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theshyftgroup.com

Shyft Group Reports Fourth Quarter and Full-Year 2020 Results

Posts Full Year EPS of $1.05 on Sales of $676.0 Million

Business Transformation Drives Full Year Adjusted EPS to $1.34, up 8%

Provides 2021 Midpoint Guidance of $100 Million of Adjusted EBITDA, up 30% on Sales of $875 Million

NOVI, Mich., March 11, 2021 /PRNewswire/ — The Shyft Group, Inc. (NASDAQ: SHYF) (the “Company”), the North American leader in specialty vehicle manufacturing and assembly for the commercial and fleet vehicle industries (including last mile delivery, specialty service and vocation-specific upfit markets), as well as for the recreational vehicle markets, today reported operating results for the fourth quarter and full-year periods ending December 31, 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 twelve-month period ending December 31, 2019, include $91.4 million of pass-through revenues from a one-time USPS truck body order. 

Full-Year 2020 Highlights from Continuing Operations

For the full-year 2020 compared to the full-year 2019:

  • Sales of $676.0 million, a decrease of $80.5 million, or 10.7%, from $756.5 million. Excluding USPS order, sales increased $10.9 million, or 1.6%, despite pandemic related headwinds throughout the year.
  • Gross margin of 21.6% of sales, a 610 basis point improvement from 15.5% of sales, due to the momentum from the Company’s strategy to focus on higher margin products and actions taken to improve overall operating efficiency.
  • Income from continuing operations of $38.3 million, or $1.05 per share, compared to $36.8 million, or $1.03 per share.
  • Adjusted EBITDA of $76.3 million, or a record 11.3% of sales, an increase of $12.3 million, or 19.2%, from $64.0 million, or 8.5% 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 $48.2 million, or $1.34 per share, an increase of $4.3 million, or 9.9%, from $43.9 million, or $1.24 per share.
  • Generated $65.8 million of cash from operating activities, an increase of $31.6 million, or 92.6% from $34.2 million and reduced debt by $65.0 million.
  • Consolidated backlog at December 31, 2020, totaled $478.7 million, up $142.1 million, or 42.2%, compared to $336.6 million at December 31, 2019, reflecting continued strong demand across business units.

Fourth Quarter 2020 Highlights from Continuing Operations

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

  • Sales of $171.6 million, a decrease of $8.4 million, or 4.7%, from $180.0 million.
  • Income from continuing operations of $8.3 million, or $0.22 per share, compared to $14.3 million, or $0.40 per share.
  • Adjusted EBITDA of $16.0 million, or 9.3% of sales, a decrease of $7.6 million, or 32.0%, from $23.6 million, or 13.1% of sales.
  • Adjusted net income of $10.1 million, or $0.27 per share, compared to $16.5 million, or $0.47 per share.
  • Repurchased 300,000 shares of The Shyft Group common stock for approximately $7.5 million in the aggregate pursuant to the Company’s share repurchase authorization.
  • Purchased the F3 MFG, Inc. business (“DuraMag”), a leading aluminum service body and accessory manufacturer of the well-recognized DuraMag® and Magnum® brands.

“By all accounts, 2020 proved to be a historic and transformative year for The Shyft Group, as we strategically aligned our product portfolio to take advantage of more profitable growth markets after the sale of the ER business,” said Daryl Adams, President and Chief Executive Officer.  “I am incredibly proud and appreciative of the tremendous efforts of our entire team.  Throughout 2020, we rose to the challenge to overcome the impact of the COVID-19 pandemic and related plant disruptions to meet customer demand, while ending the year with nearly $500 million in backlog.  We completed another key acquisition that expanded our product offerings, and we continued our efforts toward greater efficiency and productivity across our operations.  We emerge from 2020 in a stronger position, well equipped to drive growth in each of our businesses for years to come.”

