or 13.7% of sales, a year ago.  The increase was primarily due to product mix, productivity, cost reduction actions, lower healthcare costs, and the USPS order. 

Segment backlog at September 30, 2020, which totaled $228.9 million, has increased $54 million, or 23%, to approximately $282 million as of October 31, 2020.   This compares to $223.8 million at September 30, 2019 and reflects strong demand for vehicles across the entire FVS product portfolio.   

Specialty Vehicles (SV)

SV segment sales were $58.3 million, an increase of 29.2%, from $45.1 million due to higher luxury motor coach chassis sales and the Royal Truck Body (Royal) acquisition completed in September 2019.

Adjusted EBITDA increased $3.1 million to $7.2 million, or 12.3% of sales, from $4.1 million, or 9.0% of sales, a year ago.  The increase was primarily due to volume and the Royal acquisition.

Segment backlog at September 30, 2020, totaled $51.8 million, up 29.6% compared to $39.9 million at September 30, 2019, due to increased luxury motor coach chassis orders.

Liquidity Update

The Shyft Group's access to capital remains strong at $143.7 million, including $43.1 million of cash on hand at September 30, 2020, a portion of which was used to fund the F3 acquisition on October 1, 2020.  The Company paid down $10.0 million on its revolving credit facility during the third quarter and another $10.0 million in October.  The leverage ratio currently stands at 0.5 times adjusted EBITDA and leaves the Company in a solid position to continue to pursue strategic opportunities.

Outlook – Reinstates Initial 2020 Guidance

Based on our strong third quarter performance, our current growing backlog position and chassis visibility, notwithstanding intensifying pandemic-related issues, the Company is reinstating its previously issued March 2020 guidance, and shifting its profitability targets to the higher end as follows: 

  • Revenue to be in the range of $660.0 to $680.0 million
  • Adjusted EBITDA of $73.0 to $75.0 million
  • Adjusted earnings per share of $1.28 to $1.32

"As we approach the end of the year, I'm pleased to say that our strategy is paying off.  The end markets we serve continue to be strong, fueled of course by the surge in ecommerce parcel deliveries.  As we begin Q4, we are seeing the increase in demand that we expected, and we are encouraged by our interactions with our customers about future growth," said Adams. "Q3 was incredible for us, due in large part to our ability to pull ahead key builds and produce at optimal levels.  I'm extremely optimistic for what the future has in store for The Shyft Group."

Conference Call, Webcast, Investor Presentation and Investor Information

The Shyft Group will host a conference call for analysts and portfolio managers at 10 a.m. EST today to discuss these results and current business trends.  The conference call and webcast will be available via:

Webcast: www.TheShyftGroup.com/investor-relations/webcasts  
Conference Call: 1-877-317-6789 (domestic) or 412-317-6789 (international); passcode: 10148648

For more information about The Shyft Group, please visit www.TheShyftGroup.com

About The Shyft Group
The Shyft Group is the North American leader in specialty vehicle manufacturing, assembly, and upfit for the commercial, retail, and service specialty vehicle markets.  Our customers include first-to-last mile delivery companies across vocations; federal, state, and local government entities; the trades; and utility and infrastructure segments.  The Shyft Group is organized into two core business units: Shyft Fleet Vehicles and Services and Shyft Specialty Vehicles. Today, its family of brands includes Utilimaster, Royal Truck Body, DuraMag, Strobes-R-Us, Spartan RV Chassis, Builtmore Contract Manufacturing, and corresponding aftermarket provisions. The Shyft Group and its go-to-market brands are well known in their respective industries for quality, durability, and first-to-market innovation. The Company employs approximately 2,900 associates across campuses, and operates facilities in Michigan, Indiana, Maine, Pennsylvania, South Carolina, Florida, Missouri, California, Arizona, Texas, and Saltillo, Mexico. The Company reported sales from continuing operations of $757 million in 2019. Learn more about The Shyft Group at www.TheShyftGroup.com.

