shyf20230331b

shyf20230331b_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023.
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission File Number 001-33582

THE SHYFT GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

Michigan (State or Other Jurisdiction of Incorporation or Organization)		38-2078923 (I.R.S. Employer Identification No.)
41280 Bridge Street Novi, Michigan (Address of Principal Executive Offices)		48375 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (517) 543-6400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SHYF	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at April 21, 2023
Common Stock	34,915,231 shares

			Page

FORWARD-LOOKING STATEMENTS			3

PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements:

		Condensed Consolidated Balance Sheets – March 31, 2023 and December 31, 2022 (Unaudited)	4

		Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2023 and 2022 (Unaudited)	5

		Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2023 and 2022 (Unaudited)	6

		Condensed Consolidated Statement of Shareholders’ Equity – Three Months Ended March 31, 2023 and 2022 (Unaudited)	7

		Notes to Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

	Item 4.	Controls and Procedures	23

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	24

	Item 1A.	Risk Factors	24

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 6.	Exhibits	25

SIGNATURES			26

	March 31,		December 31,
	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	7,378	$	11,548
Accounts receivable, less allowance of $255 and $246		120,141		115,742
Contract assets		60,094		86,993
Inventories		109,308		100,161
Other receivables – chassis pool agreements		16,112		19,544
Other current assets		4,908		11,779
Total current assets		317,941		345,767
Property, plant and equipment, net		73,939		70,753
Right of use assets – operating leases		54,931		53,386
Goodwill		48,880		48,880
Intangible assets, net		48,126		49,078
Net deferred tax assets		10,390		10,390
Other assets		2,805		2,227
TOTAL ASSETS	$	557,012	$	580,481

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	107,807	$	124,309
Accrued warranty		6,183		7,161
Accrued compensation and related taxes		16,038		14,434
Contract liabilities		7,719		5,255
Operating lease liability		11,576		10,888
Other current liabilities and accrued expenses		14,404		19,452
Short-term debt – chassis pool agreements		16,112		19,544
Current portion of long-term debt		183		189
Total current liabilities		180,022		201,232
Other non-current liabilities		9,557		10,033
Long-term operating lease liability		45,251		44,256
Long-term debt, less current portion		65,224		56,266
Total liabilities		300,054		311,787
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock, no par value: 2,000 shares authorized (none issued)		-		-
Common stock, no par value: 80,000 shares authorized; 34,915 and 35,066 outstanding		89,260		92,982
Retained earnings		167,629		175,611
Total Shyft Group, Inc. shareholders’ equity		256,889		268,593
Non-controlling interest		69		101
Total shareholders' equity		256,958		268,694
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	557,012	$	580,481

	Three Months Ended March 31,
	2023			2022

Sales	$	243,439		$	206,883
Cost of products sold		200,515			180,952
Gross profit		42,924			25,931

Operating expenses:
Research and development		6,949			4,927
Selling, general and administrative		32,289			26,552
Total operating expenses		39,238			31,479

Operating income (loss)		3,686			(5,548	)

Other income (expense)
Interest expense		(1,648	)		(154	)
Other income (expense)		70			(35	)
Total other income (expense)		(1,578	)		(189	)

Income (loss) before income taxes		2,108			(5,737	)
Income tax expense (benefit)		430			(1,885	)
Net income (loss)		1,678			(3,852	)
Less: net loss attributable to non-controlling interest		32			-

Net income (loss) attributable to The Shyft Group Inc.	$	1,710		$	(3,852	)

Basic earnings (loss) per share	$	0.05		$	(0.11	)
Diluted earnings (loss) per share	$	0.05		$	(0.11	)

Basic weighted average common shares outstanding		35,058			35,108
Diluted weighted average common shares outstanding		35,340			35,108

	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net income (loss)	$	1,678		$	(3,852	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		3,864			2,969
Non-cash stock based compensation expense		1,827			1,648
(Gain) on disposal of assets		-			(10	)
Changes in accounts receivable and contract assets		22,500			(5,012	)
Changes in inventories		(9,147	)		(24,072	)
Changes in accounts payable		(16,920	)		7,594
Changes in accrued compensation and related taxes		419			(7,966	)
Changes in accrued warranty		(978	)		(326	)
Change in other assets and liabilities		2,644			1,243
Net cash provided by (used in) operating activities		5,887			(27,784	)