Full-Year 2020 Segment Results from Continuing Operations

For the full-year 2020 compared to the full-year 2019:

Fleet Vehicles and Services (FVS)
FVS segment sales were $490.5 million, a decrease of 14.8% from $575.9 million.  Sales increased 1.2%, or $6.0 million, excluding the USPS order, due to higher last mile delivery vehicle volume.

Adjusted EBITDA increased $24.5 million to a record $85.2 million, or 17.4% of sales, from $60.7 million, or 10.5% of sales, a year ago.  The increase was primarily due to product mix, productivity and cost reduction actions. 

The segment backlog at December 31, 2020, totaled a record $427.3 million, up 39.7%, compared to $305.9 million at December 31, 2019, which reflects strong demand for delivery vehicles.

Specialty Vehicles (SV)
SV segment sales were $185.5 million, essentially flat compared to last year’s $185.9 million due to lower volume in luxury motor coach chassis and contract manufacturing, partially offset by the Royal (September, 2019) and the DuraMag (October, 2020) acquisitions.    

Adjusted EBITDA was $19.0 million, or 10.2% of sales, a decrease of $1.7 million from $20.7 million, or 11.1% of sales, a year ago.  The decrease was primarily due to lower volume partially offset by the recent acquisitions.

Segment backlog at December 31, 2020, totaled $51.3 million, up 67.0%, compared to $30.7 million at December 31, 2019, due to increased luxury motor coach chassis and service body orders.

Liquidity Update
The Shyft Group’s access to capital remains strong at $146.8 million, including $21.0 million of cash on hand at December 31, 2020.  The Company paid down $65.0 million on its revolving credit facility during 2020 and during the fourth quarter, repurchased 300,000 shares of Shyft common stock for approximately $7.5 million.  The leverage ratio currently stands at 0.4 times adjusted EBITDA and leaves the Company well positioned to continue its pursuit of strategic opportunities.

2021 Outlook
“Our record EBITDA margin performance this past year and the strength of our balance sheet reflects the power of our recently transformed company.  We effectively replaced a non-strategic ER business with two leading service body companies that generate nearly $100 million of annualized revenue with attractive profitability, said Jon Douyard, Chief Financial Officer.  “We generated cash flow well in excess of net income, which we were able to deploy in 2020 to repay debt and return $11 million in cash to our shareholders.”   

Company guidance for full-year 2021 from continuing operations is as follows:

  • Revenue to be in the range of $850 to $900 million
  • Net income of $51 to $58 million
  • Adjusted EBITDA of $95 to $105 million
  • Effective tax rate of approximately 26%
  • Earnings per share of $1.42 – $1.62
  • Adjusted earnings per share of $1.65 – $1.85

“We look ahead to 2021 with optimism. The actions taken to date to support our growth strategy are aligned to take advantage of the strength of our end markets.  During 2021, we will continue to invest in our exclusive VelocityTM line of vehicles, including additional ICE and EV platforms to support our customer demands and we plan to opportunistically pursue acquisitions to penetrate new markets while maintaining a focus on last mile delivery.  We emerge from 2020 in an advantageous position, well equipped to drive sustainable, profitable growth in each of our businesses and to drive long-term value for our shareholders,” concluded Adams.

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. ET today to discuss these results and current business trends.  The conference call and webcast will be available via:

Webcast: www.theshyftgroup.com/webcasts or click on “Investor Relations” then “Webcasts”
Conference Call: 1-877-317-6789 (domestic) or 412-317-6789 (international); passcode: 10152483

For more information about Shyft, 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 & Services and Shyft Specialty Vehicles. Today, its go-to-market brands include Utilimaster, Royal Truck Body, DuraMag and Magnum, Strobes-R-Us, Spartan RV Chassis, and Builtmore Contract Manufacturing, which are well known in their respective industries for quality, durability, first-to-market innovation, and industry-leading aftermarket parts, service, and support. The Company employs approximately 3,000 employees and contractors 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 $676 million in 2020. 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, all other information provided with respect to our outlook for 2021 and future periods, and other statements concerning our business, strategic position, financial projections, financial strength, future plans, objectives, and the performance of our products and operations that are not historical facts.  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 release relating to the COVID-19 pandemic, 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; 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 & Director of Investor Relations
The Shyft Group, Inc
517-997-3862