This release contains several forward-looking statements that are not historical facts, including our revenue and earnings guidance and other statements concerning our business, strategic position, financial projections, financial strength, future plans, objectives, and the performance of our products and operations.  These statements can be identified by words such as "believe," "expect," "intend," "potential," "future," "may," "will," "should," and similar expressions regarding future expectations.  Furthermore, statements contained in this document relating to the global outbreak of the novel coronavirus disease (COVID-19), the impact of which remains inherently uncertain on our financial results, are forward-looking statements.  These forward-looking statements involve various known and unknown risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, and likelihood.  Therefore, actual performance and results may materially differ from what may be expressed or forecasted in such forward-looking statements. Factors that could contribute to these differences include future developments relating to the COVID-19 pandemic, including governmental responses, supply chain shortages, and potential labor issues; operational and other complications that may arise affecting the implementation of our plans and business objectives; continued pressures caused by economic conditions including weaknesses resulting from the COVID-19 pandemic; challenges that may arise in connection with the integration of new businesses or assets we acquire or the disposition of assets; restructuring of our operations, and/or our expansion into new geographic markets; issues unique to government contracting, such as competitive bidding processes, qualification requirements, and delays or changes in funding; disruptions within our dealer network; changes in our relationships with major customers, suppliers, or other business partners, including Isuzu; changes in the demand or supply of products within our markets or raw materials needed to manufacture those products; and changes in laws and regulations affecting our business.  Other factors that could affect outcomes are set forth in our Annual Report on Form 10-K and other filings we make with the Securities and Exchange Commission (SEC), which are available at www.sec.gov or our website.  All forward-looking statements in this release are qualified by this paragraph.  Investors should not place undue reliance on forward-looking statements as a prediction of actual results.  We undertake no obligation to publicly update or revise any forward-looking statements in this release, whether as a result of new information, future events, or otherwise.

CONTACT: 
Juris Pagrabs
Group Treasurer
The Shyft Group
(517) 997-3862

The Shyft Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except par value)

(Unaudited)


September 30,


December 31,


2020


2019

ASSETS




Current assets:




Cash and cash equivalents

$          43,055


$          19,349

Accounts receivable, less allowance of $198 and $228

99,461


58,874

Contract assets

9,667


10,898

Inventories, net

43,076


59,456

Other receivables - chassis pool agreements

12,741


8,162

Other current assets

9,490


5,344

Current assets held for sale

-


90,725

Total current assets

217,490


252,808





Property, plant and equipment, net

37,360


40,074

Right of use assets – operating leases

35,529


32,147

Goodwill

43,480


43,632

Intangible assets, net

51,662


54,061

Other assets

1,938


2,295

Net deferred tax asset

7,660


25,520

TOTAL ASSETS

$        395,119


$       450,537

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$          63,433


$          54,713

Accrued warranty

5,564


5,694

Accrued compensation and related taxes

15,421


15,841

Deposits from customers

650


2,640

Operating lease liability

6,273


5,162

Other current liabilities and accrued expenses

6,731


15,967

Short-term debt - chassis pool agreements

12,741


8,162

Current portion of long-term debt

220


177

Current liabilities held for sale

-


49,601

Total current liabilities

111,033


157,957





Other non-current liabilities

6,063


4,922

Long-term operating lease liability

29,836


27,241

Long-term debt, less current portion

48,522


88,670

Total liabilities

195,454


278,790

Shareholders' equity:




Preferred stock, no par value: 2,000 shares authorized (none issued)

-


-

Common stock, $0.01 par value; 80,000 shares authorized; 35,550 and 35,343 outstanding

355


353

Additional paid in capital

90,362


85,148

Retained earnings

109,288


86,764

Total The Shyft Group, Inc. shareholders' equity

200,005


172,265

Non-controlling interest

(340)


(518)

Total shareholders' equity

199,665


171,747

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$        395,119


$       450,537

 

The Shyft Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)




Three Months Ended

September 30,



Nine Months Ended

September 30,




2020



2019



2020



2019


Sales


$

203,473



$

224,703



$

504,391



$

576,582


Cost of products sold



152,723




186,674




393,335




496,974


Gross profit



50,750




38,029




111,056




79,608



















Operating expenses:

















Research and development



824




1,103




3,496




3,475


Selling, general and administrative



23,525




19,812




69,534




46,815


Total operating expenses



24,349




20,915




73,030




50,290



















Operating income



26,401




17,114




38,026




29,318



















Other income (expense):

