Cash flows from investing activities:
Purchases of property, plant and equipment		(4,469	)		(5,514	)
Proceeds from sale of property, plant and equipment		25			29
Acquisition of business, net of cash acquired		(500	)		-
Net cash used in investing activities		(4,944	)		(5,485	)

Cash flows from financing activities:
Proceeds from long-term debt		40,000			45,000
Payments on long-term debt		(31,000	)		(10,000	)
Payment of dividends		(1,878	)		(1,886	)
Purchase and retirement of common stock		(8,765	)		(26,789	)
Exercise and vesting of stock incentive awards		(3,470	)		(6,523	)
Net cash used in financing activities		(5,113	)		(198	)

Net decrease in cash and cash equivalents		(4,170	)		(33,467	)
Cash and cash equivalents at beginning of period		11,548			37,158
Cash and cash equivalents at end of period	$	7,378		$	3,691

	Number of Shares			Common Stock			Retained Earnings			Non- Controlling Interest			Total Shareholders’ Equity
Balance at December 31, 2022		35,066		$	92,982		$	175,611		$	101		$	268,694
Issuance of common stock and tax impact of stock incentive plan		5			(4,656	)		-			-			(4,656	)
Dividends declared ($0.05 per share)		-			-			(1,820	)		-			(1,820	)
Purchase and retirement of common stock		(349	)		(893	)		(7,872	)		-			(8,765	)
Issuance of restricted stock, net of cancellation		193			-			-			-			-
Non-cash stock based compensation expense		-			1,827			-			-			1,827
Net income (loss)		-			-			1,710			(32	)		1,678
Balance at March 31, 2023		34,915		$	89,260		$	167,629		$	69		$	256,958

	March 31, 2023		December 31, 2022
Finished goods	$	11,696	$	13,361
Work in process		3,796		5,200
Raw materials and purchased components		93,816		81,600
Total inventories	$	109,308	$	100,161

	March 31, 2023		December 31, 2022
Chassis pool agreements	$	16,112	$	19,544
Total short-term debt	$	16,112	$	19,544

	March 31, 2023			December 31, 2022
Line of credit revolver	$	65,000		$	56,000
Finance lease obligation		407			455
Total debt		65,407			56,455
Less current portion of long-term debt		(183	)		(189	)
Total long-term debt	$	65,224		$	56,266

	March 31, 2023			March 31, 2022
Contract Assets
Contract assets, beginning of period	$	86,993		$	21,483
Reclassification of the beginning contract assets to receivables, as the result of rights to consideration becoming unconditional		(66,340	)		(18,635	)
Contract assets recognized, net of reclassification to receivables		39,441			30,141
Contract assets, end of period	$	60,094		$	32,989

Contract Liabilities
Contract liabilities, beginning of period	$	5,255		$	988
Reclassification of the beginning contract liabilities to revenue, as the result of performance obligations satisfied		(4,421	)		(988	)
Cash received in advance and not recognized as revenue		6,885			5,193
Contract liabilities, end of period	$	7,719		$	5,193

	Three Months Ended March 31, 2023
	FVS		SV		Eliminations and Other			Total
Primary geographical markets
United States	$	154,028	$	87,184	$	(3,181	)	$	238,031
Other		5,405		3		-			5,408
Total sales	$	159,433	$	87,187	$	(3,181	)	$	243,439

Timing of revenue recognition
Products transferred at a point in time	$	12,154	$	37,562	$	-		$	49,716
Products and services transferred over time		147,279		49,625		(3,181	)		193,723
Total sales	$	159,433	$	87,187	$	(3,181	)	$	243,439