The Shyft Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except par value)

(Unaudited)

 
   

December 31,

   

December 31,

 
   

2020

   

2019

 

ASSETS

               

Current assets:

               

Cash and cash equivalents

 

$

20,995

   

$

19,349

 

Accounts receivable, less allowance of $116 and $228

   

64,695

     

58,874

 

Contract assets

   

9,414

     

10,898

 

Inventories, net

   

46,428

     

59,456

 

Other receivables – chassis pool agreements

   

6,503

     

8,162

 

Other current assets

   

8,172

     

5,344

 

Current assets held for sale

   

     

90,725

 

Total current assets

   

156,207

     

252,808

 
                 

Property, plant and equipment, net

   

45,734

     

40,074

 

Right of use assets – operating leases

   

43,430

     

32,147

 

Goodwill

   

49,481

     

43,632

 

Intangible assets, net

   

56,386

     

54,061

 

Other assets

   

2,052

     

2,295

 

Net deferred tax asset

   

5,759

     

25,520

 

TOTAL ASSETS

 

$

359,049

   

$

450,537

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

               

Current liabilities:

               

Accounts payable

 

$

47,487

   

$

54,713

 

Accrued warranty

   

5,633

     

5,694

 

Accrued compensation and related taxes

   

17,134

     

15,841

 

Deposits from customers

   

756

     

2,640

 

Operating lease liability

   

7,508

     

5,162

 

Other current liabilities and accrued expenses

   

8,121

     

15,967

 

Short-term debt – chassis pool agreements

   

6,503

     

8,162

 

Current portion of long-term debt

   

221

     

177

 

Current liabilities held for sale

   

     

49,601

 

Total current liabilities

   

93,363

     

157,957

 
                 

Other non-current liabilities

   

5,447

     

4,922

 

Long-term operating lease liability

   

36,662

     

27,241

 

Long-term debt, less current portion

   

23,418

     

88,670

 

Total liabilities

   

158,890

     

278,790

 

Shareholders’ equity:

               

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

   

     

 

Common stock, no par value: 80,000 shares authorized; 35,344 and 35,343
outstanding

   

91,044

     

353

 

Additional paid in capital

   

     

85,148

 

Retained earnings

   

109,286

     

86,764

 

Total The Shyft Group, Inc. shareholders’ equity

   

200,330

     

172,265

 

Non-controlling interest

   

(171)

     

(518)

 

Total shareholders’ equity

   

200,159

     

171,747

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

359,049

   

$

450,537

 

 

The Shyft Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 
   

Three Months Ended

December 31,

   

Twelve Months Ended

December 31,

 
   

2020

   

2019

   

2020

   

2019

 

Sales

 

$

171,582

   

$

179,960

   

$

675,973

   

$

756,542

 

Cost of products sold

   

136,361

     

142,541

     

529,696

     

639,515

 

Gross profit

   

35,221

     

37,419

     

146,277

     

117,027

 
                                 

Operating expenses:

                               

Research and development

   

865

     

1,389

     

4,361

     

4,864

 

Selling, general and administrative

   

23,534

     

17,734

     

93,068

     

64,549

 

Total operating expenses

   

24,399

     

19,123

     

97,429

     

69,413

 
                                 

Operating income

   

10,822

     

18,296

     

48,848

     

47,614

 
                                 

Other income (expense):

                               

Interest expense

   

(91)

     

(1,008)

     

(1,293)

     

(1,839)

 

Interest and other income

   

358

     

423

     

601

     

1,370

 

Total other income (expense)

   

267

     

(585)

     

(692)

     

(469)

 

Income from continuing operations before income taxes

   

11,089

     

17,711

     

48,156

     

47,145

 
                                 

Income tax expense

   

2,783

     

3,426

     

9,867

     

10,355

 
                                 

Income from continuing operations

   

8,306

     

14,285

     

38,289

     

36,790

 
                                 

Loss from discontinued operations, net of income taxes

   

(504)

     

(41,952)

     

(5,123)

     

(49,216)

 
                                 

Net income (loss)

   

7,802

     

(27,667)

     

33,166

     

(12,426)

 
                                 

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

   

169

     

154

     

347

     

140

 
                                 

Net income attributable to The Shyft Group, Inc.