Interest expense



(11)




(144)




(1,202)




(831)


Interest and other income



238




473




243




947


Total other income (expense)



227




329




(959)




116


Income from continuing operations before income taxes



26,628




17,443




37,067




29,434



















Income tax expense



7,253




4,317




7,084




6,929



















Income from continuing operations



19,375




13,126




29,983




22,505



















Loss from discontinued operations, net of income taxes



(598)




(2,711)




(4,619)




(7,264)



















Net income



18,777




10,415




25,364




15,241



















Less: net income (loss) attributable to non-controlling interest



41




61




178




(14)



















Net income attributable to The Shyft Group, Inc.


$

18,736



$

10,354



$

25,186



$

15,255



















Basic earnings (loss) per share

















Continuing operations


$

0.55



$

0.37



$

0.84



$

0.64


Discontinued operations


$

(0.02)



$

(0.08)



$

(0.13)



$

(0.21)


Basic earnings per share


$

0.53



$

0.29



$

0.71



$

0.43



















Diluted net earnings (loss) per share

















Continuing operations


$

0.54



$

0.37



$

0.83



$

0.64


Discontinued operations


$

(0.02)



$

(0.08)



$

(0.13)



$

(0.21)


Diluted earnings per share


$

0.52



$

0.29



$

0.70



$

0.43



















Basic weighted average common shares outstanding



35,559




35,317




35,491




35,311



















Diluted weighted average common shares outstanding



35,989




35,463




35,794




35,355


 

The Shyft Group, Inc. and Subsidiaries


Sales and Other Financial Information by Business Segment


(Unaudited)














Three Months Ended September 30, 2020 (in thousands of dollars)















Business Segments


















Fleet Vehicles &
Services


Specialty
Vehicles


Other


Consolidated


Fleet vehicle sales

$   136,382


$               -


$                  -


$      136,382


Motorhome chassis sales

-


38,190


-


38,190


Other specialty chassis and vehicles

-


17,601


-


17,601


Aftermarket parts and assemblies

8,808


2,492


-


11,300


       Total Sales


$   145,190


$   58,283


$                  -


$      203,473












Adjusted EBITDA

$      33,237


$     7,183


$      (7,827)


$        32,593














 

 

 

The Shyft Group, Inc. and Subsidiaries

Sales and Other Financial Information by Business Segment

(Unaudited)












Three Months Ended September 30, 2019 (in thousands of dollars)




















Business Segments

















Fleet Vehicles &
Services


Specialty
Vehicles


Other


Consolidated


Fleet vehicle sales

$     172,530


$                -


$                   -


$       172,530


Motorhome chassis sales

-


33,038


-


33,038


Other specialty chassis and vehicles

-


9,370


-


9,370


Aftermarket parts and assemblies

7,064


2,701


-


9,765


       Total Sales


$     179,594


$     45,109


$                  -


$      224,703












Adjusted EBITDA

$         24,689


$      4,079


$     (6,443)


$          22,325













 

 

 

Sales and Other Financial Information by Business Segment


(Unaudited)













Period End Backlog (amounts in thousands of dollars) 



Sept. 30, 2020


Jun. 30, 2020


Mar. 31, 2020


Dec. 31, 2019


Sept. 30, 2019


Fleet Vehicles and Services*

$  228,870


$  286,955


$  302,236


$  305,876


$  223,753


Motorhome Chassis *

40,387


38,804


30,641


20,097


26,719


      Other Vehicles

11,036


11,621


11,580


10,062


11,769


 Aftermarket Parts and Accessories

333


115


198


575


1,459


Total Specialty Vehicles

51,756


50,540


42,419


30,734


39,947













Total Backlog

$  280,626


$  337,495


$  344,655


$  336,610


$  263,700




* Anticipated time to fill backlog orders at September 30, 2020; five - seven months for Fleet Vehicles and Services; approximately three months for Specialty Vehicles.


















































Reconciliation of Non-GAAP Financial Measures

This release contains adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), which is a non-GAAP financial measure. This non-GAAP measure is calculated by excluding items that we believe to be infrequent or not indicative of our continuing operating performance. We define adjusted EBITDA as income from continuing operations before interest, income taxes, depreciation and amortization, as adjusted to eliminate the impact of restructuring charges, acquisition related expenses and adjustments, non-cash stock-based compensation expenses, and other gains and losses not reflective of our ongoing operations.  Adjusted EBITDA for all prior periods presented have been recast to conform to the current presentation.

