shyf20230630c

shyf20230630c_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 June 30, 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 July 21, 2023
Common Stock	34,961,090 shares

Table of Contents

THE SHYFT GROUP, INC.

INDEX

			Page

FORWARD-LOOKING STATEMENTS			3

PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements:

		Condensed Consolidated Balance Sheets – June 30, 2023 and December 31, 2022 (Unaudited)	4

		Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	5

		Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2023 and 2022 (Unaudited)	6

		Condensed Consolidated Statement of Shareholders’ Equity – Three and Six Months Ended June 30, 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	17

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

	Item 4.	Controls and Procedures	27

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	28

	Item 1A.	Risk Factors	28

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

	Item 5.	Other Information	28

	Item 6.	Exhibits	29

SIGNATURES			30

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FORWARD-LOOKING STATEMENTS

This Form 10-Q contains some statements that are not historical facts. These statements are called “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements involve important known and unknown risks, uncertainties and other factors and generally can be identified by phrases using “estimate,” “anticipate,” “believe,” “project,” “expect,” “intend,” “predict,” “potential,” “future,” “may,” “will,” “should” or similar expressions or words. The Shyft Group, Inc.'s (the “Company,” “we,” “us” or “our”) future results, performance or achievements may differ materially from the results, performance or achievements discussed in the forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Risk Factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.

Risk Factors include the risk factors listed and more fully described in Item 1A – Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on February 23, 2023, subject to any changes and updates disclosed in Part II, Item 1A – Risk Factors below, “Risk Factors”, as well as risk factors that we have discussed in previous public reports and other documents filed with the Securities and Exchange Commission. Those risk factors include the primary risks our management believes could materially affect the potential results described by forward-looking statements contained in this Form 10-Q. However, these risks may not be the only risks we face. Our business, operations, and financial performance could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. In addition, new Risk Factors may emerge from time to time that may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, although we believe that the forward-looking statements contained in this Form 10-Q are reasonable, we cannot provide you with any guarantee that the results described in those forward-looking statements will be achieved. All forward-looking statements in this Form 10-Q are expressly qualified in their entirety by the cautionary statements contained in this section, and investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company undertakes no obligation to update or revise any forward-looking statements to reflect developments or information obtained after the date this Form 10-Q is filed with the Securities and Exchange Commission.

Trademarks and Service Marks

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. Solely for convenience, some of the copyrights, trademarks, service marks and trade names referred to in this Quarterly Report on Form 10-Q are listed without the ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trademarks, service marks, trade names and domain names. The trademarks, service marks and trade names of other companies appearing in this Quarterly Report on Form 10-Q are, to our knowledge, the property of their respective owners.

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PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

THE SHYFT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)

	June 30,		December 31,
	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	7,808	$	11,548
Accounts receivable, less allowance of $270 and $246		93,442		115,742
Contract assets		41,230		86,993
Inventories		101,303		100,161
Other receivables – chassis pool agreements		9,312		19,544
Other current assets		7,078		11,779
Total current assets		260,173		345,767
Property, plant and equipment, net		77,393		70,753
Right of use assets – operating leases		49,132		53,386
Goodwill		48,880		48,880
Intangible assets, net		47,173		49,078
Net deferred tax assets		10,390		10,390
Other assets		2,705		2,227
TOTAL ASSETS	$	495,846	$	580,481

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	85,733	$	124,309
Accrued warranty		6,018		7,161
Accrued compensation and related taxes		14,770		14,434
Contract liabilities		4,198		5,255
Operating lease liability		11,378		10,888
Other current liabilities and accrued expenses		8,549		19,452
Short-term debt – chassis pool agreements		9,312		19,544
Current portion of long-term debt		179		189
Total current liabilities		140,137		201,232
Other non-current liabilities		9,826		10,033
Long-term operating lease liability		39,501		44,256
Long-term debt, less current portion		45,184		56,266
Total liabilities		234,648		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; 34,956 and 35,066 outstanding		90,606		92,982
Retained earnings		170,523		175,611
Total Shyft Group, Inc. shareholders’ equity		261,129		268,593
Non-controlling interest		69		101
Total shareholders' equity		261,198		268,694
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	495,846	$	580,481

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022

Sales	$	225,101		$	232,195		$	468,540		$	439,078
Cost of products sold		182,347			190,077			382,862			371,029
Gross profit		42,754			42,118			85,678			68,049

Operating expenses:
Research and development		5,890			7,563			12,839			12,490
Selling, general and administrative		30,270			26,860			62,559			53,412
Total operating expenses		36,160			34,423			75,398			65,902

Operating income		6,594			7,695			10,280			2,147

Other income (expense)
Interest expense		(1,477	)		(463	)		(3,125	)		(617	)
Other income (expense)		124			(488	)		194			(523	)
Total other expense		(1,353	)		(951	)		(2,931	)		(1,140	)

Income before income taxes		5,241			6,744			7,349			1,007
Income tax expense (benefit)		556			1,461			986			(424	)
Net income		4,685			5,283			6,363			1,431
Less: net loss attributable to non-controlling interest		-			-			32			-

Net income attributable to The Shyft Group Inc.	$	4,685		$	5,283		$	6,395		$	1,431

Basic earnings per share	$	0.13		$	0.15		$	0.18		$	0.04
Diluted earnings per share	$	0.13		$	0.15		$	0.18		$	0.04

Basic weighted average common shares outstanding		34,935			35,049			34,995			35,078
Diluted weighted average common shares outstanding		34,991			35,243			35,161			35,437

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net income	$	6,363		$	1,431
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		8,050			6,696
Non-cash stock based compensation expense		3,090			3,708
Deferred income taxes		-			(432	)
Loss on disposal of assets		128			481
Changes in accounts receivable and contract assets		68,064			(12,863	)
Changes in inventories		(1,142	)		(34,826	)
Changes in accounts payable		(38,567	)		7,333
Changes in accrued compensation and related taxes		303			(6,146	)
Changes in accrued warranty		(1,143	)		(379	)
Change in other assets and liabilities		(9,525	)		(1,672	)
Net cash provided by (used in) operating activities		35,621			(36,669	)

Cash flows from investing activities:
Purchases of property, plant and equipment		(10,963	)		(10,010	)
Proceeds from sale of property, plant and equipment		82			148
Acquisition of business, net of cash acquired		(500	)		-
Net cash used in investing activities		(11,381	)		(9,862	)

Cash flows from financing activities:
Proceeds from long-term debt		70,000			85,000
Payments on long-term debt		(81,000	)		(30,000	)
Payment of dividends		(3,653	)		(3,640	)
Purchase and retirement of common stock		(8,786	)		(26,789	)
Exercise and vesting of stock incentive awards		(4,541	)		(8,591	)
Net cash provided by (used in) financing activities		(27,980	)		15,980

Net decrease in cash and cash equivalents		(3,740	)		(30,551	)
Cash and cash equivalents at beginning of period		11,548			37,158
Cash and cash equivalents at end of period	$	7,808		$	6,607

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE SHYFT GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited)

(In thousands)

	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
Issuance of common stock and tax impact of stock incentive plan		5

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