 

$

7,633

   

$

(27,821)

   

$

32,819

   

$

(12,566)

 
                                 

Basic earnings (loss) per share

                               

Continuing operations

 

$

0.22

   

$

0.40

   

$

1.07

   

$

1.03

 

Discontinued operations

 

$

(0.01)

   

$

(1.19)

   

$

(0.14)

   

$

(1.39)

 

Basic earnings per share

 

$

0.21

   

$

(0.79)

   

$

0.93

   

$

(0.36)

 
                                 

Diluted net earnings (loss) per share

                               

Continuing operations

 

$

0.22

   

$

0.40

   

$

1.05

   

$

1.03

 

Discontinued operations

 

$

(0.01)

   

$

(1.18)

   

$

(0.14)

   

$

(1.39)

 

Diluted earnings per share

 

$

0.21

   

$

(0.78)

   

$

0.91

   

$

(0.36)

 
                                 

Basic weighted average common shares outstanding

   

35,445

     

35,339

     

35,479

     

35,318

 
                                 

Diluted weighted average common shares outstanding

   

36,226

     

35,582

     

36,039

     

35,416

 

 

Sales and Other Financial Information by Business Segment

 

(Unaudited)

 
   

Period End Backlog (amounts in thousands of dollars)

 
   

Dec. 31,
2020

   

Sept. 30,
2020

   

Jun. 30,
2020

   

Mar. 31,
2020

   

Dec. 31,
2019

 

Fleet Vehicles and Services*

 

$

427,338

   

$

228,870

   

$

286,955

   

$

302,236

   

$

305,876

 

   Motorhome Chassis *

   

31,580

     

40,387

     

38,804

     

30,641

     

20,097

 

Other Vehicles

   

19,431

     

11,036

     

11,621

     

11,580

     

10,062

 

Aftermarket Parts and Accessories

   

302

     

333

     

115

     

198

     

575

 

Total Specialty Vehicles

   

51,313

     

51,756

     

50,540

     

42,419

     

30,734

 
                                         

Total Backlog

 

$

478,651

   

$

280,626

   

$

337,495

   

$

344,655

   

$

336,610

 
 

* Anticipated time to fill backlog orders at December 31, 2020; five – seven months for Fleet Vehicles and Services; approximately three months for Specialty Vehicles.  

Reconciliation of Non-GAAP Financial Measures
This release presents Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted net income, and adjusted earnings per share, each of which is a non-GAAP financial measure. These non-GAAP measures are calculated by excluding items that we believe to be infrequent or not indicative of our underlying operating performance, as well as certain non-cash expenses. 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. 

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 December 31,

 

Twelve Months Ended December 31,

The Shyft Group, Inc.

2020

% of
sales

 

2019

% of
sales

 

2020

% of
sales

 

2019

% of
sales

Income from continuing operations

$    8,306

4.8%

 

$      14,285

7.9%

 

$    38,289

5.7%

 

$   36,790

4.9%

Net (income) loss attributable to non-
controlling interest

(169)

   

(154)

   

(347)

   

(140)

 

Add (subtract): 

                     

Restructuring and other related
charges

16

   

46

   

1,873

   

316

 

Acquisition related expenses and
adjustments

410

   

1,544

   

1,332

   

3,531

 

Non-cash stock-based compensation
expense

1,525

   

1,403

   

7,706

   

5,281

 