We present the non-GAAP measure adjusted EBITDA because we consider it to be an important supplemental measure of our performance. The presentation of adjusted EBITDA enables investors to better understand our operations by removing items that we believe are not representative of our continuing operations and may distort our longer-term operating trends. We believe this measure to be useful to improve the comparability of our results from period to period and with our competitors, as well as to show ongoing results from operations distinct from items that are infrequent or not indicative of our continuing operating performance. We believe that presenting this non-GAAP measure is useful to investors because it permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate our historical performance. We believe that the presentation of this non-GAAP measure, when considered together with the corresponding GAAP financial measures and the reconciliations to that measure, provides investors with additional understanding of the factors and trends affecting our business than could be obtained in the absence of this disclosure.

Our management uses adjusted EBITDA to evaluate the performance of and allocate resources to our segments. Adjusted EBITDA is also used, along with other financial and non-financial measures, for purposes of determining annual incentive compensation for our management team and long-term incentive compensation for certain members of our management team.

Financial Summary

(In thousands, except per share data)

(Unaudited)









Three Months Ended September 30,


The Shyft Group, Inc.

2020

% of
sales


2019

% of
sales


Income from continuing operations

$     19,375

9.5%


$     13,126

5.8%


Net (income) attributable to non-controlling interest

(41)



(61)



Add (subtract): 







Restructuring and other related charges

303



243



Acquisition related expenses and adjustments

650



1,522



Non-cash stock-based compensation expense

2,064



1,581



Accelerated depreciation of property, plant and equipment

365



-



Deferred tax assets valuation allowance

275



201



Tax effect of adjustments

(842)



(752)



Adjusted net income

$     22,149

10.9%


$      15,860

7.1%









Income from continuing operations

$      19,375

9.5%


$      13,126

5.8%


Net (income) attributable to non-controlling interest

(41)



(61)



Add (subtract): 







Depreciation and amortization

2,978



1,453



Taxes on income

7,253



4,317



Interest expense

11



144



EBITDA

$     29,576

14.5%


$      18,979

8.4%









Add (subtract): 







Restructuring and other related charges

303



243



Acquisition related expenses and adjustments

650



1,522



Non-cash stock-based compensation expense

2,064



1,581



Adjusted EBITDA

$   32,593

16.0%


$     22,325

9.9%









Diluted net earnings per share

$       0.54



$       0.37



Add (subtract): 







Restructuring and other related charges

0.01



0.01



Acquisition related expenses and adjustments

0.02



0.05



Non-cash stock-based compensation expense

0.05



0.04



Accelerated depreciation of property, plant and equipment

0.01



-



Deferred tax asset valuation allowance

0.01



-



Tax effect of adjustments

(0.02)



(0.02)



Adjusted diluted net earnings per share

$       0.62



$       0.45














 




Financial Summary (Non-GAAP)

Consolidated

(In thousands, except per share data)

(Unaudited)












 Forecast




Twelve Months Ended December 31, 2020

The Shyft Group, Inc.



Low


Mid


High

Income from continuing operations



$           35,490


$           36,204


$           36,917

Add: 








Depreciation and amortization



13,828


13,828


13,828

Interest expense



1,434


1,434


1,434

Taxes



9,350


9,636


9,923

EBITDA



$           60,102


$           61,102


$           62,102

Add (subtract): 








Non-cash stock-based compensation and other charges


12,898


12,898


12,898

Adjusted EBITDA



$           73,000


$           74,000


$           75,000









Earnings per share



$               0.99


$               1.01


$               1.03

Add: 








Non-cash stock-based compensation and other charges


0.36


0.36


0.36

Less tax effect of adjustments



(0.07)


(0.07)


(0.07)

Adjusted earnings per share



$               1.28


$               1.30


$               1.32

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/the-shyft-group-posts-strong-third-quarter-results-301166842.html

SOURCE The Shyft Group, Inc.

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