The Shyft (SHYF) - 2021 Q1 - Quarterly Report

Forward-Looking Statements This section provides a cautionary statement that the Form 10-Q contains forward-looking statements based on current expectations and projections - The report contains "forward-looking statements" which involve significant risks and uncertainties, meaning actual future results could differ materially from those discussed[11] - Investors are cautioned not to place undue reliance on these statements as predictions of actual results. The company is not obligated to update forward-looking statements after the filing date[12] PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2021, including balance sheets, statements of operations, cash flows, and shareholders' equity with detailed notes Condensed Consolidated Balance Sheets As of March 31, 2021, total assets were $411.5 million and total liabilities were $204.7 million, driven by increases in current assets and corresponding current liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $206,122 | $156,207 | | Total Assets | $411,533 | $359,049 | | Total Current Liabilities | $141,005 | $93,363 | | Total Liabilities | $204,707 | $158,890 | | Total Shareholders' Equity | $206,826 | $200,159 | Condensed Consolidated Statements of Operations Q1 2021 sales increased to $197.9 million, with net income attributable to The Shyft Group rising to $11.6 million or $0.32 per diluted share, primarily due to the absence of discontinued operations losses Q1 2021 vs Q1 2020 Statement of Operations (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Sales | $197,888 | $176,948 | | Gross Profit | $39,986 | $36,301 | | Operating Income | $14,667 | $13,360 | | Income from Continuing Operations | $11,530 | $11,742 | | Net Income Attributable to The Shyft Group Inc. | $11,576 | $7,811 | | Diluted EPS | $0.32 | $0.22 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly improved to $1.3 million in Q1 2021, with investing and financing activities also using cash, resulting in a net decrease of $11.0 million in cash and cash equivalents Q1 2021 vs Q1 2020 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,303) | $(17,068) | | Net cash (used in) provided by investing activities | $(5,510) | $52,567 | | Net cash used in financing activities | $(4,133) | $(13,945) | | Net (decrease) increase in cash | $(10,946) | $21,554 | Notes to Condensed Consolidated Financial Statements Notes provide context on COVID-19, the sale of the ERV business, DuraMag acquisition, revenue recognition, debt, segment performance, and the effective tax rate, which was significantly higher in Q1 2021 - The company completed the sale of its Emergency Response Vehicle (ERV) business on February 1, 2020, for $55 million, with results reclassified to discontinued operations[33] - On October 1, 2020, the company acquired DuraMag, an aluminum truck body manufacturer, for a total purchase price of $17.8 million, integrated into the Specialty Vehicle segment[35][38] - As of March 31, 2021, the company had a backlog of remaining performance obligations totaling $666.5 million, split between $589.6 million in Fleet Vehicles and Services and $76.9 million in Specialty Vehicles[52] - The effective income tax rate for Q1 2021 was 23.2%, significantly higher than 3.1% in Q1 2020, which benefited from a $2.6 million tax benefit under the CARES Act[67][68] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2021 performance, highlighting an 11.8% revenue increase to $197.9 million, a 93.4% surge in order backlog to $666.5 million, and a 4.3% rise in Adjusted EBITDA to $19.2 million, driven by strong demand and acquisitions Q1 2021 Financial Highlights vs. Q1 2020 | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Revenue | $197.9M | $176.9M | | Gross Margin | 20.2% | 20.5% | | Operating Income | $14.7M | $13.4M | | Diluted EPS (Continuing Ops) | $0.32 | $0.33 | - Order backlog increased 93.4% to $666.5 million at March 31, 2021, from $344.7 million at March 31, 2020, reflecting strong demand across the company's product portfolio[84][98] - Consolidated Adjusted EBITDA rose 4.3% to $19.2 million in Q1 2021 from $18.4 million in Q1 2020[96] - The company is advancing its product line with introductions like the Velocity F2 and M3 walk-in vans and has EV demo units in customer testing[84] Results of Operations Q1 2021 sales increased 11.8% to $197.9 million, but gross margin slightly compressed to 20.2% due to pre-production costs, and a significantly higher income tax expense led to a slight decrease in income from continuing operations Change in Adjusted EBITDA (in millions) | Description | Amount | | :--- | :--- | | Adjusted EBITDA Q1 2020 | $18.4 | | Sales volume including acquired business | $5.0 | | Sales pricing and mix | $(0.4) | | Productivity and other cost reductions | $1.5 | | Pre-production costs | $(2.3) | | General