Loss from write-off of construction in
process

   

   

2,430

   

 

Accelerated depreciation of property,
plant and equipment

366

   

   

3,061

   

 

Favorable tax rate in income taxes
receivable

   

   

(2,610)

   

 

Deferred tax asset adjustment

56

   

   

376

   

135

 

Tax effect of adjustments

(441)

   

(619)

   

(3,892)

   

(2,056)

 

Adjusted net income

$    10,069

5.9%

 

$      16,505

9.2%

 

$   48,218

7.1%

 

$   43,857

5.8%

                       

Income from continuing operations

$      8,306

4.8%

 

$      14,285

7.9%

 

$   38,289

5.7%

 

$   36,790

4.9%

Net (income) loss attributable to non-
controlling interest

(169)

   

(154)

   

(347)

   

(140)

 

Add (subtract): 

                     

Depreciation and amortization

3,065

   

2,028

   

13,903

   

6,073

 

Taxes on income

2,783

   

3,426

   

9,867

   

10,355

 

Interest expense

91

   

1,008

   

1,293

   

1,839

 

EBITDA

$     14,076

8.2%

 

$      20,593

11.4%

 

$   63,005

9.3%

 

$   54,917

7.3%

                       

Add (subtract): 

                     

Restructuring and other related
charges

16

   

46

   

1,873

   

$        316

 

Acquisition related expenses and
adjustments

410

   

1,544

   

1,332

   

3,531

 

Non-cash stock-based compensation
expense

1,525

   

1,403

   

7,706

   

5,281

 

Loss from write-off of construction in
process

   

   

2,430

   

 

Adjusted EBITDA

$   16,027

9.3%

 

$     23,586

13.1%

 

$   76,346

11.3%

 

$   64,045

8.5%

                       

Diluted net earnings per share

$        0.22

   

$       0.40

   

$       1.05

   

$        1.03

 

Add (subtract): 

                     

Restructuring and other related
charges

   

   

0.05

   

 

Acquisition related expenses and
adjustments

0.01

   

0.04

   

0.04

   

0.11

 

Non-cash stock-based compensation
expense

0.04

   

0.05

   

0.21

   

0.15

 

Loss from write-off of construction in
process

   

   

0.07

   

 

Accelerated depreciation of property,
plant and equipment

0.01

   

   

0.09

   

 

Deferred tax asset adjustment

   

   

0.01

   

 

Favorable tax rate in income taxes
receivable

   

   

(0.07)

   

 

Tax effect of adjustments

(0.01)

   

(0.02)

   

(0.11)

   

(0.05)

 

Adjusted diluted net earnings per
share

$       0.27

   

$       0.47

   

$       1.34

   

$       1.24

 

 

Financial Summary (Non-GAAP)

Consolidated

(In thousands, except per share data)

(Unaudited)

               
     

 Forecast

     

Twelve Months Ended December 31, 2021

The Shyft Group, Inc.

   

Low

 

Mid

 

High

Income from continuing operations

   

$           51,028

 

$           54,628

 

$           58,328

Add: 

             

Depreciation and amortization

   

13,462

 

13,462

 

13,462

Interest expense

   

1,295

 

1,295

 

1,295

Taxes

   

17,793

 

19,193

 

20,493

EBITDA

   

$           83,578

 

$           88,578

 

$           93,578

Add (subtract): 

             

Non-cash stock-based compensation and other charges

 

11,422

 

11,422

 

11,422

Adjusted EBITDA

   

$           95,000

 

$        100,000

 

$        105,000

               

Earnings per share

   

$               1.42

 

$               1.52

 

$               1.62

Add: 

             

Non-cash stock-based compensation and other charges

 

0.32

 

0.32

 

0.32

Less tax effect of adjustments

   

(0.09)

 

(0.09)

 

(0.09)

Adjusted earnings per share

   

$               1.65

 

$               1.75

 

$               1.85

 

 

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SOURCE The Shyft Group, Inc.