	March 31, 2023			December 31, 2022
Land and improvements	$	12,314		$	12,314
Buildings and improvements		42,857			42,827
Plant machinery and equipment		58,517			55,969
Furniture and fixtures		18,700			18,334
Vehicles		2,116			2,083
Construction in process		12,990			9,946
Subtotal		147,494			141,473
Less accumulated depreciation		(73,555	)		(70,720	)
Total property, plant and equipment, net	$	73,939		$	70,753

	March 31,
	2023			2022
Weighted average remaining lease term of operating leases (in years)		7.9			8.5
Weighted average discount rate of operating leases		2.8	%		2.7	%

Years ending December 31:
2023⁽¹⁾	$	8,800
2024		11,017
2025		9,742
2026		7,737
2027		5,499
Thereafter		20,500
Total lease payments		63,295
Less: imputed interest		(6,468	)
Total lease liabilities	$	56,827

	Three Months Ended March 31, 2023
	Segment
	FVS		SV		Eliminations and Other			Consolidated

Fleet vehicle sales	$	147,279	$	-	$	-		$	147,279
Motorhome chassis sales		-		27,960		-			27,960
Other specialty vehicle sales		-		54,697		(3,181	)		51,516
Aftermarket parts and accessories sales		12,154		4,530		-			16,684
Total sales	$	159,433	$	87,187	$	(3,181	)	$	243,439

Depreciation and amortization expense	$	1,338	$	1,679	$	847		$	3,864
Adjusted EBITDA		12,473		13,852		(15,537	)		10,788
Segment assets		300,578		235,844		20,590			557,012
Capital expenditures		1,865		741		2,298			4,904

	Three Months Ended March 31, 2022
	FVS		SV		Eliminations and Other		Total
Primary geographical markets
United States	$	111,336	$	94,183	$	-	$	205,519
Other		1,361		3		-		1,364
Total sales	$	112,697	$	94,186	$	-	$	206,883

Timing of revenue recognition
Products transferred at a point in time	$	9,555	$	52,851	$	-	$	62,406
Products and services transferred over time		103,142		41,335		-		144,477
Total sales	$	112,697	$	94,186	$	-	$	206,883

	Three Months Ended March 31,
	2023			2022
Balance of accrued warranty at January 1	$	7,161		$	5,975
Provisions for current period sales		1,035			793
Changes in liability for pre-existing warranties		(769	)		(174	)
Cash settlements		(1,244	)		(945	)
Balance of accrued warranty at March 31	$	6,183		$	5,649

	●	Net income of $1.7 million for the first quarter of 2023, compared to loss of $3.9 million for the first quarter of 2022.
	●	Diluted earnings per share of $0.05 for the first quarter of 2023, compared to loss of $0.11 for the first quarter of 2022.

Adjusted EBITDA three months ended March 31, 2022	$	(0.6	)
Sales volume and other		7.7
Product pricing and mix		8.1
Material and labor costs		(2.0	)
EV development costs		(4.1	)
General and administrative costs and other		1.7
Adjusted EBITDA three months ended March 31, 2023	$	10.8

	March 31, 2023		March 31, 2022
Fleet Vehicles and Services	$	584,933	$	1,148,700
Specialty Vehicles		82,478		123,999
Total consolidated	$	667,411	$	1,272,699

	Three Months Ended
	March 31,
	2023		2022
Net Income (loss)	$	1,678	$	(3,852	)
Net loss attributable to non-controlling interest		32		-
Add (subtract):
Interest expense		1,648		154
Depreciation and amortization expense		3,864		2,969
Income tax expense (benefit)		430		(1,885	)
Restructuring and other related charges		62		107
Acquisition related expenses and adjustments		291		216
Non-cash stock based compensation expense		1,827		1,648
Legacy legal matters		956		-
Adjusted EBITDA	$	10,788	$	(643	)

	Financial Data
	(Dollars in Thousands)
	Three Months Ended March 31,
	2023					2022
	Amount		Percentage			Amount			Percentage

Sales	$	159,433		100.0	%	$	112,697			100.0%
Adjusted EBITDA		12,473		7.8	%		(871	)		(0.8%	)

SEC Form 10-Q filed by The Shyft Group Inc.