and administrative costs and other | $(3.0) | | Adjusted EBITDA Q1 2021 | $19.2 | - The effective tax rate was 23.2% in Q1 2021 versus 3.1% in Q1 2020, with the 2020 rate favorably impacted by a $2.6 million benefit from the CARES Act[92][93] Order Backlog The company's total order backlog surged 93.4% to $666.5 million as of March 31, 2021, with significant increases in both Fleet Vehicles and Services and Specialty Vehicles segments, indicating robust demand Order Backlog by Segment (in thousands) | Segment | March 31, 2021 | March 31, 2020 | | :--- | :--- | :--- | | Fleet Vehicles and Services | $589,604 | $302,236 | | Specialty Vehicles | $76,896 | $42,419 | | Total Consolidated | $666,500 | $344,655 | Our Segments Fleet Vehicles and Services sales decreased 3.0% due to pre-production costs, while Specialty Vehicles sales surged 60.5% and Adjusted EBITDA nearly doubled, driven by higher volumes and the DuraMag acquisition Fleet Vehicles and Services (FVS) Performance (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Sales | $131,673 | $135,688 | | Adjusted EBITDA | $18,210 | $21,736 | | Adj. EBITDA Margin | 13.8% | 16.0% | Specialty Vehicles (SV) Performance (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Sales | $66,215 | $41,260 | | Adjusted EBITDA | $7,016 | $3,721 | | Adj. EBITDA Margin | 10.6% | 9.0% | Liquidity and Capital Resources Cash decreased by $11.0 million in Q1 2021, but the company maintained strong liquidity with $126.0 million available under its revolving credit facility, using cash for operations, capital expenditures, share repurchases, and dividends - Cash and cash equivalents decreased by $11.0 million during the quarter, ending at $10.0 million[114] - The company has a $175 million revolving credit facility, with $126.0 million in available borrowings as of March 31, 2021[122][124] - A quarterly dividend of $0.025 per share was declared in February 2021[127] Quantitative and Qualitative Disclosures About Market Risk The company identifies interest rate fluctuations on variable-rate debt and commodity price changes, particularly steel and aluminum, as primary market risks, with a 100 basis point rate increase potentially adding $0.2 million to annual interest expense - The company is exposed to interest rate risk on its $22.4 million of variable-rate debt, where a 100 basis point rate increase would add $0.2 million to annual interest expense[129] - The company faces commodity risk from price changes in raw materials, mainly steel and aluminum, which it mitigates through pre-buys and active supply management[131] - The planned phase-out of LIBOR is noted as a potential risk that could increase interest expense and disrupt financial markets[130] Controls and Procedures Management concluded that disclosure controls were not effective as of March 31, 2021, due to a previously identified material weakness, for which a remediation plan is underway, though financial statements are still deemed fairly presented - Disclosure controls and procedures were concluded to be not effective as of March 31, 2021, due to a previously identified material weakness[134] - A remediation plan is being executed with the goal of resolving the material weakness before the end of fiscal 2021[136] - Notwithstanding the material weakness, management has concluded that the condensed consolidated financial statements are fairly presented in all material respects[135] PART II. OTHER INFORMATION Risk Factors This section confirms that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - There have been no material changes from the risk factors disclosed in the Form 10-K for the year ended December 31, 2020[139] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2021, the company repurchased 100,000 shares of common stock under its program, with approximately 0.4 million shares remaining available for repurchase as of March 31, 2021 Issuer Purchases of Equity Securities (Q1 2021) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Plan | | :--- | :--- | :--- | :--- | | Jan 2021 | - | $- | - | | Feb 2021 | 45,496 | $32.76 | 45,000 | | Mar 2021 | 120,184 | $35.03 | 55,000 | | Total | 165,680 | - | 100,000 | - As of March 31, 2021, 408,994 shares may yet be purchased under the existing stock repurchase authorization[141] Exhibits This section lists the exhibits filed as part of the Form 10-Q report, including CEO and CFO certifications and Inline XBRL financial data files - The exhibits filed with the report include certifications from the President and CEO, and the CFO, as well as Inline XBRL documents[144] Signatures The Form 10-Q report was officially signed and authorized by Jonathan C. Douyard, the Chief Financial Officer, on behalf of The Shyft Group, Inc. on May 6, 2021 - The report was duly signed on May 6, 2021, by Jonathan C. Douyard, Chief Financial Officer[146][147]