Shyft Group Reports Fourth Quarter and Full-Year 2020 Results

Rhea-AI Summary

The Shyft Group (NASDAQ: SHYF) reported its financial results for 2020, showing sales of $676 million, down 10.7% from 2019, due largely to the absence of a one-time USPS order. However, adjusted EBITDA increased by 19.2% to $76.3 million, reflecting improved operational efficiency. The company generated $65.8 million in cash from operations and reduced debt by $65 million. Looking ahead, 2021 guidance estimates revenue between $850 million and $900 million and earnings per share between $1.42 and $1.62. The backlog as of December 31, 2020, totalled $478.7 million, up 42.2% year-over-year.

Positive

• Adjusted EBITDA increased by 19.2% to $76.3 million, 11.3% of sales.
• Gross margin improved to 21.6%, up 610 basis points from the previous year.
• Generated $65.8 million in cash from operating activities, a 92.6% increase.
• Reduced debt by $65 million during the year.
• Consolidated backlog rose to $478.7 million, a 42.2% increase year-over-year.

Negative

• Sales decreased by 10.7%, from $756.5 million in 2019 to $676 million in 2020.
• Fourth quarter sales fell by 4.7% year-over-year to $171.6 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 Velocity^TM 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.

FAQ

What were The Shyft Group's sales figures for 2020?

The Shyft Group reported sales of $676 million for the year 2020, a decrease of 10.7% from 2019.

How much did The Shyft Group decrease its debt in 2020?

The Shyft Group reduced its debt by $65 million in 2020.

What is the earnings per share guidance for The Shyft Group in 2021?

The earnings per share guidance for 2021 is between $1.42 and $1.62.

What was The Shyft Group's adjusted EBITDA for 2020?

The Shyft Group reported adjusted EBITDA of $76.3 million for 2020, an increase of 19.2% from the previous year.

How much did The Shyft Group's backlog increase by at the end of 2020?

The consolidated backlog at the end of 2020 totaled $478.7 million, up 42.2% compared to the previous year.